Capex growth pains for Evolution

Evolution Mining has been working away at having a portfolio of 6-8 top quality gold assets ever since its inception in 2011 (reports Barry FitzGerald on MiningNews).
23rd July 2021
Resources Rising Stars

There has been a string of divestments and acquisitions along the way to get to the model portfolio.

But there is more work to do. Among its current portfolio of six assets, only Ernest Henry in Queensland is truly top quality, while Cowal in NSW and Red Lake in Ontario have the credentials to become top quality.

Even then, studies in to taking Ernest Henry deeper so it can continue to dazzle beyond the current known 3.5 years need to be completed, and a whole lot of capex has to be thrown at Cowal and Red Lake to make them top notch.

While the wait on Glencore to deliver the longer terms plans for the Ernest Henry partnership will continue into next year, Evolution's wholly-owned plans to make Cowal a great mine, and restore the historical Red Lake to its former greatness, have just been detailed in a three-year outlook by the company.

The outlook did not go down well with the market.

It was released at the same time as the group's June quarter production report which fell well short of market expectations, meaning Evolution's share price was going to come under pressure anyway.

But the real share price damage was done by the market's struggle to come to grips with the massive escalation in growth capex over the three-year outlook. It rises from the actual A$274 million in FY21 to $440-510 million in FY22, $490-560 million in FY23, and $290-360 million in FY24.

Evolution shares fell 15% in the following three trading days while Newcrest was down by 3.3% and Northern Star 6%. Share price targets on the stock tumbled, with Macquarie leading the way by slashing its price target by 18% to $4 a share.



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