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12/31/14

Nevada Copper's (NCU.to) financing deal

Yesterday post-close we got this, Nevada Copper (NCU.to) announcing it was re-booting its $200m financial loan facility with Red Kite (RK). Here's the interesting bit:

1) The facility originated in March 2013 when NCU.to borrowed $35m of the $200m total. Another $15m was advanced in October 2013. Therefore $51m came out of it.

2) NCU paid RK a $6.5m "origination fee" (i love the names they make up for these things, while we in the real world call them "legalized kickbacks") in March 2013 for the deal.

3) Yesterday, NCU announced that of the $90m advanced to RK, $57.1m was being "used to repay the Previous Facility". In other words, NCU borrows $51m in 2013 and repays $57.1m this year. Add in the "origination fee" and so far, Red Kite has managed to make $12.6m on a $51m advance in a year and a half.

4) BUT WAIT! THERE'S MORE! With yesterday's re-boot, NCU is paying another origination fee! This time $7m or so is legalized kickback that returns straight to the lender RK after having written a cheque for $90m to NCU.

5) So if you're following so far, it means that in the period March 2013 to December 2014, Red Kite has lent Nevada Copper $90m, but has already reclaimed $19.6m of that in cash. Meanwhile, the new $90m is collecting interest of LIBOR +10%, Red Kite won't have to mail the other $110m cheque until NCU has secured the rest of the financing it needs to build its mine (because unlike the message that Bonnyface tries to send in the NR yesterday, there's still a serious financing shortfall on this Pumpkin Hollow build-out) and as if mere detail, the RK deal is senior secured on the entirety of NCU's assets.

Red Kite? Nice work if you can get it
NCU equity holder? Back of the queue.