Nevada Copper (TSX: NCU) plans to raise, through a bought deal offering of 643.7 million units of the company at C$0.15 per unit, approximately C$97 million (about $71 million) to address the company’s “serious financial difficulty.”
The US-focused copper miner has entered into an agreement with Scotiabank, which on behalf of a syndicate of underwriters including RBC Capital Markets and National Bank Financial would purchase the units.
Without the offering, the company says it would be in financial difficulty due to the lack of available cash and funding resources
Each unit consists of one common share of Nevada Copper and one-half of a common share purchase warrant, with each full warrant entitling the holder to purchase one common share at C$0.20 per share for a period of 18 months following closing of the offering.
Nevada Copper has also granted the underwriters an over-allotment option, which could raise an additional C$3.6 million for the company.
The company says it would use the net proceeds to fund its operations, including restarting and ramping up production from its Pumpkin Hollow underground mine in Nevada, repaying a $30 million convertible loan from its largest shareholder Pala Investments, repaying other outstanding indebtedness including a further $9.6 million to Pala, and for general corporate purposes.
The $30 million convertible loan was part of a financial package agreed in March with Pala, which subsequently syndicated a portion of the loan, including a principal amount of $13.4 million, to an affiliate of Castlelake LP, Nevada Copper’s second-largest shareholder.
Pala and Castlelake have agreed to waive the applicable prepayment premiums and to subscribe for about 303 million units for aggregate gross proceeds of approximately $45.4 million pursuant to the offering. In addition, they have also committed to subscribe for up to an additional 163 million units pursuant to the offering for gross proceeds of approximately C$24.5 million.
Nevada Copper also announced that the company intends to apply to the TSX for a “financial hardship” exemption from the requirements to obtain shareholder approval of the offering, on the basis that without the offering, it would be in financial difficulty due to the lack of available cash and funding resources. The offering is designed to improve the company’s financial situation, it said.
Nevada Copper had been aiming to restart its Pumpkin Hollow mine this quarter, where the ramp-up earlier this year was held back by government restrictions to control the covid-19 outbreak.
The company maintains that mill restart at the underground mine is still scheduled for August, subject to revision based on impacts of the covid-19 pandemic and other factors. The goal is to ramp up to full production capacity during the fourth quarter.
It expected, as a result of the above application, the TSX would extend the remedial delisting review that Nevada Copper is currently under for a period of 120 days.
Nevada Copper shares declined 18.9% by midday Tuesday to a near 52-week low. The Vancouver-based company has a market capitalization of C$122.9 million.
