Orion’s A$25m capital raise a watershed moment for Northern Cape as newest copper district

Errol Smart, CEO, Orion Minerals

IN a development that may have watershed significance for South Africa’s under-capitalised minerals exploration sector, Orion Minerals raised A$25m (R294m) in an issue of shares that will finance the company through to an investment decision on its Prieska Copper-Zinc project.

Errol Smart, MD of Orion Minerals, said the share issue attracted new institutional investors from Australia, as well as South Africa. Given an uptick in trading liqudity of Orion shares in Johannesburg, recently, Smart said the two developments were significant.

“The surge in recent trading of Orion shares on both ASX and JSE – with the JSE actually recording more than 60% of trades for the past few weeks – endorses a groundswell of support for our strategy in the Northern Cape and indicates that we have struck a nerve with investors who have been strong buyers on market,” he said.

Based on an optimised feasibility study completed last year, the Prieska Copper-Zinc Project is scoped to produce 20,000 tons of copper annually, and 70,000 tons of zinc a year. Although a redevelopment of existing workings, Orion is nonetheless one of the few major new major investors in South Africa, especially in the Northern Cape. Vedanta’s Gamsberg zinc project would be another.

Earlier this month, Orion also announced that it intended to extend its reach in the Northern province after buying an option over control of Okiep Copper Company (OCC) for an initial price of A$7.5m (R88m). If the investment proceeds, Orion could restore OCC to historic copper production of 40,000 tons annually – a critical development as Orion accesses early cash flow.

Proceeds from today’s capital raising would be used towards taking Prieksa Copper-Zinc Project to a final investment decision in the second half of 2021. The project has been slated to see A$432m (R5.1bn) in capital investment.

The raised funds would also be used to do resource evaluation and exploration at OCC, as well as complete its acquisition. Additional exploration at OCC, as well as near mine and regional prospects throughout the Northern Cape, would also be funded from the capital raising.

Smart has been vocal about the prospectivity of the Northern Cape region. “Geologically, I can tell you, having gone around the world and looked at terrains, the Northern Cape is an absolute dripping roast,” he said at the Joburg Inbaba, a mining conference.

The details of the capital raising are that 694.4 million shares will be issued in two tranches at an issue price of 36 Australian cents/share.

In the first tranche, 490 million shares will be issued in terms of the firm’s 15% placement capacity on the Australian Stock Exchange, raising A$17.6m. In the second tranche, 204 million shares raising A$7.4m, including A$2m from Tom Borman, one of Orion’s non-executive directors, will be issued.

“This is a transformational capital raising for Orion,” said Smart. He added that the purchase of OCC, which the share issue would support, was a “game changer” for Orion as it would lead to early cash flow generation whilst the Prieska Copper-Zinc project was under development.