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#EVN sells Cracow to AIS
Added a month ago

01-July-2020:  Completion of Cracow Divestment   and   AIS: AERIS COMPLETES ACQUISITION OF CRACOW GOLD MINE

The US$ gold futures hit a seven-year high of US$1804 an ounce overnight.  The A$ gold price is sitting around A$2,580.  

EVN have sold their least desirable (least best) asset at the top of the market as expected.  This is the excellent management M&A discipline that I have come to expect from Jake Klein at EVN and also Bill Beament at NST.  They buy when prices are low, and sell when prices are high, and are always looking to improve the quality of their portfolio of gold mines and lower their costs even further.  Additionally, NST make money out of turning around underperforming assets.  EVN do some of this also, but NST have arguable been more succesful at doing it.  I hold both EVN and NST.

From www.miningnews.net this morning:  

At 1:25am AEST, gold futures hit a seven-year high of US$1804 an ounce.

Futures are currently sitting just below at $1797.70/oz, while spot gold is lagging at $1783/oz or A$2582.30/oz.

The September quarter is typically strong for gold prices and equities.

Meanwhile, copper broke through US$6000 per tonne with a 0.9% rise. Its closing price of $6004.50/t is the highest since January.

According to Bloomberg, the June quarter, which copper started at just below $5000/t, was the best quarter for the red metal in a decade.

Materials was the strongest performing sector in mining-heavy Toronto overnight.

In the gold space, IAMGOLD and OceanaGold were up more than 7% each, while in copper, First Quantum Minerals jumped 6.3%.

On the losers list was uranium, with the spot price falling by 4.6% to $31.40 per pound.

The MySteel 62% Australian iron ore fines price was 2.9% to $101/t.

The Australian dollar was sitting at 69.03c.

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#Quarterly Reports
Added 2 weeks ago
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#ASX Announcements
Last edited 6 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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#Production Guidance Downgrade
Added 2 months ago

19-June-2020:  Mt Carlton Update

This announcements includes a small Production Guidance Downgrade, which I have highlighted below (in bold).  Significantly, EVN are maintaining their very low ex-Red Lake FY20 AISC guidance of just A$990/oz.  Their AISC for Red Lake is MUCH higher (over A$2,000/oz), but Red Lake (in Canada) is Evolution's newest acquisition and it's still a work in progress.  I believe Jake can whip Red Lake into shape.  

MT CARLTON UPDATE

Evolution Mining Limited (ASX:EVN) provides the following update regarding the Mt Carlton Operation. An extensive grade control infill program of 204 drill holes (33,000m) has recently been completed post the 31 December 2019 Mineral Resources and Ore Reserves Statement to inform an update to the resource block model. The improved understanding of the geological controls on grade distribution has now indicated a reduction of approximately 75,000 ounces from the Life of Mine Plan. 

FY20 gold production at Mt Carlton is now estimated to be around 60,000 ounces (revised guidance provided to the market on 10 January 2020 was 70,000 – 75,000 ounces). For FY21, the operation is now expected to produce around 50,000 ounces.

Mt Carlton has generated A$665 million of operating cash flow since commencing production and has fully repaid all of its initial development capital and subsequent investments to deliver an average return of 19% per annum. Whilst the reduction of 75,000 ounces represents approximately 1% of Evolution’s Group Ore Reserves, the updated Life of Mine Plan in FY20 reflects a material change to the carrying value of Mt Carlton. As a result, a non-cash impairment estimated at between A$75 – A$100 million post-tax is expected to be recorded in the FY20 full year financial accounts.

All options to maximise the future value of the asset are being pursued. Drilling at the Crush Creek Joint Venture project (earn-in option to purchase 100%) located 30 kilometres southeast of Mt Carlton continues to return exciting results and has the potential to be an important source of ore feed for the future of the operation. An update is provided below. 

Commenting on the Mt Carlton update Jake Klein, Executive Chairman, said: “We are disappointed to be recording an impairment at Mt Carlton. We will be working hard over the next six months to optimise the future of the operation and to further understand the size and quality of the Crush Creek project.”

Evolution’s FY20 Group gold production, excluding Red Lake, is now expected to be around 715,000 ounces which is approximately 1.4% below previous guidance of around 725,000 ounces. All operations, other than Mt Carlton, are performing in line or better than plan for the June 2020 quarter. Costs are being well managed and there is no change to the FY20 Group All-in Sustaining Cost (AISC) guidance, excluding Red Lake, of A$990 per ounce. Red Lake is also performing well and is on track to deliver to the June 2020 quarter guidance of around 25,000 ounces at an AISC of A$2,100 – A$2,300 per ounce. 

 

Crush Creek Joint Venture (earn-in option to purchase 100%)

Drilling started at Crush Creek in April 2020 with the aim of confirming and expanding the in situ mineral inventory at the Delta and BV7 prospects. Crush Creek is located 30km southeast of Evolution’s Mt Carlton operation (Figure 1) with access to the project from the town of Collinsville. Encouraging results, which are reported below for the Delta prospect, are reinforcing Evolution’s belief that gold mineralisation at Crush Creek has the potential to provide mine life extensions at Mt Carlton.

Two diamond rigs are currently on site with a reverse circulation (RC) rig scheduled to arrive during the September 2020 quarter. Confirmatory resource drilling is transitioning to step-out drilling to expand the resource footprint at, and beyond, both targets. Mineralisation occurs in low sulfidation epithermal quartz veins and breccia bodies associated with numerous rhyolite dome complexes. Mineralisation is commonly hosted in volcanic debris deposits beneath flow-banded rhyolite. There is potential for new discoveries associated with other rhyolite domes located on the joint venture tenements. 

--- click on link at the top of this straw for the rest of this announcement ---

Disclosure:  I hold EVN shares.

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#Company Reports
Last edited 3 months 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 4 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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#Company Reports
Added 6 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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#EVN sells Cracow to AIS
Last edited 2 months ago

04-June-2020:  Agreement to divest Cracow Gold Mine for up to A$125M

Evolution Mining Limited (ASX:EVN) has entered into a binding agreement with Aeris Resources Limited (ASX:AIS) to sell the Cracow gold mine in Queensland for a total consideration of up to A$125 million.  The total consideration consists of:

  • A$60 million cash payable upon completion;
  • A$15 million cash payable on 30 June 2022; and
  • up to A$50 million contingent consideration payable in the form of a 10% net value royalty, based on gross revenues less C1 direct cash costs in relation to any gold produced at Cracow in the five-year period from 1 July 2022 to 30 June 2027.

Evolution has consistently stated that a key objective of its corporate strategy is to continuously seek to upgrade the quality of its portfolio and hold six to eight assets with an average mine life of at least ten years.  The sale of Cracow is consistent with this strategy and reflects the completion of the Red Lake acquisition in April 2020 and the Company’s view that Cracow has more value in the hands of Aeris than in Evolution’s portfolio.   
 
Commenting on the transaction, Evolution Executive Chairman, Jake Klein said: 
 
“Cracow was acquired in 2011 as part of the formation of Evolution and has been a reliable asset within the portfolio. We thank everyone at Cracow for their contribution to Evolution. One of our sustainability commitments is to leave a lasting positive legacy in the communities in which we operate and we are confident that our relationships within the broader community around Cracow, including the traditional custodians of the land, the Wulli Wulli People, reflect this. We also believe that Aeris will prove to be a great partner for the community going forward.” 
 
The sale is expected to close around the end of June 2020.  Evolution is committed to assisting Aeris to ensure a healthy, safe, smooth and orderly transition of ownership at the Cracow operations.

--- click on link to the full announcement at the top of this straw for more ---

Disclosure:  I hold EVN shares.

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#Company Presentations
Last edited 4 months ago

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

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#Results
Last edited 6 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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#Industry/competitors
Last edited 9 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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