Evolution Mining share price dips 8% in a week as Macquarie flags 'earnings risk' from energy crisis

Could rising electricity prices pose a problem for Evolution? Let's take a look.

Key points
  • Evolution Mining's share price has dropped 8% in the past week, including by 5% on Tuesday alone 
  • Macquarie is concerned about the impact of rising electricity prices on mining companies including Evolution 
  • The ASX 200 benchmark index and materials index have also fallen by nearly 6% in the past week 

The Evolution Mining Ltd (ASX: EVN) share price has been struggling over the past week.

The company's shares slumped 8.03% between market close on 7 June and 14 June. For perspective, the S&P/ASX 200 Index (ASX: XJO) tumbled 5.77% in the same time frame. The S&P/ASX 200 Materials Index (ASX: XMJ) also descended 6.13% between these dates.

Let's take a look at what could be ahead for this gold explorer.

Investor looking at falling ASX share price on computer screen.

Image source: Getty Images

Could higher electricity prices be a risk for Evolution?

Macquarie is concerned gold miners including Evolution could be impacted by higher electricity prices.

Analysts named Evolution, Newcrest Mining Ltd (ASX: NCM), Aurelia Metals Ltd (ASX: AMI), and Oz Minerals Limited (ASX: OZL) as facing the "highest earnings risk from surging electricity prices", The Australian reported.

Macquarie stated rising electricity prices are due to "increased demand, rising fuel costs and unplanned coal generator outages". Analysts added:

There continues to be upside risk to power prices in eastern states of Australia, adding cost pressures to miners operating on the East Coast of Australia.

Evolution Mining owns four mines in Australia along with a mine in Ontario, Canada. The company has a production guidance of about 650 thousand ounces (koz) of gold for FY22. Major shareholders include Van Eck, BlackRock, Fidelity, and Australian Super.

The Evolution Mining share price fell 4.86% to $3.33 on Tuesday alone. For perspective, the ASX 200 also shed nearly 4% on Tuesday, while the ASX 200 Materials Index slid 4.44%.

This drop followed Wall Street's S&P 500 market falling into a bear market on Friday night amid higher inflation. The US Fed reserve is reportedly considering raising rates by 0.75%, sparking fears of a recession.

Gold prices also hit a nearly four-week low on the back of the strong US dollar, CNBC reported. City Index senior market analyst Matt Simpson said:

Gold has faced selling pressure as investors have decided to either go to cash, or offload gold to attend margin calls across other markets.

Evolution Mining share price snapshot

The Evolution Mining share price has plunged 34% in the past 12 months, while it has sunk 18% in the year to date.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has shed around 9% in a year.

Evolution Mining has a market capitalisation of just over $6 billion based on its current share price.

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 recommended Macquarie Group Limited. 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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