Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Augusta Resource Has Cat Scratch Fever

Ocelot. Source: Wikimedia Commons.

When it rains, it pours, and for Augusta Resource (NYSEMKT: AZC  ) it's raining cats and dogs. Big cats. A recent sighting of the endangered ocelot has thrown new delays in the path of the miner getting its permits approved for the potentially lucrative but still controversial Rosemont copper mine near Tucson, Ariz. It's easy to imagine the disruption could even upend the hostile takeover HudBay Minerals (NYSE: HBM  ) is waging.

Augusta was anticipating the U.S. Forest Service would issue its final decision by the end of the second quarter, but instead informally learned the Fish & Wildlife Service had notified the agency it may need to renew consultations under the Endangered Species Act because of the ocelot sighting. That was subsequently confirmed after the agency said it was legally required to do so under the act, a move that could set back any decision-making on permits by at least four months or so.

Rosemont hosts an estimated 5.9 billion pounds of copper and 194 million pounds of molybdenum and would be capable of producing 243 million pounds of copper annually, or about 10% of all U.S. output.

Although Augusta puts up a brave front by stating both the biological opinion and final environmental impact statement reviewed the animal's possible presence -- ocelots are elusive creatures and documenting their existence in the region is difficult at best -- and mitigation plans for potential harm have already been included, Fish & Wildlife explained the biological opinion said the matter should be revisited if actual ocelot were found and noted there were substantial differences between the two documents that need more review.

In addition to the ocelot, Fish & Wildlife was also concerned about the Huachuca water umbel, a type of parsley, and various fish, amphibians, and birds, such as the Gila topminnow, the Gila chub, the Chiricahua leopard frog, and the Southwestern willow flycatcher. There may also be doubts about the project's impact on the northern Mexican gartersnake and the yellow-billed cuckoo. It seems there's a regular Noah's ark of fauna and flora that clouds the mine's future.

All of which could cause HudBay Minerals to rethink its C$540 million buyout offer that it only recently extended the deadline for. With so many endangered species affected, it's possible permits would never be forthcoming, obviously making the project that much less attractive. Of course, Fish & Wildlife admits there is a lot of uncertainty in the review's ability to account for all the impacts, but since it's forced to take them into consideration, it may represent an ominous warning.

It's also problematic for Augusta because a judge had ruled the poison pill defense it adopted to ward off HudBay's advances could only stay in effect till mid-July. It's doubtful all the reviews necessary will finish before then and the miner might have had difficulty staying afloat till then.

Fortunately for Augusta, just as it was finding out about the ocelot sighting, it was convincing RK Mine Finance Trust, a British hedge fund, to waive provisions from an earlier loan and advance of $6 million that wasn't supposed to be available until permitting was completed. It also has a financing arrangement with Silver Wheaton (NYSE: SLW  ) , but worth $230 million, in exchange for 100% of life-of-mine silver and gold production from Rosemont, but that isn't available yet either because of the permitting preconditions. 

The money won't get Augusta Resource very far, though perhaps far enough to see this ocelot matter resolved. Whether that's in the miner's favor is very much in doubt and the best investors can likely hope for is HudBay doesn't give up its quest and ultimately is successful in buying them out.

Will this stock be your next multibagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year, his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252%, and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 04, 2014, at 6:12 PM, ginenginer wrote:

    That cat was probably trapped down in central Mexico and released near the camera site for the sighting. No Ocelot will reside in that open country since they will only occupy thick forest and dense underbrush sites. The Fish and Wildlife service needs to investigate the illegal trapping and transport into this country of non-native sub species of Ocelot. They supposedly have the picture so need to check closely and see if it is not nesloni sub-species native to country about 1000 miles southeast of Arizona. Either Hud Bay or most likely the local opposition have pulled this off.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2973072, ~/Articles/ArticleHandler.aspx, 9/1/2015 8:41:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


Today's Market

updated Moments ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2014 9:40 AM
AZC $0.00 Down +0.00 +0.00%
Augusta Resource C… CAPS Rating: ***
HBM $4.74 Down -0.27 -5.39%
HudBay Minerals In… CAPS Rating: **
SLW $11.83 Down -0.40 -3.27%
Silver Wheaton Cor… CAPS Rating: ****