Can the Evolution Mining share price turn the corner in June?

Experts weigh in on the gold miner’s stock.

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Key points

  • The Evolution Mining share price has been dropping in recent months
  • Its recent production performance has disappointed some experts
  • However, the gold miner says it’s generating a sector-leading performance on costs

Is the Evolution Mining Ltd (ASX: EVN) share price an opportunity waiting to glitter again? Or has the gold miner lost its sparkle?

Evolution Mining shares have certainly not shot the lights out in recent times. Since the start of 2022, they have fallen by 9.3%. Over the past year, they have declined by more than 26%.

But with gold miners somewhat having a reputation as defensive plays during volatility, is it an opportunity after its recent falls?

What experts make of the Evolution Mining share price

One of the least optimistic brokers on the business is Credit Suisse, with a price target of $3.75. That suggests that shares will be flat, with the current Evolution Mining share price at $3.70. It suggested that production for the three months to 31 March 2022 wasn’t as good as expected, with a labour shortage and difficult weather hurting operational performance.

However, other brokers are more optimistic.

For example, while Citi has a ‘neutral’ rating on the business, the price target is $4.60. That implies a possible rise of over 20% in the next year. It said the Red Lake underground gold mine in north western Ontario, Canada,  is important for Evolution Mining’s performance in the near term.

One of the most positive experts on the business is Morgan Stanley, which is ‘equal-weight’. This is similar to a hold or neutral rating, however it has a price target of $5.05. That suggests a possible rise of more than 30%.

Quarterly update

For investors that didn’t see Evolution Mining’s quarterly update, the gold miner said it produced 148,787 ounces of gold, up from 148,084 ounces in the second quarter of FY22.

However, as a result of “extreme rainfall events and COVID-19 impacts”, the company reduced its production expectations to 650,000 ounces, down from previous guidance of 670,000 ounces.

It said that it achieved a sector-leading low all-in sustaining cost (AISC) of $990 per ounce. The AISC was down by 27% from the prior quarter.

Operating mine cash flow was $268.9 million, up 33% on the prior quarter. Net mine cash flow increased by 135% to $124.5 million after mine capital investment of $143.6 million.

In terms of the rest of the outlook, Evolution Mining said the Cowal underground development in New South Wales remains on budget and on schedule. However, over 25% of the Cowal workforce tested positive for COVID-19 during the quarter.

While production guidance was lowered, no changes were made to the AISC guidance of between $1,135 and $1,195 per ounce, or capital guidance.

Gold price

There are a few different elements that dictate the profit of a gold miner. There is how much gold it produces, the cost of production per ounce, and the price it sells that gold for.

In the three months to March 2022, Evolution Mining said it achieved a gold price of $2,464 per ounce. That was up compared to $2,378 in the three months to December 2021 and $2,364 in the three months to September 2021.

A higher gold price means the ASX gold mining share receives more revenue per ounce.

Evolution Mining share price snapshot

Over the past month, Evolution Mining shares are up around 1%. However, they are down around 3% over the past week.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison 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 Scott Phillips.

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