Evolution Mining Limited (ASX: EVN) made an announcement on 22 November 2018 stating that its Board has approved an expansion to the Cowal processing plant to 8.7Mtpa from the previously permitted 7.5Mtpa. The company also announced about the exceptional results received from step out drilling at Cowal GRE46. Following this news, the share price of the company initially decreased by 0.629 percent as on 22 November 2018 much before market close.
The expansion work of the plant will start in the March quarter of 2019 with commissioning expected approximately 12 months later. The plant expansion will cost around A$25 to A$30 million from which around A$15– A$20M will be spent in FY 2019 and remaining in FY 2020. With the increase in throughput, the gold production is expected to increase from current operating capacity to 5koz in FY20, 10 – 15koz in FY21, and 20koz per annum from FY22 onwards. Further, the plant expansion is expected to reduce unit processing costs by A$1.25 – A$1.75 per tonne which equates to a reduction of 8% – 12%.
The company announced about its Excellent results which it received from deep step-out drilling at Cowal Processing Plant including 46.0m grading 7.8g/t Au from 625m (hole 1535DD348). As per the company’s release, the High-grade mineralization at Dalwhinnie appears to be controlled by moderately south plunging shoots.
Due to the plant expansion being brought forward by 12 months; the company has updated its Three-Year Outlook. As per the new outlook, the production from Cowal will increase by 5koz in FY20 and 10 – 15koz in FY 2021. The All-in Sustaining Costs (AISC) will reduce by A$5/oz in FY 2020 and A$10/oz in FY 2021. The major capital will increase by A$15 – 20M in FY 2019 and from there onwards it will decrease by A$15 – 20M in FY 2021. Although no commitment for a plant expansion beyond 8.7Mtpa has yet been made, the Three-Year Outlook still allows for A$20 million in Major Capital to be spent in FY 2021 for a further plant expansion up to 9.8Mtpa subject to the outcome of feasibility studies.
In FY 2018, Evolution Mining reported record operating cash flow of A$811.8 million, record net mine cash flow of A$539.9 million and a record statutory net profit after tax of A$263.4 million. Due to the increase in profitability and cash generation of the business, the company distributed a total of A$127.0 million in fully franked cash dividends based on Evolution’s dividend policy of a payout ratio of 50% of after-tax earnings. In FY 2018, the company produced 801,187 ounces of gold at an All-in Sustaining Cost (AISC) of A$797 per ounce which equated to US$618 per ounce, ranking the Company as one of the lowest cost gold producers globally.
Over the past one year, the share price of the company increased by 20 percent as on 21 November 2018, and it traded at a PE ratio of 20.420x. EVN’s shares traded flat at $3.18 with a market capitalization of circa $5.4 billion as on 22 November 2018 (just before market close).
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