Our opinion on the current state of ORIONMIN(ORN)

Orion Minerals (ORN) is an Australian-based exploration company dual-listed on the Johannesburg Stock Exchange (JSE) since September 2017 and the Australian Stock Exchange in Sydney. The company focuses on revitalizing the Prieska copper and zinc mine, which was previously operated by Anglovaal and ceased operations in 1990 after two decades of active mining, yielding significant quantities of zinc and copper concentrate.

Orion is exploring opportunities to reboot the Prieska mine using a mechanized approach that minimizes labor, aiming to address the main challenge of flooding that has plagued the mine. This ambitious project involves pumping out nearly 9 million cubic meters of water from the mine’s flooded infrastructure. Production is optimistically slated to begin in 2024.

In addition to these efforts, Vedanta Resources, operating the adjacent Gamsberg mine, is considering the development of a smelter that would potentially service the entire regional mining sector, including potential resources from Namibia. This development could provide significant synergistic benefits to Orion's operations if realized.

On the financial front, Orion has taken significant steps towards funding its initiatives. On 8th September 2022, the company secured R34.5 million from the Industrial Development Corporation (IDC) for a 43.75% stake in its new Okiep copper mining venture. Subsequently, on 21st October 2022, Orion secured a R250 million line of credit with the IDC. These moves demonstrate a robust partnership with the IDC, which has become a strategic funding ally for Orion’s flagship projects, including both the Okiep Copper Project and the Prieska Copper Zinc Mine.

Despite these strategic advances, Orion remains a high-risk investment. For the six months ending 30th June 2023, the company reported a consistent loss of A$15.2 million. The headline loss per share slightly improved to 31c from 33c in the previous period. Furthermore, the company has recently updated its mineral resource estimates for the Prieska Copper Zinc Mine (PCZM), increasing the resource estimate to substantial new levels, which suggests potential for future development.

As of 30th September 2023, Orion reported having $15.74 million in cash, indicating a solid liquidity position to support its immediate operational needs. However, the recent announcement on 17th April 2024 regarding the acquisition of the Okiep mineral rights and a subsequent halt on trading due to a material announcement about exploration results at the Okiep copper mine indicates significant ongoing developments and potential volatility.

Investors considering Orion Minerals must weigh the high-risk nature of mining exploration against the potential for substantial returns if Orion successfully navigates the considerable operational and financial challenges ahead. Caution is advised, with the implementation of a strict stop-loss strategy to manage potential losses, given the volatile nature of the stock and the exploration sector it operates within.