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Copper and zinc mine development company Orion Minerals is well placed to take advantage of the projected copper shortfall in the second half of this decade with its portfolio of short lead-time, quality assets and exploration potential, S2Research analyst Simon Hudson-Peacock stated on Monday.

Globally, there are very few copper projects of similar quality that are as advanced along the value curve with secured funding, as is the ASX- and JSE-listed Orion, with its 750 000 t of declared compliant copper equivalent mineralisation, Hudson-Peacock pointed out in the October 6 analysis.

Hudson-Peacock's comments are contained in a 23-page valuation update, which quotes Glencore CEO Gary Nagle as telling Forbes magazine on October 20 that: "The world just doesn't get it. It doesn't understand that a massive copper deficit is coming." The world will stop without the additional copper supply but the price of copper is not reflecting it.

Orion's Prieska copper/zinc mine and its Okiep copper project are not far from entering the construction and implementation stage, which will open the way for South Africa to become a producer of two critical metals required for the global energy transition.

Also being developed by the company is the Jacomynspan nickel, copper and cobalt project, 70 km north of Prieska, in which it holds a 50% interest.

In March, Orion, headed by Boksburg-born CEO Errol Smart, announced a funding package that introduced Clover Alloys as a new key shareholder for Orion.

Clover Alloys is a privately owned South African mining group headed by South African mining stalwarts Philip Kotze and Adam Fleming. Fleming is the former chairperson of gold exploration and mining company Wits Gold and Kotze the former CEO of Wits Gold. (Interestingly, Mining Weekly can report that Ian Fleming, the author of the James Bond spy novels, was Adam Fleming's father's elder brother.)

At an upcoming annual general meeting (AGM) scheduled for November 28, shareholders not associated with Clover Alloys will be asked to approve the second tranche of a funding package that could take the Clover Alloy's stake in Orion from 9% to 25%, which is beyond the key shareholding threshold of 19.99% as defined by Australian Corporations Act.

This assumes that Clover Alloys chooses to follow all its rights and similarly assumes that all other shareholders exercise their options to participate.

On October 30, Orion published a financial services guide and independent expert's report to assist shareholders in their decision on how to vote at the AGM on the second tranche of Orion's strategic funding package, amid the report deeming the value of the offer as unfair to shareholders based on the dilutionary effect of the raise at an exercise price of A$1.7 cents a share (cps) that is below their assessed value of the company prior to the raise of A$2.3 cps.

However, the independent report also deems the offer as reasonable on account of the negative commercial implications of the raise on the advancement of Orion's project portfolio should Clover Alloys not be permitted to participate to the extent proposed.

S2Research, which has used the report to update its fair-market value for Orion considering the effects of the capital raise and referencing current market conditions, calculates the valuation per Orion share at current market commodity prices and exchange rates, to be R73 cps or A$6.1 cps, taking into account Jacomynspan, cash unallocated to the Prieska mine and the Okiep project and exploration potential.

S2 Research enhances the values of the exploration assets in Orion's portfolio by referencing copper mining peer Copper360, which listed on the JSE in April. It includes exploration potential at Prieska and presents an argument for a 10% resources enhancement, arguing that Prieska and Okiep can be valued using income-based discounted cash flow methods.

Prieska published a...