PERTH (miningweekly.com) – Gold miner Evolution Mining has struck a A$125-million deal to sell its Cracow gold mine, in Queensland, to fellow-listed Aeris Resources.
The consideration would consist of a A$60-million cash payment on the completion of the transaction, a further A$15-million cash payment at the end of June next year, and up to A$50-million in contingent consideration payable in the form of a 10% net value royalty, based on gross revenues less C1 direct costs in relation to any gold produced at Cracow in a five-year period between July 2022 and June 2027.
Evolution executive chairperson Jake Klein said on Thursday that the sale of Cracow was consistent with the gold miner’s strategy to upgrade the quality of its portfolio and to hold between six to eight assets with an average mine life of at least ten years.
“Cracow was acquired in 2011 as part of the formation of Evolution and has been a reliable asset within the portfolio,” said Klein, adding, however, that it was the company’s view that Cracow would be of more value in the hands of Aeris, than within its own portfolio.
Aeris on Thursday said that the acquisition of Cracow ticked several of the company’s objectives, including becoming a multi-mine producer in attractive commodities, and maintaining flexibility to pursue further growth opportunities.
“This is a truly transformational transaction for Aeris and will be immediately accretive in value. The acquisition provides us with asset and commodity diversity, strong cashflow generation and high value synergies,” said Aeris executive chairperson Andre Labuschagne.
“Cracow will be a perfect fit for the unique skill set of our management team, who have a track record of extracting value and life extensions, as demonstrated at the Tritton mine, and previously with Norton Gold Fields at the Paddington gold mine.
“Our immediate focus will be on transitioning Cracow into the Aeris culture and aggressively investing in the mine life extension opportunities we have identified.”
Aeris will be investing in both brownfield and greenfield exploration to grow the resource base and extend the mine life, with the miner saying on Thursday that A$13-million has been budgeted over the next two years to fund this work.
Aeris is also targeting A$4-million in annual cost synergies at Cracow, while the mine is expected to generate more than A$100-million in net cashflows over the next two years at the current gold price. The company said that this cashflow would provide for both investment in life-of-mine extension projects at Cracow and Tritton, as well as to continue deleveraging the company’s balance sheet.
To protect the near-term positive cashflows from Cracow, Aeris intends to enter into a gold hedging programme, initially focused over the first 12 months.
Meanwhile, Aeris on Thursday told shareholders that in order to fund the acquisition of Cracow, the company would undertake a A$40-million fully underwritten equity raising, comprising a A$7.3-million institutional placement and a A$32.7-million 2.02-for-1 pro-rata renounceable entitlement offer.
Some 1.3-billion new shares will be issued at a price of 3c each, representing a 30.2% discount to Aeris’ closing price on June 1.
The institutional component of the share placement will be conducted under Aeris’ existing capacity.
In addition to the capital raise, Aeris has also secured a A$30-million acquisition bridge debt facility with existing lender SPOV, with a 12-month term and an interest rate of 11% per year, with SPOV also providing a A$15-million guarantee facility to enable the replacement of existing financial assurances over the mine provided by Evolution.
Furthermore, Aeris has also agreed with SPOV to restructure and extend the terms of its current $32-million senior debt facilities to reflect the enlarged group’s approved credit profile and to ensure that Aeris had the flexibility to pursue its planned exploration and growth capital programmes at both Cracow and Tritton.