UPDATE 1-HudBay eyes Arizona copper deposit with Augusta offer

Mon Feb 10, 2014 11:03am EST
 
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By Euan Rocha

TORONTO Feb 10 (Reuters) - Canadian base metal miner HudBay Minerals Inc said it plans to buy exploration company Augusta Resource Corp in a bid to gain control of its Rosemont project in Arizona, an asset widely viewed as one of the most promising copper projects in the United States.

The strategically timed bid, announced late Sunday, comes just weeks before Augusta is expected to receive final approvals that would allow it to begin development and construction work on the asset that could account for as much as 10 percent of U.S. copper output, making Rosemont the third largest copper mine in the country.

Rosemont, located some 50 kilometers (31 miles) southeast of Tucson, is expected to begin operations in 2016 and produce 243 million pounds of copper, along with about 2.9 million ounces of silver and 5.4 million pounds of molybdenum, annually.

The $1.2 billion project is set to become the No. 3 copper mine in the United States, behind Freeport-McMoRan Copper & Gold Inc's Morenci mine in Arizona and Rio Tinto's Bingham Canyon Mine in Utah.

"We view the Rosemont project as an attractive complement to our existing portfolio of high quality, long-life assets," said HudBay's Chief Executive David Garofalo in a statement.

The unsolicited all-stock proposal from Toronto-based HudBay offers Augusta's shareholders a premium of 18 percent over the company's closing price of C$2.51 on the Toronto Stock Exchange on Friday.

Augusta shares surged 25 percent to C$3.14 in early trading on Monday, well above the value of HudBay's bid, indicating that investors expect a sweetened bid to emerge. HudBay's shares fell 5.5 percent to C$8.88 on the TSX.   Continued...