UPDATE 3-Regulators give Augusta time, but leave opening for Hudbay

Fri May 2, 2014 10:07pm EDT

(Adds statement from Hudbay Minerals)

By Allison Martell

TORONTO May 2 (Reuters) - Regulators on Friday gave Augusta Resources Corp more time to find a white knight, ruling that the miner's shareholder rights plan could stay in place until at least July 15 despite a challenge by hostile bidder Hudbay Minerals Inc.

Hudbay had asked the British Columbia Securities Commission to block the rights plan, or poison pill, which makes hostile takeovers difficult. Earlier on Friday, shareholders had voted to maintain the plan at Augusta's annual meeting.

The ruling gives Augusta more time to find a friendly bidder, but could also make it possible for Hudbay to complete a hostile takeover if no rival tops its offer.

"We're pleased with this outcome," said Augusta Chief Executive Gil Clausen in an interview. "It reflects the wishes of our shareholders, and it allows us to continue our strategic review process."

Hudbay wants control of Augusta's Rosemont project in Arizona, widely seen as one of the most promising copper projects in the United States.

If Hudbay extends its offer to July 16, and also agrees to extend it for an additional 10 days if it takes up any shares, the Commission will block the rights plan on July 15. Otherwise, it will remain in place.

Clausen said Augusta has signed confidentiality agreements with 11 parties, and is "actively engaged" with possible bidders.

Shareholders could have cleared the way for a Hudbay takeover by voting against the poison pill at Friday's meeting, but instead they backed it by a wide margin. Excluding Hudbay's own votes, Augusta said, 94 percent of votes were in favor of the rights plan.

Under Hudbay's offer, set to expire on Monday, investors would get 0.315 of a Hudbay common share, worth C$3.06 at Friday's close, for each share of Augusta. Augusta has called the bid "grossly inadequate".

Hudbay said in a statement on Friday that the company was pleased the B.C. Securities Commission decided to cease trade in Augusta's shareholder rights plan in July, as it would "give Augusta shareholders the opportunity to tender to our offer."

Shares of Augusta closed down 5.7 percent at C$2.99 on the Toronto Stock Exchange on Friday. (Additional reporting by Euan Rocha and Jeffrey Hodgson in Toronto; Editing by Meredith Mazzilli, Bernard Orr and Mohammad Zargham)

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