Augusta Resource Corporation’s cash reserves fell to $749,000 at the end of September, forcing the parent company of Rosemont Copper Company to sell $10 million in bonds to its chairman and a major shareholder to provide working capital to the keep the company operating through the end of this year.
Vancouver, B.C.-based Augusta states it must obtain additional financing early next year or the company will not be able “to continue development of the Rosemont project until such time as permitting is completed and the Company can initiate construction on the project.”
Augusta warned investors in its 3rd Quarter Financial Statement and Management Discussion & Analysis reports filed Nov. 14 with Canadian securities regulators that its financial condition indicates “the existence of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern and is dependent on the Company raising additional debt or equity financing.”
Augusta’s immediate financial future hinges on Rosemont Copper receiving all needed state and federal permits to begin construction of the $1.23 billion Rosemont open-pit copper mine in the 2nd Quarter of 2014. The time schedule appears to be very optimistic.
The US Forest Service cannot release its final Record of Decision on the proposed Rosemont mine until March because of administrative objection requirements. The U.S. Army Corps of Engineers, meanwhile, is not expected to make a decision on whether to issue a Clean Water Act permit for the mine until after the FEIS is released.
The U.S. Environmental Protection Agency has stated that the Army Corp’s decision on whether to issue the clean water permit is a candidate for joint review by EPA’s and the Army Corps’ headquarters in Washington. EPA also has veto authority over Army Corps clean water permits and has repeatedly stated it has serious concerns over the proposed mine’s impact on sensitive surface and ground water resources.
Augusta needs the ROD and the clean water permit, in addition to completing several other federal regulatory requirements related to endangered species and historic preservation, to obtain access to more than $300 million in pledged funds not only for working capital, but to also repay a $83 million loan that comes due in July.
Augusta states in Thursday’s regulatory filings it expects to use “a portion” of the $106 million pledged by its joint venture partner, United Copper & Moly, and $225 million from Silver Wheaton to repay the $83 million loan from Red Kite, a London-based metals hedge fund, due on July 21, 2014.
Augusta has pledged all of Rosemont Copper’s assets as collateral for the Red Kite loan.
The 3rd Quarter ending September 30 continued Augusta’s string of quarterly losses as the junior mining company posted a $1.7 million net loss for the quarter and $5.6 million net loss for the first nine months of 2013. The company spent $24.4 million in the first nine months of 2013, down from $30.2 million for the same period in 2012.
Augusta shored up its depleted cash reserves in September by selling $3.5 million in bonds that is convertible to stock. Augusta sold an additional $6.5 million in the bonds in October. Augusta Chairman Richard Warke, and one of the company’s largest shareholders, Ross Beaty, purchased the bonds.
Augusta forecasts $295 million in operating and capital expenditures for the next twelve months assuming the U.S. Forest Service issues the Final Environmental Impact Statement and draft ROD in the 4th Quarter.
Augusta projects construction to commence in the 2nd Quarter of 2014. This forecast includes approximately $194 million for Rosemont permitting and construction, $72 million for project financing fees and expenses, $4 million for general and administration and $25 million for non-Rosemont capital projects such as the construction of a Central Arizona Project water delivery system and a port facility in Topolobampo, Mexico.