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Glencore-backed nickel miner Horizonte Minerals has warned it needs a further cash injection after reporting that construction costs at its flagship project in Brazil have more than doubled.
The London-listed group reported that construction costs for its Araguaia nickel mine increased by 87% from $537 million to $1 billion.
The company's shares had been trading below 10p before the warning after falling sharply in October, but had fallen more than 60% to 3.29p by Tuesday afternoon.
This has reduced the market capitalization of Aim-listed companies to less than £10m from more than £400m before October's fall.
Shares plunged in October after the company announced capital expenditures on the mine would be overrun by at least 35% and first production would be delayed to the third quarter of 2024.
If funding is secured, first production is not expected to occur until the first quarter of 2026.
Interim CEO Karim Nasr said the company is seeking a complete financing solution and will finalize one in the coming weeks.
But he said there was “no guarantee of success” and that the interim funding would be added to the $20 million the company secured late last year from its three largest investors, La Mancha Resource Capital, Glencore and Orion Resource Partners. He warned that additional funds would be needed. After management review.
The company will work closely with these shareholders and lenders on the financing, which it aims to complete by the end of June. Discussions are also expected to be held regarding the restructuring of the debt framework.
The budget mismanagement is a blow to Glencore, which owns a 17.7% stake in the company and has the right to receive supplies from the mine for the next 10 years.
It is also a setback for La Mancha Resources Capital, a mining investment fund set up by Egyptian telecoms billionaire Naguib Sawiris, who owns 23% of the group, and Orion Resource Partners, which owns 10.5%. becomes.
The mine is aimed at producing ferronickel, which is used in stainless steel, and could help diversify the world's supply of ferronickel beyond Indonesia, which produces more than half of the world's nickel.
However, investors' confidence in the nickel sector has eroded due to soaring costs, amid concerns about a structural oversupply due to a surge in supply in Indonesia.
BHP, the world's largest nickel producer, last week booked a $3.5 billion writedown on its Nickel West business in Australia.
On Tuesday, it reiterated its belief that the metal, which is also used in electric vehicle batteries, is at risk of being oversupplied over the next decade.
