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Junior resources group Horizonte Minerals (HZM:AIM) could be just six months away from convincing the market its business model works. The company floated in May 2006 with the intention of finding large deposits with an in-situ value of at least $1 billion, to be partnered or sold to mid and large-tier miners.

December 2007 saw its first bonafide partnership, optioning the Tangara gold project in Brazil to Australian miner Troy Resources. Horizonte spent around $1 million to acquire and explore the project. It is now set for a return upwards of $20 million if company estimations of 500,000 ounces of gold are correct. It will receive cash payments for the next two years then $30 an ounce production royalty, with Troy funding all future exploration.

The potential Tangara income puts Horizonte off to a good start, but the deposit size falls considerably short of the million-plus gold ounce projects it originally set out to find.

To win the support of the market and put the share price into an upward rally, Horizonte needs to prove up a second exploration project – of greater size than Tangara – and strike a commercial deal. Investors need reassurance that Horizonte can find world-class projects and that Tangara isn’t a one-off achievement.

This could happen by August if Lontra, a Brazilian nickel project, proves economical. Horizonte claims the deposit is on a newly-discovered nickel belt being explored by some of the biggest mining producers including Xstrata (XTA), which should start production in 2009 on a large nickel mine north of Lontra.

Shallow drilling is under way at Lontra but Horizonte plans to go three times deeper from April to 60 metres. The drill results will start to appear from late June. Chief executive Jeremy Martin believes there will be enough data to make a ‘strategic decision’ on Lontra by August – namely whether it’s good enough for a major producer to buy into.

If Horizonte’s expectations aren’t met, a silver/lead/zinc project in Peru is fairly advanced and could attract partnership interest. The El Aguila deposit is currently split into two zones. Higher grades have been found at Zona Sur but drilling is more advanced at the other area, Pacos Hill. The maiden resource statement will be published soon after a drilling update in March.

The shares of Horizonte have fallen around 50% in the past year on small trading volumes, with an 11p low in early February. The company is at a turning point, which suggests the share price could have a better time in 2008. Acquisitions are likely with exclusive due diligence granted on four projects. Management is being strengthened with the appointment of chief financial officer, Gary Townsend, formerly financial controller at Ashanti Goldfields. It has also recruited more geologists for exploration in Brazil and Peru. At 12.5p, the shares are worth buying.