Broker snap: Araguaia deal to transform Horizonte

15th Sep 2010 13:05

Brazil-focused exploration company Horizonte's acquisition of the potentially world-class Araguaia nickel project through the purchase of Teck Cominco Brasil SA is a transformational transaction, the company's house broker Westhouse Securities claims.The project has been consolidated with Horizonte's adjacent Lontra nickel discovery in the Carajás mining district of Brazil. The district is well supported by infrastructure, the broker notes, and is in the same region as several other world-class nickel projects owned by big players such as Vale and Xstrata .Though it does not yet have a JORC (Joint Ore Reserves Committee) estimate, the Lontra-Araguaia project has more than 555 drill holes across the project, and demonstrates resource potential of 100 megatons (Mt) at 1.3% nickel plus cobalt and is comparable in size to projects currently being developed by major diversified miners in the region, mining analyst Mark Heyhoe asserts. The broker thinks the region is ripe for more consolidation and that the Lontra-Araguaia project will be a "compelling target for the majors already operating in the area once a resource has been defined and the project moves to the development phase."The broker is maintaining its "buy" recommendation on the stock but is bumping up its price target from 14p to 18.5p per share. "We see significant price drivers over the next year as exploration drilling ramps up and a maiden resource statement is announced. Given that the greatest value added in a mineral development is in the period running up to the announcement of a positive feasibility study, we expect to see substantial share price appreciation in the forthcoming quarters," Heyhoe said.