Evolution Mining announces A$525M Institutional Placement

About Evolution Mining

The Evolution Mining Limited (Evolution, the Group, ASX:EVN) engages in the exploration, mine development and operation and sale of gold and gold-copper concentrates in the lower risk, tier 1 jurisdictions of Australia and Canada.

Founded in 2011, the Group employs 2,730 people with a focus on improving the quality of its assets rather than increasing the number of assets in the portfolio. Improving the quality of the portfolio is achieved by buying better quality assets at attractive valuations or by divesting shorter life, higher cost assets.

It’s all about buying quality

Evolution’s stated strategy of buying high quality assets at attractive valuations with increased mine-life potential in tier 1 jurisdictions is evidenced by the acquisition of an 80 percent interest in Northparkes Copper-Gold Mine located in NSW, for US$475 million. The transaction expected to complete before the end of 2023

The acquisition price comprises US$400 million upfront cash consideration and contingent consideration capped at US$75 million. The contingent consideration is a copper price-linked payment structure and revenue share out to 30 June 2027 with the Chinese vendor, CMOC. The remaining 20 percent equity interest will be retained by Japanese integrated trading company, Sumitomo Corp and Sumitomo Metal Mining.

Northparkes is located 27 kilometres north-west of Parkes and has an onsite processing plant. The copper-gold-silver concentrate produced at Northparkes is transported to the Port of Newcastle for shipment to international destinations. Located in an area that is well known to Evolution, and with a 30-year mine life, the acquisition increases Evolution’s exposure to copper to about 30 percent of total revenue, from FY24.  Prior to this most recent acquisition, Evolution’s average portfolio mine life was 14 years.

The acquisition will be partly funded by a A$525 million underwritten Institutional Placement of 138, 157,895 shares at a price of A$3.80 per share. This represents an 8.2 percent discount to the closing price of A$4.14 per share as at 4 December 2023. The funding amount includes a new A$200 million 5-year term debt facility with no debt repayments due on the facility until the third quarter of FY2025. Seventy-four percent of debt is long-term and match-funded with mine life, and funding cost is estimated at about 5 percent per annum.

Securities Purchase Plan

In addition, an issue of 15,789,474 shares will be offered to existing shareholders under a Securities Purchase Plan (SPP) to raise $60 million. This offer will open on 13 December 2023 and close on 16 January 2024. The SPP offer price will be at the lower of A$3.80 per share, and the volume-weighted average price (VWAP) of Evolution shares traded during the 5 trading days up to and including the day on which the SPP is scheduled to close. The VWAP discount is 2.5 percent, and the maximum acceptance value has been set at $30,000 per shareholder.

Looking Ahead

The Northparkes acquisition is accretive across several per share metrics. Gold-equivalent production is expected to increase by 5 percent in FY2024 and Resources by 32 percent. Gearing post-Placement is estimated at 34 percent (before the SPP) and the Group’s dividend policy remains unchanged.

Evolution’s FY2024 gold production guidance is increased from 770,000 ounces of gold to 808,000 ounces and copper production from 50,000 ounces to 75,000 ounces. Group All-in Sustaining Cost of US$1315 per ounce of gold, down 4 percent from $1370 per ounce.

The Northparkes Copper-Gold Mine has a history of delivering on growth and expansion. The mine is supported by a recently installed $200 million new surface secondary crushing and screening facility, an abundant water supply and contacted power and a residential mine site workforce of 330 people. Northparkes appears well-placed to add shareholder value to Evolution Mining for decades to come.