Canadian securities regulations require publicly-traded companies like Augusta Resource Corporation to release quarterly Financial Statements and accompanying Management Discussion & Analysis reports within 45 days of the end of the quarter.
Augusta’s second quarter ended on June 30. Therefore, Augusta should have released the two reports by Tuesday, August 13.
Prior to releasing the financial reports, Augusta announced Tuesday it has agreed to borrow an additional $40 million from RK Mine Finance Trust I, increasing the total amount borrowed from RK to $83 million. Under an amended agreement, RK has agreed to purchase 20 percent of the gross annual production of copper until 1.5 million tons have been delivered.
Until Augusta releases its financial reports, it’s impossible to determine the long term impact of the additional $40 million RK loan. But at the previous rate of expenditures, the RK loan could carry Augusta into early next year.
Augusta has pledged all of its Rosemont Copper Company assets as collateral for the original RK loan. If the same terms are in place with the expanded loan and Augusta fails to repay the $83 million loan by July 14, 2014, then London-based RK Capital Management, a copper hedge fund, could assume control of Rosemont Copper Company.
The 2nd quarter financial statement and MD&A should provide crucial insight into Augusta’s deteriorating cash flow situation prior to the RK loan expansion.
At the end of the 1st Quarter on March 30, Augusta had less than $20 million cash on hand and was faced with more than $40 million in ongoing engineering and permitting expenses through the end of 2012.
Augusta continues to state that it will begin construction of the mine in early 2013.
However, ongoing permitting issues, particularly with the U.S. Forest Service review of public comments on the Draft Environmental Impact Statement and U.S. EPA’s concerns over the mine design raise significant questions as to when or even if this misguided project will ever materialize beyond Rosemont’s press releases and slick PR.