Nevada Copper unveils Pumpkin Hollow restart and funding plan

Components of the current work program include the completion of a second dike crossing during the third quarter and the last dike crossing by the end of the year, the start of the mining of the mining area at higher grade is north in the second quarter of 2023 and the restart of the plant in the third quarter of next year.

If all goes as planned, according to Nevada Copper, underground production will reach lift rates of around 3,000 tonnes per day in the third quarter of 2023 and increase to 5,000 tonnes per day in the fourth quarter of the year.

The restart will also involve changes to the company’s agreements with the underground mining contractor to improve performance and ultimately transfer some mining operations to Nevada Copper itself.

Under its financial package, Nevada Copper has entered into agreements with its lead lender KfW IPEX-Bank (KfW); its working capital provider Concord Resources Ltd. ; its main shareholder, Pala Investments, and another shareholder Mercuria Energy; and Triple Flag Precious Metals (TSX: TFPM), its stream and royalty partner.

Breaking down the $93 million financing, Pala and Mercuria will each pay $20 million in exchange for common stock in the company and KfW will amend its senior credit facility to provide a new tranche of up to $25 million, of which Pala , Mercuria and Triple Flag would pledge the first $15 million as a backstop.

Triple Flag will increase its existing net smelter returns royalty on the development of the Company’s surface mine project from 0.7% to 2% for a purchase price of $26.2 million (subject to a full buy-out of the increased royalty percentage). Triple Flag would also accelerate the remaining $3.8 million to be funded under Nevada Copper’s existing metals purchase and sale agreement.

Finally, KfW would defer three interest payments under its facility and Concord would defer interest and principal payments under its working capital facility.

Under the agreement, Triple Flag and Mercuria will each have the right to appoint one director and one representative to the Technical Committee of the Board of Directors.

Difficult ramp-up

“The Pumpkin Hollow underground mine has been challenged with its ramp-up, and with the proposed financial package, we hope the operation will be able to realize its anticipated potential,” said mining analyst Rene Cartier, which covers Triple Flag for BMO, commented on in a research note to clients. “We have moderated our short-term production guidance for the underground mine and slightly delayed the development of the open pit mine.

“While some investors [in Triple Flag] may not view the increased exposure to Pumpkin Hollow favorably, this may be offset by turnaround prospects. However, given the current footprint of the open pit and the structure of the transaction, we would not be surprised to see a buyout exercised,” added Cartier.

The Pumpkin Hollow underground mine and its open pit development project (which it is advancing through an updated pre-feasibility study) is about 13 km south-east of Yerington and about an hour and a half drive southeast of Reno.

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