Evolution Mining faces production challenges

Company News

by Glenn Dyer

For the second quarter in a row, wet weather and seismic problems have cut Evolution Mining’s (ASX:EVN) gold output.

The miner lost around 8,000 ounces due to wet weather at mines in NSW, Queensland, and WA. On Wednesday, it revealed a loss of much more than that - around 26,000 ounces due to the wet conditions at the Cowal and Mount Rawdon mines in NSW and Queensland, respectively.

The company revealed in its March quarterly report in April a loss of 8,000 ounces due to the wet at Cowal, Mount Rawdon, and Mungari in WA.

The latest update means the company’s annual output will fall short of the guidance of around 749,000 but still within the 5% tolerance band.

Evolution issued the update on Wednesday to ensure the market was informed of the problems ahead of major investors and shareholders visiting the company’s Cowal and Northparkes copper-gold mines in central western NSW.

The loss in production shortfall would have been updated to the investor group, so it's clear Evolution had to make sure the rest of the market and shareholders were aware of the loss and probable smaller revenue figure for the June quarter.

Evolution said its Cowal open-cut in central western NSW and the Mount Rawdon mine in north Queensland have had to battle wet weather in the current quarter, while the company’s Red Lake mine in the Canadian province of Ontario has had to deal with localized “seismic events”.

But Evolution indicated copper production from Ernest Henry in Queensland and Northparkes in central NSW “remains above plan”.

The update on production looks to be a modest way of warning investors not to get overeager about the company’s performance, especially from its key mine in NSW and another in Queensland.

"The Cowal (NSW) and Mt Rawdon (North Queensland) operations have been impacted by continued high levels of rainfall,” Evolution revealed.

"Restrictions to open-pit operations at Cowal and Mt Rawdon have necessitated the processing of lower-grade stockpile ore at various stages during the past two months to maintain full processing feed rates.”

But the company said the new underground operation at Cowal “has not been impacted by weather and has continued its planned ramp-up following successful commencement of commercial production in April 2024.”

In Canada, the Red Lake mine in Ontario has seen "material handling systems at Red Lake have been disrupted by localized seismic events at the Balmer and Cochenour areas.

"Mining rates have improved materially this quarter and there is a high level of mined ore available underground, but haulage rates available via alternative systems have lowered near-term capacity.

"The net impact on gold production quarter to date to the end of May 2024 is approximately 26,000 ounces,” Evolution said on Wednesday.

The company already had guidance for 2023-24 “at the low end" of 749,000 ounces of gold in its March quarterly report when it lost around 8,000 ounces due to wet weather at Cowal, Mount Rawdon, and Mungari in WA.

So the shortfall is around 3% at this stage, which is within the plus or minus guidance band of 5%.

Gold production in the March quarter jumped 15% to more than 185,000 ounces.

This and some other hiccups will see a rise in costs (around 5% from the forecast AISC (all in sustaining cost) of $1,470 an ounce, Evolution said.

But cash flow remains solid as the company continues to delever its balance sheet with cash on hand topping the $320 million mark heading towards the June 30 balance data.

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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