Augusta Resource (AZC-T, AZC-X) is slowly but surely pushing its Rosemont project in Arizona towards production, by securing the sixth major permit needed to start building the massive copper project, located 50 km southeast of Tucson.
News of that permit boosted the company’s share price up 10% to close the day at $2.54 in Toronto.
The junior received an aquifer protection permit (APP) on April 10 from the State’s department of environmental quality. This permit ensures the groundwater is protected by setting operating standards and controls.
Commenting on the milestone, chief operating officer, Rod Pace, said it “clearly shows that our project stands up to thorough and intense scrutiny.” He adds that it puts the company “one major step closer to completing the permitting process and starting construction” at Rosemont, which is expected to create 2,900 jobs in Arizona.
While analysts see the recent permit as an “incremental positive” to the project, they note the company still has a key permit outstanding. That permit is the Clean Water Act 404 permit, which is issued by the Army Corps of Engineers (ACOE).
In January, following a public comment period for the 404, the U.S. Environmental Protection Agency (EPA) advised the ACOE that the Rosemont project needed to be further reviewed by both agencies, citing concerns that the project’s proposed facilities could harm the area’s water quality. It also identified the need to assess whether the project poses a threat to listed or endangered species.
“Consequently, the 404 permit is in the midst of a conflict resolution process between ACOE and the EPA,” writes BMO Capital Markets analyst John Hayes in a recent note. “It’s unclear how long this process will take to resolve.”
Despite the uncertainty around the 404 process, Augusta expects to obtain that permit and an air quality permit in either the second or third quarter of this year. (The air quality permit was denied last September after the county released a draft permit. The company expects not to have problem securing it again.) During this time, it also anticipates getting the record of decision for Rosemont from the U.S. Forest Service.
Construction is projected to start by the end of 2012, with production slated for 2014.
The company previously estimated getting the project up and running by 2013, but due to the project delays pushed the timeline back.
As a result, Laurentian Bank’s analyst Christopher Chang in January revised his timeline for the permits and development. He currently expects Rosemont to finish the permitting process by mid-2013, and start production in mid-2015.
Once all the permits are in hand, which Chang says is the biggest overhang for the project at the moment, he believes Augusta could draw some much needed attention.
“Augusta represents a very attractive acquisition target due to its large resource size, low political risk jurisdiction, excellent local infrastructure and low capital intensity,” he says.
According to an updated 2009 feasibility study, the project is envisioned as an open-pit mine producing 220 million lbs. copper, 4.7 million lbs. molybdenum, and 2.4 million oz. silver a year over a 21-plus-year life. It’s expected to become the fourth largest U.S. copper producer, accounting for 10% of domestic output.
The cost to build the project is estimated at US$897 million.
Given the recent capital cost inflations, Chang predicts the project’s capex to be slightly higher at around US$1.1 billion.
The company says it plans to update the project’s captial costs in mid-2012, along with the project’s resource estimate.
Rosemont has done an outstanding job of building public support for their proposed copper mine in Pima County, AZ. Their ability to get through the permitting process in a timely manner is a testament to their commitment to reach out to the public. Public support for this mine is 3 to 1 in favor and that has had a positive influence on the regulatory process.