Gold and copper mining company Evolution Mining [ASX:EVN] continued to fall on Tuesday after it issued an earnings downgrade on Monday, sending other gold stocks lower.
EVN shares fell as much as a 20% on Monday after releasing its outlook for FY23 and FY24.
EVN shares are now down 25% in the past week and down 30% year to date.
The sell-off wasn’t contained to Evolution Mining, however.
Almost $3.5 billion was wiped off the value of the ASX’s big three gold miners
Evolution’s sobering outlook
Evolution revealed yesterday that the pandemic has led it to record absenteeism rates of 30% at its Western Australia Mungari mine, with heavy rain exacerbating slower production at its Cowal mine in NSW.
FY22 gold production is now expected to be around 640,000 ounces, a 6% downgrade, with an all-in sustaining cost (AISC) of AU$1,250 an ounce.
Evolution expects labour costs to increase 5–6% next year, a sector of business that takes 50% of operating costs.
Group production for FY23 is guided to increase 12% on the current year to 720,000 ounces.
FY24 production is expected to increase a further 11% to 800,000 ounces.
While an increase, these production levels are lower than EVN’s previous plans.
Evolution attributed this primarily to Red Lake’s slower than expected transformation, which happened a year late.
EVN share price outlook: Is gold still worth its weight?
Evolution’s Executive Chairman Jake Klein said:
‘Our portfolio is well positioned. Our confidence in the turnaround and potential at Red Lake is growing, the Cowal underground mine is on budget and schedule and the cash generation and geological upside at Ernest Henry is outstanding.
‘Aligned with our strategy, during this period of increasing costs and a challenging labour market all planned expenditure will be thoroughly assessed and gated with a focus on ensuring we continue to prioritise margins over volume and earn an appropriate return on capital.
‘I am confident that Evolution is one of the best positioned gold companies with its high-quality, low-cost portfolio of assets.’
Despite the setbacks, the mining company has its sights set on a 25% production increase by 2025.
These are challenging times for all business across varying industries.
However, the dip in gold prices means that this could be a good time to accumulate.
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For The Daily Reckoning Australia