Orion Minerals Proposed Acquisition of Okiep Copper Complex

ORION MINERALS PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX

ORION MINERALS LTD (ORN:ASX & ORN:JSE)

• Further significant upside option to existing Base Case valuation range of ZAR 71.5cps to ZAR 102.0cps (AUD 6.3cps to AUD 9.0cps). • Cheap Option over Highly Prospective Historic Copper Producing Complex. • Total Target Attrib Resources of 10.0mt (+1.2% Cu) at ZAR 20 (A$ 1.80) per tonne. • Compares to Implied Value of ZAR 40 (A$ 3.60) per tonne in Orion prior to announcement. • Low Capital Cost and Early Access Potential due to Existing Infrastructure. • Low Technical and Delivery Risks due to Experienced Management Team. • Huge 60 Year Exploration Database Available with Acquisition. • Opportunity to Apply New Electro- Magnetic Survey Methodologies & Ore Body Understanding. • Significant Prospective Acreage Remains Unexplored. • Management Synergies Available to Operate PCZM and OCC Under One Company. • Orion Becomes Multi-Project Company with Larger Capital Base. 29 30 28 27 79 Cu Zn Ni Co PGE Au Copper Zinc Nickel Cobalt PGE Gold ANALYST VERIFICATION CONTENTS I, Simon Hudson Peacock, hereby certify that the views expressed in this research accurately reflect my personal views about Orion and no part of my compensation is directly or indirectly related to the inclusion of specific recommendations or Announcement of Maiden Resource views in this research. at Okiep Copper Complex 1

Rationale for the Orion Shareholders of the OCC Acquisition 3

Salient Details of the Transaction 4

Brief History 6

Nature of the Deposits 8

Exploration Potential 9

Simon Hudson-Peacock is a Mining Engineer turned Investment Analyst and Portfolio Manager. Simon started his career as a Junior Mining Engineer at Impala Platinum Ltd before entering financial services as a Mining Analyst. Simon has over 25 years experience in the fund management industry both on the buy side and sell side, specialising in the mining sector. Simon has a B.Eng (Mining) with Commendation from the Camborne School of Mines, an MBA from the University of Cape Town and is a CFA Charter Holder.

CORPORATE DIRECTORY Auditor JSE Sponsor BDO Audit Pty Ltd Merchantec Capital Company Secretary Level 18 2nd Floor, North Block Martin Bouwmeester Tower 4, 727 Collins Street Corner 6th Road and Jan Smuts Registered office and Principal Docklands Victoria 3008 Avenue place of business Hyde Park Suite 617 Stock Exchange Johannesburg 2196 530 Little Collins Street Primary listing: Melbourne, Victoria, 3000 Australian Securities Exchange (ASX) Telephone: +61 (0) 3 8080 7170 ASX Code: ORN Website: www.orionminerals.com.au Secondary listing: Share Registry JSE Limited (JSE) Link Market Services Limited JSE Code: ORN QV1, Level 2, 250 St Georges Terrace Perth, Western Australia 6000 Telephone: +61 1300 306 089

Source: Annual Report

B PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX ANNOUNCEMENT OF MAIDEN RESOURCE AT OKIEP COPPER COMPLEX (10th Feb 2021)

Orion has reported a maiden JORC compliant against cash portion whilst the ZAR 5.0m Due Diligence Resource of 8.9mt Cu at 1.37% Cu. This expenditure is not. Thus, the total cost of ZAR 91.1m for an follows a due diligence assessment of the attributable 5.0m tonnes implies a purchase price of ZAR 18.19 per tonne. This compares to an implied market capitalisation per exploration data accessed last week following tonne of resource at the Prieska Copper Zinc (PCZM) project of the announcement by Orion of its option to ZAR 40 per tonne prior to last weeks announcement (at ORN. acquire the copper exploration assets in the SJ = 35cps). Although not strictly comparable, the acquisition is Northern Cape Province (RSA) collectively value accretive measured this way. known as the Okiep Copper Complex (OCC) The two prospecting permits that SAFTA had in place over the nd (2 Feb 2021). ground on which the Resource has been declared expired in Oct ’20 and Jan ’21 respectively. Orion has confirmed that the In last week’s announcement, Orion revealed that it had secured Department of Mineral Resources has received valid applications a 6-month option to review the existing exploration data and for new prospecting permits covering the area. to initiate any further exploration activity deemed necessary to prove up a JORC compliant baseline Resource of 8.9mt at OCC. Also in progress is a new order Mining Right application over Orion’s management team had hoped to be able to declare this a smaller area within the SAFTA concession that specifically baseline resource by the end of March but the integrity of the contains the reported Resource. Orion together with its historical data has been excellent and it would appear that no shareholding partner, the IDC, should be able to use their additional exploration effort was required to verify the results. combined experience and influence to ensure steady progress on these applications. Orion has undertaken to spend ZAR 5m on the Due Diligence process in addition to ZAR 1.8m, deductible against the purchase The Resource is held on three related deposits known as Flat price, to secure the option. Although the baseline Resource has Mine East (FME), Flat Mine North (FMN) and Flat Mine South now been reported, the Due Diligence process may still take (FMS). FME was the last active mining operation in the area up to 6 months due to the level of compliance required when a under Metorex’s management prior to closure in 2003. These public company is acquiring private companies. operations were closed after Metorex found itself unable to sustain the throughput required for the Smelter, not because of The Resource is held within one of the three entities under option, the economics of this orebody which was still in progress of ramp namely South African Tantulum Mining (Pty) Ltd (SAFTA). SAFTA up to full production. As such, access to the orebody is available is 43.7% held by the Industrial Development Corporation, a and in a good condition, ground conditions are robust and there shareholding that will be retained post the transaction. are stoping panels available to drill and blast immediately.

The option exercise price for phase 1 of the acquisition is The reported Resources are concentrated at FME and FMS. The ZAR 86.1m being ZAR 24.1m in cash and ZAR 62.0m in Orion majority of the Resources at FME are Measured whilst those at shares. The ZAR 1.8m 6 month option payment is deductible FMS are mostly Indicated.

Flat Mine North, East and South

Measured Indicated Inferred Mine/Prospect Tonnes % Cu tCu Tonnes % Cu tCu Tonnes % Cu tCu Flat Mine East 3,166,000 1.43% 45,274 800,000 1.11% 8,880 – 0.00% –

Flat Mine North 339,000 1.27% 4,305 970,000 1.50% 14,550 – 0.00% –

Flat Mine South – 0.00% – 3,321,000 1.41% 45,557 401,000 0.84% 3,368

3,505,000 1.41% 49,579 5,091,000 1.36% 68,987 401,000 0.84% 3,368

Table 1 : Maiden Mineral Resource Statement

PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX 1 ANNOUNCEMENT OF MAIDEN RESOURCE AT OKIEP COPPER COMPLEX continued (10th Feb 2021)

Importantly, these Resources do not include the target In addition, the area within a 2km radius encompassing the mineralised orebodies identified down dip of FMN by means of three reported Resources contains a multitude of prospective the Electro-Magnetic Survey conducted by SAFTA in 2018. This exploration targets that have similar historical core data available. survey, coupled with a greater understanding of the relationship These targets appear to be related, either along strike or down between mineralisation and certain lithologies highlights the huge dip, and bode well for further near future increases in Resources exploration potential of this mine alone. It is very interesting to given the experience evidenced by this maiden declaration. The note that the EM survey identified much higher sulphide content idea of a multi-mine operation with a centralised mill of a suitable in the two down dip targets identified than in the three orebodies scale is suggested by this vision. that constitute the reported Resource.

Figure 1 : Showing the location of the three mines as well as the location of borehole information available for related mineralisation within a 2km radius.

The lead time to any production will be governed by access to processing capacity, most likely the construction and commissioning of a concentrator, and the issue of the Mining Right. All the related movable surface assets were relocated to Metorex’s DRC operations in 2005. There are investigations into fast tracking production by accessing nearby processing facilities, but these are conceptual as present. The reestablishment lead-time is estimated to be between 18 and 24 months, some 6 to 12 months earlier than that planned at the PCZM.

2 PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX RATIONALE FOR THE ORION SHAREHOLDERS OF THE OCC ACQUISITION

Orion has a low-cost, exclusive option to mines as was the case during the highly successful Newmont acquire a majority exposure to a prospective tenure. Orion is targeting an ultimate production profile similar historical copper district, Okiep, in the to that of Newmont, the previous owners of the district up until the mid-1980’s, of 40,000 tpa Cu, approx. 2mtpa ore, averaging Northern Cape, some 450km West of its mine- 1.9% Cu run of mine. In order to do so, significant exploration ready Prieska Copper Zinc Project (PCZM). efforts will be required to identify and convert Resources into Reserves. This eluded the more recent owners, Goldfields and If successful and targets are met, Orion will be effectively Metorex, and will ultimately be the measure of Orion’s success buying into just over 15M (10Mattributable) JORC compliant or failure. Resource tonnes at approximately ZAR 20 per tonne. Although not strictly equivalent, Orion’s market cap per tonne of declared Orion’s rapid and effective execution of resource drill out JORC compliant Resource tonnes (due to PCZM) prior to this and feasibility study publication at Prieska demonstrates the announcement stood at ZAR 40.00 per tonne (at a share price of management team’s technical capability. Further, Orion has ZAR 35cps). The transaction would appear to be value accretive successfully proved itself in steering the permitting process of on this basis. Prieska through South Africa’s notoriously opaque governmental departments. Combined, this management experience will be The transaction is low risk. Orion had given itself 6 months at vital with regards to fast tracking any production opportunities very little cost to shareholders to decide whether to proceed. The within the Okiep district if the deal goes ahead. quality of the exploration data has evidently been good and a baseline Resource of 8.9m tonnes has been declared after only There are also significant management and operational synergies 1 week. This bodes well for further Resource identification with to be had, given the similarities and geographical proximity of Okiep respect to the vast trove of exploration data that will be available and Prieska. The Orion team is capable of managing both operations to the Orion team. for mutual benefit of each other if the transaction proceeds. Existing infrastructure requirements such as roads, power and As with Prieska, the ESG considerations will be important. water are available and are in a good condition should Orion The experience in working with nearby poor communities, decide to proceed. Furthermore, mining risks related to ground the sourcing of green energy and operating on a low carbon conditions are low based on historical experience. footprint will likely make any metal produced globally desirable There are many reasons to believe that, with new exploration at a time when “green commodities” attract premium prices. techniques and Orion’s in-house expertise, a substantial JORC Given past experience, the concentrate product is also compliant Resource for the district is possible. If Orion can repeat expected to be low in deleterious elements further underlining its success at Prieska in recognising the opportunity left behind its attractiveness. by the big mining companies and rapidly turning those to reserves The successful development of this district will transform Orion at low cost, it bodes well for success at OCC. into a diversified multi-project mining company with a substantial The OCC district has the potential to operate a cluster mining market capitalisation and liquidity that will bring it onto the radar concept with central milling and services supporting several screen of more mainstream investment managers.

PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX 3 SALIENT DETAILS OF THE TRANSACTION

Orion has a 6-month exclusive option to For this option, Orion will pay each of the above entities acquire proportionately the mineral interests ZAR 100,000 per month for the 6 months from the effective in the Okiep Copper Complex (OCC) held by date, 1st Feb 2021, until the 31st July 2021. During this time, Orion has committed to spend at least ZAR 5m on a formal Due three entities as follows; Diligence process. Total maximum spend obligation prior to the decision to proceed will therefore be ZAR 6.8m but may be more • 56.25% of South African Tantalum Mining (Pty) Ltd (SAFTA). if Orion decides that the due diligence process warrants it. Orion can withdraw from the agreement at any time and the • 43.75% held by the IDC will be retained by the IDC obligation to pay further option payments and Due Diligence post the transaction. expenditure will fall away. Correspondingly, Orion may exercise its option at any time during the exclusivity period. • 100% of Nababeeb Copper Company (Pty) Ltd (NCC). If Orion decides prior to or at the end of the 6 months that it wishes to acquire these exploration interests, it will pay a total of • 100% of Bulletrap Copper Company (Pty) Ltd (BCC). ZAR 86,062,500 in cash and shares as follows.

Entities Buying Total Cash (ZAR) Total Equity (ZAR) Total Initial (ZAR) South African Tintalum Mining (Pty) Ltd 56.25% 7,593,750 37,968,750 45,562,500

Nababeeb Copper Company (Pty) Ltd 100.00% 10,500,000 10,000,000 20,500,000

Bulletrap Copper Company (Pty) Ltd 100.00% 6,000,000 14,000,000 20,000,000

24,093,750 61,968,750 86,062,500

Table 2 : Transactional Value of Exercising the Option.

4 PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX SALIENT DETAILS OF THE TRANSACTION continued

The exclusivity payments of up to ZAR 1.8m will be deducted A further payment (“Agterskot”) to the vending shareholders of up from the cash portion if the transaction proceeds. The cost of to ZAR 98,312,500 is dependent upon the exploration success acquiring the enormous Newmont-Goldfields exploration archive for the 12-month period following the date of the transaction. will also be deducted from purchase consideration and should Orion has undertaken to spend a minimum of ZAR 4m per provide a spring-board for advancing the project. entity on exploration during this time. For every tonne of ore that becomes a JORC compliant Resource, over and above It is expected, as in the normal course of business, that the equity the baseline Resource, by the end of the 12 months, Orion portion of the deal will be priced at the 30day VWAP prior to will pay ZAR 20 per tonne to the vending shareholders (SAFTA the deal date. Therefore, the dilutive effects of the transaction shareholders receive ZAR 11 per tonne, approximately in line with will likely reduce on the back of positive news flow as the due the 56.25% shareholding). diligence proceeds, but are not possible to quantify at this stage. The total effective cost of each tonne on an attributable basis to A baseline JORC compliant Resource of 8.9m tonnes (5.0m Orion shareholders is ZAR 22.24 per tonne. The details of the tonnes attrib.) of ore is targeted for this first stage of acquisition. “Agterskot” payments are shown below. This compares to a non-compliant Resource of 9.745m tons (8.840m tonnes) at 1% Cu last declared by Metorex in 2005. The implied initial acquisition price is therefore approximately ZAR 18.19 per attributable tonne of ore declared.

Declaration of JORC Compliant Reserves Entities Buying Max Tonnes Paid R/t Declared South African Tintalum Mining (Pty) Ltd 56.25% 3,528,409 11.00 38,812,500

Nababeeb Copper Company (Pty) Ltd 100.00% 1,475,000 20.00 29,500,000

Bulletrap Copper Company (Pty) Ltd 100.00% 1,500,000 20.00 30,000,000

Total tonnes 6,503,409 20.00 98,312,500

Exploration 12,000,000 Spend

Attributable Total Spend tonnes 4,959,730 22.24 110,312,500 Phase 2

Table 3 : Transactional Value of “Agterskot” Payment

The total financial cost implied by the entire transaction is therefore ZAR 20.21 per tonne.

Total Financial Transaction Summary

Attribute Resource Total Resource ZAR ZAR per Tonne (Ore tonnes) (Ore tonnes) Due Diligence 5,000,000

First Tranche 86,062,500 18.19 5,006,250 8,900,000

Second Tranche 93,312,500

Exploration Spend 12,000,000 22.24 4,959,730 6,503,409

Totals 201,375,000 20.21 9,965,980 15,403,409

Table 4 : Total Transactional Value

PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX 5 BRIEF HISTORY

First discovered by Simon van der Stel in manner, Wheal Flat Mine (South) was reopened and development 1685, commercial exploitation of copper was started toward Wheal Flat Mine (North). only started in 1852. By the end of the Unfortunately, the slag retreatment project disappointed with 1800’s ownership control of the area had neither volumes, grades nor recoveries matching expectations. consolidated into two entities; the Cape At the same time toll treatment and recovery charges were Copper Company (CCC) (1863) and the declining on account of global excess smelting capacities. The Namaqua Copper Company (NCC) (1888). last of the mineable reserves at Nigramoep Mine and Wheal Flat Mine (South) were depleted and the lead time to access Wheal Flat Mine (North), now Flat Mine North, was deemed too long to The O’okiep Copper Company (OCC), a wholly owned subsidiary sustain the milling and smelting capacity required. of Newmont Mining, was formed in 1937 and in 1939 acquired the assets of both CCC and NCC. Subsequent exploration programs In December of 2003 the smelter was finally placed on care and from 1946 onwards identified many potential opportunities but maintenance. During the following year the labour compliment only 19 that were considered economic and subsequently mined. was retrenched or reassigned and the plant & machinery assets either sold or redeployed within the group. By September In 1984 Newmont sold OCC to Goldfields, a move motivated 2005 the last of the Okiep infrastructure had been dismantled by global economic sanctions against the then apartheid and transported to the Ruashi Etoile Copper/Cobalt project government of South Africa. Of the 27 mines operated by the in the DRC. In 2013 Metorex sold OCC, including its historic OCC since 1937, only two (Carolusberg & Nigramoep) were still exploration database and outstanding environmental liabilities, operational by the late 1990’s. into private hands. In 1998 Goldfields merged its gold assets with those of Gencor to The same year, one of the new ownership entities, South African form a focused gold mining company. At the same time, it disposed Tantalum Mining (Pty) Ltd (SAFTA), applied for a Prospecting of its non-gold assets including OCC that was sold to Metorex. Permit over the area that included the abandoned Wheal Flat The business model of OCC under Metorex was that of a Mine (North) orebody. A preliminary feasibility study indicated an copper smelting facility that treated locally mined concentrate economic opportunity motivating SAFTA to apply for a new order (captive), concentrate from other group mining activities (toll) Mining Licence in 2018 as well as further Prospecting Permits and third-party open-market concentrate (custom). In the 2002 on two other areas owned by the entities Nababeeb Copper financial year the processing split by source was 75%, 15% and Company (Pty) Ltd (NCC) and Bulletrap Copper Company (Pty) 10% respectively. Ltd (BCC).

Motivated by declining minable reserves, a slag retreatment plant In February 2021, Orion announced that it had negotiated an was commissioned (May 2002) to replace mined ore concentrate option to acquire a majority ownership (56.25%) in the mineral fed to the smelter. This project had a 7-year life during which it interests held by SAFTA and full ownership of the mineral was anticipated that exploration, especially adjacent to the slag interests held by NCC and BCC subject to an intensive 6 month plant, would reveal further mineable underground reserves. In this due diligence on the viability of reenergising the region.

1908 1910

6 PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX BRIEF HISTORY continued

Fig 2 : Showing Historical Mining Activities, Mining and Prospecting Right Applications and Geographical Location.

PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX 7 NATURE OF THE DEPOSITS

Mineralisation is “magmatic intrusive sulphide” in nature and broadly occurs in three forms; dykes, sills and plugs. Dykes are the most common form found with mineralisation concentrated at the contact of the intrusive dyke and the sedimentary host rocks through which it passes. These deposits tend to be long and narrow. Large, flat, sill type deposits can occur where fluidised mineralisation has taken advantage of the geological weakness along the contact zones between the major lithological units. Occasionally, large tear-drop shaped plug type orebodies are found that are strongly related to the intrusive cutting across specific lithologies.

Fig 3 : Showing Schematic of Orebody Type of Historical Mines and the Relationship of Mineralisation Concentration with certain Host Lithologies.

8 PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX EXPLORATION POTENTIAL

Reasonably detailed ground and arial Metorex managed the assets, the remaining underground life-of- magnetic surveys and Induced Polarisation mine reserves could no longer be replaced in a timely fashion. Metorex turned to the slag retreatment project to fill the smelter geophysical studies have been conducted gap. Ultimately low copper prices, low refining margins, a strong during OCC’s history and some 778 targets rand, poor recoveries from the slag project and insufficient short have been identified. The conversion of these lead-time orebodies resulted in closure. anomalies to target orebodies has been Future exploration opportunities in the region can be summarised elusive for a number of reasons including in two broad categories. Firstly, mentioned earlier, there is a that the distinction between Copper and Iron plethora of known anomalies and surface outcrops historically Sulphides was not possible. Because of this identified by means of detailed geological mapping and geo- inability to accurately rank targets and the physical surveying that have never been drilled. cost of diamond core drilling, only 320 of Secondly, there is a significant area of the NCC Prospecting these anomalies have been drilled. Of these, Right, representing perhaps 25% of the total OCC exploration only a few were intensely prospected or hectarage, that sits below a shallow (250m) cap of Nama tested at the specific target horizons where sedimentary cover rocks. This area has defied the sub-surface the intrusive bodies cut the most prospective geo-physical exploration techniques of the past such as Induced target lithologies. Polarisation (electrical surveying), Magnetic Surveying and Gravity Surveying. As a result, very little is known about the potential for mineralisation below. Under Goldfields’ management, and most probably related to falling metal prices, regional exploration expenditure was curtailed It is pertinent to note that both the intrusive, swarming depositional and refocused on confirming life-of-mine orebody extensions to nature of the district and the fact that there have been successful existing operations. As a result, greenfields exploration and the mining activities both east and west of the Nama cover point to drilling of previously undrilled targets was neglected. By the time an area that should be highly prospective.

Fig 3 : Surface Geological Map Showing the Nama Group Cover and the Location of Historic Mining Activities both East and West of the Cover

PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX 9 EXPLORATION POTENTIAL continued

Orion intends to bring its proven in-house technical expertise and modern geo-physical exploration techniques to bear on both categories of opportunity. Specifically, Orion will conduct Electro- Magnetic (EM) surveys that are expected to penetrate the Nama cover for the first time as well as identify down-dip and strike extensions of other depleted orebodies and surface anomalies. This coupled with the knowledge of the relationship between mineralization and certain host horizons below ground should bring a new and exciting exploration initiative to the region.

Already the validity of EM surveying has been proven with the results of the first ever such survey conducted on the SAFTA prospecting area that identified two targets down dip of Wheal Flat Mine North. This is particularly important to the optionality of this transaction.

Fig 4 : 3D Representation of EM Survey Results showing Exploration Targets down dip of Wheal Flat Mine North.

Simon Hudson-Peacock S2Research [email protected] 083 231-6830

10 PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX NOTES

PROPOSED ACQUISITION OF OKIEP COPPER COMPLEX 11 29 30 28 27 79 Cu Zn Ni Co PGE Au Copper Zinc Nickel Cobalt PGE Gold

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