Five things to know about Evolution Mining and Ernest Henry gold mine
In light of the news that Australian gold mining company Evolution has acquired a major stake in Glencore’s Ernest Henry copper gold mine, we take a look at five things you should know about the deal.
1 – The award(s) goes to…
Evolution Mining, which owns and operates seven gold mines across Queensland, New South Wales and Western Australia. From its early inception in late 2011 and years of successfully achieving production and cash cost guidance, the company was recently announced as the winner of 2016 Dealer Award at Diggers and Dealers. It doesn’t stop there, the company was also awarded Best Asia-Pacific Mining Deal at Mines and Money Hong Kong and winner of the 8th Annual International M&A awards.
2016 – the year of the plaudit.
2 – CEO Jake Klein, the “accidental” miner, the fundamental businessman
The CEO of Evolution Mining is South African Jake Klein, the self professed "accidental" miner. In a 2015 interview with Barrons that when he left South Africa in 1990, he never thought he’d be a key player in the mining industry. In fact, it was a meal with billionaire Naguib Sawiris, who famously tried to buy an island from Greece or Italy for refugees fleeing the war in Syria, that was a crucial moment in the history of Evolution Mining. Through this meal, the Egyptian businessman agreed to sell the Australian assets of his La Mancha mining business to Evolution, with Sawiris taking a 31% cornerstone stake in the company and throw in an additional AUD100 million to help fund the miner’s growth plans. Prior to becoming CEO of Evolution in 2011, Jake had been the president of Sino Gold Mining, in which he oversaw the company becoming the largest foreign participant in the Chinese gold industry. He also saw Sino Gold Mining Ltd listed on the ASX in 2002, purchased for $2billion in 2009 and operate two award winning gold mines.
Not bad Jake, not bad at all.
3 – 100 percent of gold production, yours for $880 million
The deal between Glencore and Evolution will see Evolution pay $880 million for a 30 percent stake in the Ernest Henry copper gold mine. In return, Evolution is entitled to 100 percent of gold produced at the mine and 30 percent of all silver and copper production. Glencore are not completely out of the picture however, as the company will continue to operate the day to day operations of the mine and receive monthly cash contributions equal to 30 percent of production and capital costs from Evolution.
You scratch my back we’ll scratch yours. Always with an eye for the future, both companies have agreed to co-operate in potential exploration opportunities in the nearby region. A powerful partnership indeed.
4 – The importance of being Ernest
The Ernest Henry mine is located north east of north west Queensland Australia. The former open pit turned underground mine began life in 1998, before transitioning into an underground shaft mine in 2009 for a cool $589 million. A workforce of 500 strong, the mine produces a copper gold concentrate containing around 39 percent copper and 11 grams per tonne of gold. With a mine life (thanks to the underground transition) up to 2026, Ernest Henry has an estimated gold production of 70,000 ounces of gold per year.
When you look at it that way, the deal with Evolution looks to be quite the savvy investment.
5 – One out, one in
Just last week, Evolution announced that it is to sell its Pajingo gold mine to Chinese company Minjar Gold for $52 million. Jake Klein commented that that a key object of the company’s business strategy is to “improve the quality of its asset portfolio over time.” The goal of this asset portfolio? To create a “globally relevant, mid-tier Australian gold producer.” Mr Klein, ever the man for a sound business investment, believes the recent divestment of Pajingo, coupled with this acquisition is another key moment of Evolution’s history. “The addition of low cost gold production from Ernest Henry to our portfolio gives us exposure to another high quality, long life asset that further underpins the future success of our business.”
Gerald Group resolves iron ore dispute with Sierra Leone
Gerald Group, the US commodity trader, will pay Sierra Leone $20mn and cede a 10% stake in an iron ore project as part of the resolution to a nearly two-year dispute that led to the shutdown of production, the two sides revealed.
Gerald's wholly-owned subsidiary SL Mining filed for arbitration in August 2019 over a royalty payment dispute and suspended the Marampa mine the following month. Sierra Leone's government responded by cancelling its mining licence.
As part of the agreement signed on Friday, Sierra Leone will take a non-dilutable 10% stake in a new company that will replace SL Mining and resume operations at Marampa by June 1, Gerald said in a statement.
Gerald will make two $10mn payments this year and will have the immediate right to ship its current stockpile of about 707,000 tonnes of iron ore, it said.
Both sides will withdraw their legal claims before the International Chamber of Commerce (ICC) and International Centre for Settlement of Investment Disputes (ICSID), the statement added.
Gerald’s chairman and CEO Craig Dean commented: "I am delighted that we have been able to resolve our differences and have a fresh start and new beginning with the government of Sierra Leone."
Sierra Leone's Mines Minister Timothy Kabba told a news conference on Tuesday that the agreement was a milestone for the country.
"Whatever the pain we may have borne or dreaded throughout these two years ... this outcome justifies our action," he said.
Gerald estimates that Marampa holds about 1 billion tonnes of iron ore with a potential lifespan of 30 years.
Back in 2019, Dean spoke with Mining about the development of Marampa and commented: "SL Mining offers a substantial opportunity for Gerald Group as our Marampa mine in Sierra Leone is set to deliver six million tonnes of high-grade iron ore during its operational life. If you analyse the iron ore market it has transformed, even from a couple of years ago when prices were very low. Now prices have stabilised we’re in a favourable position with our first shipments leaving for China.
"Our goal is to make ‘Marampa Blue’ an internationally recognised premium grade iron ore brand. We intend to expand the delivery of high-grade 65% iron ore concentrate to markets in Europe and Africa.”