Monday, February 10, 2014

Copper M&A: HudBay Eyes Arizona Copper Deposit With Augusta Offer TNR.v, MUX, HBM, AZC, LCC.v


  Copper M&A is heating up and following Chinese quest for the long term secured supply of Copper Hudbay is bidding for one of the most promising Copper projects in the U.S. Increasing M&A activity confirms that the bottom for the mining stocks is in and industry insiders are looking for the best assets before the general public will drive the prices up.
  Glencore is talking about the higher Copper prices to come and they are not alone in this industry observation. McEwen Mining and TNR Gold will get now more attention to Los Azules copper project, as we have discussed yesterday, and Lumina Copper will be in M&A play as well with its Taca Taca copper deposit in Argentina.

Copper M&A: Glencore Plays Deal Or No Deal With China On Prize Copper Asset MUX, TNR.v, CU, GDX

"FT reports about very interesting developments around the Las Bambas Copper mine in Peru. To sell this prize copper asset was always the condition for Chinese approval of Xstrata and Glencore merger. Chinese are ready to put their hands on it, but now, apparently, Glencore is talking about higher Copper prices and better economics of the project, which can affect the sale.
  All this new information bodies very well for McEwen Mining and TNR Gold with their Los Azules Copper project in Argentina. Actually Xstrata was involved in that project as well. Timing of the deal on Las Bambas is very important  - before it was scheduled for September and now talks could be concluded this month. Copper market M&A is heating up and the major players are ready to make their bets already."

TNR Gold TNR.V is one of the most intriguing microcap stories I follow. cc:

Los Azules Copper - McEwen Mining And TNR Gold: Yamana Gold to invest $450 million in Argentine mine MUX, TNR.v, LCC.v

"It looks like the shift in Argentina for the better is happening for real this time. Rob McEwen has discussed it in his recent presentation and that in his opinion "we have seen the low in Argentina after  a lot of disappointment". Shevron special Shale Oil deal, repayment to Repsol and now Yamana Gold investment are certainly the things we would like to see now after elections. Lumina copper is holding above CAD5.00 these days and McEwen Mining and TNR Gold should benefit from Los Azules copper revised valuation now."

Copper M&A: Peru Officials Meeting Chinalco, Minmetals This Week on Las Bambas Bids MUX, TNR.v, LCC.v, CU, GDX

 "With Chinese economy in the recovery mode quest by Chinese companies for the best mining assets is ongoing worldwide. Lumina Copper is getting some bids today again and Los Azules copper will be getting on the investors' radar screens with the changing political landscape in Argentina again."

"Los Azules Copper ProjectArgentina (100%)

In September, McEwen Mining announced an updated PEA for the Los Azules Copper project. The results from the PEA demonstrate that Los Azules has the potential to become one of the largest, lowest cost copper mines in the world. In addition, there remains excellent exploration potential to further expand the size of the existing mineral resource. Highlights from the PEA are shown below:
  • Pre-tax Net Present Value of $3.0 billion (8% discount rate) and an Internal Rate of Return of 17.7%.
  • Annual copper production during years 1-5 to average 258,000 tonnes (568 million lbs), which would have placed it in the top 3%1 of copper mines in the world during 2012. Life of mine annual copper production to average 171,000 tonnes (377 million lbs) over 35 years.
  • Indicated resource of 5.4 billion pounds of copper (grading 0.63% Cu) and 0.8 million ounces of gold (389 million tonnes with a cut-off grade of 0.35% Cu) and Inferred resource of 14.3 billion pounds of copper (grading 0.46%) and 2.6 million ounces of gold (1,397 million tonnes with a cut-off grade of 0.35% Cu).
  • Initial capital costs to construct the mine and process plant have been estimated at $3.9 billionwith a payback on a pre-tax basis has been estimated at 3.8 years at $3.00/lb copper and$1,300/oz gold.
1 Based on internal market data.
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.
The PEA has been filed under the Company's profile on SEDAR ( pursuant to the requirements of Canadian National Instrument 43-101 and is also available on the Company's website -"
All slides are from McEwen Mining presentations.

"TORONTO • For the second time this year, a large hostile bid has breathed much-needed life into the Canadian mining sector.
HudBay Minerals Inc.’s $428-million offer for Augusta Resource Corp. has prompted strong speculation of a rival bid from analysts and investors. It has been months since the sector had a major takeover battle with multiple bidders, and the bid is seen as a potential catalyst for further M&A activity."


HudBay eyes Arizona copper deposit with Augusta offer

Feb 10 (Reuters) - Canadian base metal miner HudBay Minerals Inc said it plans to buy exploration company Augusta Resource Corp in a bid to gain control of its Rosemont project in Arizona, an asset widely viewed as one of the most promising copper projects in the United States.
The strategically timed bid, announced late Sunday, comes just weeks before Augusta is expected to receive final approvals that would allow it to begin development and construction work on the asset that could account for as much as 10 percent of U.S. copper output, making Rosemont the third largest copper mine in the country.
Rosemont, located some 50 kilometers (31 miles) southeast of Tucson, is expected to begin operations in 2016 and produce 243 million pounds of copper, along with about 2.9 million ounces of silver and 5.4 million pounds of molybdenum, annually.
The $1.2 billion project is set to become the No. 3 copper mine in the United States, behind Freeport-McMoRan Copper & Gold Inc's Morenci mine in Arizona and Rio Tinto's Bingham Canyon Mine in Utah.
"We view the Rosemont project as an attractive complement to our existing portfolio of high quality, long-life assets," said HudBay's Chief Executive David Garofalo in a statement.
The unsolicited all-stock proposal from Toronto-based HudBay offers Augusta's shareholders a premium of 18 percent over the company's closing price of C$2.51 on the Toronto Stock Exchange on Friday.
Augusta shares surged 25 percent to C$3.14 in early trading on Monday, well above the value of HudBay's bid, indicating that investors expect a sweetened bid to emerge. HudBay's shares fell 5.5 percent to C$8.88 on the TSX.
Analysts expect rival bids to emerge, as they argue HudBay's current offer does not reflect the strategic value and advanced permitting status of the project.
"Given the scale of Rosemont and favorable geopolitical risk profile, we see the potential for other bidders to emerge," said National Bank analyst Steve Parsons, in a note to clients.
Based on Friday's closing price, HudBay is offering to pay C$2.96 per share for all the shares in Augusta it does not own.
Augusta shareholders will be entitled to receive 0.315 of one HudBay common share for each Augusta common share held, valuing the company at about C$455 million ($413 million). HudBay said the enterprise value of the deal could be about C$540 million.
HudBay currently owns about 23.1 million shares in Augusta, representing about 16 percent of the company's outstanding shares. HudBay made its initial investment in Augusta in 2010.
Vancouver-based Augusta said late on Sunday that its board will meet this week to discuss the HudBay offer and it urged its shareholders not to take any action until the company decides on the next course of action.
Jennings Capital analyst Peter Campbell said he believes the offer "significantly undervalues Augusta" and he views the bid as being "very opportunistic."
"We believe that shareholders who have been in Augusta for the long-term, and have held on throughout the lengthy stage of permitting the project, would be giving up significant value by accepting this offer," he wrote in a note to clients.
Augusta has already secured some of the financing to fund the construction of the Rosemont project. In 2010, the company signed an earn-in agreement with a South Korean consortium that is comprised of Korea Resources Corp and LG International Corp .
The agreement allows the Korean consortium to acquire a 20 percent interest in the project in return for a $176 million investment. Augusta is also using $230 million that it received from a separate deal with Silver Wheaton Corp to fund the project.
HudBay said its offer will be open until March 19, unless extended or withdrawn. The offer is subject to all customary conditions, receipt of the necessary regulatory approvals and no material adverse change in Augusta's status.
Analysts believe the material adverse change clause allows HudBay to hedge its bets, giving it an exit option in the event of an unfavorable ruling on Augusta's permits.
HudBay has retained BMO Capital Markets and GMP Securities as its financial advisers, with Goodmans LLP and Milbank, Tweed, Hadley & McCloy LLP acting as legal counsel."

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