Evolution Mining cuts guidance on Ernest Henry flooding

Evolution Mining has slashed its annual output guidance after North Queensland rainstorms forced it to shut its Ernest Henry mine in March.

Evolution Mining chief executive Lawrie Conway said the company still produced a solid result in the March quarter.

Evolution Mining has paid a heavy price for the North Queensland storms that closed its Ernest Henry mine in March, with the gold producer slashing annual output guidance as a result of the flooding.

Evolution was forced to evacuate its workers from the underground mine on May 8, when storms began to flood the mine, putting the gold and copper operation out of commission for at least six weeks.

But the loss of production has forced Evolution to slash its annual gold output guidance by about 60,000 ounces, or 8 per cent, and copper guidance by 12.7 per cent to 48,000 tonnes.

The loss of the copper credits will also push its annual all-in-sustaining cost guidance up $150 an ounce, to $1390 an ounce.

Managing director Lawrie Conway said on Tuesday the company’s mines had still put in a “solid” March quarter despite the flooding at Ernest Henry, with the company’s operations producing 163,910 ounces of gold and 9668 tonnes of copper in the period.

Gold output was down only 1.5 per cent from the December quarter total of 166,404 ounces – although the loss of March production from Ernest Henry pushed its copper output down almost 38 per cent.

The company’s Red Lake mine reported a 13 per cent improvement in gold production in the quarter, to 28,178 ounces, and Mr Conway said Evolution was now confident the troublesome operation was now on the path to a stable production rate and lower costs, with the company expecting it to produce 35,000 ounces of gold in the June period.

“The events at Ernest Henry are the main reason for the updated guidance of 660,000 ounces at an AISC of $1,390 per ounce. Once Ernest Henry returns to normal operating rates, Evolution will resume its sector leading low-cost high-margin position,” Mr Conway said.

Despite the hit to its output levels, Evolution’s operations generated about $96m in cash in the quarter on the back of higher gold and copper prices.

Evolution finished March with $164m at bank after paying Glencore $200m as part of its acquisition of Ernest Henry, and making a $45m debt repayment. The company finished December with $313m.

While significant, the downgrade was not as much as feared by the market, which pushed Evolution shares closed up 13c at $3.51 on Tuesday.