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December 5, 2012, 5:23 PM
Evolution Circles New Gold Mine, But Bid Lacks Luster
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By Rhiannon Hoyle and David Winning

Evolution Mining Ltd. EVN.AU -1.12%has been frustrated in its pursuit of an eastern Australian gold mine, after Canada-listed New Gold Inc. rejected a recent bid for the Peak Mines operation as too low, a person familiar with the matter told Deal Journal Australia.

Sydney-based Evolution–created last year through the combination of Catalpa Resources, Conquest Mining and assets owned by Newcrest Mining NCM.AU -1.05%–recently secured a 200 million Australian dollar (US$209 million) loan facility that has given it additional firepower to finance deals.

Peak Mines in the Cobar gold fields of New South Wales state was on Evolution’s radar because it would have added more than 85,000 troy ounces of gold to its annual production. However, talks with New Gold have stalled over price, the person said.

It isn’t known how much Evolution offered for the asset, which also produces around 13 million pounds of copper annually, or the price that New Gold was seeking. Based on recent transactions in Australia’s gold sector, the Peak Mines operation could be worth around A$250 million.

Gold prices trading near record highs are boosting producers’ profits and prompting many to expand production or secure promising deposits of the precious metal through acquisitions. Much of the deal flow in the gold sector has taken place in Australia, the world’s second-largest producer by output after China, helping to offset a sharp slump in Australian mining deals overall as Asia’s economy cools and demand for industrial minerals like iron ore slows.

According to data from Dealogic, the value of mining transactions in Australia so far this year has slumped by 54% to US$16 billion as boards tightened purse strings and overseas buyers were spooked by falling prices of many key commodities including coal.

Evolution has made little secret of its desire to grow rapidly, and replenish the ranks of Australian gold miners with a market value of between A$2 billion and A$5 billion that produce up to 800,000 troy ounces of the precious metal each year. The Sydney-based company, which counts Newcrest as a major shareholder with a 33% stake, is currently worth A$1.3 billion.

In a speech to shareholders last month, Executive Chairman Jake Klein noted that Australia is the world’s second-largest gold producer by output but can only boast of a single company – Newcrest – in the top ten gold companies worldwide by market capitalization.

“Until recently, Newcrest represented over half of the market capitalization of the gold companies on the ASX and global gold investors often bemoaned the fact that outside of Newcrest, there was a long tail of small, single asset companies with small market capitalizations and investment opportunities in Australia were very limited,” Mr. Klein said then.

Evolution is targeting production between 370,000 ounces and 410,000 ounces of gold equivalent in the current financial year from three wholly owned mines in Queensland and the Edna May project in Western Australia. It will also soon complete construction of the Mt Carlton mine in Queensland.

http://blogs.wsj.com/dealjournalaustralia/2012/12/05/evolution-circles-new-gold-mine-but-bid-lacks-luster/