Nevada Copper files for Chapter 11

September 2024 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

September 2024 Issue

Troubled copper and gold mining company Nevada Copper Corp filed for Chapter 11 bankruptcy protection in June, just five years after it began operations.

In documents filed with the Bankruptcy Court of Nevada, the company listed $500m to $1bn in assets and $100m to $500m in liabilities in its petition, which included $279.2m in secured debt obligations and $226.6m in unsecured and intercompany loans.

In addition to the filing, Randy Buffington, the company’s president and chief executive, resigned and mining veteran Tom Albanese, its lead independent director, was appointed as its new chairperson.

The filing came around a week after the company announced it was significantly scaling down operations at its Pumpkin Hollow mine after failing to secure necessary funding and amid fears that the business may not be able to continue. The Pumpkin Hollow project contains substantial mineral reserves, including copper, gold, silver and iron magnetite. The underground mine is projected to produce an annual average of 60 million pounds of copper, 9000 ounces of gold, and 173,000 ounces of silver over its first five years of operation and an annual average of 50 million pounds of copper, 8000 ounces of gold and 150,000 ounces of silver over the life of the mine. The underground mine is projected to have 1.8 billion pounds of mineral resources, while the open pit development has about 5 billion pounds of copper.

The company has secured interim debtor-in-possession (DIP) financing, allowing it to proceed with an initial borrowing of $20m from a previously announced $60m DIP financing commitment facilitated by US hedge fund manager Elliott Investment. Elliott owns two-thirds of Triple Flag Precious Metals Corp., a streaming company that invested in Nevada Copper’s operations. This funding will support the company’s care and maintenance activities and other needs during the restructuring process. Nevada Copper plans to seek final court approval for the remaining $40m of the DIP financing to ensure sufficient liquidity throughout the restructuring period. In addition, the court has authorised the continuation of wages and benefit programmes for the company’s employees.

As part of the restructuring, Nevada Copper, which is backed by Pala Investments and Mercuria Energy Group Ltd, has also announced a number of additional leadership changes. Gregory Martin has been appointed interim president and chief executive and Matthew Anderson has been named interim chief financial officer. Both had previously held senior financial positions within the company.

Prior to the company’s Chapter 11 filing, it had garnered interest from two unnamed potential buyers, but was unable to finalise a deal with either, it said.

The company, as part of its bankruptcy filing, has also announced its intention to sell itself, undergoing a delisting review by the Toronto Stock Exchange, and halting its shares from trading. The sale process will be aided by Moelis & Company LLC.

Nevada Copper’s bankruptcy comes amid a spike in demand for copper and gold. Copper in particular has become a high demand metal in recent years. This high demand is reflected in its price as the metal’s futures were priced at $4.51 per pound on 11 June, according to CME Group, after dropping from its record high of $5.17 per pound on 15 May 2024. The demand for copper is expected to continue to rise for the foreseeable future, outstripping global production this year, with the shortfall expected to last three years.

Despite this increasing demand, some copper mining companies, including Nevada Copper, have encountered challenges in generating revenue and profits. The company reported revenue of just $3.6m for the quarter ended 31 March 2024, while costs increased to $18.2m. In the third quarter of 2022, geotechnical challenges restricted access to the underground mine at the Pumpkin Hollow project, forcing Nevada Copper to suspend mining operations there, eliminating its primary source of operating income.

Richard Summerfield