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Evolution buys Ernest Henry stake from Glencore for $1bn


Evolution Mining has expanded its copper capability by securing an agreement with Glencore to take full ownership of the Ernest Henry mine in Queensland.

Worth $1 billion, the deal will see Glencore receive $800 million upfront, with the remaining $200 million due 12 months on from the transaction.

Evolution initially bought into Ernest Henry in 2016, paying Glencore $880 million to acquire 100 per cent of the gold production and 30 per cent of the copper and silver production from the mine, with additional expenditure conditions and provisions on the mine.

To fund the acquisition, Evolution has sought $US200 million ($275 million) via a United States private placement (USPP) at a fixed interest rate of 3.06 per cent. The USPP will mature in the 2031 financial year.

The acquisition will increase Evolution’s copper production guidance for the 2022 financial year (FY22) from 17,000-19,000 tonnes to 34,000-38,000 tonnes.

There is no change to Evolution’s gold production guidance for FY22 as the company already owns 100 per cent of gold output at Ernest Henry.

The deal also lowers Evolution’s all-in sustaining cost (AISC) by 12 per cent on an annual basis, amounting to a reduction of approximately $190 million for the 2023 financial year and approximately $140 million for the 2024 financial year.

Evolution executive chairman Jake Klein said full ownership of Ernest Henry had been on the company’s wish list for a while.

“We have long coveted to own 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.”

As part of the agreement, Glencore will offtake 100 per cent of the copper concentrate produced at Ernest Henry.

Glencore chief executive officer Gary Nagle said Evolution had proven its worth over the past half decade, assisting the company to elevate Ernest Henry to where it is today.

“Evolution has been a strong partner in the Ernest Henry mine for five years. They share our way of working and commitment to operating responsibly across all aspects of the business,” he said.

The deal is effective from January 1 2022 and the transaction is expected to completed on January 6 2022.

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