Base metal development company Orion Minerals (ASX: ORN) has revealed the results from a definitive feasibility study (DFS) on its flagship Prieska copper and zinc project in South Africa, showcased by a pre-tax net present value (NPV) of about $800 million and an internal rate of return (IRR) of 31 per cent.
De-risked path to production
The study maps a path to production and cash flow via by a “de-risked” two-stage development strategy with an initial shallow underground mining paving the way for longer-term development of the deeper and large-scale ‘Deeps’ resource.
More specifically, the study points to an initial ‘Upper-Level Phase’ of production with near-surface supergene sulphide ore to be mined from an existing decline. Here, first production is expected 13 months after start of construction and continuing for more than four years.
Capital expenditure to achieve first concentrate production under the Upper-Level Phase is estimated at $49 million.
Subsequently, the ‘Deeps Phase’ is forecast to begin after de-watering of the mine, refurbishment of the main shaft, and construction of the mining infrastructure.
Combined, the two-stage life of mine for the envisaged operation is estimated at 13.2 years, with a payback period from the start of construction of 5.8 years.
Robust economic profile
The proposed mine is projected to deliver total undiscounted free cash flows of nearly $1.8 billion on a pre-tax basis.
The study estimates all-in-sustaining costs of US$4,550 per tonne of copper equivalent metal sold, with an all-in-sustaining margin of 52 per cent when using a copper price of US$9,480 per tonne and an ore processing rate of 240,000 tonnes per annum for the Upper-Level Phase, and 2.4 million tonne per annum for the Deeps Phase.
Nameplate production is expected to total 22,000 tonnes of copper and 65,000 tonnes of zinc each year.
Management noted that the combination of historical infrastructure and recently installed facilities during trial mining at Prieska help facilitate a more rapid path to first production, coupled with reduced capital costs.
Total capital expenditure is estimated at about $607 million, including contingency.
Orion Minerals managing director and chief executive officer, Errol Smart, commented:
“The outstanding results outlined in the DFS-25 confirm the potential to develop a long-life, financially robust mining operation via a two-phase development plan which substantially de-risks the mine development pathway and fast-tracks initial cash flow.”
Large scale project
All up, Orion has defined probable ore reserves at Prieska consisting of 15.6 million tonnes at 1.1 per cent copper and 3.1 per cent zinc. This equates to 164,000 tonnes of contained copper and 458,000 tonnes of zinc.
Beyond the currently defined life of mine, the company believes the project hosts additional upside potential from the conversion of more mineral resources into ore reserves.
So far, the mineral resource defined at Prieska totals 31 million tonnes at 1.2 per cent copper and 3.6 per cent zinc.
In addition, management noted that the project could hold further mineralisation at depth where drilling and downhole electromagnetics indicate the presence of mineralisation beyond the limit of the current mineral resource.
Moving forward
Orion is now set to turn its attention towards finalising its financing strategy for Prieska which is expected to consist of a combination debt, equity, and offtake related funding. In turn, concentrate offtake negotiations are also on the cards.
On an operational level, the company is now set to pursue project implementation planning as wells as agreements with service providers for key early works activities and long lead items.