What the Analysts Say

WHAT THE ANALYSTS SAY: This week our team of experts run their eyes over Orion Gold.

Website: www.breakawayresearch.com

Orion Gold (ASX: ORN)

Orion has secured an option to acquire 73.3 per cent of the historic Prieska copper mine, located some 270 kilometres south-west of Kimberley in the Northern Cape Province of South Africa through the acquisition of Agama Exploration and Mining Pty Ltd, a private South African company.

Prieska, which is a Proterozoic volcanogenic-hosted massive sulphide (VMS) deposit, produced some 430,000 tonnes of copper and one million tonnes of zinc from 47 million tonnes of ore from 1971 to 1991, and was considered one of the 30 largest VMS deposits known globally.

Historical mining was limited to underground, sulphide ore, with most of the mine infrastructure currently in place to access the dip and strike potential demonstrated in historic drilling.

This includes an 8.8 metre diameter, 1,024m deep concrete lined vertical shaft and three separate ramp declines.

Dependent upon their condition, these could provide significant capital advantages should the project be developed.

In addition there is significant regional infrastructure including water, power bitumen roads, rail connection to a deep-water port and an airstrip at the mine site. Included in the Agama package is the Marydale gold project, located some 60km north-west of Prieska.

Drilling by the vendors has intersected up to 50.4m at 2.68 grams per tonne gold from near surface, in what Orion interprets as a structurally complex epithermal system.

Importantly, the South African acquisition includes new order prospecting rights, with the vendors, Agama, already having in place the Black Economic Empowerment (BEE) 26.7 per cent holding required by law – this is a key advantage when considering South African projects.

In addition the Prieska asset includes a fully funded ZAR17.3 million (approx. A$1.7 million) environmental trust.

The company is currently at an advanced stage of carrying out due diligence, with the $8 million option exercisable before July 31, 2016, with a total of $165,000 in monthly option payments required to maintain the option.

The due diligence process will be helped by the existence of an extensive mine data package and access to professionals with significant previous experience at Prieska.

Prieska, dependent upon the results of the due diligence and subsequent feasibility studies, provides a cheap entry into a large scale, near development base metal opportunity to take advantage of the next upturn in the resources cycle.

Results from Marydale are also very encouraging, and provide additional upside, leveraging on Orion’s epithermal exploration expertise.

Orion has also recently commenced RC drilling at its 100 per cent Connors Arc epithermal gold-silver project, located in Central Queensland.

The project is located in a geological and structural setting similar to other epithermal systems in Queensland, including Cracow and Mount Carlton, and in a region well served by infrastructure.

Previous work, including drilling, mapping and geochemical sampling has confirmed the prospectivity and scale of the system, and delineated a number of prospects that are being tested as part of the current program.

Work during 2015 has concentrated on further defining the epithermal systems and drill targets, and has included mapping, geochemical sampling and detailed ground magnetics.

In addition to refining drill targets, this work has also expanded the key Veinglorious and Aurora Flats prospects and located a new epithermal breccia target named Chough.

The work at Veinglorious has included spectral characterisation of drill samples from the 2014-2015 drill program to determine the level in the epithermal system.

This work has concluded that the drilling intersected shallow, low temperature parts of the system, above that where significant mineralisation would be expected, and thus provides a vector to mineralisation.

A common feature of epithermal systems is that gold and silver mineralisation is deposited in a defined vertical range in response to changing fluid conditions.

This is commonly in the order of a few 100s of metres, with the veining above and below this generally barren or weakly mineralised.

Exploration over epithermal projects can take patience, however Orion has taken a considered and technically rigorous approach to exploration

Disclaimer: The above is intended as a guide only. The Roadhouse accepts no responsibility for investments made from this advice, successful or otherwise.

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The Roadhouse makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions.