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Orion Minerals restructures equity stakes ahead of BFS and financing milestones

Orion has sorted an ownership milestone as it prepares a BFS and awaits a mining right.
Workers underground at Prieska mine
OVERVIEW: ORN The Big Picture
Underground at Prieska where the project’s black economic empowerment owners have become shareholders
  • The company has raised A$8 million for future efforts
  • It has put forward a series of structured transactions to ensure 30% of Prieska project is owned by black South Africans
  • The measures will ensure the company is acting in accordance with Mining Charter economic empowerment ownership requirements
  • Orion’s structured arrangement will make it compliant with BEE requirements 5 years early
  • The company is planning to deliver its Prieska BFS in the June quarter of 2019
  • It hopes to soon receive a mining right for the project

What does Orion Minerals do?

Orion Minerals Ltd (ASX:ORN) (JSE:ORN) specialises in project development and exploration in South Africa and Australia. It is run by managing director and CEO Errol Smart, an economic geologist who has more than 24 years of industry experience.

Smart has headed up companies for more than 12 years, serving as managing director of Clarity Minerals and Canaustra Group. He previously led mining corporate strategy at LionGold Corp Ltd (SGX:A78) and was responsible for underground and open pit operations at Metallon Corporation Limited. Smart has also served at AngloGold Ashanti Limited (ASX:AGG) (NYSE:AU) (JSE:ANG) (FRA:AOD1), Cluff Mineral Resources and Stellar Group Africa.

Orion’s MD is chairman of the Minerals Council South Africa’s Junior Leadership Forum and is a board member of the council. Smart is a registered professional with the JORC-recognised overseas professional organisation, the South African Council of Natural Scientific Professionals.

What does Orion Minerals own?

The key asset is Prieska Zinc-Copper Project in South Africa on the highly-prospective Areachap base metals minerals belt.

Orion has a total of 2.4 million square kilometres of mineral rights on this belt, with 7,819 square kilometres located near-mine.

Prieska has access to good infrastructure and is found 270 kilometres southwest of Kimberley in South Africa’s Northern Cape.

The project is located at the old Prieska copper mine which was discovered in 1968 and mined at a rate of about 250,000 tonnes a month from 1971 to 1991.

In January 2019 Orion upgraded its resource for the flagship project to 30.49 million tonnes grading 3.7% zinc and 1.2% copper for 1.1 million tonnes zinc and 361,000 tonnes copper.

The updated estimate had come after an updated open pit resource had been released for a beyond 105 metres level target of 1.76 million tonnes grading 2.0% zinc and 1.5% copper.

A Prieska scoping study released in December 2018 confirmed a 10-year mine life for Prieska during phase I of development.

The company had submitted a mining right application in April 2018 and this week described delivery of a mining right grant as “imminent.”

Petra Capital noted in its January 2019 analysis a mining right approval was an Orion milestone for the June quarter of 2019.

The company expects to deliver a funded bankable feasibility study (BFS) for the project later this quarter, noting the milestone in a Proactive Investors video interview.

Orion’s study includes a number of innovative aspects, including a proposal to source power at the project from off-the-grid.

Orion significant shareholder and Australian Fraser Range project partner Independence Group NL (ASX:IGO) (FRA:IDZ) has first rights to pick up the smaller company’s nickel projects on Areachap belt or form a joint venture.

How is Orion Minerals’ economic empowerment stake structured?

This week Orion hit a significant accelerated milestone for a new South African minerals project.

The company completed an A$8 million capital raising and put forward a structured investment package to ensure the company met a black economic empowerment (BEE) equity participation target of 30%.

A group of high-profile South African investors are joining the fold with their monetary investments and proposed Mining Charter 3-compliant buy-ins to Prieska project, funded by Orion vendor finance and met about five years earlier than a regulatory compliance date.

Among these investors were a number of Prieska-born female entrepreneurs with a record of success in the mining, banking and commercial industries.

The company also made a number of board-level changes, including the appointment of experienced South African-based mining professionals as non-executive directors.

Former Anglo American plc (LON:AAL) (JSE:AGL) (ETR:NGLB) (OTCMKTS:NGLOY) thermal coal business chief executive officer Godfrey Gomwe joined the board along with experienced director and BHP Billiton Limited (ASX:BHP) (LON:BHP) (NYSE:BHP) (NYSE:BBL) group senior manager Tom Borman.

Part of the transactions will be executed through the ownership of Orion subsidiary and Prieska project owner Repli Trading No 27 (Pty) Ltd.

A 26.7% Repli owner stake will be swapped for Orion shares, allowing a community trust to take a 5% share and an employee trust to take a further 5%.

A new company given the name BEE HoldCo is to buy a 20% stake in Repli, funded by the Orion vendor finance.

Wholly-black-owned and 75%-black-female-owned Black Star Minerals (Pty) Ltd will hold 67% of the empowerment stake holdco. Black Star is made up of the principals Jowell Tobias, Sharon Matthews and Johanna Tobias.

The 100%-black-owned Kolobe Nala Investment Company (Pty) Ltd would have the remaining 33% of the holdco. Billy Mawasha is Kolobe’s principal.

Inflection points

  • Prieska BFS delivery expected in the June quarter of 2019

  • Prieska mining right milestones

  • Company and Prieska project financing milestones

  • Offtake or production take successes

  • Independence and other major group interest in JVs, project buy-ups or other significant transactions

  • Prieska final investment decision

  • Regional, secondary and other exploration project successes and significant transactions

Orion Minerals’ MD-CEO Errol Smart outlines BEE restructure and future milestones

“This is a deal that has taken more than six months in the brewing,” Orion Minerals managing director and CEO Errol Smart told Proactive Investors yesterday.

“You can appreciate that it involves eight different parties having to sign different agreements and they, not working together, it’s a bit like herding chickens, but we managed to pull it together with great success for the company.

“In a lot of ways, we’ve broken the mist, and South Africa trades under a lot of mist, and more and more we are starting to demonstrate that they are just mists and that there is actually a real value available again in South Africa.”

Smart noted the company expected its Prieska BFS “within a matter of weeks”, and had proposed and restructured the BEE arrangements it had inherited with its project as a part of a wider effort to ensure it could raise the funds necessary for its mine which were estimated at A$300 million in the company’s December 2018 scoping study.

To learn more about how Orion structured its BEE arrangements and is looking forward toward obtaining a mining right for the project, view yesterday’s video interview filmed and published last night Australian eastern time.

Orion added 0.3 cents, or 9.68%, to its share price yesterday to end a day’s trade on the Australian Securities Exchange at 3.4 cents a share.

 

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