Ramelius buys Edna May from Evolution for A$90m

PERTH (miningweekly.com) – Gold miner Ramelius Resources has emerged as the victor in the bid for fellow-listed Evolution Mining’s Edna May mine, in Western Australia.

Evolution last week told shareholders that the company was evaluating the sale of the Edna May gold mine, after receiving a number of offers from interested parties.

The gold miner on Monday announced that Ramelius had made an offer worth up to A$90-million, consisting of A$40-million in cash on the completion of the transaction, and up to A$50-million of contingent consideration, consisting of a royalty and either cash or Ramelius shares.

A royalty payment would be due once Ramelius produced 200 000 oz from the current Edna May tenements, with a milestone payment of A$20-million in either cash or shares payable when Ramelius made a decision to start a cut-back to the current Edna May openpit.

Ramelius MD Mark Zeptner said on Monday that the acquisition of the Edna May operation represented the next step in the company’s ambition to build on the strength of its existing operations at Mt Magnet and Vivien. Upon completion of the transaction, Ramelius would become a 200 000 oz/y gold producer, with Edna May lifting the current production rate by some 54%.

“Not only does this acquisition drive a significant increase in group mineral resources and ore reserves, as a going concern it also delivers excellent returns on our initial A$40-million investment with minimal capital cost imposts,” Zeptner said.

“We are also particularly excited about the potential for Edna May to significantly increase both its ore reserves and annual production via further extensions, which represents huge optionality for Ramelius in the future.”

With the addition of Edna May to the Ramelius profile, the company’s mineral resource will increase by some 38.6% to 3.04-million ounces, while ore reserves will increase by 105% to 831 000 oz.

The Edna May mine achieved an earnings before interest, taxes, depreciation and amortisation margin of 18% during the 2017 financial year, producing 70 188 oz of gold, or some 8% of Evolution’s total gold production of 844 124 oz.

“Edna May was a founding asset of Evolution and its predecessor company Catalpa Resources. It formed an important part of the development of both companies,” said Evolution executive chairperson Jake Klein on Monday.

“Evolution has grown significantly in recent years, and Edna May is no longer a core asset of the company. In line with improving the quality of the portfolio, the decision to sell Edna May will lower our all-in sustaining cost by around A$30/oz in 2018 and A$40/oz to A$50/oz on an annual basis. Our average mine life based on reserves will increase from 8.3 years to 8.7 years,” Klein added.

Following the divestment of Edna May, Evolution has revised its 2018 production guidance from between 820 000 oz and 880 000 oz, to between 750 000 oz and 805 000 oz, while all-in sustaining costs have been lowered from between A$850/oz and A$900/oz, to between A$820/oz and A$870/oz.

The transaction is expected to close on October 3.