June 4 (Reuters) - Small Australian copper producer Aeris Resources AIS.AX on Thursday said it has offered to buy the Cracow gold project from Evolution Mining Ltd EVN.AX for up to A$125 million ($86.6 million) to diversify its portfolio.
Aeris said it has budgeted A$13 million over the next two years for exploration at the Queensland-based mine, from which the company expects to generate pro forma core earnings of A$272 million to A$282 million for the period.
Upon finalising the deal, Aeris will pay the second-largest Australian gold miner A$60 million, a deferred payment of A$15 million in 2022, and a royalty between July 2022 and June 2027 that is capped at A$50 million.
Aeris' Executive Chairman Andre Labuschagne said the deal provides the company with "asset and commodity diversity, strong cash flow generation and high-value synergies."
Cracow is on track to produce 82,500 ounces to 87,500 ounces of gold and post a net mine cash flow of A$84 million to A$89 million in the 2020 financial year, according to the Brisbane-based copper explorer.
The gold mine is expected to benefit from the more than 12% jump in bullion prices XAU= so far this year as the threat of a prolonged downturn in global economic growth from the coronavirus pandemic increased demand for the safe-haven asset. GOL/
Evolution said a key objective of its corporate strategy is to hold six to eight assets with an average mine life of at least 10 years. "The sale of Cracow is consistent with this strategy," the gold miner added.
To fund the deal, Aeris announced a capital raising of A$40 million at an issue price of A$0.03 per share.
($1 = 1.4434 Australian dollars)