Orion Minerals Ltd (ASX:ORN, JSE:ORN) has inked non-binding term sheets for an US$87 million funding package that will advance its Prieska Copper-Zinc Mine in South Africa’s Northern Cape Province.
The explorer has teamed up with precious metals streaming and royalty company Triple Flag to exclusively advance discussions and ink definitive funding agreements, which are anticipated next quarter.
This funding package is expected to underpin an early production scenario at Prieska that includes a plan to bring forward production from the open pit while dewatering the underground mine in preparation for long-term operations.
At this stage, the funding package involves two components: a precious metal stream and additional early funding.
“Strong relationship with Triple Flag”
Orion managing director and CEO Errol Smart said the company was “absolutely delighted” to have achieved this milestone funding arrangement for the Prieska Copper-Zinc Project.
“We have developed a strong working relationship with the Triple Flag team and have been particularly impressed by their technical mining expertise and incisive questioning, as well as their diligent assessment of Orion’s ESG commitment and their own alignment with our ESG goals,” Smart explained.
“We also took great comfort from reports of how Triple Flag had engaged with one of their existing South African streaming counterparties during the COVID lockdown period when the streaming counterparty endured difficulties associated with the temporary shutdown of a converter at its primary concentrate offtaker, and these challenges affected mine operations and the delivery of metal.
“Triple Flag worked with the mining company and its host community to weather the storm, providing relief funding for the community during this very difficult time. That degree of integrity really impressed us."
The fine print
The funding agreement’s precious metal stream comprises US$80 million (around A$110 million) of funding to be drawn down in tranches, alongside other bank and/or third-party funding during mine development.
Orion will also receive payments of 10% of the value of delivered payable precious metal paid at spot London Metals Exchange (LME) pricing at the time of delivery.
The proposed stream rates for gold and silver to be delivered under the agreement equal:
- 84% of 'Payable Gold' until 94,300 ounces of gold are delivered under the stream agreement; and
- 84% of 'Payable Silver' until 5.71 million ounces of silver are delivered, with each stream rate reducing to 50% after the respective milestones.
Orion and Triple Flag have also entered a term sheet for an additional A$10 million funding arrangement, which will help Orion complete the early mining feasibility study and commence dewatering at the Prieska mine.
In addition to completing due diligence and entering a definitive agreement, the funding arrangement drawdown relies on Orion securing an additional A$20 million funding to execute the agreed work, focused on early dewatering.
The additional A$20 million may be secured as equity or other funding arrangement satisfactory to Triple Flag.
These term sheets are non-binding other than in respect of confidentiality, exclusivity until January 31, 2023, and transaction costs (the amount payable to Triple Flag is capped at US$500,000).
Next steps
Smart continued: “This proposed transaction, if completed, includes funding from Triple Flag to support Orion’s community social funding projects with up to US$55,000 per annum for the life of the Prieska Copper-Zinc Mine mine, which funding will commence upon the payment of the first tranche of the stream funding.
“We look forward to working with the Triple Flag team to finalise the funding arrangements and commence mine dewatering at Prieska Copper-Zinc Mine and complete the early mining feasibility studies that are currently underway to determine the optimum development path.
“We see the commencement of mine dewatering as the most important next step for the development of the Prieska Copper-Zinc Mine, with this milestone marking the start of an exciting period of unlocking growth and value.”
ESG synergy
Triple Flag CEO Shaun Usmar said the business was pleased to provide Orion with funding support for “a very exciting base metals mine development.”
“Triple Flag prides itself on partnering with companies on projects that share our high ESG credentials, with Orion demonstrating a strong commitment to an area of ever-increasing importance,” Usmar stated.
“In a world seeking copper to enable decarbonisation and climate change imperatives, the Prieska Project is well-positioned for near-term supply delivery given the brownfield nature of this project and the significant mineral endowment that promises a long and prosperous future for Orion, local communities and its stakeholders.
“We are excited about the prospect of playing a key part of delivering this mine via our A$10 million early investment, US$80 million precious metals by-product stream and community support programs.”