Epstein-Research Blog | Nicola Mining, $51 Mm Invested In 4 Assets, Market Cap $6 Mm, Cash Flow Next Year | Talkmarkets - Page 2
Founder, Chairman, CEO, President, Treasurer, Analyst at Mockingjay, Inc.
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In 2011 Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior natural resources analyst to help increase awareness of a number of natural resource companies in which he's invested in. 

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Nicola Mining, $51 Mm Invested In 4 Assets, Market Cap $6 Mm, Cash Flow Next Year

Date: Tuesday, November 10, 2015 9:31 AM EDT

In 2011, Huldra acquired 100% ownership of Craigmont Holdings for consideration of $8 million. The Craigmont property is located near Merritt, B.C., 70 km north of Treasure Mountain. Huldra’s intent was to acquire a property that already maintained an existing mining and milling permit, as it would expedite the process of developing and mining Treasure Mountain. Given amicable weather, water, electrical infrastructure and proximity to Huldra’s former mining operations, Craigmont’s property was an ideal location to develop a mineral processing facility. The Company invested $21.6 million into a new mill plus $2.0 million into a lined tailings facility. Huldra built the Merritt Mill in 2011-2012, completing it November 2012.

Given a new management team and Board, and a new company focus, what are KEY takeaways from the Company’s history? 

Huldra Silver is an example of a company that had viable assets and a working business plan, yet was unable to service its debt. In short, it encountered the, “perfect storm” of excessive debt, falling commodity prices and diminished liquidity in both debt and equity markets. As a result, Nicola owns superior assets (see below) with near-term cash flow and longer-term exploration potential. We expect to deploy cash flow from our milling partnerships to fund other promising assets. 

Importantly, the economic environment which continues to be illiquid and unsupportive of junior miners, creates highly attractive M&A opportunities. As a former M&A banker and distressed turnaround specialist, I understand how to acquire (companies / assets) and structure transactions. We continue to look at assets that can be acquired at discounts to total capital invested. However, ultimately it’s not just the discount that matters, but also synergies created by consolidating a valuable property with our new mill site.

Why did you change the name from Huldra Silver Inc. to Nicola Mining Inc.?

The name change is simple. Some may view it as extermination of the stigmatism attached to the previous company which entered into creditor protection and saw its market capitalization collapse, but this is not the reason. Actually, Huldra Silver Inc. was exactly what the name implies, a silver-focused junior mining company, but Nicola has become much more than that. We have the potential to become a consolidator of small high-grade gold and silver deposits, (and associated base metals), located throughout British Columbia. We changed the name to Nicola Mining because we are in the Nicola Region.

Legacy Huldra Silver Debt Structure:

Debt Holder Description Amount
Waterton 1 DIP Financing $3,200,000
Waterton 2 Senior Debt $7,300,000
Convertible Debenture Holders Unsecured $11,000,000
Trade Payables Subordinated $3,000,000
Total   $24,500,00

Can you please describe the recently accomplished financial / debt restructuring?

Our team’s proactive restructuring of debt while in CCAA is one of the most compelling parts of the Nicola Mining story.  At the time of my taking over as CEO, the Company had defaulted on $24.5 million in debt and payable obligations that required immediate restructuring.  Post Tranche 3 Financing, the Company will have a senior secured 3% debt note of $1,287,500 and a Secured Convertible Debenture of approximately $8.5 million, which is due in 2 and 3 years.

Restructured Nicola Mining Debt Structure:

Debt Holder Pre-Offering Post Debt Conversion
Waterton 1  (DIP Financing) $3,200,000 $1,287,500 (3 years)
Waterton 2 $7,300,000 $0
Unsecured Convertible Debt $11,500,000 $0
Payables & CRMC Settlement $3,000,000 $0
Secured Convertible Debt   $8,500,000  (2 – 3 years)

You have described Nicola Mining as a package of 4 distinct, non-correlated assets. Can you please outline those 4 assets?

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