As cash flows, Evolution Mining expects gold to stay high over ‘medium term’
Evolution has committed to maintaining capital investment while looking after shareholders, as gold prices remain strong.
Listed gold miner Evolution Mining says it plans to accelerate the development of an underground gold mine at its Cowal operation in New South Wales.
It comes after Evolution declared a first underground ore reserve at the mine and as it booked record cash flows across its business.
Gold output was 218,104 ounces for the June quarter, up 31.8 per cent on last quarter’s 165,502 ounces.
Over the last financial year gold output amounted to 746,463 ounces, with an all-in sustaining cost price of $1008 per ounce produced in Australia and $1943 per ounce produced from the newly-acquired Red Lake operation in Canada.
Total achieved gold price across the group’s mines was $2500 per ounce, boosting mine operating cash flow to $352.1 million, a 36 per cent increase on last quarter’s $257.4 million.
Net mine cash flow was $224.5 million, up 40 per cent on last quarter’s $159.7 million.
In a call to investors, Evolution executive chairman Jake Klein was upbeat, noting that the coronavirus pandemic has not affected production and that it is likely to support record high gold prices in the medium term.
“I’d say that we’re in a very favourable gold price environment given the amount of fiscal spend that is required to address this COVID pandemic,” Mr Klein said.
“The amount of money that is being spent and is being required by governments globally suggests that we are in a very positive gold price environment for at least the medium term.”
Mr Klein said Evolution will leverage its strong cash flow to continue capital investment while paying out dividends to shareholders.
“We are very pleased about today’s high gold price and we hope it goes higher, but we are not going to bet our business on it,” he said.
“You must be continuing to produce ounces through discovery and creating ounces through improvements. If you don’t, you’re going backwards,” he said, asserting that investors will be looked after.
“We have also paid out 13 consecutive dividends and have a target of paying up to 50 per cent of free cash flow.”
In a statement to the ASX, Evolution said continued drilling at the Cowal operation had resulted in the declaration of a maiden underground ore reserve estimated at 804,000 ounces ahead of schedule, supporting the development of an underground mine.
Underground mineral resources were estimated at 264.6m tonnes, grading 1.06 grams per tonne of milled ore, up from the earlier estimate of 36.5m tonnes grading 2.48 grams per tonne of milled ore.
Estimated underground ore reserves increased to 142.2m tonnes grading 0.97 grams per tonne of milled ore, up from 10m tonnes grading 2.51 grams per tonne of milled ore.
The amount of gold to be derived from mineral resources is now estimated to be nine million ounces, and the amount from ore reserves, 4.4 million ounces.
Evolution said it would submit an underground mining application to regulators early in the December quarter with the first ore to be mined within 12 months of receiving regulatory approval.
Mr Klein said the mineral and ore upgrades change Cowal’s production profile.
“This outstanding outcome has resulted in the potential to bring forward first production of higher-grade ore from the Cowal underground which will provide a step change to the operation’s production profile,” Mr Klein said.
“Importantly, the maiden underground ore reserve is only a starting point on which to build on in the coming years. Our work at Cowal continues to demonstrate that this is a world class mineral system.”
A three-year outlook and guidance for the next financial year will be provided with the release of Evolution’s financial results on August 13.
