Orion confirms A$8m capital raise

Orion Minerals confirmed on Monday that it was raising A$8m in a rights issue “underpinned by a group of high-profile black South African investors”.

Orion plans to return the Prieska underground mine in the Northern Cape to production of zinc and copper. It needs the money to complete a bankable feasibility study into restarting the mine and building a processing plant, while the rights issue would ensure it complies with the Mining Charter’s black economic empowerment targets.

Orion asked the Australian and Johannesburg bourses on April 11 to suspend trade in its shares pending the announcement of its financing arrangement,

The details of the transaction are due to be announced on Tuesday morning, Orion said.

The West Australian website reported on Friday the ASX and JSE-listed company was raising A$8m in a rights issue offered at a 30% premium to the last traded price. Citing sources, The West Australian said the issue had been well supported and that South African shareholders would take up half the shares on offer at four Australian dollar cents each.

“The capital raising is likely to be underpinned by a group of high-profile black South African investors as part of a broader restructuring of the company’s black empowerment equity at operating level, achieving compliance with the South African Mining Charter 3,” Orion said on Monday.

The charter gazetted at the end of 2018 raised the empowerment levels to 30% from 26% in order to qualify for new mining rights.

The transaction would “ensure an appropriate alignment and restructuring of its black economic empowerment interests across both project and listed company levels, and significantly elevate its profile among South African institutional investors as it prepares to develop the Prieska Project”, it said.

Tembo Capital, a London-based investor with the largest stake in Orion at 23%, would take “another significant chunk of shares”.

Orion confirmed The West Australian report that it was raising A$8m at a rights price of 4c a share as well as a “free attaching option” at an exercise price of 5c per share in six months for every two shares issued.

“The interrelated transactions will represent a pivotal milestone for Orion ahead of the expected imminent grant of the mining right for its flagship Prieska zinc-copper project,” Orion said, adding the bankable feasibility study would be released before the end of June.

Orion plans for the mine to deliver up to 80,000 tonnes of zinc a year and 22,000 tonnes of copper a year in the first 10-year phase of the project, generating A$130m of free-cash flow annually once the mine reached steady stage production.

Orion would need peak funding of up to A$330m. The company expects payback in less than three years.

Prieska had delivered one-million tonnes of zinc and 430,000 tonnes of copper by the time it was mothballed in 1991 after 20 years of production.

seccombea@bdfm.co.za