Nevada Copper Corp. (TSX: NCU) (“
Nevada
Copper” or the “
Company”) is pleased to
announce it has entered into non-binding arrangements for a
proposed substantial balance sheet strengthening package in order
to provide increased operating flexibility to continue its ramp-up
to steady-state commercial production during this period of market
uncertainty. While the arrangements are non-binding, Nevada Copper
is working with its financing partners in an effort to reach
binding agreements within the next two weeks.
The package comprises a combination of measures
that are expected to significantly improve the liquidity profile of
the Company under lower copper price scenarios and provide enhanced
operating flexibility during the ramp-up of the Pumpkin Hollow
Underground Mine. When implemented, these measures will provide
Nevada Copper confidence regarding its positioning to weather the
current environment and execute its stated business objectives.
Matt Gili, Chief Executive Officer, commented:
“This proposed financing package is expected to provide significant
balance sheet strength and positions our business to weather this
period of unprecedented market uncertainty. We are working with our
financing partners to conclude these arrangements.”
He further commented: “Despite the significant
macro headwinds, I am pleased to report continued production
ramp-up from our Pumpkin Hollow Underground Mine. Whilst we are
experiencing a longer than anticipated commissioning period, we are
now delivering ongoing growth in concentrate production volumes as
the mine continues to ramp-up towards commercial production. We are
also seeing positive reconciliation of mined copper grades and
definition drilling versus the resource model.”
Highlights of the proposed balance sheet
strengthening package (collectively, the “Refinancing
Transactions”):
- $35,000,000 royalty and stream financing with Triple
Flag: A multi-tranche financing comprising of a precious
metals stream amendment for the underground mine and a royalty
package for the Pumpkin Hollow open pit project and Tedeboy
exploration property.
- $30,000,000 Credit Facility refinancing: The
existing $30,000,000 unsecured credit facility entered into on
November 29, 2019 (the “Credit Facility”) with
Pala Investments Limited (“Pala”) is expected to
be replaced with new longer-term convertible debt, equity, or a
combination thereof, to be provided by Pala and certain other
investors which is anticipated to provide further increased balance
sheet flexibility.
- $12,200,000 re-sculpting of KFW debt service:
The Company is in discussions with KfW IPEX-Bank GMBH
(“KFW”), its senior lender, regarding the
re-sculpting of certain amortization and debt service reserve
account payments to maximize access to liquidity over the next 18
months.
- $20,000,000 backstop: As part of the package,
the Company expects to receive a capital backstop commitment from
Pala and certain of the Company’s other shareholders of up to a
further $20,000,000 available when required by the Company to
complete the ramp-up process if it is unable to raise capital from
other sources. The backstop is intended to ensure the Company has
access to further capital that it might require in the event of
copper price declines or operational disruptions.
Operational Highlights:
Development and mining operations now
improving:
- The transition to Redpath Mining, appointed on January 30, 2020
as the mining contractor for the Pumpkin Hollow Underground Mine,
has provided improvements in achieving development and mining
rates.
- Hoisting rates have increased from the East North Vent Shaft.
This also allows the Company to shortly commence fit out of the
Main Shaft for permanent operational configuration, following the
completion of which the Company expects to be well positioned to
complete its ramp-up to steady-state production rates.
- Current mining zones are targeting stopes with average ore
grades of over 2.5% copper and definition drilling continues to
identify ore grades above those indicated by the resource
model.
Processing operations improving:
- Following delays in commissioning of the processing plant
experienced over the December holiday period which extended into
Q1, the processing plant is now achieving improved
performance.
- Concentrate is now more consistently being produced to design
specifications and the plant is operating at up to 85% of design
throughput.
- Certain defects, not materially affecting operations, are
expected to be remedied prior to the completion of construction of
the Underground Mine.
Production ramp-up:
- Concentrate production and sales volumes are expected to
continue to ramp-up during H1 2020.
- Progress in accessing high-grade stopes combined with increased
hoisting capacity is expected to result in further near-term growth
in volumes of high-grade ore feed to the processing facility and
resultant increases in concentrate production towards design
levels.
- These improvements are expected to allow the Company to deliver
and sell increasing volumes of on spec concentrate under the
Company’s offtake arrangements. The increased production volumes
and sale of on spec concentrate will alleviate the need for the
Company to make repayments for draws under its working capital
facility in cash, as has been the case in the first quarter of this
year.
Impact of COVID-19 (Coronavirus)
- The Company’s first priority is to protect the health and
safety of its employees and contractors, and contingency plans have
been implemented to ensure business continuity and protection of
its mineral assets.
- Work is continuing on site as normal, subject to enhanced
precautions. However, given the uncertainty around the severity and
duration of the outbreak and the responses of governments and
businesses, it is not possible for the Company to predict the
impact on its operations at this time. However, it is possible that
reduced working rates or temporary stoppages (as has been the case
at other operations) could occur in the future depending on how
events unfold.
Exploration Highlights:
- Further analysis of recently completed geophysics surveys has
identified new high-priority targets immediately adjacent to both
the Pumpkin Hollow Underground Mine and Open Pit.
- The Company will reduce its exploration activities and
prioritize advancing its high-priority targets in accordance with
cash availability.
Details of the Balance Sheet
Strengthening Package
Triple Flag Financing
The Company has entered into a non-binding term
sheet with Triple Flag Precious Metals Corp. and Triple Flag Mining
Finance Bermuda Ltd. (collectively, “Triple Flag”)
that provides for a precious metals stream amendment for the
underground mine and a royalty package for the Pumpkin Hollow open
pit project and Tedeboy exploration property (collectively the
foregoing, the “Triple Flag Financing
Transactions”). The Triple Flag Financing Transactions are
subject to, among other things, the Company and Triple Flag
negotiating and entering into definitive documentation, Triple Flag
board approvals and the concurrent entry into and/or completion of
each of the transactions referenced below under “KFW Discussions”,
“Credit Facility Refinancing” and “Backstop Commitment”.
KFW Discussions
The Company has obtained consent, in principle,
from its senior lender KFW to the Triple Flag Financing
Transactions, subject to final approval and review of the final
documentation. The Company is also seeking amendments to its credit
facility with KFW in order to provide for certain amortization
deferrals and debt service reserve account adjustments in order to
maintain the financial flexibility that the Company requires and
that the Refinancing Transactions are designed to provide. The
Company believes it will be able to work in a collaborative manner
with KFW to achieve the required consents and amendments to
facilitate the Refinancing Transactions.
Credit Facility Refinancing
The Company has received written confirmation
from Pala that they are willing, on a non-binding basis, to provide
further financing of $30,000,000 (the “New
Financing”) to the Company in order to replace the Credit
Facility. The Company expects that other investors may also
participate in the New Financing. The final terms of the New
Financing remain subject to agreement between the Company, Pala and
any other investors, however the New Financing is expected to be in
the form of convertible debt, equity, or a combination thereof,
with any such convertible debt structured in a manner that will
have a longer maturity than the Credit Facility. The Credit
Facility provides that interest and fees are to be paid to Pala in
cash, however Pala has indicated that it will accept the payment of
interest and fees in common shares of the Company.
The New Financing is subject to, among other
things, finalization of the specific terms thereof, negotiation and
execution of definitive documentation and the satisfaction of
various regulatory requirements.
Backstop Commitment
Nevada Copper has received written confirmation
from Pala that they are willing, on a non-binding basis, to provide
a backstop commitment of up to $20,000,000 (the
“Backstop”) available when required by the Company
if it is unable to raise capital from other sources. The form of
the Backstop is to be determined. The Company expects that other
investors may also participate in the provision of the Backstop.
The Backstop is intended to provide the Company with further
funding to support Nevada Copper, including relating to any
fluctuations in commodity prices and/or operational challenges that
may be faced by Nevada Copper in connection with the ramp-up to
commercial production of the Pumpkin Hollow Underground Mine. This
Backstop is a condition of the Triple Flag Financing
Transactions.
The Backstop is subject to, among other things,
finalization of the specific terms thereof, negotiation and
execution of definitive documentation and the satisfaction of
various regulatory requirements.
There can be no assurance that definitive
binding agreements will be entered into regarding the Refinancing
Transactions or that those transactions will be completed. If the
Refinancing Transactions are not completed, then absent obtaining
other financing the Company will not have sufficient funds to
continue ramp up operations.
Pre-Funding
Pala has provided an advance of $2,200,000 as
pre-funding prior to the closing of the Refinancing Transactions,
pursuant to the terms of a new unsecured promissory note, which is
due on March 31, 2020 and will bear no interest if repaid by such
date (the “Promissory Note”). The proceeds from
the Promissory Note are being used by the Company in order to
ensure the continued operation and construction of the Pumpkin
Hollow Underground Mine prior to the funding under the Refinancing
Transactions.
The entering into of the Promissory Note is a
related party transaction of the Company for purposes of
Multilateral Instrument 61-101 Protection of Minority Security
Holders in Special Transactions (“MI 61-101”) and
is subject to the formal valuation and minority approval
requirements thereof, unless an exemption is available. The
Promissory Note is exempt from such requirements since, at the time
the transaction was agreed to, the fair market value of the
transaction did not exceed 25 per cent of the Company’s market
capitalization.
Corporate Governance
The Board of Directors of the Company has formed
a special committee consisting of members of the Board who are
independent of Pala and management (the “Special
Committee”), and who have no direct or indirect interest
in any of the transactions contemplated above, to consider the
proposed of the Refinancing Transactions involving Pala and the
Company, including the matters relating to New Financing, the
Backstop and the Promissory Note.
Regulatory Matters
The New Financing and the Backstop is subject
to, among other things, finalization of the specific terms thereof,
negotiation and execution of definitive documentation and approval
of the Toronto Stock Exchange (the “TSX”),
including that they will be exempt from shareholder approval
pursuant to the financial hardship. The New Financing and the
Backstop will be related party transactions of the Company for
purposes of MI 61-101 and is subject to the formal valuation and
minority approval requirements thereof, unless an exemption is
available. It is the intention of the Company to rely on the
financial hardship exemption provided for in Sections 5.5(g) and
5.7(e) of MI 61-101.
Nevada Copper intends to apply to the TSX,
pursuant to the provisions of Section 604(e) of the TSX Company
Manual, for a “financial hardship” exemption from the requirements
to obtain shareholder approval of the New Financing and the
Backstop, on the basis that absent the New Financing and the
Backstop the Company is in serious financial difficulty due to the
lack of available cash and funding resources, which will likely
lead to a default under the Company’s working capital facility. The
New Financing and the Backstop are designed to improve the
Company’s financial situation. The application will be made upon
the recommendation of the Special Committee and will be based on
their determination that the transactions are reasonable for Nevada
Copper in the circumstances.
Nevada Copper expects that, as a consequence of
its financial hardship application, the TSX will place Nevada
Copper under remedial delisting review, which is normal practice
when a listed issuer seeks to rely on this exemption. Although
Nevada Copper believes that it will be in compliance with all
continued listing requirements of the TSX upon the closing of the
Refinancing Transactions, no assurance can be provided as to the
outcome of such review or continued qualification for listing on
the TSX. There can be no assurance that the TSX will accept the
application for the use of the financial hardship exemption from
the requirement to obtain shareholder approval described above.
Qualified Persons
The information and data in this news release
was reviewed by David Swisher, P.E., SVP of Operations for Nevada
Copper, who is a non-independent Qualified Person within the
meaning of NI 43-101.
About Nevada Copper
Nevada Copper (TSX: NCU) is a copper producer
and owner of the Pumpkin Hollow copper project. Located in Nevada,
USA, Pumpkin Hollow has substantial reserves and resources
including copper, gold and silver. Its two fully permitted projects
include the high-grade underground mine and processing facility,
which is now in production, and a large-scale open pit project,
which is advancing towards feasibility status.
Additional Information
For further information please visit the Nevada
Copper corporate website (www.nevadacopper.com).
NEVADA COPPER
CORP.Matthew Gili, President and CEO
For further information
call:Rich Matthews,VP Investor RelationsPhone:
604-355-7179Toll free: 1-877-648-8266
Email: rmatthews@nevadacopper.com
Cautionary Language
This news release includes certain statements
and information that constitute forward-looking information within
the meaning of applicable Canadian securities laws. All statements
in this news release, other than statements of historical facts are
forward-looking statements. Such forward-looking statements and
forward-looking information specifically include, but are not
limited to, statements that relate to: planned completion of the
Refinancing Transactions, including the Triple Flag Financing
Transactions, the amendments to the existing credit facility with
KFW, the completion of the New Financing and repayment of the
Credit Facility with Pala, the entering into of the Backstop with
Pala and certain other investors, the expected completion of
ramp-up to steady state production rates, continued achievement of
higher level performance at the Company’s processing plant,
sustained achievement of plant design specifications, defects not
affecting plant performance, concentrate production continuing to
increase, the ability of the Company to satisfy obligations under
its working capital facility through deliveries of concentrate as
opposed to cash, future exploration plans on lands adjacent to the
Pumpkin Hollow property, the anticipated impact of COVID-19 on the
Company and its business and operations and the certainty of the
financial flexibility and resources of the Company after giving
effect to the Refinancing Transactions.
Often, but not always, forward-looking
statements and forward-looking information can be identified by the
use of words such as “plans”, “expects”, “potential”, “is
expected”, “anticipated”, “is targeted”, “budget”, “scheduled”,
“estimates”, “forecasts”, “intends”, “anticipates”, or “believes”
or the negatives thereof or variations of such words and phrases or
statements that certain actions, events or results “may”, “could”,
“would”, “might” or “will” be taken, occur or be achieved.
Forward-looking statements or information are subject to known or
unknown risks, uncertainties and other factors which may cause the
actual results, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements or information.
Forward-looking statements or information are
subject to a variety of risks and uncertainties which could cause
actual events or results to differ from those reflected in the
forward-looking statements or information, including, without
limitation, risks and uncertainties relating to: failure to
complete the Refinancing Transactions; the state of financial
markets; regulatory approvals; the impact of COVID-19 on the
business and operations of the Company; history of losses;
requirements for additional capital; dilution; adverse events
relating to construction, development and ramp-up; ground
conditions; cost overruns relating to development, completion and
ramp-up of the Underground Project; loss of material properties;
interest rates increase; global economy; no history of production;
future metals price fluctuations and the continuation of the
current low copper price environment; speculative nature of
exploration activities; periodic interruptions to exploration,
development and mining activities; environmental hazards and
liability; industrial accidents; failure of processing and mining
equipment to perform as expected; labor disputes; supply problems;
uncertainty of production and cost estimates; the interpretation of
drill results and the estimation of mineral resources and reserves;
changes in project parameters as plans continue to be refined;
possible variations in ore reserves, grade of mineralization or
recovery rates may differ from what is indicated and the difference
may be material; legal and regulatory proceedings and community
actions; the outcome of the litigation with the Company’s prior
contractor; accidents; title matters; regulatory restrictions;
increased costs and physical risks relating to climate change,
including extreme weather events, and new or revised regulations
relating to climate change; permitting and licensing; volatility of
the market price of the Company’s common shares; insurance;
competition; hedging activities; currency fluctuations; loss of key
employees; other risks of the mining industry as well as those
factors discussed in the section entitled "Risk Factors” in the
Company’s Annual Information Form dated March 29, 2019. Should one
or more of these risks and uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those described in forward-looking statements or
information.
The Company provides no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
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