Tim Treadgold is a Perth-based journalist who has been covering the resources sector for more than 40 years. He writes regular columns for Stockhead and attended Mining Indaba, the Africa’s biggest mining conference, this week.

There isn’t a competition at Mining Indaba, Africa’s biggest investment conference to determine the best performing company.

But if there was, Orion Minerals, a small Australian-based stock with deep African roots, would be a strong contender.

Over the past five days, a period which includes the lead-up to this week’s conference in Cape Town, Orion shares have risen by 42%, partly because a surplus of shares left over from a recent fund-raising has been absorbed by the market.

But the rise from 2.1c to 3c is more a case of Orion starting to attract the eye of investors who like a contrarian situation – stocks which appeal because they are different and have the potential to deliver exceptional future returns.

Orion is a company different in many ways with the most startling being that it is a small mineral explorer and project developer actually investing in the South African mining industry.

That shouldn’t sound as unusual as it is because South Africa has a resource development history which is the envy of the mining world. It’s also a history which is fading for multiple reasons, including onerous government regulations, repeated changes to mining laws, and a lack of local investment support for home-grown exploration stocks – of which there are very few.

What Orion has done, with the backing of Independence Group, an Australian miner which is part-owned by the country’s richest prospector, Mark Creasy, is put its foot on a piece of South African mining history, the mothballed Prieska zinc and copper mine in the remote Northern Cape Province.

A mine frozen in time

If Prieska was in a more mining-friendly environment it would have been revitalised years ago to catch the recovery in commodity prices and to enjoy the benefits of modern exploration techniques to find additional orebodies around the copper/zinc core worked for 20 years up to 1991.

“Frozen in time” is one way of describing Prieska which has been shown by Orion to contain enough unmined ore to support a fresh campaign lasting at least 10 years, with capital payback achieved in three years, and annual free cash flow of $A130 million.

There is almost certainly more to come because the nature of the orebody at Prieska, a volcanogenic massive sulphide (VMS), is that they often occur in clusters.

With such a good story to tell, Orion should not struggle to raise the estimated $300-to-$330 million in funding from banks and investors to redevelop Prieska, and it could become a poster boy for the creation of a small explorer/developer sector on the Johannesburg Stock Exchange (JSE).

The problem is that the JSE, and the wider South African business community, has never embraced a small mining culture. That means there is only a handful of small miners listed on what is an astonishingly thin mining section of stock exchange in a country largely built on mining.

At last count the JSE had 505 listed companies with just 31 described as miners, a function of a corporate and legal history which favoured big companies and land access laws which made exploration difficult.

Having failed to develop a small-company mining culture like Canada and Australia, there is now a desire in South Africa to play catch-up because there is finally recognition that small companies are the best explorers because they are prepared to go where the majors avoid.

It doesn’t have to be this way

To put that sad situation into perspective, a speaker at this week’s Indaba conference, Hans Kuipers, from BGC (formerly Boston Consulting Group), said that South Africa, with its huge mining reputation, currently accounted for 1% of global exploration spending.

It’s that background which explains some of the unusual aspects of Mining Indaba.

Firstly, it is not a conference about South African mining, it is about all-of-Africa mining held in the most picturesque city on the continent and the one where fund managers and investors feel most safe – as well as having the sunshine to warm frozen European and North Americans fund managers in an environment of free-flowing hospitality.

Secondly, most of the Australian mining and service companies at the conference do very little of their business in South Africa.

And thirdly, some of the Australian mining companies which have tried to find a way through the obstacles erected by government, environmental and social justice groups have given up, or are in the process of giving up.

Former glory – South African investment appetite for its huge resources isn’t great right now. Picture: Getty Images

A case in point can be found in another of the mining interests of Creasy, a man who has never walked away from a challenge, but who is now said to be in the process of ending his super-ambitious hunt for gold in the home of South African gold, the Witwatersrand.

The work of White Rivers Exploration, a Creasy business that assembled one of South Africa’s biggest holdings of exploration ground, is being slowed to a crawl according to Jochen Schweitzer, the local geologist in charge of the business.

If Creasy does contract back to his Australian base, the loss of White Rivers, which was once being prepared for a listing on the London Stock Exchange, will be a huge loss for the mineral exploration sector which is already depleted.

Orion, with its plans for a classic “brownfield” restoration of an old mine, could become the catalyst to encourage other small exploration and project developers to recognise that the government of the relatively new President, Cyril Ramaphosa, wants to see the creation of a small mining industry – in much the same way the JSE does.

But in the challenge of achieving what the government and the JSE want lies the puzzle – how do you get local South African investors to develop an appetite for a type of risk they’ve not accepted before, and how to do you get corporate South Africa to offer the type of high- risk, high-reward opportunities loved by a class of Canadians, Australian and British investors?

Orion, in its own small way, could be the link between the country’s mining history and its mining future – which is possibly another reason why its share price woke this week as the company started promoting its credentials as a stock sufficiently different to achieve something which has eluded others.