HudBay Minerals Inc. (HBM), a Canadian developer of mines in Manitoba and Peru, made a C$360 million ($326 million) unsolicited offer to acquire the rest of Augusta Resource Corp. (AZC) to add a copper-mining project in Arizona.
HudBay, which already owns 16 percent of Augusta, said yesterday in a statement it will offer 0.315 of a share for each of Augusta’s. The per-share offer is valued at about C$2.96 and represents a bid premium of 18 percent, based on Feb. 7 closing prices, Toronto-based HudBay said.
Augusta rose 27 percent to C$3.20 at the close in Toronto while HudBay fell 6.1 percent. Augusta said in a separate statement its board will meet this week to discuss the proposal and shareholders should take no action.
HudBay said Augusta’s management is “overly optimistic” about the timeline for getting the necessary permits for its $1.2 billion Rosemont copper mine, raising the necessary funds and being able to complete the engineering. HudBay said it has the technical expertise and resources to bring the project into production without the financial risk currently posed to Augusta investors by any further delays.
Rosemont may attract rival bids and HudBay may have to raise its offer, Patrick Morton, an analyst at RBC Capital markets in Toronto, wrote today in a note. After seven years spent obtaining the necessary approvals for the mine, it may get its final permits in one to two months, he said
HudBay’s offer, which has an enterprise value of C$540 million and will be open until March 19, is the second unsolicited bid from a Canadian mining company in the past month, after Goldcorp Inc. (G) made a C$2.84 billion offer for Montreal-based Osisko Mining Corp. on Jan. 13.
BMO Capital Markets and GMP Securities LP are acting as financial advisers to HudBay. Goodmans LLP and Milbank, Tweed, Hadley & McCloy LLP are acting as its legal counsel.