Bitter takeover battle for giant US copper mine hots up
Shareholders in Augusta Resource Corp (TSE:AZC) (NYSE MKT:AZC) suffered a second day of losses on Friday with the copper mine developer plunging in heavy volume.
By the close the Vancouver-based junior was changing hands at $3.01, down 6.2% on the Toronto Exchange, near its lows for the day. Over 3.3 million shares in the $437 million company had traded, ten times the usual daily average.
Augusta is in the final stages of permitting at the Rosemont copper project in Arizona while fighting off a hostile takeover bid by fellow Canadian firm Hudbay Minerals (TSE:HBM) launched in February.
At stake in the increasingly bitter fight is a copper-molybdenum-silver mine which when built will be the third largest copper operation in the US and supply 10% of the country's red metal.
After the close on Friday, Hudbay said it is extending its offer to May 27 adding that it "continues to monitor developments with respect to Augusta's applications for permits" for Rosemont and the potential implications of a letter from the US Army Corps of Engineers to Augusta made public on Tuesday:
"The USACE letter advises Augusta that, in the context of its Clean Water Act section 404 permit application, Augusta's proposed compensatory mitigation is inadequate and USACE staff is changing its focus from compensatory mitigation to preparing a final permit decision."
Hudbay, worth $1.9 billion on the TSX, advanced 1.6% to $10 even on Friday bringing its gains for the week to 8%. Toronto-based Hudbay is offering 0.315 of a Hudbay common share for each Augusta common share held and at the current price Augusta shareholders who tender their shares will show a slight paper profit.
Friday wasn't the first time Hudbay had raised doubts about Augusta's "overly optimistic" timeline on permitting and its ability to find the necessary funds to build the mine should it be approved.
Augusta has in place a shareholder rights plan, or ‘poison pill’, which holds back the all-share takeover by Hudbay at least for a couple of months. The British Columbia Securities Commission ruled early May that Augusta has until 15 July to find a white knight or the poison pill will be thrown out.
Augusta previously said it has signed confidentiality agreements with more than 10 entities and is actively engaged in talks with possible bidders that can top Hudbay which it accuses of "swooping in at the last minute" with an offer it has characterized as "opportunistic", "lowball" and "grossly inadequate".
The company hopes to start building the mine in the second half of this year with first production early in 2017. Augusta still needs to raise nearly $900 million in project financing for the $1.3 billion project.
Rosemont has proven and probable reserves of 5.9 billion pounds of copper and 194 million pounds of molybdenum with annual production set for 243 million pounds of copper, 5.4 million pounds of moly and 2.9m ounces of silver over its 21-year life.