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Evolution slumps on production downgrade

Evolution

Shares in Evolution Mining slumped on Monday after the gold miner announced an expected production downgrade for the 2021–22 financial year (FY22).

While Evolution forecasts production to be 15 per cent higher in the June quarter compared to the first three months of 2022, it expects its FY22 output to drop from the previous 650,000-ounce (oz) guidance to 640,000oz.

The Sydney-based miner said it had felt the pinch of wet weather at its Cowal operations in New South Wales, while COVID-19 had affected production at its Mungari operations in Western Australia.

Since the WA opened in early March, Evolution said 30 per cent of its workforce (of approximately 500 people) had been absent for at least seven days due to either being infected themselves or a close contact.

Evolution also flagged its all-in sustaining cost (AISC) would likely be above the $1135–1195/oz FY22 guidance, with the company forecasting an AISC of $1250/oz for the 12 months.

“The final reported AISC for FY22 will largely depend on the closing copper price for June 2022, which is used to revalue unsettled concentrate shipments from Ernest Henry,” Evolution said in a statement.

“On average there are four months of production that are subject to revaluation. At the current copper price, this adjustment will negatively impact FY22 AISC.”

Despite falling short of its FY22 guidance, in FY23 Evolution expects group production to increase 12 per cent (720,000oz) from the current financial year, with a further 11 per cent climb forecast for FY24 (800,000oz).

Evolution executive chair Jake Klein said the company’s portfolio was well positioned going forward, highlighted by the turnaround potential of its Red Lake operations in Canada, which is increasing its production quarter by quarter.

Klein also highlighted the cash generation and geological upside of its recently-acquired Ernest Henry asset in Queensland, which is set to produce more than $400 million of mine cash flow for FY22.

Evolution’s share price dropped from $3.41 at close on Friday to as low as $2.65 at 3:30pm on Monday following the announcement.

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