Emerging gold miner, Evolution Mining (EVN), looks set for another upgrade to its performance after the market caught up with its September quarter production and exploration update yesterday.
Higher production and the benefits of the lower value of the Aussie dollar have had a positive impact on the company and its finances, boosting revenues and cutting costs.
While the full quarterly report won’t be out until next week, Evolution’s update reveals that it has made a strong start to the 2015-16 financial year.
The recent acquisition of Barrick’s Cowal mine in NSW and La Mancha’s Mungari mine have transformed the company into Australia’s second biggest listed gold producer, and the first production results from those mines helped Evolution top market forecasts for the September quarter by 4%.
Evolution said it produced 174,169 ounces of gold during the September quarter, but that would have been over 216,000 ounces if Evolution had ownership of Cowal and Mungari for the entire quarter.
Evolution says it plans to produce between 730,000 and 810,000 ounces for the full year, and while the company has kept its gold output guidance steady for now, analysts say there’s a rising chance of an upgrade as the year continues.
"Evolution will be in a better position to reassess FY16 guidance in January after completing a full quarter of ownership of all assets during the December quarter,” the company said in the update.
EVN 1Y – Acquisition strategy pays off for Evolution
Evolution had previously forecast an all-in-sustaining gold production cost between $990 and $1060 an ounce in 2015-16, but the update shows costs averaged $882 an ounce in the September quarter, meaning the miner had a profit margin of about $US500 an ounce.
"The Group cash balance at the end of the quarter was A$58.3 million. This was down from the closing balance at 30 June 2015 of A$205.8 million due predominantly to the use of funds to close on the Cowal transaction," it said in the update.
"The strong operational results during the quarter allowed Evolution to pay A$77.0 million into the revolver debt facility to reduce Group debt to A$530.0 million and net debt to A$481.8 million.
"Gearing (unaudited) peaked at 32% at the end of July following the closing of the Cowal acquisition and prior to new equity being issued to La Mancha. This has been reduced to 23% as at 30 September 2015,“ Evolution said.
Evolution shares were up nearly 130% up to last Friday – they jumped another 11% yesterday to $1.50.
Evolution operates seven wholly-owned mines – Cowal in New South Wales, Cracow, Mt Carlton, Mt Rawdon and Pajingo in Queensland, and Edna May and Mungari in Western Australia.
Group production for 2014-15 from Evolution’s five original operating assets (prior to completion of the Cowal and Mungari acquisitions) totalled 437,570 ounces gold equivalent at an all-In sustaining cost of A$1,036 an ounce.