Who said ‘buy and hold’ is dead? SmallCapPower.com takes a look at some Canadian companies that have rewarded patient investors that have held its shares over the past decade. Examining what has made these companies successful will hopefully help one find the next big winning stock for their portfolio.
Augusta Resource Corporation (TSX: AZC): 5,216.7% share price gain unearthed
In 2004, Augusta Resource was searching for diamonds in Canada’s far north. A year later it had entered into an Option Agreement to purchase 100% of the Rosemont Ranch copper deposits near Tucson, Arizona for US$20.8 million, in what would turn out to be a transformative transaction for the company.
Today, Rosemont’s copper resource consists of 5.9 billion Proven and Probably pounds at 0.44% copper, 7.5 billion Measured & Indicated pounds, as well as 1.1 billion Inferred pounds. Production is expected to begin in the first quarter of 2017, with anticipated annual output of 243 million pounds of copper, 5.4 million pounds of molybdenum, and 2.9 million ounces of silver over an estimated 21 year plus mine life. Augusta’s forecast is that it will cost just US$1.02 per pound to mine copper at this project.
Rosemont has the potential to be the third largest copper mine in the United States, possibly producing as much as 10% of that country’s total annual supply. Not surprising, then, was the decision by Canada’s HudBay Minerals to acquire Augusta in a sweeten US$406 million, all stock takeover deal announced on June 23, 2014.
With an after-tax Net Present Value of $2.5 billion for Rosemont (at US$3.50 per pound copper using an 8% discount rate), Augusta Resource shareholders may be feeling a bit short changed by this transaction. Augusta, however, reported just weeks earlier that Rosemont had hit a roadblock after its environmental permit was delayed, a process that had been going on for about seven years. The U.S. federal government apparently told the company that it would restart reviews of the proposed mine’s impacts on eight endangered species after an ocelot was spotted on the site.
As well, last November the Environmental Protection Agency came to the conclusion that Augusta’s proposals to mitigate Rosemont’s damage to area water supplies were “scientifically flawed” and “grossly inadequate.”
Investors who now wish to participate in Rosemont’s potential can do so by holding shares of HudBay Minerals Inc. (TSX: HBM). In HudBay, shareholders have exposure to a diversified miner, with 2014 production estimates of 101,000 to 123,000 ounces of gold/silver, 41,000 to 55,000 tonnes of copper, and 87,000 to 105,000 tonnes of zinc, as opposed to Augusta’s single copper project and associated risks.
HudBay is forecasting a 570% increase in copper output by 2015, with production at its Constancia mine in Peru expected to begin in the fourth quarter of this year. And if Rosemont works out as planned, HudBay could eventually become one of the lowest cost copper producers in the world. Shares of HudBay have risen about 26% so far in 2014 to its recent price of $11 a share.
Read more top performing Canadian stock articles:
http://www.smallcappower.com/posts/article-top-performing-canadian-stocks-over-10-years-1-8-2014
http://www.smallcappower.com/posts/article-top-performing-canadian-stocks-over-10-years-25-7-2014
http://www.smallcappower.com/posts/article-top-performing-canadian-stocks-over-10-years-18-7-2014
Please continue to follow SmallCapPower.com to discover other Top Performing Canadian Stocks Over the Past 10 Years.
