Horizon Faces Funding Crunch Despite Convertible Loan, Risks Operational Strain

Quarterly Cash Flow Pressure

Horizon Minerals Ltd has disclosed a challenging liquidity position in its quarterly cash flow report for the period ending 31 March 2025. The company recorded a net cash outflow from operating activities of A$7.48 million, reflecting ongoing expenditure on exploration, development, and production activities. This outflow, combined with investing cash outflows, resulted in total relevant outgoings of approximately A$8.07 million for the quarter.

Despite these significant cash demands, Horizon ended the quarter with a cash balance of A$5.999 million, down from A$9.624 million at the start of the period. The company currently holds no unused financing facilities, underscoring the tightness of its liquidity position.

Financing Strategy and Convertible Loan Facility

To address funding needs, Horizon has fully drawn down a US$5 million Nebari Convertible Loan Facility. This facility carries a 7% convertible coupon plus a term SOFR delta, payable monthly in arrears, and is secured on a first lien basis. The loan term extends 42 months from closing, with conversion rights allowing the lender to convert up to 100% of principal and accrued interest into Horizon shares at a 25% premium to the 15-day volume weighted average price at the time of the loan agreement.

The convertible loan structure provides Horizon with some flexibility, including the option for early repayment subject to issuing options to the lender. However, the loan’s terms also imply potential dilution risk for existing shareholders if conversion is exercised.

Operational Outlook and Cash Flow Management

Horizon has indicated it expects to maintain the current level of net operating cash flows in the near term. To support this, the company has negotiated additional ore deliveries to the Greenfields Mill, scheduled to generate further cash inflows in late April and early May 2025. This tactical move aims to inject liquidity and extend the company’s funding runway.

Nevertheless, with an estimated 0.74 quarters of funding available based on current outgoings and cash on hand, Horizon’s financial position remains precarious. The company asserts confidence in its ability to continue operations and meet business objectives, but this outlook hinges on successful execution of its operational plans and cash flow improvements.

Looking Ahead

Investors will be watching closely for Horizon’s next quarterly update to assess whether the additional ore deliveries and financing arrangements translate into improved liquidity and operational stability. The convertible loan facility provides a critical bridge but also introduces potential equity dilution risks that may influence market sentiment.