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The financial advisor to a cash-strapped nickel project in Brazil has filed a lawsuit against the mine’s developer Horizonte Minerals over US$2mn in commission payments.

Endeavour Financial says it is owed the sum for helping secure financing for Horizonte’s Araguaia project in the Brazilian state of Pará, a London Commercial Court claim reveals.

From 2018, Endeavour provided financial advisory services to Horizonte for the development of the Brazilian ferronickel mine which has been backed by investors including Glencore, La Mancha and Orion Resource Partners, as well as a bumper export credit agency (ECA)-covered debt package.

In a court filing, dated December 15, the advisory firm argues it is still owed “success fees” by Horizonte under the terms of their contract.

Endeavour’s claims it is owed the bulk of the fees following mining-focused investor La Mancha’s investment in Horizonte three years ago.

Broker BMO Capital Markets introduced La Mancha to Horizonte in September 2021, with the investor subsequently subscribing to shares worth US$71mn as well as US$15mn in convertible loan notes, according to Horizonte’s court filing.

Endeavour submitted an invoice in the weeks that followed the La Mancha investment, the filing says, only to be rebuffed by the Horizonte’s then CEO, Jeremy Martin, in an email.

Martin argued the advisory firm had not introduced La Mancha to Horizonte nor negotiated the deal.

He also cited a “carve out” in their contract which specified Horizonte would only pay “success fees” for investments from private equity funds – and not those made via public offerings or placements.

Endeavour argues it is entitled to payment for “any investment” in the Araguaia project, even in instances where it did not introduce the investor; it is also disputing the characterisation of the investment as public.

In the court filing, Endeavour says it is also owed for “private placements” made by commodity trader Glencore and La Mancha in late 2022, when the two firms subscribed to further Horizonte shares worth US$30mn and US$25mn, respectively.

In a statement to GTR, Horizonte Minerals says it “vehemently denies that any success fees are owed to Endeavour Financial on equity investments made by certain shareholders of the company”.

“Endeavour Financial was retained to provide debt advisory services and has been paid significant success fees on a debt transaction completed by the company,” the company adds.

“Endeavour Financial has performed no services in connection with the equity investments in question which would entitle it to further success fees. We have submitted our defence and this is now a matter for the courts to decide. We remain confident that our position will prevail.”

 

Financial strains

The Endeavour court dispute comes at a trying time for Horizonte and its Araguaia project.

In March 2022, Horizonte announced it had closed a US$346mn project finance deal involving a syndicate of international banks and ECAs.

This included a US$200mn commercial tranche from a syndicate of senior lenders including BNP Paribas, ING, Natixis, Société Générale, as well as the Swedish Export Credit Corporation.

Denmark’s EIFO and Finland’s Finnvera respectively covered facilities worth US$75mn and US$72mn under a separate ECA tranche.

However last month, the firm revealed that capital costs for the Araguaia project have spiralled by 87% from US$537mn to over US$1bn.

Horizonte warned the project’s future is at risk unless it can secure additional funding and restructure its senior debt package.

Horizonte previously estimated production at the Araguaia nickel mine would commence by Q1 2024, but last month, the company said “first metal” date is now forecast for the beginning of 2026.

The firm is working “closely” with its major shareholders and senior lenders on a solution, targeted for Q2 2024, a company statement added.

“Resuming and completing construction activities at Araguaia are still subject to the successful completion of a full financing solution, which the company will seek to develop in the coming weeks, but with no guarantee of success,” said Horizonte’s interim CEO, Karim Nasr.

In November, Horizonte announced a shakeup of its management team with Martin stepping down as CEO and Simon Retter leaving his post as CFO. Two non-executive board members also left.

Despite mounting headwinds, Horizonte says it is positioning itself to be a “globally significant” producer of nickel, a metal which is essential for making energy-transition goods such as EV batteries.

Construction of the Araguaia mine began in May 2022, and according to Horizonte, will be capable of producing 29,000 tonnes of the metal annually should it finalise both phases of the project.

In other parts of the world, there are growing concerns over the viability of nickel mining projects, with prices for the metal plummeting by nearly 48% in the year to January.

In recent months, Australian miners have suspended nickel mining operations and urged greater state support as they are being squeezed by the impact of cheap Indonesian nickel exports flooding the global market.

Such headwinds prompted the Australian government to add nickel to its list of commodities eligible for its A$4bn critical minerals facility, administered by its ECA, Export Finance Australia.