Augusta Resource Corporation Chairman Richard Warke has a long history of failing to disclose information to shareholders, and now a prominent investment blog is highlighting Augusta’s failure to promptly inform investors about a significant permitting issue facing the company’s Rosemont copper project.
The disclosure oversights are in addition to the fact that early in his career he was slapped with a disclosure violation regarding trades while he was an insider that has resulted in his name still appearing on the British Columbia Securities Commission website under the heading: “Disciplined Persons and Investment Caution”.
Warke also has a history of exaggerating the prospects for companies he has led, including Canley Development Corporation. The junior mining company was forced by the Toronto Venture Stock Exchange in 2003 to issue a retraction for a press release touting unsubstantiated gold reserves in Sardinia, Italy.
Canley later became Sargold Resource Corporation that left a trail of unpaid bills, a misspent government loan and broken promises for environmental clean up at the Sardinia gold mine. Sargold also failed to disclose to shareholders that a Cayman Islands hedge fund controlled more than 10 percent of Sargold’s stock for three years.
Warke’s management of Sargold became the focus of the award winning 2012 documentary Cyanide Beach.
Given Warke’s less than candid corporate disclosure record, it shouldn’t come as a surprise that Augusta withheld negative information about permitting prospects for its Rosemont copper project from shareholders leading up to last week’s annual meeting in Vancouver.
What is surprising is the business press is finally taking notice of Augusta’s disclosure history.
Augusta’s credibility took a serious hit this week when the widely read Motley Fool investment blog reported on Rosemont Mine Truth’s earlier disclosure that Augusta did not notify its shareholders about serious unresolved permitting issues in the midst of a hostile takeover bid from Hudbay Minerals Inc.
RMT reported on March 31 that the U.S. Army Corps of Engineers informed Augusta’s subsidiary Rosemont Copper Company in a Feb. 28 letter that its application for a Clean Water Act permit failed to meet regulatory requirements.
Augusta did not disclose the Army Corps’ serious concerns in subsequent regulatory filings throughout April including its 2013 Annual Information Form, Year End Financial Statement, annual proxy statement and 4th Quarter Management Discussion & Analysis.
Augusta finally notified shareholders there was a “shortfall” between its Clean Water Act mitigation proposal and what is required in a May 1 press release, the day before its annual meeting in Vancouver, B.C.
Augusta also informed shareholders that the U.S. Forest Service had failed to meet an April 30 deadline to respond to objections of the agency’s Final Environmental Impact Statement for the proposed mine. The Forest Service must respond to the objections before a Final Record of Decision approving the mine can be issued.
The Army Corps and Forest Service actions cast serious doubt on Augusta’s repeated claims that it will receive the water permit and the Forest Service’s Final Record of Decision by June 30, with construction on the mine to begin later this year.
“The double hit caused investors to fret (Augusta) may not be able to surmount the hurdles as Augusta hadn’t previously revealed the Corps’ concerns (emphasis added) that were received in February when it said it wouldn’t make its decision on the project till the end of June after the Forest Service weighs in,” the Motley Fool reports.
Hudbay states that Augusta is “misleading” its shareholders over the permitting schedule and its ability to access financing in the near term. Hudbay also states there is “no reasonable prospect of Augusta being fully financed and commencing construction in mid-2014”.
The Motley Fool states, “While Augusta has characterized HudBay’s communications with investors as ‘misleading,’ the miner’s failure to bring these (Army Corps’ Feb. 28 letter) discussions to light sooner certainly appears to lend credence to HudBay’s charges Augusta was being too optimistic about its chances for getting permit approval.”
Further complicating Augusta’s outlook is a $109 million loan, fully secured by the Rosemont project, which comes due on July 21 with a possible 90-day extension. Augusta has no performing assets and only had $2.2 million cash on hand as of March 30.
Hudbay, in the wake of the British Colombia Securities Commission May 2 ruling extending Augusta’s shareholder protection plan (poison pill) until July 15, has extended its takeover bid until May 16 while it assesses the latest permitting and approval developments.
“With the Environmental Protection Agency also not on board with Rosemont, believing the project is ‘out of balance with the impacts’ it will cause to the environment — not to mention that it has veto power over the Army Corps’ permitting — Augusta’s plans as currently envisioned look to be in grave doubt,” the Motley Fool states.