And plenty of it.
The company has just released the results of pre-feasibility work which shows that over a 28-year mine-life Araguaia is set to generate free cash of $1.95bn.
Of course, several assumptions have been plugged in to get that number, including a mining cash cost of around US$6,500 per tonne, an average selling price of US$14,000 per tonne, and an initial capital spend of US$354mln.
Sceptics will argue that the capital will be hard to raise in what’s widely recognised as a very bearish nickel market.
But Horizonte can bat that criticism aside very easily: its major shareholder is Teck Resources, one of the largest mining companies in the world.
If Horizonte can demonstrate a viable project once the full feasibility work is complete in a around a year’s time, the company has some pretty heavyweight friends on the other end of the telephone.
A more serious criticism might involve the nickel price, which touched 14-year nadir earlier this year, and which at a current level of $10,460 per tonne is some way below the $14,000 assumption that underpins that multi-billion dollar cash flow figure.
But here again, Horizonte scores well. For a start, it’s worth noting that even allowing for the recent weakness, the long-term average nickel price over the last 20 years is over $17,000.
Nickel is at historic lows, so if ever there was a time to be buying the metal, now is it.
What’s more, if it was to go into production right now, Araguaia would still be viable, chief executive Jeremy Martin is keen to emphasise.
“At today’s price it still makes good money,” he adds.
He reckons it would generate $40mln-S$50mln in operating profits.
The company has also modelled for a more conservative long-term average of $12,000 per tonne, and under that scenario the free cash still amounts to $1.26bn.
So if this is a project that can work in the very depths of a bear market, what could it do if the market turns, if nickel really has a run?
That’s perhaps not something to build a model around.
But even so, seasoned market watchers will recall that the last time nickel went on a serious run it didn’t just double or triple, but rose by a factor of at least five times.
In fact at the height during the last mining boom, the nickel price touched US$51,000 per tonne.
It’s unlikely to go there again any time soon, but stocks in LME warehouses are down significantly over the past few months, while demand is holding up pretty well.
Where is the new supply going to come from once the current surfeit has worked its way through the system?
The answer is that it’s going to come from projects like Araguaia, which at over 133mln tonnes of ore containing around 1.7 mln tonnes of nickel, is one of the largest undeveloped nickel saprolite projects in the world.
Having said that, there aren’t that many other projects around, because the prolonged nickel bear market has either put developers out of business, or forced them to change tack into other commodities.
That Horizonte has managed to survive this long, and not only that but been able to deliver a project that can stand up to today’s tough pricing environment, speaks very well of the company.
It’s run by experienced mining guys, including CEO Martin, who is well-known in City circles, and David Hall, who has the contacts into Teck and used to work for Anglo American for many years.
All of which explains why the price moved up by more than 7% to 2.22p on news of the pre-feasibility study, and why some analysts think it still has much further to go.
finncap sets a 12p target, but you have to wonder if the nickel price truly turned, whether it might not one day go a whole lot further.
Story by ProactiveInvestors