The Evolution Mining Ltd (ASX: EVN) share price jumped 5% today after the company announced a record result for the full year 2017.
Net profit rocketed to $217 million helped by an 11% increase in revenue. Here are some of the other key points:
- Production up 5% to 844,000 oz
- All-In Sustaining Costs per oz down 11%
- Gearing significantly reduced from 22.0% to 15.9%
- New dividend policy and fully-franked 3 cents per share dividend
So what?
The result is a strong sign that Evolution Mining has successfully navigated the downturn in gold price which clearly pleased investors.
As Australia's second-largest producer, behind Newcrest Mining Limited (ASX: NCM), Evolution Mining's huge scale helped it to achieve one of the lowest All In Sustaining Costs (ASIC) per ounce I've seen reported so far in 2017.
At $905 per ounce Evolution Mining's costs were about 10% below both Newcrest Mining and Northern Star Resources Ltd (ASX: NST) which had ASICs of $1,006 (US$787) and $1,013 respectively.
The low costs and record production pushed Evolution Mining's EBITDA margin (Earnings before Interest, Tax Depreciation and Amortization) to 48%, compared to Newcrest Mining's reported EBITDA margin of 40%.
Outlook
Evolution Mining announced it will aim to beat its own record gold production in the coming year. Guidance for production suggests a range of between -2.8% and +4.6% in 2018, while All In Sustaining Costs per ounce are expected to be at or below 2017 levels.
Should you buy?
A winning gold stock has three key traits: high quality assets, low cost operations, and long production life.
Evolution certainly ticks the first two boxes, but with a current reserve life of 8.3 years, the company will need to continue investing in exploration or acquisitions to sustain itself.
Fortunately, Evolution has the cash-flow and a plan in place to support that. But I would want to make sure I understand the impact this expenditure will have on free cash flow going forward before I part with my money.