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In Prieska, Orion has the opportunity to acquire a relatively low capex, short term start-up operation that could be a company maker. This is a shrewd move, taking advantage of low asset values to pick up what is potentially a very valuable resource at a bargain basement price that could be brought into production in time to take advantage of any increases in metals prices.
The historic operation comes with extensive records of previous operations, has extensive mine development in place and unmined mineralisation. It is well served by regional infrastructure, including transport, power and water. Vitally, the acquisition has the required BEE ownership structure in place and comes with a ZAR30 million financing facility being secured.
Very encouraging results have also been returned from exploration over the Australian projects. The key Connors Arc and Fraser Range areas are located over geology considered highly prospective for the styles of mineralisation being sought, with this being confirmed by exploration results.
We rate Orion as a SPECULATIVE BUY, with a base case price target of $0.052/share. We see significant upside in our valuation, and short term price movers will be positive exploration results from the Australian properties, and the successful acquisition of the Areachap Project Orion Gold NL (ASX: ORN) is an Australian based junior explorer and developer which until recently has largely focussed activities on the Connors Arc Epithermal Gold and Fraser Range Nickel-Copper-PGE and Gold Projects.
The Company has recently had a change of strategy, taking advantage of weak market conditions to secure a purchase option over the historic Prieska Copper-Zinc Mine, which has the potential to be a relatively low capital, rapid start-up operation.
With the proposed acquisition of 73.33% of the Areachap Project (“Areachap”), Orion Gold NL (ASX: ORN, “Orion” or the “Company”) is taking advantage of a counter-cyclical opportunity during a period of low asset prices in the resources sector, to purchase quality assets that have significant growth potential for investors, and could be brought on stream at a time to take advantage of future increases in metals prices.
The Company is currently undertaking due diligence on Areachap, with a decision to exercise the option to be made by the end of July 2016.Download the flashnote for more information.
ASX on Hotcooper: http://hotcopper.com.au/asx/ORN