Evolution (ASX:EVN) share price slides 5% despite revealing major growth plans

Growth initiatives and an improved outlook was not enough to inspire shareholders this morning.

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The Evolution Mining Ltd (ASX: EVN) share price has tumbled lower this morning, down 4.85% to $4.710.

The weakness in the Evolution share price follows major updates from the company including investments into growth initiatives, production results and an updated 3 year outlook.

Here’s what you need to know.

What’s driving the Evolution share price lower?

FY21 operating results

FY21 production came in at 681,000 ounces at an all-in sustaining cost (AISC) of A$1,215 per ounce.

Production figures were within the company’s original guidance of 670,000 to 730,000 ounces and 2% below the bottom end of its revised guidance of 695,000 to 710,000 ounces announced on April 2021.

AISC beat the company’s original guidance of A$1,240 to A$1,300 per ounce and is in line with the revised guidance of A$1,190 to A$1,220 per ounce.

Cowal underground approval

According to Evolution’s half-year results, the company experienced a 74% year-on-year increase in mineral resources and a 49% increase in ore reserves thanks to its prospective Red Lake and Cowal projects.

On Friday, Evolution is pleased to advise that the Board has approved the accelerated development of the Cowal underground mine.

To bring the project to commercial production, $380 million will be invested during FY22 and FY23, alongside an additional $240 million for infrastructure and $140 million for initial mine development costs.

The company is targeting production to ramp up to 350,000 ounces per annum over the next three years.

Red Lake growth update

In Evolution’s March quarter update, Red Lake production came in at 35,810 ounces.

According to today’s announcement, the company plans to lift gold production at Red lake to 350,000 ounces per annum by FY26.

Evolution advised that the “Stage One” transformation to produce 200,000 ounces per annum at an AISC of less than US$1,000 per ounce is on track.

Three-year outlook

Evolution updated its three-year outlook as a result of Cowal and Red Lake growth prospects.

The company said that production is “planned to increase by at least 30% to over 900,000 ounces during the three-year period to FY24”.

From an AISC perspective, it said that costs are “expected to remain relatively stable over the three-year period as the growth strategy continues to focus on producing high margin ounces.”

Evolution share price snapshot

The Evolution share price has slipped 6.5% year-to-date despite the company’s plans to drive growth over the medium to long term.

Its underperformance is likely in part due to lower gold prices this year, falling from US$1,898 to US$1,830 at the time of writing.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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