Augusta's AZ Asset

STEVE PARSONS, Wellington West Capital Markets (08/21/2009)
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.

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