Nevada Copper (TSX: NCU) is continuing production ramp-up from its Pumpkin Hollow underground mine in Yerington, Nevada, despite the significant macro headwinds, the company said in its latest corporate update.
Against the backdrop of the recent decline in copper prices and global pandemic fears, the company has entered into non-binding arrangements for a proposed substantial balance sheet strengthening package in order to assist with the continued ramp-up during this period of market uncertainty.
The package comprises a combination of measures that are expected to significantly improve the company’s liquidity profile under lower copper price scenarios and provide enhanced operating flexibility during the ramp-up of the Pumpkin Hollow mine.
The company is working with its financing partners in an effort to reach binding agreements within the next two weeks
The proposed arrangements include a $35 million royalty and stream financing plan with Triple Flag, $30 million in credit facility refinancing provided by Pala Investments and other investors, debt re-sculpting with KfW IPEX-Bank, and an expected $20 million capital backstop commitment provided by Pala and other shareholders.
While these arrangements are non-binding, the company is working with its financing partners in an effort to reach binding agreements within the next two weeks.
When implemented, these measures will provide Nevada Copper confidence regarding its positioning to weather the current environment and execute its stated business objectives, the Nevada-based copper producer says.
The company expects concentrate production and sales volumes from Pumpkin Hollow to ramp up during H1 2020.
Progress in accessing high-grade stopes combined with increased hoisting capacity would result in further near-term growth in volumes of high-grade ore feed to the processing facility and resultant increases in concentrate production towards design levels.
These improvements are expected to allow the company to deliver and sell increasing volumes of on spec concentrate under its offtake arrangements, alleviating the need to make repayments for draws under its working capital facility in cash, as has been the case in the first quarter of this year.
The underground mine began production recently in December 2019, becoming the first new copper producer in the US in the last decade.
The project is expected to produce 65 million lb of copper equivalent annually over a current estimated mine life of 13.5 years, with further expansion potential including 636 million lb of inferred resources.
Amid the uncertainty surrounding the coronavirus outbreak, the company states it is not possible to predict the impact on its operations at this time. However, it adds that reduced working rates or temporary stoppages (as has been the case at other operations) could occur in the future depending on how events unfold.