Evolution Mining Limited (ASX: EVN) ('Evolution' or the 'Company') is pleased to announce that it has, through a wholly owned Canadian subsidiary, entered into an agreement with Newmont Goldcorp Corporation ('Newmont Goldcorp') to acquire 100% of the Red Lake gold complex ('Red Lake') (the 'Transaction').
Red Lake is an underground gold mining complex in western Ontario, Canada. The operation comprises the Red Lake and Campbell complexes, each consisting of an underground mine and associated processing facility, and the Cochenour mine. In the 2018 calendar year the mine produced 276,000 ounces of gold at an All-in Sustaining Cost of US$988 per ounce. In CY2019, Red Lake is forecast to produce 150,000 - 160,000 ounces of gold at an AISC of approximately US$1,600/oz1. Since production commenced in 1949, Red Lake has produced more than 25 million ounces of gold at an average grade in excess of 20g/t.
Evolution has agreed to pay Newmont Goldcorp US$375 million in cash upon closing of the Transaction, and up to an additional US$100 million payable upon new resource discovery ('Contingent Consideration')2 .
Evolution has committed to invest US$100 million on existing operations and an additional US$50 million in exploration at Red Lake over the first three-year period following completion of the Transaction.
The Transaction and associated costs will be funded by a new five-year A$600 million Senior Unsecured Term Loan through Evolution's syndicate of lending banks.
Red Lake Transaction Highlights
High-grade, long life, underground gold mine located in one of Canada's most prolific gold districts
Under-capitalised asset providing an attractive opportunity to leverage Evolution's successful track record in asset optimisation by strategically investing capital to unlock value
Outstanding exploration potential with historic head grades of over 20g/t hosted in Archaean greenstone gold geology familiar to Evolution
Located in the Tier-1 mining friendly jurisdiction of Canada
Transaction funded with 100% debt by a new five-year A$600 million Term Loan
Highly accretive on a Reserves, Resources and production per share basis
Current Mineral Resources3 of 7.0 million ounces grading 11.2g/t (inclusive of Reserves)
Current Ore Reserves2 of 2.1 million ounces grading 7.0g/t
Strong safety record with current 2019 YTD Total Recordable Injury Frequency (TRIF)4 of 1.7
Provides Evolution with attractive geographic diversification for existing Australian operations by establishing a North American production hub
Current 13-year Life of Mine plan extends the average life of Evolution's asset portfolio
Following the three-year proposed turnaround phase, the aim is for Red Lake to become a cornerstone asset with annual production in excess of 200,000 ounces at an AISC below US$1,000 per ounce
Commenting on the Red Lake Transaction, Evolution's Executive Chairman, Jake Klein, said: 'Evolution is excited to be adding Red Lake to its portfolio, providing the Company with a high-grade, long life gold mine in Canada. We have been actively looking at assets in Canada since 2017 as we believe it is a country with low geopolitical risk, high geological prospectivity and a strong mining culture. Red Lake is an undercapitalised asset which, through a committed investment in development and exploration, is intended to become a cornerstone asset in the Evolution portfolio.
'We have identified a range of opportunities to deliver an operational turnaround of the asset which is expected to create significant value for our shareholders and improve the quality of our portfolio. The camp has significant exploration potential which, coupled with its relatively unexplored recent past, provides significant upside potential for Evolution to extend the longevity of the operation well beyond its current 13-year life of mine plan.
'We are confident that Evolution will be an excellent and committed steward of Red Lake and look forward to continuing Newmont Goldcorp's track record of safe and sustainable operation for the long-term benefit of a broad range of stakeholders including the local workforce, regional communities and the Lac Seul and Wabauskang First Nations Groups.'
Evolution's Turnaround Plan
Evolution has identified a range of improvement opportunities to reinvigorate the Red Lake Gold Complex with the objective of reducing costs, increasing production and extending mine life. This plan extends over the next three years. During the turnaround phase, Red Lake will have an elevated AISC position due to low production levels and the required capital investment. However, the aim is that following this three-year proposed turnaround phase, Red Lake will become a cornerstone asset with annual production at that time in excess of 200,000 ounces at an AISC below US$1,000 per ounce.
Red Lake Gold Camp Exploration Potential
Red Lake is one of the largest, highest grade gold camps in North America with historical production of over 25 million ounces with head grades exceeding 20 grams per tonne. Evolution has agreed to spend US$50 million on exploration in the first three years following completion of the Transaction, with a planned drill program of over 100,000 metres per annum. Significant resource growth potential has been identified within the Red Lake - Campbell - Cochenour footprint, as well as across the large regional tenement package. The highest priority and immediate exploration targets include the Upper Main Zone and INCO at Cochenour, the Aviation Complex at Red Lake, and HG Young which is situated 1 km north of Campbell. The small footprint of Red Lake's historic high-grade ore bodies enhances the potential for further discoveries within the complex.
Contingent Consideration
The US$100 million Contingent Consideration comprises of an additional payment of US$20 million per one million ounces of new Mineral Resources discovered and added to the existing Red Lake resource base, subject to a cap of an additional five million ounces of new Mineral Resources or US$100 million in total, over a 15-year period.
Timetable and Next Steps
Completion of the Transaction is subject to customary conditions including Evolution receiving all required consents, permits and regulatory approvals, which is expected to occur around the end of March 2020. Newmont Goldcorp and Evolution have also commenced discussions around an interim operating plan and budget to be agreed and implemented prior to closing.
Transaction Advisers
Evolution's financial adviser to the Transaction is Goldman Sachs, Canadian legal adviser is McCarthy Tetrault and Australian legal adviser is Allens.
Contact:
Bryan O'Hara
Tel: +61 2 9696 2900
About Evolution Mining
Evolution Mining is a leading, growth-focused Australian gold miner. Evolution operates five wholly-owned mines - Cowal in New South Wales, Cracow, Mt Carlton and Mt Rawdon in Queensland, and Mungari in Western Australia. In addition, Evolution holds an economic interest in the Ernest Henry copper-gold mine that will deliver 100% of future gold and 30% of future copper and silver produced from an agreed life of mine area. Outside of the life of mine area Evolution will have a 49% interest in future copper, gold and silver production. Evolution has guided FY20 gold production, exclusive of Red Lake's contribution, of 725,000 - 775,000 ounces at an All-in Sustaining Cost of A$890 - A$940 per ounce. Group guidance is expected to be updated on completion of the Red Lake transaction.
EVOLUTION MINING LIMITED 
