Evolution smashes first half record as gold price soars

Evolution is sitting pretty with its gold and copper mines but sees industry appetite for M&A.

New Evolution Mining CEO Lawrie Conway.

Evolution Mining is sitting pretty as the gold price soars but sees appetite for M&A in the sector from others unfazed by a big jump in asset valuations.

Sydney-headquartered Evolution flagged a dividend bonanza for shareholders on the back of record gold prices as long-time leader Jake Klein prepares to exit the executive team.

The gold and copper miner reported record first half net profit after tax of $365m, up 277 per cent from the same time last year, post a spending spree on organic and M&A growth that most recently included paying $US475m for the Northparkes mine in NSW.

Evolution will pay a fully-franked interim dividend of 7 cents-a-share and has reinstated a dividend reinvestment plan on the back of shareholder feedback.

The company achieved a gold price of $3875 an ounce in the first half compared to the current spot price of about $4617.

There are expectations it could hit the once almost unthinkable $US3000 ($4766) an ounce milestone amid the uncertainty created in US president Donald Trump’s first weeks in office and increasing geopolitical tensions.

Managing director Lawrie Conway said Evolution was poised to continuing boosting shareholder returns on the back of the higher gold price.

“With spot prices well above the achieved prices in the first half and the business well-placed to deliver on 2024-25 guidance, we are on track to generate over $2bn of operating cash flow for the year, which will continue to see improved returns to our shareholders,” he said.

Evolution Mining gold mine at Lake Cowal, near West Wyalong, in NSW.

Evolution remains on track to deliver full-year production guidance of 710,000-780,000 ounces of gold and 70,000-80,000 tonnes of copper.

Mr Klein, who founded Evolution, will move from his role as executive chairman to that of non-executive chairman from June 30, but intends to stay involved in the deal-making that has been a feature of his near 14 years at the helm.

“It (Evolution) has really become an integral part of my life, and Laurie and the team are not going to get rid of me easily,” Mr Klein told analysts.

“My commitment is high, but I think the time is right to take a step back.”

Mr Klein said he would continue to collaborate with Mr Conway and vice-president of business development Kirron Schmidt on “deals and various other things”.

“I am very confident this company will still be able to identify and execute deals which are accretive to us, and which improve the quality of our portfolio,” he said.

In addition to the Northparkes copper-gold mine, Evolution has in recent years paid $1bn to increase its ownership of the Ernest Henry copper-gold to 100 per cent, and expanded its Cowal and Mungari gold operations.

Bell Potter noted that although some had labelled the investments expensive, it viewed them as well-timed, particularly in light of the current gold price and copper price outlook.

Evolution’s preference is to have up to eight assets in its portfolio. It currently has six, with five in Australia and the troubled Red Lake operations in Canada.

Evolution Mine employees Michael Hopper with his dad Tony Hopper at its gold mine at Lake Cowal.

The Mt Rawdon mine in Queensland will stop producing gold this year as Evolution works on converting it into a pumped hydro asset.

Mr Conway said there was no urgency for Evolution to buy new assets, with valuations soaring alongside the gold price.

“This is the right time to be delivering the plan and putting money in the bank. At these sorts of prices, with the buying and the valuations of assets, the expectations are going to be a lot higher,” he said.

“Do you buy at the high, or is it a good time to be selling? We don’t intend, and we’re not looking at selling any of our assets because of what we’ve got in the portfolio and the future they’ve got.

“But we’re always got to have a look in terms of we want up to eight assets in the portfolio. We think that’s the right size for us. There’s no urgency for us to go and buy.

“But to answer from an industry perspective, I’m absolutely sure you will see an appetite for deals in the gold space as we go forward.”

Last November, Evolution hosed down speculation its Mungari operations in WA might be for sale.

The company is now about nine months ahead of schedule on an expansion aimed at boost Mungari production from 130,000 ounces a year to 200,000 ounces.

Evolution shares closed up 1.1 per cent at $6.29.

Originally published as Evolution smashes first half record as gold price soars