Horizonte Minerals PLC (LON:HZM, TSE:HZM) offers investors exposure to a rare, relatively lower-risk nickel company that should re-rate as it moves through development, broker BMO Capital Markets said.

The broker issued the note to client with Horizonte looking to close core funding for its key Araguaia ferronickel project in Brazil, near the renowned mining region of Carajás.

BMO initiated coverage with an ‘outperform (speculative)’ rating and a share price target of 12p.

With capex requirements of around US$470mln for stage one of the project, versus Horizonte’s market capitalisation of close to US$160mln, funding is “a key risk for the company”, the analyst Alexander Pearce said.

“However, Horizonte is at an advanced stage in negotiations with a debt syndicate for US$325mln, US$100mln from a cornerstone investor, and a 60-70% off-take agreement.”

This would leaving circa US$80M expected to come via a near-term equity raise, he added.

The company is targeting an initial capacity of 14.5 thousand tonnes per annum (ktpa) of nickel with a mine life of at least 28 years.

With significant nickel laterite resources, BMO also calculated that a second stage expansion could nearly double the nameplate capacity to roughly 28ktpa over a 25-year mine life.

Cash costs are expected to be around US$3.58/lb contained nickel.

Ferronickel is used almost exclusively in stainless steel, the dominant end use for nickel.