Evolution Mining Ltd (ASX: EVN) shares have surged 60% this year, strongly rewarding shareholders.
Evolution Mining is a gold mining company that operates six mines, including five in Australia and one in Canada (Red Lake).
While not the biggest mining stock on the ASX, Evolution Mining has a market capitalisation of $16 billion and is part of the S&P/ASX 200 Index (ASX: XJO).
Earlier this month, it hit an all-time high of $9.77.
Last Friday, Evolution Mining shares lifted 5.5% after tensions in the Middle East ramped up. Traders rushed to buy gold, a safe haven asset, after Israel launched an attack on Iran's nuclear facilities. Since then, tensions have continued to rise, while the ASX mining stock has retracted 13%.
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Is this a buying opportunity?
Earlier this month, the ASX 200 gold stock provided its annual reserve and resources update as at 31 December 2024. The company advised that resources have declined 8% from the prior year, and reserves are down 4% due to a recalibration at Red Lake.
In response to this update, broker Macquarie placed a $6.30 price target on the stock and downgraded its rating from neutral to underperform. Since then, the stock has fallen from $9.07 to $7.75 (at the time of writing), suggesting it remains overvalued.
The broker noted:
Resources at Red Lake reduced due to: refinement in models, new drill data and adjustments for reconciliation performance. Excluding Red Lake, resources were up 8% across the group aided by the increased gold price assumption with additions including 1.3Moz at Mungari, 0.4Moz at Ernest Henry, and 0.4Moz at Red lake. Cowal saw a slight YoY resource reduction while Mt Rawdon also saw depletion.
What are other brokers saying?
This week, two brokers downgraded their rating on Evolution Mining shares.
On 16 June, UBS downgraded its rating to sell and placed a $6.70 price target on the ASX 200 mining stock.
As reported by the Australian Financial Review, UBS analyst Levi Spry predicted lower production and higher investment spending than Evolution Mining expects.
Yesterday, Jefferies also downgraded its rating to sell, with a price target of $6.75.
Overall, brokers believe the ASX 200 mining stock has further to fall.
Foolish Takeaway
When ASX shares retract, retail investors are often tempted to 'buy in the dip'. Since 2009, this strategy has mostly paid off, with subsequent bear markets being short-lived. However, ASX stocks can always fall further. Evolution Mining shares have had an incredible run this year, rising 60% for the year to date. Several brokers now see the company as overvalued. Those looking to buy Evolution Mining shares should consider waiting for a better opportunity.
