EVOLUTION FPO (ASX: EVN) has emerged as the buyer of the Barrick (Australia Pacific) Pty Limited's Cowal gold mine in New South Wales, which it says is "one of Australia's most attractive gold assets."
In a deal worth US$550 million (approx. $703.7 million), Barrick will use the cash proceeds to pay down its debt while Evolution could overtake Northern Star Resources Ltd (ASX: NST) to become the nation's second largest gold miner, behind Newcrest Mining Limited (ASX: NCM).
Given that the Cowal mine has an estimated annual production of 230-260 thousand ounces, the group will have a combined annual production of 630-700,000 ounces once the transaction is complete. This could increase to as much as 860,000 ounces should Evolution also succeed with its proposed acquisition of La Mancha Australia.
The acquisition should also help improve Evolution's all-in sustaining costs (AISC), enabling it to become more competitive on a global scale. The Cowal mine is said to have an AISC of between A$850-900 per ounce, which compares to Evolution's AISC of A$1,032 for the nine-months ended 31 March, 2015. Together with Cowal and La Mancha Australia, Evolution could be looking at an AISC as low as A$950 (US$750) per ounce.
Commenting on the acquisition, Evolution's Executive Chairman Jake Klein said, "the addition of Cowal to our asset portfolio is an exciting step forward for Evolution and provides us with a cornerstone asset of the highest quality which we will shape our future around."
In order to fund the acquisition, Evolution has refinanced corporate credit facilities while it will also raise approximately $248 million through a 5-for-13 accelerated renounceable entitlement offer at an offer price of 90 cents per new share. That means that for every 13 shares you currently own, you can buy five more at a 23% discount to Friday's closing price of $1.175.
Of course, this will dilute current shareholder equity (for investors who don't participate in the offer) but it could also greatly improve the company's competitive position. As such, Evolution could certainly be a gold miner worth adding to your watchlist.