Nevada Copper Corp. (TSX: NCU) (“
Nevada
Copper” or the “
Company’’) is pleased to
announce the execution of definitive agreements in respect of the
Company’s proposed substantial balance sheet strengthening package
announced on March 18, 2020.
The financing package provides improved
flexibility for the Company’s balance sheet whilst ramping-up
operations and in light of the substantial macro-economic
uncertainty and depressed copper prices.
Nevada Copper has in place COVID-19 response
plans and currently its operations are continuing with limited
disruption. However, there are no guarantees that in the future
further work restrictions will not be required, or government
mandated, as events continue to unfold relating to COVID-19.
Matt Gili, Chief Executive Officer, commented:
“The successful execution of the agreements providing for this
financing package is a significant achievement amidst the current
environment, and provides a strong vote of confidence from our key
stakeholders. The increased balance sheet strength to be provided
by the package will play an important role in ensuring the
Company’s ongoing stability.”
Highlights of the balance sheet
strengthening package:
- $12,200,000 re-sculpting of senior debt
service: KfW IPEX-Bank GMBH (“KFW”), the
Company’s senior lender, has agreed to a re-sculpting of
amortization and debt service reserve account payments over the
next 18 months;
- $35,000,000 royalty and stream transactions:
Triple Flag Precious Metals Corp. and its affiliates have agreed to
provide a multi-tranche financing comprising an amendment to the
existing underground mine precious metals stream, in addition to
the purchase of royalties relating to the Open Pit Project and
Tedeboy exploration property;
- $30,000,000 Credit Facility refinancing: The
existing $30,000,000 unsecured credit facility entered into with
Pala Investments Limited (“Pala”) on November 29,
2019 (the “Credit Facility”) will be replaced with
a new longer-term convertible facility; and
- $20,000,000 backstop: As part of the package,
Pala has agreed to provide an additional capital backstop allowing
for additional certainty of funds in the event of further copper
price declines or operational disruptions.
Further Details of the Refinancing
Transactions:
KFW Amendment
The Company has entered into an amendment to its
existing senior credit facility with KFW providing for an aggregate
of $12,200,000 in payment deferrals through the re-sculpting of
certain amortization and debt service reserve account payments to
maximize access to liquidity over the next 18 months. The
amendments include a deferral of scheduled principal payments for
18 months with the deferred amount being payable on a pro rata
basis with the remaining installments until the existing maturity
date. They also include postponing the required funding date for
the debt service reserve account for 18 months. Such amendments are
subject to closing of the transactions contemplated by the
Refinancing Transactions referred to below.
Triple Flag Transactions
The Company has entered into a royalty and
streaming implementation agreement with Triple Flag Precious Metals
Corp., Triple Flag Mining Finance Bermuda Ltd. (“Triple
Flag Bermuda”) and Triple Flag USA Royalties Ltd.
(collectively, “Triple Flag”) that provides for
payments by Triple Flag to the Company of an aggregate amount of
$35,000,000 through the entering into of the following agreements:
(a) an amendment to the existing metals purchase and sale
agreement, as amended, between the Company and Triple Flag Bermuda
(the “Existing Stream Agreement” and after giving
effect to the proposed amendments, the “Stream
Agreement”) that provides for an additional $15,000,000 in
payments by Triple Flag Bermuda, comprised of a $10,000,000 payment
on May 1, 2020 and an additional $5,000,000 to be paid through the
reinvestment of 50% of the value of metal deliveries received by
Triple Flag Bermuda under the terms of the Stream Agreement, (b) a
new royalty agreement providing for a 0.70% net smelter return
royalty in respect of the Company’s Open Pit mining project on its
Pumpkin Hollow Property for a purchase price of $17,000,000 payable
on closing; and (c) a separate new royalty agreement providing for
a 2.00% net smelter return royalty in respect of the Company’s
Tedeboy exploration project (the “Tedeboy
Project”) adjacent to its Pumpkin Hollow property for a
purchase price of $3,000,000 payable on closing and an additional
contingent payment of $5,000,000 upon commercial production
commencing in respect of the Tedeboy Project (which is not included
in the $35,000,000 above) (collectively, the “Triple Flag
Transactions” and together with the Convertible Loan and
the Backstop referred to below, the “Refinancing
Transactions”). In addition, Triple Flag will be issued an
aggregate of 15,000,000 common share purchase warrants of the
Company at an exercise price of C$0.225 that are exercisable for a
period of five years (the “Triple Flag
Warrants”).
Closing of the Triple Flag Transactions is
subject to certain conditions, including, certain consents,
concurrent closing of the Convertible Loan and the Backstop
referred to below, and the approval of the Toronto Stock Exchange
(“TSX”) with respect to the Triple Flag Warrants.
Closing of the Refinancing Transactions is expected to occur on or
before March 30, 2020 (the “Closing Date”).
Convertible Loan
The Company has entered into a convertible loan
facility (the “Convertible Loan”) with Pala in the
principal amount of $30,000,000 in order to extend and replace the
Credit Facility. The Convertible Loan shall be repaid on the date
that is four years from the Closing Date (the “Maturity
Date”) and will bear interest at the rate of 14% per
annum, quarterly in arrears. At the option of the Corporation,
subject to approval of the TSX, such accrued interest may be
satisfied through the issuance of common shares of NCU
(“Common Shares”) based on the five-day volume
weighted average price (“VWAP”) of the Common
Shares ended on the day prior to the relevant interest payment
date, provided the Company may always pay such interest in cash if
permitted to do so under its existing financing arrangements. Pala
may, at any time, and from time to time, convert all or a portion
of the Convertible Loan into Common Shares at a price per Common
Share which is the lower: (a) of C$0.1575 (being a 1% premium to
the five-day VWAP of the Common Shares on the TSX over the period
ending on March 25, 2020 (the “Current Market
Price”)); and (b) a 5% premium to the five-day VWAP of the
Common Shares on the TSX over the period ending on April 1, 2020
(being the expected date of obtaining the TSX approval referred to
below under “Regulatory Matters”), with a minimum conversion price
of C$0.12 (the “Conversion Price”). The Credit
Facility will be repaid in full through the proceeds from the
Convertible Loan. All fees, interest and other expenses that have
accrued, are outstanding or will become outstanding as a result of
the repayment of the Credit Facility in the aggregate amount of
$3,400,000, will be satisfied through the issuance of an aggregate
of 32,400,000 Common Shares to Pala (the “Fee
Shares”), reflecting a price per Common Share of C$0.1575
being equal to the Current Market Price. The Convertible Loan may
be prepaid by the Company in full at any time, subject payment of a
premium of 15% in year 1, 10% in year 2, 8% in year 3 and 5% in
year 4. The Convertible Loan is also repayable subject to a make
whole amount upon certain change of control events. Pala is
entitled to a restructuring and extension fee of 8% of the
principal amount of the Convertible Loan which shall be added to
the principal amount of the Convertible Loan.
The closing of the Convertible Loan transaction
and replacement of the Credit Facility is subject to the closing of
the Triple Flag Transactions and certain other customary closing
conditions. The convertibility feature of the Convertible Loan will
not become applicable prior to April 1, 2020 and is subject to the
approval of the TSX as described below under “Regulatory
Matters”.
The Company and Pala intend to seek additional
investors (which may include insiders of the Company) to which Pala
may syndicate a portion of the Convertible Loan up to a maximum
amount of $12 million.
Backstop Commitment
Pala, the Company and Triple Flag Bermuda have
entered into a backstop agreement (the “Backstop”)
providing for up to $20,000,000 which will be available for the
Company to call on capital from Pala when required until December
31, 2021 if it is unable to raise capital from other sources. If
funds are called by the Company under the Backstop, the obligations
of the Company under the Backstop will be satisfied through the
issuance of Common Shares, which Common Shares will be issued at a
price to be agreed by the Company and Pala within the applicable
pricing rules of the TSX, but if a price cannot be agreed will be
based on the market price (as defined in the policies of the TSX)
at the relevant time less a discount of 20%. If the Backstop is
called after December 31, 2020, and the obligations under any such
call would require disinterested shareholder approval (which will
exclude Pala and any other insiders that may participate in the
Backstop) under the policies of the TSX, the Company must obtain
such approval as a condition to completion of the call under the
Backstop. The Company may also seek to obtain, any time after the
date hereof, approval of disinterested shareholders to issue Common
Shares pursuant to the Backstop after December 31, 2020. In the
event such disinterested shareholder approval is not obtained, any
amounts called under the Backstop for which such approval was
sought will be in the form of subordinated unsecured debt which
will have substantially the same terms as the Credit Facility, but
without the related fees, with a 3 year maturity date and
prepayable at any time. For certainty, any calls made by the
Company under the Backstop prior to December 31, 2020 will not be
subject the shareholder approval requirements of the TSX.
Notwithstanding the foregoing, Pala may elect to fund its
obligations under the Backstop through the issuance by the Company
of convertible debt, which convertible debt will have a 3 year term
to maturity, a conversion price of a 5% premium to the market price
of the Common Shares (as defined by the policies of the TSX) at the
time of issuance, no fees payable other an interest rate of 12% and
shall be prepayable by the Company at any time. The Backstop will
have a fee payable to Pala upon entering into the Backstop in an
aggregate amount of $800,000, which will be payable through the
issuance of an aggregate of 7,500,000 Common Shares (the
“Backstop Fee Shares”), reflecting a price per
Common Share of C$0.1575 being equal to the Current Market
Price.
The closing of the Backstop is subject to the
closing of the Triple Flag Transactions and certain other customary
closing conditions.
The Backstop is intended to provide the Company
with further funding support, 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.
Indemnity Shares
In connection with the provision by Pala of
certain surety bonds provided to third party contractors to support
the ramp-up process relating to the Pumpkin Hollow Underground
Mine, Pala is owed an aggregate of $2.1 million relating to fees
for providing such surety bonds. Such fees will be satisfied
through the issuance of an aggregate of 18,900,000 Common Shares
(the “Indemnity Fee Shares”) on the Closing Date,
reflecting a price per Common Share of C$0.1575 being equal to the
Current Market Price.
Potential Maximum Dilution in respect of the
Refinancing Transactions
Pala currently owns 274,379,447 Common Shares
being approximately 36.01% of the issued and outstanding Common
Shares. Assuming the issuance of the Fee Shares in respect of the
repayment of the Credit Facility, the issuance of the Backstop Fee
Shares and the issuance of the Indemnity Fee Shares, the number of
Common Shares that may be issued as a result of the Refinancing
Transactions to Pala and in total (including the Common Shares
issuable upon the due exercise of the Triple Flag Warrants and
assuming exercise in full of the Backstop at the Common Share
prices set forth below and exercise of the Convertible Loan at a
Conversion Price of C$0.12, in each case based on the exchange
rates noted below)
|
|
Total Number of Common Shares issued to Pala (In
Millions) |
% of Common Shares owned by Pala relative to Common Shares
currently outstanding |
% of Common Shares owned by Pala relative to Common Shares
outstanding after Refinancing Transactions |
Total Number of Common Shares issued pursuant to the
Refinancing Transactions (In Millions) |
% of Common Shares issued pursuant to the Refinancing
Transactions relative to Common Shares currently
outstanding |
C$0.10 / Common Share |
$1=C$0.68 |
719.5 |
94.4% |
66.4% |
734.5 |
96.4% |
Backstop / C$0.12 |
$1=C$0.73 |
670.2 |
88.0% |
65.3% |
685.2 |
89.9% |
Conversion Price |
$1=C$0.76 |
643.8 |
84.5% |
64.6% |
658.8 |
86.5% |
C$0.20 / Common Share |
$1=C$0.68 |
572.4 |
75.1% |
62.8% |
587.4 |
77.1% |
Backstop / C$0.12 |
$1=C$0.73 |
533.2 |
70.0% |
61.6% |
548.2 |
72.0% |
Conversion Price |
$1=C$0.76 |
512.2 |
67.2% |
61.0% |
527.2 |
69.2% |
Notes: (1) If the Canadian dollar weakens below
$1.00 = C$0.68 then the number of Common Shares issuable to Pala
will proportionately increase. (2) In the event the make-whole
payment referred to above becomes payable after year 1 under the
Convertible Loan, at Pala’s option, this payment would be made
through the issuance of 156.8 million Common Shares to Pala (the
“Make-whole Shares”), assuming an exchange rate of
$1.00 = C$0.68, a Conversion Price of C$0.12 and a Backstop price
of C$0.10. With the addition of the Make-whole Shares, Pala would
be issued a total of 954 million Common Shares in connection with
the Refinancing Transactions, representing 125.3% of the currently
outstanding Common Shares.
Corporate Governance
The Board of Directors of the Company (the
“Board”) 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 terms of the Convertible Loan, the Backstop and the
other transactions described above involving Pala (the
“Pala Transactions”). The Special Committee has
met regularly since its formation separately from the full Board.
After careful consideration, the Special Committee recommended that
the Board approve the terms of the Pala Transactions.
Regulatory Matters
The Convertible Loan and the Backstop are
subject to, among other things, approval of the TSX, including that
they will be exempt from shareholder approval pursuant to the
financial hardship exemption (other than the disinterested
shareholder approval relating to the Backstop discussed above). The
Convertible Loan and the Backstop will be related party
transactions of the Company for purposes of Multilateral Instrument
61-101 – Protection of Minority Security Holders in Special
Transactions (“MI 61-101”) and are 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 has applied 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 Convertible Loan and the Backstop on
the basis that, absent the Refinancing Transactions, the Company is
in serious financial difficulty due to the lack of available cash
and funding resources, which will likely lead to defaults under the
Company’s working capital facility and senior credit facility. The
Refinancing Transactions, including the Convertible Loan and the
Backstop, are designed to improve the Company’s financial
situation. The application was approved by the Board, based upon
the recommendation of the Special Committee and their determination
that the transactions are reasonable for Nevada Copper in the
circumstances. Under the policies of the TSX, the Refinancing
Transactions would have required shareholder approval by the
Company due to: (a) the Refinancing Transactions result in
consideration being paid to insiders of the Company in an amount
that is greater than 10% of the Company’s current market
capitalization when aggregated with other transactions with such
insiders within the last six months; (b) the number of Common
Shares issuable on a private placement basis in connection with the
Refinancing Transactions (assuming full conversion of the
Convertible Loan) is in excess of 25% of the number Common Shares
outstanding; and (c) the number of Common Shares issued to insiders
(assuming full conversion of the Convertible Loan) is greater than
10% of the number of Common Shares outstanding. Subject to the
approval of the TSX, no Common Shares will be issuable to Pala in
connection with the Refinancing Transactions prior to April 1,
2020. The Refinancing Transactions will not materially affect
control of the Company.
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.
Annual Filings
The Canadian Securities Administrators recently
published blanket relief for market participants regarding the
filing of certain continuous disclosure documents under applicable
Canadian securities laws as a result of the COVID-19 outbreak.
Nevada Copper intends to rely on such blanket relief in respect of
the filing of its annual information form, annual financial
statements for the year ended December 31, 2019 together with the
related management’s discussion and analysis and the CEO and CFO
certifications required under National Instrument 52-109 –
Certification of Disclosure in Issuers’ Annual and Interim Filings
(collectively, the “Disclosure Documents”). Nevada
Copper confirms that its management and other insiders are subject
to an insider trading black-out policy, noting that management and
such insiders may participate in the New Financing as disclosed
above. The Company anticipates filing such Disclosure Documents
prior to April 30, 2020. The Company hereby confirms that other
than the matters described herein in respect of the Refinancing
Transactions and the operational matters disclosed in its March 18,
2020 press release, there are no additional material developments
since the date of filing of the Company’s financial statements for
the three and nine month period ended September 30, 2019, other
than the entering into of the Credit Facility and the replacement
of the Company’s previous contractor at its Pumpkin Hollow
Underground Mine with Redpath USA Corporation, as previously
disclosed.
Advisors
Torys LLP and Shearman & Sterling LLP acted
as legal counsel to the Company. Stikeman Elliott LLP acted as
legal counsel to Pala. Blake, Cassels & Graydon LLP acted as
legal counsel to Triple Flag. Milbank LLP acted as legal counsel to
KFW. White & Case LLP acted as legal counsel for Concord.
Scotia Capital Inc. acted as financial advisor to the Company.
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 Transactions,
the repayment of the Credit Facility with Pala, the Company’s
“financial hardship” exemption application and disinterested
shareholder approval relating to the Backstop. There can be no
assurance that the Refinancing Transactions will close.
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 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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