Having strengthened its technical management team over the past six months, including the appointment of Randy Buffington as CEO in October, development rates have increased 50% compared with the back end of the summer and are expected to increase another 50% over the coming month. Other productivity improvements included equipment availability increasing from 65% to 74% and improved contractor performance with productivity up 31%.
"We didn't have a fully filled-out organisation so we did not have all of the people capabilities we needed. We did not have a supply chain we could rely on or warehouse stocks because we were not an established business and then then bang! COVID-19 hits," Nevada copper lead independent director Tom Albanese told Mining Journal. "But over the course of 2021 we've done some good work, particularly since August-September and we're seeing the numbers, the KPIs certainly turning now," he said.
With the worst now behind it, the company is pushing ahead for Pumpkin Hollow to achieve its potential and benefit from historically high copper prices. "As we look to 2022, with the ramp-up rate and expected increase in production, there's a line of sight over the coming months to be around the 3,000 tonne per day watershed level and we're anticipating being there around the end of the first quarter. Every week, we're closer to that and so every week the cash burn rate decreases as we're generating more cash," Nevada Copper non-executive chair Stephen Gil told Mining Journal.
With the technical and mining aspects performing increasingly well, Nevada Copper has also "reset" its balance sheet, according to Gil, which was hammered by the troubled start-up. In November, it closed a C$125 million equity offering which enabled it to pay down a June promissory note from main shareholder Pala Investments and amend a credit facility, which now contains an accordion feature allowing it to draw up to an additional US$15 million. Senior lender, German Development Bank KfW-IPEX, also deferred the first debt repayment under the senior credit facility by two years to July 2024.
The capital structure now features US$60 in cash, $165 million in debt of which $130 million is the senior facility from KfW, and 446 million shares outstanding.
"The November financing was a reset. The company did a good job of getting financing from shareholders in a non-diluted fashion as it went through some of the setbacks and we now did a good size equity raise, which resets the balance sheet. We have a single senior lender in KfW which is 10-year money at LIBOR plus 1.6%. We have a small working capital facility linked to the offtake, that's only partially utilised. So the balance sheet is simplified and there's additional liquidity beyond what the ramp-up is anticipated to require, which allows us to advance the open pit and exploration more broadly on the property," said Gil.
The first task in realising the potential of the district is getting the underground mine towards the 5,000tpd level envisioned in the pre-feasibility study and then potentially going beyond that. "Our strategic plans are based on substantially higher production rates. The mill is a 5,000tpd rated mill but we think it can do 6,500tpd and can expand further with some capex. The shaft was rated for 7,000tpd and we have a decline so we have a huge amount of optionality within the asset. We have a 24 million tonne reserve which is around a 50Mt resource, so while we would like to see this operation at 5,000tpd for 15 years we also think about 20 years plus at 7,000tpd," said Gil.
Next year will also see the company continue to advance on the open pit mine potential with infill drilling, extension drilling and potentially a feasibility study. "We have many tasks ahead of us in 2022. By the end of next year I would like to daylight the work we've done on the open pit so I would expect to see drilling to deliver a substantially enlarged resource base both through infill drilling of the known inferred and extensions so we can get a sense of how big the open pit is. The pit shell needs to be optimised for the current copper price because the existing pit shell is at US$2.45 per pound copper. At $4 copper, you're going to have a very different looking shell," said Gil.
Gil said the higher copper price leads the company to look at the open pit as a single 70,000tpd development rather than a phased approach. "We can add about 50% to the net present value (NPV) of the project through the low-hanging fruit. Including the known inferred resources we add 10% to the NPV and by going straight to 70,000tpd we add another 40% to the NPV. That's before we add solar power or autonomous fleet," he said.
Nevada Copper will also start to look at the broader potential of its land package beyond the underground and open pit scenarios. "We have a number of exploration prospects and the real prize at Pumpkin Hollow are not the star deposits like the open pit and underground, but the possibility of a large porphyry deposit. We have more than 20,000 acres and bonafide porphyry prospects that we haven't yet put a drill hole in. We'd certainly like to be doing that as we go forward," said Albanese.
Decarbonisation and being a low carbon copper producer has resumed its place in the company agenda, something Albanese said was part of the plan before he joined the board in 2018. "In 2018, some of the pre-feasibility study work was looking at an open pit with autonomous trucks and the underground being with battery operated electric trucks and loaders. As we were starting-up, we felt it was a bit risky so we chose to go with the conventional diesel equipment. Now, there is more confidence that electric trucks are going to work underground and autonomous trucks in the pit," said Albanese.
Studies with a renewables consulting group have also demonstrated the viability of developing a dedicated solar project for Pumpkin Hollow with up to 200MW capacity, sufficient for the needs of the open pit, which could also make a big impact in reducing costs. "For grid power we are talking five cents a kilowatt hour while the cost of solar is between 2.5 and 2.5c/kWh. For a project of our scale, that is a massive saving. We've done the follow up work to that with feasibility around automated and electric fleets and they are commercialised at this point," said Gil.
Shares in Nevada Copper are trading at C59c, valuing the company at $263 million.
