Augusta Resource Corp. said it has attracted a number of potential suitors as it tries to thwart an unwanted bid from the much larger mining company HudBay Minerals Inc.
"We are very pleased with the number and the quality of the participants that we have engaged in the process," Augusta's chief executive Gil Clausen said in an interview.
Augusta's board of directors meets this week to discuss alternatives to HudBay's $422-million offer.
Mr. Clausen would not provide details on the number of companies or entities interested in Augusta's large Rosemont copper project in Arizona. It is unknown whether another bid will eventually emerge.
Rosemont holds nearly six billion pounds of copper reserves and will be the third-largest copper mine in the United States once in production. It would push HudBay closer to the big leagues if the company succeeds in buying Augusta.
"They clearly need this asset," said Mr. Clausen. "It's a significant size to move the needle for any copper producing company."
HudBay, which operates a zinc, copper and gold mine in Flin Flon, Man., and is developing its own big copper mine in Peru, has been interested in the Rosemont project since 2010.
Preliminary merger discussions never got off the ground and instead HudBay acquired a strategic stake in Augusta. It now controls 16 per cent of the company.
HudBay contends that Augusta is in a precarious financial position and will not receive final building permits for Rosemont before the end of June. That would delay crucial investments from Augusta's project partners and derail the company's plans to get its mine into full production by early 2017.
Mr. Clausen disagreed with HudBay's assertions.
"We absolutely are on track and those statements are obviously disingenuous and a bit self-serving," he said. "We fully expect to get all our permits across the line in the second quarter."
Augusta's current $3.34 share price is higher than HudBay's stock offer of $2.62, indicating that investors expect a sweeter bid to emerge.
HudBay recently killed its minimum tender condition and extended the bid until April 2.
Mr. Clausen said it was hard for HudBay to pick up any Augusta stock because its long-term shareholders are holding on.
"They were getting zero traction," he said. "This is all part of a scare tactic to coerce our shareholders … it is doomed to fail."
Mr. Clausen said shareholders representing upwards of 35 per cent of Augusta's shares have indicated that they will not accept HudBay's bid.
(Previously, Augusta said shareholders holding more than 33 per cent would not support the deal.)
Although HudBay's chief executive successfully employed this acquisition strategy when he was at another mining company, it carries some risk.
HudBay could fail to get Augusta and be stuck with a much larger chunk of the company.
"If the bidder waives the minimum tender condition, it runs the risk that it could be stuck with a minority position in the target company, with little or no influence over that investment," said Tina Woodside, a partner with Gowling Lafleur Henderson LLP.
Equally problematic for HudBay is that there are other miners that could mount a credible bid for Augusta.
Vancouver-based Teck Resources Ltd. was once interested in the pricey and massive Las Bambas copper project in Peru. It is unknown whether Teck is looking at Augusta. The company had no comment.
The battle for Rosemont comes as the price of copper has dropped 12 per cent this year on concerns that China's slowing growth will hurt demand for the red metal.