After attempting to purchase the asset for over two years, Evolution Mining (ASX:EVN) has announced a deal to acquire Barrick’s Cowal Mine for $704m. The deal will make Evolution the second largest gold producer listed on the ASX. The mine is expected to produce about 230,000 to 260,000 ounces of gold per year. The company announced it became more indebted and underwent a $248m underwritten capital raising to fund the purchase. The company expects to lift its total production up to 860,000 ounces per year.
Chief Executive Officer Jake Klein called the deal “truly transformational” and noted that he and other executives had been seeking to purchase the mine for some time. “In July last year, myself and a fellow Evolution director made a trip to Toronto to express our interest in Cowal, so it has certainly been an asset that we have long coveted," he said. "It is a world-class asset and it is very rare, in fact, it is unique, that they are coming loose from a major.” Mr. Klein also discussed the company’s intent to reduce its gearing ratio over the next year. After the deal goes through, Evolution’s gearing ratio is expected to be 28 per cent. The company wants to “bed these assets down” to increase its profit margins.
Analysts had previously valued the Cowal mine at around US$600m (A$767.04). They also noted that the true value of the asset would be discovered once Evolution started its own operations in the mine. Part of the capital for the purchase will come from a new capital raising, in which current shareholders may purchase 13 new shares for every five shares they already own at 90c each. Shares of EVN were suspended from trading today. Its last share price was $1.175. EVN has advanced 45.06 per cent in the last 12 months and 82.17 per cent so far this year.
Author: Imran Valibhoy
May 25, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.