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Orion clinches potent new-style empowerment deal

16th April 2019 BY: Martin Creamer
Creamer Media Editor
Watch this video on YouTube

JOHANNESBURG (miningweekly.com) – Sydney- and Johannesburg-listed exploration and mining development company Orion Minerals has found a formula to achieve empowerment that puts all shareholders at full participation and contribution.

“What we’ve arrived at is a fantastic win-win scenario,” an overjoyed Orion CEO Errol Smart told Mining Weekly Online. (Also watch attached Creamer Media video.)

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The proposed transactions will introduce a high-profile South African black economic empowerment (BEE) investor group to Orion’s share registry in an $8-million capital raising and a restructuring of the company’s BEE equity participation.

Black South African investors have supported the equity raising at a 29% premium and achieved accelerated compliance with the ownership aspects of Mining Charter 3, which precedes the company obtaining a mining right for its Prieska zinc/copper project in the Northern Cape and the delivery of the project’s bankable feasibility study (BFS) later this quarter.

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The funds raised will be used to finalise the Prieska BFS and go towards continued exploration at Orion’s prospective tenements in the Northern Cape.

Black South African investors subscribed for $4-million in the placement, including $2-million subscribed for by investors who have signed a memorandum of understanding to become BEE partners at the Prieska project level, through BEE HoldCo. These include Black Star Minerals principals Jowell Tobias, his wife, Johanna Tobias, and Sharon Matthews with 67% ownership, and Kolobe Nala Investment principal Billy Mawasha with 33% ownership. BEE HoldCo members have demonstrated their commitment and financial capacity to complete the transaction by subscribing for $2-million in the placement of shares.

Top South Africans joining the Orion board as part of the transaction are former Anglo American Coal CEO Godfrey Gomwe and former senior BHP Billiton executive Tom Borman.

In addition to the placement, founding BEE partners are to exchange their shares at Prieska project level for Orion shares and the new BEE partners are to acquire a 20% holding at the Prieska project level as well as fund their proportionate share of Prieska project development costs.

“This has been a quite a complex little get-together and for us it's really pivotal,” Smart said.

Bearing in mind that the company is expecting its mining right to be granted in the next month or two, everything has to align to prepare it to build a mining operation where AngloVaal, one of South Africa’s former big-four mining houses, ran a successful 4 000-employee operation until 1991, when it was impacted by low prices. Metallurgically speaking, it was a great mine that produced top quality concentrates.

The company has had excellent inherited BEE partners that have brought it to where it is as an exploration company. But it is now at a stage of entering large capital expenditure of R3-billion to rebuild the mine.

The present was seen as the correct time for the introduction of a fresh set of BEE legs, which has exceptional skills, positioning and financial capacity.

The founding BEE partners that have brought Orion to this point are to be rewarded by having their shares elevated to the listed company level.

This will mean that for the first time, these founding BEE shareholders will hold listed equity.

The transaction moves South African mining away from BEE investors being forced to hold shares that are not at the same level as those held in the listed holding company.

“What we want to achieve is to have the situation where everybody is on the exact same level of risk and reward and we’ve finally found a formula to achieve this,” said Smart.

While its founding shareholders are elevated to becoming listed company shareholders, the new group of incoming BEE shareholders have invested in a way that allows them to level-peg with international investors and also hold BEE shareholdings at the mining right level.

Being one of the few companies with a pending mining right, Orion actually has five years to achieve new Mining Charter compliance but has elected instead to achieve compliance immediately.

“We’re not doing it because there’s a law that says we have to do it. We’re doing it because we believe it’s the right thing to do and it enhances value for everybody,” Smart added.

The new born-and-bred Prieska people in Black Star Minerals bring in mining engineering and banking skills. Jowell Tobias, a former Northern Cape executive of the Industrial Development Corporation, has commercial farming businesses on the Orange river. His wife, Johanna, is a mining engineer, and Matthews is the financial manager of a law firm.

They have introduced Orion to their sources of finance, which the company would not have encountered on its own, and have teamed up with Taung-born Mawasha, a former Rio Tinto South Africa head who had a long history with Anglo American’s Kumba Iron Ore and Finsch diamond mine before that.

This means that the company has local partners who bring technical and financial skills. Black Star Minerals has a controlling interest in Gariep Mining, a joint venture with Lutzville Engineering, a company with engineering and steel fabrication workshops that has been at several diamond-mining operations in South Africa, including Finsch. This brings potential cost-saving and development opportunity to Orion as it develops its Prieska project.

Much of the engineering capacity is going to be relocated to the town of Prieska, which stands to benefit from an engineering growth business that will also supply the Northern Cape’s diamond mines as well as the region’s many wind farms and solar plants under construction.

“They happen to be black business people but we just see them as investors in South Africa that have also been coming to the table and saying they love what we’re doing. We want base metals investment opportunities. There isn't any other base metals investor in mining in South Africa. We’re it. You’ve either got Vedanta, who are private and large, or little Orion that is going to build a very important mine. It’s a relatively small mine to start with but a very important operation and a growth opportunity,” Smart commented to Mining Weekly Online.

Gomwe formerly led Cluff Mining, which brought heap leaching to Africa and which introduced the first mechanised underground gold mine in Zimbabwe. After Cluff was acquired by Ashanti, Gomwe joined Anglo American, where he was chairperson and CEO of a number of group companies.

“When I started my career, I looked up to Godfrey Gomwe as one of the legends of the mining industry. He has seen both the junior mining industry and the biggest of the big and we all share a vision. So we have Gomwe, the mentor, Mawasha, the winner of all sorts of awards as a leading light, and myself, who just throws rocks in the bush and hopes to achieve something at the end of day.

“We have finally got a bunch of people around a table who share a vision, which is to create real home-grown value in South Africa and to break the mould of South Africa always having to trade at the so-called South Africa discount. I’m so sick and tired of Australian fund managers saying if you were in Australia, Orion would be valued at two, three, four times what it is valued now. Why must South African stocks always trade at a discount? We have top-class black investors who are investing at a premium to market and demonstrating belief in the project. They’ve come to the table. They’ve taken their risk.

“We’ve got foreign investors who are saying if those guys are on board, we’ll come alongside them at the same premium price. Let’s keep going. This is going to grow into something special. We’ve got a whole new think tank that is going to be driving the growth of Orion,” said Smart.

The company, which will be delivering its Prieska project BFS, has a lot more in the area and other locations, where it is exploring for zinc, copper, nickel, gold and silver, as well as platinum group metals and rare earth elements. 

EDITED BY: Creamer Media Reporter
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