September 26, 2022 – Yerington, NV: Nevada Copper (TSX: NCU) (OTC: NEVDF) (FSE: ZYTA) (“Nevada
Copper” or the “Company”) is pleased to provide an update on planned restart activities at its Pumpkin
Hollow underground copper mine (the “Underground Mine”) and developments with respect to the
proposed financing package that was previously announced in the Company’s news release dated August
25, 2022 (the “Prior Announcement”). The financing is expected to provide up to US$93 million of liquidity
to the Company in order to support the restart and ramp-up of the Underground Mine (the “Restart
Randy Buffington, President & CEO, commented: “These past few weeks the team has been focused on
ensuring that we are prepared for the restart of underground operations. We have made significant
progress in developing the plans, recruiting the people and implementing the systems necessary to derisk
the restart. We have attracted several key technical positions and built the initial underground team to
be able to execute on the first critical projects, primarily the remaining two dike crossings required to
access the EN zone. We believe that taking a careful, phased approach to restarting the mine removes
some of the bottlenecks the operation has faced in the past and will facilitate a rapid ramp-up to
nameplate capacity once the mill restarts in mid-2023. We are looking forward to completing the capital
projects and bringing the underground mine up to full operations so that we can turn our attention to
development of the large open pit project. I continue to appreciate the ongoing commitment and support
of our team and key stakeholders as we work diligently to close this financing and get back to operations.”
Operations and Mine Planning Activities Update
As previously announced, the Company has advanced planning for the restart of operations at its
Underground Mine. The Company engaged a third-party consulting firm, John Wood Group plc, to
complete a mine plan focusing on accessing the larger, higher-grade stopes in the East North Zone (EN
Zone). The mine plan has been completed with an optimized stoping sequence that brings value forward
in the life of mine and derisks the restart by advancing development activities and building significant
underground inventory ahead of restarting the mill in mid-2023. Included in the mine plan are updated
operating costs, which are not expected to be materially different from previous estimates as they have
not been significantly impacted by inflationary pressures.
The restart plan, as envisaged, will be executed in three phases following the closing of the Restart
Phase 1 – Completion of the remaining two dike crossings and certain capital projects, workforce
Phase 2 – Underground stope and inventory development
Phase 3 – Stope mining and mill start-up
In September, the Company entered Phase 1 by reinitiating development activities with one mining crew
focused on completing the second dike crossing. It is anticipated that the crossing will be completed and
well advanced beyond the geological dike feature within the next 30 days, at which time the crew will move
onto the third and final dike crossing. In addition, the Company is preparing to issue bid packages to
interested development contractors to perform underground development activities and for completion ofthe remaining capital projects, including: (i) coarse ore bin 2; (ii) vent shaft stripping and surface fans
installation; and (iii) Geho dewatering system.
In early 2023, the Company plans to begin rapid development with the use of a development contractor
to advance into the higher-grade stopes of the EN Zone and build significant underground ore inventory.
The Company will continue to recruit additional underground personnel to prepare for stope mining in the
second quarter of 2023. With a significant stockpile of ore on surface and underground inventory expected
to be built up, the mill is planned to start up in the third quarter of 2023.
Restart Financing Package Update
As disclosed in the Prior Announcement, the key components of the Restart Financing Package are as
• Equity Investments (US$40 million): Pala Investments Limited (“Pala”), the Company’s largest
shareholder, and Mercuria Energy (“Mercuria”), a significant shareholder of the Company, are each
expected to provide US$20 million in exchange for common shares of the Company (“Common
Shares”). Pala has already advanced US$13.5 million of such funding to the Company.
• Stream and Royalty Financing (US$30 million): Triple Flag Precious Metals Corp. (“Triple Flag”) is
expected to increase its existing net smelter returns royalty on the Company’s open pit project
from 0.7% to 2% for a purchase price of approximately US$26.2 million, subject to a full buyback of
the increased royalty percentage. In addition, Triple Flag is expected to accelerate the
approximately US$3.8 million remaining to be funded under the Company’s existing metals
purchase and sale agreement with Triple Flag.
• KfW Facility Extension (US$15 million committed): The Company’s senior credit facility (the “KfW
Facility”) with KfW IPEX-Bank GmbH (“KfW”) is expected to be amended to provide for a new
tranche of up to US$25 million, of which Pala, Triple Flag and Mercuria would commit the first
US$15 million as a backstop.
• Deferrals under Senior Project Facility and Working Capital Facility (expected to be at least US$8
million): KfW is expected to defer three interest payments under the KfW Facility. Concord
Resources Limited is expected to defer interest and principal payments under the Company’s
working capital facility.
Under the Restart Financing Package, Pala is expected to consolidate approximately US$73 million of the
indebtedness currently owing to Pala by the Company into an amended or new debt instrument (the “Pala
Debt Instrument”), which indebtedness would be convertible into Common Shares.
Please see the Prior Announcement for additional details regarding the Restart Financing Package.
Nevada Copper reminds shareholders that the terms of the Restart Financing Package are currently nonbinding and closing is subject to, among other things, finalization of the specific terms thereof,
negotiation and execution of definitive documentation and the satisfaction of various regulatory
requirements. The Company and its key financing partners intend to enter into definitive documents in
respect of and close the Restart Financing Package concurrently on or about October 5, 2022 (the “Closing
Date”). The closing of the Restart Financing Package will be subject to the approval of the Toronto Stock
Exchange (the “TSX”).
As disclosed in the Prior Announcement, there can be no assurance that binding agreements will be
entered into or completed (or the required regulatory approvals obtained) on terms satisfactory to the
Company and within the required timeframe, or at all. In addition, there can be no assurance that the
Company will be able to raise the further funding to supplement the Restart Financing Package that willbe required to complete the restart and ramp-up process. The Company expects the costs of the restart
and ramp-up process to be in the range of US$70 million-US$75 million. In addition, the Company needs
to satisfy and/or defer various outstanding vendor payables. Together these costs and payables are
expected to exceed the amount of the Restart Financing Package. As a result, the Company continues to
evaluate other additional financing options, including a public offering.
The Company intends to use the available proceeds from the Restart Financing Package of approximately
US$71.5 million (representing the US$93 million of liquidity less US$13.5 million already advanced by
Pala and less US$8 million in deferrals under the KfW Facility and the Company’s working capital facility)
to fund ramp-up costs (approximately US$15.7 million to fund capital expenditures and approximately
US$29.1 million to fund operating costs), vendor payments (approximately US$23.5 million) and for
general corporate purposes, such as overhead (approximately US$3.2 million).
If the Restart Financing Package is not completed, absent other financing, the Company will not be able
to continue carrying on business in the ordinary course and may need to pursue proceedings for creditor
protection. The Company’s creditors may also seek to commence enforcement action, including realizing
on their security over the Company’s assets.
Potential Maximum Dilution in Respect of the Restart Financing Package
Pala currently owns 167,759,110 Common Shares, representing approximately 37% of the outstanding
Common Shares on a non-diluted basis. Mercuria currently owns 48,700,000 Common Shares, representing
approximately 11% of the outstanding Common Shares on a non-diluted basis.
Pala is expected to fund its equity investment of US$20 million by the cancellation of approximately
US$13.5 million in short-term debt advanced to the Company by Pala as interim financing and by the
payment of approximately US$6.5 million on the Closing Date. The Pala Equity Investment will be at a
subscription price equal to a 15% discount to the five-day volume weighted average price (the “VWAP”) of
the Common Shares on the TSX as of the trading day prior to the Closing Date (the “Equity Subscription
Price”). By way of illustration, if the closing of the Pala Equity Investment occurred today, 120,088,496
Common Shares would be issued to Pala using a 15% discount to the five-day VWAP of C$0.266 and then
converting such VWAP into U.S. dollars using the Bank of Canada exchange rate on September 23, 2022 of
C$1.00=US$0.7369 (the “Illustrative Equity Subscription Price”). In addition, approximately US$1.665
million of guarantee and other fees will be satisfied by the issuance of Common Shares to Pala at the Equity
Subscription Price. Based on the Illustrative Equity Subscription Price, this will result in an additional
9,999,655 Common Shares being issued to Pala. The transactions described in this paragraph together with
the Pala Debt Instrument are referred to as the “Pala Equity Investment” herein.
Mercuria is expected to fund its equity investment of US$20 million in two tranches. The first tranche of
US$10 million will be paid on the Closing Date. The second tranche of US$10 million will be deposited into
escrow on the Closing Date and will be released upon the satisfaction or waiver of certain conditions. These
conditions include the completion of certain steps in the ramp-up process that the Company expects to
achieve before the end of 2022. The first tranche of the Mercuria Equity Investment will be at a subscription
price equal to the Equity Subscription Price. The second tranche of the Mercuria Equity Investment will be
at a subscription price equal to a 15% discount to the five-day VWAP of the Common Shares on the TSX as
of the trading day prior to the applicable date of closing. By way of illustration, if the closing of both
tranches of the Mercuria Equity Investment occurred today, 120,088,496 Common Shares would be issued
to Mercuria using the Illustrative Equity Subscription Price.
In connection with the Mercuria Equity Investment, Mercuria is expected to receive Common Share
purchase warrants of the Company (the “Warrants”). Each Warrant will entitle Mercuria to, subject to
satisfying certain vesting conditions, acquire one Common Share at an exercise price equal to a 20%.premium to the Equity Subscription Price. The Warrants will vest, from time to time, in conjunction with
the conversion of the Pala Debt Instrument, thereby providing Mercuria with an ability to maintain its pro
rata shareholding interest. The vesting of 50% of the Warrants will also be subject to the vesting condition
that the second tranche of the Mercuria Equity Investment has closed. The Warrants will expire upon
maturity of the Pala Debt Instrument. By way of illustration, if all Warrants vested and were exercised
today, 119,205,651 Common Shares would be issued to Mercuria assuming the illustrated conversion of
the Pala Debt Instrument described below. The transactions described in the foregoing two paragraphs are
referred to as the “Mercuria Equity Investment” herein (the Mercuria Equity Investment together with the
Pala Equity Investment are referred to herein as the “Equity Investments”).
Pala is expected to consolidate approximately US$73 million of the indebtedness currently owing to Pala by
the Company into the Pala Debt Instrument. The loans outstanding to be consolidated into the Pala Debt
Instrument would include (i) the total of approximately US$53 million outstanding under the existing credit
agreement entered into by Pala and the Company in November 2021; and (ii) US$20 million that was
advanced to the Company under a promissory note in June and July 2022. In connection with the entering
of the Pala Debt Instrument, a 4% fee on the US$20 million amount referred to above will be payable to Pala
and capitalized as additional principal under the Pala Debt Instrument. Amounts owing under the Pala Debt
Instrument would be convertible into Common Shares, at Pala’s option, at a conversion price equal to a 20%
premium to the Equity Subscription Price. By way of illustration, if all amounts owing under the Pala Debt
Instrument were converted today, 374,402,808 Common Shares would be issued to Pala using a 20%
premium to the Illustrative Equity Subscription Price.
Based on the above illustrations, the number of Common Shares that will be issued as a result of the
Equity Investments is set out below, assuming the conversion in full of the Pala Debt Instrument and the
exercise in full of the Warrants:
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