Evolution Mining urged to pounce on Greatland Resources despite Klein’s acquisition aversion

Greatland Resources chief executive Shaun Day rings the bell to mark the company's start to life on the ASX. Picture: Supplied

Evolution Mining’s chairman Jake Klein has sent clear signals to the market that the company is not a buyer of assets in the current market.

But, some think perhaps he needs to rethink that strategy when it comes to Greatland Resources.

On Tuesday, shares in Greatland Resources crashed 24 per cent to $5.24, taking its market value to $3.5bn.

The sell off was triggered when the miner, backed by billionaire Andrew Forrest, downgraded its guidance to between 260,000 and 310,000 ounces of gold, down from between 300,000 and 340,000.

Shares slightly recovered on Wednesday, gaining 6 per cent to $5.56 before the close.

That’s only weeks after listing with shares sold at $6.60 each, closing up 10.6 per cent on the first day of trade to $7.30 per share, as investors remained eager to ride the upside of the record gold price.

But the attraction for Evolution Mining is that it could buy Greatland Resources after its shares have fallen while its own are trading at $7.35, up 52 per cent this year.

A scrip deal would not cost the group from a cash perspective.

It would also add about 300,000 tonnes of gold per annum at about a $1500 all in sustaining cost.

That’s almost half the gold that Evolution Mining produces, which was 717,000 ounces at an AISC of $1477 last year.

By contrast to Greatland’s $3.75bn market value, Evolution Mining is worth $14.5bn.

Any buyer of Greatland would also inherit the Havieron gold and copper project, which industry sources say is a good development.

However, some believe Greatland would not be the right move for Evolution, because the remediation costs of the aged Telfer gold mine would be too high.

Evolution Mining executive chairman Jake Klein. Picture: Hollie Adams

It’s also worth remembering Newmont had the Telfer mine on the market before as well as the Havieron but there was no takers because Greatland Gold had pre-emptive rights.

That uncertainty has now been removed for prospective suitors who would not have to worry that Greatland would buy the asset anyway.

Some think Evolution would want to sell its Red Lake mine in Canada before it embarked on acquisitions, but there are not thought to be buyers.

And Mr Klein has told the market it would only be interested in bilateral deals with motivated sellers that improve the quality of the company portfolio.

Greatland, which is already listed in the United Kingdom, purchased the Telfer Gold Mine and the remaining 70 per cent interest in the Havieron gold project it doesn’t already own from Newmont last year for $US475m.

With pre-emptive rights, it was always known to be extremely keen to buy the assets and thought to be the most likely candidate – the question was always how it would fund a deal.

Telfer includes a copper and gold mine and the largest processing facility in the Paterson province in Western Australia, 1300km northeast of Perth, that can produce 20 million tonnes per annum.

The valuable Havieron development is about 45km away.

Telfer has an open pit and underground mining operations.

Wyloo Metals, a private investment company owned by Mr Forrest and his family, has an 8.6 per cent stake in Greatland.

Evolution Mining owns the Ernerst Henry and Mt Rawdon gold mines in Queensland, Northparkes and Cowal mines in NSW, the Mungari gold mine in WA and Red Lake in Ontario.