Macquarie analysts have thrown their weight behind Evolution Mining’s $1bn Ernest Henry gold and copper mine acquisition.
Evolution worked with RBC Capital Markets and law firm Allens to buy from Glencore complete ownership of the project, 38km from Cloncurry in Queensland.
The analysts have lifted their share price target on Evolution by 8 per cent to $4.20.
They said the acquisition would enable Evolution to focus more on deeper drilling and mine life extensions.
The transaction is both earnings and value accretive, says Macquarie.
Incorporating the Ernest Henry transaction creates a 6 per cent upgrade to the bank’s 2022 and 2023 financial year earnings estimates.
However, the analysts say the merits of the Ernest Henry acquisition is somewhat tempered by the ongoing delays at its Red Lake gold mining project in Canada.
The mine was purchased from Newmont in 2019 and is the largest contributor to its overall valuation.
As reported earlier by The Australian, Wednesday’s deal will see Evolution pay $800m upfront to take full control of Ernest Henry, and another $200m in a year.
The gold miner has launched a $US200m bond issue to back the acquisition, with the rest of the upfront cost to be paid from the company’s cash reserves.
Evolution will add Ernest Henry to its portfolio on January 1, and said the transaction would lift its forecast copper production for the current financial year from the range of 17,000 to 19,000 tonnes to 34,000 to 38,000 tonnes.
Full ownership of Ernest Henry will lift Evolution’s annual copper output by about 40,000 tonnes a year in subsequent fiscal periods, the company said, to about 60,000 tonnes.
Glencore will continue to buy all of the mine’s copper output for processing through its local refineries and smelters.
In 2016, Evolution paid $880m for the rights to all future gold revenue from the mine, along with 30 per cent of future copper and silver revenue.
Add your comment to this story
Santos deal may inflate its rivals
Santos’s buyout by the Abu Dhabi National Oil Company and The Carlyle Group is likely to add share price firepower to its rivals.
Recut deal with Platinum favours L1 Capital
Market experts say the move by L1 Capital to recast its merger deal with Platnum Asset Management was the difference between a deal getting across the line or being called off.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout