Petra Capital sets 12c price target for Orion Minerals, sees looming catalysts

The next key catalysts for base metals developer Orion Minerals (ASX: ORN) will be approvals and financing for its flagship Prieska Copper-Zinc Project in South Africa, according to Sydney-based institutional broker Petra Capital
5th July 2019
Resources Rising Stars

The next key catalysts for base metals developer Orion Minerals (ASX: ORN) will be approvals and financing for its flagship Prieska Copper-Zinc Project in South Africa, according to Sydney-based institutional broker Petra Capital.

Petra Capital analyst Craig Brown has reiterated his BUY recommendation for the stock, with a revised target price of 12c-a-share (compared with a current share price of 3c), following the recent release of a Bankable Feasibility Study which it says has confirmed a “robust, high-margin development” at Prieska.

“Orion has successfully completed the ground work required to see the foundation phase of at Prieska re-established,” Brown wrote in a new research note.

“The BFS is expected to produce ~22Ktpa of copper and ~70Ktpa of zinc over an initial mine life of 10 years, with an all-in sustaining margin of 44% and a payback period of less than 3 years.

“Petra continue to view Prieska as a strategic asset that is now bankable, giving it significant corporate appeal. We maintain our BUY with a revised target price of 12c-a-share.”

Petra Capital notes that the current mine plan of 20.8Mt at 3.4% Zn and 1.1% Cu covers only 68% of the current JORC Resource of 30.49Mt at 1.2% Cu and 3.7% Zn, leaving significant potential for mine life extension.

“Operating costs are lower than Scoping Study estimates, with C1 costs of US$55/tonne ROM…while start-up CAPEX has increased by 7% to A$401.5 million.”

Petra says there are significant extension options for the project including over 9Mt of JORC Resource not included in the current mine plan, 8Mt of existing mineralised pillars currently being assessed for future extraction and high-grade strike extensions which required future drilling.

“Petra assumes a 5-year extension based on continued resource-reserve conversion and pillars extraction,” Brown wrote.

The broker notes that next steps for the Company include optimisation of the BFS plan and progression of project financing with South African financiers, BEE partners and off-takers “which should finance a large portion of start-up CAPEX”.

A Final Investment Decision is anticipated in the second half of this year.

Meanwhile, veteran Sydney-based resource analyst Gavin Wendt has also recently issued a bullish note on Orion Minerals in the wake of the BFS.

“The Prieska Bankable Feasibility Study has confirmed a long-life, high-margin South African copper and zinc mine with strong economics, paving the way for financing, concentrate off-take and construction,” he wrote. 

“We initiated coverage of ORN almost four years ago and we’ve witnessed the company’s steady progression, transitioning from grassroots explorer to emerging producer via the acquisition and subsequent advancement of its Areachap metal projects in South Africa’s Northern Cape.

“The BFS involves what is described as 10-year ‘Foundation Phase’ at Prieska, involving a modern 2.4Mtpa underground and open pit mining operation.”

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