Orion belts out a capital raise

Orion is busy raising capital to invest in its South African base metal projects. In this three-tranche capital raise aimed at sophisticated investors, ASX- and JSE-listed Orion hopes to raise A$20 million at A$0.02 per share. There’s also a small raise aimed at all investors.

The good news is that committed funds for the first two tranches come to A$6 million in aggregate. The bad news is that this only covers 30% of the intended capital raise, so the bulk of the money needs to be raised in a world where “recession” is suddenly part of the vocabulary again.

The impact of this uncertainty is that participants in the third tranche have requested more time to finalise their involvement. Whilst this doesn’t mean that the raise will fail, one of the biggest lessons I learnt in my investment banking days was that a delayed deal can easily become a cold deal.

Included in the existing A$6 million commitment is A$2.2 million from directors of Orion.

It’s also worth noting that the first two tranches include a sweetener in the form of share options with a strike price of R0.275 per share and an expiry of June 2023. The current share price is around R0.24, so that’s by no means a giveaway price and this does give some indication of the opportunity that the investors believe in.

The current capital raise is priced at R0.22, so that’s a small discount to the traded price.

The proceeds will be used for dewatering and feasibility studies at the flagship Prieska Copper-Zinc mine, feasibility studies at the Okiep Copper Project, pre-production test work in the Jacomynspan nickel-copper-cobalt battery project and further exploration efforts in the Northern Cape.

In addition to the raise aimed at more institutional investors, there is a share purchase plan being made available to all shareholders at the same price as the institutional raise. The minimum subscription under this plan is A$2,000 and the maximum is A$30,000 per investor. The company is aiming for A$3 million under this raise and reserves the right to amend this amount.

Orion’s share price is down more than 10% this year. As is usually the case in junior mining companies, there’s a large helping of both risk and opportunity. With a market cap of over R1 billion and underlying projects focused on metals that are in high demand, Orion is worth keeping an eye on.