Evolution Mining Ltd. (EVN), partly owned by Australia’s largest gold producer, is looking to seize on the slump in the metal’s price to make acquisitions as competitors struggle and major producers exit.
“If you look at the industry in two years time you will have had the majors exit and some mines close,” Chairman Jake Klein said today in an interview in Kalgoorlie, Western Australia. “To me this is the period when the leaders into the next cycle are going to be created.”
Gold-mining companies have announced at least $21 billion of writedowns in the past two months after the metal’s steepest quarterly drop in London in more than nine decades. Evolution, almost a third owned by Newcrest Mining Ltd. (NCM), is likely to look for acquisition opportunities with a focus now on “distressed juniors,” Credit Suisse Group AG said last month.
“Firepower is limited in reality, but we are in a market where you don’t need a lot of firepower,” Klein said in the interview. “If you’re just standing and you have a cheque book, I think you are in the game.”
Evolution Mining rose 4.3 percent to 85 cents at 1:28 p.m. Sydney time. It’s dropped 50 percent this year.
Evolution, which said last month it expected to write down the value of its assets and goodwill by A$350 million ($310 million) to A$400 million, had A$13.7 million in cash at June 30 and available credit of A$73.2 million, the company said today in a presentation to the Diggers and Dealers forum in Kalgoorlie.
About 30 percent to 40 percent of gold production in Australia is likely to change ownership as major producers sell assets, while 10 percent to 20 percent of production will be lost as mines close, Klein said. “This phase of writedowns is a step towards getting the buyer and seller closer,” he said.
While the focus for potential acquisitions will be on Australia, Evolution could also look at projects in another country, Klein said. The producer doesn’t envisage operating in a large number of countries, he said.
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