Gold’s role as an inflation hedge will return to fore, says Evolution boss Jake Klein

Evolution boss Jake Klein says the ‘very strong tailwind’ behind gold and copper prices will help the company outrun rising costs at its own operations.

Evolution Mining executive chairman Jake Klein. Picture: Stuart McEvoy

Evolution Mining executive chairman Jake Klein says the gold sector has a bright outlook over the next year as rising inflation rates across the world return the precious metal to its traditional place as a “store of value”.

Speaking after Evolution declared a half-year net profit of $90.8m, Mr Klein said he thought investors were returning to gold as a hedge against rising inflation and a store of value amid geopolitical tensions across the globe.

Inflation tracked about 7.5 per cent in the US in January, the highest levels in more than 40 years and, despite confident predictions by the US Federal Reserve the rate will fall back closer to about 2.5 per cent this year, Mr Klein said the central bank had only a “very difficult and small landing strip” to manage inflation by raising interest rates.

“My view is they will err on being conservative and that will mean that inflation will be higher than expectations on a longer-dated basis, which would bring people back to a store of value commodity like gold,” he told analysts on Wednesday.

While still trading at strong levels compared to historical standards, Gold has had a choppy year over the last 12 months. The price of the precious metal fell below $US1700 an ounce a year ago, and climbed above $US1950 an ounce in November. It is currently worth about $US1860 an ounce.

While rising input and labour costs have also added to Evolution’s own production costs, Mr Klein said the rising price of gold and copper would provide “very strong tailwinds” to back the company’s financial performance.

Mr Klein’s comments come after another wave of acquisitions for the Australian gold miner in the first half of the financial year, as the company first paid $400m to Northern Star Resources to consolidate its holdings around Kalgoorlie in WA, then agreed to a $1bn deal to take control of Glencore’s Ernest Henry copper and gold mine in Queensland.

The “transformative” acquisitions, and associated capital raisings, muddied Evolution’s net result for the half, but Mr Klein told analysts on Wednesday the company was done with merger and acquisition activity in the near term, and was settling in to integrate its new assets into its portfolio.

Evolution’s net profit of $90.8m was down 60 per cent for the half, with underlying net profit of $100.1m down 57 per cent compared to the first half of the previous financial year.

Net mine cashflow of $120.4m was down 66 per cent after Evolution spent $203.7m on planned capital projects in the half, the company said. Evolution also dropped its interim dividend to 3c a share, down from 7c in 2021.

Mr Klein said the company expected to deliver a strong finish to the financial year, however, with the company maintaining its guidance of producing 670,000- 725,000 ounces of gold at all-in sustaining costs of $1135-$1195 an ounce.

“Full ownership of Ernest Henry will deliver a material increase in cashflow and financial performance,” Mr Klein said.

Evolution shares rose 7c, or 1.8 per cent, to $4.01 on Wednesday.

Originally published as Gold’s role as an inflation hedge will return to fore, says Evolution boss Jake Klein