HudBay’s offer for Augusta finally given the nod

HudBay’s offer for Augusta finally given the nod

Northern Santa Rita Mountains, where Rosemont copper mine is proposed.

After four months of fruitless attempts to acquire fellow Canadian Augusta Resource Corp (TSX:AZC), Hudbay Minerals (TSX, NYSE:HBM) said Monday the companies have agreed to friendly terms for a sweetened all-scrip takeover offer.

The revised deal is worth about $555 million, or $3.56 a share. HudBay is offering 0.315 of its shares for each Augusta share, which was the same as its initial hostile bid. But the company has also thrown in a sweetener to get a friendly deal done, offering 0.17 of a warrant for each Augusta share as well.

The deal gives HudBay control over the Rosemont project in Arizona, recently threatened by the surprise appearance of a wild cat on the property, which has the potential to become the US’ third largest copper mine, with seven billion pounds of reserves and resources of the red metal.

In a note to clients, Laurentian Bank Securities metals and mining analyst Christopher Chang said the revised offer seemed fair, adding he did not foresee a superior offer to emerge, given Augusta’s “very thorough” strategic review process, along with Rosemont’s permitting overhang.

“With the significant lock-up by Hudbay Minerals (16%), Augusta insiders, and key large shareholders representing approximately 50% of the company’s issued and outstanding shares, we believe this transaction is likely to close as currently proposed,” he said.

Augusta's board, which initially rejected Hudbay’s offer, qualifying it of an opportunistic "low-ball" bid, had plans to start building the Rosemont mine in the second half of this year with first production early in 2017.

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.