Photo by: Bloomberg
TORONTO (miningweekly.com) – US base metals project developer Augusta Resource Corp on Monday announced that its board unanimously recommended that Augusta shareholders reject the C$540-million unsolicited all-scrip offer from Canadian miner Hudbay Minerals to acquire all its outstanding common shares.
The Toronto-based company, which is the proponent of the Rosemont copper project, in Arizona, said the offer was “grossly inadequate” and did not come close to recognising the full and fair value of the project.
Augusta executive chairperson Richard Warke said that not only was the offer opportunistic, failing to compensate Augusta's shareholders adequately at a time when the company was at an inflection point of significant value creation, but it replaced this lost value with an increased exposure to risk.
“Our board rejects this low-ball bid, and recommends that our shareholders do not tender their common shares,” he said.
Hudbay currently owns 23.06-million shares of Augusta, representing about 16% of Augusta's issued and outstanding shares, but had earlier this month said its offer was contingent on securing two-thirds of Augusta shareholder’s approval.
Augusta’s Rosemont large porphyry copper/molybdenum project is close to advancing through the permitting phase.
When up and running, Rosemont is expected to be the third-largest copper mine in the US, after Kennecott Utah Copper’s Bingham Canyon mine, in Utah, and produce as much as 10% of US copper output.
The project has Canadian National Instrument 43-101-compliant proven and probable reserves of 1.1-billion pounds grading 0.44% copper and 35-million pounds of molybdenum.
The feasibility study pointed to a 21-year mine life, with seven mining phases, with high grades and low strip ratios in the first phase.
Sulphide ore would be processed at an initial rate of 75 000 t/d.
The mine is expected to come into production in 2016, with average production of 110 223 t/y at an average cash cost over the life of the mine of $1.02/lb.
Using an interest rate of 8%, the project has a net present value (NPV) of $1.5-billion and an internal rate of return of 30.9%, based on a long-term copper price of $2.62/lb.
The after-tax NPV is based on an interest rate of 8%.
Augusta’s TSX-listed stock on Friday closed at C$3.58, higher than the implied offer price of C$2.80 a share. Hudbay was offering Augusta shareholders 0.315 a Hudbay share for each Augusta share tendered.