Today has been a tough day for the ASX, with most stocks in the red amid a market meltdown that has the ASX200 index (ASX: XJO) down around 2.5% currently.
Despite these sell-offs, Evolution Mining Ltd (ASX: EVN) has surged higher today by nearly 6%.
Why is Evolution Mining on the rise?
This morning the gold and silver miner received board approval to proceed with its underground development of the Mt Carlton mine, which is expected to be operational until 2025 at least. This comes after the company was granted regulatory approval to increase the processing rate of its Cowal Gold Operation by 31% late last week.
Evolution Mining is confident that the initial Mt Carlton reserve can be expanded and that once the development is underway, the company indicates that additional drilling will be undertaken on numerous additional drill intersections, which at this stage look promising.
This project will cost Evolution Mining around $60 million in capital expenditure, with $10m expected to be spent in FY19, which Evolution Mining has already accounted for in its recent guidance.
Mt Carlton has proven to be a very profitable asset for Evolution Mining, having generated over $100 million in net mine cash flow per annum over the last three years. This development ensures the continued mining of high margin ores for the gold and silver miner, which investors are clearly pleased about.
The development is subject to regulatory approval, with submissions to the Department of Environment and Science to be lodged within the next month. Nonetheless, Evolution Mining is confident that the mine will be fully operational within 3 years, with the first ore expected by FY21.
Should you invest?
If you're pessimistic about the outlook of the ASX at the moment, it could be a good time to buy shares in Evolution Mining or another gold miner. In times of stock market turbulence and uncertainty, exposure to gold and other 'safe-haven assets' provides investors with diversification because these assets are generally uncorrelated or negatively correlated with the broader market.
Therefore, holding a gold miner like Evolution Mining could help you hedge some of your downside risks, as the value of gold and hence, gold mining companies, often rises in value as the rest of the stock market falls. Evidence of which we have seen today with the outperformance of Evolution Mining and other gold miners like Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST).
