Our timing could not be better - copper is expected to go through a major transformation in the upcoming three years due to the electrification of the world’s transportation fleet and the development of the associated infrastructure required to support that. While there is an ongoing debate on which battery metals will dominate the market in the upcoming years, copper remains the constant element and arguably the most important raw material to this transformation.

Errol Smart

MD AND CEO, ORION MINERALS

July 30, 2019

Can you elaborate on Orion Mineral’s recent bankable feasibility study (BFS) and the long-term vision for the Prieska project?

The Prieska deposit was a good fit as Orion Minerals sought a cornerstone project for a long-term production environment. Banks are very prescriptive about what they want when funding resource developments – to get their money back within three years and then see at least six years of production after that. Our BFS was therefore a 10-year study designed to demonstrate project longevity and viability. However, as a geologist, I can see clear potential for a much longer operation – we estimate at least a 17-year project life.

The Prieska project has a very significant ore body. There is no listed base-metal production project in South Africa and there is currently only one copper producer and one zinc producer in the country. Orion Minerals will be the country’s next copper and zinc producer with the Prieska project being a copper-predominant project. And our timing could not be better - copper is expected to go through a major transformation in the upcoming three years due to the electrification of the world’s transportation fleet and the development of the associated infrastructure required to support that. While there is an ongoing debate on which battery metals will dominate the market in the upcoming years, copper remains the constant element and arguably the most important raw material to this transformation.

The Prieska project is located in a belt where we have secured 3,000 square km of mineral rights containing 22 known copper-zinc deposits that have not yet been fully explored. We also have 14 known copper-cobalt-platinum deposits, one of which had a feasibility study carried out by Anglo American. Our vision is to create a base metal production hub in South Africa.

What is Orion Mineral’s funding strategy?

The project will require a capital investment of approximately $AU400 million including contingency to build the mine. Our funding strategy will be majority debt as South Africa has a highly sophisticated and well-developed debt market.

The JSE (Johannesburg Stock Exchange) is also a massive capital market. While it has not traditionally invested in junior stocks and exploration, it is a great source of capital for producing or development assets. Therefore, Orion Minerals has completed a secondary listing on the JSE to tap into this capital market. There are currently no copper or zinc stocks available on the JSE and we want to provide South Africans with the opportunity to invest in both. There is an enormous pool of sophisticated, high-quality entities willing to invest and we have positioned ourselves to allow South Africans to become investors in their own country.

The mining charter has been received with varied enthusiasm. What are the major challenges?

The procurement equity side of the mining charter is an issue. For example, if I want to buy a machine located in Sweden, the Swedish company has to secure a South African partner in order to sell the machine. That said, I believe the world has overreacted somewhat to this issue – while it poses an obstacle, it does not risk our ability to continue operations.

We have heard repeatedly that the South African mining sector is a sunset industry. What is your estimate of this statement?  

It is a sunset of the traditional mining methods and traditional mines. South Africa has some of the richest ore bodies in the world which resulted in new mines being built next to the existing ones. Following mine closures, the labor forces were moved to the newer sites and, in the process, transferred the sins of their fathers – meaning, they did not build new mines but rather new operations based on superannuated processes.

Technologically, the rest of the world has advanced way beyond South Africa as our specialized skills are not used to full capacity. At our Prieska project, Orion Minerals strives to create a low-risk, high-efficiency environment and we have put a lot of energy into educating the local communities. We want to foster a proper business mindset among the locals – meaning they should see themselves as business people functioning as suppliers to the mine rather than just employees. In this way we achieve an empowerment of the community, which brings mutual benefits to both parties.

Can you elaborate on the power situation in South Africa?

The biggest issue is that the power supply is completely centralized to Eskom. The state-owned Eskom was fraudulently operated under previous administrations, which resulted in the agency lagging behind in capital development and supply programs. Consequently, Eskom cannot sustainably and continuously deliver power with security at a reasonable cost. However, South Africa has one of the most successful renewable energy development programs in the world. The Prieska mine is surrounded by renewable energy sources and we see excellent potential for the operation to eventually be 100% sustainably powered.

What are Orion Mineral’s objectives moving forward?

We are in the process of optimizing the BFS and we see big opportunities for capital savings. In addition, we are in dialogue with a number of banks as well as equity providers and we expect to be fully financed by the end of 2019. Full development is scheduled to begin in early 2020.

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