Shares in Evolution Mining (ASX:EVN) leapt by 10% on Wednesday as its March quarterly report made it clear that the acquisition of 80% of the Northparkes mine in central western NSW, and the soaring gold price, would produce a surge in earnings, especially in the 2024-25 financial year.
The shares traded around $4.26 on Wednesday afternoon, with the day’s rise taking the gain in the past month to more than 25%.
Thanks to a combination of the contribution from Northparkes and better output from Cowal and its other mines, Evolution saw a 15% jump in gold production during the third quarter, reaching 185,252 ounces of gold.
The company reported that production was cut by around 8,000 ounces in the quarter due to wet weather in WA, central Western NSW, and north Queensland, affecting the Mungari, Cowal, and Mount Rawdon mines.
The greater output saw the company’s All In Sustaining Cost (AISC) fall by nearly 10% (partially reversing the pandemic-driven increases of the past few years) to $A1,464 per ounce ($US963 per ounce).
With the Australian dollar gold price trading above $US3,500 an ounce in recent days, Evolution (along with a host of other gold miners) is anticipating significant gains in earnings for the June half-year and the early months of the 2025 financial year.
For example, Evolution's average realized price was A$3,171 for the three months to March. This led to the company recording an all-in cost margin of $A947 per ounce, a sizable 40% increase quarter on quarter.
The fact that the company has managed to drive down costs is an added bonus – and will become more so if that gain can be sustained.
The cost gains came as the company managed the successful planned major shutdowns at its huge Cowal mine in central western NSW (near Northparkes) and at the Ernest Henry mine in north Queensland, which is getting a new lease on life.
In addition, it highlights that the Cowal underground mine transitioned to commercial production at the end of the quarter. The mine hit its stride straight away, achieving a 1.5 million-ton annualized mining rate in March, setting up this quarter for further gains.
CEO Lawrie Conway said the riches now pouring out of the company’s mines were positioning it well for the future.
"We continue to see increased cash generation with the cash balance up 13% to $215 million and gearing improving to 28%.
"Our portfolio is well positioned to benefit from high spot gold and copper prices with 95% of gold production unhedged and no copper hedging.
"Several milestones were achieved with Ernest Henry now fully repaid (including the extra investment after acquisition), Northparkes significant inaugural quarterly cash flow and the Cowal underground reaching commercial production, transforming the Cowal operation.
The company maintained guidance for gold production to be in the region of 749,000 ounces or a little higher by June 30, with the AISC expected to be around $A1,410 per ounce, while copper production is tracking towards 65,000 tonnes.
But there was a hint of a rush towards June 30 in Wednesday’s statement:
"A material increase to gold production was always planned for the June quarter from the continued ramp-up of the Cowal underground mine, planned higher production at Red Lake, and scheduled higher proportion of underground production at Mungari,” Evolution said.
Evolution pointed out that it is well-placed to ride the surge in gold and the rebound in copper prices.
"Revenue is significantly leveraged to spot metal prices (gold spot price of $A3,715/oz) with over 95% of gold sales unhedged and no copper hedging."
