In the dirt: Evolution Mining (ASX:EVN) share price slips amid 60% profit plunge

Is the gold mining giant losing its shine amid its half-year results?

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Key points

  • The Evolution Mining share price is trading to the downside, slipping less than 1% lower to $3.91
  • Profits were smashed in the first half due to a reduction in gold volumes and a lower recognised price
  • The company's interim dividend is has been pulled back from 7 cents per share down to 3 cents per share

The Evolution Mining Ltd (ASX: EVN) share price is in the red after releasing its much-awaited half-year results.

In early morning trade, shares in the gold mining company are down 0.63% to $3.91. This places the company's shares at a 28% discount to its 52-week high.

Evolution Mining share price sinks on steep profit fall

Here are the highlights of the company's latest results:

What happened during the first half?

During the six months ending 31 December 2021, Evolution Mining experienced a reduction in revenue and earnings compared to the same period a year earlier.

According to the release, the company's revenue failed to surpass the previous first half due to low gold volume from Mt Rawdon and Red Lake mines. On top of this, Evolution achieved a 4% lower gold price at $2,371 per ounce.

Other key events during the half-year period included the Kundana acquisition from Northern Star Resources Ltd (ASX: NST). Evolution processed its first higher grade ore from the mine in late August. Efforts to reduce duplicate activities and recognise some synergies are currently underway.

In November, the Evolution Mining share price moved to the upside following the $1 billion acquisition of the Ernest Henry mine in Queensland. The Australian gold mining giant has a remaining $200 million payable on 6 January 2023 for the acquisition.

ASX-listed Evolution Mining now estimates its mineral resources to be around 29.6 million ounces. This represents a 12% increase year-on-year.

What did management say?

Evolution Mining executive chair Jake Klein commented on the result:

The half-year to 31 December 2021 has been transformational for Evolution. The portfolio has benefitted from key acquisitions and a significant investment in growth projects at our cornerstone assets, which is supported by a high quality Mineral Resource and Ore Reserve base, and our business is well-positioned to deliver a very strong second half.

Full ownership of Ernest Henry will deliver a material increase in cash flow and financial performance and was considered when declaring the interim dividend. Evolution's history of dividend payments with almost A$1 billion paid since 2013 demonstrates our commitment to maximising shareholder returns.

What's next?

In terms of guidance, Evolution Mining expects to produce 670,000 to 725,000 ounces of gold in FY22. Notably, this is forecast to be done with an AISC between $1,135 to $1,195 an ounce.

On the dividend front — investors will need to be on the register before 28 February 2022 when shares will go ex-dividend. From there, shareholders can expect to receive 3 cents per share on 25 March 2022.

Evolution Mining share price snapshot

Despite inflation fears, the Evolution Mining share price has been sitting in the red over the last 12 months. Shareholders are have witnessed a 16.9% fall in the gold miner's shares during this time. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is up 4.3% in the same timeframe.

The Evolution Mining share price is now trading on a price-to-earnings (P/E) ratio of around 19 times.

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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