Orion Minerals (ASX: ORN) has underlined its commercial intentions by welcoming one of Australia’s brightest mid-cap names onto its shareholder register.
Independence Group (ASX: IGO) is an emergent resource company that has quickly become one of the leading mid-tier miners in South Africa in recent years.
Independence (IGO) also has a range of base metals mining operations in WA; with Orion incrementally becoming a larger feature on its global radar.
IGO has become a substantial shareholder in Orion via a $5 million placement at 5 cents per share, thereby cementing a collaborative working relationship between the two resource companies.
Orion and IGO already have a joint-venture agreement with respect to the Fraser Range nickel-copper project in Western Australia. The two companies agreed to the JV earlier this year with IGO subscribing to a $1.3 million placement offered by Orion.
The additional $5 million placement announced today therefore takes IGO’s shareholding in Orion from 4.2% to 11.1% and values the junior explorer at around A$70 million.
Winning strategy in resource-rich South Africa
The ownership stake highlights an important step in Orion’s broader base metal development strategy in South Africa.
The terms of the deal stipulate that IGO now has matching rights to any potential joint venture or sale of Orion’s nickel projects located in the Areachap Belt within South Africa.
If Orion wishes to assign the whole or any part of its interest in any of its South African nickel projects to a third party, it must first make the same offer available to IGO on the same terms and conditions.
In effect, IGO has bought an exclusive first-option right to Orion’s nickel projects and will also share in any upside the ASX-listed junior attains over the coming years.
IGO’s preferential rights include Orion’s advanced Jacomynspan nickel-copper cobalt project, where Orion announced a JORC-compliant mineral resource estimate in March this year.
The two resource companies are expected to reinforce their collaborative working relationship and therefore enhance Orion’s planned regional exploration programs within the “highly prospective yet under-explored Areachap Belt,” Orion said.
Orion also said that “due to the lack of favourable environments worldwide which have the potential to host major new nickel-copper-cobalt and VMS discoveries”, its large ground holdings in South Africa’s Northern Cape provides both Orion and IGO with significant exposure to exploration success.
Based on regional exploration programs already completed, Orion has identified the potential for discovery of nickel hosting massive sulphide bodies similar to IGO’s Nova Bollinger mine in the Fraser Range, WA in the Areachap Belt.
Deploying investment funds towards exploration
Following the $5 million capital infusion from IGO’s investment, Orion said it intends to commit a minimum of $1.5 million towards its nickel-copper-cobalt exploration targets.
Today’s announced deal is also expected to help Orion with its intentions of fast-tracking it flagship Prieska zinc-copper project which has seen historic production of over 430,000 tonnes of copper and more than 1 million tonnes of zinc.
“IGO’s Nova Bollinger nickel and Jaguar zinc-copper mining operations in Western Australia have remarkable geological and engineering similarities to Orion’s advanced stage projects in the Areachap Belt in South Africa. In addition, the exploration models and methods that Orion has employed in the Areachap Belt are very similar to those being used by IGO in a similar geological terrain in the Fraser Range, Western Australia. Clearly, there are strong synergies between the companies and a meeting of minds between our technical teams,” said Mr Errol Smart, managing director and CEO of Orion Minerals.
“We are very pleased to cement a relationship with a strategic investor with the qualities of IGO,” he added.
IGO’s move saw Orion shares rise by 30% in early trade this morning up to $0.05 per share – the agreed placement price taken up by IGO.