UPDATE 2-Augusta Resource sells 20 pct stake in key project

Thu Sep 16, 2010 1:23pm EDT

* Signs JV agreement with South Korean group for $176 mln

* Group led by Korea Resources Corp, LG Int'l Corp

* Shares up as much as 21 pct (Recasts; adds details, analyst comment, share data)

Sept 16 (Reuters) - Augusta Resource Corp (AZC.TO) sold a 20 percent stake in its key Arizona copper project, moving closer to securing complete funding for the project and significantly reducing the need for further share sales, sending its shares up 21 percent.

In the past, the company has tapped equity markets and raised debt to fund this project, which is expected to account for about 10 percent of total U.S. copper production.

The company's unit, Rosemont Copper Co, signed an earn-in agreement with a Korean consortium, comprising state-run resources explorer Korea Resources Corp and LG International Corp (001120.KS), to sell a 20 percent stake in the Canadian company's Rosemont copper-molybdenum project in Pima County, Arizona.

"The joint venture arrangement significantly reduces the need for further equity issuance and supports our view that the project is technically robust," BMO Capital Markets analyst John Hays wrote in a note to clients.

"The additional funds provide working capital as the project moves through the permitting process and improves the company's balance sheet, which includes $44.3 million in debt," said Hays, who has an "outperform" rating on the company's stock.

Including long-term debt, the company had total liabilities of $52.2 million at June-end.

In addition to copper, Rosemont will produce significant amounts of silver and molybdenum over its 20-year mine life, Augusta said.

In February, Augusta had signed an agreement to sell all silver and gold produced its Rosemont project to Silver Wheaton Corp (SLW.TO) for $230 million. [ID:nSGE61A0GU]

"The $176 million equity investment by KORES and LGI, together with the $230 million in funding previously committed by Silver Wheaton and combined with Augusta's contributions to date will provide about 50 percent of the total project funding," Chief Executive Gil Clausen said in a statement.

"We are well advanced in discussions with project finance lenders for the balance of the funding."

Late last month, Augusta received C$30 million via a private placement with HudBay Minerals Inc (HBM.TO) for 11 million shares at C$2.75 each.

Augusta's shares, which have risen 45 percent since the announcement of the private placement, were up 9 percent at C$3.48 in afternoon trade, Thursday on the Toronto Stock Exchange. They touched a 23-month high earlier in the day. (Reporting by Isheeta Sanghi in Bangalore; Editing by Roshni Menon)

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