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Why the Evolution Mining (ASX:EVN) share price is dropping lower

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The Evolution Mining Ltd (ASX: EVN) share price is dropping lower on Tuesday following the release of its first quarter production update.

At the time of writing, the gold miner’s shares are down 0.5% to $5.60.

How did Evolution perform in the first quarter?

For the three months ended September 30, Evolution’s group gold production came in at 170,021 ounces. This was 22% reduction on the prior quarter’s production of 218,104 ounces.

This comprises Cowal production of 51,774 ounces, Ernest Henry production of 24,569 ounces, Red Lake production of 26,638 ounces, Mungari production of 35,370 ounces, Mt Rawdon production of 20,024 ounces, and Mt Carlton production of 11,646 ounces.

Evolution’s production was achieved with an all-in sustaining cost (AISC) of A$1,198 per ounce, up from A$1,088 per ounce in the previous quarter.

Management notes that its AISC equates to US$857 per ounce, which places Evolution at the bottom of the cost curve amongst major and mid-tier global gold producers. All-in costs (AIC) came in at A$1,663 per ounce, resulting in an AIC margin of A$871 per ounce.

All operations generated positive net mine cashflow during the quarter, this led to the company delivering mine operating cash flow and net mine cash flow of A$272.3 million and A$183.4 million, respectively. Mine capital investment for the period was A$88.1 million, down from A$111.5 million in the prior quarter.

As a result of this, at the end of the period, Evolution had cash in the bank of A$369.7 million and bank debt of A$550 million.

Outlook.

No guidance was given for the remainder of FY 2021. However, management commented on a number of plans it has to boost future production.

This includes the board’s approval of the development of the Galway exploration decline. This will enable additional drilling to increase underground Ore Reserves and will also be used for future production.

Management notes that the 2,300 metre decline has received regulatory approval and is another important milestone in growing Cowal’s production to over 350,000 low cost ounces per annum.

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Motley Fool contributor James Mickleboro has no position in any of the 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 Scott Phillips.

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