Evolution Mining shares frozen amid $717 million acquisition

Evolution is snapping up this copper-gold asset to bring more cash through its doors.

| More on:
Miner and company person analysing results of a mining company.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Evolution Mining Ltd (ASX: EVN) share price is on ice this Tuesday morning.

With nowhere to go, the seven billion-dollar-strong gold miner's shares are idle at yesterday's closing price of $4.14 apiece. In the meantime, other listed gold giants are having a dull start to the day following a weakening in precious metal prices overnight.

Northern Star Resources Ltd (ASX: NST) and Newmont Corporation Ltd (ASX: NEM) are trading 4.7% and 2.5% lower, respectively. It's fair to assume Evolution might have had a red shade to its name today as well if it weren't to enter a trading halt this morning.

Instead, the gold miner is parading its latest addition.

What's bringing Evolution Mining shares to a standstill?

At a time of near-record gold prices, Evolution Mining has entered into a binding agreement to acquire an 80% stake in the Northparkes copper-gold mine from CMOC Group Limited. Operating under a joint venture, Sumitomo will retain the other 20% interest in the New South Wales (NSW) mine.

According to the release, Evolution will lay down US$475 million (~A$717.6 million) to seal the deal. The total cash consideration comprises an upfront US$400 million payment and a US$75 million contingent consideration.

Additionally, an offtake agreement has been entered with IXM S.A — a CMOC subsidiary — whereby IXM will purchase Northparkes' copper concentrates, equal to Evolution's 80% interest, over the life of the mine.

Evolution pays up for cash-generating asset

The company highlighted the cash-generating capability of Northparkes in the release, noting:

  • Delivering immediate cash flows to support current balance sheet deleveraging
  • Upcoming low capital intensity profile with a pipeline of projects
  • Multiple large-scale porphyry copper and gold deposits, suitable for bulk cave mining operation

These factors were unsurprisingly appealing given some of Evolution's recent fundamentals. As of 30 June 2023, the company maintained a debt-to-equity ratio of around 54%, with a net debt of $1.72 billion.

Nevertheless, that hasn't stopped Evolution Mining shares outpacing the S&P/ASX 200 Index (ASX: XJO) in 2023.

Northparkes holds an estimated 101 million tonnes in ore reserve at 0.53% copper and 0.27 grams per tonne of gold. The mine life is believed to be around 30 years based on forecast production.

Speaking of which — the 80% share is expected to produce 25,000 tonnes of copper and 38,000 ounces of gold in FY2024.

However, Evolution will need to honour an agreement CMOC made with Triple Flag Precious Metals Corp. As per the July 2020 arrangement, Triple Flag will receive 67.5% of CMOC's share of payable gold up to 630,000 ounces before reducing to 33.75% thereafter.

Likewise, 100% of CMOC's payable silver share will go to Triple Flag up to 9 million ounces. From there, it will reduce to 50% of Northparkes' silver production.

What it means for Evolution Mining shares

Evolution is raising A$525 million via a fully underwritten institutional placement to fund the acquisition. This represents approximately 7% of the company's market capitalisation — signifying some dilution for shareholders. In addition, the gold miner is tapping into a new A$200 million five-year term debt facility.

A share purchase plan (SPP) will be open to eligible shareholders to raise an additional A$60 million. The offer is being made at $3.80 per share, representing an 8.2% discount to yesterday's closing price.

Wasting no time, the transaction is expected to occur before the end of December this year.

Evolution Mining shares are up 36.2% since the start of the year.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

a woman drawing image on wall of big fish about to eat a small fish
Mergers & Acquisitions

2 ASX shares rocketing up to 20% on takeover news

Takeover offers have been put on the table for these companies.

Read more »

Miner looking at a tablet.
Mergers & Acquisitions

Alumina shares leap 8% on Alcoa takeover bid

ASX 200 investors are sending the Alumina share price soaring following confirmation of Alcoa’s takeover intentions.

Read more »

A man stands in a building site featuring brick walls with building equipment in the background.
Mergers & Acquisitions

CSR share price jumps again as blockbuster bid confirmed

Investors are excited about a potential takeover.

Read more »

A fit man sits and prepares to dive into a hole made in frozen ice.
Mergers & Acquisitions

Guess which ASX 200 stock is frozen on a $976 million acquisition

This company is about to throw down more than one-tenth of its value to double its production.

Read more »

A surprised man sits at his desk in his study staring at his computer screen with his hands up.
Bank Shares

ANZ shares tumble despite Suncorp Bank takeover approval

The Australian Competition Tribunal has finally given the deal the thumbs up.

Read more »

Man with rocket wings which have flames coming out of them.
Mergers & Acquisitions

APM shares rocket 73% after rejecting $1.5b takeover

$1.5 billion wasn't enough for this company's board.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Mergers & Acquisitions

Why are Boral shares outperforming the ASX 200 today?

This building materials company has received a takeover offer.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Technology Shares

Altium shares rocket on $9.1b takeover deal

This tech stock looks set to leave the ASX boards after accepting a takeover offer.

Read more »