Less Gold At Evolution Mining’s Mt Carlton

Australia | Jan 13 2020

Evolution Mining has forewarned of a downgrade to reserves and resources at its Mount Carlton gold mine while highlighting the need to seek alternative water supplies at Cowal.

-Gold production guidance for Mount Carlton reduced
-Battle to contain costs in FY20 envisaged
-Enhanced strategy to reduce fresh water consumption at Cowal

By Eva Brocklehurst

Evolution Mining ((EVN)) has endured a setback, with December quarter preliminary results indicating a reduction in gold production from Mount Carlton. The company has also forewarned of a downgrade to reserves and resources at the mine.

FY20 guidance has been reduced to 70-75,000 ozs from 95-105,000 ozs for Mount Carlton, Queensland. The mine comprises 10% of group gold production and, while this appears to be a small proportion overall, Mount Carlton has outperformed and generated robust cash outcomes in the past.

Gold bearing veins at the base of the V2 pit, extending into the planned underground development, are now narrower than previously estimated. This is the main driver of the downgrade to production expectations. A resource update from the geological review is due in February 12 and should reveal the extent of narrowing.

Morgan Stanley suspects gold production could be reduced further into FY21 as the narrowing ore bodies affect pit and underground modelling. Macquarie reduces production run rate estimates by -36%, to around 66,000 ounces, while lifting cost estimates to around $1330/oz. Given the narrower veins are also in the underground extension the broker, too, expects there is likely to be an impact over the longer term. The lodes in the open pit are tapering into a series of narrower structures at a shallower depth.

FY20 group production has been reduced to the lower end of the guidance range of 725-775,000 ounces. All-in sustainable costs guidance (AISC) for FY20 is unchanged at $940-990/oz, despite the December quarter AISC at $1069/oz. Credit Suisse believes there is a risk this will not be achieved.


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