Toronto-based Dundee Securities is breaking with other analysts following Augusta Resource Corporation (AZC) and has issued a sell recommendation to investors.
“Rosemont’s permitting timeline remains unclear and we believe that there are no short term catalysts to own AZC shares,” Dundee said in a statement released today shortly after Augusta announced a shareholder protection plan. “We believe that the risk level at the moment is too high given the ambiguity of the permitting time line.”
Dundee said it does not expect “that any AZC M&A activity will occur until permitting is complete.”
Dundee has set a $2.75 target price for Augusta’s shares, far lower than other analysts tracking the company that range between $4.50 and $6 a share.
Dundee noted that significant obstacles remain in the permitting process. Augusta, through its Rosemont Copper Company subsidiary, is seeking state and federal permits to construction an open-pit copper mine on the Coronado National Forest in the Santa Rita Mountains southeast of Tucson.
“Augusta requires a Ground Water Permit (issued by US Army Corps of Engineers) and a record of decision (“ROD”) from the US Forest Service before mine construction can begin,” Dundee stated.
“We believe that Pima County will try to make this as difficult as possible for AZC and have said if permits are received immediate legal suits would be filed.
“Further there have been lawsuits filed appealing AZC’s Clean Air Permit issued on January 31, 2012. The suit points out that AZC had changed the mine plan for Rosemont after having submitted its initial application for the permit in 2011. This appeal process adds further uncertainty to what continues to be a challenging permitting route for Rosemont.”
On the upside for Augusta, Dundee stated the company “has an excellent team” and Dundee does “not think that the delays are due to AZC’s actions.”
Dundee said that any potential buyer of Augusta would have to assume the same permitting challenges.
“Any potential acquirer would have to believe that they could handle the permitting process in a better and more efficient fashion than AZC. We do not believe that (HudBay Minerals) or any other potential acquirer would make that claim,” Dundee stated.
A number of other firms have also recently commented on AZC.
TD Securities recently lifted its price target on Augusta from $4.00 to $4.50. The firm currently has a “speculative buy” rating on the stock. Analysts at CIBC reiterated a “speculative sector outperform” rating on shares of Augusta in a research note to investors on April 3. CIBC now has a $5.50 price target on the stock.
Analysts at Laurentian raised its price target on shares of Augusta from $4.80 to $5.00 in a research note to investors on Jan. 16. Finally, analysts at Canaccord Genuity raised their price target on shares of Augusta from $5.50 to $6.00 in a research note to investors on Jan. 14.
ONE NEED BE VERY CAREFUL WHEN CANADIAN INVESTMENT HOUSES MAKE PREDICTIONS REGARDING THE BUYING AND/OR SELLING OF A PARTICULAR RESOURCE STOCK , PARTICULARLY WHEN THE CANADIAN COMPANY CONCERNED IS OPERATING SOLELY OUTSIDE OF CANADA . HAVING INDEPENDENTLY SPOKEN TO SEVERAL INVESTMENT HOUSES SOME MONTHS AGO , I DID NOT RECEIVE ANY NEGATIVE VIEW OF AUGUSTA’S ACTIVITIES . IT IS INTERESTING THAT DUNDEE REGARDS THE AUGUSTA TEAM AS ” EXCELLENT ” IN SPITE OF THEIR PAST ACTIVITIES AND THEN GOES ON TO RECOMMEND A ” SELL ” POSITION WITH REGARDS TO AUGUSTA STOCK . INVESTMENT HOUSES AND BROKERS ARE DRIVEN BY FINANCIAL BENEFITS AND THEY CAN MANIPULATE THE MARKETS FOR MAXIMUM GAIN . IN THIS CASE , THEY RELY HEAVILY ON AUGUSTA’S REPORTING TO MAKE PREDICTIONS AND SELDOM DO THEIR OWN DUE DILIGENCE .