Augusta Resource Corp. urged shareholders to reject HudBay Minerals Inc.’s hostile offer and said it controls enough shares to block the deal.
Augusta directors, management and four shareholders holding more than 33 per cent of the miner’s outstanding stock have indicated they will not accept HudBay’s offer, the company said.
“Their bid has virtually no chance of success,” Augusta chief executive Gil Clausen told investors on a conference call.
The stock offer of 0.315 of a HudBay share for every Augusta share is valued at $2.80 based on current prices and is below Augusta’s trading price of $3.20.
HudBay, which is after Augusta for its large Rosemont copper project in Arizona, requires two-thirds of Augusta shareholders to accept its bid in order to succeed.
Analysts have said HudBay would have to increase its offer.
Although Augusta said it can block the unwanted bid, the company told investors it was aggressively pursuing alternatives.
“We will not let HudBay steal this asset,” said Mr. Clausen.
Augusta accuses HudBay of an opportunistic bid that fails to compensate its shareholders, just as the miner gets ready to develop Rosemont.
The company said it has been approached by third parties and has entered into several confidentiality agreements.
Mr. Clausen would not specify the number of agreements and did not provide further detail on what kind of alternatives the company was pursuing.
Toronto-based HudBay has been interested in Rosemont for years and started acquiring small stakes in the Vancouver-based miner in 2010.
The companies started friendly negotiations that year but failed to broker a merger deal.
The miners resumed discussions about Rosemont in 2012 and had on-and-off talks throughout the year and into 2013 when Augusta’s management visited one of HudBay’s key copper projects, Constancia in Peru.
During that period, HudBay continued to buy up Augusta shares and now holds 16 per cent of the company.
HudBay dismissed Augusta’s assertions that it could block the deal, saying that the holders of the 33-per-cent stake have not signed a so-called lock-up agreement, which would stop them accepting the offer.
“Augusta today acknowledged it has no binding or contractual arrangements that prevent investors from tendering shares to the HudBay offer,” a company spokesman said.
“Based on publicly available information, Augusta’s board and management own approximately 10 per cent of Augusta’s shares, while HudBay owns 16 per cent,” he said.
HudBay’s unsolicited approach is one of three hostile bids in the Canadian mining sector so far in 2014. It comes after a tough year for the industry, where many miners lost nearly 50 per cent of their market capitalization.
Its offer expires March 19.