Evolution Mining Commits to Concentrated Portfolio Development

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Evolution Mining Commits to Concentrated Portfolio Development

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  • FY21 record statutory profit of $345.4 million
  • FY24 growth pipeline with anticipated 15 per cent annual production growth each year
  • Share price 1.99 per cent lower compared to prior corresponding period

The gold price rally earlier this month saw flow-on effects driving up the value of Australian gold producer Evolution Mining Limited. With its share price ranging currently almost 2 per cent lower compared to last September, and the possibility of gold making further moves with the coming release of US retail data, it could be worth understanding how Evolution has strategically positioned itself to create value for the coming year.

The company published its Denver Gold Forum 21 presentation earlier today, providing a three-year outlook for FY22 to FY24. This outlook charts a steady year-on-year production growth of upwards of 15 per cent, with guidance for its annual production volumes climbing steadily from 700,000 oz in FY22 to 940,000 oz in FY24. Evolution Mining maintains a concentrated focus on developing its gold mining sites within Tier 1 jurisdictions in Australia and Canada. These are among the highest-rated gold producing countries with low risk profiles, as compared using the Fraser Institute and World Bank metrics. Additionally, it also presented an outline of its net zero initiatives, with efforts such as reforestation and the application of renewable energy in its operations headlining its 2050 net zero target.

The company remains focused on a value-accretive growth strategy, which sees investment made to improve the quality of its concentrated portfolio of gold mining sites and assets. An overview of its site production capabilities presents high average annual returns on its mines, with extension research being conducted into those with a shorter lifespan. Overall, Evolution Mining seeks to align this incremental rate of annual production volumes with a low All-In Sustaining Cost (AISC) that targets a 3 to 4 per cent annual reduction. However, its AISC will trend higher in FY24 due to the development of its Red Lake site. Objectively, it justifies this increased investment cost by providing FY24 production guidance of between 940 to 1,010 kilo ounces at values of $1,170 to $1,230 per ounce.

Geared for Improved Production towards FY24

Evolution Mining released its FY21 results last month, presenting record statutory profit of $345.4 million — up 14 per cent compared to the prior corresponding period. The company reported earnings before interest, tax, depreciation and amortisation of $914.2 million, with particular mention of by-product revenue increased 27 per cent due to a higher achieved copper price.

While copper and gold spot prices factored into the company’s performance, a look at Evolution Mining’s guidance for FY22 reveals the company’s strategic positioning to ensure that its future value creation does not solely hinge on gold price fluctuation. Evolution Mining provided production guidance that sees its Cowal, and Red Lake mining sites driven by higher grade ore and throughput for the coming year. Otherwise, the majority of its mining portfolio is anticipated to produce volumes similar to that of FY21.

Despite producing 8.8 per cent less gold in FY21 compared to the prior corresponding period, Evolution Mining remains committed towards the continued and concentrated development of its gold mines, while remaining invested into its 2050 net zero target. Altogether, its acquisitions and developments place it in a position to deliver a progressive growth pipeline towards FY24. Considering that the company is trading at almost 1.99 per cent lower compared to the prior corresponding period, this may present a buying opportunity worth considering.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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