Company Report: Augusta Resource Corp
Augusta Resource Corp Augusta Resource Corporation is already well into what is probably the biggest project in the mining company's history. Gil Clausen explains why a prosperous future is drawing closer by the day

Augusta Resource Corporation has given itself a clear objective: to become a mid-tier copper producer within four years. At the heart of this objective is the Rosemont project in Arizona, a mine that the company has been working on since it acquired the area back in 2005. Augusta's President and CEO Gil Clausen joined the company shortly before this acquisition, leaving his post as Executive Vice-President of Mining for Washington Group International.

Gil explains why Rosemont has been such a focus for him ever since: "This is a world class project. Once open it'll be the third or fourth largest copper mine in the US. It'll be a very large and very strategic asset for us, the cornerstone asset for our company."

Rosemont is clearly a central part of Augusta's future, but it continues to be a slow process. Construction of the mine is scheduled to start in 2009 and it won't be producing copper until 2011. Even the large grinding mills have a delivery time of up to two and a half years. The rewards, however, are waiting to be reaped.

The mine is estimated to produce between 210 and 260 million pounds of copper, 4.5 to 5.5 million pounds of molybdenum and 2.5 to 3.5 million ounces of silver annually. The silver and copper concentrate that is extracted will be sold to smelters and the molybdenum concentrate to companies with roasting capacity. A third product will be copper sheet (99.99 percent pure), which can be sold directly to end-users.

After two years of initial site investigations the company is looking to secure funding for the rest of the project. From an estimated cost of $800 million to build the mine it will be seeking 70-80 percent externally and plans are in place to send a financing strategy into the market by the end of this quarter. Part of the funds have been raised from the sale of two other mining areas - a gold mine at Mount Hamilton, Nevada and the nearby Shell Deposit which had raised around $6.5 million. Mount Hamilton produced approximately 125,000 ounces of gold between 1994 and 1997 and was acquired by Augusta in 2004.

Sustaining the Community
Alongside an ongoing application process to acquire mining permits from the federal and state Governments, a feasibility study has recently been completed presenting detailed analysis of the project and a recommendation to move towards production. The study includes a detailed financial estimate. "The solid economics of this study further reinforce our promise to combine innovation, conservation and economic opportunity in this mine development" Gil says, referring to five sustainability elements for the project that were outlined in a plan of operations.

The first of these is to provide a sustainable water supply, an important issue given the strain on Arizona's stock. But Augusta is committed to this need - it's already started importing water from the Colorado River via canal to Tucson. From there the water is 'injected' into the water table to be withdrawn later at Rosemont some 30 miles away. Five percent will remain unused, helping to alleviate the area's shortage. In addition to this the project will employ water-recycling techniques that are anticipated to yield a 50 to 60 percent reduction in water use, compared with traditional mining practices. This is an approach that has never been adopted by an Arizona copper mining facility before.

Gil explains that this shows a real environmental focus: "If you're going to build a modern mine you have to look at minimizing impacts. Our footprint is going to be low. We expect to use between a third and a quarter less water than the average." This focus also extends to minimizing pollution caused during production - something of major importance to the company and written into its ethical policy. This includes reducing the use of hazardous materials, reducing the amount of hazardous waste generated, encouraging solid waste recycling, purchasing recycled materials and the use of appropriate controls.

Alongside this there is a visible focus on the local community. Augusta has set aside a community endowment of $50 million, which is to be managed by a community board and will support local projects long into the future. There are also plans to replace the landscape as different parts of the mine close down - a process known as concurrent mine reclamation - and to build a view shield to protect the views of travelers along the nearby highway. The final element from the plan of operations is to adhere to the principles of the Sonora Desert Conservation Plan, which outlines a vision for the surrounding region.

The Platform for Growth
The Rosemont project is set to re-balance Augusta's entire organizational structure. Staff numbers alone are expected to increase massively to somewhere around 500 during production. "Our primary challenge is to maximize the shareholder value of the corporation. If we remain focused on the right development plan then this will enable us to pursue the right growth opportunities in the future," says Gil. The company is already thinking strategically at what this might mean in terms of both new grass roots projects and acquisition projects.

It's not hard to visualize how this long-term strategy will come into effect - with production taking place on such a large scale the company expects to deliver 3 percent cost savings over its competitors. This should allow it to stay ahead, whilst reinvesting and expanding production in order to achieve sustainable growth.

"If you look at our projects we're in a very enviable position relative to our competitors," Gil summarizes. "We have put together an excellent management team with the ability to grow and we have an excellent resource in our hands." Rosemont may be four years away from production but Augusta is already at the center of an exciting change and eagerly anticipating a successful future.

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