Orion sees R4bn Prieska mine paid back in less than three years
The R4bn restart of the Prieska zinc and copper mine in the Northern Cape promises to deliver a highly profitable mine
Orion Minerals is reopening the Prieska copper and zinc mine, which was closed 28 years ago.
A bankable feasibility study released on Monday has shown that the R4bn project will be paid back within three years from the start of production.
Prieska in the Northern Cape, which was mined for 20 years up to 1991, will be restarted in what Australia’s Orion calls its “foundation phase”, a period lasting 10 years and delivering zinc and copper in concentrate, generating nearly R33bn of revenue.
While the foundation phase exploits the known reserves and resources, Orion says there is potential for extensions to the deposit and fresh discoveries around the mine.
The 2.4-million tonnes a year underground and opencast mining operation and processing plant will deliver 189,000 tonnes of copper and 580,000 tonnes of zinc in separate concentrate streams during the first 10 years.
With the study in place and the granting of the mining right “imminent”, Orion can soon conclude the financing plans for its mine, optimise its bankable feasibility study and conclude offtake or sales agreements.
“We expect to be in a position to make a final investment decision for the Prieska Project development in the second half of this year, putting us on track to commence construction in late 2019 or early 2020,” Orion CEO Errol Smart said.
If Orion secures its mining right during the third quarter as it anticipates and lines up its funding, it will begin work on the mine and concentrator plant late in 2019 or early 2020, with production starting 27 months later.
"A project execution strategy has been formulated and discussions with key service providers well advanced," Orion said.
The funding for the project will be raised in part equity from its primary listing in Sydney and its secondary listing in Johannesburg, along with debt.
Orion will fund its 70% stake in the project as well as the 10% held equally between employees and communities, while the 20% black economic empowerment partners will fund their stake. Orion will recoup the cost of the 10% stake before paying employees and communities.
One of the big costs and time consuming activities will be the de-watering of the 1km deep mine of nearly nine million cubic metres of water over 14 months. The mine is flooded to 330 metres below surface. A special dam with agitators will be used to evaporate the water.
The steel work is still in the main shaft, but it is in mostly good condition, but sections of the 8.8-metre diameter shaft will need refurbishment. The steel work is a set of rails to guide cages lowered and raised in the shaft.
While Orion needs 38 megawatts (MW) of electricity to run the mine and which will be sourced from the national grid, "Plans are at an advanced stage to commission the establishment of a renewable energy alternative source to national grid power supply, capable of potentially providing 52% of the mine’s energy needs in the near term."
The Prieska project will earn 54% of its revenue from its copper sale and the balance from zinc.
The plan is to truck the concentrate to the Groveput railway siding 50km away and send it by train to Ngqura port on SA's east coast. The estimated cost is about R93 a tonne of concentrate for rail and logistics, however, these could change as negotiations with state rail company Transnet were still underway.