The Prieska Copper Zinc Mine (PCZM) is the centrepiece of Orion’s future-facing metals portfolio. Historically mined between the 1970s and 1990s, Prieska is one of the world’s Top-30 volcanogenic massive sulphide (VMS) base metal deposits, with a recorded historical production of over 430k tonnes of copper and 1Mt of zinc from 46.8Mt of sulphide ore milled.

Orion completed an updated Bankable Feasibility Study for the PCZM development in May 2020 (BFS-20), based on a 12-year “Foundation Phase” 2.4Mtpa underground and open pit mining operation, delivering total payable metal production of 226kt of copper and 680kt of zinc in differentiated concentrates.

An updated Bankable Feasibility Study is currently underway for an accelerated development strategy at the PCZM. Trial mining has begun and early dewatering is imminent.

PCZM is fully permitted, bankable and ready to mine.

Location and Infrastructure

PCZM is located in the Northern Cape Province of South Africa, 270km south-west of the regional capital Kimberley. Importantly, the project has access to significant local and regional infrastructure, with key infrastructure including:

• Sealed access roads to project site
• 50km via bitumen road to existing rail siding
• Four high-voltage regional lines linked to the national electricity grid
• 175MW operational solar power plants in the area – with an additional 675MW approved and a further 300MW pending authorisation
• 800km rail link to a major, bulk commodity and deep-water ports at Coega and Saldanha Bay
• Bulk water pipeline supplies site from Orange River with all year pumping capacity
• Good contractor accommodation available in the private village of Copperton, ~3km from project site
• Low environmental sensitivity – existing disturbed/rehabilitated mine footprint

Resources

PCZM contains a globally significant VMS resource totalling 31Mt at 1.2% Cu and 3.6% Zn including Indicated Mineral Resources of 20.00Mt at 1.23% Cu and 3.43% Zn (refer ASX/JSE release 25 July 2023). It has a Mineral Reserve of 14.5Mt at 1.1% Cu and 3.2% Zn. Resources remain open with both strike extensions and up-folded limb extensions identified by down-hole geophysics.

Development Strategy – Starting Small to Grow Big

To capitalise on the positive near-term outlook for the base metals market, Orion has commenced a feasibility study into an Early Production Plan for the Prieska Copper Zinc Mine. The plan is designed to bring forward revenue generation and potentially reduce the upfront external peak funding requirements by phasing the mine build while retaining the ability to scale up to a full-scale project as sufficient funding becomes available.

The Early Production Plan will comprise:

• A revised mine sequence to extract the mine’s crown pillar (+105 Level Crown Pillar), which currently sits above the accumulated water level, first using underground mining methods. Extraction of the +105 Level Crown Pillar was originally planned to occur at the end of the mine life using open pit mining. Mining the crown pillar upfront offers the potential advantage of earlier concentrate production and allows for dewatering to be undertaken at lower pumping rates and concurrently with early revenue generation from crown pillar mining;
• The potential opportunistic extraction of the mineralised pillars left behind from previous mining and located above the accumulated water level. Production from the remnant pillars could supplement the early mining and defer the need to access the Prieska Deeps Deposit;
• Commencing with dewatering of the underground workings using a modular configuration at one-third of the full-scale pumping rate proposed in the BFS-20 Plan and ahead of the project being fully-funded to commence full-scale construction; and
• Appending the deeper deposits, below the previously mined area, as a future expansion phase.

An updated BFS is underway for an accelerated development strategy at PCZM. Trial mining is currently underway and early dewatering is imminent.

Project Funding

The Prieska Early Development Strategy is underpinned by a ZAR250 million (~A$20 million), senior secured, convertible debt funding facility secured with the Industrial Development Corporation of South Africa Limited (IDC) and two funding instruments secured from certain subsidiaries of Triple Flag Precious Metals Corp. (TSX/NYSE: TFPM) (collectively TF R&S Canada Ltd. and Triple Flag International Ltd., (Triple Flag) for an early funding arrangement (Funding Arrangement) facility of A$10 million to fund trial mining and dewatering and a precious metals streaming agreement (Precious Metal Stream) of US$80 million to be available for the development of commercial operations following completion of a revised bankable feasibility study (BFS) and demonstration of Orion having secured sufficient development finance.

Orion has fulfilled all conditions precedent for the ZAR250 million IDC Convertible Loan and other conditions to the Triple Flag A$10 million Funding Arrangement enabling it to submit drawdown notices to both the IDC and Triple Flag for an initial drawdown totalling ZAR167 million (~A$13.8 million) (refer ASX/JSE release 17 July 2023).

2020 Bankable Feasibility Study

The Early Production Scenario builds on the highly successful updated Bankable Feasibility Study completed in May 2020 (BFS-20), focused on the development of the Deep Sulphide Resource at Prieska, which currently comprises 28.73Mt at 1.2% Cu and 3.8% Zn.

The BFS-20 is based on a modern 2.4Mtpa underground and open pit mining operation, with a 12-year ‘Foundation Phase’ delivering payable metal production of 226kt of copper and 680kt of zinc in differentiated concentrates. Read the full updated BFS Announcement.

The BFS-20 delivered numerous improvements on the previous study completed in June 2019, including:

• 43% increase in undiscounted free cash flows to AUD1.6 billion, pre-tax (AUD1.2 billion post-tax);
• 36% increase in NPV (at an 8% discount rate) to AUD779 million, pre-tax (AUD552 million post-tax);
• 5-month reduction in the capital payback period to 2.4 years;
• 6% decrease in all-in-sustaining costs to USD3,531/t (USD1.60/lb) of copper equivalent metal sold;
• 3% increase in all-in-sustaining margin to 47%;
• 5% increase in pre-tax IRR to 39%;
• 9% increase in peak funding requirements to AUD413 million to cater for the operational improvements; and
• Peak annual production of 23kt of copper and 88kt of zinc in concentrates.

The updated BFS was based on an Ore Reserve of 14.5Mt at 1.1% Cu and 3.2% Zn for 153kt of contained copper and 462kt of contained zinc, with the mine schedule comprising 57% Probable Ore Reserves, 10% Indicated Mineral Resources and 33% Inferred Mineral Resources.

In addition, the updated BFS identified outstanding mine plan optimisation and extensional opportunities including:

• Improvements to the plant and concentrate grade recovery above the conservative estimates applied in the BFS, to match historical plant performance;
• Extensions and additions to the Mineral Resources and mine life via:
• Conversion of delineated Inferred Mineral Resources into the mining plan;
• Extensional exploration and ‘out of resource’ mineralisation;
• Near-mine and satellite exploration potential; and
• Remnant pillar extraction.

Partially completed mine-to-market optimisation studies present the potential for refinements to be applied during the mine development and early production period.

Near-Mine Exploration

Orion sees the potential to define a major new VMS camp in the region surrounding the Prieska deposit, with near-mine exploration programs delivering a series of compelling new targets.

These include the emerging Ayoba VMS discovery, located 5.3km south-west of Prieska, where the discovery drill hole intersected 9.5m of massive sulphides grading 0.63% Cu and 0.93% Zn, including 1.50m at 0.89% Cu and 4.98% Zn. (refer ASX/JSE release 28 November 2018).

Ayoba represents the first new VMS discovery in the Areachap Belt in over 36 years and highlights the enormous upside over and above the large, high-quality Mineral Resource already defined at Prieska.

Geophysical surveys have also identified numerous compelling targets for both VMS style copper-zinc mineralisation and nickel-copper sulphide mineralisation within a 15km radius of Prieska.

VMS deposits generally occur in clusters in close proximity to one large or giant deposit, and often comprise two or three medium-sized deposits and five or six smaller deposits.

Despite Prieska being one of the single largest VMS exhalite bodies known in the world, the area around the deposit has had virtually no exploration in over 36 years. Now, with the application of advanced, modern geophysics and the latest geological thinking, Orion can vector into targets which offer outstanding opportunities for new VMS discoveries.