Evolution Mining (ASX:EVN) is making a significant move to expand its investment in the New South Wales mining industry. The company has proposed to acquire an 80% stake in the long-established Northparkes copper-gold mine in the state's central west for over $A700 million. This strategic deal marks Evolution Mining's second mine in the region, complementing its existing Cowal operation in one of Australia's most promising areas for copper and gold mineralisation.
As part of the agreement, Evolution Mining will pay $US400 million in cash upfront to China's CMOC Group Ltd, the current owner of the 80% stake in Northparkes. Additionally, there will be a $US75 million earn-out payment. Sumitomo, a Japanese trading house, and its mining arm will retain their combined 20% stake in Northparkes.
To finance the acquisition, Evolution Mining plans to raise $A525 million from shareholders and secure a $A200 million five-year term debt facility. The company will also conduct a share purchase plan for retail shareholders, potentially raising up to $60 million.
The acquisition of Northparkes is expected to boost Evolution Mining's 2023-24 output guidance, adding 19,000 ounces of gold and 12,500 tonnes of copper. The All-In Sustaining Cost is estimated to decrease by $A20 per ounce, reaching $A1,315 per ounce.
The central west region, housing Northparkes, Cowal, and the large Cadia mine (operated by Newcrest, now owned by Newmont), is a hotspot for mining activity. Northparkes, which began operations in 1994 using the block cave method, is in the company of other significant projects, such as Alkane Exploration's Tomingley gold mine and prospects like Kaiser and Boda. Magmatic Resources, a small explorer, has also uncovered promising prospects named Corvette and Kingwood, boasting at least 110 million tonnes of resources.
Evolution Mining has also entered into an offtake agreement with IXM S.A. (a subsidiary of CMOC) to purchase copper concentrates produced from Northparkes. Moreover, the company will assume the obligations of CMOC Limited as guarantor under the Triple Flag Metal Purchase and Sale Agreement.
As of December 31, 2022, Northparkes had estimated Mineral Resources (excluding Ore Reserves) of 526.9 million tonnes, grading 0.55% copper, 0.19g/t gold, and 1.87g/t silver. Ore Reserves were estimated at 101.4 million tonnes, grading 0.53% copper, 0.27g/t gold, and 1.87g/t silver.
This acquisition enhances Evolution Mining's portfolio diversification and provides exposure to copper, which is expected to contribute around 30% of total revenue in 2023-24, according to Jake Klein, Executive Chair of Evolution Mining. He stated, "The acquisition of Northparkes represents a unique opportunity to add another quality asset to our portfolio, strengthening our positioning as a business that prospers through the cycle." Klein emphasised Northparkes' potential as a Day-1 cashflow producing asset with a ~30-year mine life, considerable upside, and a well-established team with a strong track record and technical expertise. CMOC's decision to exit the asset aligns with its strategic objectives, making this acquisition mutually beneficial for both parties and an opportunity for Evolution Mining to continue its successful track record at the operation.
