Nova Minerals (ASX:NVA) is the latest mining company to execute a debt conversion agreement with global investment firm Nebari.

The company has reached an agreement with Nebari Gold Fund 1 to eliminate its existing convertible debt facility by converting the outstanding balance into ordinary shares. 

Elimination of the Nebari note follows the company’s sale of its non-core investment in Snow Lake Resources (NASDAQ:LITM), for US$6.73 million ($10.85 million). 

Nebari will convert the balance of the US$5.42 million note to ordinary shares at $0.25 per share. After conversion by Nebari, the company will retain all the Snow Lake proceeds for development of the Estelle Gold and Critical Minerals Project. 

The conversion date will be on 13 January 2025, leaving Nova debt free. 

With further NASDAQ warrants exercised over the past few days, the company now holds $16 million in cash to accelerate its development plans. 

As announced by Nova today (8 January), Nebari’s intent is to continue its partner role, now as a supportive shareholder, as the company focuses on Estelle.

Commenting on the Nova conversion agreement, Nebari Senior Managing Director Roderik van Losenoord says “taking a partner approach is at the heart of what we do, and this allows us to work with our borrowers to accelerate growth and realise value”.

Nebari co-founder Clark Gillam further adds that there is no better show of support “than exercising our debt and converting to equity”. 

Nova is not the only mining company to see a Nebari debt facility converted to shares or equity, ultimately transitioning the creditor into a shareholder.

A debt conversion agreement is a financial arrangement allowing a company to convert its outstanding debt into equity. The process is also known as debt-to-equity conversion and is a tool for oftentimes struggling companies to restructure finances and improve balance sheets. 

At its core, debt conversion agreements are contracts between a company and its creditor that enables the borrower to issue new shares to the creditor, effectively transforming the creditor into a shareholder.

True North Copper

True North Copper (ASX:TNC) is one recent example. As Mining.com.au reported on 25 November 2024, Nebari Natural Resources Credit Fund II agreed to convert part of its outstanding debt owed by the company, then totalling $3.9 million, into shares in True North via such a debt-to-equity conversion. 

True North Copper conducted a $50.3 million conditional placement, as part of a broader recapitalisation, to support funding a new exploration strategy. 

A 24 October report by this news service uncovered sources who said Nebari ultimately triggered True North’s initial administration process and KordaMentha’s appointment last year. It is understood Nebari called in breaches of some ‘onerous’ debt covenants and was unable to come to an agreement with the copper company’s largest shareholder Tembo Capital Holdings UK regarding an injection of funds that would have helped it satisfy all conditions to draw down tranche two of a Nebari debt facility.

In February last year, True North had met all tranche one conditions precedent of the senior secured loan facility to clear the way to draw down US$18 million. Then in May, True North announced a fully underwritten $24.3 million equity raising which was supported by Tembo Capital Management and Nebari.

Mining.com.au understands by later seeking to draw down the US$10 million available in tranche two, the administration process was triggered by Nebari as the lender deemed True North’s market capitalisation – then just under $30 million – as well as its cash levels as below a threshold and therefore an ‘unacceptable risk’.

Metro Mining

In late November, Metro Mining (ASX:MMI) entered into a binding and definitive agreement with Nebari Natural Resources Credit Fund I and Nebari Natural Resources Credit Fund II for up to US$21.5 million in debt financing. 

The restructuring of its debt facility and private royalty agreement came after a competitive refinancing process. The funds were set to be released via two tranches and in addition to the existing two tranches of US$30 million under a senior debt facility agreed upon in 2023. 

Nebari in April last year emerged as an 8.754% significant shareholder in the bauxite miner as part of a funding package previously inked in March 2023. Nebari Partners, Nebari Partners GP, Nebari Partners GP III, Nebari Natural Resources AIV I LP, and Nebari Natural Resources AIV II then collectively held 421 million shares in the company.

As reported by Mining.com.au, US$11.5 million will be provided to ‘buy back’ the private royalty held by Nebari, which will be converted to senior debt. A US$10 million stand-by facility was also provided, with a minimum drawdown of US$5 million in lieu of a line fee.

The remainder is able to be drawn at Metro’s option before the end of December 2025. 

Recent Nebari deals

On 2 January this year, West Red Lake Gold Mines (TSX-V:WRLG) announced it entered into a completed credit agreement with Nebari to borrow up to US$35 million. The credit facility was first announced in October 2024, when the company and Nebari had entered into a non-binding term sheet. 

Tranche one was drawn down on 31 December last year.

Meanwhile, in early December, Lion One Metals (TSX-V:LIO) entered into an agreement to amend certain terms and draw down a further US$4 million of its senior secured financing facility provided by Nebari.

Lion One has now fully drawn down the facility. In addition to amending the terms of the financing facility to facilitate drawing down tranche three, the company amended certain reporting covenants.

Kingsgate Consolidated (ASX:KCN), which remains focused on getting its Chatree Gold Mine into full production, in July 2024 reported the conditions precedent to draw down the US$35 million term facility with Nebari Gold Fund 1 and Nebari Natural Resources Credit Fund II had been satisfied.

In June 2023, Horizon Minerals (ASX:HRZ) reported drawing down US$3 million in funding to advance its Cannon Underground Gold Project in Western Australia towards a final investment decision. The company reports it had met the conditions precedent to draw down the debt, which was part of a US$5 million convertible loan facility and general security deed executed with Nebari on 23 November 2022.

Write to Adam Orlando at Mining.com.au

Images: Nebari