Orion Minerals subsidiary Prieska Copper Zinc Mine (PCZM) has signed a nonbinding term sheet with a wholly owned unit of Glencore for financing of $200m-$250m and concentrate offtake for the Prieska project.
The deal with Glencore enables Orion to transition to a producer. The news was welcomed by investors, with the share price jumping 15.79% to 22c in early trade on the JSE.
In terms of the deal, the financing will be made available to PCZM as a first tranche of $40m to be used for the construction and start-up of the ore bodies close to the surface at Prieska and a second tranche of $160m-$$210m to be used for the construction and start-up of the deeper ore bodies at Prieska. Of this, $50m may be drawn early to commence works on the deeper ore bodies, based on certain conditions being fulfilled.
These conditions include Glencore completing satisfactory due diligence, agreeing to an acceptable intercreditor agreement with existing secured lenders to PCZM and the parties entering into binding legal documentation for the facilities and the offtake as well as other conditions typical for financing and offtake arrangements of this nature.
Drawdown will be based on milestones for each tranche to be agreed during the due diligence process, with the first drawdown targeted for November.
PCZM has the right to repay the facilities early without penalty and Glencore has the right to offset amounts payable by it to PCZM under the offtake against amounts payable to Glencore under the facilities.
“This is a watershed moment for Orion with the proposed Glencore funding enabling the company to transition into a producer. I am pleased that an industry major such as Glencore will be working with us to move to a binding agreement over the next four to six weeks,” said Orion CEO Tony Lennox.
“Tranche A enables the company to move swiftly into first production and first cash flow from mining of the [ore bodies close to the surface] at Prieska. Crucially, the early drawdown of tranche B allows Orion to commence early works on the [deeper ore bodies] in accordance with the Prieska Definitive Feasibility Study. This will allow for smooth and continuous operations as we move from the [ore bodies close to the surface] towards full-scale operations from the [deeper ore bodies],” he said.
“In parallel with the due diligence process with Glencore, we will continue discussions with our current funding partners,” Lennox said.
“We have been following Orion and PCZM’s progress at the Prieska project for some time and look forward to playing our part in financing the mine’s development and subsequent marketing of the concentrates,” said Toby Spittle of Glencore’s copper marketing division.
“We are committed to completing our due diligence expeditiously and seeing Prieska recommence production as soon as possible.”
The terms of the offtake agreement include 100% of bulk concentrates from the ore bodies close to the surface for five years and 100% of copper and zinc concentrates from the deeper ore bodies for 10 years.
The Industrial Development Corporation has supported the project as an early funder.
“As a significant early funder of PCZM, IDC is excited about the prospects of advancing the project to implementation. The early support provided by IDC in developing the project is key to our mandate,” said IDC’s acting divisional executive for industry planning and project development, Rian Coetzee.
“The implementation of the project will bring significant job creation in the Northern Cape and add to the socioeconomic development of the region. IDC will maintain its support for the project and be part of its successful implementation,” Coetzee said.
Orion is upbeat about the prospects for its SA mine development projects, which the company hopes will allow it to start selling copper by next year.
Earlier this year the mining exploration group published feasibility studies for PCZM, the group’s flagship project and the first mine it plans to develop in SA, and its Flat Mines operation, the first mine to be developed at its O’Kiep Copper Project.
By bringing PCZM and O’Kiep to first production in the coming years, Orion expects to sell its first copper in late 2026 and aims to grow production to more than 50,000 tonnes a year by decade’s end.
PCZM is a key part of the group’s portfolio, with a posttax net present value estimated at A$568m (R7.1bn). The asset is expected to produce 213,055 tonnes of copper and 610,630 tonnes of zinc over its lifespan.
The group also sees significant potential in O’Kiep, which it hopes to restore to its former glory through further drilling and feasibility work this year.
In previous decades, O’Kiep consistently produced 30,000-40,000 tonnes of copper a year under the ownership of Newmont and Gold Fields.
“The exploration upside of the region, in addition to the opportunity to increase resources through further resource definition drilling, is significant,” said Lennox, adding that “we envisage developing multiple mines at O’Kiep over time.”
With Jacob Webster
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