Orion Minerals secures watershed financing and offtake agreement with Glencore

Mining exploration company Orion Minerals’ share price leapt over 21% after it announced a financing agreement for up to R4.35 billion, along with an offtake agreement, with global commodity giant Glencore.

"This is a watershed moment for Orion, with the proposed Glencore funding enabling the company to transition into a producer. I am pleased that an industry major such as Glencore will be working with us to move to a binding agreement over the next four to six weeks,” said Orion’s MD and CEO Tony Lennox.

The share price gain of the mining exploration company, which focuses on copper and zinc in South Africa and Australia, rose to 23 cents, representing a rebound after the price had declined steadily from 20 cents a year ago to as low as 12 cents a share last month.

"Tranche A enables the company to move swiftly into first production and first cash flow from mining the Uppers at Prieska. Crucially, the early drawdown of Tranche B allows Orion to commence early works on the Deeps in accordance with the Prieska Definitive Feasibility Study. This will allow for smooth and continuous operations as we move from the Uppers towards full-scale operations from the Deeps,” said Lennox.

"In parallel with the due diligence process with Glencore, we will continue discussions with our current funding partners," he added.

Orion Minerals stated that its subsidiary, Prieska Copper Zinc Mine (PCZM), had signed a non-binding term sheet with a wholly owned subsidiary of Glencore plc, for financing and concentrate offtake for the Prieska project.

Glencore is one of the world's largest diversified natural resource companies and a major producer and marketer of more than 60 commodities.

The financing will be available in two tranches: Tranche A of $40 million will be used for the construction and startup of the Uppers at Prieska, while Tranche B, ranging from $160m to $210m, will be used for the construction and startup of the Deeps at Prieska. Up to $50m can be drawn early to start early works on the Deeps.

Glencore is conducting due diligence, the success of which is a condition for the funding arrangement. Drawdown will be based on milestones for each tranche to be agreed upon during the due diligence process.

The offtake arrangement will be at competitive market pricing and payables terms, comprising 100% of bulk concentrates from the Uppers for five years, 100% of copper concentrates from the Deeps for ten years, and 100% of zinc concentrates from the Deeps for ten years. There will also be flexibility for global delivery in accordance with prevailing market conditions.

"We have been following Orion and PCZM's progress at the Prieska project for some time and look forward to playing our part in financing the mine's development and subsequent marketing of the concentrates. We are committed to completing our due diligence expeditiously and seeing Prieska recommence production as soon as possible," Glencore's Toby Spittle, Copper Marketing, said in a statement.

Industrial Development Corporation (IDC) Acting Divisional Executive IPPD, Rian Coetzee, stated that as a significant early funder of PCZM, the IDC was excited about advancing the project to implementation.

“The implementation of the project will bring significant job creation in the Northern Cape and contribute to the socio-economic development of the region. The IDC will maintain its support for the project and be part of its successful implementation," said Coetzee.

BUSINESS REPORT