Nevada Copper Corp (TSX:NCU, OTC:NEVDF) has released updates on its plans to restart activities at its Pumpkin Hollow underground copper mine and on its previously-announced financing package which is expected to provide up to $93 million to support the development of the mine.
"We have made significant progress in developing the plans, recruiting the people and implementing the systems necessary to derisk the restart,” Randy Buffington, president and CEO, said in a statement.
“We believe that taking a careful, phased approach to restarting the mine removes some of the bottlenecks the operation has faced in the past and will facilitate a rapid ramp-up to nameplate capacity once the mill restarts in mid-2023.”
“We are looking forward to completing the capital projects and bringing the underground mine up to full operations so that we can turn our attention to development of the large open pit project. I continue to appreciate the ongoing commitment and support of our team and key stakeholders as we work diligently to close this financing and get back to operations," he added.
READ: Nevada Copper announces significant proposed financing package and restart plan for Pumpkin Hollow copper mine
Operations and Mine Planning Activities Update
The company said the restart plan will be executed in three phases after the financing package closes. In phase 1, the company will complete the remaining two dike crossings as well as certain capital projects, and develop the workforce while phase 2 will focus on underground stope and inventory development. In phase 3, stope mining and mill start-up begin.
In September, the company entered Phase 1 by reinitiating development activities with one mining crew focused on completing the second dike crossing. The crossing is expected to be completed and well advanced beyond the geological dike feature within the next 30 days, at which time the crew will move onto the third and final dike crossing. The company is also preparing to issue bid packages to interested development contractors to perform underground development activities and for completion of the remaining capital projects. These include the coarse ore bin, vent shaft stripping and surface fans installation; and the Geho dewatering system.
In early 2023, the company plans to begin rapid development with the use of a contractor to advance into the higher-grade stopes of the East North Zone and build significant underground ore inventory. The company will continue to recruit additional underground personnel to prepare for stope mining in the second quarter of 2023. With a significant stockpile of ore on surface and underground inventory expected to be built up, the mill is planned to start up in the third quarter of 2023.
As previously announced, the company engaged a third-party consulting firm, John Wood Group plc, to complete a mine plan focusing on accessing the larger, higher-grade stopes in the East North Zone.
Restart financing package update
Nevada Copper said the company and its key financing partners intend to enter into definitive documents in respect of and close the financing package concurrently on or about October 5, 2022. The closing of the financing package will be subject to the approval of the Toronto Stock Exchange.
The company said it expects the costs of the restart and ramp-up process to be in the range of US$70 million-US$75 million. In addition, the company needs to satisfy and/or defer various outstanding vendor payables. Together these costs and payables are expected to exceed the amount of the financing package. As a result, the company continues to evaluate other additional financing options, including a public offering.
The company intends to use the available proceeds from the financing pckage of approximately US$71.5 million to fund ramp-up costs, vendor payment) and for general corporate purposes, such as overheads.
The company noted that if the restart financing package is not completed it may not be able to continue the ordinary course of business and may need to pursue proceedings for creditor protection. The company’s creditors may also seek to commence enforcement action, including realizing on their security over the company’s assets.
Potential dilution
Pala Investments Limited, the company’s largest shareholder currently owns 167,759,110 common shares, representing approximately 37% of Nevada Copper’s outstanding common shares while Mercuria Energy currently owns 48,700,000 common shares, representing approximately 11%. These shareholdings will change when the financing package is closed.
The company said Pala’s shareholding, after its equity investments including conversion of the debt instrument and exercise of the warrants, will rise from 37.41% to 56.39 % while Mercuria’s shareholding will rise from 10.86% to 24.16 %.
Nevada Copper also said it has applied to the TSX for a “financial hardship” exemption from the requirements to obtain shareholder approval of components of the Restart Financing Package on the basis that, absent the Restart Financing Package the Company is in serious financial difficulty due to the lack of available cash and funding resources.
The board of directors of the company has formed a special committee to consider the proposed terms of the restart financing package, including the terms of the equity investments. The Special Committee has met continuously throughout the negotiation of the proposed terms of the package.
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