Evolution Mining (ASX:EVN) Signs $729M Deal for Glencore’s (LON:GLEN) Ernest Henry Mine

Source: Glencore

Evolution Mining (ASX:EVN), based in Australia, is a globally recognized gold miner. On October 5, 2021, the company acquired the Ernest Henry Mining (EHM) copper and gold mine in Queensland, Australia, from Glencore (LON:GLEN) for $729.60 million (A $1 billion). 

Ernest Henry includes an underground mine that produces copper and gold concentrate that is transported to Mount Isa Mines for smelting.

Evolution acquired the company $582 million (A$800 million). After completion of 12 months, a further A$200 million will be paid. Evolution had previously acquired an economic interest in Ernest Henry in 2016 through a joint structure, with the asset managed and operated by Glencore. This new deal brings the Ernest Henry Mine under Evolution’s control and ownership. Evolution is now the sole owner of the asset so it will assume full ownership of its operations as well.

An Exit for One of the World’s Largest Natural Resource Companies

Glencore is one of the world’s largest diversified natural resource companies, as well as a major producer and marketer of more than 60 commodities. In Australia, Glencore produces coal, copper, cobalt, nickel, zinc, lead, silver, and gold between 26 mining operations. Glencore is also one of the country’s biggest employers.

Glencore employs approximately 17,700 people in Australia (including around 600 at the Ernest Henry Mine) and in 2020 the company contributed more than $13.8 billion to the regional, state, and national economies. 

Glencore CEO Gary Nagle said in a statement, “Evolution has been a strong partner at Ernest Henry Mine for five years. They share our way of working and our commitment to operating responsibly in all aspects of the business.”

Glencore’s commitment to northwest Queensland will continue with the Mount Isa Mines copper and zinc complex, copper smelter, and Townsville copper refinery. Glencore will also pivot from this mine and increase its focus on lower-cost, long-life copper assets in its global portfolio, such as those in Africa and South America.

Shares of Evolution Mining Ltd (ASX: EVN) were up nearly 8% on the day of the announcement. 

An Effort to Boost Production

The company advised that the acquisition will increase its copper production from its previous forecast to between 34,000 and 38,000 tons and reduce its all-in sustaining cost (AISC) to around A$90 to A$100 per ounce. This will help cement it as one of the lowest-cost gold producers in the world.

The recent acquisition aligns with Evolution’s strategy of investing in assets with immediate material increase in cash flow generation. 

Once the initial $800 million round of the transaction is completed, Evolution will have about $900 million in liquidity available at settlement, the release noted. 

Evolution Mining’s CEO said, “We have long coveted ownership of Ernest Henry. It is a world-class asset, in Australia, and one we know extremely well due to our successful investment in the asset in 2016 and we are proud that it will once again be 100% Australian. The acquisition is consistent with our strategy, substantially improves the quality of our portfolio and offers both strong cash flow and life-of-mine extension opportunities.”

He continued, “The site management team has an outstanding track record of operational delivery and we are delighted to have them join Evolution and look forward to working with them to make this an even better operation. We are also pleased to continue our strong relationship with Glencore and that product will continue to be treated in the local region at their Mt Isa smelter and Townsville refinery.”

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

By Matthew Evanoff

I cover the mining industry and the best mining stocks around the world. I write about industry news, individual companies, projects, management, and profiles on industry leaders.

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