* Deal will boost Evolution's gold output to 800,000 ounce/year
* Evolution set to become Australia's No.2 gold producer
* Bankers say harder to find a buyer for Barrick's Porgera mine (Adds Evolution chairman, analyst comments)
By Sam Forgione and Sonali Paul
NEW YORK/MELBOURNE, May 25 (Reuters) - Barrick Gold , the world's top gold producer, has agreed to sell its Cowal mine to Evolution Mining for $550 million in a deal that will turn Evolution into Australia's second largest producer of the precious metal.
The deal gives Evolution a large, low-cost mine that will boost its output to around 800,000 ounces a year, around one-third the output of top Australian producer Newcrest Mining .
"This is a truly transformational acquisition for Evolution," Executive Chairman Jake Klein said after the deal was announced on Monday. "This is the high quality asset we have been looking for to cornerstone our business."
Barrick put Cowal up for sale along with its Porgera mine in Papua New Guinea, among other assets, in an effort to cut debt by $3 billion by the end of this year.
Analysts congratulated Evolution for snaring Cowal for well below the $650 million price tag it had been expected to fetch.
"We put in what we thought was a fair price, but one which we are very happy acquiring it at," Klein told analysts and media on a conference call, adding that the price reflected the subdued asset values in the current market.
Evolution was able to afford the bid with the backing of Luxembourg-based private company La Mancha, from whom it recently agreed to buy two small Australian mines in an all-share deal worth A$293 million ($229 million).
Evolution plans to pay for Cowal by raising about A$248 million through a sale of new shares and with new bank loans.
With this deal, Evolution's production will overtake fellow Australian gold miner Northern Star Resource, which grew rapidly last year after buying four gold mines from Barrick and Newmont Mining Corp for less than $200 million.
Analysts said it was too early to tell which one would end up stronger.
"The jury's out. Evolution's definitely got scale but a little bit more operational risk and a little bit more debt," said Patersons Securities analyst Matthew Trivett.
Following the sale of Cowal and three mines last year, Barrick will have only one asset left in Australia, a 50 percent stake in the Kalgoorlie Super Pit. To help cut costs further, it said it is closing its Perth office.
Barrick's spokesman was not immediately available to comment on the status of the Porgera auction. Several bankers have said it would be harder to find a buyer for Porgera as it faces a range of environmental and social challenges.
Credit Suisse is advising Barrick and Sydney-based boutique firm Record Point is advising Evolution on the deal due to be completed in the third quarter of 2015.
$1 = 1.2789 Australian dollars Reporting by Sam Forgione and Sonali Paul; Editing by Sandra Maler, Andrew Hay and Himani Sarkar