Nevada Copper (NCU.TO) has announced it has signed a new debt agreement with Red Kite for a total consideration of up to $200M. A first tranche of $90M has already been made available and this will be used to pay the 3.5% arrangement fee, repay the amount Nevada Copper had already drawn down from the previous facility and this means that an additional $26M can immediately be used to continue the development of the first stage of the Pumpkin Hollow copper project where the shaft sinking should be completed in January/February where after lateral development and an underground drill program can finally start.
This financing deal should remove a lot of uncertainties as Nevada Copper should now be in a position to quickly advance stage one further. The debt isn’t exactly what you’d call ‘cheap’ but it’s still better than an equity dilution and Red Kite also doesn’t receive any free warrants which could have led to a dilution further in the future. On top of that, Nevada Copper doesn’t have to pay a penalty in case it wants to repay the loan earlier than by 2020, so the company could easily repay the Red Kite facility with the proceeds from an alternative and cheaper debt deal.
Nevada Copper is ending 2014 very strong as the land change bill was approved by the Senate and signed by the President earlier this month and this new financing deal removes a lot of near-term financial uncertainties. Sure, it comes at a price, but Nevada Copper is now able to advance the project further putting it on track to start its copper production in 2016 from the high-grade underground zone.
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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.
