Ramelius Resources will acquire the Edna May gold mine in Western Australia from Evolution Mining for up to $90 million.
Evolution last week signalled that it was considering the sale of Edna May after receiving several offers for the mine. The operation, about 350km east of Perth, produced more than 70,000 ounces of gold in the 2017 financial year.
Ramelius’ acquisition of Edna May involves a $40 million cash payment, plus up to an additional $50 million comprising of a royalty and cash and/or shares.
The second part of the deal will see Evolution receive either $20 million in cash or Ramelius shares – or a combination of both – if the Edna May stage three open pit project is approved.
Evolution could also receive royalty payments of up to $30 million, payable at $60 an ounce from gold production of more than 200,000 ounces, or up to $50 million payable at $100 an ounce if the stage three open pit project does not go ahead.
Ramelius managing director Mark Zeptner said the acquisition of Edna May represented the next step in the company’s stated ambition to build on the strength of its existing operations at Mt Magnet and Vivien.
“Upon completion, we become a 200,000 ounce per annum gold producer, with all operations within a one hour flight from Perth,” Zeptner said.
“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 $40 million investment with minimal capex imposts.”
Zeptner said Edna May had the potential to significantly increase both its ore reserves and annual production via further extensions, which represented huge optionality for Ramelius in the future.
“Our management team has the skills and experience to collaborate with the existing Edna May workforce to deliver on the turnaround started by Evolution and in extending the future potential of the mine,” Zeptner said.
Evolution has owned the mine since 2011 when the company was created through the merger between Catalapa Resources and Conquest Mining.
The company said the sale of Edna May was part of a strategy to improve the quality of its asset portfolio over time.
Evolution chairman Jake Klein said Edna May formed an important part of its development as a founding asset.
“Evolution has grown significantly in recent years and Edna May is no longer a core asset of the company,” Klein said.
“In line with improving the quality of the portfolio the decision to sell Edna May will lower our all-in sustaining cost by approximately $30 per ounce in full year 2018 and $40-$50 per ounce on an annual basis.
“Our average mine life based on reserves will increase from 8.3 years to 8.7 years.”
Evolution has lowered the company’s gold production guidance for fiscal 2018 to between 750,000-805,000 ounces to reflect the sale.
The deal is expected to close on October 3.