Evolution Mining declares record dividend, profits as gold price lifts
Evolution boss Jake Klein has hailed a ‘great year’ for the gold miner as it declares record profits and dividends.
Evolution Mining boss Jake Klein says the gold price has “set a new floor” and still has plenty of room to move upwards, despite this week’s sharp tumble in the value of the precious metal.
Evolution declared a record 9c a share dividend on Thursday after the company posted a 38 per cent lift in annual profits on the back of the rising gold price.
Evolution booked a $301.6m net profit for last financial year, up from $218.2m the previous year, on the back of earnings before interest, tax, depreciation and amortisation of $1bn, up 41 per cent.
Group revenue rose to $1.95bn, according to its annual accounts, after the company sold 764,6555 ounces of gold for the year – with 100,000 ounces delivered into the company’s hedge book at an average price of $1734/oz, compared with the $2320/oz received on average for the rest of Evolution’s gold sales.
Executive chairman Jake Klein said it had been a “great year” for the gold miner, topped off by a massive upgrade of the resource at its newly acquired Red Lake mine, bought for $US375m.
“It was a great year for Evolution, with a strong improvement in safety and sustainability performance, record underlying net profit, record free cash flow generation and record dividends,” he said.
“The 11 million ounce mineral resource at Red Lake is a strong indication that Red Lake is likely to be the most transformative, value creating opportunity in Evolution’s history.”
After closing on $US2100 last week, the gold price tumbled sharply to just above $US1900 an ounce this week.
But Mr Klein told analysts on Thursday that, although Evolution was still focused on maintaining its margins from its Australian and Canada, he believed there was still plenty of room for the gold price to rise.
“The geopolitical tensions, the fiscal programs which are being rolled out by governments and, of course, we’re in the one currency that you can’t print, being gold,” he said.
Evolution flagged a steady lift in its gold production over the next three years, from 630,000 to 730,000 ounces in the current financial year to 790,000 to 850,000 ounces in 2022 to 2023.
Its planned transformation of the Red Lake mine in Ontario is a key part of those plans, with Evolution outlining the early stages of plans to lift production to more than 200,000 ounces a year from the mine – which has been producing gold since 1939 – from about 135,000 ounces currently.
Analysts welcomed the upgraded production outlook for the company’s global operations, but sounded a note of caution about rising costs across the group.
Ord Minnett analysts said in a client note on Thursday the 55 per cent lift in resources at Red Lake was a positive sign, but caution was warranted until Evolution detailed its future mining plans for the mine.
“In the 2018 financial year Evolution did 780,000 at $768/oz all-in-sustaining cost and in the 2021 financial year we expect it to do 703,000 ounces at $1,300/oz all-in-sustaining cost,” the analysts said.
“Red Lake resource grows by 55 per cent to 11 million ounces, but what rate can they get it out? The larger resource gives Evolution greater scope for optimisation, and we expect a larger operation will be envisioned to get the gold out of the ground quicker.”
Evolution shares closed up 18c, or 3.3 per cent, at $5.72 on Friday.