Metals producer Evolution Mining (ASX:EVN) released their 2015 December Quarter report, showing increases in gold production, along with relatively solid cash flow from their operations.
Group gold production for Q42015 was 203,700oz. This was a 17% increase, when compared to Q32015 (174,169oz). AISC (All-In Sustaining Costs) for gold in Q42015 was A$1,016/oz. This was a 15% increase, in comparison to Q32015.
Evolution’s Cowal Mine in NSW was the best performer, producing 54,792oz of gold in the Q42015.Moroever, their Mungari Mine in WA was the second best performer, producing 40,692oz of gold in Q42015.
Evolution’s group production guidance for FY16 is between 770,000-820,000 ounces (an increase from 730,000-810,000 ounces). Furthermore, with an AISC of A$970-1,020 per ounce (a decrease from A$990-1,060 per ounce).
Evolution had relatively sustainable cash flow in Q42015, despite a lower than average realised gold price and major capital expenditure. Achieving a Net Mine Cash Flow of A$97.8 million, a 6.8% decrease, when compared to Q32015 (A$105 million).
Discovery expenditure for Q42015 was A$9 million (Q32015: A$2.5 million), with increased expenditure at their Mungari, Puhipuhi and the Tenant Creek JV. Total capital expenditure for the quarter was A$44.2 million (Q32015: A$42.3 million).
Moreover, the group’s cash balance, as at the end of Q42015 was A$45.3 (Q32015: A$58.3 million).
Throughout Q42015, Evolution made some debt repayments, totalling A$50 million into its senior secured syndicated facility with an additional A$25 million, subsequent to the end of Q12016.
Since the beginning of September 2015, Evolution has wiped off A$152 million worth of debt, with an outstanding A$455 million. Comprised of A$130 million in the senior secured syndicated revolver facility, and A$325 million in the senior secured syndicated term facility.
Evolution has met all of its repayment obligations for the current financial year, along with half of its repayment obligations for Q32016.
Takeover of Phoenix Gold
Evolution’s takeover of gold producer Phoenix Gold (ASX:PXG) closed towards the end of Q42015, having a relevant interest in 95.67% of all Phoenix shares on issue. Evolution is now proceeding with the compulsory acquisition of the remaining Phoenix shares on issue.
Evolution’s ongoing commitment to exploration is showing positive results, with good drill intercepts reported at most of their operations. Particularly, the Mt Carlton and Mungari mines show potential mine life extensions.
The acquisition of Phoenix Gold has produced a consolidated land position of approximately 920km in the Kalgoorlie Terrane. This position includes tenements that cover a 45kmstrike length of the fertile Zuleika Shear Zone and associated structures. Evolution considers the Zuleika Shear Zone to be underexplored, and will commence an exploration program in the area.
Investors have reacted rather positively to the announcement, with EVN up over 2% (As at 11.19am AEDT), to $1.51. With the surging of the gold price in 2016, in response to the volatility in the major global markets, EVN has garnered investors a considerable 8.6% return for 2016.
Author: Matthew Dibb
Jan 27, 2016
Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.