Evolution (ASX:EVN) share price lifts on production guidance beat

Here's why the Evolution Mining share price is running away this morning…

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The Evolution Mining Ltd (ASX: EVN) share price is moving higher on Wednesday morning. This follows the company releasing its September quarterly report this morning.

At the time of writing, shares in the gold mining company are up 2.15% to $3.80. This incline places the S&P/ASX 200 Index (ASX: XJO) constituent 16.2% above its 52-week low.

Let's have a look at what investors are getting excited about this morning.

Rising gold share price represented by a green arrow on piles of gold block.

Image source: Getty Images

Why is the Evolution Mining share price moving higher?

The market appears to be pleased by the quarterly numbers posted by Evolution Mining today. In the first quarter of FY22, gold production improved with a slightly higher achieved price. Here are some highlights from the quarterly report:

  • Gold production of 170,681 ounces, above the 155,000 to 167,000 previously guided
  • All-in sustaining costs (AISC) of A$1,413 per ounce, below the A$1,450 per ounce previously guided
  • Mine operating cash flow of A$193.7 million
  • Group cash flow of $30.2 million
  • Cash in the bank at the end of the quarter of $422.2 million

What happened during the quarter?

It was mostly a positive quarter for the nearly $7 billion gold mining company. During the 3-month period, Evolution achieved total group gold production of 170,681 ounces. This represents a 0.9% quarter-on-quarter lift in production output. Importantly, the production exceeded the range previously guided, giving shareholders a pleasant surprise.

Additionally, the miner managed to deliver AISC below its projections. Although, the $1,413 per ounce costs do reflect a 14% increase compared to the prior quarter. However, the stronger achieved gold price during the quarter helped partially offset the rising costs, this being a positive for the Evolution share price.

With reasonably steady gold prices and 163,046 ounces of gold sold during the first quarter, Evolution was able to pull in $193.7 million in mine operating cash flow. These funds accommodated the repayment of a $145 million drawn-down facility and a $25 million quarterly repayment. As a result, the company's net debt finished the quarter at $467.8 million, slightly higher than the $451.2 million at the end of FY21.

Operationally, Evolution progressed the development of the Cowal underground mine, with several key milestones being achieved. Meanwhile, at Red Lake, underground development increased a further 28% to 3,132 metres.

Other milestone moments during the first quarter included the completion of the Kundana mine and Carbine project acquisition. This project, including multiple joint ventures with Northern Star Resources Ltd (ASX: NST), came to a total consideration of $400 million.

Looking ahead

The gold mining giant did not provide any forward-looking guidance in conjunction with its quarterly report. However, Evolution Mining did highlight its continued drive to upgrade the quality of its asset portfolio.

For now, it appears the miner will have its hands full with progressing its Cowal underground development and Red Lake transformation plan. On top of this, drilling at Cue joint venture has extended the gold mineralisation footprint for over 1.6km strike length, with the release stating it is "emerging as an exciting discovery".

Despite what it has planned ahead, the Evolution share price is down 38.5% over the past 12 months.

Motley Fool contributor Mitchell Lawler 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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