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Evolution Mining Ltd - Soft Result For The December 2019 Quarterly Report

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Evolution Mining Ltd (ASX: EVN) is an Australian gold mining company. Evolution owns five gold mining operations. Three are in Queensland, one in New South Wales and one in Western Australia. Evolution has a market capitalisation of A$6.4 billion.



What are the key findings from Evolution’s quarterly report?

  • Total gold production for the December quarter is 170,890 ounces, down 11% from the previous quarter.
  • All-in Sustaining costs (ASIC) for the December quarter is A$1,069/oz, in line with the previous quarter.
  • Gold production at the Cowal operation (100% owned) for the December quarter is 65,080oz at an ASIC of A$898oz (September quarter: 75,807/oz, ASIC A$885/oz).
  • Gold production at the Mungari operation (100% owned) for the December quarter is 32,751oz at an ASIC of A$1,344/oz (September quarter: 30,738oz, ASIC A$1,351/oz).
  • Gold production at Mt Carlton operation (100% owned) for the December quarter is 9,787oz at an ASIC of A$2,182/oz (September quarter: 20,877/oz, ASIC A$1,301/oz).
  • Gold production at the Mt Rawdon operation (100% owned) for the December quarter is 20,338/oz at an ASIC of A$1,815/oz (September quarter: 19,250, A$1,748/oz).
  • Gold production at the Cracow operation (100% owned) for the December quarter is 19,854oz at an ASIC of A$1,284/oz (September quarter: 21,917/oz, ASIC A$1,307/oz).
  • Gold and copper production at the Ernest Henry operation (100% owned) for the December quarter is 23,080/oz and 5,355t respectively at an ASIC of negative A$(526)/oz (September quarter: 23,378oz gold, 5,028t copper, ASIC A$(414)/oz).

A key point raised in the report is Evolution’s recent announced acquisition of the Red Lake gold complex in Ontario Canada from Newmont. Evolution will pay US$375 million (`A$554 million) in cash and up to an additional US$100 million (`A$162 million) payable upon new resource discovery. The operation currently has a 13-year life mine plan. Evolution’s management notes that Red Lake is an under-capitalised asset which provides an attractive opportunity to leverage Evolution’s successful track record in asset optimisation by investing capital to unlock value.


What is the outlook for Evolution mining?

FY20 group guidance:

Gold production is expected to be around 725,000 ounces. AISC guidance of A$940 – A$990 per ounce remains unchanged.

In addition to the acquisition of the Red Lake gold complex, Evolution is continuing to undertake drilling expansions at Cowal, Mungari and Ernest Henry operations. This is expected to allow for further gold production soon.

The overall outlook for gold is not looking as favourable as it has been last year. This reflects global economic conditions improving and new developments with certain countries that can improve economic certainly within the global economy. In particular, the United States (US) and China recently signed phase one of a new trade deal between the countries. Additionally, there is increased certainty that the newly elected Prime Minister Boris Johnson will deliver Brexit, with the United Kingdom (UK) expected to leave the EU on 31 January 2020. After this, the UK will begin the transition period involving the UK negotiating a new trade deal with the EU. If this deal is reached, along with further trade agreements with the US and China, global economic and political concerns may ease, causing the outlook for the gold price to be not as favourable as it had been in 2019.


What is the market reaction?

The market reaction to Evolution’s quarterly activities report is negative. Evolution’s share price is down 2% and is currently trading at A$3.785. Evolution has a forward P/E ratio in the low-twenties and an annual dividend yield of 3.1%.




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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