Picture: 123RF/LURII KOVALENKO
Picture: 123RF/LURII KOVALENKO

Orion Minerals is attracting interest from other mining companies as it nears financing deals for its R4bn copper and zinc operation in the Northern Cape.

Orion, which is listed in Johannesburg and Australia, is checking financial and engineering studies into restarting the defunct Prieska mine to finalise potential funding deals for the project, but interest from other miners is giving it an alternative capital-raising option.

Prieska was shut in the early 1990s after two decades of operation. 

As confidence in the project grows and work on funding progresses, interest from other companies in Prieska has reached a point where this could be an alternative source of funding, said CEO Errol Smart, who has said the mine will repay its capital in three years.

“Orion is now investigating a number of options due to unsolicited approaches made by interested parties who could enhance project value through the provision of technical and financial input,” said Smart.

“The interest that we are now enjoying from established mining companies as they recognise the quality and growth potential of this project with its modern, high-efficiency mining focus is encouraging,” he said, adding that “there may well be unexpected synergies emerging that need to be considered as we work out how to maximise our shareholder returns”.

Black Mountain

Vedanta, the large diversified Indian resources company, has the Gamsberg and Black Mountain zinc operation to the north of Prieska and there has been talk in the past of potentially unlocking areas of mutual benefit.

Another major company involved in Prieska is Anglo American, which, through its enterprise development division, has taken up a 3.7% stake in Orion.

Anglo knows the Northern Cape well, having operated the zinc deposits it sold to Vedanta. While not interested in zinc, the copper in the project would slot neatly into Anglo’s core commodities portfolio.

“The potential positive effect of operational synergies that may be achieved through investment by strategic partners, thereby reducing the equity amount to be provided by Orion, is now being assessed as an alternative funding source,” said Smart.

There remains a large, unmined portion of the ore body that Orion plans to extract, using the old shaft it will refurbish, as well as tunnels that must be pumped clear of water.

Orion plans to release an updated and optimised bankable feasibility study in the first quarter of 2020, stripping out as many costs as possible in the study it released in June 2019. This would lead to revised cash flow forecasts, said Smart.

Once that document is finalised, Orion will agree debt finance towards building the project. Senior, secured debt proposals have been made by seven financial institutions, two of which are development funding groups.

Companies wanting to secure flows of metal from the mine had also made proposals to provide debt and an investment in the project, Smart said.

“Several expressions of interest have also been received from potential strategic investors, who are interested in partnering via significant equity participation in Orion’s mine operating subsidiary companies,” he said.

“These discussions will be progressed in parallel with the project finance negotiations.”

The new bankable study — essentially a high-confidence, detailed document a mining company can take to financiers to secure funding — would also outline the “opportunity for an expanded and enhanced Prieska Project development scenario”.

“Results of these optimisation studies have the potential to reduce pre-production capital, significantly extend the planned mine life and further improve project economics,” Smart said.

Prieska has a resource of 30.5-million tons, of which 1.5% was copper and 3.7% was zinc.

The mine would, in its first decade-long phase, deliver 189,000 tons of copper and 580,000 tons of zinc in total during that period.

seccombea@bdfm.co.za