HudBay to buy 11% stake in Augusta Resources and Rosemont copper project

One of the largest U.S. copper deposits, Rosemont Copper near Tucson has attracted the attention and investment of both HudBay and Silver Wheaton.

Author: Dorothy Kosich
Posted: Wednesday , 25 Aug 2010

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RENO, NV -

Hudson Bay said Tuesday that it has agreed to make a Cdn$29.99 million investment in Augusta Resources, the operator of the Rosemont Copper project in the historic Rosemont Mining District near Tucson, Arizona.

Augusta (TSX/NYSE Amex: AZC) claims the deposit will account for 10% of U.S. copper output once production is commenced in 2012.

Rosemont's annual production is expected to be 221 million pounds of copper, 4.7 million pounds of molybdenum, 2.4 million ounces of silver and up to 15,000 ounces of gold over a 22-year mine life with a capex of US$897 million. Resources total 7.7 billion pounds of copper, 190 million pounds of moly, and 80 million ounces of silver.

The final EIS and the Record of Decision from the U.S. Forest Service for Rosemont is expected in the third quarter of 2011. Construction is expected to begin in the third or fourth quarter of 2011.

Hudson Bay will acquire 10,905,590 units for a purchase price of C$2.75 per unit. Each unit consists of one common share of Augusta and one-half of one common share purchase warrant.

On closing of the financing, HudBay will own 11% of Augusta. Each whole warrant entitles HudBay to acquire one share of Augusta at an exercise price of C$3.90 in the 24 months following the closing of the transaction.

In February Augusta Resource signed a precious metals agreement with Silver Wheaton to provide Silver Wheaton with all the payable silver and gold to be produced by Rosemont. Silver Wheaton has agreed to pay Augusta upfront cash payments of US$230 million and payments of US$3.90 per ounce of silver and US$450 per ounce of gold during the mine life, or the prevailing market prices.