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TORONTO (miningweekly.com) – Following a months-long hostile pursuit of project developer Augusta Resource Corp, base metals miner Hudbay Minerals on Monday said the two companies had agreed to friendly terms for a sweetened all-scrip takeover offer.
The C$555-million deal would see Hudbay, which already owned a 16% stake in Augusta, gain control of the prospective Rosemont copper project, located near Tucson, Arizona.
The sweetened offer of C$3.56 per Augusta share is a 10% premium to Hudbay's initial offer of 0.315 of a Hudbay common share for each Augusta common share and a 42% premium to Augusta's closing share price on the TSX on February 7, before Hudbay launched its initial offer. It also represented an 11% premium to Augusta’s closing price of C$3.20 a share on Friday.
Under the revised offer, Augusta's shareholders would receive 0.17 of a warrant to buy one HudBay share for each Augusta share in addition to the original offer of 0.315 HudBay shares an Augusta share.
Augusta's board, which had rejected Hudbay’s offer from the outset, citing the offer as an opportunistic "low-ball" bid, on Monday unanimously recommended that Augusta shareholders accept the revised offer and agreed to terminate Augusta's shareholder rights plan.
"After a thorough process to consider all our alternatives, we are pleased to have agreed on a mutually beneficial transaction representing a successful conclusion to our value maximising process. We believe this is a fair transaction for Augusta shareholders.
“Our agreement with Hudbay provides Augusta shareholders with an attractive premium for their shares and a stake in a growing intermediate base metals mining company with a portfolio of producing mines and development projects, including the world-class Rosemont project,” Augusta’s executive chairperson Richard Warke said.
Laurentian Bank Securities metals and mining analyst Christopher Chang in a note to clients said he viewed the revised offer by Hudbay to be fair and he did not foresee a superior offer emerging, given Augusta’s “very thorough” strategic review process, along with Rosemont’s permitting overhang.
“With the significant lock-up by Hudbay Minerals (16%), Augusta insiders and key large shareholders representing about 50% of the company’s issued and outstanding shares, we believe this transaction is likely to close as currently proposed,” he said.
Despite a scarcity of takeovers in the mining sector, copper assets have been at the centre of many of the mining deals struck since the start of the year.
In April, a Chinese consortium agreed to buy the Las Bambas copper mine, in Peru, from Glencore for $6-billion and, last week, First Quantum Minerals agreed to buy Lumina Copper for about C$456-million in a bid to gain control of the Taca Taca copper project in Argentina.
The deals highlight the scarceness of high-quality copper projects. The widely used industrial metal is expected to be in short supply over the long term, as the project pipeline had significantly contracted owing to lower prices and shareholder-mandated budget cuts among the world's top miners.