Rosemont Copper’s Section 404 Clean Water Act permit in jeopardy as Army Corps again cites mitigation shortfalls

The U.S. Army Corps of Engineers on Tuesday notified Rosemont Copper Company that its most recent mitigation plan in its application for a Clean Water Act permit needed to construct the proposed Rosemont copper mine fails to fully compensate for damage to springs, washes and wetlands.

Rosemont’s failure to provide adequate mitigation for the irreversible damage the proposed massive open-pit mine will inflict on federal waters increases the possibility the Army Corps will not issue the company the crucial Section 404 Clean Water Act permit necessary to build the mine.

The May 13 letter from Army Corps Los Angeles District Engineer Col. Kimberly Colloton to Rosemont Copper CEO Rod Pace stops short of stating the agency will deny the permit. “This determination is not dispositive of a decision yet to be made whether to issue or deny your permit application,” Colloton states.

However, Colloton notified Pace that the Army Corps has concluded a year-long series of weekly meetings with Rosemont to discuss its mitigation plan which continues to fall short of minimum federal standards. “I have decided that my staff should now change its focus toward preparing a final permit decision,” Colloton states.

Colloton stated the Corps decision will be based in “accordance with the record and applicable regulations whether or not the permit should be issued.”

The Army Corps notified Rosemont on Feb. 28 that its mitigation plan did not meet regulatory standards and requested that Rosemont provide an updated plan by April 15. Rosemont submitted a series of documents between April 1 and April 24 to address mitigation regulations, but they failed to meet federal regulatory guideline, Colloton states.

The Army Corps, Colloton states, is continuing to work closely with the U.S. Forest Service which is the lead federal agency overseeing the complex permitting process for the mile-wide, half-mile deep mine proposed for the Santa Rita Mountains on the Coronado National Forest southeast of Tucson.

“It remains my goal to conclude the permit application evaluation process in a time frame that is concurrent with the USFS’s decision making process,” she states. The USFS is currently reviewing hundreds of written objections to the agency’s Final Environmental Impact Statement for the proposed mine.

The Forest Service missed an April 30 deadline to respond to the objections and will provide an update by the end of May on when it expects to complete the review process that must be done before it can issue a Final Record of Decision on whether to approve construction of the mine on federal lands.

The Army Corps determination that Rosemont has not developed a suitable mitigation plan for the massive damage to the watershed and to surface and ground water resources will be an important factor in whether the Forest Service issues a favorable Final Record of Decision approving the project.

The Army Corps is scheduled to meet with Rosemont officials on May 21 in response to the company’s May 2 letter requesting “more opportunity to meet and discuss my determination on adequacy of your proposed compensatory mitigation,” Colloton’s letter states.

This week’s Army Corps letter comes at a crucial time for Rosemont and its parent company, Vancouver, B.C.-based Augusta Resource Corporation. Augusta has been urging its shareholders to reject a hostile takeover bid from much larger Hudbay Minerals Inc. Hudbay has been seeking to purchase the company since Feb. 9 and has extended several deadlines for its offer, the latest of which expires at 5 p.m., May 16.

Hudbay has repeatedly stated that Augusta has been “misleading” its shareholders over the permitting for the mine. Augusta has insisted that all permits – including the Army Corps 404 permit and the Forest Service’s favorable Final Record of Decision – will be issued by June 30.

Augusta has stated that $336 million in contingent funding will become available upon receipt of the final permits and completion of long term financing to build the $1.2 billion mine.

Hudbay and other partners including Silver Wheaton that has a $230 million metals streaming agreement, have stated that the contingent funding will not be available until construction begins on the project on more than 3,000 acres of Coronado National Forest begins.

Augusta is facing a serious cash flow crisis and has a $109 million loan commitment from RK Mine Finance due on July 21, with a 90-day extension option. Augusta has provided Rosemont Copper as collateral for the loan and could lose its only asset if RK is in position to call the loan.

Receipt of the 404 and a favorable Forest Service Record of Decision would give Augusta access to $12.5 million from the RK Mine Finance loan commitment. Augusta reported $6 million in cash at the end of the 1^st Quarter on March 31 and is spending approximately $2 million a month.

At the present rate of spending, Augusta will run out of cash by June 30, the date it has repeatedly assured shareholders it would receive the the 404 permit and the Forest Service Record of Decision.