Orion completes funding puzzle for Prieska Copper Zinc mine with R250m loan from IDC

ORION Minerals has secured R250m in finance from the Industrial Development Corporation (IDC) for its Prieska Copper Zinc Mine (PCZM) in a development that concludes funding for the Northern Cape mine.

“This funding derisks the project materially,” said Orion Minerals CEO, Errol Smart in an interview on Friday. “It substantially unlocks the project finance, taking us to a definitive feasibility study next year ahead of project funding.”

Smart also expected shares in Orion to re-rate, especially as the funding would finance dewatering of the Prieska mine, a technical challenge Orion had to demonstrate it could manage. Shares in the company are 35% weaker year-to-date.

In terms of the financing agreement with the IDC, a government-owned lender, A$22m will be advanced to Orion as a senior secured, convertible debt facility. The loan and capitalised interest can be converted into Orion shares equal to a value of R1.2bn.

This is the equivalent of as much as 25% of the Newco through which PCZM is owned. Having the IDC was a pre-production finance partner opened the possibility of it becoming an equity financier at a later stage, said Smart.

The IDC loan also unlocks A$10m in early stage financing provided by Triple Flag, a Canadian royalty and streaming finance company. Including the IDC loan, this is R350m in early stage financing.

As for total project funding, Triple Flag earlier this year agreed to provide US$80m to build projects works such as plant and equipment. In return, Orion is to supply 84% of all silver and gold produced by the mine to Triple Flag.

This streaming agreement, along with the IDC loan and Triple Flag’s early stage finance of A$10m is enough to bring PCZM into production.

The mine was initially planned as a 200,000 tons a day ore feed mine at a cost of R4.8bn. However, earlier this year the project was rescaled to 100,000 tons daily which would have a lower capital cost, details of which are yet to be disclosed.

In terms of the rescale project, Orion would first mine open pit reserves ahead of exploiting the underground section of PCZM and its deeps section, post the mine dewatering (a process that could take up to three years).

“This is a huge milestone for all our stakeholders, particularly for the shareholders who have supported us and the local communities that stand to benefit as this very significant new mining project for the Northern Cape region comes to life,” said Smart.

Orion has also developig the Okiep Copper Mine (OCM) on a site 450 kilometres from the PCZM. Orion Minerals could produce up to 110,000 tons of copper concentrate in the next two to three years. OCM is forecasting production of about 40,000 tons a year.