Nevada Copper (NCU.TO) has announced an extensive update on its construction activities on the first phase of the Pumpkin Hollow project. The shaft sinking is going according to plan and the company has now reached a depth of 1475 feet which means that more than 77% of the planned depth has been reached and we have the impression the company did the right thing by switching its shaft sinking contractor earlier this year. We are actually looking forward to the shaft being finished as Nevada Copper will then be able to start with the lateral development (which could be as early as January 2015), and more importantly, it could budget an underground drill program to determine where the higher grade copper zones are which could be prioritized for production in order to minimize the capital payback period and maximize the output and cash flow.
Additionally, the company is optimizing its second phase of the Pumpkin Hollow project and this could lead to a further improvement of the economics. The outcome of this new feasibility study is expected to be released in Q1 2015 as well. Even though the copper price has recently gone up again, fine tuning the original feasibility study could definitely be worth the efforts as better economics will very likely attract better partners for the project. On top of that, the updated feasibility study will include an additional 10,000 meters of drilling which has been conducted since the previous resource estimate at Pumpkin Hollow.
Nevada Copper has also received several proposals to finalize the funding for the first phase of Pumpkin Hollow and is now aiming to complete the final funding package in Q1 2015 as well, and the final funding will probably be announced after completing the shaft. The current cash position is roughly $15M and an additional $10M could be drawn down from the existing $20M credit facility offered by Pala Investments, its largest shareholder.
We were hoping to see the company having completed its financing package before the end of the year, but it looks like we’ll have to be a bit more patient. As we said numerous times before, the management’s interests are aligned with the shareholders’ interests, so we aren’t afraid of a huge dilution at this point.
Nevada Copper moved up almost 40% since our call to bottom fish on October 16th but is coming down again. Should the share price reach the C$1.35 level again, it’s very likely the company will form a triple bottom at that level, indicating there’s a lot of interest to pick up shares around the C$1.35 level.
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Disclosure: The author holds a long position in Nevada Copper. Nevada Copper is a sponsor of the website. Please see our disclaimer for current positions.
