Orion’s shares rise on deal activity

PERTH (miningweekly.com) – The share price of metals developer Orion Gold has increased by nearly 11% on news of two distinctive deals struck this week.

Orion on Friday announced that it had reached an agreement with equity group Tembo Capital, which has agreed to invest some A$3-million on Orion’s current convertible note issue.

The current raising comprises the issue of up to 307.6-million convertible notes, each with a face value of 2.6c, to raise up to A$8-million to advance volcanogenic massive sulphide zinc-copper projects in South Africa.

Tembo’s participation in the note issue is subject to the equity group acquiring up to a 19.9% interest in Orion through the placement of shares, to raise up to A$4.7-million at an issue price of 2.4c a share.

If the placement proceeds, Tembo will have the right to appoint one nonexecutive director to the Orion board for as long as it holds at least a 12.5% interest in the company.

Orion told shareholders that, subject to the completion of the placement, the two companies would also enter into a strategic relationship agreement, under which Orion will have access to Tembo’s strategic and financing networks within emerging markets, while Tembo will have access to certain information about Orion and its assets, subject to confidentiality and disclosure obligations.

Orion will also, subject to ASX approval, grant Tembo an antidilution right, giving the investor the right to participate in any equity raising to ensure its shareholding is maintained, while Tembo has agreed, that if requested by Orion, it would sub-underwrite a rights issue by Orion on standard market terms and conditions to raise additional equity if undertaken within three months following the completion of the placement.

Shareholders are expected to vote on the Tembo transaction on March 13.

Meanwhile, Orion has also signed a joint venture (JV) agreement with metals miner Independence Group over the Fraser Range nickel-copper project, in Western Australia.

Under the terms of the agreement, Independence will acquire a 70% interest in Orion’s tenements, and a 60% to 65% interest in various JV tenements in exchange for a A$700 000 cash injection, and subscribing for A$1.3-million Orion shares, priced at 2.4c each.

Orion pointed out on Friday that the company would maintain exposure to the ongoing exploration and development work at the Fraser Range project without the need for additional financial commitment, given that Orion will be free-carried through to the first prefeasibility study on any of the tenements.

In addition to the equity holdings in the projects, Independence will also hold the option to acquire an additional 5% equity in the Fraser Range project for A$10-million in cash, or the equivalent in Independence shares. This would result in Independence holding a 75% interest in the Orion tenements, a 65% interest in the Creasy JV tenements and a 70% interest in the GR JV.

Alternatively, if this option is not exercised, Independence will hold the option to earn an additional 5% interest in the GR JV only by paying Orion A$5-million in cash, or equivalent Independence shares, resulting in Independence holding a 70% interest in the GR JV, and Independence retaining a 70% interest in the Orion tenements and a 60% interest in the Creasy JV.

Independence also had a further option to earn an additional 5% interest in the Orion tenements, and the Creasy JV by paying Orion A$7.5-million in cash or shares. This would result in Independence holding a 75% equity in the Orion tenements, a 65% equity in the Creasy JV and a 70% interest in the GR JV.

Orion currently holds a 70% interest in the Creasy JV, with entities controlled by Mark Creasy, and an 80% share in the GR JV, with Geological Resources.

The company told shareholders on Friday that the agreement with Independence was consistent with Orion’s decision to place greater focus on its resources and activities on its more advanced Areachap zinc-copper project, and gold projects in South Africa.