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MarketScreener Homepage  >  Equities  >  Australian Stock Exchange  >  Evolution Mining Limited    EVN   AU000000EVN4

EVOLUTION MINING LIMITED

(EVN)
  Report
End-of-day quote. End-of-day quote Australian Stock Exchange - 01/22
4.62 AUD   -1.28%
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Evolution Mining : Catalysts Aplenty Ahead For Evolution Mining

10/27/2020 | 10:15am EST

A soft September quarter was expected for Evolution Mining but two key assets are in transition and represent key upcoming catalysts for the gold producer.

-Lower grade feed impacted Cowal in September quarter
-Key catalysts in February centre on Cowal and Red Lake
-Quality stock but several brokers concerned about valuation

 

Evolution Mining ((EVN)) has set its sights on achieving better grades at Cowal (NSW) in the second half while increasing the gold intake at Red Lake (Canada). The miner's September quarter production was sequentially softer, down -22% with a 10% increase in all-in sustainable costs (AISC).

Management has retained FY21 guidance of 670-730,000 ounces at AISC of $1240-1300/oz. Several brokers expect costs may come in below guidance because of higher by-product copper price estimates while UBS asserts the quarter was not reflective of the underlying value of the portfolio.

Goldman Sachs retains forecasts at the low end of the cost guidance range for FY21 production because of a favourable copper price outlook. Nevertheless, the broker's FY21 and FY22 estimates for operating earnings (EBITDA) are reduced -6% and -3%, respectively, after incorporating the quarterly result and updating AUD/USD forecasts.

The Cowal mill is currently being fed by lower grade stockpiles, while a turnaround at Red Lake requires time and capital. Nevertheless, UBS believes these two assets could drive production towards 900,000 ounces per annum over the next 4-5 years.

Production varied across the company's assets, with Ernest Henry (Queensland) benefiting from higher copper prices and beating the internal budget. Along with Mungari (WA) and Cowal, this drove the bulk of cash generation.

Mungari had record mill throughput in the quarter while Mt Rawdon (Queensland) was affected by a rockfall in the open pit. Costs at Mount Carlton (Queensland) were much higher than UBS expected because of the drop in grade to 2.4g/t during the quarter and also because of lower by-product credits from copper.

While Mount Carlton has a short life, management envisages Crush Creek, an exploration project 30km away, has the potential to extend life. Mount Carlton remains a key concern for Morgan Stanley as costs are close to current spot prices.

The share price has underperformed the US dollar gold price since mid September, Citi observes, and with an opportunity to hold a quality stock that has two long-life growth opportunities in Cowal and Red Lake upgrades to Neutral from Sell.

Credit Suisse retains Evolution Mining as one of its preferred large-cap gold stocks, given strong cash generation and upside from execution on growth, noting the portfolio is also well diversified in tier-1 locations.

Catalysts

February should be a key catalyst and Credit Suisse will be most interested in the extent of conversion from the 11m ounces of resources at Red Lake to reserves, and the implications for mine planning.

UBS expects Evolution Mining will report growth in reserve tonnage at Cowal rather than grade while the focus for the maiden reserve at Red Lake is expected to be on grade and dilution rather than tonnage.

The company has made progress on the transformation plan at Red Lake with a surface decline study initiated. A decision on long-term milling optimisation is expected by June 2021. In the September quarter a fire had cause a temporary suspension of operations, resulting in a -11% reduction in operating time.

Cowal

Production was 51,800 ounces at Cowal in the September quarter, down -15% sequentially. The cutback is progressing and access to fresh ore should progressively improve grade in the remainder of FY21. The approvals process at Cowal underground continues to progress and management has indicated underground production could occur within 12 months of permits being received.

Approval of the 2.3km Galway decline is a vote of confidence by management in the potential scale of the Cowal underground, Citi asserts, while Shaw and Partners considers the submission of the mine development application a major milestone that could mean permits are gained by June 2021.

The size of the additional decline also impresses the broker and could be part of the underground mine in future. A feasibility study on the underground is due by June 2021.

Among those stockbrokers not monitored daily on the FNArena database, Shaw and Partners has a Buy rating and $7.00 target while Goldman Sachs, on the other hand, retains a Sell rating with a $4.80 target. FNArena's database has three Sell ratings, based on valuation, two Hold and one Buy (Credit Suisse). The consensus target is $5.39, suggesting -4.2% downside to the last share price.

See also, Consistency A Hallmark Of Evolution Mining on September 3, 2020.

FNArena is proud about its track record and past achievements: Ten Years On

All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.

© 2020 Acquisdata Pty Ltd., source FN Arena

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Financials
Sales 2021 2 010 M 1 549 M 1 549 M
Net income 2021 464 M 358 M 358 M
Net Debt 2021 82,2 M 63,4 M 63,4 M
P/E ratio 2021 17,1x
Yield 2021 2,96%
Capitalization 7 894 M 6 092 M 6 086 M
EV / Sales 2021 3,97x
EV / Sales 2022 3,63x
Nbr of Employees -
Free-Float 98,4%
Chart EVOLUTION MINING LIMITED
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Evolution Mining Limited Technical Analysis Chart | EVN | AU000000EVN4 | MarketScreener
Technical analysis trends EVOLUTION MINING LIMITED
Short TermMid-TermLong Term
TrendsBearishBearishNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 15
Average target price 5,26 AUD
Last Close Price 4,62 AUD
Spread / Highest target 51,5%
Spread / Average Target 13,8%
Spread / Lowest Target -4,76%
EPS Revisions
Managers and Directors
NameTitle
Jacob Klein Executive Chairman
Robert Fulker Chief Operating Officer
Lawrie Conway CFO, Finance Director & Executive Director
Evan Elstein Secretary, Vice President-IT & Community Relations
James Edward Askew Non-Executive Director
Sector and Competitors