Evolution Mining has boosted its production targets after agreeing to buy Northern Star Resources’ Kundana assets in Western Australia for $400 million.
The acquisition is expected to increase Evolution’s three-year gold production guidance to above 1 million ounces by the 2024 financial year and expand its presence in the Goldfields region of Western Australia.
Evolution’s three-year production guidance has been revised to 700,000-760,000 ounces in the 2022 financial year, 815,000-875,000 ounces in the 2023 financial year, and 940,000-1.01 million ounces in the 2024 financial year.
Under the agreement, Evolution will acquire Northern Star’s 100 per cent interest in the Kundana operations, 51 per cent interest in the East Kundana joint venture (JV), 100 per cent interest in tenements comprising the Carbine project and 75 per cent interest in West Kundana JV.
The deal is expected to be completed in August 2021 and will involve a $400 million cash payment that is underwritten by an institutional placement and share purchase plan. The Kundana assets are located within eight kilometres of Evolution’s Mungari operations.
Evolution executive chairman Jake Klein said the acquisition would transform Mungari into a cornerstone asset for the company by increasing its mine life and production.
“This is a pivotal transaction that will transform Mungari to establish the operation as the fourth cornerstone asset in the Evolution portfolio,” Klein said.
“It presents a unique strategic opportunity for Evolution to consolidate the Eastern Goldfields region given our existing presence at Mungari, resulting in Evolution being one of the largest tenement holders in the Kalgoorlie region.
“The acquisition assets are located in close proximity to Mungari’s processing infrastructure, with all key mining operations and identified orebodies located within 8 kilometres of the Mungari mill.”
Evolution expects the acquisition will reduce processing costs per tonne and contribute to a mill expansion at Mungari at 4.2 million tonnes per annum.
It will also provide an opportunity to increase Mungari’s mine life with access to high-grade ore sources through the Kundana assets.
Haulage distance will also be reduced by 85 per cent after Evolution consolidates Kundana into an integrated operating platform.
The Kundana assets produced 120,943 ounces in the 2021 financial year with a combined resource estimate of 2.4 million ounces.
Northern Star managing director Stuart Tonkin said Mungari was not required for the company’s strategy following its merger with Saracen.
“The sale of these assets is consistent with our strategy to employ capital where we believe it will generate the greatest return,” Tonkin said.
“This is a great outcome for all stakeholders, including all our employees working at these assets, who will be offered continuity under Evolution’s ownership.”
Klein spoke positively about Evolution’s relationship with Northern Star at an investor call on Thursday.
“The engagement with Northern Star has been excellent. They’ve been very good to deal with,” Klein said.
“It’s been a very frantic run over the line from both sides. We started a relationship, we know them well and we look forward to other opportunities.”