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#ASX Announcements
Last edited 3 months ago

12  February 2020

2020 HALF-YEAR FINANCIAL RESULTS

FINANCIAL HIGHLIGHTS

  • Record underlying net profit after tax 62% to A$149.1M
  • Record EBITDA 23% to A$441.2M
  • Earnings per share 61% to 8.7cps
  • Mine operating cash flow 32% to A$511.8M
  • Net mine cash flow 48% to A$351.8M
  • Record Group cash flow 119% to A$242.4M
  • Doubled interim dividend to 7.0cps fully franked
  • Debt free A$300M debt repaid in half-year
  • Red Lake transaction funds fully committed

 

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#ASX Announcements
Added 4 months ago

5 February 2020

Regional Lake Aircore Drilling Commences

  • Large regional aircore drilling program commences at Cue on Lake Austin as part of Evolution JV > 200 holes for >20,000m of aircore drilling planned
  • Drilling will test the extension of the Lena-Break of Day mineralised corridor north under Lake Austin

...

Ongoing Exploration

Evolution JV

  • The initial diamond drilling program at Lake Austin North is now complete. Assay results are expected in March 2020.
  • First assays from the regional Lake Austin aircore drilling program are expected in Q2 2020 and will be batched and reported on a target area basis.

Musgrave 100% tenements

  • The Company is progressing towards delivering a Lena resource update later in Q1 2020.
  • Reverse circulation drilling at Break of Day testing the new ‘link-lode’ position is continuing, with first assays expected in March 2020.
  • Reverse circulation drilling testing the new high-grade gold discovery at the Consols prospect, within the Mainland area, is continuing, with first assays expected in late March 2020.
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#Company Reports
Added 4 months ago

29-Jan-2020:  December 2019 Quarterly Report

QUARTERLY REPORT – For the period ending 31 December 2019

HIGHLIGHTS

Sustained strong cash flow and debt free

  • Mine operating cash flow of A$233.1 million (FY20 year-to-date (YTD): A$511.8 million)
  • Net mine cash flow of A$144.4 million (FY20 YTD: A$351.8 million)
  • Group free cash flow of A$83.8 million (FY20 YTD: A$242.4 million)
  • Outstanding debt of A$275.0 million repaid. Net cash position increased by A$78.6 million to A$170.3 million

Operations

  • Group gold production of 170,890 ounces at an All-in Sustaining Cost (AISC) of A$1,069 per ounce (US$730/oz)
  • FY20 YTD production of 362,857 ounces at an AISC of A$1,041 per ounce (US$713/oz)
  • Significant progress made at Cowal in reducing the operation’s reliance on surface fresh water

Value accretive growth through M&A

  • Acquisition of high grade, long life Red Lake gold complex in Ontario, Canada, expected to complete at end of March 2020

Continued exploration success driving organic growth

  • Cowal’s GRE46 and Dalwhinnie ore bodies continue to return exceptional drilling results which is expected to inform an upgrade in size and classification of the current underground Mineral Resource of 1.4Moz. The Board has approved the commencement of a Pre-Feasibility Mine Design Study for an underground mine
  • Extensional drilling highlights from the Cowal underground complex include: 38m (30.4m etw) grading 6.64g/t Au and 7m (5.6m etw) grading 124.72g/t Au
  • Mungari’s Boomer prospect continued to return narrow laminated vein intercepts containing visible gold with a best intersection of 0.78m (0.58m etw) grading 96.71g/t Au
  • Ernest Henry drilling commenced below the 1200mRL with 10 holes completed for 4,400m. Assay results are expected in the March 2020 quarter. Drilling to continue in CY2020 with over 18,000m planned

FY20 Group guidance

As per ASX release on 10 January 2020 Group FY20 gold production is expected to be around 725,000 ounces.  AISC guidance of A$940 – A$990 per ounce remains unchanged.

----------------------------------------------

Disclosure:  I hold EVN shares.  They are our (Australia's) 3rd largest gold miner (behind NCM & NST) and they look like they're going to once again have the lowest costs, with AISC guidance of below A$1,000/oz.  Not bad at all when the A$ gold price is over $2,300/oz.

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#ASX Announcements
Added 5 months ago

10 January 2020

OPERATIONS UPDATE

Preliminary December 2019 Quarter Results Evolution Mining Limited (ASX:EVN) (“Evolution”) provides the following update for the December 2019 quarter:

  • Group gold production of 170,890 ounces at an All-in Sustaining Cost1(AISC)of A$1,069per ounce(US$730/oz) 2.Year to date production of 362,857 ounces at an AISC of A$1,040 per ounce (US$712/oz)3.
  • Group mine operating cashflow ofA$233.1million and net mine cashflow of A$144.0million.
  • Achieved gold price of A$2,091 per ounce compared to current spot gold price of A$2,267per ounce4.
  • Evolution ended the quarter debt free and with cash at bank of A$170.3 million after repaying outstanding bank debt of A$275.0 million. This is an increase of A$78.6 million from the 30 September 2019 net cash position of A$91.7 million. Commitment of bank debt facilities for completion of the Red Lake Gold Complex (Red Lake)acquisition remain in place.
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#Company Reports
Last edited a month ago

23-Apr-2020:  March 2020 Quarterly Report

HIGHLIGHTS

  • Increased cash flow
    • Mine operating cash flow increased 10% quarter-on-quarter (QoQ) to A$257.4 million 
    • Net mine cash flow increased 11% QoQ to A$159.7 million 
      • Record net mine cash flow at Mungari (A$31.9 million) and Cracow (A$27.6 million)
    • Group free cash flow increased 33% QoQ to A$111.5 million 
    • Total liquidity of A$528.9 million including cash of A$168.9 million and an undrawn A$360.0 million revolver facility
  • Improved Sustainability performance
    • Continued improvement in safety performance with TRIF reduced to 7.2 (31 December 2019: 8.4)
    • MSCI ESG Rating upgraded to A from BBB
  • Consistent operational delivery
    • No material impact to Evolution’s operations from COVID-19 virus
    • Group gold production declined 3% QoQ to 165,502 ounces 
    • All-in Sustaining Cost (AISC) declined 7% QoQ to A$991 per ounce (US$652/oz)
  • Red Lake to drive significant growth
    • Successful completion of Red Lake gold mine acquisition in Ontario, Canada on 31 March 2020
    • Leaner site leadership team established and Interim General Manager appointed
    • Evolution to receive A$18.8 million in cash flow for March 2020 quarter under ‘locked box’ mechanism
  • Continued exploration success with best intersections at:
    • Red Lake’s Cochenour: 6.60m (4.88m etw) grading 16.97g/t Au and 3.30m (2.67 etw) grading 11.40g/t Au 
    • Cowal’s GRE46 and Dalwhinnie: 5.0m (4.0m etw) grading 28.9g/t Au and 12m (9.6etw) grading 10.8g/t 
    • Mungari’s Boomer: 0.30m (0.27m etw) grading 256.74g/t Au and 1.22m (1.03m etw) grading 119.95g/t Au
  • FY20 Group guidance unchanged
    • Group FY20 gold production, excluding Red Lake, is expected to be around 725,000 ounces at an AISC at the top end of guidance of A$990/oz
    • Should current spot metal prices be maintained during the June quarter, net cash flow is expected to be A$90 – 95 million higher but AISC would be negatively impacted by ~A$20 – 25/oz due to higher royalties and lower by-product credits.

Notes:

  1. etw = Estimated True Width
  2. Au = Gold (chemical symbol for gold)
  3. EVN remains the lowest cost (lowest AISC - All-In Sustaining Cost) major gold producer listed on the ASX.

--- click on link above for more ---

Disclosure:  I hold EVN shares.

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#COVID-19 Update
Added 2 months ago

01-Apr-2020:  COVID 19 Update and Completion of Red Lake Acquisition

Business as usual.

Excerpt:  ...To date there has been no material impact on Evolution’s operations from the COVID-19 virus.  At Evolution’s 100% owned Australian operations, only Cracow has a fly-in fly-out (FIFO) workforce. With 97% of Cracow’s workforce residing in Queensland, cross-border travel restrictions have not impacted the operation.  In the absence of any material restrictions being enforced on the operations, Evolution maintains current FY20 Group guidance, excluding Red Lake Gold Mine (“Red Lake”), of around 725,000 ounces at an AISC of A$940 – A$990/oz.

Red Lake Gold Mine Acquisition  

Evolution is pleased to announce that the acquisition of Red Lake has been completed following all conditions precedent having been satisfied. Evolution announced on 26 November 2019 the agreement with Newmont Corporation to acquire 100% of the Red Lake Gold Mine for US$375 million.

Red Lake is a high grade, long life gold mine in Ontario, Canada. It is an undercapitalised asset which provides an attractive opportunity to leverage Evolution’s successful track record in asset optimisation by investing capital, improving the engagement of the site team, and changing the strategy of the operation to unlock value. The operation currently has a 13-year mine life and provides outstanding exploration potential in Archean greenstone gold geology familiar to Evolution.

A five-year term loan of A$570 million from a syndicate of six banks has been utilised to fund the acquisition and related transaction costs. Due to the strong cash position of the business, the final term loan amount is A$30 million less than contemplated at the time of announcing the transaction. Evolution put a foreign currency hedge in place at the time of announcing the transaction to fix the US dollar consideration. This has delivered a benefit of approximately A$63 million to the final consideration amount. The amortisation of the loan is aligned to the expected ramp up in production and cash generation at Red Lake. The repayment schedule is contained in the appendix to this release with first repayment of A$20 million due in July 2020.  

Balance Sheet

Evolution’s balance sheet remains strong. Post completion of the transaction and the payment of the interim dividend of A$119 million on 27 March 2020, the Company has a total liquidity position of approximately A$510 million comprising of a cash position of approximately A$150 million and an undrawn three-year revolver of A$360 million. Gearing post completion of the transaction will be within the range of 11 – 13%.

--- click on link above for more ---

Nice!  I hold EVN as a core position in my industry super fund, along with NST, SBM & SAR (that's my main gold exposure).  Nice set I reckon.  Listening to Matt Haupt on the WAM Funds conference call / webinar this morning, he believes that just as happened during the GFC, gold stocks begin by going down with the rest of the market (as we have seen this time as well) due to everybody liquidating whatever they can (coz they need the cash), and then gold rises significantly from there (dragging gold companies up with it) due to the unprecidented fiscal and monetary stimulus measures that central banks and governments around the world are undertaking to try to mitigate the economic fall-out of the crisis and keep markets operating with sufficient liquidity.  Matt's fund, WLE (WAM Leaders Fund LIC) is holding NCM, NST and SAR currently (plus some iron ore names, but otherwise he's avoiding materials, particularly base metals).  They were the 3 he mentioned this morning anyway.  He may also be holding EVN.  If I was him I'd swap out NCM (Newcrest, the largest goldy, but the worst run) for EVN and also add SBM, but that's just me.

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#ASX Announcements
Added 4 months ago

QUARTERLY REPORT –For the period ending 31 December 2019

HIGHLIGHTS

  • Sustained strong cash flowand debt free
  • Mine operating cash flow of A$233.1million (FY20 year-to-date(YTD):A$511.8 million)
  • Net mine cash flow ofA$144.4million(FY20 YTD: A$351.8million)
  • Group free cash flow ofA$83.8million(FY20 YTD:A$242.4 million)
  • Outstanding debt of A$275.0 million repaid.Net cash position increased by A$78.6 million to A$170.3 million

Operations

  • Group gold production of 170,890 ounces at an All-in Sustaining Cost1(AISC) of A$1,069 per ounce (US$730/oz)2
  • FY20 YTDproduction of 362,857 ounces at an AISC of A$1,041per ounce (US$713/oz)3
  • Significant progress made at Cowal inreducing the operation’s reliance on surface fresh water

Value accretive growth through M&A

  • Acquisition of high grade, long lifeRed Lake gold complex in Ontario, Canada,expected to close at end of March 2020

Continued exploration successdriving organic growth

  • Cowal’s GRE46 and Dalwhinnie ore bodies continue to return exceptional drilling results which is expected to inform an upgrade in size and classification of the current underground Mineral Resource of 1.4Moz. The Board has approved the commencement of a Pre-Feasibility Mine Design Study for an underground mine
  • Extensional drilling highlights from the Cowal underground complex include: 38m (30.4m etw) grading 6.64g/t Au and 7m (5.6m etw) grading 124.72g/t Au
  • Mungari’sBoomer prospect continued to return narrow laminated vein intercepts containing visible gold with a best intersection of 0.78m (0.58metw) grading 96.71g/tAu
  • Ernest Henry drilling commenced below the 1200mRL with 10 holes completed for 4,400m. Assay results are expected in the March 2020 quarter. Drilling to continue in CY2020 with over 18,000m planned

FY20 Group guidance

  • As per ASX release on 10 January 2020 Group FY20 gold productionis expected to be around725,000ounces. AISC guidance of A$940 –A$990 per ounce remains unchanged
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#Company Reports
Added 6 months ago

ENT: Murchison Project Exploration Update

https://www.asx.com.au/asxpdf/20191129/pdf/44c3q2xjxpkx2b.pdf

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#Company Presentations
Last edited 2 months ago

24-Sep-2018:  Evolution Mining have today released their Denver Gold Forum Presentation - see here.

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#EVN buys 19.9% of TBR
Last edited 3 months ago

Evolution Mining (ASX:EVN) has acquired 11.05 million shares, representing a 19.9% shareholding, in Tribune Resources (ASX:TBR) for a cash consideration of A$41.3 million - see here.

These shares were purchased by EVN from the Commonwealth of Australia (see here) subsequent to the Takeovers Panel final orders made after their finding of unacceptable circumstances regarding TBR and RND not properly disclosing who their major shareholders were (who ultimately controlled the major shareholdings in TBR and RND).  Millions of shares were ordered to be sold, and those shares were transferred to and held by the Commonwealth Government during the sale process.  It looks like EVN have picked up a large swag of those at just under $3.74 each.

Tribune’s major asset is the Company’s interest in the East Kundana mining operation which is a joint venture between Northern Star Resources Limited (ASX:NST) (51% and operator), Rand Mining (ASX:RND) (12.25%) and Tribune (36.75%). The East Kundana Joint Venture (EKJV) tenements are adjacent to Evolution’s 1.7 million tonnes per annum Mungari processing plant, which is located approximately 20km west of Kalgoorlie in Western Australia.

As at 30 June 2018 the EKJV tenements (100% basis) hosted a Mineral Resource of 10.54Mt grading 6.1g/t for 2.06Moz Au and Ore Reserves of 6.15Mt grading 6.3g/t for 1.24Moz Au1.

Tribune also has a 44.2% shareholding in Rand Mining Limited.

This is an interesting development - since EVN now own a good chunk of the companies (TBR & RND) that are partners of/with EVN's rival NST in the EKJV.

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#Industry/competitors
Last edited 3 months ago

24-Aug-2018:  Northern Star (NST) reported yesterday.  FY2019 Guidance is for 600,000oz to 640,000oz at A$1,025 - A$1,125.  Using US$1.00=A$0.73 that equates to US$748 - US$821. The mid-points are 620,000oz at A$1,075 (US$785).

Evolution (EVN) are still the lowest cost producers of the big 3.  However, NST are doing pretty well too:

In August 2017, Northern Star announced that Resources had grown to 10.2Moz and Reserves had tripled to 3.5Moz. In August this year, the Company announced that Resources had increased further to 15.9Moz, including 9.8Moz in the Measured and Indicated Category. Reserves had also grown and now stand at 4Moz, despite 0.6Moz of mining depletion.

NST Executive Chairman Bill Beament said it had been a stellar year marked by significant growth on all key levels and most importantly on a per share basis.

“This was a year of huge transformation for Northern Star as we moved our focus to two concentrated centres of production and established mine life visibility of more than 10 years in both cases,” Mr Beament said.

“We hit our target of producing from these two centres at the rate of 600,000oz a year, in the process returning them to their status as world-class Tier-1 projects in Tier-1 jurisdictions.

“The success of this strategy is demonstrated not only by the inventory and production growth at these centres, but also by the 15 per cent increase in their EBITDA to A$486 million and their exceptional EBITDA margin of over 50 per cent.

“This culminated in our overall return on equity for the year reaching an industry-leading 27 per cent and a return on invested capital (ROIC) of 25 per cent.

“Given that our end objective at Northern Star is to maximise financial returns, we consider our strategy to have delivered in spades in FY2018.”

Mr Beament said Northern Star’s success in generating superior returns for Shareholders was also highlighted by the fact that underlying free cashflow per share for FY18 was an outstanding 30¢.

“We have been one of the few resources companies globally which has not only paid regular dividends to Shareholders, but also increased these payouts from consistent growth in underlying earnings throughout the cycle,” Mr Beament said.

The Company has grown the total annual dividends to Shareholders by 280% since commencing payments in 2012.

NST's TSR (total shareholder return) for 1, 3, 5 & 10 years is 35%, 54%pa, 51%pa & 63%pa (/year) respectively.  They've been brilliant over all time frames!

 

 

 

 

 

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#Industry/competitors
Last edited 3 months ago

August 2018:  Results and Forecasts for Australia's three largest ASX-listed gold producing companies:

1. NCM:  Newcrest Mining.  AISC for FY18 = A$1,077 (US$835) per ounce, up 6% on FY17.  They produced 2,346,000 ounces in FY18.   Forecast AISC for FY19 = A$1,063 (US$776) per ounce.  See notes below.

2. EVN:  Evolution Mining.  AISC for FY18 = A$797 (US$618) per ounce, down 12%.  801,187 ounces were produced.  FY19 guidance is for between 720,000 and 770,000 ounces at an AISC of between A$850 and A$900 per ounce (US$620 to US$657/oz).

3. NST:  Northern Star.  AISC for FY18 = A$1,029 (US$761) per ounce.  570,110 ounces were produced.  NST report tomorrow, but in their "Growing Against the Tide" presentation at Diggers & Dealers at the beginning of this month they described themselves as an "ASX 100, top 25 global gold producer with mines in Western Australia; +600koz per annum at an AISC of ~A$1,075/oz (US$795/oz)".

Clearly Evolution Mining is the lowest cost producer of the three.  Evolution are also the second largest producer, and produce more gold than every other ASX-listed producer except Newcrest.  While Newcrest produce more than 3 x the gold (per year) that EVN produce, Newcrest's costs are significantly higher, so they are less profitable than Evolution.

I won't invest in Newcrest.  I don't like their management.  Newcrest have one really brilliant mine, Cadia, which has really low costs, but the group is dragged down by their high-cost Telfer and Lihir gold mines.

Evolution don't really have any weak links in their portfolio of mines now.

I hold EVN and NST, and EVN look good at current levels to be topping up.

Notes:

  1. All-in Sustaining Cost includes C1 cash cost, plus royalty expense; sustaining capital; and general corporate and administration expenses on a per ounce sold basis.
  2. FY18 costs (AISC) in US$ was calculated using an average AUD:USD exchange rate for FY18 of US$0.7752.  Newcrest report in US$, so the same exchange rate was used to convert their costs to A$.  EVN & NST report in A$.  For FY19 (current year forecasts), an exchange rate of US$0.73 has been used (what it is today).
  3. Newcrest (NCM) reported after 5pm tonight (22nd August).  They gave guidance for FY19 which, subject to market and operating conditions, includes expected gold production of between 2.35 and 2.60 million ounces at an AISC (in US$ millions) of between $1,870m and $1,970m.  The mid-points are 2.475moz at an AISC of US$1,920m, which = US$776/oz = A$1,063/oz.

 

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#Results
Last edited 3 months ago

13-Feb-2019:  EVN's H1FY19 Results:  Four page summary - see here.

Full Results (including Appendix 4D, 42 pages) - see here.

Results Presentation (22 pages) - see here.

Dividend maintained at 3.5 cents, fully franked, same as at this time last year.  Trailing dividend yield is a shade under 2% fully franked, which is not too bad for a mining company.  The yield has come down due to EVN's share price increasing from around $2.80 one year ago to $3.80 now.

Market Reaction:  Muted.  EVN closed down 4 cents at $3.80 (-1%).

 

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#Bull Case
Last edited 3 months ago

17 August 2018:  Evolution Mining (EVN) FY18 FINANCIAL RESULTS AND FINAL DIVIDEND

Records achieved:

  • Records achieved:
    • Statutory net profit after tax – increased by 21% to A$263.4 million
    • Underlying net profit after tax – increased by 21% to A$250.8m
    • Sales revenue – increased by 4% to A$1,540.4m
    • EBITDA – increased by 11% to A$795.1m
    • AISC – decreased by 12% to A$797 (US$618) per ounce
    • Operating mine cash flow – increased by 15% to A$811.8m
    • Net mine cash flow – increased by 17% to A$539.9m
  • Gold production decreased by 5% to 801,187 ounces
  • Cash balance increased by A$285.8 million to A$323.2m
  • Net bank debt reduced by A$325.8 million to A$71.8m
  • Fully franked dividends totalling A$109.9 million paid during the year
  • Gearing reduced to 2.7% (30 June 2017: 15.9%)
  • Seventh consecutive year of meeting Group production and cost guidance
  • FY19 guidance: 720,000 – 770,000 ounces of gold at an AISC of A$850 – A$900 per ounce

Final fully franked dividend of 4 cents per share declared based on Evolution’s dividend policy of a payout ratio of 50% of after tax earnings.

Evolution Mining (EVN) is the third largest ASX-listed pure-play gold producer, behind Newcrest (NCM), and EVN are the 2nd best managed gold producer, behind Northern Star (NST, who are the 2nd largest and the best run).

Jake Klein runs Evolution as a business first and a miner second, just as Bill Beament over at Northern Star does.  Both Jake and Bill are master deal makers, buying quality assets at low prices when nobody else seems interested (& sentiment is terrible) and selling lesser assets at the top of the market.  My favourite gold company is still NST, and I own NST, but I wouldn't be buying NST up here;  EVN's SP has dropped over 20% in the past 7 weeks from over $3.50 to under $2.80.  I bought $20K worth of EVN in my SMSF yesterday (16-Aug-18).

The recent 20+% fall in EVN's SP was due to lower production forecast for FY19.  They sold their weakest link, a mine called Edna May, to Ramelius Resources (RMS) last year.  While they are going to produce less gold, EVN's all-in sustaining costs (AISC) have actually dropped since they offloaded Edna May.

If gold goes for a run (always a possibility when you've got Trump in charge of the world's largest economy), our largest 3 gold stocks - NCM, EVN & NST - will go for a run also, and EVN currently is the most profitable of the 3, with the lowest AISC.

Disclosure:  I hold EVN.

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#Company Reports
Last edited 4 months ago
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#Results
Last edited 4 months ago

10 July 2019:  Evolution Mining (EVN) Preliminary FY19 Operating Results

Highlights:

PRELIMINARY FY19 OPERATING RESULTS AND FY20 GUIDANCE

June 2019 Quarter

  • Gold production of 194,866 ounces (Mar 2019 qtr: 175,901oz)
  • All-in Sustaining Cost (AISC) of A$915 per ounce (Mar 2019 qtr: A$925/oz)
  • Operating mine cash flow of A$217.4 million (Mar 2019 qtr: A$168.3M)
  • Net mine cash flow of A$154.4 million (Mar 2019 qtr: A$107.8M) 

 FY19

  • Gold production of 753,001 ounces (Guidance: 720,000 – 770,000oz)
  • AISC of A$924 per ounce (Guidance: A$850 – A$900/oz)
  • Operating mine cash flow of A$773.6 million
  • Net mine cash flow of A$500.0 million 

The significant cash generation during the quarter of A$109.4 million moved Evolution to a net cash position as at 30 June 2019 of A$35.2 million (31 Mar 2019: net bank debt of A$74.2 million). The Group cash balance increased by A$79.4 million to A$335.2 million and bank debt was reduced by A$30.0 million to A$300.0 million.
 
FY19 Group gold production of 753,001 ounces was above the midpoint of guidance.
 
FY19 AISC achieved was above the top of the A$850 – A$900 per ounce guidance range. This was driven by both operational and non-operational factors. Mungari, despite an improved performance in June, experienced slight delays in some of the Frog’s Leg  Mists stopes which resulted in an overall lower than anticipated grade processed; Mt Rawdon was unable to extract sufficient higher-grade ore as it transitioned back into the northern end of the pit; metal prices in the June quarter negatively impacted AISC due to higher royalties (higher achieved gold price) and lower by-product credits (lower achieved copper price); and higher non-cash share based payments expense due to a higher percentage of performance rights expected to vest at the end of FY19.

Full details of the June 2019 quarter production results will be provided in the Quarterly Report to be released on 24 July 2019. 
 
Commenting on the preliminary results, Evolution’s Executive Chairman, Jake Klein, said:  “The outstanding cash generation of our business reflects the quality of our portfolio, moving us to a net cash position at the end of the year. This cash generating capacity of the business is expected to continue in FY20. Notwithstanding this, we are disappointed we did not deliver to our cost guidance in FY19. We are determined to remain focused on margin and operating efficiencies which is reflected in our guidance for FY20. This will ensure we maintain our position as one of the lowest cost gold producers in the world and continue to generate superior returns for our shareholders.” 

FY20 Guidance 
 
Evolution is forecasting FY20 Group gold production of 725,000–775,000 ounces of gold with AISC expected to be in the range of A$890–A$940/oz.

Using the average AUD:USD exchange rate of 0.7156 for the 12 months to 30 June 2019, Evolution’s forecast FY20 costs are among the lowest of global gold producers and equate to AISC of US$635 – US$670 per ounce.

Investment in sustaining capital in FY20 is forecast to be between A$90.0 – A$130.0 million. This is approximately in line with FY19 sustaining capital. Investment in tails facilities is the main capital item taking place at Mungari, Mt Carlton, Mt Rawdon and Cracow. Resource definition drilling, which is included in sustaining capital, is expected to be A$13.0 – A$20.0 million.

Investment in major project capital and exploration is additional to the costs included in AISC. Major capital in FY20 is expected to be in the range of A$195.0 – A$235.0 million. The bulk of the major project capital investment is associated with expansion projects at Cowal as the operation delivers on its objective of increasing production from 250,000 per annum to over 300,000 ounces per annum.

FY20 exploration investment is expected to be A$80.0–A$105.0M. This is a substantial increase on the FY19 group exploration spend of approximately A$50.0M and is largely driven by the success at Cowal as the GRE46 and Dalwhinnie underground mineralisation continues to be defined and extended. Cowal (A$50.0–A$60.0m), Mungari (A$15.0–A$20.0M) and greenfields exploration projects (A$10.0–A$15.0M) will receive the largest allocation of the discovery investment in FY20.

FY20 production guidance of 725,000–775,000oz is unchanged from the 3-year outlook issued at Evolution’s AGM on 22 November 2018.  AISC guidance of A$890–A$940/oz is in line with the cost results achieved in FY19 and is approximately 5% higher than the previous outlook.  

FY21 Outlook
 
Evolution’s FY21 production outlook is unchanged from the previous outlook issued on 22 November 2018 of 710,000–765,000oz. AISC has been revised higher by A$20 per ounce to A$880–$930/oz. Sustaining capital in FY21 is expected to be in the range A$80.0–A$110.0M while major capital increases to A$220.0–A$260.0M in FY21 as a result of the significant investment at Cowal to increase production to over 300,000 ounces per annum and the underground mine at Mt Carlton.

Disclosure:  I hold EVN shares.

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#Company Presentations
Last edited 6 months ago

03-Jun-2019:  Bank of America Merrill Lynch (BAML) "Delivering Value Through Discovery" - Glen Masterman - VP Discovery & Business Development

14-May-2019:  BAML Global Metals Mining & Steel Conference Presso - Jake Klein, Executive Chairman

03-Jun-2019:  Evolution is still going strong, on a day when the much smaller Gascoyne Resources (ASX:GCY) announce they have entered voluntary administration due to ongoing issues with reconciliation to Ore Reserves and Mineral Resource models materially below expectations impacting gold production.  Basically, the gold they thought they had there at Dalgaranga isn't there in the quantities and grades that they had in their business model - their bankable feasibility study (BFS) was flawed, and they have been losing money while trying to get to the higher grade gold that they thought was there - but hasn't been so far.  The ore that they have been mining has also proved to be more expensive to process than they had expected.

New independent expert advice - including a new preliminary unclassified Localised Uniform Conditioning (LUC) resource model for the Gilbeys deposit which they have now adopted - indicates that the losses would likely continue for another 6 months, and the GCY board have now realised that they have run out of funding options to get them through another 6 months of losing more money.  They have therefore called in the administrators and the CEO and CFO have both quit - along with half of the board (including their Chairwoman). 

I don't have any shares in GCY, but I do have shares in NRW Holdings (ASX:NWH) who are Gascoyne's mining contractors at Dalgaranga and who own 8.58% of GCY.  Fortunately, NRW are very busy with many other contracts which range in size up to over $100m each at all three of the new large iron ore projects under construction in WA's Pilbara region (owned by BHP, RIO & FMG).  NRW have dozens of other contracts around Australia with other clients also.  To my knowledge, they have two problematic contracts and their Dalgaranga contract with GCY is certainly one of those, and NRW entered a trading halt this morning pending an announcement on that contract.  The FAL (Forrestfield-Airport-Link) project in Perth where NRW are junior partners in an 80/20 JV with an Italian tunnel boring company is the other one that has experienced some major delays.

But back to gold miners.  Dacian Gold (DCN) also entered a trading halt this morning, pending an announcement regarding a production update at its Mt Morgans Gold Operation.  Hopefully that's good news, but I fear it might not be.  I do own shares in DCN (and EVN).

While some of our bigger gold producers are flying - particularly NST & EVN, there are also a number of our ASX-listed gold producers that are struggling at the minute, either in terms of share price performance (I also own SBM) or in terms of achieving and maintaining profitability (GCY).  In DCN's case, I'm reasonably sure that they're still profitable, but they're clearly going to either upgrade or downgrade production and AISC guidance when they emerge from this trading halt, and their SP is already down -45% in the past 12 months, so we don't really need another downgrade.  I fear we're going to get one anyway. 

SBM downgraded their own production guidance on Friday (31-May-2019) and while the new guidance was only 4% below the mid-point of their previous guidance (so a relatively minor downgrade) and was caused by delays on a single stope at Gwalia - and that gold will now be mined in July instead of in June - it still caused the SBM share price to drop another 5%+ on Friday.  Despite rebounding around +4% today so far, St Barbara (SBM) are still trading well below their entitlement offer price (the price at which existing shareholders can buy 1 share for every 3.1 shares they already owned as part of SBM's fully underwritten accelerated non-renounceable pro-rata 1 for 3.1 entitlement offer to partially fund the aquisition of TSX-listed Atlantic Gold Corporation that SBM announced in mid-May.

In terms of our ASX-listed goldies, I'm thinking NST & EVN are still great HOLDs, and SBM is a BUY (cheap with very good management - and the second lowest cost producers - after EVN), but I hold all three so I am clearly biased towards them.

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Last edited 7 months ago

10-May-2019 WA Gold Sector Update from MiningNews.Net (Kristie Batten, 7-May-19), Straw #1 (of 2)

Evolution (EVN) gets a mention near the end (which will be in Straw #2) due to the dubious distinction of having a mine with reported March quarter AISC of over A$1,500 per ounce (Mungari, A$1,521/oz) - Newcrest's Telfer mine was even worse (A$1,594/oz).  This article clearly explains why not all of WA's gold miners have been good investments over the past year or two.  Some have certainly been big winners.  Others, not so much.  The larger companies with multiple gold mines, like NCM, EVN & NST, have some very low cost mines in their stable, which in NCM's case offsets Telfer, and in EVN's case offsets Mungari.  I hold NST, EVN, SBM, DCN & IGO (and AMI up until recently) and I also own a couple of mining contractors who work in the gold sector (MAH, NWH) and engineering and construction contractors who specialise in the gold sector (GNG, LYL), so I'm bullish on gold, but you have to choose your companies carefully, and be prepared to bail out and move on when necessary.

 

Things aren't all that glittering in WA gold

THEY say it’s never been a better time to be an Australian gold producer – which is true if you’re Newcrest, Northern Star, St Barbara, Evolution or Saracen. But look a tier down and it’s a very different story.

The Australian gold sector has been praised globally over the past couple of years for its staggering success, outperforming its global peers.

Strong management teams, a razor focus on costs and high Australian dollar have made the Australian mid-tier the "rock stars" of the local mining sector, and the darlings of the global gold industry.

But several events over the past year have led to board upheaval, destroyed shareholder value and dented the reputation of the Western Australian gold sector - and is likely continuing to weigh on the rest of the pack.

One of the biggest blights on the WA gold sector was the saga of Eastern Goldfields.

The Mike Fotios-founded company faced protests at Diggers & Dealers 2017 for unpaid bills, with the fledgling Davyhurst producer then put into liquidation by a creditor.

The company's shares were suspended from trading between August 2017 and April 2018, when it re-emerged after completing a A$30.6 million capital raising, cornerstoned by Hawke's Point Holdings.

Davyhurst continued to underperform, producing just 8087 ounces of gold in the June 2018 half against an original forecast of 35,284oz, and the decision was made to put the operation on care and maintenance in the September quarter.

In late November 2018, Eastern Goldfields collapsed. A proposed recap is now underway, with the rebadged Ora Banda Mining seeking to raise $30-40 million in an offer lead managed by Hartleys.

Early last year, Diggers & Dealers' 2017 Emerging Company Award-winner Kin Mining, farewelled its managing director Don Harper just a week before construction of the Leonora gold project was due to kick off.

Amid board tensions, construction was abruptly halted in April 2018 as the definitive feasibility study estimates were called into question, and subsequent investigations revealed capital costs would be much higher than the $35 million first envisaged.

In the fallout, Kin faced another board spill and was forced to repay the initial US$5 million drawn down under a $35 million Sprott project funding facility.

Kin shares were trading at 25c before construction was halted. The company raised A$8.9 million at 11c last year and over $9 million at 8c early this year. Its shares now sit at just over 7c.

It is targeting a fresh final investment decision for Leonora in December.

Bronzewing redeveloper Echo Resources released the bankable feasibility study for its Yandal project during Diggers & Dealers in August 2018, with the 3.75-year mine life disappointing the market in the process.

Shares in the Northern Star-backed company lost around half of their value in five weeks, culminating in the departure of finance director Gary Lethridge and managing director Simon Coxhell.

The company raised $4 million at 11c in December (against its pre-BFS price of 22c) and bolstered its board, including the appointment of former Barminco exec Victor Rajasooriar as MD.

A revised BFS followed last month, which only marginally increased the life to four years, but Echo resolved last week to raise $15 million at 13c to fund an aggressive exploration program to find more ounces and extend mine life.

Continued in Straw #2...

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#Industry/competitors
Last edited 7 months ago

10-May-2019 Australian Gold Sector Update from MiningNews.Net (Kristie Batten, 7-May-19), Straw #2 (of 2)

Read Part 1 first.

 

Another development hopeful to implode was Capricorn Metals (CMM).

Like Echo, Capricorn was a late withdrawal from the Precious Metals Summit in Colorado in September. As revealed by MNN during the event, the company had received a scrip takeover proposal from Regis Resources that valued the company at 11.4c per share, a 93.2% premium.

Regis walked away when major Capricorn shareholder Hawke's Point refused to back the deal.

MD Heath Hellewell and founder Peter Langworthy also exited several months later, and just two months later, despite a Macquarie funding deal on the table, shareholders called for the removal of the new board.

That move succeeded, with the new board resolving to do a deal, rather than develop Capricorn's Karlawinda project.

Curiously, despite rejecting Regis' 11.4c offer, Hawke's Point joined forces with Emerald Resources to lob an 11c per share cash and scrip proposal - an offer rejected by Capricorn.

After near-collapse and a life-saving capital raising early in 2018, it looked as though things had finally turned the corner for Blackham Resources.

Not so, with the company downgrading guidance for a second time last week and lifting its cost guidance to a marginal $1700/oz.

Founding MD Bryan Dixon and chief operating officer Richard Boffey were shown the door, leaving chairman Milan Jerkovic to handle affairs and steady the ship.

The ongoing underperformance of the Wiluna operation has seen Blackham shares drop from close to 10c early last year, to an all-time low of less than 1c last week.

The news came just a month after the company issued 1.7 billion new shares at 3c each to raise $25.8 million, with underwriter Hartleys picking up the tab for $19.8 million.

It's a similar story over at Gascoyne Resources, which poured first gold at its Dalgaranga operation last year and has been on a steady decline ever since due to resource reconciliation issues.

Things really got ugly when new chairman Ian Murray departed after just 16 days in the role, and was joined by long-time MD Mike Dunbar.

It was left to former Macquarie banker Sally-Anne Layman to try and turn things around, but the operation has still faced several production downgrades since then.

Gascoyne revealed yesterday that a deeply discounted (but underwritten) $20.6 million raising only attracted $5.6 million in subscriptions, leaving Hartleys to again take the rest.

Shares in the company hit a low of 4.6c last week and are down 90% year-on-year.

Still, it lives on, unlike small-scale Goldfields miner Coolgardie Minerals, which called in the administrators just six months after its IPO.

Like Gascoyne, Coolgardie had grade issues at its Geko mine and ran out of cash before it could be rectified.

Of the fledging producers, Dacian Gold (DCN) has been the most successful, with only minor hiccups reported at its Mt Morgans operation near Laverton.

Full-year guidance was downgraded from 180,000-200,000oz to 150,000-160,000oz after March quarter production of 35,000oz at all-in sustaining costs of $1488 an ounce was reported.

Still, there was a significant number of WA gold mines that reported AISC of more than $1500/oz in the March quarter, according to Argonaut Securities.

Those were Evolution Mining's Mungari ($1521/oz), Millennium Minerals' Nullagine ($1576/oz), Newcrest Mining's Telfer ($1594/oz), Red 5's Darlot/King of the Hills ($1637/oz) and Blackham's Wiluna ($1757/oz).

Gascoyne reported AISC of A$2052/oz for the March quarter, and has tipped costs to only marginally come down this quarter to $1550-1875/oz.

Aurum Analytics' Sam Ulrich, who tracks cost and grade data across Australian mines, said on average, costs had been rising over the past year as the gold price rose.

"Higher gold prices allow lower grade ore to be mined, which will lead to higher costs per ounce, but the margin is important in terms of maintaining the same level of profitability per ounce," he told MNN.

"Though maintaining the same level of overall profit means one has to maintain the same level of production (total ounces), which is difficult with lower grade ore as mines are processing-constrained."

With the Australian dollar gold price rising to an all-time high of $1871 in February (it's averaged $1824/oz so far in 2019), it would be understandable if WA Treasurer Ben Wyatt decided to revisit a gold royalty rise in Thursday's state budget.

However, Wyatt told the West Australian last month that there was no plan to increase gold royalties.

While that news will no doubt be a relief to high-cost producers, if a company can't make money at an $1800/oz gold price, there's probably little chance of it ever making money.

--- ends ---

Things aren't all that glittering in WA gold, MNN (MiningNews.Net), Kristie Batten, 07-May-2019

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Last edited 8 months ago

04-Apr-19:  Evolution Mining, Australia's 3rd largest listed gold miner (miners where gold is their primary focus) has today organised a site tour of their Cowal gold mine in NSW.  See here for the presentation that their Cowal GM Craig Fawcett is giving to those who attend.  It gives a decent overview of EVN, but focuses primarily on Cowal, which is the jewel in the Evolution crown, their flagship mine.  They are currently mining gold at 6 sites which are all within Australia, and only one of them (Mungari) is in WA, near Kalgoorlie.  The others are all in NSW and Queensland, including Ernest Henry (EH) which is located near Cloncurry (in Qld) which Evolution owns 30% of.  They own 100% of all of their other gold mines. 

EH is owned and operated by Glencore and EVN paid $880 million for a 30% stake in the operation in 2016 when Glencore were undertaking debt reduction activities which involved selling some of their assets and reducing their stake in others.  EVN are entitled to 100% of the mine’s gold, and 30% of its copper and silver production.  EVN pay ongoing monthly cash contributions equal to 30 per cent of production and capital costs associated with copper concentrates.

Further reading on EH (the Ernest Henry mine):  

http://www.australianmining.com.au/news/evolution-mining-buys-glencores-ernest-henry-mine/

http://www.i-q.net.au/main/evolution-buys-into-ernest-henry-mine

http://evolutionmining.com.au/ernest-henry/

http://www.ernesthenrymining.com.au/en/Pages/home.aspx

Jake Klein is an excellent deal maker, and is similar to his rival over at NST, Bill Beament, who also runs his gold company as a business first, and as a miner second.  They both like buying distressed assets or good assets from forced sellers, when they see great opportunity to make money out of the asset.  They don't buy at the top of the market.  They tend to sell their weaker mines when the gold price is high, and buy assets when the gold price is low.  I hold both EVN and NST in my super, and I also hold NST in my main trading portfolio (and on my Strawman scorecard).  I rate Jake Klein and Bill Beament both very highly as managers and deal makers, and I'm happy to retain exposure to their companies through the cycle.  However, the time for buying these companies is not when their share prices are on a tear but rather on a serious pullback - which is usually associated with a falling gold price.  Load up when everybody is selling out of gold companies, and sit back and enjoy the gains when gold is rising.

One of the issues with the Strawman scorecard system is that we can't nominate buy or sell prices - we have to accept end-of-day prices.  A bigger issue is that we can't nominate position sizes.  We can hold a company more than once on our scorecard but that's more of a "double or nothing" scenario.  In reality, position sizing is a lot more subtle than that, and very important to returns.  Ideally, you want to hold much smaller positions in higher risk and more speculative companies especially project developers, and turnaround stories (which often don't succesfully turn around), and you would buy much larger slabs of highly profitable companies like EVN and NST when they're a lot cheaper than where they are today.  EVN was 30% cheaper six months ago, and NST was around 40% cheaper 12 months ago.  I loaded up on both around those times - in my super.  If Strawman had a better position sizing aspect to it, I think the scorecard returns could look a lot different for many of us.

 

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