With cash running out, Augusta turns to an officer and shareholder for $10 million as Rosemont permitting looms

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 2^nd 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 2^nd 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.