Toronto-based Dundee Securities Tuesday lowered its target price for Augusta Resource Corporation to $2.30 and reaffirmed its “sell” rating for what it calls a “high risk” stock.
Dundee cited a lawsuit filed Friday by a coalition of environmental groups and private citizens challenging the Arizona Department of Environmental Quality’s issuance of an aquifer protection permit as an example of what it believes will be continued local opposition to the project.
“The local county where Rosemont is located has said it will pursue action in the courts in an effort to impede further progress,” Dundee stated. “This lawsuit shows that they are not kidding.”
The aquifer protection permit was issued last year to Augusta’s wholly-owned subsidiary Rosemont Copper Company and is needed to begin construction on the mine.
“We believe that this first lawsuit could be the start of a lengthy string of subsequent litigation,” Dundee stated in its report. “Locals in Pima County, where the proposed mine site is located, have said that further lawsuits will be filed after subsequent permits are granted.”
As a result, Dundee stated “we expect further delays.”
Dundee noted that Coronado National Forest Supervisor Jim Upchurch has stated he wants to release the Final Environmental Impact Statement and Record of Decision on whether the mine should proceed by Sept. 27.
Dundee states, however, that “this timeline may not be met” and even if a favorable ROD approving the mine is issued, Dundee expects “there will be lawsuits filed upon its release.”
The report discounted Augusta’s projection that it will begin construction on the $1.2 billion mine by the end of the year and states that the first half of 2014 is a “best case scenario” to break ground.
Dundee said it expected Augusta to execute an agreement announced last week where Augusta’s chairman, Richard Warke, and a major shareholder agreed to purchase $10 million in convertible securities. Dundee said that cash infusion would be enough to meet Augusta’s cash needs through the end of the year.
Notwithstanding the criticism from key regulators, Dundee considers Augusta’s Rosemont mine to be a “world class asset with the wrong address” that will eventually receive the necessary permits to build the mine projected to produce 244 million pounds of copper of year for about 21 years.
Last April, Dundee lowered its target price for Augusta to $2.75. At that time, Dundee stated while it believes that the proposed Rosemont mine is “an excellent project” and that once permitted, Augusta would be a likely takeover target, it expected litigation would delay final permitting.
THE FINANCIAL STATE OF AUGUSTA REFLECTS A VERY SERIOUS SITUATION . IT IS VERY RARE IN THE MINERAL RESOURCE INDUSTRY WHEN A SENIOR OFFICER OF A COMPANY IS FORCED TO DRAW ON HIS OWN PERSONAL FUNDS TO HELP PROVIDE OPERATING CAPITAL AMOUNTING TO US$10MILLION IN ORDER FOR THE COMPANY TO MEET ITS OPERATIONAL OBLIGATIONS . THIS WOULD SUGGEST THAT A MEMBER OF THE EXECUTIVE HAS VERY DEEP POCKETS . PERHAPS THIS RELATES TO AUGUSTA’S SALE OF THEIR INTERESTS IN A COLUMBIAN PROPERTY TO A BRAZILIAN TYCOON . DUNDEE IS ONE OF THE FEW INVESTMENT HOUSES THAT HAS COME OUT WITH AN EVALUATION OF AUGUSTA AND THE ROSEMONT PROPERTY . INITIALLY , DUNDEE WERE CAUTIOUSLY OPTIMISTIC BUT THAT APPEARS TO HAVE TURNED TO A STATE OF OUTRIGHT PESSIMISM . THEY HAVE DOWNGRADED THE AUGUSTA STOCK TO HIGH RISK WITH A SELL ORDER AND HAVE MADE IT CLEAR THAT WITHOUT FULL PERMITTING IN PLACE , AUGUSTA HAS VERY LITTLE FUTURE WITH THE ROSEMONT PROSPECT . IF THERE IS A SUITOR IN THE WINGS AS DUNDEE SUGGESTS , THEY WILL REMAIN SILENT UNTIL AUGUSTA COMPLETES THE PERMITTING SUCCESSFULLY AND IN FULL . TIME IS RUNNING OUT FOR AUGUSTA AND PERHAPS IT HAS BEEN CAUGHT IT ITS OWN WEB OF DECEIT .