Nevada Copper (NCU.TO) has now formally started a strategic review process to evaluate all possible alternatives and might lead up to a sale of the entire company or an equity stake in the project. Even though it’s now officially called a ‘strategic review process’, this isn’t exactly something new as Nevada Copper has been talking to several parties in the past 12-24 months so it will be interesting to see what comes out of it considering not a lot of potential partners/acquirers will be trigger-happy at the current low copper price.
As the strategic deal is taking longer than expected, Nevada Copper had to re-negotiate a deal with Red Kite as the previous loan agreement included a clause a strategic deal had to be completed by the end of last year. Red Kite agreed to extend this date by 3.5 months to April 15th to complete an alternative financing (equity or subordinated debt) to the tune of $15M a reduced amount from the $20M that was previously required). Should Nevada Copper fail to complete the financing by April 15th, the entire outstanding loan will be due immediately, although we would expect Red Kite to be flexible once again as RK has told Nevada Copper it would be willing to put up US$2M of the needed financing.
Nevada Copper saved the most interesting part for last, as it has also entered into an offtake buyback agreement with Red Kite. As you might remember, the original financing deal between Nevada Copper and Red Kite included a substantial offtake agreement whereby Red Kite would have the right to purchase up to 74.5% of the copper concentrate from the underground phase at Pumpkin Hollow. This could be interesting as it would allow Nevada Copper to use the copper production from the underground mine as bargaining chip in the strategic review process as any potential partner will be very interested in having the rights to as much of the concentrate production as possible.
Go to Nevada Copper’s website
The author holds a long position in Nevada Copper. Nevada Copper is a sponsor of the website. Please read the disclaimer
