With Newcrest Mining (ASX:NCM) set to be acquired by Newmont in the coming weeks, Evolution Mining (ASX:EVN)and Northern Star (ASX:NST) emerge as the remaining local majors, gaining increasing attention from investors seeking direct exposure to gold and copper. This shift follows Newmont's plan to issue and list CDIs on the ASX to replace Newcrest shares. How have these two mini majors performed in the first three months of their 2023-24 financial years?
The answer is quite positively, as both companies have recently released strong quarterly reports. They have showcased solid production performances, reaffirmed their financial year guidance for gold, and, in the case of Evolution, unveiled promising brownfields exploration successes, particularly at their Cowal mine in NSW's central west and Mungari operation in WA.
Additionally, Evolution has confirmed that the Ernest Henry copper-gold operation in northern Queensland is returning to normal operations, with a viable outlook until at least 2040. Evolution reported September gold production of 158,304 ounces, which met expectations despite a slight decrease due to scheduled maintenance. They remain on track to meet their full-year guidance of 770,000 ounces of gold at an All In Sustaining Cost of $1,370 per ounce.
Furthermore, copper output saw a significant increase of 76% to 13,594 tonnes compared to the June quarter, when Ernest Henry was recovering from heavy rain and flooding. Although slightly below the output in the September 2022 quarter, the current Australian dollar gold price of over $A3,000 per ounce presents a substantial profit margin for Evolution, offsetting the lower copper price of approximately $US3.58 per pound.
Evolution's CEO, Lawrie Conway, expressed optimism, stating, "During the September quarter, we delivered gold and copper production in line with our guided FY24 production profile, driving strong operational cash generation." Mine operating cash flow increased by 42% to $280 million, with mine cash flow before major capital rising by 97% to $245 million.
The exploration successes at Mungari and Cowal, with promising intercepts from new mineralisation near underground mining areas, indicate potential growth in underground mineral resources at both operations. Evolution remains focused on delivering high-grade underground production in the coming years.
On the other hand, Northern Star has reaffirmed its 2023-24 gold sales guidance despite a decrease in first-quarter sales, attributed to planned shutdowns at its production centers. The company aims to sell 1.6 million to 1.75 million ounces of gold at an AISC of $A1,730-$A1,790/oz, weighted toward the second half of 2023-24. This guidance follows 1.563 million ounces of gold sales in the previous year, with an AISC of $A1,939 per ounce.
Northern Star reported total gold sales revenue of $A1.04 billion for the quarter, with underlying free cash flow of $A28 million. The company maintains a strong financial position with $A1.2 billion in cash and bullion as of September 30 and another $A1 billion available in debt facilities.
Looking ahead, Northern Star has hedging commitments of 1.68 million ounces at an average price of $A2,929/oz, further fortified by additional hedges during the September quarter. The company also plans to utilise its $A300 million on-market share buyback program opportunistically.
CEO Stuart Tonkin emphasised the successful completion of planned shutdowns at production centers in the quarterly report, positioning the company to achieve its full-year guidance, which is weighted toward the second half of the financial year.
