Canadian mining company HudBay Minerals launched a
takeover bid for Augusta Resources, the parent company of Rosemont Copper [
photo credit Rosemont Copper], which is permitting a large open-pit copper mine south of Tucson. The following is taken from the announcement made by HudBay:
HudBay Minerals Inc. ("Hudbay" or the "company") (TSX:HBM)(NYSE:HBM) today announced that it intends to commence an offer to acquire all of the issued and outstanding common shares of Augusta Resource Corporation ("Augusta") not already owned by Hudbay (the "Offer").
Under the terms of the Offer, Augusta shareholders
will be entitled to receive 0.315 of a Hudbay common share for each
Augusta common share held, representing approximately C$2.96 per Augusta common share (based on Hudbay's closing share price on the TSX on February 7, 2014). The Offer represents a premium of 62% to Augusta's 20-day volume-weighted average price on the TSX for the period ending February 7, 2014, and a premium of 18% to Augusta's closing share price on the TSX on February 7, 2014
in addition to Augusta's 26% share price increase during the two
trading days preceding the Offer. The Offer values Augusta at an
enterprise value of approximately C$540 million on a fully diluted in-the-money basis.
Transaction Highlights
- Addition of Augusta's Rosemont
project to Hudbay's portfolio of low-cost, long-life assets will
enhance Hudbay's position as a leading intermediate base metals mining
company with world-class copper production growth.
- Acquisition of the Rosemont
project is an ideal fit with Hudbay's disciplined growth strategy of
acquiring high quality development-stage assets in mining friendly
jurisdictions in the Americas.
- Hudbay has the technical and operational expertise and financial capacity to efficiently develop and operate the Rosemont project to the benefit of all stakeholders.
"Since our initial investment in Augusta in 2010, we have been excited about the potential of the Rosemont project. We view the Rosemont
project as an attractive complement to our existing portfolio of high
quality, long-life assets that fits well with our construction timeline
at Constancia," said David Garofalo, president and
chief executive officer. "The transaction will be accretive to Hudbay
shareholders on key per share metrics and both Hudbay and Augusta
shareholders will benefit from our ability to leverage our 87 year
history of successful project execution and operations."
Benefits to Augusta Shareholders
Hudbay believes that the Offer will be attractive to Augusta shareholders for the following reasons:
-
Significant Premium: Based on the 20-day volume-weighted average share prices of Hudbay and Augusta on the TSX for the period ending February 7, 2014, the Offer represents a premium of 62%. Based on the closing share prices of Hudbay and Augusta on the TSX on February 7, 2014,
the Offer represents a premium of 18%, in addition to Augusta's 26%
share price increase during the two trading days preceding the Offer.
-
Participation in a Leading Intermediate Base Metals Mining Company:
Augusta shareholders will participate in Hudbay's low-cost, long-life
portfolio of producing and fully funded construction-stage assets, and
its robust growth profile, which includes forecasted copper production
growth of approximately 570% between 2013 and 2015 as Hudbay's current
development projects reach commercial production; the Rosemont
project will contribute to the next phase of growth and enhance
Hudbay's position as a leading intermediate base metals mining company
with world-class copper production growth.
-
Continued Participation in Rosemont without Single Asset Risk:
As shareholders of Hudbay, Augusta shareholders will continue to
benefit from future increases in value associated with the permitting
and development of the Rosemont
project without the significant single asset permitting, development
and financing risk to which Augusta shareholders are currently exposed.
-
Proven Experience in Project Development:
Hudbay has extensive experience in bringing new projects into
production over its 87 year history, including its recently completed
Lalor and Reed mines in Manitoba, and its Constancia project in Peru, which is over 56% complete. Hudbay would apply this expertise to the development of Rosemont to the benefit of all stakeholders.
-
Greater Capacity to Advance Rosemont to Production: Hudbay is confident the Rosemont
project will receive all necessary permits. However, based on its
extensive due diligence independent of Augusta, Hudbay believes
Augusta's management continues to be overly optimistic about the
permitting timeline and Augusta's ability to complete the required
engineering and raise the necessary financing to construct the Rosemont
project. With Hudbay's significant technical expertise and superior
financial capacity, Hudbay believes it is better positioned than Augusta
to advance the Rosemont
project through the final stages of permitting and into construction
without the risk currently facing Augusta that further delays may result
in liquidity shortfalls or require dilutive financings which would
materially impair the value of Augusta shareholders' investments.
-
Stronger Financial Capacity to Build Rosemont: The Rosemont project is anticipated by Augusta management to have initial capital costs of approximately $1.2 billion.
Having already sold a joint venture interest, streamed 100% of the
precious metals production and committed the majority of its offtake, in
a challenging capital markets environment Augusta has few remaining
financing options, other than a highly uncertain project financing and
the prospect of materially diluting its shareholders' equity. Hudbay is
well capitalized and has sufficient liquidity to complete the
construction of Constancia and to commence work on Rosemont.
Hudbay expects its producing and development assets will provide
considerable operating cash flow to assist in funding the construction
of Rosemont,
and Hudbay has demonstrated its ability to raise the financing
necessary to fund significant development projects with minimal dilution
to its shareholders.
-
Enhanced Financial and Capital Markets Profile:
Augusta shareholders will benefit from the enhanced capital markets
profile of Hudbay, which has a large public float, greater trading
liquidity and a more extensive presence in the capital markets than
Augusta.
"The Offer presents a unique opportunity for Augusta
shareholders to receive a substantial premium and participate in
Hudbay's low-cost, long-life assets in mining friendly jurisdictions
with world-class copper production growth," said Mr. Garofalo. "We
strongly believe in the merits of this transaction and the benefits to
both companies' shareholders. We look forward to creating long-lasting,
mutually-beneficial relationships with local stakeholders in Arizona."
About the Offer
The Offer will be made for all of the issued and
outstanding common shares of Augusta not already owned by Hudbay. Hudbay
currently owns 23,058,585 shares of Augusta, representing approximately
16% of Augusta's issued and outstanding shares.
The Offer will be open for acceptance until 5:00 p.m. EST on March 19, 2014,
unless extended or withdrawn. The Offer will be subject to customary
conditions, including the deposit under the Offer of Augusta common
shares that together with the Augusta common shares held by Hudbay and
its affiliates, represent not less than 66 2/3% of Augusta common shares
on a fully-diluted basis, receipt of all necessary regulatory
approvals, no material adverse change in Augusta and Augusta's
shareholder rights plan being waived, invalidated or cease-traded. The
Offer will not be subject to the approval of Hudbay's shareholders and
is not subject to any financing or due diligence conditions.
The full details of the Offer will be set out in the
takeover bid circular and accompanying offer documents (collectively,
the "Offer Documents"), which Hudbay expects to file with the Canadian
securities regulatory authorities. Concurrently, Hudbay expects to file
with the Securities and Exchange Commission (the "SEC") a
registration statement on Form F-10 (the "Registration Statement"),
which contains a prospectus relating to the Offer (the "Prospectus"),
and a tender offer statement on Schedule TO (the "Schedule TO"). This
news release is not a substitute for the Offer Documents, the
Prospectus, the Registration Statement or the Schedule TO. AUGUSTA
SHAREHOLDERS AND OTHER INTERESTED PARTIES ARE URGED TO READ THESE
DOCUMENTS, ALL DOCUMENTS INCORPORATED BY REFERENCE, ALL OTHER APPLICABLE
DOCUMENTS AND ANY AMENDMENTS OR SUPPLEMENTS TO ANY SUCH DOCUMENTS WHEN
THEY BECOME AVAILABLE, BECAUSE EACH WILL CONTAIN IMPORTANT INFORMATION
ABOUT HUDBAY, AUGUSTA AND THE OFFER. Materials filed with the Canadian
securities regulatory authorities are available electronically without
charge at
www.sedar.com. Materials filed with the SEC are available electronically without charge at the SEC's website at
www.sec.gov. All such materials may also be obtained without charge at Hudbay's website,
www.hudbayminerals.com or by directing a written or oral request to the Information Agent for the Offer, Kingsdale Shareholder Services Inc. at
1-866-229-8874 (North American Toll Free Number) or
1-416-867-2272 (outside North America), or by email at
contactus@kingsdaleshareholder.com or to the Vice President, Legal and Corporate Secretary of Hudbay at 25 York Street, Suite 800, Toronto, Ontario, telephone
(416) 362-8181.
The PBS public affairs program Arizona Illustrated, KUAT-Ch 6 in Tucson, is running a feature piece tonight at 6:30 pm interviewing AZGS geologists Jon Spencer and Phil Pearthree on the origin of
the lower Colorado River. [Right, Colorado River and Grand Canyon, 1899, US Dept. of Interior]
The word at the Tucson gem show is that a new pocket of azurite was found in the Milipillas Mine in Sonora, Mexico, with some gorgeous specimens hitting the market. I found at least four of the dealers at the Westward Look show have pieces on sale, ranging from a few hundreds of dollars to $125,000. The azurite is a deep rich blue that looks almost like it's illuminated internally. The higher-end pieces for the most part are associated with malachite [e.g., examples from the Evan Jones Mineral room]. If you missed the Westward Look show, expect to see many specimens at the official Tucson Gem and Mineral Show coming up at the convention center.
Long-time collector Bob Jones [right] was the featured speaker and gave a wonderful tour of the history of the people and events that made Arizona a haven for mineral collectors and the hobby of collecting, along with the roots of the Tucson Gem and Mineral Show. 
I missed attending the Little Colorado River Plateau Resource Conservation and Development Winter Watershed Conference last week in Show Low, but potash was a big discussion item. My contacts tell me that there was informal talk about a possible "big announcement" coming out in the coming weeks from one of the three companies currently exploring the Holbrook basin. Speculation centered around Apache Junction based Passport Potash. The other major players in the potash deposit are Denver-based American West Potash, and Dallas-based HNZ Potash. [Right, potash thickness map and corehole locations. Purple lands are National Park. Credit, AZGS]
Arizona Senate Concurrent Resolution 1015 calls for a constitutional amendment changing the State Mine Inspector from an elected position to one appointed by the Governor.
The Arizona Oil & Gas Conservation Commission meeting in Phoenix scheduled for Feb. 7 was cancelled due to schedule conflicts with some of the members. Steve Rauzi, the Oil & Gas Administrator at AZGS was going to present a summary of activity for 2013.
Kelin Whipple, a professor in the School of Earth and Space
Exploration at Arizona State University and a senior fellow in the Earth
System Evolution Program of the Canadian Institute for Advanced
Research, has been recognized with the G.K. Warren Prize from the National Academy of Sciences, presented every
four years for distinguished contributions to river-related geology. Kelin is being honored for his seminal studies on the role of fluvial
incision as a key process that links climate, tectonics and landscape
evolution. Established by Emily B.
Warren in memory of her father, the award honors noteworthy and
distinguished accomplishment in fluvial geomorphology and closely
related aspects of the geological sciences. [Photo credit, ASU]
The Associated Press reports that California resident Mike Campa was sentenced to 30 years in prison and ordered to repay $5.1 million to victims of an Arizona gold mining scheme and phony oil and gas projects in Montana. [Right, native gold. Credit, USGS]
