Advanced Zn-Cu project being fast tracked to feasibility
The PC project is located 270 kilometres south-west of Kimberley (the regional capital) in the Northern Cape province. Importantly, the project has access to significant local and regional infrastructure, with mine infrastructure including a regional power grid feed, bitumen access roads, access to a bulk, treated water supply and a 1,900 metre landing strip. Several large commercial wind and solar generation projects are operational in the surrounding area and the mine is located just 48 kilometres from a railway siding at Groveput with an open-access railway line connecting the site to the world-class export port of Saldanha Bay.
In November 2015 the Company announced the signing of a binding term sheet giving Orion the right to acquire the unlisted company, Agama Exploration & Mining (Pty) Ltd (Agama), a South African registered company which through its subsidiary companies, ultimately holds an effective 73.33% interest in the PC Project and the Marydale gold project (Option). The commercial terms were revised in May 2016 and are detailed below. The projects have a well established Broad Based Black Economic Empowerment (BBBEE) ownership structure (26.66% ownership) in place with strong local partners.
The PC Project cover the historical Prieska Copper Mine, which was operated by Anglovaal Limited between 1971 and 1991. During this time the mine produced over 430,000 tonnes of copper and more than 1 million tonnes of zinc from an underground operation based on an initial drilled reserve(3) of 47Mt grading 1.74% copper, 3.87% zinc, 8g/t silver, 0.4g/t gold and 30% pyrite. The operation was a significant financial success for its owners, returning ZAR2.64 per share (US$1.16 in money of the time) in dividend yields for an investment of ZAR0.5 per share (US$0.70) by the shareholders.
Mining ceased in 1989, with milling ceasing in 1991. The site was closed and rehabilitated in 1991. The premature closure of the mine was influenced by an early operating decision by the owners to focus on maximising dividend yields, rather than investing further in underground capital development to extend mine life. The decision was influenced by uncertain economic and political environment in South Africa in the mid-1980s.
The underground development and regional infrastructure and services in place at the mine is estimated by Orion to have significant replacement value, which will assist in the feasibility and economics of any potential redevelopment of the mine. The underground mine is accessed via an 8.8 metre diameter concrete lined vertical shaft to a depth of 1,024 metres. Three separate ramp declines (6.5 metres by 3.8 metres) have been developed to access the deepest ore at a vertical depth of 1,140 metres. The mineralisation lies in a synformal structure and the target lies in the keel and upturned limb of the syncline, above 1,200 metres.
2. Source of information in this section: Mine records.
3.Note – this is not a JORC Compliant figure, source Prieska Copper Mines Ltd Annual Report 1970.
Orion’s Due Diligence and Confirmatory Drilling
The terms of the Option enables Orion to continue to conduct comprehensive due diligence, including geophysics, in-fill and confirmatory drilling and feasibility studies in advance of a decision to exercise the Option and to advance discussions with prospective investors interested in financing and/or joint venture participation in the acquisition.
Since signing of the Option the Company has progressed extensive due diligence investigations including:
As part of its due diligence process, Orion has digitally captured, validated and modelled all available project drilling data, from hard-copy sources. This work has enabled the Company to calculate Exploration Targets for near surface mineralisation comprising both oxide, supergene and primary sulphide material to a depth of 100 metres which is potentially accessible via an initial open pit (+105 level Exploration Target) and an Exploration Target for the deeper sulphide mineralisation identified by historic drilling (Deep Sulphide Exploration Target) (refer Table 1 and ASX Release 18 November 2015).
The Exploration Target is based on 182 historical drill intersections, which can be relied on for width and depth of mineralisation, while 88 historical drillholes provide information on grade of mineralisation (Figure 14 and 15). While the data has shortcomings due to loss of some historic records, which prevent estimation of JORC 2012 compliant resources, the Company is encouraged by the assessment by its Competent Person that limited infill and confirmatory drilling may be sufficient to establish JORC 2012 compliant resource estimates. The historic data and mine records also provide important information for preliminary mine design and selection of mining methods to advance scoping studies.
|PC Project – Exploration Targets|
|Area||Tonnage Range||Cu range (%)||Zn range (%)|
|+105 Level||3,000,000 – 4,500,000||1.0 – 1.6||1.3 – 2.0|
|Deep Sulphide||7,000,000 – 11,000,000||1.2 – 1.8||3.9 – 5.9|
Table 1: Exploration Targets at the PC Project. Detail and supporting information relating to these Exploration Targets is contained in the ASX Release of 18 November 2015.
The current drilling program at the +105 Level Exploration Target. is designed to confirm, in-fill and extend the historical drilling and targets mineralisation that would be amenable to extraction via open pit (Table 1). The latest drilling results can be found in our Announcements section. Best results at this time include:
7m at 17.8% Zn and 1.41% Cu (OCOR016);
17m at 9.98% Zn and 2.01% Cu (OCOR023); and
3m at 7.4% Cu and 4.34% Zn (OCOR017).
Option Agreement - Agama option (South Africa)
The Company has secured an exclusive option to acquire a 100% interest in Agama Exploration and Mining (PTY) Ltd who holds an effective 73.33% interest in the Prospecting Rights over the historic Prieska Copper Mine (PC) and the nearby Marydale project.
Option term expires 31 December 2016. As part of the terms of the agreement, the Company is currently undertaking a drilling and survey program across the PC and Marydale projects as part of the due diligence process.
The effective option price is ZAR85.5 million (~A$8 million) = ZAR64 million cash and ZAR21.5 million in Orion shares. Each share issued will have an attached unlisted option, exercisable at a 100% premium to the share issue price and expiring on the date which is 24 months following the date of issue of the unlisted option. The PC project has also secured ZAR30 million facility to partly fund a feasibility study.
Refer ASX release 13 May 2016 for full terms of the option agreement.