Updated on at 1:21 p.m., Feb. 26 to include information from the Augusta Resource Corp. “Directors Circular” concerning HudBay Mineral Resources’ takeover offer.
Contrary to previous statements, Augusta Resource Corporation’s Chief Executive Officer Gil Clausen on Monday said the company plans to expand its Rosemont copper project beyond the proposed mile-wide, half-mile deep pit that is the basis for the Coronado National Forest’s (CNF) Final Environmental Impact Statement (FEIS) and Draft Record of Decision (ROD).
The Coronado National Forest’s FEIS, which was released in December, did not evaluate the environmental impacts of a much larger mining operation, extending over a much longer time, that Clausen now confirms is actually a key part of Augusta’s plans for the site.
Augusta provided further details of Rosemont’s expansion and exploration potential in a “Directors Circular” filed late Monday with Canadian regulators.
The company stated that the existing mine plan of operations that was subject to the FEIS and Draft ROD “is premised on only proven and probable reserves of approximately 5.9 billion pounds of copper.” The Augusta circular states that an additional 3 billion pounds of copper may exist at the Rosemont site and if developed “could significantly increase annual production and mine life.”
The circular also states that there is additional exploration possibilities within the 20,100 acres of private lands, patented and unpatented mining claims that make up the Rosemont project area.
In the past, Clausen had repeatedly dismissed the possibility that Augusta would expand the Rosemont copper project to other mining claims it holds nearby.
But Clausen suggested a far different outlook during a Monday conference call to discuss the Augusta board of directors’ decision to reject a $540 million unsolicited takeover offer from Toronto-based HudBay Mineral Resources.
During his presentation, Clausen made clear that one of the key reasons the HudBay offer should be rejected was because the Rosemont project could grow even bigger based on further exploration and possible expansion.
Augusta similarly acknowledged in a Monday press release that “Rosemont offers expansion and exploration potential.”
Clausen’s discussion with analysts and investors was accompanied by a presentation that included a section on “Exploration Upside”. The report stated that Augusta has “identified multiple IP (Induced Polarization) anomalies in close proximity to the Rosemont pit which are worthy of exploration.” (Induced polarization is a geophysical imaging technique used to identify subsurface ore bodies.)
“This could substantially extend our mine life and our throughput,” he said.
Although Clausen didn’t identify the location of the “anomalies”, it is well known that Augusta has three significant mining claims near the Rosemont deposit that contain copper reserves: Broad Top Butte, Copper World and Peach Elgin.
If these claims were developed, Augusta’s copper project would sprawl over the top of the Santa Ritas and spill over on to the western slope, where the mining operations would be visible from Green Valley and other towns, something that has generated significant concern and controversy in the past.
During Monday’s call, Clausen also made clear that HudBay’s offer was a “grossly opportunistic bid” designed to “deprive our shareholders” of reaping the rewards of years of work that is about to come to fruition with permitting drawing to a conclusion.
“We will not let HudBay steal that asset with this low-ball bid,” Clausen said.
At least 33 percent of Augusta’s shareholders have stated they will not accept HudBay’s bid, Clausen said, making it extremely difficult for the takeover offer to move forward.
HudBay already controls nearly 16 percent of Augusta’s 144 million shares of stock outstanding. HudBay began purchasing Augusta shares in 2010 and has spent $70 million to acquire 23 million shares at an average price of $3.04 a share. HudBay’s all stock offer for Augusta is worth approximately $2.80 a share.
With the door all but slammed shut on HudBay, Clausen told investors and analysts that Augusta has signed confidentiality agreements with “several” parties that might be interested in acquiring Augusta.
“We have been approached and our financial advisors have initiated contact with a number of third parties,” Clausen said.