HUDBAY’s 777 mine on Flin Flon’s greenstone belt in northern Manitoba, the company’s heartland since 1927. “HudBay’s always built its own projects,” says chief executive David Garofalo. “It’s never bought cash flowing assets."

HUDBAY’s 777 mine on Flin Flon’s greenstone belt in northern Manitoba, the company’s heartland since 1927. “HudBay’s always built its own projects,” says chief executive David Garofalo. “It’s never bought cash flowing assets."

David Garofalo: We're Not Trying to Play Hardball

Issue 78, March 2014

HudBay Minerals, currently embroiled in an acrimonious hostile bid for Augusta Resource Corp., is planning further acquisitions whether or not its bid for Augusta succeeds, chief executive David Garofalo tells Global Mining Observer.

HudBay launched a C$428m ($390m) all-paper bid for Augusta and its giant Rosemont project in Arizona last month, sending Augusta’s shares flying from C$2.00 to C$3.55, valuing the company at over C$500m.

Augusta, already 16 per cent owned by HudBay, has slammed the offer as “low ball”, but after repeated permitting delays is facing a liquidity cliff, with less than $750,000 in cash and a loan of $109m falling due in July. The loan is secured against Rosemont and owed to copper lender Red Kite, which settled a debt dispute with Americas Bullion Royalty last year by swallowing its royalty portfolio.

“For an extension of terms, what is Augusta going to pay,” Garofalo says. “That’s our biggest concern.” Red Kite has also lent money to EMED Mining, likewise facing permit driven delays at its project in Spain; terms were extended in June in exchange for an upscaled off-take and convertible debt.

Final permits for Rosemont, expected to become the US’s third largest copper mine, would trigger relief payments for Augusta under a streaming deal with Silver Wheaton, but HudBay contests Augusta’s permitting timeline, already 4 years overdue guidance. “For a shareholder, it’s a bit frustrating,” Garofalo says, “but I understand, when you’re a single asset junior you flog the horse you have and you flog it hard.”

Augusta, which maintains it is on the brink of Rosemont’s construction, has accused Garofalo of constant underperformance and says HudBay’s bid is failing. “Their tactics are just appalling,” said chairman Richard Warke.

Behind the back-and-forth, 39 days after HudBay’s offer, the absence of a counter-bid becomes evermore glaring. Garofalo says he will duck any bidding war and tender HudBay’s shares in Augusta into a higher offer. “If somebody else decides they want to overpay for it, then obviously we would tender. We’re not trying to play hardball. I think we put a very fair offer on the table.”

His hard line positions HudBay to either land control of Rosemont with its current bid, or...

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“I understand, when you’re a single asset junior you flog the horse you have and you flog it hard.”

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