In the wake of federal wildlife regulators’ decision to reopen studies of the proposed Rosemont copper mine’s impact on endangered species, cash-strapped Augusta Resource Corporation has obtained a $6 million loan advance and now expects final federal approvals to be delayed until the 3rd Quarter.
Augusta has repeatedly stated in financial disclosures that it would receive a Final Record of Decision (ROD) from the U.S. Forest Service approving construction of the mine on federal lands and a Section 404 Clean Water Act permit from the U.S. Army Corps of Engineers by June 30.
But that deadline has now been swept aside because of recent developments involving endangered species and problems with Augusta’s application for the 404 permit that is required before construction can begin on the mile-wide, half-mile deep mine in the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.
The missed deadline supports Hudbay Minerals Inc. repeated assertions during its contentious hostile take over bid for Augusta that the Vancouver, B.C. speculative miner’s permitting projections are overly optimistic.
With its back against the wall and funds running low, Augusta has once again turned to the London-based metals hedge fund Red Kite to provide it expensive, short term operating capital. Red Kite waived a loan condition that required Augusta to obtain the Final ROD before Augusta could draw $7.5 million from a $26.6 million loan granted last November.
Augusta stated Red Kite will now make available $6 million on June 2. The waiver conditions include a one-time fee of $175,000, which Red Kite will add to the loan balance. The balance of the $7.5 million will be advanced when Augusta receives the Final ROD from the Forest Service.
The November loan was the third time Red Kite has expanded its credit facility to Augusta that now totals $109.6 million. The loan terms allow Augusta to draw an additional $5 million upon receipt of the 404 permit. The Red Kite loan with interest totals $124 million and is due on July 21.
Augusta has been counting on receiving the Final ROD and 404 permit by June 30 in order to tap $336 million in contingent funding to repay the Red Kite loan when it comes due. But without the 404 permit and Final ROD, Augusta cannot tap a $230 million metals streaming agreement with Silver Wheaton or an additional $106 million from its joint venture partner, United Copper and Moly.
Augusta can extend the repayment date on the Red Kite loan until October 21, but it will be expensive. The extension fee is 1.5 percent of the outstanding principle per month.
Clausen said the loan advance provides Augusta the funding necessary to complete permitting and continue seeking alternatives to Hudbay’s hostile takeover bid that is now set to expire on May 27. Hudbay has repeatedly extended the deadline since launching its takeover bid last February. Augusta has implemented a shareholders’ protection plan (poison pill) to stymie Hudbay’s bid.
The timing of when, and if, the Forest Service will issue a Final ROD approving the Rosemont copper project is uncertain. The Forest Service said Friday it will not issue a Final ROD “until the consultation process is complete and a new biological opinion is issued.”
The consultations will include the mine’s potential impact on sensitive Sonoran Desert streams, springs and washes including those in the nearby federally-controlled Las Cienegas National Conservation Area that support several endangered species. The FWS and Forest Service will also review what impact the mine could have on the endangered ocelot. The wild cat has been recently photographed at least two times near the mine site.
Recent image of the ocelot taken in the vicinity of the proposed Rosemont mine.
Endangered species consultation between FWS and the Forest Service will also include a new evaluation of the mine’s impact on the endangered jaguar.
The consultations and preparation of a new biological opinion could last several months, if not much longer, depending on the complexity of the analysis.
In a permitting update also released Thursday, Augusta focused only on the ocelot and stated it expects the review to completed in less than 135 days because “the issues that would need to be addressed are limited and much of the analysis has already been completed.”
The endangered species review is not the only new hurdle facing Augusta.
The Army Corps earlier this month notified Augusta’s Rosemont Copper Company subsidiary that Rosemont’s application for the 404 permit falls short of federal regulations because it failed to provide adequate mitigation for damage to fragile desert water resources, raising the possibility the Corps will deny the permit.
5 Responses to Red Kite waives loan condition and advances Augusta Resource $6 million to address endangered species review