Orion records another significant achievement
Rewritten Article:
Copper investors should keep a keen eye on Orion Minerals, a firm venturing into two copper-oriented projects in the Northern Cape. These endeavors – Prieska Copper Zinc Mine (PCZM) and Flat Mines – have the potential to pump out a massive 28,500 tons of copper annually, according to Orion's latest reports.
Orion's stock performance has left investors underwhelmed, with a 33% dip since its 2017 secondary listing on the JSE. However, building mines, even brownfield ones, is a gradual phenomenon, as proven by established copper districts such as Chile, where projects have taken upwards of two decades to transition from discovery to production.
Yet, hopes are high that Orion's news stream could pick up pace, especially given the current optimism surrounding copper, which has shot up to around $10,000/t in recent weeks. This surge is due in part to expectations that it might surpass last year's record high of $11,000/t. Kostas Bintas, global head of metals and minerals at Swiss commodities trading house Mercuria, told the Financial Times that he anticipates prices hovering above $12,000.
With the market seemingly on their side, Orion aims to secure R8.9 billion to fund both projects, albeit not all at once. The shallower part of PCZM's ore body, known as the Upper Project, could be developed in just 13 months for an estimated R550 million, states Orion. "That's a manageable budget, considering we've got the Industrial Development Corp [IDC] on board," said Errol Smart, Orion's former CEO, shortly before his resignation. The IDC holds minority stakes in the projects and will finance Orion's Black Economic Empowerment shareholders.
Smart's sudden departure took many by surprise, but he clarified to the FM in a subsequent interview that it was due to exhaustion, and not a dispute over strategy. "I just need a break, and the project needs fresh blood to secure funding and completion," he explained. In his stead, Tony Lennox, previously a nonexecutive director of Orion and formerly the MD of Palabora Copper when it was owned by Rio Tinto and Anglo American, has stepped up. "Tony is more than capable of leading us forward," Smart commented optimistically.
Lennox's first order of business will likely be organizing the project finance. Smart shares that copper traders and royalty companies are eager to offer prepayment terms for the copper, given the emerging supply deficit. Fortunately, the varying copper output of Orion's projects allows for blending, a feature that offtakers appreciate as they can tailor their supply to their specific needs. Shareholders should expect Orion to reveal significant developments shortly.
The financing process can take several months, according to Smart, who also mentioned the possibility of equity financing. Engaging a major mining company as an equity partner is also on the table. "There are interesting discussions to be had," says Smart. "Majors recognize our ability to move swiftly with minimal costs compared to larger companies. However, we might benefit from a bigger ally to help us."
If Orion can secure funding for PCZM's Upper Project, First production should commence within 13 months of the final investment decision. Operating for roughly four years, the Upper Project will then pave the way for the deeper section of PCZM, which willolds be developed next. To keep costs in check, the Upper Project will sacrifice zinc by-production – projected to be 65,000 tons annually – in favor of gold and silver by-products. Though it's a pity the zinc production won't occur when both metals are trading at historic highs, the global economic upheaval shows no signs of diminishing interest in safe-haven precious metals.
The PCZM mine is anticipated to be operational for about 14 years, followed by Flat Mines, which requires A$103 million in capital and is expected to produce average copper output of 6,500 tons annually, peaking at 9,500 tons a year with a 12-year mine life. Implementing additional pre-development work on Flat Mines is necessary due to its unique deposit structure, which is sausage-like before plunging at a 90° angle. The feasibility studies estimate an all-in sustaining cost of $4,550/t of copper equivalent metal sold. Total capital intensity for the projects, including expenses, is just under $9,200 per equivalent ton. "Our projects have top-tier status with fully permitted projects located in the lowest-cost quarter," emphasizes Smart.
(*Details about recent funding acquired by Orion Minerals from Ratel Growth Pty Ltd can be found in the enrichment section, but was deemed to add minimal value to the text and was not included for brevity.*)
- Orion Minerals, a company focusing on two copper-oriented projects in the Northern Cape, is aiming to secure R8.9 billion in financing for these projects, hoping to pump out 28,500 tons of copper annually from the Prieska Copper Zinc Mine (PCZM).
- Investors are keeping a close eye on Orion Minerals, with hopes that its news stream could pick up pace, given the current optimism surrounding copper.
- Companies in the trade and finance sectors are eager to offer prepayment terms for the copper produced by Orion, given the emerging supply deficit.
- Tony Lennox, the new CEO of Orion, will likely focus on securing project finance and engaging a major mining company as an equity partner.
- If successful, the Upper Project at PCZM could commence first production within 13 months and operate for approximately four years, paving the way for the deeper section of PCZM.
- The PCZM mine is expected to be operational for about 14 years, followed by Flat Mines, which requires A$103 million in capital and produces an average of 6,500 tons of copper annually with a 12-year mine life.
