Rosemont facing “extreme scrutiny” for $404 million in construction loans as cash runs low

Already facing a cash flow crisis that could see Augusta Resource Corporation run out of money by year’s end, a former World Bank official says it is very unlikely the company will be successful in its plan to obtain $404 million in loans from international development banks to finance construction of its proposed Rosemont copper mine.

Renate Kloppinger, who was responsible for developing rural financial systems for the World Bank and previously worked as a senior corporate banker for CitiBank and Deutsche Bank, says Augusta will face “extreme scrutiny” from international development banks for its proposed Rosemont open-pit copper mine in the Coronado National Forest.

“Given the extreme scrutiny that mining projects have to undergo as far as environmental and human impacts are concerned, I could not see a European public bank wanting to face huge adverse publicity, even if its board, management and staff should be in favor of a mining project such as Rosemont, which I could not envision,” Kloppinger says. “The current tight money situation makes this even more unlikely.”

Difficulty in securing the $404 million in long-term debt compounds the financial problems facing the Vancouver, B.C.- based speculative mining development company.

The Arizona Daily Star reported on June 24 that Augusta had less than $20 million cash on hand and was spending at a rate where it would run out of money by the end of 2012.

Augusta has repeatedly stated it was on the verge of securing the loans, but so far, that has not happened.

In February 2010, Augusta’s CEO Gil Clausen was quoted in a mining trade journal  saying that Augusta has “very strong” interest from development banks and that the company expected to secure financing by the end of the October 2010.

Last January, Clausen told the Daily Star that Augusta was negotiating final terms for $404 million in financing with import-export banks in Denmark, Switzerland, Germany and Korea. Clausen said Augusta expected the loans to be approved by April.

Kloppinger, who holds an M.S degree in Psychology from Goethe-University in Frankfurt and an MBA in international finance from UCLA, said her analysis of the Rosemont mine’s potential impact on Southern Arizona’s economy showed it to be “quite dismal”.

“And this does not even take into consideration the destruction of a wonderful habit and the terrible environmental impacts on water, air and night skies,” she said.

Kloppinger worked on financing development projects in communities on three continents directly impacted my mining projects. The purpose of the projects, she said, was to mitigate the negative impacts of the mines on the local economy and people.

“None of those projects worked very well and the mines never benefited much the local population, except for some well-placed officials, and the promoters and mine owners, of course,” she said.