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The Galaxy Resources Limited (ASX: GXY) share price is charging higher on Thursday morning.

At the time of writing, the lithium producer’s shares are up 6% to $4.23.

Why is the Galaxy share price charging higher?

Investors have been bidding the Galaxy share price higher today following the release of its second quarter update.

According to the release, Galaxy achieved record quarterly production of 63,321 dmt of lithium concentrate during the three months. This was in line with customer requirements.

Galaxy achieved this with a unit cash operating costs of US$328/dmt, which represents a 17% reduction on the prior quarter. It is also well short of its FY 2021 guidance of US$420 to US$450 per dmt. Though, its costs will increase in the second half as the first phase of pre-stripping activities at 2NW ramps up.

In addition, the company revealed lithium concentrate shipments of 48,499 dmt for the period, with an additional two shipments totalling 31,500 wmt completed early in July.

No details were provided on the price received for its lithium, other than it is selling contracted volumes on a spot pricing basis. It will also continue doing so for the remainder of 2021.

At the end of the period, Galaxy had a cash balance of US$208 million.

Outlook

Also giving the Galaxy share price a boost today was management’s positive outlook commentary.

It commented: “Galaxy continues to experience strong demand for its spodumene concentrate as rising global EV sales increase the utilisation of spodumene converters in China. Contracting arrangements with long term customers are well advanced for further shipments of ~60kt in Q3, in addition to the 31,500 wmt already shipped in July.”

The company also revealed that demand for uncontracted production has been strong.

“Due to the strong production performance at Mt Cattlin in H1 2021, Galaxy had produced sufficient uncontracted volumes to enable a spot shipment to be sold in addition to contracted volumes. In mid-July Galaxy ran an auction process with selected buyers for 15kt of spodumene concentrate at 5.8% Li2O to be shipped in late Q3. A number of strong bids were received from parties throughout Asia and Galaxy expects to conclude the contract with the preferred buyer in July,” it added.

The post Why the Galaxy (ASX:GXY) share price is up 6% to a multi-year high appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Woolworths Group Ltd (ASX: WOW) share price has surged to record highs after a steady rise since the start of 2021.

Shares in the supermarket behemoth closed yesterday’s trading session at a record $38.93.

Most recently, there have been several catalysts that may have boosted the Woolworths share price.

Let’s take a closer look.

Acquisition and demerger fuels Woolworths share price

Early last month, the Woolworths share price lifted following news regarding its proposed acquisition of PFD Food Services.

The Australian Competition and Consumer Commission (ACCC) announced that it would not oppose the company’s acquisition. As a result, Woolworths received the green light for the $552 million investment.

Shares in Woolworths also took a boost in May after the $10 billion demerger of its Endeavour business.

Endeavour Group Ltd (ASX: EDV) is a separately listed entity that owns Woolworths’ retail and drinks businesses. These include popular bottle shop chains Dan Murphy’s, BWS, 300 licensed venues and 12,000 gaming machines.

Around 99.85% of Woolworths shareholders voted in favour of the demerger. As a result, the deal is estimated to return between $1.6 billion to $2 billion in cash to shareholders via dividends.

Woolworths launches digital wallet

Earlier this week, Woolworths announced the creation of a digital wallet for its Everyday Rewards loyalty program.

According to Woolworths, the new digital wallet is aimed at streamlining checkouts and enhancing consumer shopping experiences.

The digital wallet ‘Everyday Pay’ is expected to be trailed in the next few months.

The launch follows the supermarket giant’s stand-alone payment system ‘Wpay’ which was announced last month.

Woolworth noted its position as the 5^th largest processor of card payments in Australia, equating to a value of approximately $50 billion.

Snapshot of the Woolworths share price

Shares in Woolworths have rallied more than 11% since the start of the year.

Despite closing yesterday’s trading session at $38.93, shares in the supermarket giant hit an intra-day high of $39.09.

In early opening trade, the Woolworths share price is currently swapping hands for $39.09.

The post The Woolworths (ASX:WOW) share price is surging to record highs appeared first on The Motley Fool Australia.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Earnings season is upon us. Over the next few weeks, companies will be releasing updates on how they performed through the second quarter of 2021. One well-known stock, audio music streamer Spotify (NYSE: SPOT), is set to release its Q2 report before the market opens on July 28. Should you buy shares before the Q2 release? Let’s dive deeper and find out.

The business is steadily growing

The majority of Spotify’s revenue comes from its ad-free music subscription service. Since subscription revenue is inherently recurring, Spotify is able to reliably grow its revenue base along with the number of subscribers it adds to its service. In Q1, revenue grew 16% year over year (22% excluding foreign currency fluctuations) to $2.5 billion, in conjunction with premium subscribers growing 21% year over year to 158 million.

Spotify recently announced price increases in some of its mature European and North American markets. If the company can slowly increase prices as it continually improves the value proposition of its service, revenue growth could even outpace subscriber growth in future quarters.

However, this may be buoyed by entrances into less wealthy markets like India, Southeast Asia, and Africa. This winter, Spotify announced it would enter over 80 new markets in 2021, most of which are countries where citizens have less spending power than in Western Europe or North America as it pushes to get more than 1 billion users on its platform.

With only 356 million total monthly active users at the end of Q1, Spotify has a clear path to grow subscribers and subsequently grow revenue for the foreseeable future.

New initiatives showing promise

One pushback with Spotify is that its gross margins are structurally low due to the high royalty payouts it makes to the music labels and other music rightsholders. In Q1, the gross margin was a measly 25.5%, which tracks pretty closely with the overall numbers the last few years. Within its core music subscription offering, Spotify will likely struggle to raise gross margin much, if at all, over time.

However, to help alleviate these margin issues, Spotify has multiple new initiatives, including:

Podcasts

Spotify has invested hundreds of millions in podcast studios, exclusive licensing deals, and distribution platforms over the past few years to help drive listeners and podcast creators to the Spotify platform. Right now, podcasts bring in minimal revenue compared to what Spotify has spent acquiring shows and content. But if it can build out its advertising network for podcasts, this could start bringing in tons of high-margin revenue within three to five years.

Two-sided marketplace

This is Spotify’s promotional marketplace for labels and artists. Through sponsored recommendations and insertions on Spotify’s popular playlists, this marketplace can help the company capture gross margin dollars back from the labels.

Live audio

Recently, Spotify acquired Locker Room, a live discussion mobile application like Clubhouse that is focused on sports-related content. It rebranded the app as Spotify Greenroom and is looking to push it to broader audiences, especially musicians and podcast hosts who are already popular on the core Spotify app.

It is unclear how Spotify plans to make money off of Greenroom, but it provides optionality for Spotify over the next decade and could eventually turn into another high-margin revenue source.

The valuation remains reasonable

With a market cap of $46 billion, Spotify has a trailing price-to-sales ratio (P/S) of 4.8. This might seem cheap compared to many other fast-growing consumer internet businesses, but investors should remember that Spotify has low gross margins, generating only $2.45 billion in gross profit over the last 12 months. Again, this will limit free cash flow and profit generation.

Considering these factors, it still looks like Spotify is trading at a reasonable valuation, depending on how bullish you are on the growth of its core music business and its other bets in podcasting, the two-sided marketplace, and live audio.

Time to buy?

Spotify isn’t a bargain at these prices, even with the stock down 22% year to date, but it looks like a great opportunity for anyone bullish on the long-term growth of music streaming and podcasts. If you believe the company can keep up its double-digit growth in premium subscribers while also rapidly growing its other initiatives, Spotify stock looks like a buy heading into its Q2 earnings report.

That’s not to say I know what will happen to the stock in the short term, but if you are confident in management’s plan over the long term, this could be a perfect time to start a position in the Swedish audio streamer.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should You Buy Spotify Stock Before Earnings Next Week? appeared first on The Motley Fool Australia.

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Brett Schafer owns shares of Spotify Technology. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Spotify Technology. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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S&P/ASX 200 Index (ASX: XJO) oil shares are battling through a dramatic week of mergers, rumoured asset purchases, and rocky oil prices.

Of the three largest ASX 200 oil shares, only one is posting a gain for the week so far. While another has crashed a whopping 6%.

Let’s take a look at the week that’s been for some of Australia’s biggest oil companies.

ASX 200 oil shares’ week so far

Oil price and ASX 200 oil shares slid as OPEC+ lifted production

The week started out tough for ASX 200 oil shares.

On Sunday the Organization of Petroleum Exporting Countries and Russia (OPEC+) announced it will be increasing its production of oil.

It will be producing an extra 400,000 barrels of oil a day every month beginning in August.

The increase in production will see the 6 million barrels of oil currently being withheld every day back on the market by September 2022.

Following the news, oil prices dipped by as much as 8% on Tuesday and they haven’t yet recovered.

ASX 200 oil shares are, in turn, feeling the pressure.

Oil Search’s rejection of Santos’ merger offer

Perhaps the biggest news from the ASX energy sector this week came from Santos Ltd (ASX: STO).

On Tuesday, Santos declared Oil Search Ltd (ASX: OSH) had rejected a confidential merger offer late last month.

The merger would have seen Oil Search shareholders given 0.589 shares in Santos for each Oil Search share held. The implied value represents a 12.3% premium on the Oil Search share price as of 24 June 2021.

The Oil Search share price is posting a gain this week, despite dipping 4.9% on Monday. Shares in Oil Search have gained 10% since news of the rejection broke.

In comparison, the Santos share price has been the worst hit ASX 200 oil share so far this week. It’s fallen 6% this week so far.

Woodside to buy BHP assets?

Finally, word on the street today is Woodside Petroleum Limited (ASX: WPL) might be in discussions to buy oil assets from BHP Group Ltd (ASX: BHP).

Yesterday, The Australian reported on rumours that Woodside is in the running to buy either BHP’s Australian oil assets or its US$15 billion international assets.

The Woodside share price has fallen 4% since Monday.

The post What’s happening with ASX 200 oil shares this week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Commonwealth Bank of Australia (ASX: CBA) share price underperformed its big four counterparts on Wednesday. This came as Australia’s largest bank advised it has seen a surge in requests for loan deferrals from its financially struggling customers.

On Tuesday, the CBA share price hit a monthly low before bouncing back up yesterday to finish the day at $98.42, up 0.83%. Despite the increase, the company’s share price underperformed the other big ASX banks.

Let’s take a look at what CommBank had to say.

CBA lends further support

The resurgence of COVID-19 cases across Australia, and the associated lockdowns, has seen many businesses battling to stay afloat.

As the super infectious Delta variant spreads through communities, CBA chief executive Matt Comyn advised the bank had received over 500 requests for financial assistance on Tuesday alone, according to 7 news. And arguably, that number could be likely to grow in the near future as half of Australia goes through another lockdown. Most notably, Melbourne, with a population of more than 5 million, is now in its fifth lockdown since March 2020.

Unfortunately, non-essential businesses have been forced shut by state governments, further weighing on an already fragile economy.

To help customers and businesses alike, CBA is accepting loan deferrals for two months, as well as other tailored solutions. This follows similar support that was handed down during last year’s recession. CBA did advise, however, it expects foreclosures to be minimal.

CBA’s Comyn stated he is predicting the economy to be weaker during the September quarter. Although once restrictions are eased across the country, he believes the economy will “bounce back quite strongly”.

Meanwhile, the Australian Taxation Office has ended the ‘short cut’ tax deduction at the end of the financial year (30 June 2021). This allowed people working from home to claim 80 cents per hour to cover associated costs. There have been calls to extend the temporary tax measure into the new financial year while current lockdowns persist.

CBA share price summary

As COVID-19 has continued to wreak havoc on the Australian economy, the CBA share price has managed to ascend. Despite only managing a modest gain of 0.37% over the past month, the banking giant’s shares have risen almost 33% since this time last year.

CBA is the ASX’s largest company on valuation grounds, holding a market capitalisation of roughly $174.6 billion. The company has more than 1.7 billion shares on its books.

The post CBA (ASX:CBA) share price lags big banks as requests for deferrals surge appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The A2 Milk Company Ltd (ASX: A2M) share price finished yesterday’s session in the green.

A2 Milk shares finished yesterday at $6.95, a 0.9% gain from the previous closing price.

Whilst there was no market sensitive news yesterday, let’s take a closer look at what has unfolded for the company lately.

What is behind the a2 Milk share price lately?

A2 Milk says it received regulatory approval to acquire a 75% interest in Mataura Valley Milk on 5 July.

Approval came from the New Zealand Overseas Investment Office for A2’s stake in the New Zealand dairy nutrition company.

A key benefit to this deal, A2 Milk says that majority shareholder China Animal Husbandry Group (CAHG) will retain a 25% interest alongside the company.

CAHG is currently the majority shareholder in Mataura Valley Milk. It is also a wholly-owned subsidiary of China National Agricultural Development Group Co Ltd (CNADG).

According to A2, CNADG is also the parent company of China State Farm, A2’s distribution partner in China.

Investors can expect more updates on the acquisition when A2 Milk releases its full-year results in August.

Since the announcement on 5 July, the A2 Milk share price has climbed 6.6%.

A2 Milk share price snapshot

The A2 Milk share price has had a choppy year to date, posting a loss of 39%. This has extended the previous 12 month’s loss of 64%.

For context, the S&P / ASX 200 Index (ASX: XJO) has posted a 12-month return of 20%.

At the time of writing, A2 has a market capitalisation of $5.2 billion.

The post The A2 Milk (ASX:A2M) share price climbs as China deal receives go-ahead appeared first on The Motley Fool Australia.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Northern Star Resources Ltd (ASX: NST) share price will be one to watch on Thursday morning. This comes after the Australian gold miner announced an asset sale along with a leadership change.

At yesterday’s market close, Northern Star shares finished the day at $10.21.

Northern Star sells Kundana assets

According to its release, Northern Star has entered into a binding Share and Asset Sale Agreement with fellow gold miner, Evolution Mining Ltd (ASX: EVN).

The sale price of Northern Star’s Kundana assets is listed for $400 million in cash. This includes the following:

• Kundana Operations;
• East Kundana Production Joint Venture 51% interest;
• West Kundana Farmin Joint Venture 75% interest; and
• Carbine / Carnage gold project.

To ensure a smooth transition, Evolution will offer employment contracts to all of Northern Star’s transferring employees.

In FY21, the Kundana Assets produced 120,943 ounces of gold. The combined resource estimate is 2.4 million ounces, including reserves of 579,000 ounces.

Northern Star will use the sale proceeds to accelerate growth projects currently in the pipeline.

The completion of the sale is subject to receiving ministerial consent for the transfer of six mining tenements. The company expects to wrap up the transaction by the end of next month.

Leadership change

In other news, Northern Star announced the appointment of Stuart Tonkin as its new managing director in the wake of the company’s merger with Saracen Mineral Holdings Ltd (ASX: SAR).

Mr Tonkin replaces Raleigh Finlayson, who will move from managing director to executive director for a transitionary period of around two months. Once this time has passed, Mr Finlayson will retire from the board, before re-joining again as a non-executive director in April 2022.

Northern Star said that Mr Finlayson’s temporary departure will allow him to complete an Advanced Management Program with Harvard University.

Northern Star chair Michael Chaney commented on the reshuffle, highlighting Mr Tonkin’s achievements:

Stuart is highly qualified for the role in every respect. He is widely regarded as one of the leading resource project operators in Australia and has more than 20 years’ experience as a senior executive in the industry.

Having spent the past five years as Chief Executive of Northern Star and three years before then as the Company’s Chief Operating Officer, Stuart has firsthand knowledge of our business, with an extensive understanding of the assets, and especially our people.

Stuart is perfectly placed to lead Northern Star as we seek to optimise the operational performance and financial returns of the exceptional asset base which the Company has established as the result of an intense period of merger and acquisition activity.

Northern Star share price summary

The Northern Star share price has been gradually descending over the past year, recording a fall of roughly 35%. In 2021 alone, the company’s shares are down about 20%.

Based on valuation grounds, Northern Star has a market capitalisation of approximately $11.8 billion, with 1.1 billion shares on issue.

The post Why the Northern Star (ASX:NST) share price is on watch today appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras owns shares of Northern Star Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The CSL Limited (ASX: CSL) share price has had an…. interesting few years. Since topping out at its all-time high of nearly $343 a share back in February 2020, CSL shares have more or less treaded water ever since.

At yesterday’s closing share price of $290.13 a share, CSL is ‘only’ up 1.8% in 2020 so far. That doesn’t look great against the broader S&P/ASX 200 Index (ASX: XJO), which has managed a far healthier 9.34% in 2021. CSL is also up a very muted 2.6% over the past 12 months. Again this doesn’t compare too favourably against the ASX 200, which is up more than 20% over the same period.

This might come as a surprise to many investors. Prior to 2020, CSL was known as a red hot, but still blue chip, growth share. It managed gains of roughly 50% in 2019, more than 30% in 2018 and around 40% in 2017. So a retreat into single-digit numbers is certainly a sea change for this healthcare company. As is its withdrawal into market-trailing returns.

CSL had a rough time with the outbreak of the pandemic last year. It’s experienced issues with its blood plasma collections for one. It also had a potential vaccine candidate, developed in partnership with the University of Queensland, shelved last year.

But where to now for the CSL share price?

Is the CSL share price a buy today?

One broker who thinks there might be some small upside left in CSL shares is investment bank Goldman Sachs. Goldman currently has a 12-month share price target of $305 for CSL. Albeit with the caveat of a current ‘neutral’ rating.

The broker notes the ongoing sluggishness of CSL’s plasma collection business, as well as what it sees as “consecutive years of single-digit earnings growth” as the primary reasons behind this rating.

Goldman reckons there is “a long road to recovery” for the company’s plasma collections, which remain well below pre-COVID levels. Further, the bank is concerned that low earnings growth rates are not accurately reflected in the current CSL share price.

Even so, if Goldman’s share price prediction proves accurate, it implies a potential upside of 5.1% over the next 12 months.

My Fool colleague James recently discussed the predictions of two other brokers recently. He noted that both Citi and Credit Suisse had slightly higher share price targets on CSL right now, both at $310 a share.

At the current CSL share price, the company has a market capitalisation of $132.05 billion. It also has a price-to-earnings (P/E) ratio of 36.8, and a trailing dividend yield of 0.97%.

The post What is the outlook for the CSL (ASX:CSL) share price? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Afterpay Ltd (ASX: APT) share price has been making a bounce off last week’s lows, which occurred following speculation Apple Inc is developing its own buy now, pay later (BNPL) later service.

The BNPL sector seems to have no shortage of competitors, from local ASX-listed players and banks to global behemoths such as Apple and PayPal Holdings Inc.

In a recent article featured on Livewire, Shaw and Partners portfolio manager James Gerrish is drawing comparisons between the once overcrowded lithium market and today’s BNPL space.

While the now booming lithium market and the Afterpay share price might be worlds apart, they may have more in common than you’d think.

When lithium went from boom to bust

Gerrish thinks there is a possible scenario in which the BNPL sector follows a similar path to the lithium sector.

“It was incredibly ‘hot’ through 2017/18 only to fall significantly over the ensuing few years as production was ramped up, globally suppressing prices. This increase in commodity supply can be compared to the increase of BNPL players.”

According to S&P Global Inc, lithium carbonate prices tumbled from record highs of US$25,000/mt to lows of around US$10,000/mt.

Commentary dating back to 2019 from S&P Global said of the situation: “Lithium supply is growing far quicker than lithium demand and this can be said for all battery materials as the EV pick up rate is not expected to really start increasing until the early to mid-2020’s”

Between January 2019 and February 2020, shares in leading ASX-lithium miner Pilbara Minerals Ltd (ASX: PLS) would tumble 50.7% to a record low of 30 cents.

Other leading lithium players including Orocobre Ltd (ASX: ORE) and Galaxy Resources Ltd (ASX: GXY) would also see their valuations more than halve between 2019 and 2020.

Unfortunately, emerging players Alita Resources Ltd and Altura Mining Ltd went on to eventually fall into administration after running out of cash and/or failing to secure offtake agreements.

Fast forward to today, Pilbara, Orocobre and Galaxy have surged to either multi-year or record highs.

Turning back to ASX BNPL shares and Gerrish says there could be a “protracted period of underperformance from the BNPL space but we do ultimately believe they can rise from the ashes”.

Afterpay share price so far this year

The Afterpay share price has once again delved into negative year-to-date territory, down about 10%.

Gerrish thinks the BNPL sector could be in for a volatile next couple of months, saying “a further 20-25% fall by local leader Afterpay for example, wouldn’t be a surprise”.

The post What can the surging lithium sector tell us about the Afterpay (ASX:APT) share price? appeared first on The Motley Fool Australia.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Apple, and PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $75 calls on PayPal Holdings, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Apple and PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Evolution Mining Ltd (ASX: EVN) share price won’t be going anywhere on Thursday.

This is because this morning the gold miner requested a trading halt.

Why is the Evolution share price in a trading halt?

The Evolution share price was placed in a trading halt this morning so that the company could launch an equity raising to fund a major acquisition.

According to the release, Evolution is aiming to raise $400 million via a fully underwritten institutional placement and a non-underwritten share purchase plan.

These funds are being raised at $3.85 per new share, which represents a 5.4% discount to the Evolution share price at yesterday’s close. Though, due to recent weakness in the Evolution share price, it is also a discount of 18% to where its shares were trading just one month ago.

The acquisition

Evolution is raising these funds after entering into an agreement with Northern Star Resources Ltd (ASX: NST) to acquire its assets in the Eastern Goldfields of Western Australia for $400 million.

These comprise a 100% interest in the Kundana Operations, a 51% interest in the East Kundana Joint Venture, a 100% interest in certain tenements comprising the Carbine Project, and a 75% interest in the West Kundana Joint Venture.

The company notes that the main acquisition assets are located within 8km of Evolution’s Mungari Operations and represent an important strategic opportunity to consolidate the region, optimise the value of its existing infrastructure, and capture significant operational synergies.

Evolution’s Executive Chairman, Jake Klein, commented: “This is a pivotal transaction that will transform Mungari to establish the operation as the fourth cornerstone asset in the Evolution portfolio.”

“It presents a unique strategic opportunity for Evolution to consolidate the Eastern Goldfields region given our existing presence at Mungari, resulting in Evolution being one of the largest tenement holders in the Kalgoorlie region.”

Mr Klein is expecting the acquisition to unlock synergies and provide the company with significant exploration potential.

He added: “The Acquisition Assets are located in close proximity to Mungari’s processing infrastructure, with all key mining operations and identified orebodies located within 8km of the Mungari mill. This unlocks the ability to capture valuable unique synergies and provides significant operational flexibility for the combined operations.”

“The Transaction improves Mungari on a production, mine life, and Mineral Resources basis. We are also excited about the exploration potential that the consolidated land package holds, which represents further mine life extension opportunities for Mungari. It also improves the overall scale, quality and mine life of the portfolio, which continues to operate exclusively in Tier 1 mining jurisdictions. Finally, we look forward to partnering with Rand and Tribune at the EKJV as we seek to optimise the value of this operation for the benefit of all shareholders,” he concluded.

The Evolution share price is down 23% year to date. Shareholders will no doubt be hoping that this acquisition is an inflection point for its shares.

The post Why the Evolution (ASX:EVN) share price is in a trading halt appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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