British billionaire with James Bond link boosts Orion Minerals
There are plenty of reasons for investors to avoid Orion Minerals (ASX: ORN), a copper hopeful which has essentially gone nowhere over the past 10 years, and a few important reasons to take a closer look at a company showing signs of stirring.
Negatives include its focus on assets in South Africa, a country struggling to escape its history, including a peculiar trait of designing complex financial structures which can be impenetrable to an outsider.
Australians of certain age are likely to see Orion, which is listed in Australia and South Africa, as corporate proof of a famous quip by the late Tamie Fraser, wife of former Australian Prime Minister, Malcolm Fraser, that, “life wasn’t meant to be easy”.
Errol Smart, Orion’s long serving chief executive officer knows exactly what that means because he’s been pushing the Orion story uphill for the past decade and for that he deserves a gold medal.
Four years ago, when I was first exposed to Orion on a site visit to its flagship asset, the once world-class Prieska copper and zinc mine in the desolate but mineral rich Northern Cape province of South Africa, there was hope of a quick mining restart.
It didn’t happen for a variety of reasons. South Africa was in crisis over government corruption, and the price of copper was in the process of sliding from US$3 a pound to US$2.50/lb, followed by the Covid crisis of 2020 which drove it price down to US$2/lb.
Copper enjoying new-found demand
Times change, and they could finally be shifting in Orion’s favour. Copper is enjoying new-found demand as a battery metal with a price hovering just below US$4/lb after almost touching US$5/lb last year.
A new Northern Cape copper asset has been added to the Orion business, a fresh (albeit intricate) funding package secured, and a high-powered management team injected into the business.
The market, so far, has ignored what appears to be a new-look Orion which has just raised $13 million with the potential after options are exercised for that to grow to $73 million – possibly enough to make the start on copper mining at Prieska, which was first proposed in 2019.
Clover Alloys backs Orion
Half the new money is coming from a well-established but private South African mining and mineral processing company called Clover Alloys which has its base as a chrome miner in the Rustenburg area best known as the home of South African platinum.
Clover is run by Phillip Kotze, a man described as South Africa’s equivalent of Chris Ellison, the human bulldozer behind the highly successful Australian iron ore, lithium and mining services business, Mineral Resources (ASX: MIN).
But at the top of Clover is someone far more interesting, Adam Fleming, a British billionaire and great grandson of Scottish banker Robert Fleming, who founded a bank in his own name. Also, Fleming’s uncle Ian Fleming created Britain’s most famous secret agent, James Bond.
The pedigrees of the Clover men are important because they point to no-nonsense achievers with deep connections to mining and money – a beautiful combination.
In Fleming, Orion gets an impeccably connected 74-year-old former banker ranked as Britain’s 118th richest man, with a net worth estimated by London’s The Sunday Times at £1.5 billion (A$2.8 billion) who is also a self-confessed gold bug with a deep interest in other minerals and metals.
In Kotze, they get a man who loves to build mining projects, the faster the better, a quality which shines in his record of growing Clover’s chrome processing plant capacity from 24,000 tonnes a year to 270,000t per year.
Prieska could quickly begin producing
If all goes well, and that’s a loaded proviso given Orion’s track record, a start on copper and zinc production at Prieska could happen quickly.
First target will be the extraction of high-grade ore in pillars left by the early miners, working down as de-watering progresses to the rich ore at the bottom of the old mine which is estimated to still contained 30.5 million tonnes of material grading 3.7% zinc and 1.2% copper.
Over a 10-year campaign the born-again mine which was last worked in 1991 could yield up to 80,000t of zinc each year, plus 22,000t of copper.
After that, or possibly at the same time, a start could be made on the new addition, the Okiep, a mine with a 150-year history and a star cast of previous owners, including US gold leader Newmont, and one of South Africa’s top mining companies, Gold Fields.
A fresh look at Orion reveals a company which has cleared some of its hurdles though others remain.
Funding arrangements are ludicrously complicated with layers of capital from financiers based in Canada (Triple Flag Precious Metals and Delphi Group), London (Tembo Capital Management) and the South African Government through the Industrial Development Corporation.
In time, the financial structure will need to be simplified, as will Orion’s capital base which has swollen over time to a remarkable 5.46 billion shares on issue – a wall of paper which helps explain the $0.016 share price and market capitalisation of $70 million.
Hidden gems
For investors prepared to look through Orion’s chosen home base of South Africa and its struggle to make rapid progress with Prieska there are four hidden gems.
Firstly, the Northern Cape is a world class mineralised region which faded from view during South Africa’s apartheid years, a political event which did not disturb the rich geology of the region.
Secondly, copper is hot, and will get hotter.
Thirdly, the South African Government, for all its faults, is keen to seen Orion succeed.
Fourthly, the arrival of Fleming and Kotze adds gravitas to a company which still qualifies for the humiliating title of penny dreadful – though perhaps not for much longer.
