Evolution Mining Ltd (ASX:EVN) has agreed to acquire Carnaby Resources Ltd (ASX:CNB, FRA:1FI) in an all-scrip transaction valued at about A$213 million, strengthening its copper growth pipeline around the Ernest Henry operations in Queensland.
The deal will add Carnaby’s advanced Greater Duchess Copper-Gold Project to Evolution’s regional portfolio, giving the major miner access to a copper-rich development opportunity close to its existing processing infrastructure.
Evolution said Greater Duchess could support around 10,000 tonnes per annum of additional copper production at Ernest Henry while improving the operation’s cost profile through the use of existing infrastructure and available mill capacity.
Greater Duchess adds regional growth option
Greater Duchess is located near Evolution’s large-scale Ernest Henry copper-gold operation and is expected to complement the company’s broader regional development strategy.
Evolution believes the acquisition will allow it to leverage existing infrastructure, utilise latent processing capacity and support the Bert expansion project already under execution.
The combination is also expected to reduce development risk for Greater Duchess by placing the project within a larger operating platform backed by Evolution’s technical expertise and balance sheet.
Carnaby shareholders offered substantial premium
Under the transaction, Carnaby shareholders will receive 0.0682 new Evolution shares for every Carnaby share held.
The exchange ratio implies an offer price of A$0.77 per Carnaby share and values the explorer at approximately A$213 million.
Carnaby shares closed at A$0.48 on Friday, while Evolution shares last traded at A$11.29.
Carnaby’s board has unanimously recommended the transaction, subject to the absence of a superior proposal and confirmation from an independent expert that the deal is in shareholders’ best interests.
Funding and development risks reduced
Carnaby said the offer provided shareholders with a significant and immediate premium to the company’s recent trading price.
The transaction is also expected to de-risk the funding and development of Greater Duchess by giving the project access to Evolution’s operational experience, financial capacity and established infrastructure.
Carnaby shareholders will retain exposure to the future upside of Greater Duchess through their ownership of Evolution shares.
They will also gain exposure to Evolution’s broader portfolio of gold and copper assets and become eligible for future dividends in accordance with Evolution’s dividend policy.
Strategic fit with Ernest Henry
Evolution’s Ernest Henry operation is one of Australia’s largest copper-gold mines and forms a central part of the company’s long-term growth strategy.
The addition of Greater Duchess is expected to increase Evolution’s regional copper inventory and provide another source of feed for its existing facilities.
The acquisition is consistent with Evolution’s strategy of building production around established assets where nearby resources can be developed using existing infrastructure and operating capability.