Shares in would-be copper miner Augusta Resource Corporation (AMEC:ACZ, TSX:AZC) spiked almost 15% in the first minutes of trading on the Toronto Stock Exchange after the company announced a US$176 million earn-in agreement on its Rosemont Copper Project in Arizona.
Augusta Resource Corporation has inked the deal with a consortium of Korean businesses, including LG International and Korea Resources Corporation (KRC) – which is wholly-owned by the Korean government.
The agreement will see the Korean consortium acquire a 20% joint venture interest in Rosemont in return for supplying funding of US$176 million, of which $70 million will be directed a development pre-permitting and the remaining US$106 million to help fund construction of the mine.
The agreement also includes a off-take agreement whereby LG and KRC will be able to market 30% of copper concentrate production and 20% of copper cathode and molybdenum concentrates from Rosemont.
"The US$176 million equity investment by KORES and LGI, together with the US$230 million in funding previously committed by Silver Wheaton and combined with Augusta's contributions to date will provide about 50% of the total project funding,” Augusta's President and CEO Gil Clausen said. “We are well advanced in discussions with project finance lenders for the balance of the funding. The steps taken today have substantially de-risked the project and will enable timely project construction upon receipt of final permits."
Just last month Augusta closed a $30 million private placement with Hudbay Minerals (TSX:HBM) giving the Canadian base metal miner an 11% equity interest (13.6% on a fully diluted basis). Hudbay paid $2.75 per unit, which consisted of one common share and one full warrant exercisable at $3.90 for a period of 18 months.
The Rosemont deposit is expected to produce 221 million pounds per year of copper once it begins production in 2012, and will also produce significant amounts of silver and molybdenum over its 20-year mine life.
As of January 2009, Rosemont has proven and probable mineral reserves containing 546 million tons grading 0.45% copper, 0.015% molybdenum and 0.12 ounces per ton silver in sulfide ore, and an additional 70 million tons at 0.17% copper in oxide ore.
Using long-term metal price assumptions of $1.85 per pound for copper, $12 per ounce for silver and $15 per pound for molybdenum, the project generates an NPV (5%) of US$1.2 billion.