The SANTA RITA Mountains surrounding Augusta’s Rosemont copper project.

The SANTA RITA Mountains surrounding Augusta’s Rosemont copper project.

Gil Clausen: 'HudBay Bid Won't Succeed, Period'

Issue 79, March 2014

HudBay’s bid for Augusta looks set to end in a court battle, according to comments by Augusta’s president to Global Mining Observer this week.

Speaking on Wednesday, Gil Clausen said HudBay had “tried to intimidate” Augusta’s investors into accepting a $428m bid for the company, made in February. HudBay has since dropped its minimum tender condition, offering to buy any shares tendered, whether or not they meet a full takeover threshold.

Augusta says the move is designed to earn a “blocking position”, which it plans to counter by issuing shares to minority investors, diluting HudBay under a so-called poisoned pill. “This HudBay bid right now,” Clausen said, “it’s just not going to work. Period.”

Poisoned pills are fiercely contested under takeover law, with proponents saying they defend minority investors and critics saying they entrench management by scotching bids. “Long term, loyal shareholders are quite frankly offended by the fact that somebody has tried to steal value away from them,” Clausen said, “and they’re very happy to have this pill in place.”

At stake is Augusta’s Rosemont deposit, Arizona, due to produce 116,000 copper tonnes per annum, equal to 10 per cent of copper output from the US. Clausen calls Rosemont a “cornerstone asset”, saying Augusta plans to become a wholly-North American copper miner that would be “the absolute darling of the sector.”

Augusta sold all gold and silver byproduct from the mine to streaming group Silver Wheaton in 2010 for $230m, payable on final permitting, then due by the year end, but that has since slipped, lifting Augusta’s share count in increments by over 30 per cent.

HudBay’s bid endorses final permitting, lifting permitting fatigue from the stock, but the two companies hotly contest the likely timing of approval and Augusta’s capacity to absorb future delays. Clausen says Augusta’s $9m cash position has been repeatedly misstated, failing to account for a $27m loan extension last year, whilst loan repayments totalling $109m falling due in July can be extended until October.

Clausen did not speculate on the likelihood of a rival bid, but confirmed Augusta’s board would meet this week. “If you’re in the copper industry, this is a project that moves the needle for any company out there, major or mid-tier.”

“Long term, loyal shareholders are quite frankly offended.”

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