17-Jan-2024: I hold EVN in my SMSF, but nowhere else, so not here on Strawman.com. I wasn't planning to take part in their SPP, which formed part of the CR for their recent acquisition of 80% of the Northparkes Copper-Gold Mine from CMOC Group Limited, but a few things have changed now. [I'm still not planning to participate despite those changes]

Firstly - there's this: Extension-of-Share-Purchase-Plan.PDF released on Thursday 11th Jan (last Thursday) which advises that the closing date for the SPP that was announced on 5 December 2023 will be extended from its original closing date of 16 January 2024 (yesterday) to 5.00pm on Tuesday 30 January 2024.

Eligible shareholders participating in the SPP will be able to purchase shares at the lower of:

• A$3.80 per Share, being the same price paid by institutional investors under the Placement announced on 5 December 2023; and
• a 2.5% discount to the 5-day volume-weighted average price of Shares traded on the ASX up to, and including, the revised SPP Closing Date (30 January 2024) (rounded to the nearest cent). 

Which is a good thing for EVN shareholders participating in the SPP because they're now likely to be paying a good deal less than $3.80 for those shares now due to today's announcements:

Wednesday 17 January 2024:

Firstly: December-2023-Quarterly-Report-EVN.PDF

Secondly: Exploration-Success-Continues-at-Cowal-and-Ernest-Henry.PDF

The first one did the damage. EVN closed down -65 cps at $3.10, so down -17.33% today.

The market was in no mood for bad news - here's the sector movements today:

Gold sector down -5.27% - that's a BIG move. EVN's selloff would have contributed to that for sure because they are the third largest constituent of that gold sector. They should be the second largest after NST, but the sector still has NEM in it, Newmont Corporation, even though they are listed in the USA and are not an Australian company. Because Newcrest (formerly NCM) WERE Australia's largest gold producer, and Newcrest shareholders were paid in Newmont (NEM) shares when Newmont acquired Newcrest last year, they've (S&P have) decided to keep those NEM CDIs in the Australian gold index.

EVN was the worst of a bad bunch today...

The fact that the majority of our goldies closed substantially lower than the four physical gold ETFs (see above) is a clear sign of seriously negative sentiment across the sector today.

Pantoro (PNR) released the following update last week (on the 8th): December-2023-Quarter-Production-Update-PNR.PDF

And their SP fell -7.55% on the day and then another -6.12% the following day.

Today they released this at 9:33am: Underground-Development-to-Commence-at-Scotia.PDF

And their SP fell another -6.25%. Those that follow PNR (and that would be a small group, because they're a small goldie) were clearly expecting or at least hoping for better, or more, and dumped them when they didn't get what they wanted from those updates. Pantoro finished CY 2023 @ 5.7 cps and they're now (in the middle of January) some -21% lower at 4.5 cps. I have held them in one of my real money portfolios previously and do occasionally have a small trade in them with some loose change here - because of the lack of brokerage fees.

After the market closed, at 4:54pm, they lodged this: Addendum---Underground-Development-to-Commence-at-Scotia.PDF

Meanwhile Evolution Mining (EVN), one of our gold majors, closed at $4.14/share on December 4th, the day before they announced the Northparkes transaction and capital raising, and today they closed at $3.10, which is -25% lower.

Some details from today's update:

• Evolution’s Chief Operating Officer (COO), Bob Fulker has decided to leave the Company to pursue other opportunities. Mr Fulker will finish at the end of March. A search to identify an appropriate replacement is underway.
• Gold production for the quarter was 161,073 ounces at an All-in Sustaining Cost (AISC) of $1,618 per ounce (US$1,052/oz) compared to the previous quarter which was very similar:
• 
• Despite some positives elsewhere, the market is probably focusing more on the continuing basket case that is Red Lake:
• 
• Evolution Mining's Red Lake underground gold mine in north-western Ontario (Canada) is their only gold mine located outside of Australia (they have 4 gold or copper/gold mines here in Australia - Cowal, Ernest Henry, Mungari and Mt Rawdon, plus their 80% of Northparkes in NSW as well), and Red Lake is certainly their problem child. The update (see above) shows that for the December quarter, their production at Red Lake (gold produced) fell by -4%, their AISC (costs) rose by +31% from A$2,552 to A$3,343/ounce (above the gold price, so Red Lake is losing money), cashflow decreased by -11%, and sustaining capital (which is included in that AISC) increased by +32%. I've included the whole page (above) on Red Lake from today's quarterly report, for some context. That is one acquisition that Jake Klein made that has NOT worked out as planned. Not yet anyway.

Appendix 1 contains their December 2023 quarter and their FYTD (financial-year-to-date) production and cost summaries. Below is page 14, which is the second page of Appendix 1. Page 13 was the production breakdown. Page 14 (below) is the cost breakdown for the December quarter:

The full report can be read here: December-2023-Quarterly-Report-EVN.PDF

You can see there how wide the range is across their minesites for their costs - both AISC and AIC. Their AISC ranges from negative (A$5,677)/ounce at Northparkes up to positive A$3,343/ounce at Red Lake. It is only because of those byproduct credits for copper from Ernest Henry and Northparkes, which both produce far more copper than gold, that EVN manages to get their Group AISC down to A$1,618/ounce. All of their mines also produce Silver, but the silver production is not particularly material, as shown on page 13 (reproduced below).

Cowal, EVN's flagship copper/silver mine in NSW which produces around 45% of all of EVN's annual gold production, is clearly their best asset. Cowal has an AISC of just $1,226/oz after silver byproduct credits and it's a high quality gold mine for sure. And I'm sure Ernest Henry and Northparkes are great copper mines too, that also produce some gold. But looking across the suite of mines that EVN operate, the quality varies greatly, as do the costs.

Cowal-fact-sheet-FY23F.pdf

Source: https://evolutionmining.com.au/cowal/

Cowal is an excellent mine that is expanding with heaps more gold there at good grades, but I believe the market isn't entirely comfortable with how some of EVN's other assets are travelling.

I'm not adding to the EVN position in my super or selling any - it's a long term holding in what was Australia's third largest gold producer when I bought that position a few years ago (@ $2.83/share) - they are now Australia's second largest goldie after Newcrest got taken out by Newmont last year.

But I don't intend to buy any EVN in any of my other portfolios, including the virtual one I have here. Other goldies like NST and GMD look heaps better to me at this point.

05-Dec-2023: Trading-Halt.PDF

Evolution Mining are doing a CR - a placement and an SPP. I imagine they're buying something - don't know what yet.

Disclosure: I hold EVN shares.

10-August-2023: Today: Jake Klein joins us to Share the Evolution of the $8b Gold Major - YouTube

Their Show Notes:

"We’re at the end of 3 big days at Diggers, and we’ve got a great interview to share. Please bear with our lower-than-usual production standards because the value of this one is phenomenal."

"Jake Klein, the executive chair of Evolution Mining (EVN), one of Australia’s largest gold miners, came on Money of Mine to share his thoughts with us. We had a great chat about gold, copper, M&A, previous acquisitions, and a bunch more."

"We hope the Money Miners enjoy the discussion!"

Source: https://www.youtube.com/@Moneyofmine

CHAPTERS

0:00 Preview

0:29 Introduction

2:26 Interview with Jake Klein

24:09 Wrap-up

You can click on the time stamp to the left of the "Chapter" title above to go straight to that point.

DISCLAIMER

All Money of Mine episodes are for informational purposes only and may contain forward-looking statements that may not eventuate. The co-hosts are not financial advisers and any views expressed are their opinion only. Please do your own research before making any investment decision or alternatively seek advice from a registered financial professional.

---

I hold EVN shares. They are Australia's third largest ASX-listed gold miner, and after NCM is delisted from the ASX later this year (after the completion of US-based-Newmont's acquisition of Newcrest) - Evolution (EVN) will become Australia's SECOND largest ASX-listed gold miner. Jake Klein is one of the highest profile "thought leaders" in the Aussie gold sector, and is always worth listening to - I feel the same about Bill Beament but Bill is out of gold now and into mining services, although I believe Bill's new company (DVP) will end up owning some mines themselves as well, a business model that could end up being similar to MinRes' (MIN's) business model. I don't think Jake Klein is going anywhere - he's definitely still a gold-bug!

In this interview with the MoM podcast boys at "Diggers" (or D&D) in Kalgoorlie today, Jake discusses Evolution (of course) but also why he's bullish on gold and the gold price from here. This interview was recorded after Jake's D&D Presentation, which by all acoounts was very well received.

05-June-2023: No less than 5 (five) announcements from EVN today, three of which have been marked price sensitive. You can access all of them from here: Investors - Evolution Mining

EVN is one of the few goldies that is actually in the green today - most of them have lost ground after a couple of very good days to start June last week.

Disclosure: I hold EVN both here and in my SMSF.

05-Sep-2021:  This is really a reply to Barney's Business Model/Strategy Straw for EVN. If you like Minelab, they are owned by Codan (CDA) - have a look at their share price graph.  I own Codan shares and Evolution Mining Shares.  I also own a few other gold stocks, and some gold ETFs, so you could say I'm bullish on gold longer term.  However, you have to realise that gold producers are a leveraged play on gold.  When the gold price is rising, most quality listed gold producer's share prices will rise by MORE than the gold price rises, and when the gold price falls, particularly if it is in a downtrend, the share prices of most gold producers will fall FURTHER than the gold price in percentage terms.  When you invest in a gold producing company, you are investing in what they own (which is primarily gold, albeit most still underground or in pits or in ore stockpiles) and the company's ability to deliver shareholder returns in the form of profits, dividends, and share price increases.  Gold companies are generally valued with a good discount off the gold that they own that is still underground, because there is risk associated with them being able to efficiently extract that gold (including getting it to their plant and processing it through their plant) and then sell it while the gold price remains accomodative. 

Also, with a lower gold price, lower grades of gold - in terms of ounces per tonne of ore (dirt/rock/whatever it's in) - may not be economic to dig up and process - the cost might be higher than what they will get when they sell the gold - but a higher gold price means that lower grades become worth processing, even though they are going to be costlier to process.  For example a company might have an AISC (all-in sustaining cost) for their gold production of $1,200/ounce, however if the gold price rises to A$2,800 (Perth Mint gold price is currently around A$2,450/ounce), the same company might be able to mine additional lower grade ore that might cost $1,500 or $1,800/ounce to process and still make heaps of money.  A higher gold price can means that a company can include more of their ore as minable gold.  They use a cut-off grade for calculating what they've got, and the higher the gold price, generally the lower the cut-off grade can be.

So what that means is that without anything else happening other than the gold price rising, a gold producing company can get a double positive, in that the gold they were going to mine anyway becomes worth more, and they may also be able to mine and process additional gold that they already know they have but that was previously not economical (cost-effective) to mine.

The same effect works in reverse when the gold price falls substantially.  They may have to raise the cut-off grade to remain profitable which may mean they now have less minable gold - i.e. less gold that is cost-effective to mine.

All that said, Evolution Mining is the third largest ASX-listed gold producer (behind Newcrest and Northern Star), and they currently have the best portfolio of mines I think, certainly the cheapest AISC (costs) of the three.  Also there have been two star performers in terms of superstar gold company managers in Australia in the past 10 years and Jake Klein at Evolution is one of those.  The other is Bill Beament who used to run Northern Star (NST) but has now left to run Venturex (VXR) who are currently focussed on base metals (not precious metals like gold).  Jake and Bill have excellent track records of very smart dealmaking, mostly buying quality yet underperforming assets during the gold-price-lows, then turning those assets around and working them hard and smart, and also offloading assets when the gold price is high and prices of gold mines are even higher.  With Bill stepping away from the gold industry for the time being, that leaves Jake (at EVN) as the #1 smartest gold mine manager in Australia - in the opinion of most industry participants I would imagine.

If you're going to buy a gold producer, buy them when the share price is at the lower end of their range - and EVN is back to near March 2020 (COVID-19 crash) lows.  Also buy a quality gold producer that makes money and has very smart management - and EVN ticks those boxes also.  

On page 12 of their recent FY21 Full Year Results presentation, they stated that they have low leverage at less than 0.5x and modest gearing at 15% (net debt to equity ratio) plus no material debt repayments until 2026, followed by some material repayments due in 2029 and 2032.  Their average debt maturity is 7 years.  I'm not worried about their debt.  They also have a lot of cash and a lot of cashflow.

But Barney, if you want to go look for gold yourself, you can't beat a Minelab gold detector, they are the best in the world!

15-Apr-2021:  VanEck Australia: Visionaries + Innovators - Jake Klein, Founder and Executive Chairman of Evolution Mining (ASX: EVN)

Very interesting interview with Australia's second best gold mine manager, and soon to be the best I reckon once Bill Beament moves from NST to Venturex.

[Disclosure:  I hold EVN & NST shares.]

10-Dec-2020:  Evolution Acquires 100% of Crush Creek

Evolution Mining Limited (ASX:EVN) is pleased to advise of the acquisition of a 100% interest in the Crush Creek project located 30km southeast of the Mt Carlton Operation in Queensland.

In September 2019 Evolution entered into an earn-in agreement with Basin Gold Pty Ltd (“Basin Gold”) over the Crush Creek project. Evolution has now achieved the requirement of sole funding A$7.0 million of exploration expenditure to earn a 70% interest in the project. In addition, Evolution has exercised an option to acquire the remaining 30% of the project from Basin Gold for a cash payment of A$4.5 million. Basin Gold retains a 10% Net Profit Interest on any gold production in excess of 100,000 ounces.

Crush Creek hosts low sulphidation epithermal gold mineralisation which has significant potential to provide mine life extensions at Mt Carlton. Drilling under Evolution management of the project has focused on understanding and expanding the mineralisation at BV7 along with testing the Delta area for a new discovery. Encouraging results have been received from BV7 as well as from the Delta, The Kink and Gamma prospects. Drilling continues at these prospects during the December quarter focusing on the high-grade plunge to the north of BV7, as well as follow up drilling at The Kink and Gamma prospects.

Commenting on the earn-in, Glen Masterman, Vice President Discovery and Business Development said: “Drilling at Crush Creek has returned promising results and reinforces our belief that mineralisation we are delineating has the potential to extend mine life at Mt Carlton.”

--- click on the link at the top for the full announcement with a map showing Crush Creek's proximity to EVN's Mt Carlton gold operation ---

[I hold EVN shares.]

About Evolution Mining:  Evolution Mining is a leading, growth-focused Australian gold miner.  Evolution operates five wholly-owned mines – Cowal in New South Wales, Mt Rawdon and Mt Carlton in Queensland, Mungari in Western Australia, and Red Lake in Ontario, Canada.  In addition, Evolution holds an economic interest in the Ernest Henry copper-gold mine in Queensland.  FY21 Group gold production is forecast to be between 670,000 – 730,000 ounces at an AISC of A$1,240 – A$1,300 per ounce.  

[EVN are one of the lowest cost gold producers on the ASX, and they are also the third largest (after NCM & NST).]

27-Oct-2020:  September 2020 Quarterly Report

[I hold EVN shares.  That report link is from their website: https://evolutionmining.com.au/]

13-Oct-2020:  Evolution Mining (EVN) CEO Jake Klein has reportedly told the Diggers and Dealers mining forum (yesterday) that the company has no intention of pursuing a large-scale merger. Adding Evolution's current size is the optimum one at which to create meaningful value for shareholders, and that large-scale mergers had been attempted in the gold sector before with little success.

I guess that means he's waving the white flag in the battle to become Australia's second largest listed gold producer (behind Newcrest Mining - NCM).  EVN have been there on a couple of occasions, but the position has belonged to NST for a little while now, since the Pogo acquisition actually, and now, with the impending merger between NST and SAR (Saracen were Australia's 4th largest goldie, after EVN), EVN have NO chance.  They will be relegated to third place for the foreseeable...

Both Klein and Beament are consumate deal makers and excellent managers, and I can understand Jake talking up his own book here, and talking down the benefits of the NST-SAR merger.  However, as a shareholder of all three companies (NST, EVN & SAR) I like the merger a lot, and I'm also very happy to keep holding EVN.  It's all good Jake!

12-Oct-2020:  PRELIMINARY SEPTEMBER QUARTER RESULTS

Evolution Mining Limited (ASX:EVN) is pleased to provide a preliminary summary of its production, costs, and financial performance for the September 2020 quarter. This summary is being released to coincide with the annual Diggers and Dealers Mining Forum which commences today in Kalgoorlie, Western Australia. Full activities for the September quarter will be released on Tuesday 27 October 2020.

Group summary:

• Gold production of 170,021 ounces
• All-in Sustaining Cost (AISC)* of A$1,198 per ounce (US$857/oz)** 
• All-in Cost (AIC)*** of A$1,663 per ounce at an AIC margin of A$871 per ounce
• Operating mine cash flow of A$272.3 million
• Net mine cash flow of A$183.4 million
• Net bank debt of A$180.3 million (30 June 2020: A$196.4M) post FY20 final dividend of A$153.8 million

* Includes C1 cash cost, plus royalties, sustaining capital, general corporate and administration expense. Calculated per ounce sold

** Using the average AUD:USD exchange rate for the quarter of 0.715

*** Includes AISC plus growth (major project) capital and discovery expenditure. Calculated per ounce sold.

All the above metrics are tracking ahead of the FY21 plan. These results exclude any contribution from Cracow which was divested on 1 July 2020.

Evolution also advises that a major milestone has been achieved for the Cowal underground mine development with the submission on 30 September 2020 of the Significant State Development (SSD) Application and the Modification 16 Development Application to the New South Wales Department of Planning, Industry and Environment. An Environmental Impact Study forms part of the SSD and will be on public display for a period of 60 days commencing in mid-October. The Feasibility Study for the Cowal underground mine is progressing in line with plan.

Commenting on these results, Evolution’s Executive Chairman Jake Klein said:

“It’s great to start the new financial year with continued positive momentum. Our operations are performing well and it is pleasing to be ahead of where we had planned to be at the end of the first quarter. Most importantly, the business continues to generate sector leading cash flow per ounce and our balance sheet remains strong with net debt reducing even after rewarding shareholders with their 15th consecutive dividend of A$153.8 million.”

“The submission for approval of the Cowal underground mine is another important step towards achieving our objective of producing 350,000 ounces per annum of low-cost gold from this cornerstone operation.”

About Evolution Mining

Evolution Mining is a leading, growth-focused Australian gold miner. Evolution operates five wholly-owned mines – Cowal in New South Wales, Mungari in Western Australia, Mt Carlton and Mt Rawdon in Queensland, and Red Lake in Ontario, Canada. In addition, Evolution holds an economic interest in the Ernest Henry copper-gold mine in Queensland. Evolution is forecasting FY21 Group gold production of 670,000 – 730,000 ounces at an AISC of A$1,240 – A$1,300 per ounce.

--- ends ---

[I hold EVN shares in my SMSF.  It's one of a number of quality gold producers that I do hold.]

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.

05-Oct-2020:  Update:  Obviously Strawman.com now DOES have position sizing - they did not have that option when I wrote the above straw.  It is no coincidence that my returns here on Strawman.com were very pedestrian up until that change, which coincided with the "pandemic pullback" (or crash) that the market experienced in March, and have improved a fair bit since then when I have had the ability to get my Strawman.com scorecard positions as I would like them to be - with regard to risk versus reward.  

While it might seem like I have a high risk tolerance, because I dabble in mining stocks for one, and also because I don't mind the odd base metals or precious metals explorer who is still burning through cash and doesn't generate ANY revenue let alone profits... I make up for that apparent reckless attitude with position sizing and diversification.  That means that my high risk (and potentially high reward) positions tend to be very small, and my safer ("heads I win, tails I don't lose much") companies tend to be my larger positions.  And I hold a LOT of companies relative to most other community members here.  That means that I have the ability to outperform in a falling market, as you can see from my scorecard chart, but it also means I will never shoot the lights out like a single-stock-portfolio (or a very concentrated portfolio) can.  My approach is much more about risk management, particularly around capital preservation.  I still want to make profits, but I would rather NOT lose money (meaning permanent capital losses). 

It's not all about the results.  It's also about the process.  If you get the process right, the results tend to look after themselves - eventually.

And good exposure to quality gold miners is certainly an important part of my approach.

01-Sep-2020:  MiningNews.Net: M&A 'drum beat is loud': Jake Klein

Evolution Mining executive chairman Jake Klein is remaining cautious on the M&A front as talk of deals heats up.

The high gold price has heightened talk of possible mergers of equals and consolidation in the Australian gold space.

"What concerns me is we're in that part of the cycle where the drum beat is loud - people want action," Klein said during Evolution's biennial strategy day today.

"I think that's a time when deals haven't gone well.

"In the past, sellers have gone better than buyers in a rising gold price environment and that concerns me."

He added that there were unlikely to be motivated sellers at this price, and juniors had access to capital, making deals more difficult.

As for mergers of equals between peers, Klein said there would have to be obvious synergies and a strong case for value creation.

"Is there a compelling need for it to happen? I'm not sure," he said.

"I don't buy into the fact that you'll be more visible to shareholders."

Margin continues to be the highest priority for Evolution over scale.

Klein reiterated Evolution wanted to remain a mid-tier miner with 6-8 assets focused on Australia and Canada, which he described as "tier one jurisdictions where the rule of law can be relied on".

He believes tacking on operations in additional jurisdictions would erode the company's culture.

Evolution has acquired four assets and sold three in its nine-year history, the most recent sale being Cracow in July.

Klein described M&A as a double-edged sword.

"Yes, it can be massively accretive, but it has also been the downfall of many great companies," he said.

"Relying on a rising gold price to make an acquisition accretive is a terrible strategy."

Evolution will only transact if it believes it can add value to an unloved asset, or can see exploration upside.

Its most recent acquisition, the US$375 million of Red Lake in Canada from Newmont Corporation, ticked both boxes for the company.

Red Lake had suffered from underinvestment in development and exploration, and Evolution has committed to a three-year turnaround to get production back to 200,000 ounces per annum at all-in sustaining costs of closer to $1000 an ounce.

After reporting a maiden JORC resource of 11 million ounces for Red Lake last month, Evolution revealed today that it could see the operation reaching production of 300,000-500,000ozpa.

"The opportunity for something larger is there," Evolution chief operating officer Bob Fulker said.

"We're now thinking in terms of decades, not years."

Evolution is planning to work on lifting production over the next five years, which will likely comprise a decline, open pits and additional milling capacity.

At Cowal in New South Wales, the company is looking at lifting production to a sustainable 350,000ozpa, while at Mungari in Western Australia, a decade of mine life at up to 150,000ozpa is being targeted.

Klein said the company had "unbelievable organic growth opportunities".

"I believe we're entering the most exciting period in our history," he said.

Evolution shares were trading 0.9% lower this morning at A$5.50, valuing the company at $9.4 billion. The stock hit an all-time high of $6.585 in July.

--- ends ---

[I hold EVN.  Jake Klein at EVN and Bill Beament at NST (which I also hold) are the best gold mine managers in Australia (possiby the world) and the best deal makers in the sector, in my opinion.  They tend to buy when things are looking bleak and prices are low, and sell their weakest assets when the gold price is high and people are prepared to overpay for gold assets.  Unlike some other managers who are more concerned with empire-building and don't focus enough on price - and value.]

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.

27-August-2020 Update:  A lot has happened in the two years since I wrote the above straw.  For the latest list of FY21 production and cost guidance for our Australian-listed gold producers (and a list of all 25 known gold producers from lowest cost per ounce to highest cost per ounce - scroll down for that list), click here.  (You may have to scroll down to find the post - it was added on August 23rd 2020.) 

EVN now has the third lowest AISC of the 25, and the second lowest AISC of the top 10 largest gold producers (behind RRL).  NST has moved down to #12 in terms of low AISC, and NCM is at #4, behind EVN.  #1 is GOR (Gold Road), and they are Australia's 11th largest pure-play (>70% gold) Australian-headquartered-and-listed gold producer.  While GOR do have the lowest forecast costs for FY21, they only own half of Gruyere (the other half is owned by the large South African gold miner, Gold Fields Limited - JSE:GFI) and GOR are therefore only entitled to ~134 koz of the gold that Gruyere is expected to produce this FY.  Companies like NCM, NST, EVN and even RRL are going to produce a lot more gold than that, so that needs to be considered - cost is not the only variable that is important.

Of those companies mentioned above, I currently hold EVN, NST, RRL and GOR, but not NCM.

13-Aug-2020:  FY20 Financial Results and Final Dividend   and   FY20 Financial Results Presentation   and   Appendix 4E and FY20 Annual Financial Report

Also:  13-Aug-2020:  Red Lake 11 Million Ounce Mineral Resource   and 12-Aug-2020:  Red Lake Update

[I hold EVN shares]

23-7-2020:  June 2020 Quarterly Report

June 2020 Quarterly Results Presentation

Cowal Maiden Underground Ore Reserve

[I hold EVN shares]

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.

--- ends ---

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.

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.

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.

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.

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.

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%).

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.

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.

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.

27-Nov-2019:  Interesting times in the Australian gold mining sector.  Firstly, Northern Star (NST) buys an Alaskan gold mine (Pogo).  Next, St Barbara (SBM) buys Atlantic Gold, with a producing mine and a few other projects in various stages of development in Nova Scotia, Canada.  Then yesterday, Evolution Mining (EVN) announced that they have just acquired the Red Lake gold complex in Canada.

26-Nov-2019:  Evolution Mining acquires Red Lake Gold Complex in Canada

Also:  Red Lake Acquisition Investor Presentation

It's interesting.  The largest two gold producers you can buy shares in globally are Barrick (TSX: ABX / NYSE: GOLD) and Newmont (NYSE: NEM) and they had a 50/50 JV (Joint Venture) here in Australia called Kalgoorlie Consolidated Gold Mines (or KCGM) which owned and operated the Kalgoorlie Super Pit (a.k.a. the Fimiston Open Pit) as well as their Mt Charlotte and Gidji Operations.  In a recent interview (published on September 24th 2019) Barrick's boss, Mark Bristow, made it clear he was in a hurry to sell out of KCGM and exit Australia entirely.  He is South African and founded Randgold Resources which he ran for two decades before they merged with Barrick, combining Randgold's "tier-one" African mines with Barrick's major American mines to create what is now close to a US$40 billion company (compared with about $18 billion at the time of the merger).  Bristow sees Barrick's sustainable competitive advantages as being relatively clear:  They have the biggest exposure to gold mines with 500,000oz-a-year production, with all-in sustaining costs in the bottom half of the global cost curve, and 10-year-plus mine life, which stacks up very well against all of the other sector majors.  

Barrick has plans to add - organically or through M&A - to its slate of tier-one mines, including potentially in Canada, where Bristow has said the major is under-invested and where it has sizeable tax benefits to seize. But not in Australia, where fellow gold major Newcrest Mining is the leader, and where Barrick was in a hurry to exit the tier-one Kalgoorlie Super Pit.

"We won't go to Australia," Bristow said.

"We [South Africans] might be able to beat you at cricket and rugby but not mining in your backyard. We're not going to take you on. I've seen too many guys get rogered there.

"We use a lot of Australian skills. Aussies are the best underground miners by a country mile. And we've made it our business to learn from them.

"Australia has produced some amazing resource businesses, some very focused on exploration and organic generation. Right now they're operationally leaders. If you take the Northern Stars and Evolutions, they're very operationally focused, and the consolidation of the industry and the focus in their backyard - which we haven't seen in Australia before - would be a fantastic preparation for further consolidation in the industry [elsewhere].

"I would be encouraging Australians to be focusing on consolidation. [But] what I think we're going to see, like we've seen in the past, is they're going to come and take all this hard-earned money, on the back of a weak Aussie dollar, and they're going to blow it in North America, and there's going to be no benefit.

"Canada at the moment is probably where Australia was 10 years ago.

"It's neglected its mineral endowment, and there's a lot to do. The problem with Canada is it is promotional and banked, it's not managed - it's not a business.  It needs consolidation, it needs a cleanout of management, because it's really not efficient. But it is full of entrepreneurs and it's still got huge potential.

"So we are very focused on Canada and the opportunities, whether they are M&A or organic.

"We've got a dedicated team managing that side of our business."

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I find that particularly interesting.  He is focussed on Canada himself, and he's sees heaps of opportunity there, but he warns Australian companies against "blowing" their hard earned money in North America.  He wants our goldies to focus on consolidation in our own back yard.  Bob Vassie from SBM said at the time of the Atlantic Gold acquisition that such deals were impossible to find in Australia.  NST has done very well out of Pogo (in Alaska).  I think there's every chance that EVN will do very well out of Red Lake and SBM will also do very well out of the Atlantic Gold assets (in Canada).

Meanwhile, Saracen (SAR) have just bought Barrick's share of KCGM in a "transformational" deal which should propel them up into being one of the largest four gold miners listed here in Australia (along with NCM, NST & EVN).

There's plenty going on in the Australian Gold Sector at present!!

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...

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.

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