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The Export and Investment Fund of Denmark (EIFO) says it has learnt lessons from a nickel mining project in Brazil that unravelled last year, leaving its backers exposed to millions of dollars in potential losses.

In May 2024, Horizonte Minerals was placed into administration after the collapse of its Araguaia development in the Brazilian state of Pará.

London-headquartered Horizonte had been positioning itself to be a “globally significant” producer of nickel, a metal essential for making energy-transition goods such as electric vehicles.

The firm had secured backing from investors including Glencore, Orion Mine Finance and La Mancha Investments. In early 2022, Horizonte Minerals struck a US$346mn project financing deal with a group of banks and the Danish and Finnish export credit agencies (ECAs).

As part of the deal, Denmark’s EIFO and Finland’s Finnvera respectively covered facilities worth US$75mn and US$72mn under an ECA-backed tranche, while a syndicate of commercial lenders and the Swedish Export Credit Corporation separately approved a US$200mn tranche.

But the project was rocked by plunging nickel prices in early 2024, alongside an 87% escalation in project costs, which surged from US$537mn to over US$1bn. Horizonte had also been facing UK court action from advisory firm Endeavour Financial, which claimed it was owed fees for securing investments.

Peter Boeskov, EIFO’s chief commercial officer for large corporates, says the Horizonte nickel project became “no longer viable” and has since been removed from the Danish export credit agency’s books.

“It is off our books. We sold our exposure,” he says, though declined to specify the buyer.

Horizonte did not fully draw down the EIFO-backed loan prior to the project’s collapse, so while there were losses for the agency, these were “significantly less” than the headline amount of the transaction, he says.

Boeskov says the agency has learnt lessons that it will apply to other commodity deals, adding that it may still consider nickel projects in the future.

“It is tough to lose money on a deal, but we will benefit from those learnings as we go forward,” he tells GTR. “A lot of it relates to how you structure the project and how you monitor the ongoing progress and construction.”

Third-party advisory agencies had been engaged to run checks on the Horizonte project and flag any potential issues.

But some of the monitoring structures were not adequate, Boeskov suggests. “There were issues we could have identified earlier if some of the setups had been a little bit more robust.”

Following the May administration, Horizonte entered creditors’ voluntary liquidation in November last year.

The company’s administrators, FRP Advisory, said in a late 2024 report that they expect the move into liquidation would “facilitate a distribution to unsecured creditors”.

The report showed that Araguaia Niquel Metais Ltd, a subsidiary of Horizonte tasked with developing the mine, remains under the control of its director who is pursuing funding solutions or the sale of the company’s assets.

“Consequently, there is still a possibility that the senior lender’s claim can be mitigated, subject to ongoing negotiations and support of its creditors,” FRP said.

 

Critical minerals

Demand for critical minerals is set to boom in line with growing production of electric vehicles, batteries, wind turbines and solar power plants. Yet UN experts warn of a significant investment gap in the mining sector that could squeeze supply chains.

EIFO says it is ready to bolster support and is engaged in the sector through FLSmidth, a Danish multinational that produces mining processing equipment.

In January, EIFO issued a non-binding letter of interest to GreenRoc for its Amitsoq Graphite project in Greenland, the autonomous Danish territory that has become the focal point of a dispute with US President Donald Trump.

Despite the growing demand, there are risks for ECAs and export finance banks in the critical minerals sector. Projects are often in developing regions such as Latin America, Central Asia and Sub-Saharan Africa where environmental, social and governance (ESG) concerns are more pronounced.

“These mines can be in the middle of a jungle in Brazil and sometimes the power supply is fossil fuels. There are certain trade-offs if we want to obtain critical minerals, but ESG is a key consideration,” Boeskov says.

He notes that EIFO has “one of the best ESG departments” in the industry and is well-equipped to analyse and devise action plans for critical mineral projects. “Given the location where these mines are, this is a very important factor for us.”

He tells GTR that pricing is another potential concern.

“China has cornered the market for many of these commodities, so there is a price risk. As an example, off-takers accept a price for a number of years, but all of a sudden China starts flooding the market with a specific commodity… the deal could fall apart, especially if there are delays and some of the off-takers are also the sponsors which may decide against taking the project forward.”