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Can Horizonte Minerals shares recover as nickel prices soar?

The Horizonte Minerals share price has been volatile over the past year, much like the price of nickel. There are many factors that could affect the nickel development company over the next few years, including its production and the future price of nickel.

Despite the rising price of nickel over the past year, the Horizonte Minerals [HZM.L] share price has sunk 34% since its 52-week high in September to close at 124p on 21 June.

The decline could partly be due to an equity fundraise in November 2021, where the nickel mining company raised $75m from a share placing for the purpose of funding its Araguaia project. This diluted stakeholders’ holdings, which contributed to a large decline in this period.

While the past six months have been more positive for the group, its share price has remained broadly flat during this period. However, compared to the FTSE 100’s year-to-date (through 21 June) fall of 3.1%, which has suffered from inflationary pressures, the stock has underperformed the broader market. The Horizonte share price is down 4.2% in the same period.

Nickel prices and Horizonte Minerals shares

As a nickel miner, the Horizonte Minerals share price is dependent on the price of the metal. In this respect, the miner has been performing well. In 2021, nickel was priced at around $17,000 per tonne, yet it was trading at $25,500 per tonne as of 21 June 2022. This has mainly been driven by high demand, as nickel is a key component in lithium-ion batteries, used to power electric vehicles (EVs). It also has further usage within the production of coins and electronics.

Despite this, the recent nickel price has been extremely volatile. For example, in early March 2022, nickel briefly topped $100,000 per tonne. This was due to fears of shortages amid the Russian invasion of Ukraine, which led to large amounts of panic buying. During this period, Horizonte Minerals shares were able to soar to peaks of over 170p. However, as a result of worries about demand for nickel following recent Chinese coronavirus restrictions, the precious metal has dropped back to more reasonable levels. Consequently, the Horizonte Minerals share price has fallen back from these recent highs.

The future for nickel prices

As a pre-revenue company, Horizonte Minerals is still in its exploration stage, which means that it has not yet been able to profit from the high price of nickel.

There are several factors that could help boost nickel prices in future. For instance, in its latest industry report, Fitch Solutions indicated that as the Russia-Ukraine war continues, supply will likely remain disrupted. At the same time, amid new stimulus measures in China, demand is likely to remain strong. Therefore, a mixture of these factors is expected to give a short-term boost to the nickel price.

There are also positive signs for the long-term future. Indeed, nickel is a fundamental component in EVs. As Bloomberg expects EVs to total more than two-thirds of vehicle sales by 2040, this is likely to help boost the demand for nickel further. This bodes well for the long-term future of Horizonte Minerals.

However, there are also risks to the price of nickel. For example, nickel is the fifth most abundant element found on Earth, meaning that it can easily be subject to oversupply. The Fitch Solutions report also indicated that refinery output could ramp up soon, which could result in the nickel share price sinking. The risk of a recession could also be a factor causing the nickel price to slump. Any fall in the nickel price is likely to negatively affect the Horizonte Minerals share price.

What’s next for Horizonte Minerals?

Although there is limited analyst coverage for Horizonte Minerals, it is nonetheless very positive. Indeed, the company’s stock has four ‘buy’ recommendations, with no broker advocating for investors to ‘hold’ or ‘sell’. With a median target price of 269p, this implies an upside of more than 100% for the company.

Other companies involved in nickel mining have also been performing well in the past few years. For example, Glencore [GLEN.L], which is also involved in the production of copper, iron, zinc and aluminium, has seen its stock soar 67.6% over the past year through to 21 June.

IGO [IGO.AX], an Australian miner that produces metals required for sustainable clean energy, including nickel, has also risen 49.1% in the same period. The positive performance could be an indication that investors are bullish on the price of nickel

Disclaimer Past performance is not a reliable indicator of future results.

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