ASX-listed mining company Orion Minerals has proposed to buy SA’s historic O’Kiep Copper Complex in the Northern Cape for R86m cash and shares to the three companies that own it.
Orion, which is reviving the Prieska zinc and copper mine 450km to the east, agreed it would pay R97m more for O’Kiep, depending on what it finds in an exploration programme.
Orion plans to produce 22,000 tonnes a year of copper contained in concentrate at Prieska apart from the zinc. O’Kiep and Prieska together could deliver 40,000-60,000 tonnes of copper a year in concentrate, said Orion CEO Errol Smart.
“Now you’re speaking big numbers. That starts becoming important,” he told Business Day.
As the concentrate, which is free of contaminants such as lead and arsenic, contains gold and silver as by-products, Orion will realise increased revenue for its concentrate sales.
O’Kiep, near Springbok in the northwest of the province, produced 2-million tonnes of copper during 150 years of operation before it was closed. Orion described the asset as having “outstanding exploration upside”.
Smart said the second asset gives the company risk diversification and a source of early cash because it could be brought into production faster than Prieska.
“A lot of the strategic investors we’ve been speaking to tell us they love Prieska but what are you doing next, how do you turn Orion into a mega-base metals company? We have created a clear road map now to create a large base metal producer in the Northern Cape,” he said in an interview.
He declined to say how much money is needed to start mining, which will focus on the shallow, easily extracted copper-bearing ore that previous mining companies left behind, as well as how much a concentrator plant would cost.
Development work
He is optimistic that production could start in 18-24 months.
Peter Major, a director in charge of mining investments at Mergence Corporate Solutions, which has a 12% stake in one of the three companies, said limited portals and development work has already started. Bringing O’Kiep back into production could be done quickly and cheaply.
Major had been trying for 12 years to find a credible buyer for O’Kiep and it was the track record Smart and his Orion team brought to the copper mine that swung the deal.
“This is a regulatory problem at O’Kiep, not a technical one, and [Smart] and his team have worked miracles with Prieska. They’ll do the same at O’Kiep. That was the decider for us,” Major said.
The mine only truly hit its stride from the 1940s and was closed in 2003, with three sets of owners in that time focusing on the high-grade copper of 2% to 3%, leaving behind anything less. There is much copper left in the O’Kiep area, said Major.
Orion has notched up exploration successes at Prieska and it intends to use its expertise to do the same at O’Kiep, which has an abundance of high-quality data and records by previous owners Newmont, the US mining company that operated the property for nearly 50 years.
Orion intends to deliver a scoping study into the construction of a mine in March.
Lion’s share
O’Kiep is owned by three companies: SA Tantalum Mining (Safta), which is 44% held by the Industrial Development Corporation (IDC); Nababeep Copper Company; and Bulletrap Copper Company. Orion is buying all three, apart from the shares owned by the Industrial Development Corporation (IDC).
Safta will receive the lion’s share of the upfront purchase price, taking R45m in cash and shares, and the other two companies will split the balance.
The exposure the 14 signatories will have to the O’Kiep and Prieska mines, giving them more value than they hold now, was the swing factor in the competitive bid for O’Kiep against other companies, said Smart.
“We moved very fast and nobody thought we would make a binding offer as quickly as we did,” he said, adding it took three months of negotiations to secure the deal.
O’Kiep passed through the hands of Newmont for 44 years up to 1984 when it was bought by Gold Fields SA and then Metorex in 1998. Metorex shut the mine in 2003.
The mine is flooded but Orion intends bringing its dewatering expertise from Prieska, where it is also dewatering the flooded mine, to clear the O’Kiep mine.
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