Battle royal over US copper mine
Friday was a good and bad day for Augusta Resource Corp (TSE:AZC) (NYSE MKT:AZC).
The Vancouver company is advancing the Rosemont copper project in Arizona and is at the same time fighting off a hostile takeover bid by fellow Canadian firm Hudbay Minerals (TSE:HBM) launched in February.
At stake 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.
On Friday investors in Augusta voted overwhelmingly to keep 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 provisions of the poison pill plan would see the automatic issuing of new shares should any one entity take control of more than 15% of Augusta’s outstanding stock, neutralizing any Hudbay acquisition attempt.
Hudbay, which has been picking up Augusta shares on the open market for months, asked the British Columbia Securities Commission (BCSC) to cancel the rights plan ahead of the expiry of its offer on Monday.
But late on Friday the regulator said the poison pill can stay.
But only until 15 July, by which time it will be thrown out if Augusta cannot find a white knight should Hudbay as expected extend the offer.
Augusta 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.
For its part Hudbay has raised doubts about Augusta’s ability to find the necessary funds and pointed to what it calls “deep financial problems” and an “overly optimistic” timeline on permitting.
What sent Augusta shares tumbling nearly 6% on Friday was news of permitting delays and approval problems for the proposed mine located in Pima County, approximately 50 kilometres southeast of Tucson, Arizona.
The US Forest Service is pushing out a decision on the project by at least a month in order to respond to 100 comments and objections and the Army Corps of Engineers informed Augusta that there is a “shortfall” in its water use plans and that it is still investigating other permitting criteria.
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.