Nevada Copper Corp NEVDQ

Dundee Capital Markets comments on Nevada Copper Corporation

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According to Dundee Capital Markets:

https://is.gd/lZ5O4Y

Nevada Copper Corp.

(NCU-T: C$0.87)

September 30, 2015

BUY, High Risk

Dundee target: C$3.00

Pumpkin Hollow: The Next Cycle Project

NCU extends debt maturities & repayment dates: This morning NCU provided a corporate and project update - the main highlight was the announcement that they have extended the maturity and repayment dates on two of their debt facilities. The maturity on the $200M Red Kite Loan Facility, of which $90M has been drawn down to date, has been extended to December 31, 2021 (from January 2019), while the dates of the loan drawdown, repayment commencement and first commercial production were all extended 12 months. First interest payments are now due on March 31, 2017. NCU also extended their $25M Pala bridge loan facility to June 30, 2016, with an option to further extend. This allows NCU some breathing room as they look for a financing solution.

Pumpkin Hollow is shovel ready: With NCU fully permitted and shovel ready, project financing is the next major catalyst for the company. NCU management will look to accelerate financing discussions with a goal of a 2018 production start at Pumpkin Hollow. Among the possible financing solutions, NCU is considering a joint venture partnership, project bank debt (with or without an offtake agreement), EPCM contracts with offtake provisions or combinations of these options. We also believe NCU could be a target for acquisition.

NCU has options with Pumpkin Hollow: With two development options, both fully permitted and supported by feasibility studies, NCU has flexibility with how they advance the Pumpkin Hollow project. Production could start with the smaller, lower capex underground operation (hoist, headframe and production shaft are ready to go) or the larger 70,000 tpd integrated operation.

Pumpkin Hollow financing recap: If NCU chooses not to drawdown on the remainder of the Red Kite facility, the company will have to raise approximately $277MM to finance the remainder of the Phase 1 CAPEX, or $1.07Bn to finance the integrated option. Conversely, if NCU chooses to drawdown on the balance of the Red Kite Facility, then only $167MM would have to be raised to fund Phase 1, or ~$897M for the integrated approach.



Sources: Company Documents, DCM

Bottom Line: We maintain our belief that NCU is an attractive M&A target - based on HBM's recent acquisition of AZC, we believe NCU has an implied takeover valuation ranging from $2.00-$5.57/share. We have a BUY rating on NCU and a target price of $3.00/share based on a 0.9x multiple to our NAV of $3.33/share.