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4 E&MJ; • MARCH 2014 www.e-mj.com NEWS-LEADING DEVELOPMENTS Augusta Resource Corp.'s board of direc- tors unanimously recommended on February 24, that the company's share- holders reject an unsolicited offer from HudBay Minerals to acquire all of Augusta's outstanding common shares. HudBay had announced on February 9 plans for an offer to acquire all of the Augusta shares that it did not already own. At that time, HudBay owned about 16% of Augusta. HudBay's all-share offer valued Augusta at about C$540 million. Augusta's primary asset is its Rose- mont copper-molybdenum project 50 km southeast of Tucson, Arizona. The project is based on a large-tonnage copper- molybdenum deposit that is amenable to open-pit mining. Sulphide ore will be processed to produce separate copper and molybdenum concentrates. The pro- ject's 2012 feasibility study calls for con- centrator throughput to average 75,000 st/d for the first four years of production, ramping up to 90,000 short tons per day (st/d) during the second half of a mine life that is estimated at more than 21 years. Production of copper in concentrates will average about 243 million lb/y over the life of the mine. Total initial capital costs for construction, commissioning, and mine pre-development are estimated at $1.226 billion. Regarding the HudBay offer, Augusta's Executive Chairman Richard Warke said, "The unsolicited offer is grossly inade- quate and does not come close to recog- nizing the full and fair value of Augusta and the world-class Rosemont project. It not only is opportunistic, failing to com- pensate Augusta's shareholders ade- quately at a time when the company is at an inflection point of significant value creation, but it replaces this lost value with an increased exposure to risk. Our board rejects this low-ball bid and recom- mends that our shareholders do not ten- der their common shares." Augusta has received seven of the eight major permits for the Rosemont project and anticipates that the last major permit, the Clean Water Act 404 permit, will be issued by the end of the second quarter of 2014. Construction is expected to begin in mid-2014. The Augusta press release stated that directors, officers, and four other share- holders of Augusta holding more than 33% of Augusta's shares had advised that they would not tender to the HudBay offer. Among the offer's conditions is a condition that no less than 66⅔% of Augusta shares, calculated on a fully diluted basis, be ten- dered to the offer and not withdrawn. "Given the determination of the direc- tors, officers, and these four shareholders, it is a virtual certainty that, as structured, the unsolicited offer cannot succeed," the Augusta press release concluded. ICL Supporting Allana's Danakhil Potash Project Allana Potash announced in mid- February that it has secured a strategic alliance with Israel-based ICL that will support Allana in its development of the Danakhil potash project in the Dallol region of the Afar province of northeast Ethiopia. The agreement calls for ICL to invest approximately $23 million in units of Allana at a price of approxi- mately $0.43 per unit. Following com- pletion of its initial investment, ICL will hold approximately 16% of Allana's reg- ular shares on a non-diluted basis. ICL may increase its holding in Allana to approximately 37% upon its exercise of warrants that are part of the units. The total investment could increase to as much as $84 million upon full exercise of the warrants. Allana will use the proceeds of the investment to develop and advance the Danakhil project. The feasibility study for the proposed mine indicates that it will produce approximately 1 million mt/y of muriate of potash via solution mining/ solar evaporation within a period of five years. The companies have entered into an off-take agreement that calls for ICL to purchase the entire production of the Danakhil project up to 1 million mt/y, with a take-or-pay commitment by ICL on a minimum of 80% of the output of the project. ICL will also provide technical assistance to Allana to develop and oper- ate the mine. Allana is a Canadian company, head- quartered in Toronto and listed on the Toronto Stock Exchange. Augusta Resources' flagship project is the Rosemont Cu/Mo property in southeastern Arizona, USA. According to the Vancouver, Canada-based company, the project is 'construction ready,' having already spent $90 million on equipment—with most major items procured at fixed-price contracts set in 2008-2009—and having paid for and taken delivery of the project's grinding mills and drives. (Photo courtesy of Augusta Resources) Augusta Board Opposes HudBay Buyout Offer EMJ_pg04-27_EMJ_pg04-27 3/3/14 10:31 AM Page 4