Covid-related labour shortages and wet weather have combined to force Evolution Mining to trim its estimated 2021-22 gold output forecast, news that saw investors send the shares down almost 5% in trading on Thursday to $4.34.
At the same time the company is looking at a shortfall in silver production, but surprisingly, copper output has already matched 2020-21’s figure and will be a new high by the end of June.
The good news on copper was ignored by the market which focused on the gold shortfall and why it has happened.
In its March quarterly report on Thursday Evolution revealed that 25% of its workforce at Cowal gold mine in NSW had tested positive to COVID-19 during the quarter.
This coincided with heavy rainfall early in the year which slowed progress and resulted in gold production of 53,321 ounces from Cowal to start 2022, down 12% from the December, 2021 quarter but up on the 51,823 ounces produced in the first quarter of 2021.
Group gold production increased by less than half a per cent to 148,787 ounces from the three months to last December but was down 12,529 ounces or around 9% from the 161,316 million tonnes in the March, 2021 quarter.
Evolution said the Mt Rawdon gold mine in Queensland also experienced extreme weather as Australia’s east coast battled terrible floods, which restricted access to ore in the pit in the quarter.
As a result, Evolution has reduced its group gold production target for the 2022 financial year to 650,000 ounces down from 670,000 ounces previously. That will also be down on the 680,788 ounces in 2020-21.
Production of silver (a by-product) was 419,982 ounces in the 9 months to March down from 436,734 ounces in the 9 months to March, 2021. Evolution will be hard pressed to match the 650,268 ounces produced in 2020-21.
With Ernest Henry mine in Queensland now 100% controlled, Evolution said copper produced improved, more than tripling in the quarter to 13,352 tonnes.
Copper produced for the 9 months to March was 23,564 tonnes, which is well over the 16,015 tonnes in the first 9 months of 2020-21 and well ahead of the 21,361 tonnes produced in all of 2020-21.
Evolution said it delivered a record mine operating cash flow of $268.9 million in the March quarter. Net mine cash flow was $124.5 million. Mine capital investment for the quarter was on plan at $143.6 million (December quarter: $147.9 million). The majority of this capital relates to the Cowal Underground and Red Lake expansion plans (the latter is in Canada).
At March 31 Evolution said it had cash in the bank of $537.8 million and net debt of $1.295 billion.
Looking to this quarter the company sees its Red Lake operation lifting gold production this quarter to “at least 40,000 ounces” from 33,056 ounces in the March quarter which was down from the 35,810 in the March, 2021 quarter but up 67% on the weak December performance.
