Nevada Copper Corp. [NCU-TSX] has agreed to non-binding terms with its senior lender, KfW IPEX-Bank (KfW) and its largest shareholder Pala Investments Ltd. for a loan of up to US$70 million by way of a new tranche extension to the existing senior credit facility with KfW.
This funding would be provided by Pala, with the potential participation of other lenders, the company said. 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) and 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 during the month of July, 2022.
If implemented, the proposed financing package will provide access to significant further liquidity for Nevada Copper to maintain assets at the Pumpkin Hollow underground copper mine in Nevada and pursue certain projects such as completing the dike crossing and advancing open pit project feasibility work, and to explore and advance discussions on further financing and strategic options.
On Monday, Nevada Copper shares fell 13.4% or $0.03 to 22.5 cents on volume of $638,200. The shares are currently trading in a 52-week range of $2.20 and 25 cents.
Pumpkin Hollow is a high-grade skarn/iron oxide copper gold (IOCG) deposit located within a porphyry copper district within the Walker Lane mineral belt of western Nevada.
The project hosts an underground mine as well as a permitted open pit development project located four kilometres west of the underground mine.
In a recent update, the company said the underground mine encountered operational and geotechnical challenges in the latter part of May, 2022Â that are expected to delay stope mining in the East South mining area and result in reduced concentrate production for the second quarter of 2022.
The company said access to planned stopes for the months of June and July was delayed due to an unidentified weak rock structure being encountered in the main ramp to the East South Zone that requires additional drilling and geotechnical mitigation work to reinforce the area before proceeding.
â€œThis, together with the limited access to the main ramp, slower than planned developed and longer backfill cycles, has resulted in lower than anticipated development ore production,â€™â€™ the company said.
Meanwhile, in light of Nevada Copperâ€™s current liquidity constraints, the company has not made payments that were due to certain creditors and vendors, including its mining contractor Redpath. As a result, the company has received a notice of default from Redpath, which has indicated that it indents to pursue available remedies.
In spite of the default, Nevada Copper and Redpath have reached a deal on suspension of mining work at the underground project and the limited work to be completed going forward in order to protect the companyâ€™s assets.