ASX/JSE RELEASE: 28 July 2022
June 2022 Quarterly Activities Report
Key funding milestone achieved for the Prieska Copper-Zinc Project in the Northern Cape with a US$87m funding package negotiated with Canadian streaming and royalty company Triple Flag to underpin the early production strategy announced last Quarter.
Outstanding high-grade results received from in-fill drilling of the +105 Level Crown Pillar, supporting the early production strategy and making early mining, via open pit, increasingly attractive. Significant assays received to date include:
- 7.46m at 9.24% Cu, 0.19% Zn, 0.44g/t Au and 17.46g/t Ag in OCOU164; and
- 12.53m at 4.89% Cu, 0.04% Zn, 0.51g/t Au and 15.12g/t Ag in OCOU155.
Permitting, metallurgical test work, mine and infrastructure design and community engagement activities progressed at the Okiep Copper Project in the Northern Cape.
Exciting value-add beneficiation opportunity being evaluated after Orion secured an exclusivity agreement with Stratega Metals for the development of a specialist battery product refining facility in the Northern Cape using Stratega’s licensed refining technology.
The Stratega/TCM technology offers the potential to increase both metal recovery and the payability of metals produced in concentrate from polymetallic sulphide ores, such as Orion’s Jacomynspan Nickel-PGE Project, Prieska Copper-Zinc Project and Okiep Copper Project.
Capital raising commenced in June 2022:
- Three-trancheplacement to sophisticated and professional investors to raise up to $20 million at 2.0 cents per share (being ZAR22 cents);
- Committed funds for Tranche 1 and Tranche 2 total $6 million, with commitments for Tranche 3 currently being progressed. Due to the downturn in global capital markets since the Company went into a trading halt on 10 June 2022, numerous potential participants have requested additional time to consider their involvement;
- Together with other funding sources, the capital raise will put Orion in a strong position to access the recently announced US$87 million funding package from Triple Flag Precious Metals to underpin the early production strategy for the flagship Prieska Copper-Zinc Mine; and
- Funds to be used principally to progress mine dewatering, complete early production feasibility studies, battery precursor product production test work and continued exploration at Orion’s portfolio of advanced base metal projects in South Africa.
In addition to the capital raising, a Share Purchase Plan is offered to provide eligible shareholders with the opportunity to subscribe for new Shares in Orion at the same offer price as the Shares issued under the capital raising.
Orion Minerals Limited
Incorporated in the Commonwealth of Australia
Suite 617, 530 Little Collins Street, Melbourne, Victoria 3000
ASX Code: ORN
ACN: 098 939 274
JSE Code: ORN
Ordinary shares on issue: 4,538m I Options on issue: 276m
Orion’s Managing Director and CEO, Errol Smart, said:
“The June Quarter was another busy and productive period for Orion Minerals as we continued to work hard on several fronts to fast-track our two key South African base metals hubs through financing, development and into operation.
“Notwithstanding the extremely volatile and difficult conditions in global financial markets during the Quarter – and the significant short-termpull-back in commodity prices – we believe that Orion remains well placed to realise our ambition of becoming a fully-integrated mining and processing business that produces premium metal products with strong ESG credentials that are certified from point-of-source to market. The quality of our assets positions us to be a key supplier of future-facing metals for the impending global energy transition.
“Importantly, we achieved a major funding milestone for our flagship Prieska Copper-Zinc Project during the Quarter after successfully negotiating a US$87 million funding package with the leading Canadian streaming and royalty finance company, Triple Flag. We have developed a strong working relationship with Triple Flag underpinned by a shared commitment to excellence in ESG, community engagement and the development of a new generation of mining projects that will deliver significant benefits for the future of South Africa.
“We have also continued to progress the capital raising initiated towards the end of the Quarter, and I would like to take this opportunity to thank existing and new investors who have supported this initiative, particularly considering the events that have unfolded in global financial markets since we embarked on the capital raising.
“The placement is being undertaken in three tranches to allow investors with whom we have had positive engagement in recent weeks some additional time to consider their participation. In addition, we’re offering a Share Purchase Plan to allow our loyal existing shareholders to participate at the same offer price as the Shares issued under the Placement.
“The proceeds of the capital raising will allow us to complete the early mining feasibility studies and commence mine dewatering, which we consider the most important next step in the development of the Prieska Project.
“On the project development front, the Orion team continued to re-evaluate the Prieska Project development schedule to assess the potential to bring forward production – even on a reduced scale initially – at Prieska, as announced last Quarter. This could deliver a major breakthrough for the Project.
“Investigations into this early production scenario and the potential to extract remnant pillars have progressed well, with outstanding results received during the Quarter from in-fill drilling of the +105 Level Crown Pillar. Importantly, the grades intersected to date mostly exceed that of the average grade of the standing Inferred Resource estimate, making the early start of mining via an open pit an increasingly attractive opportunity.
“During the Quarter, we also advanced our beneficiation investigations by securing exclusive access to what we believe could be game-changing refining technology for the production of battery metal salts and fine carbonyl powders.
“Our agreement and earn-in right on the development of a refining facility in the Northern Cape comes as these products all experience surging demand within the burgeoning battery manufacturing sector. We are thrilled about this strategic partnership since the battery materials sector is a key focus for Orion due to its strong growth outlook and its pivotal role in driving reduced global carbon emissions.”
Recession fears, war in Europe, interest rate hikes and Chinese lockdowns all contributed to declining base metal prices during the Quarter. Copper – which is widely regarded as a barometer for global economic activity – peaked in March 2022 but has since been swept along by the bearish sentiment that caused all base metals prices to fall sharply towards the end of the June 2022 Quarter. Metal prices have since stabilised and analysts are projecting a recovery over coming months.
While zinc and nickel were not immune to the commodity price sell-off, the nickel market appears to have stabilised following the March 2022 “short-squeeze” price spike which resulted in a week-long suspension of nickel trading on the LME.
LME COPPER PRICES APRIL 2022 – JULY 2022
Source: London Metal Exchange
LME ZINC PRICES APRIL 2022 – JULY 2022
Source: London Metal Exchange
LME NICKEL PRICES APRIL 2022 – JULY 2022
Source: London Metal Exchange
Longer-Term Outlook Remains Strong
While prices fell during the Quarter, inventories of most metals also continued to fall sharply during the Quarter, reinforcing the longer-term robust outlook which is underpinned by surging demand for renewable energy applications as the global energy transition gathers pace. For example, LME copper inventories fell by 52%, zinc by 58% and nickel by 35% in the June 2022 Quarter.
Importantly, while metal prices fell to their lowest values in nearly two years, they did in fact decline to a value above the metal prices used in Orion’s 2020 Bankable Feasibility Study (BFS-20) for the Prieska Copper-Zinc Mine (PCZM). Orion’s BFS-20 included metal price assumptions of US$6,680/tonne Copper and US$2,337/tonne Zinc, below the recent low prices of US$6,998/tonne Copper and US$2,920/tonne Zinc.
Vanessa Davidson, Director of copper research and strategy at the CRU Group, told delegates at the Prospectors and Developers’ Association of Canada (PDAC) Conference that, in addition to very low industry stocks, copper projects were taking longer to develop due to stringent ESG requirements, more complex product characteristics and greater stakeholder demands. Acknowledging the growing demand for copper to power the green-energy transition, she said the world will require 5.3 million tonnes per annum (Mtpa) more copper by 2030, assuming a 2.1% per annum global growth rate.
This view was reinforced by S&P Global in an extensive report on the outlook for copper that was released on 15 July 2022. The key takeaway from the S&P report is a prediction that global copper demand will double from the current level of 25Mtpa to 50Mtpa by 2035, given its essential role in the electrification of the world and the global push for net-zero emissions by 2050.
S&P concluded that the push for net-zero could be “short-circuited” unless copper supply steps up in a meaningful way, with the forecaster estimating that another 25 Escondida-sized copper mines will be needed to meet the demand surge over the next decade and a half.
S&P Forecast Global Copper Refined Usage – Driven by the Energy Transformation
Source: S&P Global – The Future of Copper Report, July 2022
Impact on Capital Raising
On 22 June 2022, Orion announced a capital raising to underpin its Early Production Strategy at the flagship Prieska Copper-Zinc Project (Prieska Project). Thanks to the support of existing and new investors, the Company has received firm commitments for the first two tranches (~$6 million) of a three-tranche placement targeting up to $20 million at an issue price of 2.0 cents (being ZAR22 cents) per fully paid ordinary share (Share) and, in respect of the first two tranches, the issue of one option for every two Shares issued (exercise price of 2.5 cents (being ZAR27.5 cents) and an expiry date of 30 June 2023).
As evident in the graphs above, extreme volatility has been experienced in global commodity markets over recent months. Global financial markets have also been in turmoil since the Company entered into a trading halt for the capital raising on 10 June 2022. This has resulted in the capital raising being undertaken in three tranches, to provide additional time for potential participants in the third tranche to consider their involvement. Discussions with potential participants in Tranche 3 are continuing.
Considering the volatile and uncertain global economic and investment outlook, Orion is implementing prudent cost containment measures across the business.
A successful completion of the capital raising, together with other funding sources, will put the Company in a strong position to progress towards development of its key near-term production assets in the second half of 2022, helping to realise its vision of becoming a fully-integrated producer of future-facing metals in South Africa’s Northern Cape Province.
The Company’s key focus remains on commencement of mine dewatering and the completion of feasibility studies for the PCZM Early Production Scenario, progress the Feasibility Study on the Okiep Copper Project, the Company’s second advanced near-term production asset in the Northern Cape and undertaking battery precursor product production test work on Jacomynspan nickel-copper-cobalt PGE Project, its third key asset in the Northern Cape.
In addition to working closely with Triple Flag, the Company is also continuing to progress discussions with banks, leading development financing agencies, and other financing institutions, in relation to funding the development of the fully permitted PCZM. Importantly, very good progress towards a funding package has been made recently following an extended period of due diligence and negotiations with a leading development financing agency.
Refer to the Corporate Section, for additional information in relation to the Capital Raising and funding.
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