The world's biggest gold miner, Canada's Barrick Gold Corp, has sold its Cowal gold mine in Australia to mid-tier gold producer Evolution Mining Ltd for approximately $550 million in an all-cash deal, as part of its strategy to reduce debt by divesting non-core assets.
For Sydney-based Evolution, this is its second acquisition in a month. In April, Evolution acquired Luxembourg-based gold miner La Mancha Resources' Australian assets for approximately $300 million in an all-stock transaction.
Through the Cowal acquisition, Evolution will become Australia's second-largest gold producer, after Newcrest Mining, with its gold production reaching around 800,000 ounces annually.
Barrick's co-president Kelvin Dushnisky said in a statement, ''The sale of Cowal is consistent with the strategy we have outlined to create long-term value for our owners, making a significant contribution to our debt reduction target while further focusing the geographic footprint of our portfolio.''
Barrick, which has a debt burden of about $13 billion had said that the company is committed to reduce it by $3 billion by the end of the year.
The two gold mines put on the block in February were Cowal in New South Wales and the Progera in Papua New Guinea.
''We are pleased to have achieved a successful outcome following a competitive auction process in the first of several asset sales now underway,'' Barrick said.
Cowal is a low-cost open pit operation with an annual production capacity of 230,000-260,000 ounces of gold. The mine has mineral reserves of 136 million tonnes with gold content of 1.1-1.2 grams per tonne. The processing plant has a capacity of around 7.5 million tonnes per annum.
Sydney-based Evolution Mining, formed in 2011 through a merger of Catalpa Resources and Conquest Mining, operates five gold and silver mines in Queensland and Western Australia. For the year ended 30 June 2014 the company produced approximately 428,000 gold equivalent ounces.
Evolution's executive chairman Jake Klein said in an Australian Stock exchange release, ''This is a truly transformational acquisition for Evolution,'' further adding, ''This is an asset that has a long history of stable, large scale, low cost production.''
''The addition of Cowal to our portfolio is an exciting step forward for Evolution and provides us with a cornerstone asset of highest quality which will shape our future around,'' Klein said.
According to analysts' the deal is lucrative for Evolution, as Cowal was estimated to worth about $650 million.
"We put in what we thought was a fair price, but one which we are very happy acquiring it at," Klein told analysts and reporters on a conference call.
The price reflected the subdued asset values in the current market, he added.
Apart from debt reduction, the sale of Cowal will also reduce Barrick's overhead costs as it plans to shut its Perth office.
The transaction is expected to close in the third quarter of 2015 subject to customary closing conditions.
Credit Suisse is acting as financial advisor to Barrick on the deal, while Evolution is advised by Record Point.