Evolution buoyant despite Ernest Henry dampener

Company News

by Glenn Dyer

As expected the big wet in northern Queensland early last month has taken a toll on Evolution Mining’s March and June quarter and full financial year gold and copper production guidance with the company confirming the loss of thousands of ounces of gold and thousands of tonnes of copper from its still damp Ernest Henry mine.

According to updates in the last couple of weeks the flood event at Ernest Henry on March 8 has forced a six-week closure while the mine is drained and rehabilitated.

Evolution said on Tuesday that’s still on track, but there’s the damage to production and sales as well as costs.

“Prior to the weather event at Ernest Henry, Evolution was tracking to the lower end of Group production guidance and below the Group AISC guidance of $A1,240/oz. Copper production was tracking above the guidance of 55,000 tonnes by approximately 2,000 tonnes.”

Evolution said the impact of the wet and flooding at Ernest Henry was a fall of gold output of 17,000 ounces and 10,000 tonnes of copper.

That will be partly offset by the improving performance of Evolution’s Red Lake mine in Canada which “is continuing on its improvement path to attain a stable production rate and lower cost position with further improvement expected in the June 2023 quarter with production expected to increase to at least 35,000 ounces.”

Evolution said its Group All in Sustaining Cost (AISC) has been impacted by the temporary lower copper production which equates to an increase of $195 per ounce of gold “and is the main contributor to the changed guidance. This is being partially mitigated by the higher copper price and forecast lower sustaining capital for the year.”

The rise by world gold prices to around $US2,000 an ounce from under $US19,000 an ounce in the past fortnight should also help if the rise of around $US100 an ounce can be maintained.

For the March quarter, Evolution reported gold production of 163,910 ounces and copper production of 9,668 tonnes at an AISC of $A1,291/oz (US$866/oz).

The wet weather at Ernest Henry saw gold and copper production in the three months to March cut by around 6,400 ounces and about 4,100 tonnes respectively.

Even after that cut, output was higher than the 148,787 ounces in the Covid impacted March, 2022 quarter. But copper production was lower than the 13,439 tonnes output in the March, 2022 quarter.

As a result, Evolution cut its group guidance is updated to approximately 660,000 ounces of gold, from the previous 720,000 ounces at an AISC of around A$1,390 per ounce ($A1,240 previously).

Copper production will be approximately 48,000 tonnes.

At 660,000 ounces, total 2022-23 gold production will be still higher than the 640,275 ounces in 2021-22 and copper production at 48,000 tonnes will be higher than the 39,293 tonnes produced in 2021-22.

The company said its sustaining capital is expected to be at or below the lower end of guidance of $190 to $240 million while major capital is expected to be at the bottom end of the guidance range of $530 to $600 million.

All in all, it was a positive update from Evolution – the shares rose nearly 4% to $3.51.

Investors were expecting more damage than reported from the flooding, but the sweetened offer for Newcrest from Newmont also helped lift Evolution’s price, as it did the rest of the sector and the market generally.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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