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 silhouette shot of two business man shake hands in a boardroom setting with light coming from full length glass windows beyond them.
Mergers & Acquisitions

Rio Tinto share price rises on $10b Arcadium Lithium takeover deal

Management believes the deal makes it a global leader in energy transition commodities.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Mergers & Acquisitions

Arcadium Lithium shares rocket 46% on Rio Tinto takeover approach

The mining giant could soon become the third largest lithium supplier.

Read more »

Multiple ASX share investors take on one another in a tug of war in a high rise building.
Mergers & Acquisitions

Platinum shares slump despite Regal takeover update

Could a takeover deal be getting closer? Let's find out.

Read more »

Female pharmacist smiles with a digital tablet.
Healthcare Shares

Sigma shares up 25% in 2 days as Chemist Warehouse merger looks set

The deal continues to create tailwinds for Sigma shares.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Small Cap Shares

Which small cap ASX stock is jumping 20% after receiving a takeover offer?

This tech stock could be heading to the NASDAQ after receiving a takeover offer.

Read more »

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Healthcare Shares

Guess which ASX 200 healthcare stock is up 12% on big Chemist Warehouse news

Investors appear to believe this news could be a sign that the deal will go ahead.

Read more »

Happy woman holding white house model in hand and pointing to it with a pen.
Mergers & Acquisitions

REA share price charges higher on big Rightmove news

It wasn't fourth time lucky for the realestate.com.au operator.

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Financial Shares

Platinum shares fall after rejecting Regal Partners takeover offer

The fund manager believes the offer undervalues the company.

Read more »