Ground Breakers: Could rich backing turn this long time developer into a miner?

South African copper and zinc developer targets up to $73 million in funding for Northern Cape mines
A company chaired by former Harmony Gold chair Adam Fleming will become a new cornerstone investor of Orion Minerals
Materials stocks bounce back after two tough days

It has been six years since Orion Minerals (ASX:ORN) picked up the Prieska copper and zinc mine, a historical producer regarded as a top-30 historic VMS base metal deposit at the time of its acquisition.

With an ore reserve of 14.5Mt at 1.1% copper and 3.2% zinc, Orion has boasted a BFS since 2019, updated a year later, but the path to production has hardly been a straightforward one.

The ~$60 million company has seen its value fall 60% over the past five years as efforts to develop Prieska and the neaby Okiep copper project have stalled.

There has been a sense the mine is carrying a discount from investors and the like thanks to its location in socio-politically hairy South Africa and that the same orebody in Western Australia would be fawned over. With Orion’s share price and market cap far below its funding requirements, gathering finance has been a jigsaw puzzle.

A US$87 million funding package from Triple Flag Precious Metals, including a US$80m stream fund to be paid off by 84% of future gold and silver by-product production from Prieska, brought the firm some of the way there last year.

It also has a funding facility from the Industial Development Corporation for 250 million South African Rand, around $20 million Aussie dollars.

But a new funding arrangement today, potentially raising up to $73m, could bring the junior closer to realising its production dreams.

Even more interesting may be the corporate backing that comes along with that contribution.

Crimson and Clover, over and over

That promise has come from a new cornerstone investor known as Clover Alloys.

The South African based chrome producer will take $6.7 million worth of Orion shares in a $13m placement also backed by long term shareholders and instos Delphi Group, Tembo Capital (whose shares will be issued in repayment of the balance of a loan facility) and Orion board directors.

The placement will also include an options package exercisable at 1.7c until November 30 if approved by shareholders at a general meeting around May 19, which would take the total haul to $73m if all exercised.

Clover is notable for the involvement of its chairman Adam Fleming.

A former chairman of Harmony Gold, Fleming’s Clover Alloys is in the process of building a third chrome recovery plant having started open pit mining at the Rustenburg Chrome Mine in January 2022, and boasts 1.5Mtpa of processing capacity with a mine life of two decades.

“Securing the involvement of Clover Alloys as part of a broad strategic funding package represents a gamechanger for Orion. The combination of a strongly supported A$13 million Placement plus an options package that provides a clear pathway to securing a total equity funding injection of A$73 million, puts us in a strong position to realise our growth vision as a major new South African base metals producer,” Orion MD Errol Smart said.

“Clover Alloys is a highly-regarded privately owned mining group with an enviable track record of value-creation and success in rapidly constructing and operating highly efficient processing plants. Clover Alloys’ expertise will be invaluable to Orion as we complete the Feasibility Studies at Prieska and Okiep and execute our rapid development plan.

“This investment brings huge momentum to our company and, together with the support of our other cornerstone shareholders, puts us in an outstanding position to become a near-term producer. We are delighted to have Clover on board and we look forward to developing a long-term strategic partnership with Clover that will deliver significant benefits to all our shareholders.”

Orion will use the funds to settle an outstanding amount on its Anglo American sefa Mining Fund facility, satisfying a condition to the draw-down of $10 million of early funding on the Triple Flag finance and its IDC convertible loan facility.

It will also progress the Prieska mine by starting trial mining and processing, along with completing feasibility studies on early production scenarios on Prieska and Okiep.

Orion also wants to advance metallurgical processing and refining test work and studies on its Jacomynspan nickel-copper-cobalt and PGE project also in the Northern Cape.

Orion Minerals (ASX:ORN) share price today:

And on the markets?

After two extraordinary days for gold miners the tables have turned, with bullion producers taking a pause and coal and iron ore stocks finding favour with investors.

All of the big Pilbara producers are in the green, with tidy fundamentals keeping prices of iron ore strong.

Singapore iron ore futures were up 0.78% to US$132.75/t this morning, dodging and weaving complaints from China’s National Development and Reform Commission that it would move to further regulate markets in response to high prices.

Coal miners lifted despite a fall in thermal prices again overnight to ~US$180/t (Newcastle 6000kcal).

The laggard among the big miners was 29Metals (ASX:29M), which revealed its Capricorn copper mine could be out for longer than first thought after “significant volumes” of water entered underground workings at the Esperanza South sub-level cave. 29M shares tumbled more than 15% in early trade.

29M had initially expected a suspension to last 3-4 weeks, with the massive rainfall numbers seen in North Queensland also prompting production halts at Evolution Mining’s (ASX:EVN) Ernest Henry copper-gold mine.

New Century Resources (ASX:NCZ) also entered a trading halt today pending an update about the impact of weather events on its tailing retreatment operation at the Century Zinc mine.

The materials sector lifted 0.55% by 1pm AEDT.