Augusta Resource Corp. has turned to a corporate officer and an existing shareholder for $10 million to shore up its depleted cash reserves as the company awaits a crucial decision from the Coronado National Forest on its proposed Rosemont copper project, according to its Management Discussion & Analysis report that accompanies its 2nd Quarter financial statement released today.
The Vancouver, B.C.-based speculative mining company states that an unnamed officer and a major shareholder will purchase $10 million in convertible unsecured notes. The five-year notes carry a 7% interest rate and the arrangement is expected to close Sept. 4, pending regulatory approvals.
This internal debt funding scheme comes as Augusta’s 2nd Quarter financial statement shows the company had only $6.4 million in cash as of June 30, down from $29 million as of Dec. 31, 2012.
The $10 million in financing comes at a crucial time in the Rosemont copper project. Augusta is pressing the Coronado National Forest to issue a Final Environmental Impact Statement (FEIS) and Record of Decision (ROD) to approve the open pit copper mine by Sept. 27 before new administrative rules take effect delaying issuance of a final decision on the mine at least 90 days.
Delaying release of the FEIS and ROD will have a significant financial impact on Augusta.
“In the event of a delay in the issuance of the ROD, the Company forecast(s) minimum $29.0 million expenditures for the Rosemont (copper mine) and other projects and general and administrative expenses,” Augusta states in the MD&A. “This will also delay the commencement of construction and the closing of project financing to 2014.”
The $10 million convertible debt financing continues Augusta’s longstanding reliance on debt to fund operating expenses.
Augusta borrowed $43 million from RK Mine Finance Trust I in 2011 as cash reserves dwindled. Augusta borrowed an additional $40 million from RK last October. The $83 million loan is due in July 2014. Augusta has pledged all the assets of its wholly-owned subsidiary, Rosemont Copper Company, as collateral for the loan.
Augusta spent $17.7 million during the six months ended June 30, compared to $19.7 million for the same period in 2012.
Augusta reports spending $12.8 million (2012 – $16.6 million) on permitting, engineering and ongoing support activities and deposits on long-lead equipment, and $3.6 million (2012 – $2.9 million) spent on capital and other assets.