Nevada Copper Corp (TSX:NCU, OTC:NEVDF) said it has agreed to non-binding terms with its financing partners for liquidity of up to $93 million to support the restart and ramp-up of its Pumpkin Hollow copper mine in Yerington, Nevada.
The company said non-binding terms have been agreed with its senior lender, KfW IPEX-Bank, its working capital provider, Concord Resources Limited, its largest shareholder, Pala Investments Limited, another significant shareholder, Mercuria Energy, and its stream and royalty partner, Triple Flag Precious Metals Corp.
In a statement, Randy Buffington, Nevada Copper CEO said: "I am very pleased with the substantial ongoing support of all our key stakeholders. The significant contribution by each of them is a testament to the conviction in the quality of the Pumpkin Hollow project and its intrinsic value."
READ: Nevada Copper provides update on its Pumpkin Hollow mine for which it is seeking substantial mine financing
"The current pause of production allows the company to make meaningful changes to address challenges that were impeding the final stages of the underground mine ramp-up. This is intended to de-risk the business plan and build a more profitable long-term business from the underground mine.
"We also continue to advance the open pit project at Pumpkin Hollow through the ongoing pre-feasibility study update process. I would also like to thank our team and key suppliers for the commitment and support through the recent challenges and I look forward to working towards a resumption of full operations," Buffington added.
The highlights of the non-binding package are as follows:
- Equity Investments ($40 million): Pala and Mercuria each to provide $20 million in exchange for common shares of the company. Pala has already provided an early disbursement of $7.5 million from its $20 million commitment.
- Stream and Royalty Financing ($30 million): Triple Flag to increase its existing net smelter returns royalty on the company's open pit project from 0.7% to 2% for a purchase price of $26.2 million, subject to a full buyback of the increased royalty percentage. In addition, Triple Flag to accelerate the $3.8 million remaining to be funded under the company's existing metals purchase and sale agreement with Triple Flag.
- KfW Facility Extension ($15 million committed): The company's senior credit facility with KfW to be amended to provide for a new tranche of up to $25 million, of which Pala, Triple Flag and Mercuria would commit the first US$15 million as a backstop.
- Deferrals under Senior Project Facility and Working Capital Facility (expected to be at least $8 million): KfW to defer three interest payments under the KfW Facility. Concord to defer interest and principal payments under the company's working capital facility.
- The company also said it is in discussions with other potential capital providers and may also pursue public and private capital markets opportunities to raise additional funds to complete the ramp-up process.
Debt consolidation
Nevada Copper also said Pala intends to consolidate debts currently owed by the company, which would amend the existing credit agreement of November 2021. The loans outstanding include (i) the total of $53 million outstanding under the Pala facility, and (ii) $20 million that was recently advanced to the company under a promissory note in June and July 2022. Amounts owing under the amended credit facility would be convertible into common shares, at Pala's option, at a conversion price equal to a 20% premium to the equity subscription price.
In addition, Mercuria would be granted warrants to allow it to acquire common shares pro rata with Pala's conversion of its convertible debt to preserve its equity position at the same exercise price.
Pala would be granted fourth-lien security to secure amounts owing under the amended credit and the company's wholly-owned subsidiary, Nevada Copper Inc (NCI), would become a guarantor of all amounts outstanding under the amended credit facility.
The remaining commercial terms in the amended credit facility will remain substantially the same as the terms under the Pala facility.
Pala and KfW would agree to amend Pala's existing guarantee of the US$15 million tranche B loan outstanding under the KfW facility to permit Pala to purchase the loan in certain circumstances.
The company said it has advanced planning for the restart of operations at its underground mine. Provided that the funding package is completed on the expected timeline, the key components of the restart plan will be as follows:
- Changes to the underground mining contractor arrangements to improve performance of ramp-up activities with a goal of transitioning certain underground mining activities to be company-performed
- The second dike crossing scheduled to be completed during the third quarter of 2022 and the final dike crossing scheduled to be completed by the end of 2022
- Stoping in the higher grade East North mining zone scheduled to commence in the second quarter of 2023, and (iv) the mill restart scheduled to commence in the third quarter of 2023
If the restart plan goes to schedule, the company said its management anticipates that underground production will ramp up to hoisting rates of approximately 3,000 tons per day (tpd) in the third quarter of 2023 and then further increase to 5,000 tpd in the fourth quarter of 2023.
Board strengthening
In conjunction with the restart financing package, the company said its board of directors will be strengthened in several areas. Chief executive officer Randy Buffington will join the board as a director and both Triple Flag and Mercuria will each have the right to nominate a director and to have a representative on the Technical Committee of the board.
Effective August 26, 2022, Nevada Copper also said Matt Anderson will replace Kris Sims as the interim chief financial officer of the company. Anderson is a Certified Public Accountant and previously served as the director, Corporate Finance at Argonaut Gold Inc.
Nevada Copper is a copper producer and owner of the Pumpkin Hollow copper project. Located in Nevada Pumpkin Hollow has substantial reserves and resources including copper, gold and silver.
Contact the author at jon.hopkins@proactiveinvestors.com