Orion Minerals Ltd (ASX:ORN) (JSE:ORN) recently published a bankable feasibility study (BFS) on its Prieska copper project indicating a post-tax real NPV of $380 million.
Orion’s BFS highlights low capital intensity, short lead time, low costs and exceptional returns.
Following is an extract from Vunani Securities’ research report on Orion:
Orion Minerals is a JSE- and ASX-listed base metal exploration company.
It owns exploration assets in Australia, where its partner, the Independence Group (ASX:IGO), is actively expanding its exploration efforts into Ni-Cu and Cu-Zn prospects.
In South Africa, it owns 70% of the Prieska project, where the company recently completed a BFS that indicates robust returns, short lead times and significant upside to the first stage of the project.
The company also has significant prospecting rights in the Northern Cape.
- Our valuation confirms the ZAR4bn valuation for a 10 year project, but building a mine with a 10 year life is not the investment case, in our view. Our interviews with the executive team, together with our interpretation of the near mine exploration results and the already demonstrated potential to find additional satellite orebodies lead us to believe that the Prieska project may have a life exceeding 20 years.
- We believe the orebody will sustain free real cash flows of ZAR1.2bn per annum for at least 20 years at the projected production, grades, costs, and recoveries.
- The investment case, in our view, is therefore the potential future FCF yield of more than 100%, even after allowing for a doubling of the shares in issue.
- A capital raise to develop the mine may result in the number of shares doubling in the near term, which results in a one-year target price of ZA60cps and we estimate the fair value of the company to be ZA150cps, BUY