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Evolution Mining Ltd FY19 Results - Falling Earnings but Outlook For Gold Positive

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

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).




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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