HudBay eyes Arizona copper deposit with Augusta offer

Mon Feb 10, 2014 12:30am EST

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Feb 10 (Reuters) - Canada's HudBay Minerals Inc has offered to buy shares of Augusta Resource Corp it does not already own for C$2.96 per share in stock, to gain access to Augusta's Rosemont copper deposit in Arizona.

According to a 2012 feasibility study, Augusta's Rosemont project is expected to produce 243 million pounds of copper per year, which could be as much as 10 percent of United States' copper output, potentially making the project the third largest copper mine in the country.

Augusta shareholders will be entitled to receive 0.315 of HudBay common share for each Augusta common share held, giving the deal an equity value of about C$428 million ($386.91 million). HudBay said the enterprise value of the deal could be about C$540 million.

The per share offer represents a premium of 18 percent over Augusta's Friday closing price of C$2.51 on the Toronto Stock Exchange.

"We view the Rosemont project as an attractive complement to our existing portfolio of high quality, long-life assets that fits well with our construction timeline at Constancia," HudBay's Chief Executive David Garofalo said in a statement.

HudBay's Constancia copper project is located in the South-eastern Andes of Peru.

Augusta said late on Sunday that its board will meet this week to discuss the HudBay offer and has urged its shareholders not to take any action until the company decides on the next course of action.

HudBay currently owns 23.1 million shares in Augusta, representing about 16 percent of the company's outstanding shares. HudBay made its initial investment in Augusta in 2010.

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