@Bear77 be interesting what you think. there is a large streaming agreement that appears to include almost all the gold production for the next 15 years or so. that leaves the copper production unencumbered. Therefore, i think this is more of a copper acquisition, especially in the first decade and a half. changes the mix appreciably for EVN exposure to gold/copper proportions once streaming rights are taken into account. copper now more important in the mix. Obviously deliberate move

makes it hard to work out the valaution, for me anyway

disc held

Ok i get a 9% pre tax FCF on this investment which is about normal i guess, for gold, good given the quality of the asset

utilized assumptions ASIC A$150/oz (dont know if this includes main. capex-no real diff anyway), Cu 12.5t A$12500/t, 19k ozs Au @A$2650/oz.

streaming takes 90%*67% of gold rev, ignored and Ag contribution

gives about 9% on the acquisition price annualised

the only other thing i will add, this was quite a tight discount, imo, so would be some intense conversations currently going on now to place the stock by the underwriters, imo

OK @Solvetheriddle - back from work and I've had a look at this deal. It sounds like Northparkes is a decent copper mine, but there's not much gold there, certainly there's not much gold per tonne of dirt (/ore). The top of page 5 of the announcement says:

"As at 31 December 2022, reported Mineral Resources (excluding Ore Reserves) for Northparkes were estimated at 526.9 million tonnes grading 0.55% copper, 0.19g/t gold and 1.87g/t silver and Ore Reserves were estimated at 101.4 million tonnes grading 0.53% copper, 0.27g/t gold and 1.87g/t silver."

They've rounded that 0.19g/t Au up to 0.20g/t Au in their presso, on slide 17:

And the tonnage has increased from 526.9m to 628m tonnes, so it must be a later calculation than the December 2022 one.

But it's LOW grade, around one fifth to one quarter of one gram of gold for every tonne of dirt(/ore). This is a copper mine and it looks like Jake Klein is happy to move further into copper, as explained on slide 8, where he says, "Increases Evolution’s exposure to copper to ~30% of revenue on a FY24E basis."

And I get the impression that apart from liking copper more these days and being happy for Evolution to be a copper and gold producer now, Jake is also happy to continue using these copper/gold mines to lower his group AISC to paper over EVN's high cost gold mines, one of which (Red Lake) is currently unprofitable and I would imagine that Mungari would be barely profitable most of the time as well:

The massive NEGATIVE AISC at Ernest Henry (EH) has lowered the EVN Group AISC (all-in sustaining costs) down to under A$1,400/ounce, and the ultra-low A$150/oz AISC at Northparkes has lowered the EVN Group AISC even lower, now down to $1,340/ounce, despite Red Lake being a whopping A$2,000/oz, Mungari being A$1,930/oz and Mt Rawdon being A$1,850/oz. Cowal is the ONLY good gold mine that Evolution own. And Ernest Henry is a good copper/gold mine. And Northparkes looks like a decent copper mine. Jake is using the copper produced at Northparkes and EH to produce copper byproduct credits that make the gold production look really cheap. For instance, the copper produced at EH is worth more (in dollars) that it costs Evolution to produce both copper and gold at EH, which is why the AISC for the gold at EH is a negative number - and not a minor negative number, it's negative -A$2,000/oz. So it MUST be a decent operation. However, over half of their portfolio of mines prior to buying 80% of Northparkes is rubbish really.

So we need to keep those shenanigans in mind when we compare EVN to NST and other majors gold producers who don't use that trick the way Jake does. Cowal is a really nice gold mine, low costs, supportive community, in rural NSW, lots to like. But Red Lake, Mungari and Mt Rawdon are VERY average operations.

Next - debt. Slide 23 says: Transaction funding is comprised of a A$525m placement and A$200m of new debt. Their pro forma gearing will be 34% (before the SPP). Something to keep in mind. EVN is a gold miner that is moving into copper - with three high cost gold mines (discussed above) - and substantial debt - slide 24 shows their debt maturity profile:

Next - by my calculations @Solvetheriddle Evolution lose 20% of everything produced at Northparkes to Sumitomo (who own 20% of Northparkes), and of the remaining 80%, Evolution lose 67.5% of the gold to Triple Flag (TF) - and all of the silver - for at least 20 years, based on the agreement starting in July 2020 and annual production (EVN's 80% share) of 38Koz p.a. Au. If they can produce more gold than that per annum, then the 630koz milestone could be reached sooner, at which point EVN would lose 32.5% of their gold instead of 67.5% of their gold (to Triple Flag). So the gold split between EVN/TF is 32.5%/67.5% for about the next 20 years and then 66.25%/33.75% after that - plus EVN would get half of the silver after that also - no silver between now and then however - all silver goes to TF until the 630koz gold target is reached - which I reckon is going to take about 20 years at current production levels. Good thing this mine has about 30 years of mine life left. Maybe more if they find more copper/gold.

So it seems to me that this isn't really about the gold - it's about the copper, and the ability to lower their group AISC even further using copper byproduct credits, and about the geological upside. On slide 9, Jake says, "Long mine life ~30 years with geological upside in our backyard" - I think he likes the idea of buying a producing mine with no regulatory hurdles or community push-back like you can and often do get with new greenfields projects - one example being Regis' McPhillamys gold project in NSW and how long that thing is taking to get built. On slide 7, he says, "Highly prospective geology and close to Cowal."

On slide 8, he highlights:

• Proven strong social licence and community support
• Highly independent site team, strong technical skill base
• Long history of Ore Reserve replenishment and mine life extension
• Well capitalised operation with lower capital intensity in next few years

As well as the increased exposure to copper which he sees as an additional benefit, but those points there are big ticks over buying a project that needs to be developed into a mine. Massively derisked.

I think this was also a bit opportunistic; On slide 9 he says, "Compelling opportunity – vendor redeploying capital in other geographies."

That's basically how NST and Saracen ended up with 50% each of the Kalgoorlie Super Pit (now 100% NST after the NST-SAR merger) when the world's two largest gold miners - Newmont and Barrick - decided to exit, saying at the time that they saw better opportunities in places like Canada - and then a few years later Newmont turns around and buys Newcrest!

OK, in terms of the small discount - I agree that this looks like it's priced for a market that's willing to buy - EVN don't think they need to go for a deep discount. $3.80 is -8.2% below the current EVN price - of $4.14 - which is Monday's closing price because they've been in a trading halt all of Tuesday, however $3.80 is also ABOVE where they closed LAST Monday (of last week, i.e. 27th Nov) - at $3.75 - and they closed at $3.68 the trading day prior to that (Fri 24th Nov), so the only reason that there's ANY discount in that placement (and SPP) price is the nice run up that the EVN share price had in the week prior to this announcement - so I guess what I'm saying is - Well timed Jake! Very well timed!

So - in summary - I can see the logic in this, however I would make a couple of quick points.

1. EVN is no longer a gold pure-play company. The majority of their revenue is still derived from gold, yes, but they are a gold and copper producer now, and they are using their copper production to make their costs appear lower than they really are at most of their gold mines.
2. If you like gold AND copper, then EVN may look attractive - however, they have 3 very ordinary gold mines, one really good gold mine (Cowal), one good copper/gold mine (EH) and soon 80% of another copper mine that also produces a little bit of gold.
3. Considering EVN's debt, and the fact that close to a third of their revenue is going to be derived from copper going forwards, you'd have to have a reasonably bullish view on the copper price (so copper demand).
4. Jake Klein and Bill Beament have been the two best deal-makers in the Aussie gold sector for the past decade, and Bill's moved on now - from gold into mining services and lithium by the looks of it - and maybe some zinc and other minerals down the track (at DVP). So, I would probably give Jake the benefit of the doubt that this IS a decent deal for Evolution, because his track record suggests that it most likely is.
5. That said, I only hold EVN in my Super, and it's a minor position, and I don't know if I'll keep it much longer as I was really after a range of gold exposures when I added EVN to my superannuation account, and EVN is more than just gold now, and three of their gold mines don't look too flash these days.
6. I will NOT be participating in the SPP, unless the EVN share price rockets up and gives me a decent arbitrage to do so.
7. I won't argue with your numbers @Solvetheriddle - sounds plausible to me - but I think there's more to this than just straightforward returns on invested capital - I think there's some possible future optionality around the surrounding tenements, there's what the copper production does to EVN's group AISC (i.e. lowers their headline costs), and then there's what happened at EH to consider. Jake went into Ernest Henry with a seemingly strange deal to begin with, not too disimilar to this one, and then a couple of years later he buys the other owners (Glencore) out and EVN now owns all of EH. Perhaps history will repeat at Northparkes... Or at least rhyme...

For clarity, Evolution initially bought into Ernest Henry in 2016, paying Glencore $880 million to acquire 100% of the gold production and 30% of the copper and silver production from the mine. Six years later, in early 2022, they bought the rest of it off Glencore - see here: https://www.australianresourcesandinvestment.com.au/2022/01/06/evolution-complete-at-ernest-henry/

And here: https://inqld.com.au/business/2021/11/18/glencore-offloads-ernest-henry-mine-in-1-billion-transaction/

Take another look at the FY24E Guidance Slide above and imagine what those Group Costs (AISC) would be without that massive NEGATIVE cost contribution from Ernest Henry. So Ernest Henry was a good purchase by Jake Klein for a number of reasons, and perhaps Northparkes will prove to be also, given time.

But having done this additional work on EVN (looking at them in this fresh light), and not particularly wanting to increase my exposure to copper at this point, I am leaning towards selling my EVN now, not buying more. I'd rather swap that money into Genesis (GMD) where I know exactly what exposure I'm getting. I'd have said Northern Star (NST) but I'm already full to the gills with NST, so I don't need to buy any more NST, but I've still got some room left for some more GMD.

@Bear77 thanks for that basically agree with you. By-product accounting is a furphy imo and i gross up reveneus and costs, cant do sensitivities without doing that. I didnt realise Mungara was a battler as well. your point about the gold story being diluted is correct. I hold NST as well. i sold some EVN recently and cant see myself participating in the SPP, note not underwritten. Maybe I'll change the mix more towards NST. best regards

06-Dec-2023 (midday, Sydney time): Completion-of-A$525-million-Institutional-Placement.PDF

So they've raised their $525 million via the placement at $3.80/share, but the SPP might not go off quite so well considering the EVN SP is currently down -14.5% at $3.54, and they've been as low as $3.475 today already. The SPP will be priced at the lower of:

• A$3.80 per Share, being the same price paid by institutional investors under the Placement; and
• a 2.5% discount to the 5-day VWAP of Evolution shares traded up to, and including, the closing date of the SPP (expected to be Tuesday, 16 January 2024).

If I wanted more EVN (I don't), I would be buying on market at current prices rather than try to get a tiny 2.5% discount to the 5-day VWAP - coz that volume-weighted average price will end up higher than current (circa $3.50) levels if the EVN SP recovers somewhat over the next six weeks and trades higher in that week leading up to Jan 16th. Of course, they could also go lower still, especially if the gold sector has a few more negative days. But the SPP doesn't look very enticing at all.

@Bear77, I think your being a bit harsh on the quality of the mines that Evolution has. I agree that Red lake has proven itself to be a bad purchase, but the problem here seems more to be around on-site culture and workforce productivity rather than it being a dodgy asset - regardless though I doubt they would buy it today if they had their chance again. So on par this is the only one that I think they have gotten wrong. It seems like they know whats wrong but fixing culture problems is always harder than logistical/operational challenges and I am not sure if they will get the production up consistently to lower AISC and make it profitable. I wouldn't be too surprised to see this one sold off.

I think Mungari is transitioning to be a pretty good mine. It has a 15yr life and the expansion plans aim to get the AISC down to $1750/ounce and produce 155-200K ounces/yr, which provides a pretty good margin at the current and predicted direction of the gold price. This is costing them $250m capex, but they have hedged 120k ounces at $3150 to offset this risk.

Mt Rawdon is a finished mine and is really a wildcard on whether it will be turned into a hydro electric battery and sold for a good profit or is a liability they need to clean up.

Ernest Henry and Cowal are both excellent mines with good managers and workforce. Both of these have been expanded and under Evolutions ownership.

One thing I have been impressed with is the geology team at evolution, they seem to know what is in the ground of their mines and target the drilling to expand their resources well. I am thinking that the purchase of NorthParkes being so close to Cowal gives them confidence that they can expand this resource over time as well.

I haven't had much of a chance to look at the new deal so it was good to read your summary. It does look like they are becoming a copper option for the ASX. I don't think this is a bad thing given the lack of options available. They have shown with Ernest Henry that they can handle the complexity of being a copper and gold producer

I am not sure if I will take up the SPP rights, I think it is pretty fairly valued at its current price ($3.50-4) and I think gold needs to break out of the $US1700-2000/oz channel before it really warrants too much further excitement. It looks like the most recent test of the $US2000 mark has failed for now.

@Solvetheriddle I don't have much of a problem with the by-product accounting, its not like they are hiding anything, as its pretty clear why it is an outlier. The costs to get the gold out are still included in the calculation though so it still is a fair reflection of the mine quality, or am I missing something here? To me it makes the point of how valuable and beneficial to the broader group these multi-ore mines can be.

@Bear77 when i see this share price reaction after a raise, i tend to think there is a feeling the subbies have been caught with stock. which I suspect could well be the case here, not knowing any inside info. the sharp moves in gold probably caught the underwriters out.

@Slideup the only issue is when i think of costs, i think milling costs, fuel, labour, etc not really by product revenues. i have seen some people who are unaware off the accounting, thinking they are in a low cost mine when really it is the by product revenues supporting it, and when those revenues fall they get a shock. Now its high costs!! what?? as long as you know the accounting you can adjust for it. means you need a view on two metals, although having two streams should offer some diversification, so lower risk

This is like a replay of MXI

Another one where looks like some were forced to take too much stock and had to offload while relying too much on the IBs to sell the story on a lacklustre acquisition.

Anyway I digress. I haven't gone deep into the financials like most of you here.

What is concerning is the announcement doesn't mention the level of support from the institutional placement. Unless I've missed something again.

I'm also surprised South32 did not show any interest.

Tempting to catch a falling knife but better to be cautious instead.

@Slideup - Fair call on Mungari. You clearly know way more about that mine than I do. I totally agree about Cowal and Ernest Henry - I don't have any problem with those two. Cowal was the main reason I first invested in EVN - and because of Jake Klein's deal making. Good to know that EVN have a great geo team there. I did get the impression that there was a bit of nearology in this Northparke acquisition - i.e. it being so close to Cowal which has been so good for EVN. Further geological upside was mentioned.

In terms of the SPP, if you wanted more, probably best to buy on days like today when the SP is down around $3.48 to $3.60, rather than pay $3.80/share in the SPP. There is a chance that the SP will drop even further and you'll get a lower SPP price than $3.80 (using that 2.5% discount to the 5-day VWAP option in January), but if the share price goes back above $3.80 you're going to pay $3.80 in the SPP and EVN was down to $3.475 at one point today (call it $3.48).

Also, I do understand that using AuEq numbers and byproduct credits is perfectly legitimate, not dodgy, but I find it gives me the wrong impression of where the company sits on the cost curve. For years EVN was claiming to be the lowest cost mid to major gold producer in Australia, and since Ernest Henry, a lot of that is due to copper sales giving Ernest Henry a negative AISC - and when you looked at their actual gold mines (not copper/gold, just gold) - they only had one single low cost gold mine - Cowal, and 3 that were fairly high cost, or they've become high cost lately. So in that regard I do side with @Solvetheriddle in that I prefer not to have to deal with byproduct credits because I find it complicates comparisons between gold producers and understanding how expensive it is for them to extract the gold from their ore.

@edgescape - Todays "$525 million Placement Completion" announcement infers that the placement was well supported but no, it doesn't actually mention if the underwriters had to take any of the stock. The AFR was talking up the deal yesterday - suggesting that Bill Beament and Nev Power’s Metals Acquisition Corp was also interested, among others, but that it was Evolution who got it in the end, presumably by bidding more?

EVN ASX: Evolution to pay $720 million for NSW copper and gold mine Northparkes (afr.com)

Excerpt:

Evolution pays $720m for NSW copper and gold mine

Brad Thompson, Reporter (AFR), Dec 5, 2023 – 11.25am

Evolution Mining will pay a Chinese company almost $720 million for the lion’s share of the Northparkes copper and gold mine in Central Western NSW after becoming part of a bidding war for the asset.

Under the deal with China Molybdenum Company (CMOC), Evolution will own 80 per cent of Northparkes while Japanese conglomerate Sumitomo retains 20 per cent stake.

Evolution intends to fund the transaction through a $525 million fully underwritten institutional placement at $3.80 a share and $200 million in debt funding.

Tanks holding water used for froth flotation at the Northparkes copper and gold underground cave mine. Bloomberg

The deal involves an upfront cash payment of $US400 million ($604 million) and a subsequent payment of up to $US75 million under a formula linked to copper prices.

Evolution also becomes responsible for repayments through gold and silver supply on the balance on a $US550 million financing deal struck in 2020 between CMOC and a Bermuda-registered subsidiary of stream and royalty financing company Triple Flag.

The Australian Financial Review’s Street Talk team reported that Evolution defeated Bill Beament and Nev Power’s Metals Acquisition Corp to secure Northparkes, with ASX-listed copper plays Sandfire and Aeris among those that cast an eye over the mine.

Evolution said on Tuesday that it had coveted Northparkes since around the time of the CMOC stream financing deal with Triple Flag, and ended up in a highly competitive sale process that went down to the wire after 10 months of talks

“Our understanding is that there have been multiple parties who have expressed strong interest. As late as 48 hours ago, we were not certain that we were going to secure the asset, so it’s been a very competitive process,” Evolution chairman Jake Klein said.

“We’ve secured it with what we believe is bilateral engagement ultimately with CMOC.”

Evolution will sell its share of copper from Northparkes to a CMOC subsidiary under an offtake deal that covers the life of mine based on existing ore reserves.

CMOC has owned Northparkes for almost a decade, paying Rio Tinto $US820 million for its 80 per cent stake in December 2013. It started to test the market for the 29-year-old asset earlier this year as BHP closed in on its $9.6 billion acquisition of OZ Minerals.

Evolution was seen as a logical bidder, given the proximity of its copper and gold about 100 kilometres away at Cowal.

The first big deal by an ASX-listed gold miner since Newmont’s acquisition of Newcrest, the acquisition increases Evolution’s exposure to copper with the red metal expected to make up about 30 per cent of the company’s revenue in this financial year.

Evolution expects Northparkes to produce about 19,000 ounces of gold and 12,500 tonnes of copper in the six months to June 30.

Mr Klein said the company was adding a long-life asset close to existing operations in NSW to its portfolio through a combination of debt and equity.

He described Northparkes is a “Day-1 cashflow producing asset with a 30-year mine life and considerable upside”.

Mr Klein said Evolution had learned lessons from past acquisitions, including paying $895 million across 2019 and 2021 for the underperforming Red Lake gold mine in Canada, and was attracted by the reliability of Northparkes.

Northparkes was considered a small part of CMOC’s global business, which is focused on mines in the Democratic Republic of Congo, Indonesia and China.

--- ends ---

And: EVN ASX: Bankable Evolution shows how to get a pre-Christmas deal done (afr.com)

Bankable Evolution shows how to get a pre-Christmas deal done

It is closing time at the last chance saloon, so expect some last minute deals before time runs out on 2023.

Chanticleer , Dec 5, 2023 – 4.44pm

After tearing down deals for a few weeks, investors need to prepare for the annual pre-Christmas deals rush.

The market backdrop is good enough, the window is open and there are a stack of corporate buyers and private equity types trying to tie together a year’s worth of tyre kicking and negotiations with a last-minute pre-Christmas agreement. It is closing time at the last chance saloon.

Evolution Mining executive chairman Jake Klein has done it all before.  David Rowe

It may take a certain type of deal this year to cut through, particularly if it requires capital markets support. Serial dealmaker Evolution Mining, a $7.6 billion rock star M&A proponent, showed us what sort of deal on Tuesday.

Evolution’s deal was bankable: on-strategy, bite-sized, backed by a track record, in an in-demand commodity or sector, and comes as the global gold price hit an all-time high.

If only every transaction could be so fit for the times. It is everything that recent blow ups at Ebos/Greencross, TPG Telecom/Vocus and Origin Energy were not, lacking the complexity, scale and moving parts that make deals hard to consummate in a difficult environment.

Most importantly for Evolution investors, it is the sort of deal they have come to expect from the gold miner. It is paying $US475 million ($715 million) to acquire up-and-running copper-gold mine Northparkes in regional NSW and funding it with a $525 million share placement.

The deal is much more bolt-on than bet-the-farm. The raising represents only 7.5 per cent of existing shares on issue, the acquisition is worth about 10 per cent of Evolution’s market value and Evolution executive chairman Jake Klein told analysts to forget about any near-term upgrades to Northparkes’ numbers.

Despite the backdrop, Klein says Northparkes was not an easy deal.

He told investors the $US475 million agreement was up in the air only 48 hours ago. Yes, discussions were principal-to-principal which helps, and this was a major strategic seller, but there were others on the scene and Evolution had to fight hard to win it.

Klein told investors both Evolution and seller CMOC Group, from China, which bought the mine off Rio Tinto a decade ago, emerged from the late-stage talks with “some bruises, which shows it is probably a good deal”.

Evolution is buying an 80 per cent stake in Northparkes, while Japan’s Sumitomo will continue to own the other 20 per cent.

Evolution and its broker Macquarie Capital had all the usual supportive stats to try to get investors interested. The investor presentation said it was financially accretive on a gold-equivalent production, resources and reserves per-share basis.

But like we said, the key ingredient as far as investors are concerned is that M&A has always been at the heart of the Evolution growth and value creation story. We all know these sorts of deals are dressed up with a glowing “equity story”, as the bankers would say, but more important is management’s strategy, track record and incentives.

Track record

Klein and his team have stitched together a string of transactions in the past 12 years to create what is now the ASX’s third-largest listed gold miner and consistently used equity markets to fund those.

Klein says the key to mining M&A is to engage direct with the counterparty and buy off bigger groups exiting for strategic reasons. “Corporate deals are much more challenging,” he says, referring to takeovers as opposed to his asset purchases.

Evolution’s two most valuable projects are Ernest Henry in western Queensland and Cowal in NSW, bought from Glencore and Barrick Gold respectively.

Its other assets include Red Lake in Canada (acquired from Newmont in November 2019), WA’s Mungari (made possible by some bolt-on acquisitions in 2021) and Mt Rawdon in Queensland (acquired from Newcrest in 2011 and now slated as a pumped hydro site).

It hasn’t been one-way success. Evolution has struggled with Red Lake, which Klein says “has left us with some scars”. He says Evolution was unlucky in its timing, buying just prior to an 18-month lockdown and is battling with soft issues made harder by the distance.

“It’s not a hardware challenge, it’s a software challenge,” he says of Red Lake, adding Evolution was “not giving up yet”.

Despite that hiccup, Klein has sparked an impressive ASX-listed company value creation story: Evolution has achieved a 27.4 per cent annual total return over the past decade, easily outpacing the benchmark S&P/ASX 200 (9 per cent), and bigger names like BHP (13.9 per cent), Commonwealth Bank (10.7 per cent) and Telstra (4.9 per cent).

Northparkes is like those bankable deals before it. It has a 30-year mine life, was formerly owned by Rio Tinto, a long operating history, an established presence in its local community, and a reasonably stable management team (who will soon be working for Evolution). Evolution would have loved to have bought it a decade ago, when Rio sold to CMOC, but it was way too big for the then-microcap.

A jumbo drill is parked at a draw point where ore is siphoned from the block cave chamber at Northparkes copper and gold underground mine. Carla Gottgens/Bloomberg

Klein made it clear on Tuesday’s analyst call Northparkes was also a good chance for Evolution to pick up some technical skills.

Northparkes is perhaps best known in Australian mining for its block cave capabilities. Block cave is a type of underground mining, where ore is collapsed under its own weight and fed out via a series of underground chambers. It is a bit of new territory for Evolution.

It could get busier in the next few weeks for deals. This is last chance saloon season and from what we hear, the past few weeks have seen some indicative bids flying around to see whether any boards are in the mood to bite.

Expect some M&A. After this week, it will get harder if there is any sort of capital markets involvement, particularly for a chunky deal that would require a rights issue rather than a placement.

But Evolution should at least give hope that deals can be struck. All it takes is the right target, the right size and the willingness to wear a few bruises.

--- ends ---

Anthony Macdonald is a Chanticleer columnist. He is a former Street Talk co-editor and has 10 years' experience as a business journalist and worked at PwC, auditing and advising financial services companies.

---

Also: Evolution Mining beats Metals Acquisition Corp to buy Northparkes mine (afr.com)

[Street Talk]

Evolution Mining beats Metals Acquisition Corp to buy Northparkes mine

Sarah Thompson, Kanika Sood and Emma Rapaport, Dec 5, 2023 – 9.55am

Evolution Mining defeated Metals Acquisition Corp to buy an 80 per cent stake in Northparkes copper mine for up to $US475 million ($718 million), after a sale process run by Citi and Standard Chartered.

It is understood Metals Acquisition Corp was among the underbidders for the mine, while ASX-listed Sandfire Resources and Aeris Resources had an early look but did not advance through the auction.

Metals Acquisition Corp was among the underbidders at Northparkes. Rob Homer

Sources said Evolution Mining put forward a clean deal, with no regulatory approvals required and easy access to equity capital markets – the $525 million placement falls within its existing placement capacity and is underwritten.

It also picked its financial adviser well, given that Russell Keating’s resources team at Macquarie Capital had worked for Northparkes’ then-owner Rio Tinto when it sold to CMOC a decade ago. For legal advice, Evolution Mining had Allens’ Guy Alexander, Mark McAleer and Julian Donnan at hand.

The seller, CMOC Group, and its advisers began reaching out to investors earlier this year, telling potential bidders they would run a selective process. CMOC had Citi’s head of metals and mining, Rowan King, and Standard Chartered’s Sam Brodovcky tasked on the sale process. Three partners from King & Wood Mallesons provide legal advice, including Paul Schroder from the M&A unit, Tim Sherman for tax, and Matthew Austin for environment and native title matters.

The $525 million placement is being done at $3.80 a share, or an 8.2 per cent discount to the last close. Bids for Asia-Pacific investors are due at 5pm Tuesday.

Evolution’s largest shareholder is AustralianSuper, with 13.6 per cent of the company. Fidelity owns 5.2 per cent.

The deal comes a day after Street Talk revealed NYSE-listed Metals Acquisition Corp is finally ready to press play on its ASX listing, with investors expecting a pathfinder prospectus before Christmas. It mandated Barrenjoey and Canaccord Genuity last year, was understood to be waiting for the Northparkes sale to be finalised before making its IPO pitch to Australian fund managers.

--- ends ---

@Bear77 "Strongly supported" is not enough to grab attention.

Words such as "Overwhelming", "Oversubscribed" and "99%" along with "not underwritten" will get punters excited.

Check the statements from Azure Minerals, Next DC and IPD Group regarding their placements. Although it is still early days with IPD Group after the placement shares just got issued.

Don't know about everyone else here, but I'm starting to detect a pattern.

Just need to see another placement from a different company that uses the above words to fully confirm if this is a reliable indicator.

Yeah - that got a chuckle out of me @edgescape - these announcements always put the best possible spin on everything, often without giving much in the way of detail.

Here's an interesting watch/listen:

Why Evolution Mining is Spending Up for Northparkes | Daily Mining Show - YouTube

Plenty of history of the asset (Northparkes) and the deal details, and a fair amount of discussion on the claimed ultra-low AISC of A$150/ounce of gold produced - considering it's a copper mine that produces SOME gold as well.

"...we go deep into all the details, including why they’ve bought it, what the streaming does and what the actual price is. Our second deal to dive into was the acquisition of the Beyondie potash project by Reward Minerals. Our chief potash expert, Travis Riccardinho, took great pleasure in pulling apart the deal to assess what it actually means for previous equity & debt holders, and to see if anyone is winning."

0:00:00 Preview

0:01:43 FOEC clarifications

0:03:50 Deap Sea Mining sustainability

0:06:20 The big arm wrestle happening next week

0:08:37 Evolution buy Northparkes

0:09:53 Northparkes history

0:15:51 The financials of Northparkes

0:35:58 Reward wrap up Beyondie

0:40:30 What does Reward's acquisition mean for previous holders?

Click on that image directly above (of the MoM podcast boys discussing the Northparkes acquisition by EVN) to go straight to that discussion. Or cick on the first image (further up) to listen to the entire podcast.

The boys make a great point about the copper byproduct credits reducing the AISC for Evolution's gold production - both from Ernest Henry and soon from Northparkes as well - and how people generally think of Evolution as a gold miner and when people who do NOT get into the weeds as much as we do are looking to allocate capital to gold producers, Evolution screens as a great option from the point of view of low costs - they look like a low cost gold producer - and a better option than many other mid and large cap gold miners because of that low Group AISC that Evolution claim - but when you strip out the copper production - it changes things a LOT. The boys actually discussed this very issue with Jake Klein at D&D a few months ago. That discussion is also mentioned in this podcast.

Imagine what Sandfire (SFR) could claim their costs were for the gold produced from DeGrussa (a copper mine that also produced some gold). Anyway, have a listen if you're interested. I learned a few things, and got a few other things confirmed (confirmation bias anyone?). They certainly explain a lot more than what we've covered here so far.