Vancouver-based Nevada Copper Corp. has struggled for years to ramp up production at its Pumpkin Hollow copper mine in Nevada.BOB STRONG/Reuters
Nevada Copper Corp. NCU-T shareholders are poised to lose their entire investment, with the struggling Canadian miner seeking bankruptcy protection, and hoping to secure emergency financing from U.S. hedge fund Elliott Investment Management.
The Vancouver-based company has struggled for years to ramp up production at its Pumpkin Hollow copper mine in Nevada. Earlier this year, the company told investors it was a going-concern risk and was running a dangerously high debt load against a dwindling cash position. As of the end of March, Nevada Copper held only US$300,000 in cash, had a working-capital deficit of US$115.4-million, and total debt of approximately US$262-million.
On Monday, the company’s U.S. subsidiary filed for Chapter 11 bankruptcy protection in a Nevada court. Randy Buffington also resigned as chief executive officer at that time, while former Rio Tinto PLC CEO Tom Albanese took over as chairman. Mr. Albanese was already the lead independent director and an investor in Nevada Copper before his appointment. According to Refinitiv, he is the company’s fifth-biggest shareholder.
Before it was halted earlier on Monday, Nevada Copper’s stock traded on the Toronto Stock Exchange. They last changed hands at three cents apiece, a decline of more than 80 per cent over the past year.
New York-based Elliott Investment Management LP, which has experience investing in bankrupt companies, has proposed a US$60-million debtor-in-possession (DIP) financing for Nevada Copper at an interest rate of approximately 14 per cent. The financing has yet to be approved by the Nevada court. In court filings, Nevada Copper said it is now concentrating on finding a buyer.
Jersey-based Pala Investments Ltd. is Nevada Copper’s biggest shareholder, holding 61 per cent of the company’s shares. Pala provided some additional funding to Nevada Copper earlier in the year, but it wasn’t enough to keep the company going. Mercuria Energy Holdings Singapore PTE Ltd. is Nevada Copper’s second-biggest shareholder. Rothschild & Co. Asset Management is the third-biggest shareholder.
Among the Canadian companies that have financed Nevada Copper is royalty and streaming company Triple Flag Precious Metals Corp. TFPM-T In 2022, it provided $30-million to Nevada Copper. In May, as Nevada’s financial situation was deteriorating rapidly, Triple Flag’s chief financial officer, Sheldon Vanderkooy, said Triple Flag had no intention of injecting more money into Nevada Copper. Triple Flag’s biggest investor is Elliott Investment Management, the company proposing the DIP financing for Nevada Copper.
Operational problems at Nevada Copper’s Pumpkin Hollow mine over the past few years include the failure of both a power transformer and a lifting mechanism at its mill. The company has consistently missed production forecasts and cycled through several CEO changes since late 2020. During that time, the top management spot has been occupied by Mike Ciricillo, Mike Brown and Mr. Buffington.
Nevada Copper reported revenue of only US$3.6-million in the quarter ended March 31, 2024, against costs of US$18.2-million. It suspended both mining and milling in the first quarter and said the cost of putting the facility on a care and maintenance basis was close to $10-million.
The company is failing at a time of extremely high copper prices. The commodity traded at US$4.56 a pound on Wednesday. Copper hit a record of US$5.20 a pound last month.