Evolution Mining Ltd (ASX: EVN) released its half year results for FY19 to the market today and reported its net profit (NPAT) fell 31.4% to $91.1 million.

Evolution is a gold mining company which owns and operates five gold mines in NSW, QLD and WA.

Key Results

Evolution reported:

  • Gold production of 382,214 oz at $928/oz
  • EBITDA down 25% to $360 million (click here to learn what EBITDA means)
  • EBITDA margin down 5% to 48%
  • NPAT down 26% to $91 million
  • EPS down 26% to 5.3c
  • Operating cash flow down 7% to $388 million
  • Interim dividend (fully franked) of 3.5cps unchanged.

Non-Cash Items Hit Profit

Evolution said the lower NPAT was mainly driven by $35.3 million non-cash expenses relating to:

  • The utilisation of ore stockpiles at Mt Rawdon ($11.4 million)
  • Higher depreciation and amortisation charges ($13.3 million)
  • Lower capitalisation of mine costs ($10.6 million)

Evolution cited a cash cost increase of $11.3 million from mine operating costs also reducing its profit.

Production On Track

The company guided that full-year production costs and guidance remains on track. It even suggested there is the potential for a positive surprise with a planned improved operational performance for the second half, along with a gold price that is $155/oz higher than $1,695/oz achieved in the first half.

Future Growth Possible

During the half year, Evolution also continued to make investments to expand its resources and production, including:

  • $29.9 million investment in discovery and resource definition drilling programs across the Group
  • Acquired another 3.2 million shares in Riversgold Ltd (ASX: RGL), taking the total to 15.7 million shares or 18.7% of the outstanding shares
  • Board approval of the Mt Carlton underground development and plant upgrade modifications with capital expenditure estimated at $60 million
  • Approval from the NSW Department of Planning and Environment to increase the Cowal mine plant processing rate by 31% from 7.5 million tonnes per annum (Mtpa) to 9.8Mtpa
  • Regulatory approval to commence the development of the Galway-Regal-E46 exploration decline at Cowal
  • Entered into a joint venture with Andromeda Metals Ltd (ASX: ADN).

Is The Price of Gold Headed up?

To quote Warren Buffett, “I have no views as to where it will be [the price of gold], but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola  will be making money, and I think Wells Fargo will be making a lot of money and … it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

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