Is gold miner EVOLUTION FPO still raking in the cash?

Earlier this year Evolution FPO (ASX:EVN) was one of the miners to beat. Is it still?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Earlier this year the Executive Chairman of gold miner EVOLUTION FPO (ASX: EVN), Jake Klein, appeared on Bloomberg Business and talked up the company's outlook. "Evolution is making a lot of money at these prices" he announced, noting that the gold mining industry was at a "low point in the cycle" and was on its way to recovery.

Well, a recovery may have been optimistic, but, to be fair, things were looking rosy for gold producers at the time. The gold price was sitting nicely at around US$1,200 per ounce, the Aussie dollar was lower than the year prior, oil was cheap and labour was becoming more accessible as iron ore producers cut back staff.

Since then the price of gold has plummeted, now sitting below US$1,100 per ounce, but so too has the Australian dollar. This hasn't been good for Newcrest Mining Limited (ASX: NCM), which has a large pile of debt priced in U.S. dollars which suddenly costs a lot more to pay back, but what about Evolution Mining?

Evolution's largest source of debt (as at 31 December, 2014), was a drawn-down credit facility set in local dollars, so the company doesn't have the same negative exposure to the U.S. dollar as Newcrest does.

Likewise Northern Star Resources Ltd (ASX: NST) also has its debt set in Aussie dollars. This gives Evolution and Northern Star far more benefit when using any free cash flow to pay back debt.

So is Evolution still raking in the cash? Here is how the company stacks up for the most recent June quarter when comparing All-In Sustaining Costs per ounce (AISC/oz) to the average price of gold received:

Company (code) Reported AISC/oz Average gold price received
Evolution FPO (ASX:EVN) $1,084 $1,533
Newcrest Mining Limited (ASX:NCM) $978 $1,532
Northern Star Resources Ltd (ASX:NST) $983 $1,497

Source: Company June quarter updates

Evolution reported slightly higher AISCs than Newcrest Mining and Northern Star, but at an average Australian dollar gold price of $1,533, it still made a theoretical margin of $485 per ounce.

Since Jake Klein's comments in April the price of gold has fallen around 10.5%, while the Aussie dollar has fallen around 7%. The net result would be a just a slight decrease in the margin Evolution was getting back in April, if the company maintains costs.

Evolution has a history of consistent production growth and looks well positioned to produce free cash under current gold price and currency conditions. However both factors can change quickly, despite even the best laid plans, which is why I won't be adding Evolution to my portfolio today.

Motley Fool contributor Regan Pearson has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »