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  • Gold producer Evolution Mining (EVN) downgrades its full-year production guidance for FY22 to 640,000 ounces on the back of pandemic disruptions and project delays
  • Wet weather and COVID-related absences continued to impact Cowal operations in NSW which is one of five of the company’s wholly-owned operations
  • FY23 group production is expected to increase 12 per cent to 720,000 ounces and a further 11 per cent to 800,000 ounces in FY24, however, these levels are lower than EVN’s previous plans due to delays at the Red Lake project in Canada
  • The company is focused on prioritising margins over volume and earning an appropriate capital return and remains confident it’s one of the best positioned gold companies
  • EVN shares are down 21.2 per cent to trade at $2.67 at 3:39 pm AEST

Evolution Mining (EVN) has provided an updated on expected performance for the 2022 financial year and an outlook for FY23 and FY24.

Guidance

The gold miner operates five wholly-owned mines which include Cowal in New South Wales, Ernest Henry and Mt Rawdon in Queensland, Mungari in Western Australia, and Red Lake in Ontario, Canada.

For the current June quarter, Evolution expects production will be 15 per cent higher than the March quarter at around 170,000 ounces.

At the Red Lake mine specifically, the company expects a quarter-on-quarter production increase of 15 per cent to produce around 38,000 ounces of gold in the June quarter.

Similar to the March quarter, production at the Cowal operations continued to be impacted by wet weather which restricted access to the open pit and Mungari production was impacted by COVID-related staff absences.

Since the WA border opened in March, over 30 per cent of the workforce were absent for at least seven days due to COVID-related reasons which put a strain on operations.

Evolution has further downgraded its FY22 group production guidance to about 640,000 ounces, down from the 650,000-ounce guidance following the March quarter.

FY22 group all-in sustaining cost (AISC) is expected to be roughly $1250 per ounce which is above the guidance range of $1135 to $1195 per ounce. The final figure largely depends on the closing copper price for June 2022 which is used to revalue unsettled concentrate shipments from Ernest Henry.

Sustaining and major capital is both expected to be at the lower end of their guidance ranges of $150 to $175 million and $440 to $505 million, respectively.

In terms of its cash position, the billion-dollar stock has around $900 million of liquidity including $540 million of cash expected at the end of FY22.

Outlook

Group production for FY23 is expected to increase 12 per cent on the current year to 720,000 ounces and the outlook for FY24 is expected to increase a further 11 per cent to 800,000 ounces. This will deliver a total increase of 25 per cent over the next two years.

These production levels are lower than EVN’s previous plans due to the Red Lake transformation being achieved a year later than planned.

The FY23 AISC guidance and FY24 AISC outlook is expected to be in line with the current year at approximately $1240 per ounce.

These costs are higher than previously outlined due to industry-wide cost pressures and the lower production at Red Lake. However, this cost level still places Evolution as one of the lowest-cost global gold producers.

Sustaining capital is guided to be approximately $190 to $240 million in FY23 with the same outlook for FY24.

The company noted that this is higher than previously outlined due to the inclusion of capital in FY23 for fleet replacement at Ernest Henry given the confidence of a mine life extension.

“Aligned with our strategy, during this period of increasing costs and a challenging labour market all planned expenditure will be thoroughly assessed and gated with a focus on ensuring we continue to prioritise margins over volume and earn an appropriate return on capital,” Executive Chairman Jake Klein said.

“I am confident that Evolution is one of the best positioned gold companies with its high-quality, low-cost portfolio of assets,” he concluded.

Company shares fell 21.2 per cent to $2.67 each at 3:39 pm AEST.

EVN by the numbers
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