2020 is looking like being a year to forget for gold miner Evolution even as gold prices have started the year strongly and the Aussie dollar has again faded back well under 70 US cents.
The company ended 2019 with its financial position strong with solid cash flows and no debt.
But thanks to unexpected problems at its Mt Carlton site in Queensland, Evolution looks like being unable to fully exploit the higher gold prices – thanks to rising tensions in the Middle East and Donald Trump’s various brawls with Iran; China – over trade and his impeachment problem.
Thanks to the discovery that its orebodies at Mount Carlton narrower than first estimated, meaning expected profit will be down by up to 27%, leading to a 40% surge in costs per ounce.
The Mt Carlton mine had been forecast to produce 95,000 to 105,000 ounces in the year to June 30, but in an update to the market on Friday, Evolution it had cut forecast output by 27 percent to between 70,000 and 75,000 ounces for the full year.
That means Evolution’s group gold production for 2019-29 will fall short of previous estimates.
Evolution said its six Australian mines had been expected to produce between 725,000 to 775,000 ounces of gold for the year to June.
The problems at Mount Carlton mean group production will be around the lower end of guidance.
Evolution said production for the three months to December was 170,890 ounces, down 14% from 199,967 ounces from the previous quarter.
For the six months to December 31 gold production totaled 362,857 ounces.
In an update to the market last week, Evolution said drilling in sections of the pit at the Mt Carlton mine had found the orebodies were narrower than expected, meaning the cost of mining the gold would increase from less than $A850 an ounce to between $A1150 and $A1225 an ounce.
“Mt Carlton was scheduled to produce significantly higher ounces in the June 2020 quarter from the mining of thick, high-grade areas in the pit and underground,” Evolution said.
“However … the unanticipated loss of ore tonnes in areas that were planned to be mined over the remainder of financial year 2020 are expected to result in an estimated production range of 70,000 to 75,000 ounces for Mt Carlton.”
Shares in Evolution fell sharply on the news and ended the session 6% lower at $3.58. That pushed the shares down 5.8% year to date despite a near 3% rise in gold since the start of the year.
Still, for all there problems Evolution ended the half-year in a solid financial state.
It said group mine operating cash flow of $A233.1 million for the half-year was and net mine cashflow was $A144.0 million after an achieved gold price of $A2,091 an ounce compared to current spot gold price of $A2,267 an ounce
Evolution said it ended the December quarter debt-free and with cash at bank of $A170.3 million after repaying outstanding bank debt of $A275.0 million.
“This is an increase of $A78.6 million from the 30 September 2019 net cash position of $A91.7 million,” the company revealed on Friday.