MinesOnline.com Reviews Evolution’s Acquisition of Northern Star’s Eastern Goldfields Assets

On 22 July 2021, Evolution Mining Limited (ASX:EVN) (Evolution) announced that it had entered into an agreement with Northern Star Resources Limited (ASX:NST) (Northern Star) to acquire a group of assets located in the Eastern Goldfields of Western Australia. The group of assets comprises:
  • A 100% interest in the Kundana Operation (Kundana);
  • a 51% interest in the East Kundana Joint Venture (EKJV);
  • a 100% interest in tenements comprising the Carbine Project (Carbine); and
  • a 75% interest in the West Kundana Joint Venture (WKJV) (together, the Acquisition Assets) (the Transaction).
Under the terms of the Transaction, Evolution will acquire the Acquisition Assets for a total cash consideration of A$400M (US$296M) (the Transaction Consideration).  The Transaction Consideration will be funded by a A$400M equity raising consisting of fully underwritten institutional placement and a share purchase plan.

The Transaction will be subject to the receipt of all consents required under the WA Mining Act to transfer legal title of the Acquisition Assets to Evolution, with the completion date expected in late August 2021.

Set out below is the JORC (2012) Ore Reserves table for the Acquisition Assets:
Table 1: Acquistion Assets JORC (2012) Ore Reserves

The Acquisition Assets form part of Northern Star’s current portfolio of Operations and as such, MinesOnline.com has reviewed the Transaction on an Operations basis.

Based on the Transaction Consideration of US$296M and a 579koz Au Ore Reserve, Evolution will pay US$511/oz Au, representing a premium of 189%, 85% and 86% to MinesOnline.com’s 1, 3 and 5 year normalised average Operational Reserve multiples of US$177/oz Au, US$276/oz Au and US$275/oz Au, respectively.

Set out below is a summary of MinesOnline.com’s Transaction Metrics Analysis:

Table 2: MinesOnline.com’s Operation Transaction Metrics
MinesOnline.com notes that the Kundana Operations offer material operational and logistical synergies to Evolution’s existing Mungari operations.
The transaction multiple of US$511/oz Au is indicative of the cost to acquire and add a high quality gold asset(s) to a company’s portfolio of operations.