Participants in Evolution Mining’s equity raising are licking their wounds, with the stock trading under water after investors took exception for the $US475m it paid for a stake in the Northparkes copper and gold mine.
The gold miner’s share price has tanked since it announced the deal, where it will own 80 per cent of Northparkes on the east coast of NSW, with concern that Evolution gains a reputation of being overly enthusiastic on the acquisitions front.
To fund the transaction, it announced it would sell shares at $3.80 each, an 8.2 per cent discount to its last traded share price of $4.13, raising $525m through an institutional placement.
But after it emerged from a trading halt, shares fell 15 per cent on Wednesday after recovering Thursday, but are still below the $3.80 issue price, closing at $3.65.
The verdict around the market is that Evolution overpaid for the asset, particularly because it does not gain full control with Sumitomo remaining a shareholder after it had earlier flagged acquisitions were on its agenda with six to eight assets in its sights.
The mine, previously owned by Rio Tinto, is 27km northwest of Parkes in central west NSW and has been on the market most of the year through Citi and Standard Chartered, with the special purpose acquisition company MAC also bidding.
Evolution has the Cowal mining project in close proximity, which was why the deal was said to have made sense.
It will pay $US400m up front with the remaining $US75m subject to certain performance hurdles.
Evolution said the price equated to 7 times earnings before interest, tax, depreciation and amortisation.
Some shareholders said they were comfortable with the price despite others in the market saying the deal was expensive.
Making it tough for Evolution are volatile market conditions, with investors wary to support deals amid a high inflation environment, making debt expensive.
The acquisition is being funded by a $525m fully underwritten placement and a $200m five-year debt facility.
The raise was by way of a placement and comes only days after sub-underwriters got left with 16 million shares after Treasury Wine Estates raised about $825m to fund its $US900m purchase of the US luxury wine business DAOU at $10.80 each while shares are now trading at $10.40.
The Northparkes mine is expected to produce 15,000 ounces of gold for the six months to June 2024 and 12,500 tonnes of copper.
It comes after Evolution Mining in 2021 purchased the Northern Star Kundana group of mines worth up to $450m.
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