ORION Minerals can finally begin development of its Prieska Copper Zinc Mine after the first $40m phase of a $250m metals offtake agreement with Glencore became unconditional.
Shares in Orion gained an initial 3% in Johannesburg, but there will be more to come for the group should it secure the R2bn balance of funding for PCZM ‘Deeps’, the second stage of the mine.
For now, the $40m to be received from Glencore will enable mining to begin on the ‘Uppers’ – or near-surface – orebody of the mine, with a view to first metal at the end of 2027.
Tony Lennox, MD and CEO of Orion, said on Monday that finalising the offtake deal with Glencore had been “a lengthy and detailed process”. He added that it marked “a major milestone for Orion and a pivotal moment in our transition from explorer to developer and producer”.
The agreement with Glencore was first made public in September last year. Since then, Orion has worked on engineering and development plans for PCZM. It has also picked its contractors.
Under the terms of the deal, Orion will supply all of the bulk concentrates from both the Uppers and Deeps sections of PCZM – the former for five years and the latter for 10 years. A separate $87m agreement to supply gold and silver by-products to Triple Flag, a North American investor, will rank equally with the Glencore offtake.
Attention now turns to financing the development of the more complex PCZM ‘Deeps’ in order to unlock the remaining $210m of the Glencore financing. Orion said it would “continue to engage with existing and new funding partners to secure the remaining project financing required to proceed with development of the Deeps”.
PCZM, a brownfields project in the Northern Cape, is scoped to deliver 22,000t of copper and 65,000t of zinc per year.
Orion has received mixed news in the past few months. Its shares were recently added to the ASX’s All Ordinaries index, which attracts tracker funds.
But it lost a cornerstone investor in Tembo Capital Management. The UK private equity firm had been a staunch supporter of the miner since 2017, providing a convertible loan and backing several funding rounds.
For South Africa, Orion’s success would be a relatively rare victory for mining against the odds. The country’s junior and development mining sector has shrunk owing to a lack of investment, with investors scared off by unhelpful switches in mineral policy.
Last year, amendments to the keystone Mineral and Petroleum Resources Development Act that threatened to damage investor confidence were tabled in Parliament. However, recent meetings between industry and government on the amendments point to a good outcome, according to industry sources.