Glencore strikes deal to sell stake of Ernest Henry copper mine

August 24, 2016

Advancing its plans to pay down its debt, Glencore Plc. has struck a deal with Evolution Mining that will see Evolution pay Glencore A$880 million ($670 million) for gold and a percentage of the Ernest Henry copper mine in Australia.

Evolution will receive all of the gold produced by Ernest Henry for its current 11-year mine life, as well as 30 percent of the copper, which it would sell back to Glencore, offsetting gold production costs.

The deal will boost Evolution’s gold output by about 88,000 oz/year, extend the life of its reserves, and lower its all-in sustaining cost of production.

Reuters reported that the deal will take Glencore nearer to its target of cutting debt to between $17 billion and $18 billion by the end of this year.

“This agreement recognizes Ernest Henry Mine as a world class copper-gold-silver mining operation with significant potential going forward,” Glencore said in a statement.

Glencore is targeting asset sales of up to $5 billion this year, on top of $1.4 billion it has reaped from sales of future output of precious metals.
It has already raised $3.1 billion from the sale of just under half of its agricultural business, and is in talks to sell its Cobar copper mine and its coal rail business in Australia, which together could fetch close to $1.5 billion.

Evolution approached Glencore to buy the Ernest Henry mine some time ago but was told it was not for sale, Executive Chairman Jake Klein told Reuters.

So instead, Evolution, advised by Royal Bank of Canada, came up with the proposal to buy the mine's gold and set up a partnership with Glencore by taking an economic stake. It is also in talks to drive exploration around the mine.

The deal will boost Evolution's gold output by about 88,000 ounces a year, extend the life of its reserves, and lower its all-in sustaining cost of production by 7 percent to A$930 an ounce. That compares with the current gold price at A$1,760.

Evolution produced 735,000 ounces of gold last year from six mines, excluding the Pajingo mine which it recently agreed to sell.



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