Orion Gold NL : Option exercised over zinc-copper project in South Africa (03/01/17)

ASX Announcement / Media Release

3 January 2017

Option exercised over world-class VMS zinc- copper project in South Africa

ASX Code: ORN

Issued Capital: Ordinary Shares: 644M Options: 85M

Directors: Denis Waddell

Chairman

Errol Smart

Managing Director, CEO

Bill Oliver

Technical Director

Alexander Haller

Non-Executive Director

Management: Martin Bouwmeester

Company Secretary &

Business Development Manager

Suite 2

64 Thomas Street West Perth WA 6005 ABN 76 098 939 274

T: [phone]

E: [e-mail]

Highlights:

• Option exercised to acquire a 100% interest in Agama, which holds an effective 73.33% in Prospecting Rights over the historic Prieska Copper Mine, located at Copperton, Northern Cape province, South Africa and the Marydale Gold-Copper Project.
• The historic Prieska Copper Mine is recorded as one of world's 30 largest VMS base metal deposits with recorded historical production of 0.43Mt of copper and 1Mt of zinc from 46.8Mt of sulphide ore milled(1). Unmined dip and strike potential is confirmed by extensive drilling and geophysics.
• Exploration programs are set to recommence in January 2017 including:
  • Completion of drilling on near surface mineralisation; and
  • Metallurgical testwork on oxide and sulphide material.
• Maiden Mineral Resource due for completion in early 2017.
• Orion is canvassing investor support for both equity and debt financing to complete the acquisition. Initial discussions with potential financiers have been positive at both South African and international level.

Orion Gold NL (ASX: ORN) is pleased to advise that it has exercised the option to acquire Agama Exploration & Mining (Pty) Ltd (Agama), which through its subsidiary companies, ultimately holds an effective 73.33% interest in the company holding Prospecting Rights over the historic Prieska Copper Mine (PC), located at Copperton, Northern Cape province, South Africa and the Marydale Gold-Copper Project, a volcanogenic gold-copper discovery located 60 kilometres from PC (Figure 1).

In July 2015, the Company announced the signing of a binding term sheet giving Orion the right to acquire Agama. During the option period, Orion has undertaken comprehensive due diligence including conducting exploration programs at both the PC Project and Marydale Project.

In recent months, the Company has announced very encouraging exploration results from the +105 Level Target (open pit) at the Prieska Zinc- Copper Project. As announced in previous ASX releases, 3D modelling of the mineralised zone intersected in drilling is now underway with the objective of producing Mineral Resources compliant with the JORC Code (2012) in early 2017 and feeding these resource estimates into a Pre-Feasibility Study with a target completion date of mid-2017. To aid these studies, a large diameter diamond core hole is being drilled to provide material for metallurgical testwork.

Drilling is scheduled to resume on 9 January 2017.

(1) Source: Mine records.

W: www.oriongold.com.au

Agama is well financed at project level to advance its main project, with a ZAR30 million (~A$3.0 million) facility available from a South African Investment Fund. Importantly, the PC Project also has a cash backed environmental fund of ZAR17.5 million (~A$1.75 million) which has not been needed since the mine closed in 1991.

The key terms of the purchase agreement (Agreement) are set out below:

• The vendor group, who are unrelated and at arm's length to Orion, have agreed to sell a 100% interest in Agama.

• Subject to the conditions below, purchase consideration payable upon completion of the acquisition is ZAR53 million (~A$5.3 million), of which:

  • Cash - ZAR31.5 million (~A$3.15 million) is payable in cash;

  • Consideration Shares - ZAR21.5 million (~A$2.15 million) is payable by issue of Orion fully paid ordinary shares (Shares), to be issued at a 10% discount to the 10 trading day volume weighted average price of the Shares prior to the issue of the Shares (Share Issue Price); and

  • Each Share issued will have an attached unlisted Orion option, exercisable at a 100% premium to the Share Issue Price and expiring on the date which is 24 months following the date of issue of the unlisted option (Unlisted Option).

    The Consideration Shares are subject to regulatory and shareholder approvals. If certain South African regulatory approvals for the issue of Shares to the vendors are not received prior to 15 March 2017, the Consideration Shares may be settled by cash payment to the vendors unable to obtain such approvals.

    Shares issued to the vendors will be subject to a 6-month voluntary escrow period from their date of issue and 75% of the Shares issued to the vendors will be subject to a 12-month voluntary escrow period from their date of issue;

• The acquisition is subject to the satisfaction of a number of conditions precedent including:

  • Orion providing proof of financial capacity to complete the transaction;

  • the issues of Shares and Unlisted Options to the vendors being approved by Orion shareholders, where required by law, including the ASX listing rules;

  • Orion providing or procuring finance for Agama so that it can settle all shareholder loans to an aggregate amount of approximately ZAR32.3 million (~A$3.23 million);

  • regulatory approvals; and

  • Agama disposing of all its assets and liabilities, other than the Prieska Zinc- Copper Project and the Marydale Project prior to settlement.

Satisfaction of the conditions precedent to the acquisition will occur by no later than 15 March 2017 (or such later date as may be agreed to between the parties), failing which the parties will be released from their obligations under the Agreement.

The projects have a well established Broad Based Black Economic Empowerment ownership structure (26.66% ownership) in place with strong local partners.

Forward Plan

Orion has canvassed investor support for both equity and debt financing to complete the acquisition and advance the projects. Initial discussions with potential financiers for the project have been positive at both South African and international level. The Company will seek to finalise an optimum financing structure and complete agreements securing the finance required by the end of February 2017.

Orion's focus in 2017 will be to complete the Agama acquisition and to fast-track the PC Project through a Pre Feasibility Study while also seeking to add potential satellite feed sources from Orion's other highly prospective exploration holdings in the Areachap Belt.

Errol Smart

Managing Director and CEO Company Enquiries:

Errol Smart - Managing Director and CEO Denis Waddell - Chairman

T: [phone]

E: [e-mail]

About Orion

Orion Gold is focused on acquiring, exploring and developing large tenement holdings or regional scale mineral opportunities in world-class mineral provinces. The Company has acquired quality projects in proven mineral provinces.

Recently, the Company has secured an outstanding growth and diversification opportunity in the global gold and base metals sectors and has secured options and earn-in rights over a combined area of 1790km2 on the highly prospective Areachap belt, North Cape Province of South Africa (Figure 1). These include:

• An option that has been exercised to acquire, an advanced volcanic massive sulphide zinc- copper project with near-term production potential. The option gives Orion the right to acquire an effective 73.33% interest in a portfolio of projects including an exploration project at the Prieska Zinc-Copper Project, located near Copperton in the Northern Cape province of South Africa, and the Marydale Prospecting Right, a virgin gold discovery of possible epithermal origin, located 60 km from the Prieska Zinc-Copper Project. (refer ASX releases 3 January 2017 and 18 November 2015).

• An earn in right to ultimately earn a 73% interest in a 980km2 prospecting right area located approximately 80 km north of the Prieska copper Project. The project area contains several VMS and VHMS zinc and copper targets including the advanced stage Kantienpan zinc - copper project. (refer ASX releases 31 May 2016 and 29 April 2016).

• An earn in right to ultimately earn an 80% interest, via a South African registered special purpose vehicle which will be 74% owned by Orion, to prospecting and mining right applications covering a combined and partially overlapping area of 626km2. The mineral rights areas include an advanced stage ultramafic hosted nickel - copper project, analogous to the geology of the Fraser Range, Western Australia. Several VMS and VHMS copper-zinc targets are also located within this mineral rights package. (refer ASX release 14 July 2016).

The Company also continues to explore a large tenement package on the Connors Arc in Queensland, where a significant intermediate sulphidation, epithermal gold and silver system has been identified at Aurora Flats. The project lies between the Cracow and Mt Carlton epithermal deposits. The Company is increasing its focus on this project, following promising reports from expert consultants, and its fieldwork has led to the discovery of substantial epithermal systems at the Veinglorious and Chough Prospects.

The Company also holds a substantial tenement holding in the Albany-Fraser Belt, host to Australia's two most significant discoveries of the last decade (the Tropicana Gold Deposit and the Nova Nickel- Copper-Cobalt Deposit). Part of this tenement holding was acquired from entities associated with Mark Creasy who is a large shareholder in Orion. Orion's intensive, systematic exploration programs have successfully defined 34 targets to date by a combination of geological, geochemical and geophysical methods.

Additionally, the Company owns the Walhalla Project located in Victoria, which is prospective for gold, copper - nickel and PGEs.

The Company has an experienced management team with a proven track record in exploration, development and adding shareholder value.

Figure 1: Regional geology map of the Areachap Belt showing prospecting rights currently under option to Orion and noted mineral occurrences as per published data from South African Council for Geoscience.