In the past about a week, Augusta has two important announcements. They first announced on October 31st a silver off-take funding arrangement with Silver Wheaton is to be re-structured upon completion of the Updated bankable feasibility study which is expected to be complete by yearend. My expectation is that the term will be likely more beneficial than the prior contract elected back April, 2008, due to higher resource estimates and therefore better economic value. Then this Monday (Nov 3rd), they announced that they have received significant strategic interest regarding their 100% owned Rosemont Copper/Moly project.
The Rosemont Copper task for Augusta is a very large low priced open-pit copper deposit. The full total resources (M&I and Inferred) are estimated to be 7.7 billion pounds of copper, 190 million pounds of moly and 80 million ounces of silver precious metal, which turns into 11 billion lbs of copper equal about. 0.9 per lb of copper.
With today’s depressed commodity prices over the board, there is still a good profit margin because of its high quality and low priced. This puts Augusta well below other median and marginal cost suppliers and give them a large competitive advantage. Strategically, the major U.S. Freeport-McMoRan is also operating near Augusta’s property, which location, the low-risk jurisdiction and its copper/moly wealthy mines make Augusta well situated for future options.
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800 million total, with 40% of the administrative centre committed under set price contracts. 96 million. The payback period is also impressive with significantly less than 3 years. The upcoming BFS is likely to be more favorable due to increased degree of resources. Even with the recent reduced forecast of copper demand, the copper mine supply falls short for near future years still.
No doubt that the current slump in commodities has frustrated the stock prices of several developmental mining companies like Augusta. 15 million cash at the last Q2 survey. The previous April Silver Wheaton deal has satisfied about 20% of total capital requirements for the Rosemont project by only compromising 2% of the total future project revenue. 40 million loan with Sumitomo.
Both offers have minimized equity dilution for existing shareholders. 2 typically for quite some time in to the future, the operating leverage provided by Augusta will substantially boost the value of its Rosemont project. 3-4 range, 12 months which only brings them back to the price level this time around last. Disclosure: I don’t own Augusta Resources, but I really believe AZC is currently undervalued and provides a good opportunity for a diversified mining portfolio for long term capital gain.
Why this inflation in purchasing power has not translated into increasing CPI is a complex issue (massive global investment/overcapacity, unlimited supply of technologies and digitalized result, a services-based economy, inequitable wealth distribution, “financial engineering”, etc.). Clearly, with the Fed manipulating interest rates and backstopping securities marketplaces through massive QE buys, “money” has been incentivized to flow into securities and asset marketplaces (over real overall economy investment).