Nevada Copper arranges US$70M loan for Pumpkin Hollow, suspends underground mining work

In an effort to raise additional funds to continue operations at its Pumpkin Hollow copper mine in Nevada, Nevada Copper (TSX: NCU; OTC: NEVDF) has agreed to terms with its senior lender KfW IPEX-Bank and its largest shareholder Pala Investments for a loan of up to US$70 million by way of a new tranche extension to the existing senior credit facility with KfW.  

The funding would be provided by Pala, with the potential participation of other lenders. Of the total amount, US$50 million will be committed to be advanced by the lenders (including the outstanding amount of the previously announced up to US$20 million promissory note provided by Pala). An additional US$20 million may be available for future draw by the company on an uncommitted basis.

Nevada Copper is in ongoing discussions with KfW, Pala and other lenders with the aim of executing binding agreements this month. While these negotiations are going on, the company plans to make further draws under the US$20-million promissory note from Pala in order to meet its immediate cash needs. As of July 1, most underground mining work was also suspended.

If implemented, the proposed financing package will provide access to “significant further liquidity” for the company to maintain the assets at Pumpkin Hollow, it says.

Nevada Copper’s Pumpkin Hollow project. Credit: Nevada Copper.

Currently in production stage, Pumpkin Hollow was the first copper mine to come online in the U.S. over the past decade. The underground mine is capable of producing 50 million lb. of copper annually during a 13.5-year mine life.

Furthermore, the financing would allow Nevada Copper to pursue certain projects such as completing the dike crossing to gain access to the East North mining zone, the largest mining area within the underground mine.

The company has experienced poor ground conditions at the mine that have hampered the ramp up of production.

Nevada Copper says the financing would allow it to work on the Pumpkin Hollow open-pit project, which it is advancing towards feasibility status, and to explore further financing and strategic options.

As previously disclosed, Nevada Copper is facing liquidity constraints that prevents it from making payments due to certain creditors and vendors. These include its mining contractor Redpath, which provided a notice of default to the company.

Despite this, the parties agreed to suspend mining work at Pumpkin Hollow underground and conduct limited work going forward in order to protect the company’s assets.

The company’s shares were down 11.5¢ this afternoon in Toronto, trading at traded at 23.5¢ apiece within a 52-week trading range of 20¢ and $2.20. The company has a market capitalization of $105.4 million.