Gold Report - Augusta Resource Corporation TSX:AZC; NYSE.A:AZC; A5R:GR

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Augusta Resource Corporation

TICKER: TSX:AZC; NYSE.A:AZC; A5R:GR

DESCRIPTION: Vancouver-based Augusta Resource Corporation is a base metals company focused on advancing the Rosemont copper-moly deposit near Tucson, Arizona. Rosemont hosts a large copper/molybdenum reserve that is expected to account for 10% of U.S. copper output once in production in late 2011. The exceptional experience and strength of Augusta's management team, combined with the developed infrastructure and robust economics of the Rosemont project, will propel Augusta to become a solid mid-tier copper producer within the next four years. Augusta is traded on the Toronto Stock Exchange and the NYSE/AMEX under the symbol AZC, and on the Frankfurt Stock Exchange under the symbol A5R.

WEBSITE: http://www.augustaresource.com/

The information below is based on the most recent information we have received from analysts and the companies participating in The Gold Report. We encourage you to visit the company's web site for updates.

TGR: What are some of other potential plays?

SP: One of the most logical plays that could benefit from the same theme [near-term trend of foreign smelters buying copper mining companies] is the Augusta Resource Corporation (NYSE/AMEX:AZC) project—Rosemont in Arizona. It's one of the largest undeveloped copper stories that has no off-take deal in place. Importantly, the concentrate should be of a very high quality, with a high copper grade and few deleterious elements. Of course, the smelters also want stability of supply, which should be very good in Augusta's case because it's coming from the U.S. For these reasons, I'd say smelters probably are vying for the Augusta concentrate.
- The Gold Report Interview with Steve Parsons (10/06/09)

Augusta's principal asset is the 100%-owned Rosemont copper-moly project in Arizona. With good access to infrastructure, more than 5.2 billion pounds of copper and 164 million pounds of molybdenum contained in the proven and probable reserve category—an approximate 21-year resource life—and the potential for a clean, high-grade concentrate, we believe Rosemont has the size and the attributes to be of strategic interest.

Re-rating in the offing. As the company achieves development milestones relating to mine permitting and project financing, we contend that the merits of Augusta's 100%-owned Rosemont project should become apparent and result in value accretion. The Record of Decision for the mine operating permit is expected in July 2010. Before that, we look to a commercial offtake/funding deal with a smelter group and a likely minority partner deal to provide better visibility on mine financing.

Maintaining our Buy rating, but raising our target price to $3.75 from $3.00. Our target price is based on a 0.85x multiple of our fully diluted, fully financed NAV8% estimate of $4.44/share ($3.75/share previously). Our valuation accounts for the sale of a 40% interest in Rosemont to a minority JV partner.
-STEVE PARSONS, WELLINGTON WEST CAPITAL MARKETS (08/21/09)

Analysis & Forecasts: Highlights from Q2/09 include:

Economic Impact Study completed by Arizona State University suggests a $745mm pa contribution to the local economy for 20 years. Additionally, the Arizona Mine Inspector approved AZC's land reclamation plan.
AZC signed an $82mm agreement to purchase 23 Caterpillar 793F trucks and related equipment.
At quarter-end, AZC had US$1.2mm in cash and US$45mm in debt. Subsequently, a C$25mm bought deal financing was announced in July. We estimate AZC has approximately US$21mm in cash currently.

To be conservative, we expect permitting to be complete by mid-2011, one year later than management's guidance. Production should begin in late 2013, ramping up to 230mmlbs Cu per annum at a cash cost of about $0.65/lb net of by-product moly and silver.

Valuation & Recommendation: The Rosemont deposit is one of the few remaining senior-sized (5.5bln lb Cu in 550mm tons grading 0.45% Cu, 0.015% Mo, and 0.012oz/t Ag) deposits with a feasibility study. We believe the impact of the U.S. recession on jobs and taxes will trump environmentalist concerns. Our C$4.00/sh target is based on 0.7x NAV using a $2.15/lb copper price. Maintain Outperform.

Primary Reasons for Recommendation:

Large and well-defined copper resources
Low risk location with depreciating currency support
Permitting remains the only foreseeable issue

-GEORGE TOPPING, BLACKMONT CAPITAL (08/18/09)

Advancing the Rosemont Copper Project in Arizona

Augusta Resource Corporation is currently advancing its 100%-owned Rosemont Copper Project, located 50 km southeast of Tucson, Arizona.

The company has completed a full feasibility study for the project to develop an open-pit mining operation to produce copper and molybdenum concentrates and copper cathode.

Augusta is in the midst of the permitting process and the environmental impact assessment stage of the project. Permitting remains the key milestone for the company. We believe Augusta has put in place a comprehensive program, with dedicated personnel to manage the process. The final record of decision to allow for mining is expected in July 2010.

We expect the company to produce on average 212 MMlb Cu, 4 MMlb molybdenum and 5 MMoz Ag annually over the life-of mine at a cash cost of $0.71/lb net of by-products. Oxide (cathode) production is expected to commence in late 2011 and sulphide (concentrate) production is expected to commence in 2012 provides investors with access to a premier copper project situated in a sound political environment requiring limited infrastructure Financing alternatives for the proposed $897 MM project continue to progress with negotiations revolving around joint ventures, debt financing, smelter off-take agreements and potentially royalty streams off the precious metals by-products (silver/gold).

We believe Augusta provides investors with access to a premier copper project situated in a sound political environment requiring limited infrastructure.

We are initiating coverage with a Buy (S) recommendation and a 52-week C$3.75 target. Our target is based on 0.5x our 100% equity financed NAVPS estimate of C$7.41, given the development risks that remain.

-CLIFF HALE-SANDERS, CIBC WORLD MARKETS (07/16/09)

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