Orion Minerals clears key hurdle as it nears funding deal

Orion Minerals, which is bringing the Prieska zinc and copper mine in SA back into production, has secured a long-term water-use licence, clearing the way for its imminent announcement on funding of the R5.3bn project.

Orion, which is listed on the JSE and the Australian bourse, asked for a trading halt of its shares on both exchanges on August 4 as it finalised its capital-raising plans. Orion has a R754m market cap.

An announcement regarding the funding is expected on Monday August 10, a public holiday in SA.

A key part of the funding was securing a 20-year water-use licence for Prieska that was last mined three decades ago. The mine in the Northern Cape is flooded and the licence includes removing 8.5-million cubic metres of water to access the bottom of the mine and restarting mechanised operations.

“Many of the banks and potential strategic partners we have been dealing with have flagged the outstanding licence as a major concern that could potentially hold up an investment decision,” said CEO Errol Smart.

He described securing the licence as the “largest remaining regulatory hurdle” to be cleared before the project can start in earnest.

Originally, Orion was going to evaporate the water coming from the mine, but it has now opted for a water treatment plant to raise its quality to agricultural standards for the irrigation of crops and livestock, as well as for use on the mine. Interest has been received from third parties and empowerment partners wanting to build a modular plant to treat the water and then charge Orion a fee.

Water would also be used with waste rock to create a paste to pump into underground voids in a process known in the mining industry as backfill, adding to rock stability in tunnels.

The licence allows Orion to recharge underground water aquifers in a very dry part of the country.

Orion has flagged that other major resources companies have expressed an interest in the project, which will be a major source of base metals in SA.

Orion is close to India’s Vedanta Resources’ Gamsberg zinc mine and concentrator, while global resources company Anglo American’s sefa Mining Fund has rolled over the repayment of a R14m loan from end-July 2020 to April 2021. The sefa loan is secured against a 29% stake in Prieska held by Agama Exploration and Mining, a wholly owned Orion subsidiary.

Prieska will, on average, produce 59,130 tonnes a year of zinc in concentrate compared to SA’s output of 115,000 tonnes in 2019, according to Minerals Council SA data.

The mine will generate 19,652 tonnes of copper annually, compared to the 56,000 tonnes SA produces from primary copper mines, as well as the by-product of platinum group metals mining.

Based on the latest feasibility study, Prieska, with its 11-year life based on existing reserves estimates, will repay its capital investment in 28 months.

There is an existing 900m-deep shaft and horizontal tunnels, which are all in good condition despite being submerged for decades.

Smart said in a recent Business Day interview, “Not only that, we have an orebody that is a 2.5km-long, uninterrupted, continuous slab of mineralisation averaging 9m wide. You just don’t get orebodies like this,” adding that the site is well served with roads, rail, power and water.

seccombea@businesslive.co.za