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Junior Copper – Another Takeover

Posted by nexvucapital on February 10, 2014

Another substantive in-ground copper asset receives a takeover offer as the Mid-Tier Producers look to take advantage of historically low valuations:

The National Post reports in its Monday edition that HudBay Minerals (HBM: TSX) launched a $540-million (Canadian) hostile bid Sunday for Augusta Resource (AZC: TSX). The Post’s Peter Koven writes that in order to sell the deal to Augusta holders, HudBay argues it is in a much better position to develop the large Rosemont copper project in Arizona than Augusta is. HudBay says Augusta has “few financing options” remaining for the $1.2-billion (U.S.) project after it already sold a joint venture interest, committed most of the offtake and sold a precious metals stream. Financing would not be an issue for HudBay, as it has plenty of cash flow and greater access to capital than Augusta. HudBay believes Augusta’s management is “overly optimistic” about the permitting timeline for Rosemont, and believes its own team could do a better job. HudBay is offering 0.315 of its shares for each Augusta share. That works out to $2.96 (Canadian) a share, which is an 18-per-cent premium over Augusta’s closing share price on Friday. HudBay has been interested in Augusta for a long time. It made an initial $30-million (Canadian) investment in the company in 2010, and raised its stake above 15 per cent last year.

This trend will continue as long as valuations reflect historic lows. The movement of fresh capital into the sector will look to find the “Next” targets as the recovery process in the Junior Sector continues.

 

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