Orion Mine Finance is handing over US$25 million in cash in exchange for a 2.25% royalty on Horizonte Minerals' (TSX: HZM; AIM: HZM) Araguaia project in Brazil, one of the largest undeveloped ferro-nickel projects in the world.
The royalty applies only to the first 426,429 tonnes of contained nickel within the final ferronickel product that will be produced and sold from the project, which lies south of northeastern Brazil's Carajas mining district in Para state.
The capital from Orion will allow Horizonte to start early works and advance the open-pit nickel laterite project to construction.
News of the funding sent Horizonte's shares up 16.7% to 7 ? - a new 52-week high.
A feasibility study completed last October estimates pre-production capex at US$443 million.
The study envisions that ore from a number of pits would be processed at a central metallurgical processing facility, where a single line rotary kiln furnace would extract ferronickel from the ore over an initial mine life of 28 years.
Once in full production, the plant is expected to produce at a rate of about 900,000 tonnes of dry ore feed per year for annual production of 52,000 tonnes of ferronickel containing 14,500 tonnes of nickel.
The study includes an option to build a second process line in the future, which would double Araguaia's production capacity from 14,500 tonnes of nickel a year up to 29,000 tonnes. If a second line is built, it would be financed through existing cash flow.
The product will be trucked by road to the port of Vila do Conde for sale overseas.