Reinstating Coverage on Augusta

CLIFF HALE-SANDERS, Cormark Securities (07/16/2009)
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.

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