Evolution surges on $1B mine acquisition

Evolution Mining shares surged almost 10% on Thursday after it announced it would acquire 100% of the Glencore owned, Ernest Henry Mining Pty Ltd, the owner of the world class Ernest Henry copper-gold mine located in Queensland for $1 billion.

The transaction, comprising of $800 million payable upfront, and $200 million payable on the first anniversary of the transaction, will result in Evolution’s copper production increasing, lowering its All-in Sustaining Cost per ounce and cementing its position as one of the lowest cost gold producers in the world.

Ernest Henry is a large-scale, long-life, copper-gold mine located ~38km north-east of Cloncurry, Queensland. The operation commenced as an open pit mine in 1998 and transitioned to underground mining in 2011. The current shaft underground mining operation employs a low-cost and highly efficient sub-level caving ore extraction method. There is also an underground primary crusher and ore handling system, with a hoisting capacity in excess of 6Mt per annum. The operation also has an effective and sophisticated above and below ground water management system.

Copper, gold and silver are recovered from the ore using traditional grinding and flotation methods in the concentrator, and the plant has a current processing rate of ~6.8Mtpa. The concentrate is treated at Glencore’s Mt Isa smelter (~150km trucking distance) and metal is refined at Glencore’s Townsville refinery.

The addition of 100% of Ernest Henry from 1 January 2022 increases FY22 copper production guidance for Ernest Henry from 17 – 19kt to 34 – 38kt, while there is no change to gold production guidance as Evolution already receives 100% of gold production from the current mining area above the 1,200RL. For FY23 and FY24, annual copper production will increase by 40kt to approximately 60kt per annum. It will also result in a reduction to FY22 Group AISC of approximately A$90 – A$100/oz. The impact on the Group AISC outlook for FY23 and FY24 is a reduction by approximately A$190/oz and A$140/oz respectively.

Commenting on the Transaction, Evolution’s Executive Chairman Jake Klein said: “We have long coveted to own Ernest Henry. It is a world-class asset in Australia and one which we know extremely well due to our successful investment in the asset in 2016 and proud that it will once again be 100% Australian owned. The acquisition is consistent with our strategy, materially improves the quality of our portfolio and delivers both strong cash flow and mine life extension opportunities.