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MANAGEMENTS DISCUSSION AND ANALYSIS

****

****

For the Year Ended

December 31, 2010

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MANAGEMENTS DISCUSSION AND ANALYSIS

General

The Managements Discussion and Analysis (MD&A) of
Augusta Resource Corporation and its subsidiaries, (Augusta or the Company)
is dated as at March 29, 2011 and provides an analysis of Augustas audited
financial results for the fiscal year ended December 31, 2010 compared to the
previous year.

The following information should be read in conjunction with
the Companys December 31, 2010 audited consolidated financial statements and
related notes, which are prepared in accordance with generally accepted
accounting principles in Canada (Canadian GAAP) and reconciled to U.S. GAAP in
note 18 of the financial statements. All amounts are presented in U.S. dollars
unless otherwise indicated.

The Companys shares are listed on the Toronto Stock Exchange
(TSX) and the NYSE Amex LLC under the symbol AZC. Additional information on
the Company including the Annual Information Form for the year ended December
31, 2010 is available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.

Forward-Looking Statements

Certain of the statements made and information contained herein
and in the documents incorporated by reference may contain forward-looking
statements or information within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and forward-looking statements or
information within the meaning of the Securities Act(Ontario). Forward-
looking statements or information include statements regarding the expectations
and beliefs of management. Forward-looking statements or information include,
but are not limited to, statements or information with respect to known or
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements or information.
Forward-looking statements or information are subject to a variety of risks and
uncertainties which could cause actual events or results to differ from those
reflected in the forward-looking statements or information, including, without
limitation, risks and uncertainties relating to Augustas plans at its Rosemont
property and other mineral properties, the interpretation of drill results and
the estimation of mineral resources and reserves, the geology, grade and
continuity of mineral deposits, the possibility that future exploration,
development or mining results will not be consistent with the Companys
expectations, metal recoveries, accidents, equipment breakdowns, title matters,
labor disputes or other unanticipated difficulties with or interruptions in
production and operations, the potential for delays in exploration or
development activities or the completion of feasibility studies, the inherent
uncertainty of production and cost estimates and the potential for unexpected
costs and expenses, commodity price fluctuations, currency fluctuations, failure
to obtain adequate financing on a timely basis, the effect of hedging
activities, including margin limits and margin calls, regulatory restrictions,
including environmental regulatory restrictions and liability, the speculative
nature of mineral exploration, dilution, competition, loss of key employees, and
other risks and uncertainties. Should one or more of these risks and
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in forward-looking
statements. Accordingly, readers are advised not to place undue reliance on
forward-looking statements or information. Augusta does not expect to update
forward-looking statements or information continually as conditions change, and
you are referred to the full discussion of the Companys business contained in
the Companys reports filed with the securities regulatory authorities in Canada
and the United States. Readers are also advised to consider such forward-looking
statements, which speak only as of the date the statements were made.

Description of the Business

Augusta and its wholly owned subsidiary, Rosemont Copper
Company (RCC), are engaged in the exploration and development of mineral
properties in Pima County, Arizona. Augustas main asset is the Rosemont copper
project (Rosemont) which is currently in the permitting stage. The Company
anticipates that the Rosemont Draft Environmental Impact Study (DEIS) will be
released in the second quarter of 2011. A Record of Decision (ROD) is expected to be
issued late in the fourth quarter of 2011 and construction to begin in early
2012. Rosemont is expected to be the one of the largest copper mines in the
United States, accounting for approximately 10% of total U.S. copper
production.

|                            
|----------------------------
|Augusta Resource Corporation

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

The Rosemont property is comprised of approximately 15,000
acres (6,070 hectares) of patented and unpatented claims and fee land in
addition to approximately 15,000 acres (6,070 hectares) of leased grazing
ranchland. Rosemont is approximately 50 kilometres southeast of Tucson, Arizona
near a number of large porphyry type producing copper mines operated by
Freeport-McMoRan Copper & Gold Inc. and ASARCO LLC (ASARCO). Rosemont
contains an open-pit mineable copper/molybdenum/silver skarn deposit, as well as
other exploration targets.

Corporate Developments

On November 16, 2010 the DEIS was delivered to the US Forest
Services, Coronado National Forest. Upon completion of the various levels of
review by the Regional Forest Service Office and the cooperating agencies, the
DEIS will be printed and released to the public, which starts the 90-day
consultation period. The Company expects the DEIS will be released in the second
quarter of 2011.

On September 27, 2010, the Company appointed Letitia Cornacchia
to the position of Vice-President, Investor Relations and Corporate
Communications. Ms. Cornacchia has 10 years experience in investor relations and
corporate communications. Prior to joining Augusta, Ms. Cornacchia was the
Director of Investor Relations at Yamana Gold. Ms. Cornacchia has a commerce
degree with a major in finance from the Sauder School of Business at the
University of British Columbia and has a Chartered Financial Analyst
designation.

On September 16, 2010, the Companys wholly-owned subsidiary,
RCC, entered into an Earn-In Agreement with United Copper & Moly LLC
(UCM), a company formed by Korea Resources Corporation and LG International
Corporation to hold its interest in the Rosemont joint venture (Rosemont JV or
the Joint Venture). UCM can acquire up to a 20% interest in Rosemont by
funding $176 million (the Investment) of project expenditures. UCM will fund a
maximum $70 million for permitting, engineering, long-lead equipment purchases
and ongoing support activities (collectively, Pre-Construction Costs) and the
remaining $106 million for construction. UCM and RCC have also entered into a
Joint Venture Agreement to establish their roles and responsibilities in the
joint venture and agreed to enter into an off-take agreement for 30% of the
copper concentrates and 20% of copper cathode and molybdenum concentrates
produced annually by Rosemont. In the fourth quarter 2010 UCM had contributed
$36.2 million to earn a 4.1% interest in the Rosemont JV.

On August 27, 2010, the Company completed a private placement
with HudBay Minerals Inc. (HudBay) for the sale of 10,905,590 units at
Cdn$2.75 per unit for gross proceeds of approximately Cdn$30 million. Each unit
consists of one common share and one-half of a share purchase warrant. Each full
warrant is exercisable into one common share at a price of Cdn$3.90 per share
for an eighteen month period expiring on February 27, 2012. On March 18, 2011,
HudBay exercised all of its share purchase warrants for proceeds of Cdn$21.3
million.

On April 23, 2010, the Company completed a $43 million senior
secured loan agreement and a copper concentrate off-take agreement with Red Kite
Explorer Trust (Red Kite). The proceeds from the loan were used to retire the
$40 million Sumitomo loan facility, $1.89 million of accrued interest and two
outstanding notes payable of $2.0 million. Under the copper concentrate off-take
agreement, once Rosemont commences commercial production, the Company will
supply Red Kite with 16.125% of copper concentrate production per year at market
terms. This agreement ends when 483,750 dry tonnes of concentrate have been
delivered to Red Kite.

On March 12, 2010 the Company completed the sale of 11,820,000
common shares to a syndicate of underwriters at a price of Cdn$2.75 per share
for gross proceeds of Cdn$32.51 million ($31.91 million).

Page 2 of 16

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

On February 11, 2010 the Company signed a definitive agreement
with Silver Wheaton Corporation (Silver Wheaton) for the sale of all of the
Companys silver and gold produced from Rosemont. Silver Wheaton will pay
Augusta upfront cash payments of $230 million and production payments of $3.90
per ounce of silver and $450 per ounce of gold delivered, or the prevailing
market price, if lower, during the mine life. The drawdown of the cash payments
is subject to Augusta receiving the ROD.

Permitting and Environmental Impact Statement

The Environmental Impact Statement process (EIS process) is
managed by the United States Forest Service (USFS). The Record of Decision
(ROD) will be issued by the USFS and Bureau of Land Management for mining
activities on public land and by the Army Corps of Engineers for mining
activities within jurisdictional waters of the United States.

Currently, our best estimate, from the amended Memorandum of
Understanding with Coronado National Forest (CNF), anticipates the release of
Rosemonts Draft Environmental Impact Statement (DEIS) in the second quarter
of 2011 with public hearings scheduled for the third quarter 2011. This follows
an April 30, 2010 statement from CNF that the DEIS would be delayed in order to
complete additional native plant studies and groundwater modeling of development
plan alternatives. CNF has completed field surveys for native plants that live
on some of the sites on the land where the Company has proposed to put the waste
rock and mine tailings. In addition, the DEIS project teams conducting detailed
groundwater hydrology studies have completed further calculations on potential
impacts and mitigation measures for the alternative facility sites under
evaluation in the DEIS. The delivery of these two technical reports completes
the submissions from Rosemont to CNF and their third party contractors. The DEIS
was delivered to the CNF on November 16, 2010 for internal review. Upon
completion of these reviews the DEIS will go to printing at the Government
Printing Office and then be released to the public for their review and
comments.

The Company continues working on completing the necessary work
to obtain the following permits:

- The Aquifer Protection Permit when issued by the Arizona Department of
  Environmental Quality will establish the operating standards and controls so
  that operations do not degrade groundwater;
- The Air Permit when issued by the Pima County Department of Environmental
  Quality will establish the standards for air quality and emissions control for
  mining operations;
- The Certificate of Environmental Compliance Process managed by the Arizona
  Corporation Commission. The ultimate power route will be determined by the
  Commission and the permit will be issued to Tucson Electric Power. The timing
  for this process has been set so the Right of Way (below) will be the one
  approved for use by the Commission; and
- The State Land Department Right of Way valuation and approval process will
  provide a route to get water and power to Rosemont.

Engineering and Ongoing Support Activities

The Company completed the basic engineering phase of the
Rosemont project in the fourth quarter of 2010. Detailed engineering work has
been adjusted to match the revised construction schedule. Since the commencement
of permitting activities, the Company has maintained an active community
relations program which includes maximizing the economic benefits to the region
in which the Rosemont project operates in, support of local and regional
activities and maintaining a community outreach program.

Page 3 of 16

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

Rosemont Project

As at December 31, 2010 Augustas capitalized costs on the
Rosemont project were as follows:

|Mineral properties                  |   |            |   |   |            | 
|----------------------------------- | - | ---------- | - | - | ---------- | 
|                                    |   | 2010       |   |   | 2009       | 
|Balance, December 31, 2009 and 2008 | $ | 25,665,438 |   | $ | 25,462,869 | 
|Sale of interest                    |   | (1,057,978 | ) |   | -          | 
|Acquisition costs                   |   | 63,991     |   |   | 86,358     | 
|Capitalized
      interest          |   | 16,913     |   |   | 116,211    | 
|Balance, December 31, 2010 and 2009 | $ | 24,688,364 |   | $ | 25,665,438 | 

Deferred development costs

|                                                                   |   | 2010       |   |   | 2009       | 
|------------------------------------------------------------------ | - | ---------- | - | - | ---------- | 
|                                                                   |   |            |   |   |            | 
|Balance, December 31, 2009 and 2008                                | $ | 64,516,724 |   | $ | 41,717,224 | 
|Permitting, engineering and on-going support activities,
      net |   | 31,298,587 |   |   | 21,147,900 | 
|Sale of interest                                                   |   | (2,829,158 | ) |   | -          | 
|Capitalized loan interest and financing charges                    |   | 4,435,745  |   |   | 1,091,500  | 
|Capitalized stock compensation expense                             |   | 1,186,919  |   |   | 560,100    | 
|Balance, December
      31, 2010 and 2009                          | $ | 98,608,817 |   | $ | 64,516,724 | 

|Deposits on long-lead equipment                            |   |            |   |   |            |  
|---------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                           |   | 2010       |   |   | 2009       |  
|                                                           |   |            |   |   |            |  
|Balance, December 31, 2009 and 2008                        | $ | 35,490,072 |   | $ | 15,282,230 |  
|Deposits made during the year                              |   | 26,613,307 |   |   | 14,991,717 |  
|Sale of interest                                           |   | (2,579,746 | ) |   | -          |  
|Contractual obligations to be paid in the following period |   | -          |   |   | 5,254,215  |  
|Reclassifications                                          |   | -          |   |   | (38,090    | )
|Balance, December
      31, 2010 and 2009                  | $ | 59,523,633 |   | $ | 35,490,072 |  

Financing

On September 16, 2010, the Company entered into an Earn-In
Agreement with UCM to earn up to a 20% interest in Rosemont JV by funding $176
million of project expenditures. UCM will fund a maximum $70 million of
Pre-Construction Costs and the remaining $106 million for construction. During
the fourth quarter of 2010 UCM had contributed $36.2 million to earn a 4.1%
interest in the Rosemont JV.

On August 27, 2010, the Company completed a private placement
with HudBay Minerals Inc. (HudBay) for the sale of 10,905,590 units at
Cdn$2.75 per unit for gross proceeds of approximately Cdn$30 million. Each unit
consists of one common share and one-half of a share purchase warrant. Each full
warrant is exercisable into one common share at a price of Cdn$3.90 per share
for an eighteen month period expiring on February 27, 2012. On March 18, 2011,
HudBay exercised all of its share purchase warrants for proceeds to the Company
of Cdn$21.3 million.

On April 23, 2010, the Company completed a $43 million senior
secured loan agreement and a copper concentrate off-take agreement with Red
Kite. The proceeds from the loan were used to retire the $40 million Sumitomo
loan facility, $1.89 million of accrued interest and two outstanding notes
payable of $2.0 million.

Page 4 of 16

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

On March 12, 2010 the Company completed the sale of 11,820,000
common shares to a syndicate of underwriters at a price of Cdn$2.75 per share
for gross proceeds of Cdn$32.51 million ($31.91 million).

On February 11, 2010 the Company signed a definitive agreement
with Silver Wheaton Corporation (Silver Wheaton) for the sale of all of the
Companys silver and gold produced from Rosemont. Silver Wheaton will pay
Augusta upfront cash payments of $230 million and production payments of $3.90
per ounce of silver and $450 per ounce of gold delivered, or the prevailing
market price, if lower, during the mine life. The drawdown of the cash payments
is subject to Augusta receiving the ROD.

Results of operations

|                                                                              |   | Twelve months ended |  
|----------------------------------------------------------------------------- | - | ------------------- | -
|                                                                              |   | December 31,        |  
|                                                                              |   | 2010                |  
|                                                                              |   |                     |  
|EXPENSES                                                                      |   |                     |  
|Salaries and benefits                                                         | $ | 1,692,925           |  
|Stock-based compensation                                                      |   | 1,229,926           |  
|Legal, Accounting and Audit                                                   |   | 1,505,182           |  
|Travel                                                                        |   | 223,968             |  
|Consulting and Advisory services                                              |   | 230,422             |  
|Filing and Regulatory fees                                                    |   | 120,338             |  
|Recruiting fees and relocation costs                                          |   | 55,500              |  
|Office and Administration                                                     |   | 226,925             |  
|Rent                                                                          |   | 168,211             |  
|Investor Relations                                                            |   | 118,325             |  
|Directors' fees                                                               |   | 134,094             |  
|Insurance                                                                     |   | 168,379             |  
|Membership and Conferences                                                    |   | 12,148              |  
|Amortization                                                                  |   | 181,499             |  
|Fiscal and Advisory services                                                  |   | 15,363              |  
|Loss from operations                                                          |   | (6,083,205          | )
|Interest and other income                                                     |   | 669,718             |  
|Other expenses                                                                |   | (706,311            | )
|Gain on held-for-trading securities                                           |   | 118,462             |  
|Foreign exchange gains                                                        |   | 612,840             |  
|Loan interest and
      finance charges                                       |   | (50,684             | )
|Loss from continuing operations                                               |   | (5,439,180          | )
|Loss from
      discontinued operations                                       |   | -                   |  
|Net loss for the period                                                       | $ | (5,439,180          | )
|                                                                              |   |                     |  
|Basic and diluted loss per share                                              |   |                     |  
|Continuing operations                                                         | $ | (0.04               | )
|Discontinued operations                                                       |   | -                   |  
|Basic and diluted
      loss per share                                        | $ | (0.04               | )
|                                                                              |   |                     |  
|Weighted average number of shares outstanding - basic and
      fully diluted |   | 123,283,762         |  

For the year ended December 31, 2010, the Company reported a
$5.4 million loss from continuing operations or $0.04 loss per share compared to
a $5.0 million loss or $0.05 loss per share for the previous year. Net loss for
the year was $5.4 million or $0.04 loss per share compared to $5.5 million net
loss or $0.06 loss per share for the previous year. Included in the
2009 loss was a non-cash $1 million write-down of the Ely receivable. Excluding
the write-down, the 2010 net loss would have been $1 million higher than the
previous year.

Page 5 of 16

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

The 2010 operating expenses increased $0.8 million over 2009
due primarily to $0.7 million spent on legal and tax advisory services and $0.1
million spent on consulting services on IFRS conversion, Sarbanes Oxley and
other consulting services. Other expenses also increased $0.2 million to $0.7
million in 2010 due primarily to higher ranch maintenance costs and cattle
purchases compared to the previous year..

Summary of Quarterly Results

Select financial information for each of the eight most
recently completed quarters of fiscal 2010 and 2009 are as follows:

Net Loss andInterest and Other
    
    
    Comprehensive
    
    
    Basic and DilutedIncome/Expenses
    
    
    Loss
    
    
    Loss Per ShareQ4 2010
    
    213,422
    
    
    (1,193,358
    )
    
    (0.01
    )Q3 2010
    
    115,641
    
    
    (1,094,003
    )
    
    (0.01
    )Q2 2010
    
    141,484
    
    
    (2,212,418
    )
    
    (0.02
    )Q1 2010
    
    199,171
    
    
    (939,401
    )
    
    (0.01
    )Q4 2009
    
    62,673
    
    
    (2,139,179
    )
    
    (0.02
    )Q3 2009
    
    25,619
    
    
    (943,401
    )
    
    (0.01
    )Q2 2009
    
    9,241
    
    
    (892,178
    )
    
    (0.01
    )Q1 2009
    
    145,131
    
    
    (1,553,183
    )
    
    (0.02
    )


Factors that can cause fluctuations in the Companys quarterly
results include the timing of stock option grants and foreign exchange gains or
losses related to the Companys holding in Canadian dollar denominated working
capital balances. Since the Companys Rosemont project is not yet in production,
the Company believes that its losses and its loss per share is not a primary
concern to investors in the Company.

Liquidity and capital resources

At December 31, 2010, the Company had $31.5 million in cash and
cash equivalents, of which $6.1 million was held by the Rosemont JV. The Company
spent $4.6 million on operating activities during 2010 compared with $4.3
million expended on operating activities for the same period last year. The
Company had working capital of $27.3 million at December 31, 2010 compared to a
working capital deficit of $47.5 million at the beginning of the year. The
December 31, 2009 working capital deficit included the $42.2 million Sumitomo
debt and two promissory notes (collectively, the Debt) that were due in 2010.
On April 23, 2010 the Company replaced the Debt with a new two-year $43 million
senior secured loan. The loan was recorded as long-term resulting in an improved
working capital position.

The Company generated $99.9 million in cash from financing
activities during the year ended December 31, 2010 compared to $37.0 million of
cash generated in 2009. The Company completed two equity financings during 2010,
the first closed on February 23, 2010 which raised gross proceeds of $31.9
million (Cdn$32.5 million) from the issuance of 11,820,000 units at Cdn$2.75 per
unit. The second financing was with HudBay Minerals Inc. and closed on August
27, 2010. The Company issued 10,905,590 units to HudBay at a price of Cdn$2.75
per unit for gross proceeds of $28.4 million (Cdn$30.0 million). Each unit
consists of one common share and one-half share purchase warrant with each whole
warrant exercisable into one common share at a price of Cdn$3.90 per share for
18 months and may be subject to an accelerated expiry if the Companys stock
price traded above Cdn$4.25 for ten consecutive days. The Company also received
$11.1 million from the exercise of 2,220,565 stock options and 3,414,066 share
purchase warrants. On April 23, 2010, the Company also completed a $43 million
senior secured loan and a copper concentrate off-take agreement with Red Kite.
The loan bears interest at LIBOR plus 4.5% and matures on the earlier of April
21, 2012 or the date of closing of a Rosemont senior debt project financing.

Page 6 of 16

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

Upon commencement of commercial production the Company will
supply Red Kite with 16.125% of Rosemonts annual copper concentrate production.
The off-take agreement ends when 483,750 dry tonnes of concentrate have been
delivered to Red Kite. During the fourth quarter 2010, UCM had contributed cash
of $36.2 million to earn a 4.11% interest in the Rosemont joint venture.

On October 20, 2010, the Company exercised the ASARCO
pre-payment option to early settle the ASARCO obligation with a $2.7 million
payment.

During 2010 the Company spent $70.9 million in investing
activities consisting of $31.9 million on deposits on long-lead equipment
purchases, $36.9 million on permitting, engineering and other Rosemont related
expenditures and $2.1 million on capital asset additions.

The Company has off-balance sheet arrangements under its
agreement with Silver Wheaton Corp. (Silver Wheaton) whereby the Company has
agreed to sell to Silver Wheaton all of its silver and gold ounces produced at
the lower of $3.90 per ounce of silver and $450 per ounce of gold delivered, or
prevailing market price, in exchange for upfront cash payments of $230 million
and contracts in place for the purchase of long-lead equipment. There were no
material capital lease agreements.

The Company does not expect to generate any significant revenue
from its operations until Rosemont commences commercial production.

To fund its planned 2011 capital expenditures program, the
Company expects most of the expenditures will be covered by its existing cash,
the remaining $33.8 million that UCM will contribute towards the maximum $70.0
million in permitting, engineering and ongoing support activities and proceeds
from the exercise of options and warrants. The Company may raise additional
funds through debt and/or equity offerings for additional working capital to
cover unplanned capital expenditures. Project financing is expected to be in
place before the end of the fourth quarter of 2011 in preparation for
construction in early 2012. In the meantime, the Company will continue to
monitor its cash flows and operate in a manner to preserve cash while the
Company secures its funding for Rosemont.

The following table lists the known contractual obligations as
at December 31, 2010:

|in thousands of
      U.S. dollars        |   | < Year 1 |  |   | 1 - 2 Years |  |   | 2 - 3 Years |  |   | 3 - 4 Years |  |   | 4 - 5 Years |  |   | Total   | 
|----------------------------------------- | - | -------- |  | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | ----------- |  | - | ------- | 
|Accounts payable and accrued liabilities  | $ | 5,209    |  | $ | -           |  | $ | -           |  | $ | -           |  | $ | -           |  | $ | 5,209   | 
|Long-term debt                            |   | -        |  |   | 42,033      |  |   | -           |  |   | -           |  |   | -           |  |   | 42,033  | 
|Deposits on long-lead equipment purchases |   | 50,978   |  |   | 59,232      |  |   | 2,229       |  |   | -           |  |   | -           |  |   | 112,439 | 
|Land purchases                            |   | 360      |  |   | -           |  |   | -           |  |   | -           |  |   | -           |  |   | 360     | 
|Operating lease obligations               |   | 174      |  |   | 71          |  |   | 55          |  |   | 38          |  |   | 38          |  |   | 376     | 
|                                          | $ | 56,721   |  | $ | 101,336     |  | $ | 2,284       |  | $ | 38          |  | $ | 38          |  | $ | 160,417 | 

Outlook

The main focus in 2011 will be to continue with the detailed
engineering, including earthwork, civil and structural design. Ongoing
discussions with vendors are being held with respect to transportation storage,
off-loading facilities and smelters for the copper and molybdenum concentrates
as well as freight being delivered during the construction phase of the
project.

The Company continues with the federal, state, and local
regulatory approval process. The process relies on completion of an
Environmental Impact Statement (EIS) which is being managed by the USFS. A
DEIS has already been submitted to the US Forest Service, Coronado National
Forest for their internal review. Subsequent levels of review will include the
Regional Forest Service office and the cooperating agencies and on completion of these reviews the DEIS will then
be printed and released to the public. This will be the start of the 90-day
public consultation period. The Company anticipates the Rosemont DEIS will be
released to the public in the second quarter with public hearings scheduled for
the third quarter of 2011. The Company expects the ROD to be issued in the
fourth quarter of 2011.

Page 7 of 16

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

The Companys community relations campaign of meeting with
community leaders, neighbourhood groups and public tours of the Rosemont project
site will continue in 2011 to promote the economic benefits and the Companys
plans on alleviating the impact of mining activities to the environment.

The Company will commence project financing activities in the
second quarter of 2011 with the goal of securing project financing in the fourth
quarter 2011. Construction is expected to start in early 2012.

The Company has planned expenditures totalling $84.7 million
for 2011, including $15.3 million for the completion of detail engineering,
$14.0 million for environmental impact study and permitting and $34.3 million
for deposits on long-lead equipment, land and other capital asset purchases. The
Company plans to hire additional project and operations personnel as the Company
gears up for the start of construction.

Based on anticipated 2011 expenditures on the Rosemont project,
the Company believes that its current cash position, anticipated proceeds from
the exercise of options and warrants and the $33.8 million remaining on UCMs
maximum $70 million funding for permitting, engineering and ongoing support
activities at Rosemont may be sufficient to meet its obligations and planned
expenditures as they become due. However, unplanned expenditures or delays in
the permitting process may require the Company to raise funds from equity or
debt financings. Unforeseen market events and conditions could impede access to
capital or increase the cost of capital. These events could have an adverse
effect on Augustas ability to fund its working capital and other capital
requirements and hence, there is no assurance that these initiatives will be
successful.

Transactions with Related Parties

The Company shares rent, salaries and administrative services
with companies related by common directors and officers. As at December 31,
2010, included in due from related parties was $0.01 million due from two
companies for the recovery of rent, salaries and administration expenses.

On July 1, 2010, the Company and the related companies formed a
management services company (ManCo.) to share personnel costs, office rent and
other administration costs to each of the companies under a management services
agreement. Each company holds an equal share in ManCo. For the six months ended
December 31, 2010, Manco charged the Company $0.44 million for its share of
salaries, rent and other administrative expenses. As at December 31, 2010, there
was no balance owing.

On January 22, 2010, the Company borrowed $3 million (Loan)
from a related company to complete a scheduled deposit on a long-lead equipment
purchase. The amount borrowed bore an interest rate of one-month LIBOR plus 4%
and was repaid on March 12, 2010. Interest paid on the loan was $0.02 million
and was capitalized to the related asset.

Included in accounts payable as at December 31, 2010, was $0.07
million (December 31, 2009 - $0.01 million receivable) owing to an officer and
other companies related to the officer.

All related party transactions are recorded at the exchange
amount.

Proposed Transactions

There are no undisclosed proposed transactions that will
materially affect the performance of the Company.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

Share Capital

The share capital as at March 29, 2011 is as follows:

|                                     |  |                  |  |   | Weighted average | 
|------------------------------------ |  | ---------------- |  | - | ---------------- | 
|                                     |  |                  |  |   | exercise price   | 
|                                     |  | Number of shares |  |   | (Cdn$)           | 
|Issued and outstanding common shares |  | 141,928,493      |  | $ | -                | 
|Restricted share units               |  | 295,002          |  | $ | -                | 
|Options                              |  | 8,166,237        |  | $ | 2.96             | 
|Warrants                             |  | 1,791,700        |  | $ | 3.90             | 
|Fully diluted                        |  | 152,181,432      |  |   |                  | 

|(a) | As at March 25, 2011, the Company had 5,731,610 common
      shares available for granting stock options under the Companys Stock
      Option Plan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

FINANCIAL INSTRUMENTS

Under Canadian GAAP, financial instruments are classified into
one of the following five categories: held-for-trading, held to maturity
investments, loans and receivables, available-for-sale financial assets and
other financial liabilities.

The carrying values of the Companys financial instruments are
classified into the following categories:

|                                |   | 2010        |   |   | 2009        |  
|------------------------------- | - | ----------- | - | - | ----------- | -
|Cash and cash equivalents       | $ | 31,505,341  |   | $ | 6,247,217   |  
|Loans and receivables           |   | 2,734,365   |   |   | 2,657,253   |  
|Other financial liabilities (1) | $ | (47,134,146 | ) | $ | (58,154,125 | )

(1) Includes accounts payable, accrued liabilities and
long-term debt.

Financial instruments are initially recognized at fair value and financial instruments designated as loans and receivables and other financial liabilities are subsequently measured at amortized cost, with gains and losses recognized in the statements of operations in the period in which the gain or loss occurs.

The Company has estimated the fair values of its financial
instruments based on appropriate valuation methodologies. These fair values are
not materially different from their carrying value.

RISKS ARISING FROM FINANCIAL INSTRUMENTS AND RISK
MANAGEMENT

The Companys activities expose it to a variety of financial
risks; market risk (including foreign exchange), credit risk and liquidity risk.
Reflecting the current stage of development of the Companys Rosemont project,
the Companys overall risk management program focuses on facilitating the
Companys ability to continue as a going concern and seeks to minimize potential
adverse effects on the Companys ability to execute its business plan.

Risk management is the responsibility of the corporate finance
function. Material risks are identified and monitored and are discussed by
senior management and with the audit committee of the Board of Directors.

Foreign exchange risk

On January 1, 2009, the Company changed its functional and
reporting currency from Canadian to U.S. dollars. As a result, the Company is
exposed to currency risks on its Canadian dollar denominated working capital
balances due to changes in the USD/CAD exchange rate.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

The Company issues equity in Canadian dollars but a majority of
its expenditures are in U.S. dollars. The Company purchases U.S. dollars based
on its near term forecast expenditures and currently does not hedge its exposure
to currency fluctuations.

The Company is exposed to currency risk through the following
assets and liabilities denominated in Canadian dollars:

|                                               |   | 2010       |   |   | 2009      |  
|---------------------------------------------- | - | ---------- | - | - | --------- | -
|Cash and cash equivalents                      | $ | 9,391,768  |   | $ | 4,942,433 |  
|Accounts receivable                            |   | 88,580     |   |   | 253,350   |  
|Prepaid expenses                               |   | 53,336     |   |   | 9,966     |  
|Accounts payable
      and accrued liabilities |   | (1,004,191 | ) |   | (512,029  | )
|                                               | $ | 8,529,493  |   | $ | 4,693,720 |  

Based on the net Canadian dollar denominated asset and
liability exposures as at December 31, 2010, a 10% change in the USD/CAD
exchange rate will impact the Companys earnings by approximately $0.78 million
(2009 - $0.41 million).

Credit risk

Credit risk arises from cash and cash equivalents held with
banks and financial institutions, as well as credit exposure on outstanding
accounts receivable. The maximum exposure to credit risk is equal to the
carrying value of the financial assets.

The Companys cash and cash equivalents are held at a large
Canadian chartered bank and a large US bank and are invested in either short-term
GICs or high interest saving accounts. Management believes the risk of loss is
remote.

The other asset and significant portion of the accounts
receivable relates to an Ely receivable, which has a fair value of $2.7 million
and is payable over the next five years to 2015 and warrants exercisable into
2,000,000 Ely common shares through to May 16, 2011. In the event that Ely does
not make the required payments  Augusta can take back the common shares
of DHI Minerals and DHI Minerals US or the properties in question. Should
Augusta reacquire the DHI shares or properties, an asset impairment assessment
may be required.

Liquidity risk

Liquidity risk arises through excess of financial obligations
over available financial assets due at any point in time. The Companys
objective in managing liquidity risk is to maintain sufficient readily available
reserves in order to meet its liquidity requirements at any point in time. The
Company achieves this by maintaining sufficient cash and cash equivalents.

Based on our 2011 planned permitting and engineering
expenditures and on-going support activities at the Rosemont project, the
Company believes that our current cash reserves along with continued funding by
UCM to earn its 20% interest in the Rosemont project will be sufficient to meet
its obligations as they become due. However, additional equity financing may be
required to fund additional unplanned capital purchases.

CRITICAL ACCOUNTING ESTIMATES

The most critical accounting estimates that may affect the
Companys financial position are those requiring estimates of the recoverability
of its capitalized mineral property expenditures, deferred development costs and
the determination of the fair value of stock-based compensation. Management believes the estimates used are reasonable; however, actual
results could differ materially from those estimates and, if so, would impact
future results of operations and cash flows.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

Mineral properties and deferred development
costsWhen it has been established that a mineral deposit is commercially
mineable and an economic analysis has been completed, the costs incurred
subsequently to develop a mine on the property are capitalized and amortized
against future production following commencement of commercial production, or
written off if the property is sold, allowed to lapse or abandoned. The carrying
value of mineral properties and deferred development costs represent costs
incurred to date less write-downs, if any.

Stock-based compensationThe Company grants stock
options to employees, directors and consultants under its stock option plan. The
Company uses the fair value method of accounting for all stock based
compensation awards. Under this method, the Company determines the fair value of
the compensation expense for all awards on the date of the grant using the
Black-Scholes pricing model. The fair value is expensed over the vesting period
of the awards. In estimating the fair value, management is required to make
certain assumptions regarding such items as the expected life of the options and
forfeiture rates and expected volatility. Changes in the assumptions used to
estimate fair value could result in materially different results.

NEW ACCOUNTING PRONOUNCEMENTS

In January 2009, the CICA issued CICA Handbook Section 1582,
Business Combinations, which replaces former guidance on business
combinations. Section 1582 establishes principles and requirements of the
acquisition method and related disclosures. In addition, the CICA issued Section
1601 Consolidated Financial Statements, and Section 1602, Non-Controlling
Interest, which replaces existing guidance. Section 1601 establishes standards
for the preparation of consolidated financial statements and Section 1602
provides guidance on accounting for non-controlling interest in a subsidiary in
consolidated financial statements subsequent to a business combination. These
standards apply prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after January 1, 2011 and early adoption is permitted. The Company will
adopt these pronouncements at January 1, 2011; the result of this adoption would
have no impact on the consolidated balance sheets.

International Financial Reporting Standards

In 2006 the Canadian Accounting Standards Board (AcSB)
published a new strategic plan that will significantly affect financial
reporting requirements for Canadian companies. The AcSB strategic plan outlines
the convergence of Canadian GAAP with IFRS over an expected five year
transitional period. In February 2008, the AcSB announced that 2011 is the
changeover date for publicly-listed companies to use IFRS, replacing Canadian
GAAP. The changeover date is for interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011. The conversion
from Canadian GAAP to IFRS as a primary basis for preparing the Companys
consolidated financial statements has and/or will result in changes to the
Companys accounting policies, information technology and data systems, internal
control over financial reporting, disclosure controls and procedures and
financial expertise and training requirements.

The Companys transition date is January 1, 2011 and will
require the restatement for comparative purposes of amounts reported by the
Company for each of the quarter beginning in January 1, 2010. The Company has
commenced the process to transition from Canadian GAAP to IFRS. As part of the
transition process, the Company has provided or will provide IFRS specific
training to senior financial reporting personnel and directors. The transition
process consists of four primary phases: scoping and diagnostic phase; impact
analysis, evaluation and design phase; implementation and review phase and
post-implementation.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

- Scoping and diagnostic phase  A preliminary diagnostic review was
  completed by an external consultant which included the determination, at a
  high level, of the financial reporting differences under IFRS and the key
  areas that may be impacted.
- The areas with the highest potential impact were identified to include the
  basis of consolidation, impairment of assets, financial instruments and
  initial adoption of IFRS under the provisions of IFRS 1.
- Analysis, quantification and evaluation phase  In this phase, each area
  identified from the scoping and diagnostic phase will be addressed in order of
  descending priority. This phase involves specification of changes required to
  existing accounting policies, information systems and business processes,
  together with an analysis of policy alternatives allowed under IFRS and
  development of draft IFRS financial statement content. The Company anticipates
  that there will be changes in accounting policies and that these changes may
  materially impact the financial statements. The Company expects to complete
  the quantification of the changes to the financial statements in the second
  quarter of 2011. The areas where the Company expects material differences are
  described below.
- Implementation and review phase  This phase includes the execution of any
  changes to information systems and business processes and completing formal
  authorization processes to approve recommended accounting policy changes. It
  will also include the collection of financial information necessary to compile
  IFRS-compliant financial statements and audit committee approval of IFRS
  financial statements. IFRS 1, First-Time Adoption of International Financial
  Reporting Standards, provides entities adopting IFRSs for the first time with
  a number of optional exemptions and mandatory exceptions, in certain areas, to
  the general requirement for full retrospective application of IFRSs. The
  various accounting policy choices available are being assessed and those
  determined to be most appropriate in our circumstances will be implemented.
- Post-implementation  Involves the maintenance of sustainable IFRS
  compliant financial data and processes for fiscal 2011 and beyond. This phase
  will be carried out throughout 2011. Management does not anticipate any
  significant issues with completing this phase of its transition plan.

During the fourth quarter of 2010, the Company continues to
execute on the implementation phase of its changeover plan. During this period,
specific project milestones were achieved including determining and selecting
the accounting policies and the completion of the white papers. The draft
opening balance sheet is complete and progress has been made on the mock-up
financial statements and notes under IFRS. As the Company completes the
implementation phase, and as changes to IFRS standards may continue to occur,
the differences and impacts described below may be subject to change.

The Company has evaluated the options available under IFRS 1,
and are expected to apply the following optional exemptions:

- To apply IFRS 2, Share-Based Payments, only to share-based payments that
  have not vested as of the transition date; and
- To elect to reset the cumulative translation balance to zero, at the date
  of transition.

The Company has identified the significant accounting
differences between Canadian GAAP and IFRS that will have an impact on the
consolidated financial statements. This is not, however, a complete list of
changes that will result from the transition to IFRS. It is intended only to
highlight the areas that we believe to be most significant.

Exploration and evaluationUnder Canadian GAAP, exploration
and evaluation costs incurred prior to establishing proven and probable reserves
for an exploration property or to expand existing properties are expensed may be
capitalized. Under IFRS, exploration and evaluation costs are expensed as
incurred until such time as the Company expects the mineral resources will be
converted to mineral reserves within a reasonable period.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

Functional currencyUnder Canadian GAAP, financial
statements of foreign operations are translated into the functional currency
using either temporal method for integrated operations or current rate method
for self sustaining operations. Under IFRS, each foreign entity determines its
own functional currency. The financial statements are translated into the
presentation currency using the current rate method with resulting exchange
differences recorded in Other Comprehensive Income.

Share issue costsUnder Canadian GAAP, share issue costs can
either by charged to share capital or to deficit. Under IFRS, share issue costs
are charged to share capital. The Companys policy was to charge share issue
costs to deficit.

Interests in joint ventureUnder Canadian GAAP and IFRS, an
interest in a joint venture is accounted for using proportionate consolidation.
On the formation of the joint venture the Company recognizes a deferred gain on
the transfer of the mineral property to the joint venture to the extent of the
other participants interest. Under IFRS the gain would have been recognized
immediately into income.

Disclosure Controls and Procedures

Management has designed disclosure controls and procedures, or
has caused them to be designed under its supervision, to provide reasonable
assurance that material information related to Augusta is gathered and reported
to senior management, including the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), as appropriate to permit timely decisions regarding
public disclosure.

Management, including the CEO and CFO, has evaluated the
effectiveness of Augustas disclosure controls and procedures, as defined in the
rules of the US Securities and Exchange Commission and Canadian Securities
Administration, as at December 31, 2010. Based on this evaluation, the CEO and
CFO have concluded that the Companys disclosure controls and procedures were
effective to a reasonable assurance standard to ensure that information required
to be disclosed in reports filed or submitted by Augusta under US and Canadian
securities legislation is recorded, processed, summarized and reported within
the time periods specified in those rules.

Managements Report on Internal Control over Financial
Reporting

Management has designed internal control over financial
reporting, or caused it to be designed under its supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements. Management has used the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) framework to
evaluate the effectiveness of Augustas internal control over financial
reporting. Based on this assessment, management has concluded that as at
December 31, 2010, the Companys internal control over financial reporting was
effective. Managements assessment of the effectiveness of the Companys
internal control over financial reporting as of December 31, 2010 has been
audited by Ernst & Young LLP, an independent registered public accounting
firm, as stated in their report.

Changes in Internal Control over Financial Reporting

Internal control over financial reporting is a process designed
to provide reasonable assurance regarding reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with
Canadian GAAP. The Chief Executive Officer and Chief Financial Officer have
concluded that there has been no change in the Companys internal control over
financial reporting during the year ending December 31, 2010 that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

RISKS AND UNCERTAINTIES

The Company and its current and future business and financial
condition are subject to various risks and uncertainties due to the nature of
the business and the present stage of development of the Rosemont project.
Certain of these risks and uncertainties are set out below and under the heading
Risk Factors in the Companys Annual Information Form for the year ended
December 31, 2010 which is available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.

Augusta will require additional capital to fund future
business plans.

As of December 31, 2010, Augusta had working capital $27.2
million. Augusta has minimal revenue from its operations and does not expect to
generate any significant revenue until Rosemont is placed into commercial
production. Augusta will require project financing to be in place by the fourth
quarter 2011 as soon as a ROD is issued and the Company prepares for construction at
Rosemont. Augusta may raise additional capital through debt or equity financing,
and possibly production sharing arrangements or other means. Recent upheavals in
the financial markets worldwide could make it very difficult for Augusta to
raise funds. Such funding may not be available on commercially acceptable terms
or at all. The Companys failure to meet its ongoing obligations on a timely
basis or raise additional funds that may be required could result in delay or
indefinite postponement of further exploration and development of the Companys
property or the loss or substantial dilution of any of its property
interests.

Augusta could lose its only material property upon an
event of default under the loan agreement with Red Kite.

The Companys obligations under the Red Kite Loan Agreement are
secured by the common shares and assets of Rosemont Copper Company, which holds
the Companys only material property. In the event of a default in which the
Company is unable to immediately pay all accrued and unpaid interest and
principal debt, Red Kite is entitled to take possession of the common shares and
assets of Rosemont Copper Company and sell, lease, or dispose of such collateral
including the Rosemont property and apply the proceeds to the Companys debt. If
such an event occurs, the Company could lose its only material property and the
Companys shareholders could lose their entire investment.

Augustas Joint Venture Agreement with UCM could result
in the possibility of deadlock

Under the Joint Venture Agreement, a number of important
project decisions (including program and budget approval, the replacement of the
operator and the terms and conditions of project financing) require unanimous
approval of the parties, which means that each party to the Joint Venture has a
right to veto any of these decisions, which could lead to a deadlock.

Exploration, development and mining involve a high degree
of risk.

The Companys operations will be subject to all the hazards and
risks normally encountered in the exploration, development and production of
copper and other base or precious metals, including, without limitation,
encountering unusual or unexpected geologic formations or other geological or
grade problems, unanticipated changes in metallurgical characteristics and metal
recovery, periodic interruptions due to inclement or hazardous weather
condition, seismic activity, rock bursts, pit-wall failures, cave-ins,
encountering unanticipated ground or water conditions, flooding, fire, and other
conditions involved in the drilling, removal of material, environmental hazards,
discharge of pollutants or hazardous chemicals, industrial accidents, failure of
processing and mining equipment, labour disputes, supply problems and delays and
changes in the regulatory environment any of which could result in damage to, or
destruction of, mineral properties, mines and other producing facilities, damage
to life or property, personal injury or death, loss of key employees,
environmental damage, delays in the Companys exploration and development
activities, monetary losses and legal liabilities. Satisfying such liabilities
may be very costly and could have a material adverse effect on the Companys
future cash flow, results of operations and financial condition.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

Price volatility - copper, molybdenum, silver, gold and
other metal prices.

The value and price of the Companys common shares, its
financial results, and its exploration, development and mining activities, if
any, may be adversely affected by declines in the price of copper, molybdenum,
silver, gold` and other metals. Metal prices fluctuate widely and are affected
by numerous factors beyond Augustas control such as interest rates, exchange
rates, inflation or deflation, fluctuation in the value of the United States
dollar and foreign currencies, global and regional supply and demand, and the
political and general economic conditions throughout the world. Metal prices
fluctuate in response to these and many factors that cannot be predicted. The
prices used in making the resource estimates are disclosed and differ from daily
prices quoted in the news media. The percentage change in the price of a metal
cannot be directly related to the estimated resource quantities, which are
affected by a number of additional factors. For example, a 10% change in price
may have little impact on the estimated resource quantities and affect only the
resultant cash flow, or it may result in a significant change in the amount of
resources. Because mining occurs over a number of years, it may be prudent to
continue mining for some periods during which cash flows are temporarily
negative for a variety of reasons including a belief that the low price is
temporary and/or the greater expense incurred in closing a property
permanently.

Mineralized material calculations and life-of-mine plans using
significantly lower metal prices could result in material write-down of
Augustas investment in Rosemont and increased amortization, reclamation and
closure charges.

In addition to adversely affecting Augustas mineralized
material estimates and financial condition, declining metal prices may impact
operations by requiring a reassessment of the commercial feasibility of a
particular project. Such a reassessment may be the result of a management
decision related to a particular project. Even if the project is ultimately
determined to be economically viable, the need to conduct such a reassessment
may cause substantial delays in development or may interrupt operations, if any,
until the reassessment can be completed.

Insurance risk

The Companys insurance will not cover all the potential risks
associated with mining operations such as environmental pollution and other
hazards as a result of production which may not be insured against or which the
Company does not elect to insure against due to high insurance premiums. Losses
from these events may cause the Company to incur significant costs that could
have a material adverse affect on its financial condition and results of
operations.

Title to Augustas properties may be subject to other
claims.

Although Augusta believes it has exercised commercially
reasonable due diligence with respect to determining title to properties it
owns, control or has the right to acquire by option, there is no guarantee that
title to such properties will not be challenged or impugned. The Companys
mineral property interests may be subject to prior unrecorded agreements or
transfers or native land claims and title may be affected by undetected defects.
There may be valid challenges to the title of Augustas properties, which, if
successful, could impair development and/or operations. This may be exacerbated
due to the large number of title transfers historically involved with some of
the properties.

Mineral resources and proven and probable reserves are
estimates.

Although the mineralized material and proven and probable
reserve figures included in this document have been carefully prepared by
independent engineers, these amounts are estimates only, and Augusta cannot be
certain that specific quantities of copper, molybdenum, silver, gold or other
mineral will in fact be realized. Any material change in the quantity of
mineralization, grade or stripping ratio, or mineral prices may affect the
economic viability of the Companys properties. In addition, Augusta cannot be
certain that metal recoveries in small-scale laboratory tests can be duplicated
in larger scale tests under on-site conditions or during production. Until an unmined
deposit is actually mined and processed the quantity of mineral resources and
reserves and grades must be considered as estimates only.

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|Managements
      Discussion and Analysis for the year ending December 31, 2010
|--------------------------------------------------------------------------------

Government regulation may adversely affect Augustas
business and planned operations.

Augusta believes its exploration projects comply with existing
environmental and mining laws and regulations affecting its operations. The
Companys mining, processing, development and mineral exploration activities, if
any, are subject to various laws governing prospecting, mining, development,
production, taxes, labor standards and occupational health, mine safety, toxic
substances, land use, water use, land claims of local people and other matters.
Augusta cannot guarantee that new rules and regulations will not be enacted or
that existing rules and regulations will not be applied in a manner which could
limit or curtail production or development.

A portion of the present Rosemont land position is located on
unpatented mine and millsite claims located on US federal public lands. The
right to use such claims is granted under the General Mining Law of 1872.
Unpatented mining claims are unique property interests in the United States, and
are generally considered to be subject to greater title risk than other real
property interests because the validity of unpatented mining claims is often
uncertain. This uncertainty arises, in part, out of the complex federal and
state laws and regulations under the General Mining Law and the interaction of
the General Mining Law and other federal and state laws, such as those enacted
for the protection of the environment. Unpatented mining claims are subject to
possible challenges of third parties or contests by the federal government. The
validity of an unpatented mining claim, in terms of both its location and
maintenance, is dependent on strict compliance with a complex body of federal
and state statutory or decisional law. In addition, there are few public records
that definitively control the issues of validity and ownership of unpatentable
mining claims. In recent years, the US Congress has considered a number of
proposed amendments to the General Mining Law. If adopted, such legislation
could, among other things:

- impose a royalty on the production of metals or minerals from unpatented
  mining claims;
- reduce or prohibit the ability of a mining company to expand its
  operations; and
- require a material change in the method of exploiting the reserves located
  on unpatented mining claims.

All of the foregoing could adversely affect the economic and
financial viability of mining operations at the Rosemont property.

Amendments to current laws, regulations and permits governing
operations and activities of mining and exploration companies, or more stringent
implementation thereof, could have a material adverse impact on Augustas
business and cause increases in exploration expenses, capital expenditures or
production costs or reduction in levels of production at producing properties or
require abandonment or delays in development of new mining properties.

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