Australian gold miner Evolution Mining [ASX: EVN] updated guidance and information on events and results through the March quarter of FY23.
Evolution’s guidance was tweaked after the group quantified the impact of bad weather events that happened at Ernest Henry early in March.
Now the miner sees FY23 production of 660,000 ounces at an all-in-sustaining cost (AISC) of $1,390 an ounce and copper production to reach about 48,000 tonnes.
EVN continued trading at around $3.38 a share at the time of writing. For near-term metrics, the gold mining stock appears to be faring well, up 22% in the past month and more than 13% so far for 2023:
Source: tradingview.com
Evolution’s March quarter
Even before bad weather had hit operations at Ernest Henry, the gold miner was already heading towards the lower end of the group’s production guidance.
Copper production had been performing well, heading higher than the 55,000 tonnes initial guidance, surpassing the range by around 2,000 tonnes.
In March, heavy rainfall saw the site go offline as Ernest Henry recorded 227mm of rainfall in one week alone, forcing the group to evacuate.
Highlights from that period include:
- ‘Gold production of 163,910 ounces and copper production of 9,668 tonnes
- All-in-Sustaining Costs (AISC) of $1,291/oz (US$866/oz)
- Operating mine cash flow of $270 million
- The impact of the weather event at Ernest Henry reduced gold and copper production in the March quarter by 6,400 ounces and 4,100 tonnes respectively.
- Red Lake improved by 13% in the March quarter to 28,178 ounces through a 7% grade increase and a 5% increase in processed tonnes.
- Evolution’s new guidance is near to 660,000 ounces at an AISC of around A$1,390 per ounce, copper production is expected at 48,000 tonnes.’
This means weather impacts at Ernest Henry will result in lower production of gold and copper, approximately 17,000 ounces and 10,000 tonnes, respectively.
Evolution believes sustaining capital should be below the lower end of guidance, $190–240 million, while major capital is expected to be at the bottom end of the guidance range, $530–600 million.
The group said its overall AISC had been impacted by temporary lower copper production, with an increase of $195 per ounce. This is the main contributor to the changed guidance, yet it is being partially mitigated by a higher copper price and forecast lower sustaining capital for the year.
Lawrie Conway, Evolution’s CEO, said:
‘The performance for the March quarter was solid despite the weather event impact at Ernest Henry. The team has continued to perform exceptionally to safely resume mining activities and I am extremely proud of their response. Red Lake has improved during the quarter with further improvements expected in the June quarter.
‘The events at Ernest Henry are the main reason for the updated guidance of 660,000 ounces at an AISC of $1,390 per ounce. Once Ernest Henry returns to normal operating rates, Evolution will resume its sector leading low-cost high-margin position.
‘The transition to net cash generation, following a recent period of intensive capital investment in growth projects, at a time of very elevated gold and copper prices is opportune. The business is very well positioned to take advantage of this to further strengthen the balance sheet.’
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Regards,
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For The Daily Reckoning
