Evolution to acquire CMOC’s 80% interest in Northparkes mine

Evolution Mining (ASX: EVN) has agreed to buy an 80% interest in the Northparkes copper-gold mine in NSW from CMOC Group Limited for a total cash consideration up to $722m (US$475m), with Sumitomo Metal Mining and Sumitomo Corporation retaining their 20% interest in the JV.

Evolution has also agreed to enter into an offtake agreement with IXM S.A., a subsidiary of CMOC, under which IXM will purchase from Evolution copper concentrates produced from the Northparkes mine equal to Evolution’s 80% attributable interest over the life of mine’s existing ore reserves.

In addition, Evolution will assume the obligations of CMOC Limited as guarantor under the Triple Flag Metal purchase and sale agreement, under which Evolution will deliver a percentage of its attributable gold and silver production from Northparkes to Triple Flag over the operation.

The transaction will be funded by a $525m fully underwritten institutional placement and a new $200m five-year term debt facility, with completion of the transaction expected to occur before the end of December 2023.

Evolution Mining executive chair Jake Klein says the Northparkes acquisition represents a unique opportunity to add another quality asset to the company’s portfolio.

“Northparkes is a ‘day one’ cashflow producing asset with an approximate 30-year mine life, considerable upside and a well-established team that has a great track record and technical experience at the operation,” he said.

“Following a long period of a successful ownership, CMOC has decided to exit the asset in pursuit of other strategic initiatives more aligned to CMOC’s objectives.

“Ultimately, this is a mutually beneficial outcome for both parties and an opportunity for Evolution to continue delivering on the successful track record of the operation.”

Evolution Mining managing director and chief executive Lawrie Conway commented on the acquisition agreement.

“Positioned in the Lachlan Fold Belt, one of Australia’s most prospective copper-gold belts, Northparkes has a long history of ore reserve replenishment and growth, increasing reserves by 49% since 1994, with a current ore reserve of 101mt,” he said.

“In addition, the asset is favourably located close to well-capitalised infrastructure, featuring concentrated mining options with five deposits situated within a 2km radius.

“Following a period of higher capital investment, the asset is now entering a cash flow generation phase, aligned with our strategy to continue to deleverage our balance sheet while delivering returns to our shareholders.

“Notably, the transaction funding structure reflects our commitment to balance sheet management with no debt repayments due under this facility until the third quarter of FY25.”

Northparkes is a copper-gold mine 27km northwest of Parkes, in central west NSW.

The mine has been in operation since 1994 and was the first mine to use the block cave mining method in Australia.

The asset’s underground mining operations are highly automated with E48 block cave achieving 100% mining automation in 2015.

Mining production is currently sourced from the E48 block cave, which is nearing completion, the E26 lift 1 block cave and the E26 sub level cave supplemented by stockpile ore feed and open pit mining.

The onsite processing plant at Northparkes produces a copper-gold-silver concentrate that is trucked and railed to the Port of Newcastle before being shipped to international clients.

On 10 July 2020, an affiliate of CMOC entered into a streaming agreement with Triple Flag Precious Metals Corp.

Under the terms of that agreement, TFPM is entitled to both gold and silver production from CMOC’s attributable share of payable production from Northparkes.

In H2 FY24, Northparkes is expected to produce 19,000oz of gold and 12,500t of copper, bringing Evolution’s FY24 guidance to a total of 789,000oz of gold and 62,500t of copper.