Three Valley Copper Corp V.TVC.H

Papomono block caving start up

[DrHoliday]

       The transition towards the start up of underground block cave mining, and the suspension of open pit mining operations at Don Gabriel MTV, is in my mind a prudent business decision since the underperformance due to lower than expected grade in the open pit was enough to service outstanding senior debt instruments, but not enough to fund the ramp up of the underground mine. The market had a severe over reaction to the news of mining being suspended even though no default event was triggered, because of the fear of equity stakeholders being wiped out if the company would be unable to continue as a going concern. To properly allay these fears, the company is in talks with it's senior lenders to provide a temporary bridge loan to finance the underground operation while winding down the open pit. This short term cash flow crunch needs to be bridged while the transition plan away from open pit and to far more profitable underground mining is being implemented. Since the forecast is quite profitable, then I see no reason why alternative or bridge loan financing would not be provided for the start up as this would re-assure the lenders that their loans would perform over time and provide a decent percentage yield return on investment ROI.

       Since Three Valley Copper has over 95 % equity in the mine, then there is also the possibility of partnering for a portion of it's equity interest in the mine with existing lenders if they choose to take stock in the company in exchange for additional financing. Of course, it would be preferable to retain the 95% equity interest, but the need for financing during the start up and transition from winding down the Don Gabriel open pit and the start up of Papomono block caving is paramount. The best alternative would be additional secured loans and or a combination of bridge financing options rather than any dilution of equity in terms of stock or property rights. There may be no covenants in the terms of any existing loan agreements with the company's senior lenders that would prevent the company from seeking alternatives from a third party to finance the mine in the event that the current lenders refuse to make any additional secured loans or extensions of the existing credit facilities on the books. So, there are a number of options available to finance the funding gap in the interim while Papomono operations are being started. Once this hump or hurdle is solved, then I expect to see a jump up in the value of the stock based upon robust fundamentals, strong copper pricing and positive performance of any financial debt instruments.

        Once these goals are accomplished, then in 6 months or a year from now, the company can begin to pay down and reduce any outstanding indebtedness.
The unknown right now, is just how much in addition to the $7 million US on hand, the company needs to finance the start up of Papomono.

DOC