Appointment of new director fuels speculation that cash-strapped Augusta Resource, parent of Rosemont Copper, may be sold

Robert Pirooz

Augusta Resource Corporation’s appointment of mining attorney Robert Pirooz to its board of directors indicates the Vancouver, B.C.-based junior miner that owns the Rosemont Copper Company may soon be acquired.

The appointment comes as Augusta continues to struggle with cash flow as its primary asset, Arizona-based Rosemont Copper, seeks necessary permits to begin construction of a massive open-pit copper mine on the Coronado National Forest south of Tucson.

Augusta is vigorously pressing the U.S. Forest Service to issue a Final Environmental Impact Statement (FEIS) and Record of Decision for the Rosemont copper mine.

The Forest Service has scheduled a press conference for Friday, Nov. 16, to possibly announce whether it intends to issue a FEIS clearing the way for a mining permit to be issued; or require a new Draft EIS be prepared to address sweeping changes the company announced last July for the mile-wide, half-mile deep, open pit copper mine.

Regardless of the Forest Service decision on whether to issue a FEIS or require a new environmental study for the Rosemont project, Pirooz’s appointment can be interpreted as a signal that Augusta’s management is considering a strategic move.

Mr. Pirooz has more than 20 years of legal experience focused in the mining sector with a particular strength in strategic transactions. He serves as general counsel for Pan American Silver Corp., whose executive chairman is Vancouver mining magnate Ross Beaty.

Beaty has a major stake in Augusta, controlling more than 14 million shares of stock since May 2010. Augusta has 144 million shares outstanding.

Ross Beaty

Pirooz also has a history of working with Augusta Chairman Richard Warke in executing the sale of Ventana Gold Corporation in early 2011. Warke was chairman of Ventana when Pirooz joined the Ventana board in June 2009. Ventana controlled gold mining claims in Columbia and was trading for less than $2 a share.

Prior to Pirooz’s Ventana board appointment, Pirooz and Beaty, through Lumina Capital Limited Partnership, purchased more than 9 million shares of Ventana. In February 2011, Ventana was sold to Brazil’s richest man, Eike Batiste, for $1.56 billion, or $13.06 a share.

At the same time Augusta announced Pirooz’s appointment to the board, the company announced the resignation of Warke’s longtime associate, Donald B. Clark. Clark, a banker, has worked closely with Warke since the late 1980s on various public companies. Clark owns 5.7 million shares of Augusta stock and will continue to serve the company in an advisory role.

The board shuffle coincided with the release of Augusta’s 3rd quarter financial statement and accompanying management discussion & analysis.

Augusta reported an anemic $2.9 million cash on hand as of September 30. This was after Augusta received a $5 million advance on Sept. 12 from a $40 million loan from Red Kite Mine Finance Trust I that didn’t formally close until October 5.

Red Kite, a London-based copper trading hedge fund, advanced the $35 million balance of the loan when it closed. Red Kite has now extended two loans to Augusta totaling $83 million that are due in July 2014. Augusta has provided all the assets of its Rosemont Copper Company as collateral for the loan.

Augusta Resource, in a pattern it has repeated for several years, is continuing to move out the date when it anticipates obtaining complete financing for the $1.23 billion mine.

Augusta states it “will continue with project financing activities over the next few quarters with the goal of completing project financing for Rosemont by the end of the second quarter of 2013.”