ASX and JSE-listed Orion Minerals has improved the business case for its Prieska copper-zinc project in the Northern Cape Province of South Africa, with the results of the updated bankable feasibility study, released on 26 May 2020.
The updated bankable feasibility study (BFS) for the Foundation Phase of the Prieska copper-zinc project outlines an improved business plan compared to the one reported in the June 2019 feasibility study (BFS-19). The BFS confirms the potential of the Prieska project to underpin a significant near-term, low-cost, copper and zinc development project, with exceptional opportunities for future growth.
Compared to the BFS-19 plan, material changes in the updated BFS include:
- Reducing the mine dewatering timeline and supplementing water treatment of that water;
- Incorporating additional Mineral Resources into the mining plan, increasing the mine life by 2 years;
- A more conservative timeline to ramp-up to steady-state production;
- Prioritising early mining of the high-grade zones in the mining sequencing;
- The adoption of semi-autogenous grinding (SAG) mills in the processing flowsheet;
- An owner miner operating philosophy for underground mining and utilising an experienced contractor to operate the processing plant; and
- Change in the key operational infrastructure being supplied and financed by third party financing and supply of select key operational infrastructure.
The BFS incorporates updated assumptions based on the current macro-economic outlook and considers the results of ongoing investigations that sought to improve the commercial viability of the baseline mining plan outlined in the BFS-19.
The project aims to deliver sound commercial returns while also establishing mine infrastructure and operational capacity that will become a platform for further mining of deposit extensions and the exploration and mine development of neighbouring prospects (Foundation Phase).
The duration of the Foundation Phase has been extended by two years, to now run for 12 years of production at a design run-of-mine (RoM) processing rate of 2.4 Mtpa. This phase of operation targets the exploitation of those portions of the Prieska deposit that were upgraded to indicated and inferred mineral resources from the first surface-based drilling campaign conducted between 2017 and 2018.
Both underground and surface mining methods are planned to be used in conjunction with conventional froth flotation concentration to produce differentiated copper and zinc concentrates for export.
The Foundation Phase of the project has undiscounted cash flows of A$1.6 billion pre-tax (A$1.2 billion post-tax), a net present value (NPV) of $779 million pre-tax and post-royalties ($552 million post-tax, post royalties), using non-inflation-adjusted estimates and a discount rate of 8%, and achieves an internal rate of return (IRR) of 39% pre-tax (33% post-tax). The NPV is based on long-term forecast metal prices of US$6 680/t for copper and US$2 337/t for zinc.
Peak funding requirements total A$413 million including a 10% contingency allowance. This is forecast to occur in the third year of the capital expenditure (Capex) programme. Payback is planned to occur five years from the start of construction or 2.4 years from the start of production.
“The substantial improvements achieved since the June 2019 BFS are reflected in the headline numbers. The mine is now forecast to deliver A$1.6 billion of pre-tax free-cash-flow over 12 years and a pre-tax NPV of A$779 million (at an 8% discount rate), with the initial 12-year LOM plan delivering an impressive 47% all-in-sustaining margin and underpinned by a robust mine plan delivering more payable metal in differentiated high quality copper and zinc concentrates,” says Orion Minerals MD and CEO Errol Smart.
“The capital payback period has been reduced to less than two-and-a-half years from first production on lower commodity price assumptions, even with the inclusion of water treatment and offsite irrigation and assuming a more conservative construction schedule and build-up to first production,” says Smart.
The importance of ESG outcomes
In addition, the updated BFS has enhanced the project’s environmental, social, and governance outcomes.
Sustainable development goals have been planned at the forefront increasing the use of renewable energy and reducing the carbon footprint. Water conservation and recycling in the dry and arid conditions at the project is now maximised.
Moreover, the business plan provides a clear roadmap for progressive 4IR adoption, which should deliver high productivity and personnel well-being gains to our workforce. “
Meanwhile, there is further scope to significantly extend the mine life, given that the deposit remains open both at depth and along strike. Potential satellite discoveries both near-mine and within the broader region provides the opportunity to potentially operate in this district for many decades to come,” says Smart.
“With the Prieska BFS update now complete, the development of the Prieska project is ideally positioned to play a vital role in the local economic recovery plan for the Northern Cape region.
“The project’s low exposure to imported materials and foreign labour reduces construction challenges as the world overcomes and recovers from COVID-19.
“Prieska is well positioned to supply high-quality copper and zinc concentrates to the global market, targeting a production start-up in 2024 as market conditions permit,” Smart concludes.