Evolution Mining Shares Tumbled On ASX Despite Receiving Approval For GRE46 Exploration Decline

  • Oct 26, 2018 AEDT
  • Team Kalkine
Evolution Mining Shares Tumbled On ASX Despite Receiving Approval For GRE46 Exploration Decline

On 26 October 2018, Evolution Mining Limited (ASX: EVN) announced that its Cowal Gold Operation near West Wyalong in NSW has received regulatory approval from the NSW Department of Planning and Environment (DP&E) to initiate construction of the Galway-Regal-E46 (GRE46) exploration decline. Following this news, the share price of the company decreased by 2.194 percent as on 26 October 2018.

The Galway-Regal-E46 (GRE46) exploration decline is being developed to conduct further resource definition and discovery drilling. In addition, the approval will also facilitate further drilling and delineation of the recently discovered high-grade Dalwhinnie Lode. The development is expected to start early in the March 2019 quarter and it is expected that will involve capital expenditure of around A$20 – A$22 million over FY 2019 and FY 2020. Additionally, it is expected that there will be a further investment of A$6 – A$7 million on underground drilling.

In the recently released quarterly production report, it was revealed that the September FY 2018 Quarter’s production of the company was less as compared with the record-breaking September 2017 quarter but Cowal was noted by the company for its strong financial performance. 

In FY 2018, Evolution reported a record statutory net profit of A$263.4 million which was achieved on the back of a record operating cash flow of A$811.8 million and net mine cash flow of A$539.94 million. Due to the strong cash generation, the company was able to reduce net debt by A$325.8 million during the period to A$71.8 million. The continued increase in cash generation of the business saw a total of A$109.9 million in fully franked cash dividends paid during the year based on Evolution’s dividend policy of a payout ratio of 50% of after-tax earnings.

Cowal delivered reliable, low-cost production with 257,951 of gold produced at an AISC of A$877 per ounce. Mt Carlton also performed well this year with a production of 112,479 ounces at an AISC of A$535 per ounce. Ernest Henry, in its first full year in Evolution’s portfolio, made a strong contribution by producing 95,209 ounces of gold at an AISC of A$(641) per ounce to generate net mine cash flow of A$219.2 million.

The company is focused on delivering on a strategy of upgrading the quality of asset portfolio continued with the sale of the Edna May operation in September 2017 for an upfront payment of A$40 million and a contingent payment of up to an additional A$50 million. The company is focused on prioritizing margins over production growth and it is expected that the Group gold production in FY 2019 will be around 720,000 – 770,000 ounces at an AISC in the range of A$850/oz – A$900/oz.

In the last six months, the share price of the company increased by 1.27 percent as on 25 October 2018, traded at a PE level of 20.490x. EVN’s shares traded at $3.120 with a market capitalization of $5.41 billion as on 26 October 2018 (AEST 4:00 PM).


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