HudBay’s $30-M investment lifts Augusta

VANCOUVER — Augusta Resource (AZC-T, AZC-X) is $30 million richer after HudBay Minerals (HBM-T, HBMFF-O) picked up 11% of the company, providing Augusta with the funds it needs to keep advancing its Rosemont copper project near Tucson, Ariz.

HudBay is buying 10.9 million Augusta units for $2.75 apiece, with each unit comprising a share and half of a warrant exercisable at $3.90 for 18 months. The purchase gives HudBay an 11% stake in Augusta, or 13.6% on a fully diluted basis. Augusta also granted HudBay the right to participate in future financings so as to maintain its percentage ownership, for two years.

Augusta will use the $30-million investment to continue advancing Rosemont through the Arizona permitting process. Rosemont is home to a large, open-pittable sulphide deposit hosting copper, molybdenum, silver, and gold as well as an oxide cap that carries just copper. Augusta plans to develop a 75,000-tonne-per-day open-pit mine and sulphide process plant as well as a heap-leach and solvent extraction-electrowinning (SXEW) facility to treat the oxide copper resource.

An updated feasibility study from early 2009 pegged capital costs at almost $900 million. For that investment Augusta should be able to produce 221 million lbs. copper, 4.7 million lbs. moly, 2.4 million oz. silver, and 15,000 oz. gold annually, over a 20-year mine life.

Engineering work is almost complete and Augusta has already inked a $43-million offtake agreement with Red Kite Explorer. Now the company just needs to clear all of the remaining permitting hurdles.

Augusta will receive the Rosemont draft environmental impact statement (EIS) before the end of the year. In early 2011 the company can then hold public hearings, which are required before the company can submit a final EIS. Augusta is also working to obtain an aquifer protection permit, an air permit, and a certificate of environmental compliance in relation to the mine’s power line.

Augusta’s share price got a healthy lift on news of the HudBay investment, gaining 21¢ in a day to close at $2.40. The company has a 52-week trading range of $1.30-$3.78 and 122 million shares outstanding, 133 million fully diluted.