Key elements of junior metals explorer and mining aspirant Orion Minerals’ overarching strategic funding package have culminated in the securing of total funding of almost R2.5-billion – more than double the company’s current R900-million market capitalisation. 

“Our ability to raise this capital clearly reflects the fact that Orion is now poised for a rapid transformation from explorer to developer and, ultimately, operating mining company of a premium portfolio of copper-focussed base metal mines,” Orion MD and CEO Errol Smart said on April 26 upon the release of the company’s latest activity report for the quarter ended March 31. 

He said that combined predevelopment funding being provided by mining investment firm Triple Flag and the Industrial Development Corporation (IDC) would allow the company to progress its development plans both for the flagship Prieska copper/zinc project and the Okiep copper project, both in the Northern Cape. 

“We have taken our first base metals project, [Prieska], closed over 30 years ago, to its current status as a fully-permitted, ready-to-mine project with a long life-of-mine. We have also expanded our business to include other base metal hubs within the Northern Cape,” Smart said. 

During the quarter, Orion received firm commitments for a two-tranche share placement to raise about A$13-million. Tranche one has been completed at A$10.66-million, while tranche two is still subject to shareholder approval.  

The placement also offered participants four free attaching options for each share issued under the placement, exercisable at 20c a share and expiring on November 30. The total value of the equity funding package, assuming all placement options are ultimately exercised, is about A$73-million. 

In addition, privately-owned South African mining group Clover Alloys has become a cornerstone investor in Orion by subscribing for about A$6.7-million of shares. Clover Alloys has much experience in the development of modular processing plants, which Orion believes will be of significant strategic value as the company brings its key base metal projects into production. 

This move will also see Clover Alloys CEO Philip Kotze become a nonexecutive director on Orion’s board. 

Smart said the capital raise puts Orion in a strong position to access the previously announced $87-million funding package from Triple Flag and a R250-million funding facility secured from the IDC. 

The senior secured convertible loan facility from the IDC will be used to fund early works at Prieska.  

Smart said the IDC convertible loan, together with the Triple Flag funding package, would underpin Orion’s early production strategy at Prieska, including the completion of a feasibility study for early mining and the start of mine dewatering. 

These developments have led Smart to believe that Orion is now in a strong position to become a rapidly growing supplier of future-facing metals to global markets, at a time when demand for such metals is expected to surge because of global efforts to decarbonise. 

Orion’s 2023 outlook for base metals hinges on the interplay between a slowing global economic outlook and the green energy transition.  

Smart noted that commodities such as copper had a subdued start to the year, as tightening central bank monetary policies, the strengthening US dollar and weak demand from China resulted in price volatility. 

Copper prices opened the year at $8 386/t and started an early ascent to reach a seven-month high of $9 436/t by January 20. At the end of the first quarter, the price closed out at $8 933/t.  

Precious metals authority and retailer of bullion products Kitco has previously pointed out that copper has become a long-term critical metal, as the world upgrades its energy infrastructure and transitions to green renewable energy. As the primary metal needed for electrification, copper is essential to all energy transition plans. 

“Longer-term, we believe copper demand will improve amid the accelerated move into renewables and electric vehicles (EVs). In EVs, copper is a key component used in the electric motor, batteries and wiring, as well as in charging stations. Copper has no substitutes for its use in EVs, wind and solar energy, and its appeal to investors as a key green metal will support higher prices over the next few years,” multinational financial services company ING analysts recently said. 

Analysts from private banking company S&P Global agreed, stating that they expect global demand for copper to double by 2035. Demand growth will, however, be suppressed this year, causing the refined market surplus to widen.  

“We expect the supply response to lag, however, on a thinning pipeline caused by dwindling exploration budgets and a dearth of significant discoveries,” S&P said. 

Orion notes that zinc prices had trailed copper’s trajectory, scaling to $3 509/t at the end of January after starting the year at $3 025/t. Last year, zinc experienced its highest price volatility in a decade, with consulting firm Wood Mackenzie analysts expecting heightened volatility to remain a feature throughout the year.  

Ratings agency Moody’s Investor Service recently noted that while zinc prices will be supported by tight supply, low inventories and higher energy costs will displace high-cost producers.

Regarding nickel, Moody’s predicted a surplus of nickel this year but noted that incremental growth in demand from the EV market would create supply deficits.

While nickel prices rallied late last year, prices declined in the first quarter of this year. Starting the year at $32 100/t, nickel declined to close out the first quarter at $23 050/t, driven by expectations of supply tightness easing off. In this regard, data from the intergovernmental organisation the International Nickel Study Group showed that a 22% year-on-year increase in global nickel production occurred in January.