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MANAGEMENTS DISCUSSION AND
ANALYSIS





For The Year Ended December 31,
2013

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MANAGEMENTS DISCUSSION AND ANALYSIS

General

The following Managements Discussion and Analysis (MD&A)
of Augusta Resource Corporation and its subsidiaries, (Augusta or the
Company) provides an analysis of the Companys audited financial results for
the year ended December 31, 2013.

The following information should be read in conjunction with
the Companys December 31, 2013, consolidated financial statements together with
the related notes contained therein, which are available under Augusta's issuer
profile on SEDAR at www.sedar.com. The financial statements were prepared
in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). This MD&A
contains forward-looking statements and forward looking information that are
subject to risk factors set out in the cautionary note contained herein. All
figures are in United States dollar unless otherwise noted. This MD&A has
been prepared as of March 27, 2014.

The Companys common shares are listed on the Toronto Stock
Exchange (TSX) and the NYSE MKT LLC under the symbol AZC.

Cautionary Statement on Forward-Looking Statements

This MD&A contains information that constitutes
"forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 or "forward-looking information" under
Canadian securities laws. These statements and information relate to future
events and Augusta's future performance, business prospects or opportunities,
which are subject to certain risks, uncertainties and assumptions. Such
forward-looking statements and forward-looking information include, but are not
limited to statements concerning:

- Augusta's plans at the Rosemont Project, including the timing for obtaining
  final permits, construction and estimated production;
- expectations surrounding future financings and re-financings;
- capital and operating cash flow estimates; and
- changes in market conditions, changes or disruptions in the securities
  markets and market fluctuations in the prices for Augusta's securities.

Forward-looking statements or information is frequently, but
not always, characterized by words such as "will", "plan", "expect", "project",
"intend", "believe", "anticipate", "budget", "forecast", "schedule", "estimate"
and similar expressions, or statements that certain events or conditions "may",
"should", "could", "might" or "will" occur. The forward-looking statements or
information contained in this MD&A is based on the reasonable expectations
and beliefs of management as at the date of this Directors' Circular and
involves numerous assumptions, known and unknown risks and uncertainties, both
general and specific to Augusta and the industry in which the Company operates.
Such assumptions, risks and uncertainties include, but are not limited to
Augusta's history of losses, requirements for additional capital, dilution, loss
of material properties, interest rate increases, global economy, no history of
production, speculative nature of exploration activities, periodic interruptions
to exploration, development and mining activities, environmental hazards and
liability, industrial accidents, failure of processing and mining equipment,
labour disputes, supply problems, commodity price fluctuations, uncertainty of
production and cost estimates, the interpretation of drill results and the
estimation of mineral resources and reserves, legal and regulatory proceedings
and community actions, title and tenure matters, regulatory restrictions,
permitting and licensing, volatility of the market price of the Company's common
shares, insurance, competition, hedging activities, currency fluctuations, loss
of key employees, as well as those factors disclosed in Augusta's documents
filed from time to time with the securities regulators in the provinces of
British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick and
Newfoundland and Labrador. Should one or more of these risks and uncertainties
materialize, or should underlying assumptions prove incorrect, actual results,
performance or achievements of the Company, or industry results, may vary
materially from those described in this MD&A. For further details, reference
is made to the risk factors discussed or referred to in Augusta's Annual
Information Form on file with the Canadian securities regulatory authorities and
available under Augusta's issuer profile on SEDAR at www.sedar.com.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

Although Augusta has attempted to identify important factors
that could cause actual actions, events, results, performance or achievements to
differ materially from those described in the forward-looking statements or
information contained in this MD&A, there may be other factors that cause
actions, events, results, performance or achievements not to be as anticipated,
estimated or intended. There can be no assurance that forward-looking statements
or information will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements. Such
forward-looking statements and information are made or given as at the date of
this MD&A and Augusta disclaims any intention or obligation to update or
revise any forward-looking statements or information, whether as a result of new
information, future events or otherwise, except as required under applicable
securities law. The reader is cautioned not to place undue reliance on
forward-looking statements or information.

Note Concerning Mineral Resource and Technical
Information

Information in this MD&A and disclosure documents of
Augusta that are filed with Canadian securities regulatory authorities
concerning mineral properties have been prepared in accordance with the
requirements of securities laws in effect in Canada, which differ from the
requirements of United States securities laws.

Without limiting the foregoing, these documents use the terms
"mineral reserve", "mineral resource", "measured mineral resource", "indicated
mineral resources" and "inferred mineral resource" and derivatives thereof.
Shareholders in the United States are advised that, while such terms are
recognized and required by Canadian securities laws, the U.S. Securities and
Exchange Commission (the "SEC") does not recognize them. Under United States
standards, mineralization may not be classified as a "reserve" unless the
determination has been made that the mineralization could be economically and
legally produced or extracted at the time the reserve determination is made.
Investors are cautioned not to assume that all or any part of measured or
indicated resources will ever be converted into reserves. Further, inferred
resources have a great amount of uncertainty as to their existence and as to
whether they can be mined legally or economically. It cannot be assumed that all
or any part of the inferred resources will ever be upgraded to a higher resource
category. Under Canadian rules, estimates of inferred mineral resources may not
form the basis of feasibility or pre-feasibility studies, except in rare cases.
Therefore, investors are also cautioned not to assume that all or any part of
the inferred resources exist, or that they can be mined legally or economically.
Disclosure of contained ounces is permitted disclosure under Canadian
regulations; however, the SEC normally only permits issuers to report resources
as in place tonnage and grade without reference to unit measures. Accordingly,
information concerning descriptions of mineralization and resources contained in
these documents may not be comparable to information made public by United
States companies subject to the reporting and disclosure requirements of the
SEC.

National Instrument 43-101  Standards of Disclosure for
Mineral Projects("NI 43-101") is a rule developed by the Canadian
Securities Administrators, which has established standards for public disclosure
an issuer makes of scientific and technical information concerning mineral
projects. Unless otherwise indicated, all resource and technical information of
Augusta contained in this Directors' Circular or contained in documents
referenced in this Directors' Circular have been prepared in accordance with NI
43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum
Classification System.

Description of the Business

Augusta and its wholly-owned subsidiary, Rosemont Copper
Company (RCC), are engaged in the acquisition, exploration and development of
natural mineral resource properties. Augustas only material property is the
Rosemont Copper Project (Rosemont or Rosemont Project) located in Pima
County, Arizona. The Rosemont Project is currently in the final stages of
permitting, with final permits expected to be issued in the second quarter of
2014 and construction scheduled to start in the second half of 2014. The
completion of the Final Environmental Impact Statement (FEIS) was announced by
the United States Forest Service on November 27, 2013, and on December 13, 2013,
a Notice of Availability of the FEIS was published in the Federal Register, the
daily journal of the United States government. A draft Record of Decision
(DROD) in respect of the Rosemont Project was announced by the United States
Forest Service on December 16, 2013, and on December 31, 2013, a legal notice
was published in the newspaper of record, the Arizona Daily
Star, which initiated the 45-day objection period beginning January 1, 2014.
Construction on Rosemont is expected to commence in the second half of 2014. The
Rosemont Project is expected to be one of the largest copper mines in the United
States, accounting for approximately 10% of total U.S. copper production.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

The Rosemont property is comprised approximately 30,000 acres
(12,140 hectares) of patented and unpatented claims and fee land and surface
grazing leases owned by Augusta. Rosemont is located in Pima County, Arizona on
the northeastern flank of the Santa Rita Mountains approximately 50 kilometers
southeast of the city of Tucson, Arizona near a number of large porphyry type
producing copper mines operated by Freeport-McMoRan Copper & Gold Inc. and
ASARCO LLC. Rosemont contains an open-pit mineable copper/molybdenum/silver
skarn deposit, as well as other exploration targets.

2013 Key Objective

The Companys key objective for 2013 was to complete the
permitting process and obtain the final Record of Decision (FROD) necessary to
construct and operate Rosemont. During the public comment period on the Draft
Environmental Impact Statement (DEIS) in late 2011 and early 2012, the U.S.
Forest Service (USFS) received more than 25,000 comments. The process to
review the comments and to prepare responses to the substantive comments was
extensive and any substantive comments were incorporated into the FEIS. This
culminated with the USFS, on July 1, 2013, delivering a Preliminary
Administrative FEIS on the Rosemont Project to the Local, State and Federal
Cooperating Agencies for their comments. The Cooperating Agencies were initially
given 30 days to provide their comments, but, due to the volume of reports and
materials to review, the comment period was extended. On September 27, 2013, new
regulations governing the USFS decision process came into effect for issuance of
the FEIS and FROD. The new regulations apply to all USFS decisions on
Environmental Assessments and Environmental Impact Statements, including the
Rosemont Project. Under the new decision process, the release of the FEIS and
DROD starts a 45-day objection period to allow people who had submitted comments
during the prior official comment periods during the EIS process an opportunity
to file objections to the DROD, followed by a 45-day review period for the USFS
to review and respond to the objections, with an option of one 30 day extension
to the review period. The total objection and review period thus has a maximum
statutory limit of 120 days after which the USFS will issue written responses to
the objections and may include recommendations for changes to the DROD. After
the review period, the FROD is issued. With this new process, there is no
opportunity for additional review or administrative appeal of the FROD. The
Company estimated that the new regulation delayed the completion of the USFS
decision process by approximately four months. On December 13, 2013, the Notice
of Availability for the FEIS was published in the Federal Register and on
December 16, 2013 the USFS issued a DROD which identified Alternative 4, the
Barrel Alternative, as the preferred alternative in the FEIS. The official start
to the objection period was established as January 1, 2014. The Company now
expects the FROD and the Clean Water Act Section 404 Permit (404 Permit) to be
issued in the second quarter of 2014. The completion of project financing and
recommencement of detailed engineering is now expected to occur in the second
half of 2014.

2014 Developments

On February 9, 2014, HudBay Minerals Inc. ("HudBay") issued a
press release that announced its intention to commence an unsolicited offer to
purchase, for consideration of 0.315 of a common share of HudBay for each common
share Augusta (each, a "Common Share"), all of the issued and outstanding Common
Shares of Augusta, other than any Common Shares held directly or indirectly by
HudBay and its affiliates (the "HudBay Offer"). On February 10, 2014, HudBay
filed its offer and accompanying take-over bid circular in respect of the HudBay
Offer (the "HudBay Offer and Circular"). On February 11, 2014, HudBay formally
commenced the HudBay Offer by advertisement.

On February 24, 2014, Augusta issued its directors' circular
(the "Directors' Circular") in response to the HudBay Offer pursuant to which
the board of directors of Augusta (the "Board of Directors" or the "Board"),
based on its review and analysis of the HudBay Offer and acting on the advice of
its legal advisors, Davies Ward Phillips & Vineberg LLP and Cravath, Swaine,
& Moore LLP, and its financial advisors, Scotia Capital Inc. and TD
Securities Inc., unanimously recommend that Augusta shareholders reject the
HudBay Offer and not tender their Common Shares to the HudBay Offer. For more
information on the process followed by the Board of Directors in making its recommendation to shareholders and for detailed reasons why the
Board of Directors believes that the HudBay Offer is grossly inadequate and does
not come close to recognizing the value and potential of Augusta and its
Rosemont Project, please refer to the Directors' Circular, which is available
under Augusta's issuer profile on SEDAR at www.sedar.com. Additional
information in respect of the HudBay Offer, including a copy of the HudBay Offer
and Circular is also available under Augusta's issuer profile on SEDAR at www.sedar.com.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

The Board of Directors has also given its financial advisors
and Augusta's management team a broad mandate to, among other things, manage a
process of exploring and considering alternative strategic transactions to the
HudBay Offer and to make recommendations to the Board of Directors on a regular
basis in respect thereof. Augusta and its financial advisors have been
approached by, and/or have initiated contact with, a number of third parties.
These parties include those who had previously conducted site visits to the
Rosemont Project and/or who have expressed an interest in considering a
transaction. Discussions are ongoing and Augusta has established an electronic
data room for purposes of providing confidential information to third parties
who have entered into confidentiality agreements. The Board of Directors'
efforts with respect to such strategic alternatives process are ongoing and,
given the complexity of the situation, it is not yet possible to predict whether
or when an alternative transaction that is superior to the HudBay Offer will
emerge.

On March 17, 2014, the Company responded to an announcement
made by HudBay on March 14, 2014, that it had (i) extended its Offer to acquire
all of the common shares of the Company that it does not already own to April 2,
2014, and (ii) waived the Offers minimum tender condition. The HudBay
announcement also stated that HudBay plans to submit an application to the
British Columbia Securities Commission to cease trade the Companys shareholder
rights plan in due course. The Companys response (i) confirmed that its
permitting process is progressing as planned with previous guidance remaining
unchanged for receipt of both the 404 permit from the Army Corps of Engineers
and the Final Record of Decision from the U.S. Forest Service in the second
quarter of this year, (ii) reminded shareholders that as long as Augusta's
shareholder rights plan remains in effect, HudBay cannot take up any shares that
might be tendered to its offer without triggering the rights, and (iii) noted
that Augusta's Board of Directors intends to meet during the week of March 24,
2014, to receive an update regarding the Company's strategic process.

On March 27, 2014, the Board of Directors  met and received an update on the Company’s strategic review process. As of  that date, nine interested parties, including a number of significant industry  players, had signed confidentiality agreements and were in the process of  conducting an extensive review of the materials in the Company’s electronic  data room. Site visits to the Company’s Rosemont Project are also scheduled to  take place in the upcoming weeks. In addition, the Board of Directors  determined that the Company will hold an annual and special meeting of its  shareholders on May 9, 2014, to have, among other things, shareholders consider  the continuation of its existing shareholder rights plan until the following  annual meeting of shareholders.

2013 Highlights

On December 12, 2013, the Company closed a $26.6 million
increase ("Additional Commitment") to the existing $83 million RK Mine Finance
Trust I (Red Kite) loan facility ("Existing Loan"). The Additional Commitment
and the Existing Loan will total $109.6 million (referred to collectively as the
Expanded Loan) once the Company has fully drawn the Additional Commitment. The
terms for the Expanded Loan are substantially the same as the Existing Loan,
including interest payable at LIBOR plus 4.50% . The Company has the option to
extend the maturity date of the Expanded Loan by up to three months to no later
than October 21, 2014 by making an extension fee payment to Red Kite for each
month the Expanded Loan is extended. In connection with the Expanded Loan,
Augusta also issued a total of 3.3 million Common Share purchase warrants to Red
Kite with an exercise price of $2.12 per Common Share. These warrants expire on
December 12, 2016.

On October 17, 2013, the Companys Shareholder Rights Plan (the
Rights Plan) was ratified and approved by its shareholders at the Special
Meeting of Shareholders held for such purpose. The Rights Plan, which came into
effect on April 19, 2013, will continue in force until the end of the Companys
Annual Meeting of Shareholders in 2016.

On August 14, 2013, the Company entered into a Notes Purchase
Agreement with two major shareholders, including Richard W. Warke, the Company's
Executive Chairman, providing for the issuance by the Company of up to an
aggregate of Cdn$10 million in unsecured convertible notes (the Notes). The
Company issued the full amount of the Notes in four tranches in September and
October 2013. The Notes have a 5 year term, bear interest at 7% per annum, and
have a conversion price equal to a premium of 30% above the volume weighted
average trading price of the Companys Common Shares on the TSX for the five
trading days ending the last business day prior to the closing date of each
tranche.

On August 9, 2013, the Companys wholly-owned subsidiary, RCC,
together with its joint venture partners, LG International Corp. and Korea
Resources Corporation, announced the signing of a project financing mandate
letter (the Mandate Letter) with a syndicate of 12 international
financial institutions (the Mandated Lead Arrangers or MLAs). The Mandate
Letter sets out an exclusive arrangement with the MLAs describing the activities
needed to arrange a limited recourse loan facility for the construction of the
Rosemont Project. The Mandate Letter also specifies the roles and
responsibilities of the MLAs, appoints certain MLAs to agent roles and
stipulates certain fees payable to the MLAs and agents. The due diligence
process that the MLAs undertook following the signing of the Mandate Letter,
which included a review of the Rosemont Project by an independent engineering
firm, has now been substantially completed. The senior secured debt from the
MLAs is expected to provide all of the debt required for the Rosemont
Project.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

On August 8, 2013, the Companys wholly-owned subsidiary, Cobre
Verde de Mexico, S.A. de C.V. (Cobre Verde or CVM) was awarded a 25 year
concession by the Administración Portuaria Integral de Topolobampo, S.A. de C.V.
(API) to build and operate a copper concentrate export facility at the Port of
Topolobampo, Sinaloa, Mexico. The concession agreement was signed on September
6, 2013 and officially registered on December 20, 2013 with Secrectaria de
Comunicaciones y Transportes Mexico (SCT). The facility, which will be built
on a 54,500 square meters site at the Port of Topolobampo, will manage bulk
concentrate receiving, storage, and reclaim for load-out onto transport ships.
The Company has engaged National Bank Financial Inc. as its financial advisor in
connection with a potential transaction involving a direct or indirect
investment by third parties in Cobre Verde.

On June 26, 2013, Lenard F. Boggio was appointed to the Board
of Directors. Mr. Boggio was the Mining Leader for PricewaterhouseCoopers
(PwC) and a senior member of PwCs Global Mining Industry Practice until his
retirement in May 2012. Mr. Boggio holds a B.A. and B. Comm. from the University
of Windsor, Ontario and is a member of the Institute of Chartered Accountants of
British Columbia and Ontario. He also holds a CPA in Illinois and is a member of
the State Boards of Accountancy of Illinois and Washington State and holds an
ICD.D designation and is a member of the Institute of Corporate Directors.

Permitting and Environmental Impact Statement

On December 13, 2013, the Notice of Availability for the FEIS
was published in the Federal Register. On December 16, 2013, the USFS issued a
DROD which identified Alternative 4, the Barrel Alternative, as the preferred
alternative in the FEIS. This alternative complies with applicable Federal and
State laws and regulations and is considered to be the environmentally
preferable alternative as it, where feasible, minimizes the adverse
environmental and social impacts.

The Company continues its work on the Rosemont Mine Plan of
Operations (MPO) so that once the FROD and the 404 Permit have been issued,
which is expected in the second quarter of 2014, the Company can commence
construction in the second half of 2014.

The Class II Air Permit and the Aquifer Protection Permit
(APP) have each been issued and are in full force and effect, but remain
subject to appeal processes.

- On July 8, 2013, the Arizona Water Quality Appeals Board upheld a judges
  affirmation of Rosemonts APP. After the Company received this favorable
  ruling, the appellants appealed the decision and filed a lawsuit seeking to
  overturn the decision. The appeal is limited to process and to those issues
  raised in front of the Water Quality Appeals Board. The appellants reply
  brief is due on March 31, 2014, and no date has been set for appearances in
  court. The APP permit remains in force as issued, during the appeal process.

- Hearings on an appeal of the Class II Air Permit application concluded in
  August 2013 and closing argument filings continued to November 27, 2013. The
  Air Permit ruling is expected to be issued on April 14, 2014. The Company
  intervened in this appeal and provided technical support to the Arizona
  Department of Environmental Quality (ADEQ) as well as a legal defense of the
  Air Permit. The Air Permit is considered final and in force, even while it is
  undergoing a review as per State of Arizona administrative procedures.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

In order to finalize the Federal 404 permit, the ADEQ must
concur that the 404 permit conditions are protective of surface water quality
standards (State 401 certification). On February 21, 2014, the ADEQ issued a
notice of a preliminary decision to issue the 401 certification and the start of
a public comment period. The 401 certification is expected to be issued in early
April 2014 following the end of the public comment period.

Project construction activities can commence on public lands
following the issuance of the 404 permit, the FROD and subsequent approval by
the USFS of the MPO. The FROD will include the final conditions required for the
MPO.

Project Management and Ongoing Support Activities

Detailed engineering work has been adjusted to match the
revised permitting timeline. The Rosemont Project team worked on the Project
Execution Plan during the year. Since the commencement of permitting activities,
the Company has maintained an active community relations program that includes
emphasizing the economic benefits of the Rosemont Project to the region,
supporting local and regional activities, and maintaining a community outreach
program.

As at December 31, 2012 and 2013, Augustas capitalized
development costs on the Rosemont Project and deposits on long-lead equipment
were as follows:

Development Costs

|As at January 1, 2012                                                  | $ | 119,014,472 |  
|---------------------------------------------------------------------- | - | ----------- | -
|Permitting, engineering and on-going support activities                |   | 28,239,085  |  
|Capitalized loan interest and financing
      charges                  |   | 3,926,948   |  
|Capitalized
      stock-based compensation expense, net of forfeitures |   | 1,527,532   |  
|As at December 31, 2012                                                | $ | 152,708,037 |  
|                                                                       |   |             |  
|As at December 31, 2012                                                | $ | 152,708,037 |  
|Permitting, engineering and on-going support activities                |   | 20,784,999  |  
|Capitalized loan interest and financing
      charges                  |   | 5,696,451   |  
|Mitigation land                                                        |   | 3,463,029   |  
|Capitalized stock-based compensation expense, net of
      forfeitures |   | (430,284    | )
|As at December
      31, 2013                                          | $ | 182,222,232 |  

Deposits on Long-lead Equipment

|As at January 1, 2012                             | $ | 78,213,911  |  
|------------------------------------------------- | - | ----------- | -
|Additions                                         |   | 3,900,225   |  
|Reclassification to property, plant and equipment |   | (70,443,212 | )
|As at December
      31, 2012 and 2013            | $ | 11,670,924  |  

Financings

During the year ended December 31, 2013, the Company received
proceeds of Cdn$0.2 million from the exercise of 341,667 stock options at an
exercise price of Cdn$0.68 per share. The weighted average share price when the
stock options were exercised was Cdn$1.77 per share.

On December 12, 2013, the Company closed the $26.6 million
Additional Commitment to the existing $83 million Existing Loan. The Additional
Commitment and the Existing Loan total $109.6 million. The Additional Commitment
will be drawn in four tranches:

- Tranche 1 of $4.1 million upon completion and signing of final
  documentation (received on December 16, 2013);

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      Discussion and Analysis for the Year Ended December 31, 2013
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- Tranche 2 of $10.0 million upon publication of Rosemont's FEIS and DROD by
  the USFS (received on January 13, 2014);
- Tranche 3 of $7.5 million upon publication of Rosemont's FROD by the USFS
  (expected to be received in the second quarter of 2014); and
- Tranche 4 of $5.0 million upon issuance of the final 404 Permit by the ACOE
  (expected to be received in the second quarter of 2014).

The Company paid a financing fee of $1.1 million and issued a
total of 3.3 million Common Share purchase warrants to Red Kite, exercisable at
$2.12 per Common Share and expiring on December 12, 2016. The warrants were
valued at $1.6 million at the time of issuance. The warrants are subject to
customary and usual anti-dilution conditions. The terms for the Additional
Commitment are substantially the same as the Existing Loan, except the Company
has an option to extend the maturity date of the Expanded Loan by up to three
months to no later than October 21, 2014 for an extension fee. The Additional
Commitment also bears interest at LIBOR plus 4.50%, the same as the Existing
Loan.

On August 14, 2013, the Company entered into a Notes Purchase
Agreement with two major shareholders (Note Holders), including Richard W.
Warke, the Company's Executive Chairman providing for the issuance by the
Company of an aggregate of Cdn$10 million in Notes. The Notes mature 5 years
from the effective date of each of the Notes and bear interest at 7% per annum.
The Company may at its option redeem the Notes after 3 years assuming the
Companys stock price is trading at least at 125% of the conversion price for 20
consecutive trading days ending 5 trading days prior to the date on which a
written notice of redemption is provided. The Notes also provide the Note
Holders thereof with an option to convert the principal into Common Shares at a
conversion price equal to a 30% premium over the volume weighted average trading
price on the TSX for the 5 trading days prior to the last business day before
the closing date of each tranche of the Notes. A total commitment fee of $0.1
million was paid to each of the Note Holders pursuant to the Notes Purchase
Agreement. The Company issued the Notes for the full Cdn$10 million in four
tranches between September 4 and October 25, 2013. The Note Holders each hold a
Cdn$5 million aggregate principal amount of Notes.

RCC and its joint venture partners, LG International Corp. and
Korea Resources Corporation, signed the Mandate Letter with the Mandated Lead
Arrangers, which sets out an exclusive arrangement describing the activities
needed to arrange a limited recourse loan facility for the construction of the
Rosemont Project. The proposed senior secured debt is expected to provide all of
the debt required for the Rosemont Project. During the year ended December 31,
2013, the Company incurred $3.7 million (RCCs share - $3.4 million) of legal,
consulting and travel costs related to the project financing which is reported
as prepaid debt issuance costs. These costs and future debt issuance costs will
be netted against the future project loans.

On November 28, 2013, the Company received from Ely Gold &
Minerals Inc. ("Ely") $1.3 million as final settlement of a $1.75 million
receivable in respect of the Company's sale of its interest in the Mount
Hamilton, Shell and Monte Cristo properties to Ely in February 28, 2008. The
Company incurred a $0.2 million loss on this transaction.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
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Results of Operations

The Company will not be generating any significant revenue
until the Company completes the construction and commences commercial
production. The following table summarizes the Companys results of operations
during the years ended December 31, 2013 and 2012.

|                                         |   | Years Ended December 31, |  
|---------------------------------------- | - | ------------------------ | -
|                                         |   | 2013                     |  
|                                         |   |                          |  
|EXPENSES                                 |   |                          |  
|Salaries and benefits                    | $ | 1,850,893                |  
|Stock-based compensation                 |   | 1,435,112                |  
|Exploration and project investigation    |   | 1,449,616                |  
|Legal, accounting and audit              |   | 854,155                  |  
|Travel                                   |   | 187,981                  |  
|Consulting                               |   | 117,442                  |  
|Filing and regulatory fees               |   | 136,621                  |  
|Recruiting fees                          |   | 847                      |  
|Office and administration                |   | 507,775                  |  
|Rent                                     |   | 356,767                  |  
|Investor relations                       |   | 102,191                  |  
|Directors' fees                          |   | 193,137                  |  
|Insurance                                |   | 379,570                  |  
|Membership and conferences               |   | 17,762                   |  
|Amortization and depreciation            |   | 371,116                  |  
|Fiscal and advisory services             |   | 29,988                   |  
|Loss from operations                     |   | (7,990,973               | )
|Interest and other income                |   | 787,778                  |  
|Other expenses                           |   | (422,126                 | )
|Gain on shares, warrants and derivatives |   | 1,058,665                |  
|Foreign exchange gain                    |   | 165,249                  |  
|Interest and finance charges             |   | (241,760                 | )
|Loss before taxes                        |   | (6,643,167               | )
|Deferred income tax recovery (expense)   |   | 147,000                  |  
|Net loss and comprehensive loss for the  |   |                          |  
|year                                     | $ | (6,496,167               | )

For the year ended December 31, 2013, the Company had a $6.5
million net loss and comprehensive loss or $0.05 loss per Common Share compared
to a $9.7 million net loss and comprehensive loss or $0.07 loss per share for
the comparable period in 2012. The decrease in loss was due primarily to
reduction in non-cash gains of $0.7 million relating to changes in the valuation
of Ely shares, Red Kite warrants and derivative liability, $0.6 million decrease
in stock-based compensation expense and a recovery in deferred income tax. This
was partially offset by $0.5 million increase in cash operating expenses
pertaining to project investigation, legal fees and IT system hosting and
maintenance fees.

Other significant variances include:

Exploration and Project Investigations

For the year ended December 31, 2013, exploration and project
investigation costs increased $0.2 million to $1.4 million compared to $1.2
million for the same period in 2012 due primarily to costs associated with due
diligence work on a potential project that did not materialize during the second
quarter of 2013.

- 8 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

Stock-based Compensation

For the year ended December 31, 2013, stock-based compensation
expense decreased $0.7 million to $1.4 million compared to a $2.1 million
expense for the same period in 2012. The decrease was due primarily to the
reversal of previously amortized stock-based compensation expense on certain
restricted shares and restricted share units that were forfeited due to
performance conditions not being met.

Legal, Accounting and Audit

For the year ended December 31, 2013, legal, accounting and
audit increased $0.2 million to $0.9 million compared to $0.7 million for the
same period in 2012 due to higher audit and legal fees. The Company also
incurred $1.9 million of legal fees during the year (2012 - $0.1 million) in
connection with project financing activities which have been capitalized as
prepaid debt issuance costs, a component of prepaid expenses. These costs and
future legal fees incurred up until the closing of project financing will be
charged against the proceeds from project loans.

The Company will be incurring additional legal and financial
advisory fees in the first half of 2014 in connection with HudBays unsolicited
bid for the Companys outstanding shares that it does not already own.

Gain (Loss) on Shares, Warrants and Derivatives

Gain (loss) on Common Shares, warrants and derivatives consists
of changes in the fair value of the Companys investments in held for trading
securities, Canadian dollar denominated Common Share purchase warrants and Notes
derivative liability. The comparison year-to-year is not comparable due to the
various components that make up the 2013 and 2012 amount. For instance, the
comparative period in 2012 includes recognizing the changes in the fair
value of Canadian dollar denominated warrants up to September 12, 2012, the date
when the Company changed the exercise price to US dollars. This change resulted
in the reclassification of the warrants from a derivative liability to an equity
instrument and no longer requires the warrants to be fair valued at the end of
each reporting period.

For the year ended December 31, 2013, the Company recognized a
non-cash, $1.1 million unrealized gain on held-for-trading securities and fair
value of warrants liability and convertible note derivative liability compared
to a $0.4 million unrealized gain on held-for-trading securities and Canadian
dollar denominated share purchase warrants for the same period in 2012.

Review of the Quarterly Results  Three months ended
December 31, 2013 compared to the three months ended December 31, 2012

For the three months ended December 31, 2013, the Company
incurred a $0.8 million net comprehensive loss compared to a $4.9 million net
comprehensive loss for the comparable period in 2012. The decrease in the net
comprehensive loss was due primarily to a $1.2 million favorable
marked-to-market valuation on our held for trading securities and derivative
liability and a decrease in deferred income tax expense. The Company recognized
a $3.0 million deferred income tax expense in the fourth quarter of 2012
relating to the expiry and loss of utilization State loss carry forwards
compared to $0.5 million deferred income tax expense for the fourth quarter
ended December 31, 2013.

Selected Annual Information

The following table summarizes the selected financial
information relating to its results of operations and financial position. Since
the Company does not generate any significant revenue, the Company relies on
debt and equity to finance its operations and capital expenditures. During the
second half of 2013, the Company issued Cdn$10 million of Notes and closed a
$26.6 million Additional Commitment to the existing $83 million Red Kite Loan of
which $4.1 million was drawn as at December 31, 2013. The Red Kite Loan and
accrued interest is classified as a current liability and due on July 21, 2013
with an option to extend the maturity date for an additional three months by
paying Red Kite an additional fee. Factors that cause significant variances in
net comprehensive profit (loss) are primarily non-cash items such as stock
compensation expense, marked-to-market adjustments on its warrants and
derivative liabilities, deferred income tax expense (recoveries), gains
from sale of interest in Rosemont to its joint venture partner and foreign
exchange gain (losses) on its Canadian dollar and Mexican Pesos denominated
working capital items. For the year ended December 31, 2011, the Company had
recognized a $22.4 million after-tax gain on the sale of a 3.85% interest in the
Rosemont Joint Venture.

- 9 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

|                                             |   | Years Ended December 31, |  
|-------------------------------------------- | - | ------------------------ | -
|(in US dollars)                              |   | 2013                     |  
|Revenue                                      | $ | -                        |  
|Profit (loss) before taxes                   |   | (6,643,167               | )
|Net comprehensive profit (loss) for the year |   | (6,496,167               | )
|Basic and diluted earnings (loss) per share  |   |                          |  
|Basic earnings (loss) per share              |   | (0.05                    | )
|Diluted earnings (loss) per share            |   | (0.05                    | )
|Total Assets                                 |   | 321,981,459              |  
|Cash used in operations                      |   | 6,304,149                |  
|Capital expenditures                         |   | 31,559,086               |  
|Non-current financial liabilities            |   | 8,217,530                |  
|Dividends declared                           |   | Nil                      |  

Summary of Quarterly Results

Select financial information in accordance with IFRS for each
of the eight most recently completed quarters are as follows:

Interest and 
      Other Income (Loss)
    
    
    Net Comprehensive Loss
    
    
    Basic Loss Per Share
    
    
    Diluted Loss Per ShareQ4 2013
    $
    (14,138
    )
    $
    (807,086
    )
    $
    (0.01
    )
    $
    (0.01
    )Q3 2013
    
    168,258
    
    
    (1,692,527
    )
    
    (0.01
    )
    
    (0.01
    )Q2 2013
    
    462,910
    
    
    (1,786,106
    )
    
    (0.01
    )
    
    (0.01
    )Q1 2013
    
    170,748
    
    
    (2,210,448
    )
    
    (0.02
    )
    
    (0.02
    )Q4 2012
    
    193,860
    
    
    (4,909,395
    )
    
    (0.04
    )
    
    (0.04
    )Q3 2012
    
    149,915
    
    
    (2,116,696
    )
    
    (0.01
    )
    
    (0.01
    )Q2 2012
    
    140,070
    
    
    (1,225,287
    )
    
    (0.01
    )
    
    (0.01
    )Q1 2012
    
    173,262
    
    
    (1,467,499
    )
    
    (0.01
    )
    
    (0.01
    )


Factors that can or have caused fluctuations in the Companys
quarterly results include the timing of stock option grants, change in the value
of derivative liability, gains from sale of the Companys interest in Rosemont
and foreign exchange gains or losses related to the Companys holding of
Canadian dollar and Mexican Pesos denominated working capital items. Since the
Rosemont Project is not currently in production, the Company believes that its
losses and loss per share are not a primary concern to investors in the
Company.

Liquidity and Capital Resources

The Companys cash position at December 31, 2013 was $2.3
million compared with $29.1 million at December 31, 2012. The Company had a
working capital deficit of $88.3 million at December 31, 2013 compared to $28.8
million of positive working capital at December 31, 2012. The $117.1 million
decrease in working capital was due primarily to reclassifying the $93.5 million
Red Kite Expanded Loan and accrued interest thereon to a current liability
maturing on July 21, 2014, $30.7 million spent on investing activities primarily
on capital and permitting expenditures at the Rosemont Project, and partially
offset by $10.1 million net cash proceeds from investing activities.

- 10 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

On December 12, 2013, the Company closed the $26.6 million
Additional Commitment to the existing $83 million Existing Loan with Red Kite.
The Company drew the first tranche of the Additional Commitment for $4.1 million
on December 16, 2013 and drew the second tranche for $10 million on January 13,
2014.

On August 14, 2013, the Company entered into a Notes Purchase
Agreement providing for the Company to issue an aggregate of Cdn$10 million in
Notes. The Company had issued the full Cdn$10 million of Notes as of October 25,
2013.

On August 8, 2013, the Companys wholly-owned subsidiary, Cobre
Verde was awarded a 25 year concession, with an option to extend, by the API to
build and operate a copper concentrate export facility at the Port of
Topolobampo, Sinaloa, Mexico. The facility will manage bulk concentrate
receiving, storage, and reclaim for load-out onto transport ships and may be
used for metal concentrate shipments. As at December 31, 2013, $0.7 million of
concession and engineering costs have been capitalized as part of other assets.
To assist with financing the construction of the export facility, which is
expected to cost between $32 million to $40 million, the Company has engaged
National Bank Financial Inc. as its financial advisor in connection with a
potential transaction involving a direct or indirect investment by third
parties. This process, and any potential transaction, is expected to conclude
the first half of 2014.

Project financing activities continued during the fourth
quarter and the project financing is expected to be in place prior to the start
of construction at Rosemont, which the Company anticipates will occur in the
second half of 2014. Committed financing for the Rosemont project is a condition
precedent to obtaining draws under the Silver Wheaton streaming agreement and
hence will be required prior to funding from Silver Wheatons $230 million
streaming agreement and the remaining $106 million earn-in funding from United
Copper & Moly LLC (UCM), Rosemonts joint venture partner. The project
financing is anticipated to provide the Company with all the debt financing
required to construct the Rosemont project. For the year ended December 31,
2013, the Company incurred $3.4 million of legal, banking and consulting fees
and other expenses related to project financing activities which is currently
charged to prepaid debt issuance costs, which is a component of prepaids and
other. These and all future costs incurred to complete project financing will be
charged against the proceeds from the project loans.

On August 24, 2012, Cobre Verde Development Corporation, the
Companys wholly-owned subsidiary, and SICAN Inc. entered into a joint
arrangement through the formation of JPAR LLC, an Arizona Limited Liability
Company, to fund the construction and operate the Community Water Company of
Green Valley Central Arizona Project Water Delivery System (CAP WDS), which is
estimated to cost $24 million to construct. The purpose of the CAP WDS is to
replenish Rosemonts use of groundwater for its future mining operations from
within the Town of Sahuarita and the community of Green Valley. The Company is
responsible for funding 100% of the construction of the CAP WDS. During year
ended December 31, 2013, the Company contributed $1.0 million (cumulative
contributions of $1.6 million) into JPAR LLC and has recognized an 82.2%
(December 31, 2012 - 63.1%) share of JPARs assets and 100% of its
liabilities.

The Company used $6.3 million of cash for operating activities
during year ended December 31, 2013 compared to $5.3 million for the same period
in 2012. The $1.0 million increase was due primarily to an increase in operating
expenses, timing of vendor payments, and the related changes to working
capital.

The Company received $13.7 million from advances under the
Expanded Loan from Red Kite and the issuance of Notes during the year ended
December 31, 2013. The Company also received $0.2 million from the exercise of
stock options during 2013 compared to $1.7 million during 2012. The Company does
not expect to generate significant revenue from its operations until the
Rosemont Project commences commercial production.

The Company used $30.6 million of cash in investing activities
during the year ended December 31, 2013, compared to $37.3 million for the same
period in 2012. The $6.7 million decrease was due primarily to lower spending on
long-lead equipment purchases and development costs as the Company continued to
adjust Rosemonts spending match the revised permitting timeline. The investing
activities included $26.3 million (2012 - $36.5 million) spent on permitting,
engineering and ongoing support activities and deposits on long-lead equipment,
and $6.4 million (2012 - $3.6 million) on capital and other assets and
contribution to restricted funds related to the Port of Topolobampo development. The Company also received from Ely an annual $0.75
million payment in June 2013 and $1.3 million in November 2013 as final
settlement of a $1.75 million receivable due over the next two years.

- 11 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

The Companys forecast cash requirements for the next 12 months
are $370 million for construction of the Rosemont and Topolobampo projects and
general and administrative expenses, and $113 million to repay the Expanded Loan
maturing on July 21, 2014. The Company may extend the repayment of the Red Kite
loan for up to three additional months subject to an extension fee for each
month the loan is extended. The forecast cash requirement exceeds the Companys
current working capital and completion of project financing prior to the start
of construction on the Rosemont project will be required in order to fund
planned Rosemont construction expenditures. The Company may also need to raise
additional equity to complete the financing of Rosemont construction. The $106
million from UCM and the $230 million from Silver Wheaton are the other
components of financing for the construction of Rosemont.

The Companys current financial position indicates the
existence of a material uncertainty that raises substantial doubt about the
Companys ability to continue as a going concern and is dependent on the Company
receiving the permits necessary for the construction of the Rosemont Project and
raising additional debt or equity financing to meet its obligations as they
become due. The Company must obtain additional funding in the third quarter of
2014 in order to continue development and construction of the Rosemont Project.
Furthermore, the Company is currently negotiating project financing terms with a
number of lending institutions, which the Company believes will result in the
Company obtaining the project financing required to fund the construction of the
Rosemont Project. However, there is no assurance that such additional funding
and/or project financing will be obtained or obtained on commercially favourable
terms.

The consolidated financial statements are prepared on a going
concern basis, which assumes the Company will be able to meet its obligations as
they become due for the next twelve months. The consolidated financial
statements do not give effect to any adjustment which would be necessary should
the Company be unable to continue as a going concern and, therefore, be required
to realize its assets and discharge its liabilities in other than the normal
course of business and at amounts different from those reflected in the
consolidated financial statements. Such adjustments could be material.

UCM has already completed its commitment to fund $70 million of
pre-construction costs to earn a 7.95% equity interest in the Rosemont Project.
The remaining $106 million of the $176 million total investment increase UCMs
interest in Rosemont to 20% and will be released on a pro-ratabasis with
Silver Wheatons $230 million to fund construction once all of the material
permits have been issued and project financing in place. The Company expects to
draw on these funds in the third quarter of 2014.

Off-Balance Sheet Arrangements

The Company has an off-balance sheet arrangement with Silver
Wheaton which provides for the Company to deliver to Silver Wheaton silver and
gold credits equivalent to all of the payable silver and gold ounces produced at
Rosemont at a price equal to the lower of $3.90 per ounce for silver and $450
per ounce for gold (escalated by 1% per annum after the first three years of
production), or prevailing market prices, in exchange for $230 million to fund
construction of the Rosemont Project. These funds form a vital part of the
Companys equity contribution towards funding of Rosemonts construction costs.
These funds can only be drawn after the satisfaction of certain conditions
precedent, including, inter alia, receipt of all of the major permits and
the arrangement of committed project financing. The Company expects to receive
approximately $375 million from Silver Wheaton for the deliveries of silver and
gold credits equivalents over the life of the Rosemont Mine.

- 12 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

Commitments

The Company had the following known commitments and contractual
obligations as at December 31, 2013:

More
      than 5in U.S. dollars
    
    Less
      than 1 year
    
    
    1-3
      years
    
    
    3-5
      years
    
    
    years
    
    
    TotalAccounts payable and accruedliabilities
    $
    4,425,550
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    4,425,550Other liability
    
    3,615,125
    
    
    -
    
    
    -
    
    
    -
    
    
    3,615,125Long-term debt
    
    100,062,301
    
    
    1,316,284
    
    
    10,067,852
    
    
    -
    
    
    111,446,437JPAR and right of way
    
    15,081,570
    
    
    -
    
    
    -
    
    
    -
    
    
    15,081,570Property, plant and equipment
    
    1,851,100
    
    
    -
    
    
    -
    
    
    -
    
    
    1,851,100Deposits on long-lead equipment purchases
    
    -
    
    
    60,795,405
    
    
    -
    
    
    -
    
    
    60,795,405Operating lease obligations
    
    1,254,529
    
    
    2,964,301
    
    
    2,723,944
    
    
    33,077,942
    
    
    40,020,716$
    126,290,175
    
    $
    65,075,990
    
    $
    12,791,796
    
    $
    33,077,942
    
    $
    237,235,903


In the event of a change in control, the Cdn$ 10 million Notes,
along with accrued and unpaid interest, is subject to an accelerated conversion
(the Change of Control Payment) concurrent with the closing of the change of
control transaction. The Change of Control Payment is payable in either cash or
common shares of the Company at the option of the Note Holders.

The Company may extend the repayment of the Red Kite loan for
up to three additional months subject to an extension fee for each month the
loan is extended.

Outlook

The Company continues to work on updating the MPO to
incorporate the requirements set forth in the DROD. The MPO provides a roadmap
for compliance with the specifications set out in the DROD and consist of
multiple elements requiring procedures for implementation.

The Notice of Availability for the FEIS was published in the
Federal Register on December 13, 2013, and the DROD became available on December
16, 2013. The legal notice for the DROD was published on December 31, 2013,
which initiated the 45-day objection period beginning on January 1, 2014, and
which is followed by a 45-day review period for the USFS to review the
objections, with an option of one 30 day extension of the review period. The
Company expects to receive both the FROD and the 404 Permit in the second
quarter of 2014.

Detailed engineering, including earthwork, civil and structural
design, has been adjusted to the revised permitting timeline. The project
management team will continue work on the project execution plan. 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 logistics for deliveries during the construction phase of the
project.

Basic engineering on the Topolobampo export facility started in
September 2013 and is expected to be completed in the second quarter of 2014
with construction expected to start in the third quarter of 2014. Under the
terms of the Topolobampo concession the Company has 18 months following the
registration and transfer of the concession to Cobre Verde to complete
engineering and construction of the port facility and prepare for operations. A
default in any of the terms of the Topolobampo concession may result in the
Company losing the concession and the right to operate the export facility. The
Company is currently working on finalizing the capital cost estimate on the Topolobampo
export facility which is currently estimated to be between $32 million
to $40 million. To assist in obtaining funding for construction, the Company has
engaged National Bank Financial Inc. as its financial advisor in connection with
potential transactions involving direct or indirect investment by third parties
in Cobre Verde. This process, and any potential transaction, is expected to
conclude in the first half of 2014.

- 13 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

The Company is continuing to advance project financing for the
Rosemont Project, with a goal of completing documentation in the third quarter
of 2014. Initial funding for construction will be provided by the $106 million
investment from UCM, the company formed by RCC's joint venture partners, and
$230 million from the Silver Wheaton agreement. The Company expects to use a
portion of the UCM and Silver Wheaton funding to repay a portion of the Expanded
Loan which is currently due on July 21, 2014 and may be extended for three
additional months.

The Companys community relations campaign of meeting with
community leaders and neighbourhood groups and providing public tours of the
Rosemont Project site will continue into 2014 to promote the economic benefits
of the Project and the Companys plans to alleviate the impact of mining
activities on the environment.

Forecast operating and capital expenditures for the next twelve
months total approximately $260 million and are based on the FROD and 404 Permit
being issued in the second quarter of 2014. Construction is expected to commence
in the second half of 2014 once the final MPO has been approved by the USFS.
This forecast includes approximately $212 million for Rosemont permitting and
construction, project financing and bonding costs, $5 million for general and
administrative expenses, and $43 million for non-Rosemont capital projects such
as the construction of the CAP water delivery system and the Topolobampo export
facility. In addition, the Company will also require $113 million in funding for
the repayment of the Red Kite Loan which is due on July 21, 2014, with an option
to extend the repayment for three additional months. Funding for the forecast
cash requirements will initially come from UCM and Silver Wheaton followed by
proceeds from project financing. Any delays in the permitting process or any
unplanned expenditures may require the Company to raise additional funds to
complete the process of obtaining the FROD, the 404 Permit and approval of the
MPO. Unforeseen market events and conditions could impede access to capital or
increase the cost of capital and 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.

In the event of unexpected further delays in the completion of
the permitting process, spending on construction and project financing
activities will be curtailed and monthly expenses reduced to approximately $2.5
million per month.

Transactions with Related Parties

The Company shares rent, salaries and administrative services
with companies related by common directors and officers (the Related
Companies). As at December 31, 2013 and December 31, 2012, included in due from
related parties were $0.01 million and $0.02 million, respectively.

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. Costs incurred by ManCo are allocated between the Related Companies
based on time incurred and use of services and are charged at cost. Each company
holds an equal share in ManCo. For each of the years ended December 31, 2013 and
2012, ManCo charged the Company $1.3 million for its share of salaries, rent and
other administrative expenses.

As discussed above, the Company entered into a Notes Purchase
Agreement with Richard W. Warke, the Executive Chairman of the Company. The
Company issued an aggregate of Cdn$5 million in Notes to Mr. Warke and paid him
a 2% commitment fee in accordance with the terms of the Notes Purchase
Agreement.

The Company has identified its directors and certain senior
officers as its key management personnel. The compensation costs for key
management personnel for the years ended December 31, 2013 and 2012 are as
follows:

- 14 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

|                               |   | 2013      |  |   | 2012      | 
|------------------------------ | - | --------- |  | - | --------- | 
|Salaries and benefits          | $ | 2,205,769 |  | $ | 2,156,950 | 
|Stock-based
      compensation |   | 2,198,925 |  |   | 2,462,304 | 
|                               | $ | 4,404,694 |  | $ | 4,619,254 | 

Proposed Transactions

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

The Board of Directors has, however, given its financial
advisors and Augusta's management team a broad mandate to, among other things,
manage a process of exploring and considering alternative strategic transactions
to the HudBay Offer and to make recommendations to the Board of Directors on a
regular basis in respect thereof. Augusta and its financial advisors have been
approached by, and/or have initiated contact with, a number of third parties.
These parties include those who had previously conducted site visits to the
Rosemont Project and/or who have expressed an interest in considering a
transaction. Discussions are ongoing and Augusta has established an electronic
data room for purposes of providing confidential information to third parties
who have entered into confidentiality agreements. The Board of Directors'
efforts with respect to such strategic alternatives are ongoing and, given the
complexity of the situation, it is not yet possible to predict whether or when
an alternative transaction that is superior to the HudBay Offer will emerge.

Outstanding Share Data

The authorized share capital of Augusta consists of an
unlimited number of Common Shares. As at March 27, 2014, the following
securities of Augusta were issued and outstanding:

- 145,388,035 Common Shares, which includes 347,501 issued and outstanding
  restricted Common Shares;
- 5,949,834 options;
- 211,668 restricted share units;
- 5,091,700 warrants; and
- CAD $10,000,000 aggregate principal amount of Notes.

Had the Notes holders exercised their option on March 27, 2014,
to settle the Notes in full in Common Shares, the Company would have issued
3,777,978 Common Shares at a weighted average conversion price of CAD$2.70 per
Common Share.

FINANCIAL INSTRUMENTS

IFRS 13, Fair Value Measurement, establishes
a fair value hierarchy that reflects the significance of the inputs used in
making the measurements. The fair value hierarchy has the following levels:

Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;

Level 2 - inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and

Level 3 - inputs for the asset or liability that are not based
on observable market data (unobservable inputs).

The Companys financial instruments include: cash and
equivalents, accounts receivable, short-term investments, due from related
parties, restricted funds, accounts payable and accrued liabilities, other
liability, long-term debt, warrants liability, and derivative liability. The
cash and cash equivalents, short-term investments and restricted funds are classified as Level 1 on the fair value hierarchy.
The warrants liability and derivative liability are classified as Level 3 on the
fair value hierarchy.

- 15 -

---

|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

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 risk), credit risk, and liquidity
risk. Reflecting the current stage of development of the 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.

Foreign exchange risk

The Company is exposed to currency risks on its Canadian dollar
and Mexican peso denominated working capital balances due to changes in the
USD/CAD and USD/MXP exchange rates and the functional currency of the
Company.

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

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

|                                         |   | December 31, |   |   | December 31, |  
|---------------------------------------- | - | ------------ | - | - | ------------ | -
|                                         |   | 2013         |   |   | 2012         |  
|Cash and cash equivalents                | $ | 460,252      |   | $ | 371,288      |  
|Accounts receivable                      |   | 334,205      |   |   | 55,475       |  
|Short-term investments                   |   | 145,935      |   |   | 259,440      |  
|Accounts payable and accrued liabilities |   | (658,661     | ) |   | (575,752     | )
|Derivative liability                     |   | (2,058,157   | ) |   | -            |  
|Long-term
      liability                |   | (6,682,008   | ) |   | -            |  
|                                         | $ | (8,458,434   | ) | $ | 110,451      |  

Based on the net Canadian dollar denominated asset and
liability exposures as at December 31, 2013, a 10% change in the USD/CAD
exchange rate will impact the Companys earnings by approximately $0.8 million
(2012 -$0.01 million).

Credit risk

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

The Companys excess 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. The partner receivable is with
UCM, a company formed by Korea Resources Corporation (KORES) and LG
International Corp. (LGI). KORES is wholly-owned and supported by the Korean
government and LGI is part of the LG Group, one of the largest conglomerates of
South Korea. Management believes the risk of loss is remote.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

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 as they become due. This is
achieved through the management of its capital structure and debt leverage.

Based on the Companys planned expenditures on permitting,
engineering and on-going support activities at the Rosemont Project for the next
twelve months, the Company will require additional debt or equity financings to
meet its obligations as they become due. Recent upheavals in the financial
markets worldwide, particularly for publicly-traded mining companies, could make
it difficult for the Company 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 a 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.

Equity price risk

The Company is exposed to price risk with respect to equity
prices. Equity price risk is defined as the potential adverse impact on the
Companys earnings due to movements in individual equity prices or general
movements in the level of the stock market.

Capital risk management

The Companys objectives in managing capital are to safeguard
the Companys ability to continue as a going concern in order to pursue the
development of the Rosemont Property and to maintain a flexible capital
structure which optimizes the costs of capital at an acceptable risk level.

Similar to other mining companies in the development stage, the
Company may enter into discussions with certain parties to provide funding for
the Company to execute its business plan. On September 16, 2010, the Company
entered into an Earn-In Agreement with UCM that enables UCM to earn up to a 20%
interest in the Rosemont Project by contributing cash of up to $176 million to
fund permitting, engineering and ongoing Rosemont expenditures through to
construction. The 2012 Feasibility Study update estimated the capital cost of
the mill and mining equipment and all related construction costs including mine
pre-development costs at $1.23 billion. Funding for the Rosemont Project could
come from a number of sources, including project financing, off-take agreements,
sale of future metal streams and from capital markets.

There are no externally imposed capital requirements. In the
management of capital, the Company includes the components of shareholders
equity, long-term debt and current liabilities. The Company manages the capital
structure and makes adjustments in light of changes in economic and market
conditions (including receptivity of the capital markets to new equity or debt
issuances) and the risk characteristics of the underlying assets. To maintain or
adjust the capital structure, the Company may issue additional Common Shares,
issue new debt or dispose of assets and/or consider strategic alliances
including joint venture partners.

In order to facilitate the management of its capital, the
Company prepares an annual budget that is updated periodically to account for
changes in the timing of expenditures and market conditions. The annual budget
is approved by the Board.

The Companys investment policy is to invest its excess cash in
highly-liquid, short-term interest-bearing investments. The investments are
selected based on the expected timing of expenditures from continuing
operations. In order to maximize ongoing development efforts, the Company does
not pay out dividends.

The capital requirements for the next twelve months will
include scheduled deposits for long-lead equipment purchases, the ongoing cost
of permitting, engineering and on-going support activities at the Rosemont
Project as well as for administration expenses. Rosemont expenditures will
be funded from the Companys existing cash reserves and proceeds from potential
future financings to meet its ongoing commitments and capital purchases.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

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, development costs,
determination of the fair value of stock-based compensation, Common Share
purchase warrants issued with strike price that is subject to adjustment or denominated in a currency
other than the issuers functional currency and derivative liability. 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.

Mineral Properties and Development Costs

Mineral properties consist of payments to acquire property
rights and leases. Mineral properties are assessed for impairment if (i)
sufficient data exists to determine technical feasibility and commercial
viability, (ii) facts and circumstances suggest that the carrying amount exceed
the recoverable amount, and (iii) a decline in base metal prices, adverse impact
due to changes in government regulations, and other market conditions.

Development costs incurred on a mineral property are deferred
once management has determined that, based on a feasibility study, a property is
capable of economical commercial production as a result of having established
proven and probable reserves. Development costs are carried at cost less
accumulated depletion and accumulated impairment charges. Exploration
expenditures incurred prior to determining that a property has economically
recoverable resources are expensed as incurred.

The Company reviews the carrying values of mineral properties
and development costs regularly with a view to assessing whether there has been
any impairment in value, or whenever events or changes in circumstances might
indicate the carrying value may not be recoverable. In the event the estimated
discounted cash flows expected from its use or eventual disposition is
determined to be insufficient to recover the carrying value of the property, the
carrying value is written-down to the estimated recoverable amount.

Once a mine has achieved commercial production, mineral
properties and development costs are depleted on a units-of-production basis
over the life of the mine.

Stock-based Compensation

The Company grants stock options to employees, directors and
consultants under its stock option plan. In addition, the Company grants
restricted Common Shares and restricted share units ("RSUs") to employees,
directors and consultants under its amended and restated restricted share unit
and restricted share plan. The fair value method of accounting is used for
stock-based awards. Under this method, stock options, restricted Common Shares
and RSUs are recorded at their estimated fair value on the grant date and are
charged either to earnings or capitalized to development costs over the vesting
period with a corresponding credit to reserves. If the stock options are
exercised, the proceeds are credited to share capital and the fair value of the
options exercised is reclassified from reserves to share capital. Restricted
Common Shares are issued from treasury at date on the grant and are fair valued
at the date of grant. The fair value is charged to either earnings or
capitalized over the vesting period. On the vesting date, the fair value is
transferred from reserves to share capital. For options subject to vesting, the
Company calculates the fair value of each vesting period as separate awards with
individual expected lives and amortizes the calculated expense for the award on
a straight-line basis over the vesting period of the award.

Financial Instruments

The Company may issue Common Share purchase warrants with
a strike price subject to adjustment under certain conditions or a
Canadian dollar strike price to subscribers pursuant to debt or equity
financings by the Company. Common Share purchase warrants are initially recorded
at its estimated fair value on the date of issue and charged to either share
issue costs on an equity issue or netted against the proceeds from a debt issue
with a corresponding credit to warrants liability only if the underlying strike
price is subject to adjustment or denominated in a currency that is not the same as the
functional currency of the issuer. The Common Share purchase warrants are fair
valued at each balance sheet date and any changes to the fair value are charged
or credited to the statement of comprehensive profit (loss). On the date of
exercise, the warrants are fair valued and transferred from warrants liability
to share capital.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

The Company may enter into financing arrangements which may
include the issuance of convertible debentures that are denominated in a
currency different than the Companys U.S. dollar functional currency or does
not meet the fixed-for-fixed criterion in accordance with IAS 32.22, Financial Instruments  Presentation. In such case, the Common Share
conversion feature of these convertible debentures would be classified as a
derivative liability and is fair valued at each balance sheet date with changes
in the fair value recognized in the statement of comprehensive loss.

NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

Certain new standards, interpretations and amendments to
existing standards have been issued by the IASB or International Financial
Reporting Interpretations Committee (IFRIC) that are mandatory for accounting
periods beginning 2013, or later periods. Some updates that are not applicable
or are not consequential to the Company may have been excluded from the list
below.

Adoption of New or Amended IFRS

On January 1, 2013, the Company has applied the following new
accounting standards that were previously issued by the IASB:

Consolidated Financial Statements

IFRS 10, Consolidated Financial Statements, replaces the
guidance on control and consolidation in IAS 27,

Consolidated and Separate Financial Statements, and
SIC-12, Consolidation  Special Purpose Entities. IFRS 10 requires
consolidation of an investee only if the investor possesses power over the
investee, has exposure to variable returns from its involvement with the
investee and has the ability to use its power over the investee to affect its
returns. Detailed guidance is provided on applying the definition of control.
The accounting requirements for consolidation have remained largely consistent
with IAS 27. The Company applied IFRS 10 at January 1, 2013, and this did not
have an impact on the consolidated financial statements.

Joint Arrangements

IFRS 11, Joint Arrangements, replaces IAS 31,
Interests in Joint Venturesand SIC-13, Jointly Controlled Entities
Non-Monetary Contributions by Venturers. IFRS 11 provides for a
principles-based approach to the accounting for joint arrangements that requires
an entity to recognize its contractual rights and obligations arising from its
involvement in joint arrangements. A joint arrangement is an arrangement in
which two or more parties have joint control. Under IFRS 11, joint arrangements
are classified as either a joint operation or a joint venture, whereas under IAS
31, they were classified as a jointly controlled asset, jointly controlled
operation or a jointly controlled entity. IFRS 11 requires the use of the equity
method of accounting for interests in joint ventures, whereas IAS 31 permitted a
choice of the equity method or proportionate consolidation for jointly
controlled entities. Under IFRS 11, for joint operations, each party recognizes
its rights to and obligations for the assets, liabilities, revenues and expenses
of the arrangement. The Company applied IFRS 11 retrospectively by reassessing
the type of, and accounting for, each joint arrangement in existence at January
1, 2013. No significant impacts resulted to the consolidated financial
statements.

Disclosure of interest in other entities

IFRS 12, Disclosure of Interest in Other Entities,establishes disclosure requirements for interests in other entities, such as
joint arrangements, associates, special purpose vehicles, and off balance sheet
vehicles. The standard carries forward existing disclosures and also introduces
significant additional disclosure requirements that address the nature of, and
risks associated with, an entitys interests in other entities and the effects
of those interests on its financial statements. Disclosures arising from the adoption
of IFRS 12 can be found in Note 3 in the consolidated financial statements.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

Fair value measurement

IFRS 13, Fair Value Measurement, sets out a single IFRS
framework for measuring fair value, clarifies the definition of fair value, and
enhances disclosures about fair value measurements. The Company applied IFRS 13
prospectively at January 1, 2013, and this did not have a significant impact on
the consolidated financial statements.

Future Accounting Changes

Financial instruments

IFRS 9, Financial Instrumentsreplaces IAS 39,
Financial Instruments: Recognition and Measurement. The IASB recently
suspended the original planned effective date of January 1, 2015, and at present
the effective date has not been determined. The Company is currently evaluating
the impact the final standard will have on its consolidated financial
statements.

DISCLOSURE CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Companys management, with participation of its Chief
Executive Officer and Senior Vice-President and Chief Financial Officer, has
evaluated the effectiveness of the Companys disclosure controls and procedures.
Based on this assessment, the Chief Executive Officer and Senior Vice-President
and Chief Financial Officer have concluded that as of the end of the period
covered under this report, the Companys disclosure controls and procedures were
effective to provide reasonable assurance that the information required to be
disclosed by the Company in reports it files is recorded, processed, summarized
and reported, within the appropriate time periods and is accumulated and
communicated to management, including the Chief Executive Officer and Senior
Vice-President and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.

Internal Control over Financial Reporting

The Companys management is responsible for establishing and
maintaining adequate internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and
preparation of financial statements for external purposes in accordance with
IFRS. However, due to inherent limitations, internal control over financial
reporting may not prevent or detect all misstatements and fraud. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by unauthorized override of the control.

There have been no changes to the Companys internal controls
over financial reporting that occurred during the year ended December 31, 2013
that have materially affected or are reasonably likely to affect the Companys
internal controls over financial reporting.

Control Framework

Management has used the original Committee of Sponsoring
Organizations of the Treadway Commission framework in order to assess the
effectiveness of the Companys internal control over financial reporting.

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 a comprehensive
list can be found under the heading Risk Factors in the Companys Annual Information Form, which
is available under Augusta's issuer profile on SEDAR at www.sedar.comand
EDGAR at www.sec.gov.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

The Company will require additional capital to fund its
business plans.

Augusta has minimal revenue from its operations and does not
expect to generate any significant revenue until Rosemont is placed into
commercial production in 2017. Augusta will require project financing to be in
place by the time the FROD is issued, which is expected to occur in the second
quarter of 2014. 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, particularly within Europe, 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.

The Company could lose its only material property in the
event of default under the Red Kite Loan Agreement.

The Companys obligations under the loan agreement entered into
with Red Kite are secured by the common shares and assets of Rosemont Copper
Company, which holds title to the Companys only material property, the Rosemont
Project. In the event of a default in which the Company is unable to immediately
pay all accrued and unpaid interest and principal debt under the Expanded Loan,
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 Augustas
shareholders could lose their entire investment.

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.

The Company may be adversely affected by fluctuations in
copper, molybdenum, silver, gold and other metal prices.

The value and price of the Companys common shares, financial
results, and its exploration, development and mining, if any, activities may be
adversely affected by declines in the price of copper, molybdenum, silver, gold
and other metals. Mineral prices fluctuate widely and are affected by numerous
factors beyond the Companys control such as interest rates, exchange rates,
inflation or deflation, fluctuation in the value of the US dollar and foreign
currencies, global and regional supply and demand, and the political and
economic conditions of mineral producing countries throughout the world. The
price for metals can fluctuate in response to many factors beyond anyones
ability to predict. 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 percent 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.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

Mineralized material calculations and life-of-mine plans using
significantly lower metal prices could result in material write-downs of the
Companys investments in the Rosemont Property and increased amortization,
reclamation and closure charges.

In addition to adversely affecting the Companys mineralized
material estimates and financial condition, declining metal prices could impact
operations by requiring a reassessment of the commercial feasibility of the
Rosemont 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.

Title to the Companys properties may be subject to other
claims.

Although the Company believes it has exercised commercially
reasonable due diligence with respect to determining title to properties it
owns, controls or has the right to acquire by option, there is no guarantee that
title to such properties and other tenure 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 the Company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 the Company cannot
be certain that specific quantities of copper, molybdenum, silver, gold or other
minerals will in fact be realized. There are numerous uncertainties inherent in
estimating measured, indicated and inferred mineral resources and proven and
probable mineral reserves including many factors beyond the Companys control.
The estimation of mineral resources and mineral reserves is necessarily a
subjective process, and the accuracy of any such estimates are a function of the
quantity and quality of available data and of the assumptions made and judgments
used in engineering and geological interpretations, which may prove to be
unreliable and different materially from actual results. Any material change in
the quantity of mineralization, grade or stripping ratio, or mineral prices may
affect the economic viability of its properties. In addition, the Company cannot
be certain that metal recoveries in small-scale laboratory tests will be
duplicated in larger scale tests under on-site conditions or during production.
Until a deposit is actually mined and processed the quantity of mineral
resources and reserves and grades must be considered as estimates only.

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

The Company believes the Rosemont Project complies with
existing environmental and mining laws and regulations affecting its operations.
Its mining, processing, development and mineral exploration activities, if any,
will be subject to various laws governing prospecting, mining, development,
production, taxes, labour standards and occupational health, mine safety, toxic
substances, land use, water use, land claims of local people and other matters.
The Company can provide no assurance 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.

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|Managements
      Discussion and Analysis for the Year Ended December 31, 2013
|-------------------------------------------------------------------------------

A portion of the present Rosemont Property land position is
located on unpatented mine and millsite claims located on US federal public
lands. The right to use such claims are granted under the United States General
Mining Law of 1872 (the General Mining Law). Unpatented mining claims are
unique property interests in the US, 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 by 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 any future 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 its 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.

The Company does not insure against all
risks.

The Companys insurance policies do not insure the Company
against all the potential risks associated with a mining companys operations.
The Company may also be unable to maintain insurance to cover these risks at
economically feasible premiums. Insurance coverage may not continue to be
available or may not be adequate to cover any resulting liability. Moreover,
insurance against risks such as environmental pollution or other hazards as a
result of exploration and production is not generally available to the Company
or to other companies in the mining industry on acceptable terms. The Company
might also become subject to liability for pollution or other hazards which may
not be insured against or which the Company may elect not to insure against
because of premium costs or other reasons. Losses from these events may cause
the Company to incur significant costs that could have a material adverse effect
upon the Companys financial condition and results of operations.

The Company may incur losses associated with foreign
currency fluctuations.

The Company reports its financial statements in U.S. Dollars
(USD) with operations in the U.S., Canada and Mexico. As a consequence, the
financial results of our operations, as reported in USD, are subject to changes
in the value of the USD relative to local currencies. A portion of the operating
and capital expenditures are in local currencies any may negatively impact our
financial results by strengthening local currencies relative to the USD and
positively impacted by the inverse. The local currencies that the Company is
exposed to are the Canadian dollar and the Mexican pesos. In order to mitigate
this exposure, the Company maintains a portion of its cash balances in these
currencies. The Companys balance sheet also includes various monetary assets
and liabilities, some of which are denominated in foreign currencies. These
balances are fair valued at the end of each period, with resulting adjustments
being reflected as foreign exchange gains or losses on our consolidated
statements of comprehensive loss. Refer to Note 12, Financial Instruments, for
further details of foreign denominated monetary assets and liabilities.

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