Augusta secures US$176M for Rosemont

VANCOUVER — Augusta Resource (AZC-T, AZC-X) has taken another big step towards funding its Rosemont copper-molybdenum project with an infusion of cash from a Korean consortium.

Korea Resources and LG International plan to inject US$176 million into the Arizona-based project in exchange for a 20% joint-venture interest. Of that amount, US$70 million will go to development pre-permitting and the remaining US$106 million will go to construction.

The consortium also gets an offtake agreement on market terms for 30% of copper concentrate and 20% of copper cathode and molybdenum concentrates produced annually from the project.

The US$176 million represents 20% of the US$897 million capital cost of Rosemont. Augusta noted that the financing, combined with an earlier deal with Silver Wheaton (SLW-T, SLW-N), represents roughly half the necessary capital and substantially de-risks the project.

This latest financing comes only weeks after HudBay Minerals (HBM-T, HMBFF-O) took an 11% stake in the company for $30 million. HudBay picked up 10.9 million units at $2.75 each, which included one share and a half-warrant exercisable at $3.90 for 18 months.

Before that, Augusta reached a US$43-million loan and offtake agreement with Red Kite Explorer Trust in April. That deal gives Red Kite the right to 16.1% of copper concentrate production per year until roughly 484,000 dry tonnes of concentrate are delivered. That money, however, went largely towards retiring a previous loan agreement with Sumitomo.

In February, Augusta updated the value of a gold-silver offtake agreement with Silver Wheaton to US$230 million, which will see Augusta selling silver at US$3.90 per oz. and gold at US$450 per oz. to Silver Wheaton for the mine’s life.

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 facility to treat the oxide copper resource.

Augusta expects 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 from Rosemont.

The company continues to work through a number of permits on the mine, with a draft environmental impact statement expected in the fourth quarter of 2010.

Augusta’s share price was up 24¢ or 7.6% on the latest news, only to fall 12¢ or 3.5% the next day to close at $3.30. The company has a 52-week trading range of $1.30-$3.85 and 133 million shares outstanding.