Augusta nails US$40 million facility with Sumitomo

Augusta Resource Corp. (AZC-T, AZC-X) traded up 71 a share or 13.6% to finish at a 52-week high of $5.93 today on news that Sumitomo Corp. is giving its subsidiary, Rosemont Copper, a US$40 million loan for major equipment contracts and general working capital.

The funds will be used over the next year to advance Rosemont’s copper project, 50 km south of Tucson, Arizona.

Augusta is guaranteeing the loan, which is secured against Rosemont’s assets, including the deposits on the long-lead time equipment being ordered. Augusta anticipates having full project financing in place before the maturity date in June 2010.

In exchange for the loan, Augusta has granted Sumitomo certain rights to negotiate a minority ownership interest in the Rosemont project.

Repayment of the loan is for the principal amount, plus interest, at a rate of 1.5%. There are no other fees associated with the facility.

Augusta believes the economics of the project will turn the company into a solid mid-tier copper producer within the next three years.

The Rosemont deposit has proven and probable mineral reserves of 493 million tons at 0.47% copper, 0.015% molybdenum and 0.12 oz. per ton silver in sulfide ore and an additional 50 million tons at 0.18% copper in oxide ore.

Proven and probable reserves are included within the measured and indicated resource, which estimates 7.2 billion lb copper in measured, indicated and inferred resources. The estimate also includes 180 million lbs of molybdenum, and 75 million oz. silver in measured, indicated and inferred resources.

According to an August 2007 feasibility study, Rosemont’s open pit mine, concentrator and leaching facilities will include a nominal concentrator production capacity of 75,000 tons per day, for a combined total of 27.3 million short tons annually over an 18.2-year mine life.

Each year the Rosemont mine is expected to produce 220 million lbs of recovered copper, 4.5 million lbs of recovered molybdenum, 2.7 million oz. recovered silver and about 15,000 oz. gold as a by-product credit over the course of the mine’s lifetime.

A heap leach SX-EW plant is expected to produce an additional 14 million lbs. of copper cathode per year for the first 8 years.

Based on weighted average metal prices of US$2.61 per lb. copper, $31.06 per lb. molybdenum and US$11.37 per oz. silver, the base case scenario for Rosemont would be to generate an internal rate of return of about 30.2% with a payback of 2.9 years on an after-tax basis. Cash costs would be valued at $0.38 per lb. copper net of by-product credits.