Evolution Mining to pay $1bn for control of Glencore’s Ernest Henry copper mine in Queensland
Evolution Mining has added another 40,000 tonnes of copper production a year to its inventory as Glencore edges away from more Australian assets.
Evolution Mining has cut a $1bn deal with Glencore to take complete control of Queensland’s Ernest Henry copper and gold mine.
The deal gives Evolution operational control of the mine, which sits 38km away from Cloncurry in Queensland’s rich base metals district, as Glencore retreats further from its ageing Australian base metals assets.
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.
Under Wednesday’s deal, it will 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. The copper credits would drop Evolution’s average all-in-sustaining gold production costs by about $140 to $190 an ounce across its portfolio in the medium term.
Evolution boss Jake Klein said the company had long coveted full ownership of 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 per cent Australian owned,” he said.
“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.”
Glencore will continue to buy all of the mine’s copper output for processing through its local refineries and smelters.
Glencore chief executive Gary Nagle said the company remained committed to its presence in Northern Queensland, where it owns the Mount Isa mine, a copper smelter and a refinery in Townsville.
But with Glencore’s Cobar mine in NSW also said to be on the market, the decision to sell Ernest Henry is a further signal of a Glencore retreat from its ageing Australian base metals assets.
“Glencore will also increase its focus on lower-cost, long-life copper assets in its global portfolio like those in Africa and South America,” Mr Nagle said in a statement.
“Glencore will continue to be among Australia’s leading producers and exporters of the green metals that underpin the global transition to a low-carbon future.”
Evolution shares closed down 12c to $4.01 on Wednesday.