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AFRIcA

Orion polishes Prieska Prieska copper-zinc project

numbers updated BFS

Reserve: 14.5mt @ 1.1% copper
and 3.2% zinc

revised BFS has provided Orion Miner- to meet expectations. He said profiling the Resource: 30.49mt @ 1.2% copper
A als Ltd the impetus it needed to press company’s ESG work – including district- and 3.7% zinc
ahead with development of its Prieska base scale water management, renewable en-

metals project in the Northern Cape, South ergy and battery storage strategies and on- Capex: $414 million
Africa. going community upliftment – had ongoing Life-of-mine: 12 years

The updated BFS, released in late May, benefits. Throughput: 2.4 mtpa
showed a two-year increase to mine life (to “Although we did the original study with a

12 years), a 20% increase to copper produc- high level of ESG embedded, we probably Production: 226,000t copper;
tion (to 226,000t), a 17% increase to zinc hadn’t highlighted it enough,” Smart said. 680,000t zinc

production (680,000t), and increases to pre- “As we began explaining to investors what AISC margin: 47%
tax cashflow (43% to $1.6 billion), AISC mar- we were doing they were saying: ‘Why don’t

gin (47%) and NPV (36% to $779 million). you say more about this? Because our in- Free cash flow: $1.6 billion (pre-tax)
Payback was also reduced by five months vestors are interested’. These days most NPV: $779 million (pre-tax)

to 2.4 years from first production and peak fund managers are driven by ESG because Payback: 2.4 years
funding increased by 9% to $413 million. a lot of the money comes with tags because
Orion managing director Errol Smart told people won’t invest in things which don’t
Paydirt TV the results from the updated have decent ESG. right, for Vardocube is now at the final stag-
study confirmed the inherent growth oppor- “Working in an impoverished part of Af- es, after environmental approval in January.
tunities available at Prieska. rica, you are immediately in the limelight and And, the Minister [for Mineral Resources
“We put out the original BFS last June but we took a proactive approach from Day 1. and Energy Gwede Mantashe] has said the
had a bunch of studies still under way at the We see it as an investment in our total busi- DMRE is going to accelerate the granting
time,” Smart explained. “The project was al- ness because it pays a return.” of licences because they see it as a critical
ways great but we knew we could improve Market reaction to the BFS was muted redevelopment and financial investment op-
the circuit, improve water management but Smart was neither surprised nor disap- portunity for South Africa.”
and fiddle with schedule to mine some of pointed that Orion shares didn’t climb. That would allow Orion to benefit from a
the better ore earlier, which is important for “Getting investor reaction in this market is predicted upturn in copper and zinc prices
cashflow particularly when you are making tough but what we have seen is the institu- towards the middle of the decade.
the project bankable.” tional investors, the funds, ringing the phone “There is a whole lot of mines which
The revised economic numbers are off the hook,” he said. “The data room is a have shut down and they are not going to
based on a reserve of 14.5mt @ 1.1% cop- very busy place currently. This is what the be incentivised to reopen at current copper
per and 3.2% zinc. Smart said the increase updated BFS was about. Mums-and-dads prices, never mind any price below this,”
in metal had been recognised by investors. retail investors don’t want to see these num- Smart said. “By 2024 the copper and zinc
“There is a clear flick of a switch in peo- bers, it is just a reminder of how much it will prices will be responding very positively.
ple’s minds when you go from nine years to cost to fund development. But for institution- That’s what we want to do; construct now
12 years,” he said. al investors, those are exactly the numbers while construction costs are very low and
On the processing side, Orion incorpo- they want to see because you have got the harvest the asset in four years’ time when
rated a SAG mill into the flowsheet and re- multiple returns on investment.” the price is rising.”
moved secondary crushing, screening and The revised BFS complete, Orion now plans Much could depend on whether investors
rock conveyors. to step up funding arrangements for Prieska. deem South Africa a safe jurisdiction. The
Also included in the updated BFS was “We’ve engaged Macquarie on the debt country’s mining sector has continued to
more detailed information on the company’s financing and we are re-engaging with face upheaval as it deals with its problem-
ESG plans. South Africa’s relationship with strategic investors. We are prioritising the atic past, poor safety standards and falling
mining is delicately balanced and led by strategic investors because these are big, international influence. Smart has been an
Smart, Orion is highly sensitive to the need blue chip players and they dictate what active member of the South African Miner-
the banking looks like in als Council and remains confident the in-
the end. They open the dustry will recover.
banking up on the right “It is in a better space than what it has
terms.” been for a long time,” he said. “There is
If Orion can execute a good relationship with the Minister; he
according to plan, it could knows we come out fighting but he respects
be in construction at that, and we can talk straight to the man.
Prieska – a historical pro- “The mining industry has turned itself
ducer up to 1990 – before around as well. We are becoming masters
the end of the year. of our own destiny, the way we behave is
“We have the mining important and we do have better health and
right for Ripley [one half safety around our mines than is available in
of the orebody] which was the cities or rural areas.”
granted last year,” Smart
An updated BFS has strategic and institutional investors showing said. “The second mining – Dominic Piper
more interest in Orion Minerals’ Prieska copper-zinc project in
South Africa
aUSTRaLIa’S PaYDIRT JULY 2020 Page 61