Evolution Mining (ASX:EVN) is poised for a stellar year, despite missing its gold production guidance. The surge in global gold and copper prices, augmented copper tonnage from acquiring 80% of the Northparkes mine, and stringent cost controls are set to propel the company’s revenue and earnings to new heights.
Additionally, recent exploration at the Ernest Henry mine in North Queensland has potentially uncovered a new, high-grade gold and copper zone near the existing operations. These discoveries build upon Evolution’s previous efforts since acquiring the mine from Glencore, highlighting the previous owner’s limited efforts to extend its lifespan compared to Evolution’s proactive approach.
Evolution disclosed sales, pricing, and cash flow data for the June quarter and the 2023-24 fiscal year in its latest quarterly report on Thursday. While specific revenue and earnings figures are slated for next month’s annual results, the release indicates a substantial recovery from the rain and flood-impacted 2022-23 fiscal year, where revenue hit $2.2 billion but statutory earnings plummeted to $163.5 million from $323.5 million the year before.
It appears Evolution is on track to approach or even exceed the latter figure, given the robust cash flow observed in the June quarter.
For the year ending June 30, gold production increased by 8.5% to 716,700 ounces, though this fell short of the 789,000 ounces initially projected. Meanwhile, copper production rose by 2% to 67,862 tonnes, surpassing the guidance of 62,500 tonnes.
Gold sales also saw an 11% rise to 718,224 tonnes, while copper sales dipped 3% to 69,189 tonnes. Both metals experienced a significant average price increase over the year; the average gold price rose by 11% to $A3,190 per ounce, with the June quarter averaging over $A3,500 per ounce. Similarly, the average copper price was $A13,657 per tonne, surging to over $A15,000 per tonne in the June quarter, indicating a potentially higher price for the September quarter.
Despite benefiting from a weaker Australian dollar in the previous fiscal year, Evolution noted a slight firming of the currency since then, with expectations of further strengthening, which could impact returns in Australian dollars.
The company disclosed it is 94% unhedged for gold, except for the Mungari expansion in WA, positioning it to capitalize on the rise in US dollar prices. There are no copper hedges in place, and gold hedges are not expected beyond 2025-26.
Driven by higher prices and efficient operations, Evolution reported a surge in cash flow for the year, totaling $367 million. This bolstered the company’s cash balance to $403 million as of June 30, up from $215 million at the end of the March quarter, which included paying a $40 million interim dividend.
Despite the additional production from Northparkes, Ernest Henry, Cowal, and Mungari mines, Evolution achieved a slightly lower All-in Sustaining Cost (AISC) of $A1,447 per ounce of gold compared to $A1,450 per ounce in 2022-23, albeit above the 2023-34 guidance of around $A1,340 per tonne.
Looking ahead, Evolution anticipates favorable costs for 2024-25, reporting an AISC of $A1,275 per ounce for the June quarter, driven by increasing production volumes.
Further guidance on production and costs will be provided alongside the annual results next month.