Nevada Copper looks to strengthen balance sheet

As its Pumpkin Hollow underground mine ramps up to commercial production, Nevada Copper (TSX: NCU) has entered into non-binding arrangements for a balance sheet strengthening package. The company is working to reach binding agreements in the next two weeks.

“This proposed financing package is expected to provide significant balance sheet strength and positions our business to weather this period of unprecedented market uncertainty,” Matt Gill, the company’s CEO, said in a release. “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.”

The Pumpkin Hollow copper mine in Nevada. Credit: Nevada Copper Corp.

The refinancing transactions include a US$35-million royalty and stream financing with Triple Flag, with an amendment to the precious metals stream for the underground mine and a royalty package for the Pumpkin Hollow open pit and Tedeboy exploration project. The company is also looking to refinance a US$30-million credit facility and restructure additional amortization and debt service payments to maximize its liquidity and financial flexibility.

Nevada Copper also expects to receive a backstop commitment of up to US$20 million, which would be accessible as required to complete the mine ramp-up should other sources of capital be unavailable.

At the end of January, mining at Pumpkin Hollow transitioned to contract mining, with resulting improvements in development and mining rates. Although the company saw some delays with the ramp-up of the process plant late last year and into the first quarter, the plant is now operating at 85% of its design capacity.

Concentrate production is expected to continue ramping up throughout the first half of the year with ongoing access to high-grade stopes and increased hoisting capacity expected to further boost the concentrate output.

At the end of December, the company shipped the first batch of copper concentrate from Pumpkin Hollow to its offtake partner.

Work at the site is ongoing with additional precautions due to the threats posed by COVID-19. Nevada Copper does note that reduced working rates or temporary stoppages could occur.

The underground operation at Pumpkin Hollow is expected to produce an average of 50 million lb. copper per year over a 13-year mine life at all-in sustaining costs (AISCs) of US$1.86 per lb. in the first five years.

Based on a prefeasibility study from last year, an additional open-pit operation could contribute an average of 163 million lb. copper annually over a 19-year mine life at AISCs of US$2.03 per pound. The capital cost for the permitted project is pegged at US$672 million.