Cowal’s disclosure of Evolution caused 5.5 percent of Newcrest Mining’s shares to fall, as investors feared that their nearby Cadia mine could have suffered similar levels of rain; an ironic situation for two mines facing drought stress just two years ago.
Cadia is Newcrest’s most important mine, but is also exposed to WA’s recent COVID-19 wave through its marginal Telfer mine and the Havieron growth project in the north of the state.
The three miners lost more than a billion dollars each Monday. Evolution lost more than 20 percent of its market capitalization in just one trading session.
He told investors in July last year that he was willing to reverse a trend that had caused its production to decline sequentially for four consecutive years, suggesting that the 680,788 ounces produced in the year to June 2021 would be the nadir of the company.
This promise came on the day Evolution promised to produce between 880,000 and 950,000 ounces a year by June 2024; a pledge based on plans to refurbish the Red Lake mine in Canada and expand its Cowal mine in NSW.
Both pledges were slashed Monday and Evolution said its production year through June 30 would be “about 640,000 ounces.”
The reduction means that Evolution’s gold production has declined for the fifth year in a row.
He said his gold production would increase to 720,000 ounces next year and 800,000 ounces a year by June 2024, with those two targets accompanied by a 5% margin of error.
Even if the company did 5 percent better than its new 2024 target, it would still fall below the range of 880,000 and 950,000 ounces it promised for 2024 just 11 months ago.
Time and money
Evolution expressed confidence that Red Lake would still do so, but it would only take longer to reach its potential.
Chief Executive Jake Klein had warned shareholders when he paid $ 375 million ($ 550 million) for Red Lake in 2019 that it would take more time and money to turn the operation into a lucrative asset.
Evolution’s expenditure on assets will exceed $ 1 billion by the time it reaches its potential, based on the original acquisition price, rehabilitation expenditure and the acquisition of an adjacent asset that has provided a new mill for what is now a province for the company. .
Red Lake was marginally positive in cash flow during the March quarter, but led to a cash outflow once capital expenditure was included.
Evolution isn’t the only gold miner that has lowered investor expectations recently; St Barbara lost 28 per cent of its value last week after revealing further delays in permits for the Canadian project that was supposed to be its growth project when it was acquired in 2019.
Northern Star has also found it harder than expected to improve production at Alaska’s Pogo gold mine, which it acquired in 2018.
Ramelius Resources reduced its gold production target by about 2 percent last week after heavy rains disrupted transportation routes around its WA mines and exacerbated related personnel challenges. with the pandemic.
Gold reached $ 1,830 a pound on Monday; a very high price by historical standards, but lower than the highs above the $ 2,000 an ounce reached in 2020 and earlier this year.
Shares of Northern Star and Evolution have fallen 57 percent since the first week of the November 2020 peak; a time when the former was in the process of merging with Saracen Mineral Holdings.
Gold stocks, which are favored by investors in times of economic hardship, have gone out of style after signs that the global economy was recovering from the 2020 pandemic closures.
Copper and gold miner OZ Minerals lowered this year’s copper production target by 13% due to rain, pandemic-related personnel challenges and a conveyor belt failure.
Its shares fell 3.4% relatively modest on Monday.