Wrap Text
Orion signs definitive agreement for ZAR250M convertible loan to advance development of the Prieska Copper-Zinc Mine
Orion Minerals Limited
Incorporated in the Commonwealth of Australia
Australian Company Number 098 939 274
ASX share code: ORN
JSE share code: ORN
ISIN: AU000000ORN1
Orion signs definitive agreement for ZAR250M convertible loan to advance development of the
Prieska Copper-Zinc Mine
Convertible Loan, together with Triple Flag US$87M funding package, will underpin Orion’s early production
strategy and underground mine dewatering
- Definitive agreement signed with the Industrial Development Corporation of South Africa Limited (IDC),
under which IDC will advance ZAR250 million (~A$21 million) as a senior secured convertible loan facility
(IDC Convertible Loan) to fund early works at the Prieska Copper-Zinc Mine (PCZM).
- The IDC Convertible Loan and capitalised interest may be converted into shares in Orion’s holding
company for PCZM (PCZM Holdco), based on pre-money valuation of ZAR1.2 billion for PCZM.
- The signing of a definitive agreement for the IDC Convertible Loan follows the recent signing of definitive
agreements with Triple Flag for a US$87 million funding package to advance the PCZM, comprising:
• US$80 million (~A$116 million) of Precious Metal Stream funding to be advanced against the delivery of
84% of future gold and silver by-product production, with each stream rate reducing to 50% after
certain milestones. Orion will also receive payments of 10% of the delivered precious metal value at
spot gold and silver prices at the time of delivery.
• An additional A$10 million (~US$7 million) to be advanced against calculated payments equal to 0.8%
of gross revenue from future mineral sales.
- The IDC Convertible Loan, combined with the A$10 million funding arrangement with Triple Flag, will
underpin the completion of a Feasibility Study for early mining at Prieska, fund early mining works and
enable commencement of mine dewatering.
- First draw-down of funds from the ZAR250 million IDC Convertible Loan and the A$10 million Triple Flag
Funding Arrangement are expected in Q1 CY2023.
Orion’s Managing Director and CEO, Errol Smart, commented:
“This is a hugely exciting time for Orion, with the Company now entering the final stages of our early
development studies and preparing for the imminent transition to development.
“The combined pre-development funding being provided by Triple Flag and the IDC for Prieska now totals over
ZAR371 million (~A$31 million). This will provide funding for Orion to carry out demonstration trial mining and
allow dewatering to commence from underground mine workings. Both of these work streams are critical to
our Early Works BFS, which we expect to complete by mid-2023, and mark the official start of development at
PCZM.
“I would like to take this opportunity to sincerely thank our development partners and our dedicated team for
their hard work and tenacity.”
IDC’s Senior Project Developer, Nico van Aardt, commented:
“The Prieska Copper-Zinc Mine represents an important, long-life base metals asset in South Africa that promises
to deliver high socio-economic returns in the Northern Cape. We are delighted to be on board as a
development funding partner, unlocking this high impact project.”
About the ZAR250 million IDC Convertible Loan
Orion Minerals Limited (ASX/JSE: ORN) (Orion or the Company) is pleased to announce that it has entered into
a definitive agreement with the Industrial Development Corporation of South Africa Limited (IDC) for a ZAR250
million (~A$21 million) senior secured convertible loan facility (Convertible Loan) to fund early mining works and
key pre-development activities at the Prieska Copper-Zinc Project (Prieska Project), located in the Northern
Cape region of South Africa.
The proceeds of the Convertible Loan, along with the proceeds from the Triple Flag Funding Arrangement (refer
ASX / JSE release 13 December 2022), will support the completion of a Bankable Feasibility Study (BFS) on the
previously articulated Early Production Plan at the Prieska Project (refer ASX / JSE release 20 January 2022),
while also allowing the Company to commence dewatering of the existing underground mine – a critical
workstream required for the broader long-term development of the project.
Key Funding Terms
Orion, Areachap Investments 1 B.V. (a wholly-owned subsidiary of Orion), Agama Exploration & Mining
Proprietary Limited (a wholly-owned subsidiary of Orion) (Agama) and PCZM Holdco Proprietary Limited (a
wholly-owned subsidiary of Orion) (PCZM Holdco) have signed a definitive agreement with the IDC for a ZAR250
million (~A$21 million)1 Convertible Loan to PCZM Holdco, which will be on-lent to Prieska Copper Zinc Mine
Proprietary Limited (a majority-owned subsidiary of Orion) (PCZM) on similar terms to fund the commencement
of mine dewatering and simultaneous completion of the BFS for the early mining development plan and to
facilitate a Final Investment Decision (FID) for mine development.
The BFS for the mining of the crown and remnant pillars down to the 385m level at PCZM (Early Mining Works
BFS) and the simultaneous commissioning and operating of pumping and water treatment facilities to allow
dewatering of the PCZM mine at a rate ramping up to 500m 3 per hour (Dewatering Project), are key pre-
development workstreams that are already well advanced.
The Dewatering Project is a critical long-lead item for the development of the Prieska Project, given that total
dewatering of the mine is required to access the main sulphide VMS orebody. As the dewatering of the mine
progresses, additional remnant pillars will be exposed.
The Convertible Loan is to be secured by first ranking security in favour of the IDC (and Triple Flag) given by
PCZM and other obligors over certain of their assets and claims related directly and indirectly to the Project.
The Convertible Loan funding is expected to be available for draw-down in Q1 CY2023, subject to fulfilment of
conditions precedent and drawdown conditions standard for such arrangements. Draw-down of the ZAR250
million Convertible Loan will be in tranches and will be pro rata matched by the draw down requests that Orion
will make under the A$10 million Triple Flag Funding Arrangement (refer below).
A summary of the material terms of the definitive agreement for the Convertible Loan are provided in
Appendix 1.
Triple Flag – Existing Funding Arrangement
On 13 December 2022, Orion announced that it had signed definitive agreements with certain subsidiaries of
Triple Flag Precious Metals Corp. (TSX/NYSE: TFPM) (with its subsidiaries, Triple Flag) for an US$87 million secured
funding package for PCZM made up of a precious metals stream (Precious Metal Stream) and additional early
funding arrangement (Funding Arrangement) (refer ASX / JSE release 13 December 2022).
The Precious Metal Stream, which comprises US$80 million (~A$116 million) of funding to be drawn down in
tranches, alongside other bank and/or third-party funding during mine development, is conditional on the mine
development being fully funded, finalisation of an executable mine plan to Triple Flag’s satisfaction, South
African regulatory approvals, and fulfilment of drawdown conditions standard for such arrangements.
Triple Flag will also provide an additional A$10 million (~US$7 million) Funding Arrangement, to complete the
Early Mining Works BFS and Dewatering Project. Draw down on the A$10 million Funding Arrangement is
conditional on Orion securing an additional A$20 million funding to execute the agreed work focused on the
early mining works and the dewatering. Triple Flag has confirmed to Orion that draw-down of the IDC
Convertible Loan (refer above) will be sufficient for this A$20 million funding condition to be satisfied.
Under each of the Precious Metal Stream and the Funding Arrangement, PCZM and other obligors will agree to
grant a first ranking security in favour of Triple Flag and the IDC over certain assets and claims related directly
and indirectly to the Project, with the security in respect of the Precious Metal Stream to be subordinated to
Prieska Project financiers on terms to be agreed in an intercreditor arrangement that is consistent with the
principles set out in the Precious Metal Stream agreement.
1 FX source: Oanda.com.
The Triple Flag Funding Arrangement is expected to be available for draw-down in Q1 CY2023, subject to
fulfilment of drawdown conditions standard for such arrangements.
Next Steps
The ZAR250 million IDC Convertible Loan, together with the Triple flag A$10 million early Funding Arrangement,
will enable Orion to complete the Early Mining Works BFS and commission and carry out the Dewatering Project.
The Early Mining Works BFS for the Prieska Project is well advanced, with targeted completion in mid-2023. The
Dewatering Project is also well advanced, with underground storage dams and pump site construction
completed and the shaft platform installed to facilitate pump installation.
About IDC
The IDC was established in 1940 through an Act of Parliament and is fully owned by the South African
Government. The Corporation pursues development impact through job-rich industrialisation and contributes to
an inclusive economy by, among others, funding black-owned and black-empowered companies, black
industrialists, women and youth-owned enterprises. For more information visit www.idc.co.za.
For and on behalf of the Board.
Errol Smart
Managing Director and CEO
8 February 2023
ENQUIRIES
Investors Media JSE Sponsor
Errol Smart – Managing Director & CEO Nicholas Read Monique Martinez
Denis Waddell – Chairman Read Corporate, Australia Merchantec Capital
T: +61 (0) 3 8080 7170 T: +61 (0) 419 929 046 T: +27 (0) 11 325 6363
E: info@orionminerals.com.au E: nicholas@readcorporate.com.au E: monique@merchantec.co.za
Disclaimer
This release may include forward-looking statements. Such forward-looking statements may include, among other things,
statements regarding targets, estimates and assumptions in respect of metal production and prices, operating costs and
results, capital expenditures, mineral reserves and mineral resources and anticipated grades and recovery rates, and are or
may be based on assumptions and estimates related to future technical, economic, market, political, social and other
conditions. These forward-looking statements are based on management’s expectations and beliefs concerning future
events. Forward-looking statements inherently involve subjective judgement and analysis and are necessarily subject to
risks, uncertainties and other factors, many of which are outside the control of Orion. Actual results and developments may
vary materially from those expressed in this release. Given these uncertainties, readers are cautioned not to place undue
reliance on such forward-looking statements. Orion makes no undertaking to subsequently update or revise the forward-
looking statements made in this release to reflect events or circumstances after the date of this release. All information in
respect of Exploration Results and other technical information should be read in conjunction with Competent Person
Statements in this release (where applicable). To the maximum extent permitted by law, Orion and any of its related bodies
corporate and affiliates and their officers, employees, agents, associates and advisers:
• disclaim any obligations or undertaking to release any updates or revisions to the information to reflect any change in
expectations or assumptions;
• do not make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the
information in this release, or likelihood of fulfilment of any forward-looking statement or any event or results expressed
or implied in any forward-looking statement; and
• disclaim all responsibility and liability for these forward-looking statements (including, without limitation, liability for
negligence).
Appendix 1:
Key Terms of Definitive Agreement
Orion, Areachap Investments 1 B.V. (a wholly-owned subsidiary of Orion) (Areachap), Agama Exploration &
Mining Proprietary Limited (a wholly owned subsidiary of Orion) (Agama) and PCZM Holdco Proprietary Limited
(a wholly-owned subsidiary of Orion) (PCZM Holdco) have signed a definitive agreement (Convertible Loan
Agreement) with the IDC for a ZAR250 million (~A$21 million) 2 convertible loan to PCZM Holdco (Convertible
Loan), the proceeds of which will be on-lent by PCZM Holdco to Prieska Copper Zinc Mine Proprietary Limited (a
majority-owned subsidiary of Orion) (PCZM) on similar terms. The proceeds of the Convertible Loan will be used
by PCZM to fund the commencement of mine dewatering (Dewatering Project) and simultaneous completion
of the BFS for the early mining development plan (Early Mining Works BFS) and to facilitate a Final Investment
Decision (FID) for mine development.
The key terms of the Convertible Loan Agreement are summarised below:
• The Convertible Loan will accrue interest monthly in arrears at a rate of South African Prime Rate plus
3.5%.
• The Convertible Loan will be available for draw down until 31 December 2024 and any portion of the
Convertible Loan that has not been drawn down by 31 December 2024 shall immediately be cancelled
after 31 December 2024.
• The final repayment date of the Convertible Loan will be the earlier of 30 days from Financial Close
(being the date when PCZM and/or PCZM Holdco raises sufficient funding in the form of debt and/or
equity to carry out the Early Mining Works contemplated in the Early Mining Works BFS) or the last day of
the Term (being the period commencing on the first date on which the Convertible Loan is drawn down
and ending 36 months thereafter).
• The Convertible Loan shall be secured by the same security arrangements set out in the definitive
agreements concluded between Orion and TF R&S Canada Ltd. and Triple Flag International Ltd.
(together Triple Flag) and subject to the intercreditor arrangements between the IDC and Triple Flag
(i.e. PCZM and other Orion group obligors will agree to grant a first ranking security in favour of the IDC
and Triple Flag over certain of its assets and claims (refer ASX / JSE release 13 December 2022 for details
of the Triple Flag Precious Metal Stream and Funding Arrangement and related security arrangements).
All security provided to the IDC and Triple Flag for and in respect of their respective facilities will be held
in a security SPV structure, being a ring fenced (insolvency remote) special purpose company (Security
SPV) which is administered by an independent professional trust services company and is otherwise
regulated and administered in a manner that is customary in South Africa for security arrangements
such as these.
• Conditions precedent and drawdown conditions to the Convertible Loan include but are not limited to:
o the board of directors and the shareholder (if and to the extent required) of PCZM Holdco have
passed the necessary resolutions to approve the execution of the Convertible Loan Agreement
and implementation of the Convertible Loan;
o the board of directors of Orion and Areachap have passed the necessary resolutions to approve
the execution of the Convertible Loan Agreement and implementation of the Convertible Loan;
o completion of the legal, environmental, regulatory and technical due diligence investigation to
the satisfaction of the IDC;
o the Funding Arrangement is in full force and effect or, alternatively, equity financing in an amount
of at least A$10 million has been completed by Orion and made available to PCZM, in such form
as may be acceptable to the IDC;
o the first ranking security in favour of the IDC (and Triple Flag) given by PCZM and other obligors
over certain of their assets and claims has come into force and effect;
o an inter-creditor agreement has been concluded between Triple Flag and the IDC regarding the
security being provided in their favour by PCZM and other obligors;
o Orion, PCZM Holdco and the other relevant members of the Orion group have obtained the
necessary approvals from Triple Flag for the execution and implementation of the Convertible
Loan Agreement;
2 FX source: Oanda.com.
o PCZM Holdco has provided a certificate confirming, amongst other things, that:
o no material adverse effect, event of default or economic failure has occurred and is
continuing;
o there has been no default or breach of any finance document and the warranties and
representations are true and correct in all material respects; and
o PCZM is the holder of all such regulatory approvals as it may require in order to carry out the
business and activities being conducted by it.
• A technical committee will be established between Agama and the IDC for the purpose of providing
technical guidance and management in relation to the technical operations and activities of the
Prieska Project and the advancement and development of the Dewatering Project and the Early Mining
Works BFS.
• In the event that the Early Mining Works BFS results in a positive outcome and a decision is taken to
commence with the Early Mining Plan, at the option of the IDC, the Convertible Loan (including capital
and accrued interest) can be converted into equity and a shareholder loan in PCZM Holdco, in
proportion to Agama’s existing shareholder loan claims against PCZM Holdco as at the date of
conversion, and utilising a pre-money enterprise value for PCZM of ZAR1.2 billion (Equity Conversion).
• In the event that the Equity Conversion does not take place, and PCZM Holdco is unable to settle the
Convertible Loan in full, or in the event of any other material breach, the IDC will have the right to
convert any unpaid balance of the Convertible Loan plus accrued interest into Orion fully paid ordinary
shares (Shares) at the 30 day VWAP of Shares as traded on the JSE or claim against the security
provided by PCZM and other obligors in its favour (subject to the terms of the intercreditor between
Triple Flag and the IDC).
• The IDC will have a right of first refusal to provide senior secured debt funding to PCZM for the
implementation of the Early Mining Works.
• The IDC is entitled to a raising fee of 1.25% (plus VAT) on the Convertible Loan amount, payable on the
first drawing date, as well as a Commitment Fee of 0.75% (plus VAT) on the undrawn amount of the
Convertible Loan.
• PCZM Holdco will be liable for a Cancellation Fee of 0.5% of the Convertible Loan amount if PCZM
Holdco cancels the Convertible Loan after the signature of the Term Sheet.
• The Convertible Loan Agreement otherwise contains such undertakings, warranties and terms and
conditions as would be standard and customary to include in transactions of this nature.
Date: 08-02-2023 07:21:00
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