Where Is the Evolution Mining Share Price Headed? (ASX:EVN)

Where Is the Evolution Mining Share Price Headed? (ASX:EVN)

The Evolution Mining Ltd [ASX:EVN] share price has been on a steep trajectory since mid-March.

The $8.9 billion gold giant has tacked on close to 40% to its share price since the beginning of the year.

Spurred on by a surge in the price of gold (particularly in Aussie dollar terms), The EVN share price is up ~65% from this time last year.

ASX EVN Share Price Chart - Evolution Mining

Source: Tradingview.com

EVN share price (blue) and AUD gold (white) since the beginning of 2020

So, where is the share price headed?

It depends on a series of factors, but it appears that at the moment the company is well positioned to keep up the momentum. We will run you through our reasoning.

Brownfield could beat expectations

Evolution has built its heir business around reinvigorating old brownfield sites (previously developed mines).

Sticking to their guns, EVN recently completed the acquisition of Red Lake gold mine in Ontario, Canada at the end of March.

The mine is expected to produce 25,000 ounces in the June quarter at all-in sustaining costs (ASIC) of $2,100–2,300 per ounce.

Speaking to the AFR, EVN director Jake Klein said that:

If the first three weeks of ownership were any guide, the Red Lake mine would exceed Evolution’s most optimistic expectations.

With the AUD gold price rising more than 25% this year to record highs of over $2,700/oz, anything is possible.

Take this with a grain of salt though.

Three weeks is an incredibly short period of time and is by no means a perfect gauge of future performance.

Production to continue

Despite COVID-19 restrictions hampering the production efforts of other miners, EVN has managed to keep to its previous guidance.

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Operations could continue as usual thanks to its workforce being largely residential and not in the FIFO category.

In its quarterly report released last month, EVN maintained production guidance of about 725,000oz across its operations, excluding Red Lake.

The company produced 165,502oz in the three months to 31 March, at an ASIC of $991. A reduction of 7%.

EVN’s production output has continued to dip over the past four quarters, however this doesn’t seem to have hampered cash flow.

Cash flow increased 33% quarter-on-quarter to $111.5 million.

And with the added production of the Red Lake mine, levels could increase by the end of the June quarter.

Should current spot metal prices be maintained during the June quarter, EVN said net cash flow is expected to be $90–95 million higher.

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Kind regards,

Lachlann Tierney,
For The Daily Reckoning Australia