Augusta raises $25 million for Rosemont

Vancouver – Slowly but surely Augusta Resources (AZC-T) is pulling together the funds and permits it needs to start building a mine at its Rosemont copper-molybdenum project in Arizona.

Augusta’s latest step was closing an over-subscribed $25-million financing. The bought-deal issuance, conducted through a syndicate of underwriters led by Wellington West Capital Markets, saw Augusta sell 12.4 million shares, including 1.9 million in an over-allotment, at $2.02 a piece for gross proceeds of $28.8 million.

Raising almost $30 million is significant but Augusta needs considerably more than that to develop its Rosemont mine. Total capital costs for Rosemont are estimated at US$897 million.

Augusta’s CFO, Raghunath Reddy, says the company believes Rosemont can take on a debt financing load totalling 65 to 70% of the total capital cost, which amounts to over $600 million. Specifically, Reddy says the company plans to tap into US$150 million in equipment-related financing, US$200 million in concentrate off-take financing, and US$275 million in senior debt financing.

To bring in the remaining $300 million needed for development, Augusta is pursuing forward sales contracts for its silver and gold production.

In July the company advanced one of those lines of financing, inking a term sheet for a capital lease deal with Empire Southwest, a Caterpillar dealership. The deal will see Empire finance Augusta’s purchase of 23 250-ton haulage trucks and other related equipment. The agreement is worth US$100 million.

Augusta also advanced the permitting process in July when it received approval for its Rosemont mined land reclamation plan from the Arizona state mine inspector. The company has already received the necessary permit for withdrawing, and replacing, groundwater for the mine.

The company still needs three permits before construction can begin at Rosemont. One is the air emissions permit, an application for which was recently submitted. The second is the Army Corps of Engineers Section 404 permit, which requires a complete environmental impact assessment (EIS). Augusta expects to receive a draft version of the EIS back from the U.S. Forest Service in November. And the final permit is the Record of Decision by the Forest Service, which gives final approval for operations. If permitting goes according to schedule, Augusta should receive its final approval in July 2010.

The Rosemont project is in Pima county, Arizona. An updated feasibility study, released in January, estimated the project’s net present value at US$1.2 billion, using a 5% discount and metal prices of US$1.85 per lb. copper, US$15 per lb. molybdenum, and US$12 per oz. silver. The same parameters pegged Rosemont’s internal rate of return at 17.8%, which would allow Augusta to repay its capital investment in five years.

Plans call for an open pit mine and heap-leach, solvent extraction-electrowinning (SXEW) facility churning through 75,000 tons of ore each day. Each year the operation would produce 221 million lbs. copper, 4.7 million lbs. molybdenum, 2.4 million oz. silver, and 15,000 oz. gold as a by-product credit.

Rosemont’s proven and probable reserves currently stand at 495.6 million tonnes grading 0.45% copper, 0.015% molybdenum, and 4.11 grams silver per tonne. Those reserves support a 21-year mine life.

If Augusta can start construction in mid-2010, the company should start producing cathode copper in late 2011 and concentrate in early 2012.

In the three days following the close of Augusta’s oversubscribed $25-million financing, the company’s share price gained 19¢ to reach $2.12. The company has a 52-week trading range of 43¢ to $5.36 and has 105 million share outstanding.