Evolution Mining Ltd (ASX: EVN) is an Australian gold mining company. Evolution owns five gold mining operations. Three are located in Queensland, one in New South Wales and one in Western Australia. Evolution has a market capitalisation of A$8.76 billion.
What are the results from Evolution FY19?
Today (Thursday 15 August 2019) Evolution released its FY19 annual results. The main points are as follows:
- Underlying NPAT for FY19 is A$218.2 million, down 13 per cent from FY18.
- Sales revenue for FY19 is A$1,509.8 million, down 2 per cent from FY18.
- EBITDA for FY19 is A$730.3 million, down 8.1 per cent from FY18.
- The final dividend in FY19 is 6 cents (fully franked), up 50 per cent from FY18.
- EPS for FY19 is 12.9 cents, down 21 per cent from FY18.
Specific results on company operations are as follows:
- Gold production of 753,001 ounces (oz), in line with guidance.
- Net mine cash flow for FY19 is A$497.8 million, down 7.8 per cent from FY18.
- AISC of A$924 per oz (US$661/oz), in line with guidance.
What were the drivers of this result?
Evolution notes that the 7 per cent increase in the gold price of A$1,760 per oz from actual sales of gold was more than offset by a decrease in production of 6 per cent to 753,000 oz (801,187 oz in FY18) and lower copper and silver revenue which is a result of both lower volumes and price.
What is the outlook for Gold?
The general global outlook for gold is positive. This assessment reflects a number of global political and economic concerns. These include the continuation of the proliferation of trade barriers in the form of tariffs mainly from the US and China, significant uncertainty around whether the new Prime Minister of the UK Boris Johnson can reach a successful Brexit deal, continued nuclear tensions in the Middle East surrendering the US and Iran and growing tensions in Hong Kong.
There are also concerns about the outlook for the United States economy with the possibility of a recession in the next 12 months or so.
What is the outlook for Evolution?
Given the global outlook for gold is positive, the company outlook for Evolution is positive.
Evolution also notes that FY20 gold production guidance is 725,000–775,000 ounces and AISC guidance is A$890 – A$940 per ounce. These expected outcomes for FY20 are similar to the FY19 outcomes.
Evolution has continued in FY19 to invest in the extension of mine life and production growth. This includes the development projects and exploration drilling at Cowal, and development of an underground plant and mine upgrade at Mt Carlton. Capital expenditure in FY20 is expected to be similar to capital expenditure in FY19.
What is the market reaction to Evolution FY19 results?
The initial market reaction to Evolution’s FY19 results is neutral. However, Evolution is trading at A$5.40, representing a 4.6 per cent increase in the share price (10.20am). This reflects gold stocks generally performing well in light of the global economic and political concerns mentioned previously rather than Evolution’s FY19 result. Evolution has a P/E ratio in the high thirties and an annual dividend yield of 1.39 per cent (fully franked).
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