South Africa: Miner Orion sees potential for copper refining in Northern Cape

By David Whitehouse
Posted on Tuesday, 19 October 2021 18:13

A vandalized Nancefield train station in Soweto, South Africa, September 22, 2020. Orion Minerals CEO Errol Smart says better security for the national network is needed. REUTERS/Siphiwe Sibeko

South African and Australian junior miner Orion Minerals has the long-term ambition of building a copper refinery in South Africa’s Northern Cape Province, CEO Errol Smart tells The Africa Report.

The refinery would likely be a partnership and Orion has been sounding out potential players, Smart says. Orion would probably provide the base feedstock and possibly a site for the refinery, he adds.

Orion focuses on copper, zinc, nickel, gold and platinum-group elements in South Africa and Australia. It also has stock-market listings in both countries.

The company’s flagship is the copper-zinc project at Prieska in Northern Cape, where it also has a controlling interest in several properties in the Okiep copper project. In September, South Africa’s Industrial Development Corporation agreed to become Orion’s strategic partner in the Okiep development.

Copper refining becomes economically viable from about 40,000tn  to 50,000tn of production, Smart says. Both Prieska and Okiep will be long-life mines where operations will continue for 20 years or more, he adds.

The company is currently seeking project finance to bring its copper and zinc project at Prieska into operation. The funding will be the largest project finance for a junior miner in South Africa for several decades, Smart adds. The funds will be drawn from a banking syndicate that may have about five banks involved. Smart is confident that this will be achieved in early 2022.

Project finance differs from balance-sheet-based finance, as investors have no corporate recourse outside of the cash flows generated by a specific project. Smart sees a hole in the South African funding landscape since larger projects find it hard to secure project finance. Junior mining has “fizzled” in South Africa as a result, he says.

“For too long, junior mining in South Africa has been about picking up the skeleton from the kill of the big miners and picking the last bit of meat off the bones,” Smart says. The resources available in the Northern Cape mean that Orion will not be operating as a “scavenger,” he says. “We’re setting out to do something that hasn’t been done before in South Africa.”

Copper theft

High prices for copper improve Orion’s profit outlook. They also exacerbate the logistical challenges facing the country’s miners, says Smart, who is also a director on the board of the Minerals Council South Africa. The rising value of copper makes signalling equipment on South Africa’s rail network a target for thieves, he says.

The impact of a theft is immediate. “When signalling goes down, everything goes down.” Some effective intervention is happening in terms of protecting signalling, with some arrests having been made, Smart says. There’s “still some way to go” and covering the whole of the network is an “enormous task. The police are not policing the rails.”

  • The challenge is to get down to the “core of the problem” and target the buyers of the stolen copper, Smart says. South Africa needs to “close the market for the scrap metal. It’s a police job, and sadly the police are not covering it.”
  • There is scope for the mining industry to support state-owned logistics company Transnet by providing drone monitoring to improve security, he says.
  • It would also be a good idea to privatise some sections of track, especially lines that are not being fully used at present. “These initiatives are getting attention.”
  • Transnet can also help by improving scheduling, Smart says. He estimates that efficiency gains of between 20% and 30% could be achieved simply by better rail scheduling.

Bottom line

South Africa could improve its rail network to make best use of its mineral resources.

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