Earnings call transcript: Evolution Mining Q3 2026 sees strong cash flow, stock surges

Evolution Mining Limited (ASX:EVN) reported robust financial results for Q3 2026, highlighted by significant cash flow and a strengthened balance sheet. The company generated AUD 406 million in cash flow and achieved a net cash position of over AUD 40 million. Following the earnings announcement, Evolution Mining’s stock price rose by 7.35%, closing at AUD 13.19, reflecting investor optimism about the company’s financial health and future prospects.

Key Takeaways

• Evolution Mining reported AUD 406 million in cash flow for Q3 2026.
• The company reached a net cash position of over AUD 40 million, marking a significant de-leveraging achievement.
• Stock price surged by 7.35% post-earnings announcement.
• Gold production stood at 170,000 ounces, with copper production at 11,000 tonnes.
• The company revised its FY 2026 AISC guidance to be 6% better than initially expected.

Company Performance

Evolution Mining demonstrated strong operational performance in Q3 2026, with significant cash generation and improved balance sheet metrics. The company achieved a net cash position, a milestone reflecting its rapid de-leveraging strategy. According to InvestingPro data, the company maintains a current ratio of 1.11 and its cash flows can sufficiently cover interest payments, underscoring its solid financial foundation. The company has also maintained dividend payments for 14 consecutive years, currently offering a dividend yield of 5.82%. Despite challenges such as weather impacts at the Ernest Henry mine, Evolution Mining maintained resilient production levels and continued to invest in growth projects.

Financial Highlights

• Revenue: Not specified
• Operating cash flow: AUD 769 million
• Net mine cash flow: AUD 486 million
• Gold production: 170,000 ounces
• Copper production: 11,000 tonnes
• All-in sustaining cost (AISC): AUD 2,220 per ounce

Market Reaction

Following the earnings release, Evolution Mining’s stock surged by 7.35% to AUD 13.19. This positive market response reflects investor confidence in the company’s financial performance and strategic direction. The stock has delivered an 11.46% return over the past year, with InvestingPro Tips highlighting the company’s high return over the last year as one of 10+ additional insights available to subscribers. The stock’s movement positions it closer to its 52-week high of AUD 17.75, indicating a strong recovery trajectory.

Outlook & Guidance

Evolution Mining revised its FY 2026 AISC guidance to AUD 1,640-AUD 1,760 per ounce, representing a 6% improvement over previous estimates. The company expects continued cash flow improvements in the June quarter and remains focused on extending mine life at key operations through exploration and expansion projects.

Executive Commentary

CEO Jake Klein stated, "Our strong cash generation and net cash position reflect the disciplined execution of our strategy. We are well-positioned to capitalize on the current high metal price environment to drive further growth and shareholder value."

Risks and Challenges

• Weather impacts: Adverse weather conditions at the Ernest Henry mine affected production levels.
• Cost pressures: Rising labor and consumable costs could impact margins.
• Market volatility: Fluctuations in metal prices may affect revenue and profitability.
• Operational disruptions: Potential for supply chain issues or equipment failures.
• Regulatory changes: Changes in mining regulations could affect operations.

Q&A

During the earnings call, analysts inquired about the impact of weather disruptions and the company’s strategies to mitigate future risks. Management emphasized ongoing efforts to improve water management and operational resilience to minimize future disruptions.

Evolution Mining’s Q3 2026 results underscore its strong financial position and strategic focus on growth and operational efficiency, with the market responding positively to its performance and outlook. For investors seeking deeper insights, the company is one of 1,400+ US equities covered by comprehensive Pro Research Reports, which transform complex financial data into clear, actionable intelligence through intuitive visuals and expert analysis.

Full transcript - Evolution Mining Ltd (EVN) Q3 2026:

Baden Moore, Analyst, CLSA2: I would now like to hand the conference over to Mr. Lawrie Conway, Managing Director and Chief Executive Officer. Please go ahead.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Thank you, Ashley, and good morning everyone. I’m joined on the call today by Matt O’Neill, our Chief Operating Officer, Glenton Masterman, our VP Discovery, Fran Summerhayes, our CFO, and Peter O’Connor, our GM Investor. Today, we released our March Quarterly Report and an Exploration Update which will be the reference points for the call. A key milestone and highlight for the quarter was the transition to a net cash position on the back of another very good quarter. After generating AUD 406 million in group cash flow at just under $2,500 per ounce, we are now in a net cash position of over AUD 40 million. Our cash balance at the end of the quarter was AUD 1.37 billion, and we have no debt repayments until FY 2029.

The rapid de-leveraging, where we have moved from over 30% gearing to net cash in just over two years, is a reflection of Evolution’s high-margin portfolio consistently delivering to ensure the benefits of the high metal price environment are banked. To put this into perspective, we have removed around AUD 1.7 billion of net at average achieved gold and copper prices that were $2,100 per ounce and $3,200 per ton below current spot prices while still investing in high-grade projects and paying dividends to our shareholders. We are on track to generate approximately AUD 3.6 billion of operating mine cash flow in FY 2026, where the June quarter is planned to further improve our net cash position.

The charts on page one of the quarterly report are a great graphical representation of our cash-generating capability and the momentum being built, while at the same time investing in high-return projects that either grow production or extend mine life. This outcome is a credit to everyone involved at Evolution who continue to safely deliver the plan with the right level of cost and capital discipline. In the March quarter, we produced 170,000 ounces of gold and 11,000 tonnes of copper at an all-in sustaining cost of AUD 2,220 per ounce for continuing operations. The high all-in sustaining cost for the quarter was driven by the lower production and especially the lower copper by-product credits at Ernest Henry. We delivered the quarter safely with our TRIF remaining low at 5.9.

The March quarter was expected to be a lower production quarter due to the impact of the weather event at Ernest Henry in December and the planned semi-annual maintenance work at Cowal. Ernest Henry is now back to normal operations. The outcomes of the weather impact at Ernest Henry will mean that we are expected to be around the low end of the group copper guidance. We remain on track to deliver our FY 2026 group production at the all-in sustaining cost guidance of AUD 1,640-AUD 1,760 per ounce. This all-in sustaining cost guidance is 6% lower or better than our original guidance. The group cash flow was on the back of AUD 769 million and AUD 486 million of operating and net mine cash flows respectively.

It should be noted that these were achieved despite Ernest Henry being cash flow negative for the quarter. Mine cash flows are on track to lift significantly in the June quarter. All our projects remain on plan and budget. The recently approved E22 coarse particle flotation and expansion study projects have progressed well in the first six weeks, while the preparation to commence development of the Bert deposit at Ernest Henry is underway. I want to make a couple of comments about the current global fuel supply situation. To date, we’ve had no material operational impacts, not just from fuel, but our overall consumables. Matt and Fran are actively managing our supply chain logistics and have appropriate response action plans in place. The greater focus of the team is ensuring continuity of supply of all goods and services.

Specifically on fuel, supplies are contracted with major oil distribution companies who continue to fulfill their obligations. Fuel represents 2% of our total costs, and while there is a current elevated pricing, it is not having a material impact on our cost base. On the exploration results released today, Glenton and I are very excited at what they offer in terms of adding low-cost ounces to the portfolio. They show that Mungari and Cowal, there is a lot more gold to be discovered at what are already long-life operations. Some key highlights include the very encouraging results in the underground areas of Genesis and Arctic at Mungari, which supports our aim of extending the high-grade underground mine life at current production rates. While at Cowal, significant high-grade results were received at the Oban underground target.

Meanwhile, significant new results in multiple locations across the planned E41 open pit will provide useful insights into the full scale of the deposit ahead of its development. Regional exploration around Ernest Henry will be accelerated over the next six months following our consolidation of large tenement holdings surrounding the mine. We’ve also started work on the two most recent projects in British Columbia. With that, I’ll now hand over to Matt to take us through the operational performance.

Thanks, Lawrie. As Lawrie’s already mentioned, the operational performance for the March quarter was in line with our plan on the back of the rain event at Ernest Henry and the normal plant maintenance schedules at

Baden Moore, Analyst, CLSA0: Safety performance remains in a very healthy position with the continued strong performance in this area thanks to the tireless work occurring across all parts of our business. I’d like to take this opportunity to say a big thank you to all our employees who contribute to this every day. On the production front, we are on track to meet full year guidance for gold and to land at the lower end of guidance for copper. The most significant operational milestone through the March quarter was the resumption of normal operation. For me, the highlight of the work conducted by this team was the fact that it was completed without any significant injuries or incidents.

Throughout the March quarter, the Cloncurry region continued to experience higher than average rainfall, which did slow our recovery activities, resulting in additional impacts to the full-year production for Ernest Henry, which are now estimated to be between 9,000 ounces-11,000 ounces of gold and 6,000 tonnes-8,000 tonnes of copper. At Cowal, we also saw wet weather have an impact on the completion of mining stage H in the E42 pit. Pleasingly, the processing plant operated uninterrupted, with additional feed sourced from surface stockpiles throughout these weather events. We also completed the regular plant maintenance program on schedule at Cowal. As we move into the June quarter, we will be mining the final ore from stage H, and as previously advised, we will then move to the stage I cutback and be processing stockpile ore in FY 2027.

This will see Cowal producing around 10% lower ounces next year. However, importantly, we’ll not see a material change in cash flows from the processing of the already mined ore. Northparkes, Red Lake and Mount Rawdon all performed in line with expectations, with the quarter’s highlights at these operations being the approval by the Board of the growth projects at Northparkes, the cash flow generated at both Red Lake, which was a record AUD 104 million for the quarter and nearly AUD 225 million year to date, and at Mount Rawdon, which was AUD 13 million in the quarter and over AUD 30 million year to date from processing very low stock material. Mount Rawdon is planned to complete processing at the end of this financial year. Mungari delivered a raft of new records over the quarter, with the fully commissioned mill operating at nameplate capacity throughout the quarter.

Most notable of these records are the quarterly net mine cash flow of AUD 175 million and gold production of 51,000 ounces. Mungari has generated over AUD 320 million of net cash flow so far this year, confirming the decision to invest in the planned expansion and the establishment of the Castle Hill mining hub. Looking forward, we are well set for a strong final quarter with the return of Ernest Henry to normal operations, the continued strong performance at Mungari, and Cowal having completed its annual maintenance program and mining back in stage H. I’ll now hand over to Glenn to talk through the exploration announcements made.

Glenton Masterman, VP Discovery, Evolution Mining: Thank you, Matt, and good morning, everyone. I’d like to turn your attention to our exploration announcement, which was also released this morning, to give a brief update on where we’ve seen some momentum over the last six months. Starting with Mungari, I want to briefly revisit some of the commentary I made the last time we updated our drilling results. What the team has achieved recently has fundamentally changed the view on historical geological thinking around Kundana, which had largely written off the potential for meaningful new discoveries, particularly beyond the well-known high-grade tram track positions. By challenging that old geological dogma, we’ve intersected high-grade veins in new structural positions outside where the traditional models were looking. That’s significant because it effectively broken the old paradigm and opened up entirely new search spaces around Kundana.

In practical terms, that gives us a much bigger opportunity to continue growing high-grade underground resources and reserves. The best example of this occurs at Genesis, where drilling has targeted extensions of a known system we discovered, which is shown in figure one of the update. Infill drilling across a 300 meter gap northwards towards the Barkers mine that previously had no drilling whatsoever, recently returned narrow intervals, but at very high grades, including numerous short intervals grading about 10 ounces to the tonne, yielding intercepts better than 90 gram meters and confirming mineralization occurs continuously across this zone. The results I am describing all occur outside the mineral resource footprint and are importantly located near existing underground infrastructure, so it has real implications for extending mine life. At the nearby Arctic deposit, surface drilling beneath the open pit has also yielded high-grade results.

These build on previously reported work and continue to demonstrate the potential to expand underground resources, particularly at depth, where historical drilling has been limited. The objective of ongoing follow-up drilling is to delineate the scale, continuity, and geometry of these mineralized systems with the clear ambition of converting into a long-term underground reserve, securing high-grade production over a longer mine life, capable of maintaining at or above the currently achieved annualized rate of 200,000 ounces per annum. Turning now to Cowal, where step-out drilling highlighted in Figure 2 of the release has been equally encouraging. We recently received results from the surface drilling at E41, which as a reminder, is located a few hundred meters south of E42 and will be mined as part of the Open Pit Continuation project.

Results released this morning returned broad, consistent intercepts beyond the outline of the planned E41 pit. What’s notable is that drilling perpendicular to the mineralized veins rather than parallel as much of the historic drilling was, is opening up areas that were previously considered well-tested. This highlights clear potential to grow the E41 footprint, particularly to the north towards E42 and the underground mine. I should also add that the E41 pit shape referenced in Figure 2 was optimized at a very conservative gold price of $1,760 per ounce. Underground at Oban, results continue to build confidence. Drilling is targeting major mine-scale structures and a favorable geological contact that elsewhere at Cowal is known to host high-grade mineralization.

Importantly, the recognition of this key contact, illustrated in Figure three on page four, has unlocked an entirely new search space to the north and south between the E41 pit and the Glenfredric Fault, which has hardly ever been drilled. We received multiple high-grade intercepts that support the potential for Oban to evolve into a new independent mining front over time, and a geological position where I’m confident further work will lead to the delineation of future resource iteration in the mine plan in the years ahead. This will be a major focus going forward. Looking beyond the operations, we’re also continuing to build our longer-term pipeline. In North Queensland, around Ernest Henry, we’ve expanded our landholding and identified several drill-ready copper-gold projects with an aggressive drilling program planned over the June and September quarters.

In Canada, permitting and community engagement are progressing at Two Times Fred and Clisbako in British Columbia with drilling planned across the summer field season. Meanwhile, drilling is underway at the October Gold Project joint venture in Ontario, with assay results expected later in the June quarter. Overall, these results reflect our discovery strategy in action, continuing to unlock value in the short to medium term at our operating assets while building a strong pipeline of drill ready and more advanced exploration plays with the potential to deliver new greenfields production opportunities in the medium to long term. With that, I’ll turn the call back to Ashley to open the line for questions. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two.

Baden Moore, Analyst, CLSA2: If you’re on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Hugo Nicolaci with Goldman Sachs. Please go ahead.

Hugo Nicolaci, Analyst, Goldman Sachs: Morning, Lawrie, Matt, Glenn, Fran. I hope you’re well. First one just on Mungari, you got above nameplate through the quarter. I just wanted to get a sense of how much of that is running softer, or are you already finding opportunities to start to push that nameplate a little bit?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Thanks, Hugo. I’ll hand that to Matt. I asked him the same question, going at the higher rates, but it is all. Yeah. No, it is. It’s an obvious one when you look at those numbers. It is some of the transitional or easy-to-have ore from Castle Hill that’s causing the increase there. That said, it’s obviously something that we’re going to target. At this stage, it’s running at nameplate, but we put what we designed through it.

Hugo Nicolaci, Analyst, Goldman Sachs: That’s helpful. Second one, maybe a two-parter on exploration. I mean, obviously some exciting drilling results that you put out today. I guess just firstly, when should we start to see those flow into resource updates? Is that something for the update this year? Secondly, at Cowal, I think the resource and asset life upside tends to be firming up at both the open pit and underground there. I think I asked you this last time, but at what point do we start to consider mill expansion studies at Cowal?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Glenton will talk to the first two parts. The last bit about the plant expansion is, I think as we get more information, we’ll look at it. It’s going to be predicated on once we get into E46 and E41, as to what we do with the plant. We’re probably at least 12 months-18 months off worrying about that one. Yeah. The results that we put out this morning for Mungari and for Cowal won’t be captured in the next MRR update. They’ve just come in a little too late for us to write those. We have already delivered a resource and reserve at Genesis, so that is a growing kind of ongoing concern. It would be the best way to describe it, and what we’re excited about is that we can see the opportunity unfolding along that trend between the Pope John Pit.

Glenton Masterman, VP Discovery, Evolution Mining: It’s a hanging wall structure that sits outboard of it, and it looks like it’s going to link into Barkers. We believe that we’re going to fill in that gap between Genesis and Barkers. What we’re looking to do, particularly in the next 12 months, is drill that really aggressively so that we can capture it in the 2026 MRR statement. That’s the plan there. I would say turning to Cowal with the particularly what we’re doing at Oban, there’s a lot of space there and on Figure 3. One of the things that we really like at Oban is the contact that I described earlier appears to be very similar, if not a repeat, we haven’t confirmed that, of the contact which controls all of the underground mineralization in the underground mine at the moment.

We’ve got another one of these. What we’re showing in that image is all of the drilling, and there’s hardly anything along it. There’s a long way to go there to explore, but we have the target at open, and we’ll continue basically to expand the story as we know it along strike, north and south, and look to get more drilling into that space over the coming 12-18 months.

Hugo Nicolaci, Analyst, Goldman Sachs: Fantastic. Thanks, guys. Just the last one. I know you’re 100 km-200 km away at Northparkes and Cowal. Any impacts to safety or mine disruption from the earthquake overnight?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: No, nothing from the Northparkes or Cowal side.

Hugo Nicolaci, Analyst, Goldman Sachs: Great. Thanks, guys. That’s the last one.

Baden Moore, Analyst, CLSA2: The next question comes from Kate McCutcheon with Bank of America. Please go ahead.

Kate McCutcheon, Analyst, Bank of America: Hi, good morning, Lawrie. Thank you for the 2027 Cowal reminder there. For this year, still on track for the guidance. Help me think about the four key step up here to get you to that circa 190-ounce level that you did a couple of quarters back. I assume it’s Cowal plus stage H grade with Ernest Henry normalizing. Can you just talk through that?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah, I’ll get Matt to add to it. I think he’s got too much to add, but the two biggest drivers are assets.

Baden Moore, Analyst, CLSA0: Yeah, I think the two big ones that people are well aware of, finishing the scheduled maintenance at Cowal, Ernest Henry coming back online are the two primary. Outside of that, the Mungari operation continuing to run at a pretty good rate, Northparkes doing what it’s done. You will see a little dip with Northparkes with the old stockpiles from E31 coming towards the end. Outside of that, business as usual with the uplift from the two ones that you identified.

Kate McCutcheon, Analyst, Bank of America: Okay, got it. Cowal, the underground opportunity there, I like it, returning hits of 1-2 grams under E41 and the underground system is extending. Obviously, the prize is getting out more high-grade underground tonnes. Glenn spoke to this a little before, but I guess what do you need to get confidence to say another exploration decline there? How do we think about timing or stage gates for a larger underground operation?

Glenton Masterman, VP Discovery, Evolution Mining: Kate, I was hoping someone would ask that. Look, I think if we go back to the discovery in 2018 of the underground mine, particularly the Dalwhinnie lode, which really made the difference there, the first drill hole results into commencing production in the underground. That is the timeframe that we would be thinking. A minimum of 3 years. This is going to require a lot of drilling. We actually also have to get new positions in to improve the angle of attack on the ore body, I should say. That would be something that we need to be doing and I’ll be leaning on Matt very heavily to help drive that for us so that we can get the rigs in position to do that. I’d see that being a 3-year opportunity.

I think, reflecting on the results at E41, the historical drilling has been largely oriented in an east-west direction, and that, as we have learned in the Cowal underground, has been a suboptimal drilling orientation. We’ve pivoted the rigs around now to hit those veins at a much better angle. What we have seen historically in the underground is when we’ve done that, we do see in some areas improvement in grades. We’re hoping that as we start to fill that in at a much better angle, we’ll see similar behavior at E41. Obviously, as I mentioned, the pit shell that we’re showing there is a fairly conservative shell. We do expect as we get resource space drilling into E41, that we can improve the way that pit optimizes.

Kate McCutcheon, Analyst, Bank of America: Okay, got it. If I can sneak one last quick one in, the operating cash flow projected this year, you’ve noted no intent before to sit on a cash stockpile or do deals at record prices. Is it fair to assume the Board revisits the capital management policy at the FY, or how do we think about capital returns?

Glenton Masterman, VP Discovery, Evolution Mining: Yeah, Kate. We previously said, as we get to the end of the financial year, once we’ve got our life of mine plans in, Fran and the team will put together an updated capital management plan, looking at what we do with dividend policies and capital returns. That will come out with the full-year financial results.

Kate McCutcheon, Analyst, Bank of America: Excellent. Thank you.

Baden Moore, Analyst, CLSA2: The next question comes from Levi Spry with UBS. Please go ahead.

Levi Spry, Analyst, UBS: G’day, team. Thanks for your time. Maybe another question for Fran then. Just on the costs, markets obviously focused on it across all sectors. Diesel’s only a very small portion of your cost base, and you’re probably relatively a much better set up than some of your peers. What about the rest of the pie chart? What are you seeing there? How do we think about what happens into FY 2027?

Fran Summerhayes, Chief Financial Officer, Evolution Mining: Yeah, Levi, just in regards to the costs, when you look at our cost structure, nearly 50% of our costs are labor.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: I would have said six months ago as inflation was sort of trending in that sort of 3.5%-3.8% range and trending down. That’s certainly changed now. We would expect you’re probably going to be seeing somewhere between 4% and 5% in terms of labor cost movement going into FY 2027. When you then look at our other costs, power, fairly well set up there with Cowal and Northparkes pricing fixed. Ernest Henry and Mungari are through FY 2027 as well in terms of pricing. Some slight escalation there. When you look at our consumables, it is going to be dependent upon how long the current situation lasts in terms of temporary pricing that we’d be requested to cover for additional logistics costs and the like.

Given that that’s sort of 50% of our cost base, you’re probably going to see a few % increase in that bucket as well. Overall, I think, it’s still being well managed, but it does depend on what happens over the next 3 months-6 months, Clyde.

Levi Spry, Analyst, UBS: Got it. Okay. Thanks, Lawrie.

Baden Moore, Analyst, CLSA2: The next question comes from Daniel Morgan with Barrenjoey. Please go ahead.

Daniel Morgan, Analyst, Barrenjoey: Hi, Lawrie and team. My question is on Mungari, just on costs. For this question, can we just put diesel to one side for a moment about what we’re experiencing in a live session? Just on cost, was this a representative quarter for Mungari, i.e., AUD 2,150 AISC? In previous quarters on the cost side, we had obviously some capitalization of different spend, and obviously the project wasn’t fully ramped up. Just wondering if you feel this is a representative quarter. Thanks.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah. Dan, it’s getting close. I mean, we said around a 16% reduction in all-in sustaining costs once they’re running and depending then on the mix of the ore. We would see it’s probably somewhere in the AUD 2,250-AUD 2,350 range is what you would see, AUD 2,400 at sort of the upper end, which would be in line with what we had projected. It was a good quarter, really predicated, I’d say, on the campaign of the EKJV. Higher grade material, therefore, helping us in terms of both mining and processing costs there. What you’d see in Q4 is slightly higher, but then you’re getting close to the reflection of what Mungari will operate at.

Daniel Morgan, Analyst, Barrenjoey: Thank you. Just on Cowal, it’s quite clear that you’re moving from stage H and that high-grade ore next quarter towards stage I, where you’re going to be pushing back. Just wondering how long is it before you start to get material access to stage I ore? Is this FY 2027? Obviously a lot of hard work through there, but do we start to see better grades in 2028? Thank you.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah, it’ll be first half of FY 2028 is when we’ll start to get back into stage I ore, and also be getting into good material coming out of E46 as well. There’ll be nothing really of substance in 2027, and a little bit coming through in the first half and the second half of 2028 is when you’ll see it start to ramp up in stage I. It’s about 18 months.

Daniel Morgan, Analyst, Barrenjoey: Thank you. Last question just on Red Lake. It has been a period of better stability, delivery. I think one of the comments you say set up for a good end to the year. Can we just expand on the latest live view of ops through to the end of this year and anything beyond? Thank you.

Baden Moore, Analyst, CLSA0: Yep. It’s Matthew, Dan. Essentially the final quarter, we’re going into a couple of higher grade areas, driving an expected little bit of an uplift in grade. The development, if you have a look through that’s been really quite consistent. Same thing, you get a little bit of a drop with some ore in terms of throughput in the quarter. We had a few interruptions with power and with the winter side of things. Outside of that’s really where it’s headed. Pretty consistent, pretty well set up for both grade and volume for the next quarter.

Daniel Morgan, Analyst, Barrenjoey: Is that sustainable or are the benefits sustainable?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah. Dan, I mean, the position on Red Lake still hasn’t changed. We’re focused on getting 30,000-40,000 ounces out quarter-in, quarter-out, be positive cash, and what Matt’s been working well with John and the team is making sure they’ve got contingency in the system, given you’d know the difficulties you have at Red Lake with those, make sure that when some things don’t work out, they’ve got other areas to get to.

Daniel Morgan, Analyst, Barrenjoey: Okay. Sorry. Yeah, you just cut out. Thank you very much for your perspectives.

Baden Moore, Analyst, CLSA2: Thank you. Our next question comes from Jon Sharp with JP Morgan. Please go ahead.

Jon Sharp, Analyst, JP Morgan: Yeah, morning, Lawrie and team. First question just on Ernest Henry. You’ve said you’ve returned to normal operations. Can you just explain what exactly back to normal is, and is there any improvements there to go in this quarter? Probably more importantly, has anything changed with dewatering or water management to prevent this happening again or even just decreasing the consequences? Just trying to understand if it remains an operational constraint in the future. Thanks.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah. I’ll address the first one. Normal operations basically back to running out of the cave as we were prior to the event. That’s essentially what we’ve done, so running our truck loops and the crushers and everything back operating there. There’s some minor work still to go. We’re still dewatering the bottom section of the mine. It’s not an operational area, it’s where we’re doing our development. There is still some dewatering activities occurring through there, but they don’t impact the day-to-day operations at the moment. In terms of going forward, we’ve done the investigations and we’re working through that process as we talk now. There will be some learnings from it, but I think it’s important to remember that event was sort of three times what we’d seen previously in 2023.

Whilst it’s easy to sit here and say it’s a one-off event, it’s something that we need to learn from and the key for us will be preventing the water from getting there in the first place and then being able to work with it once it does. We are learning from it, and we will take steps to make sure we minimize the chance that it happens again.

Jon Sharp, Analyst, JP Morgan: Yep. Okay. That’s clear. Just second question, Lawrie, you’ve reiterated this morning that you’re tracking below the original all-in sustaining cost guidance. With three quarters now complete, Ernest Henry back to normal, do you have enough visibility to indicate whether this year’s all-in sustaining cost is likely to land below the midpoint of the updated range?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: I won’t put Matt into a difficult spot or Fran by saying where. Our view is we’re gonna get in that range. There’s a number of things that will determine it. You’ve got the gold price, copper tonnes, copper price. One thing I will say, and it’s mentioned on the call, the cost and capital discipline in the business, we’re running very well in terms of our sustaining capital and our operating costs against budget. We’ll be in the range. That’s the political answer that you needed to give Matt some room.

Jon Sharp, Analyst, JP Morgan: Thank you.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Thanks.

Baden Moore, Analyst, CLSA2: The next question comes from Matthew Frydman with MST Financial. Please go ahead.

Baden Moore, Analyst, CLSA1: Sure. Thanks. Morning, Lawrie and team. Can I firstly extend on Levi’s question on diesel? Obviously, pretty modest in isolation on the pie chart at 2%. Just so I’m clear, how does that play through in terms of the various kind of rises and falls across some of your mining contracts and other contracts you might have in place across the business that are sort of sensitive to diesel? Are there any other exposures outside of that sort of 2% in isolation that we should be thinking of? In particular, I suppose your sort of CapEx plan, the major projects you’ve got in your pipeline, presumably a lot of that is waste movement or underground development, so should we be thinking about, I guess, diesel or explosives or sort of other cost sensitivities there also?

Is it fair to kind of assume that sort of low single-digit number is a representative sensitivity in those areas of CapEx also? Thanks.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah, Matt. If you look at it, the rise and fall for any of the contracts that require use of diesel, be that haulage or mining contractors, you will see that diesel cost flow through. As we’ve said, though, it’s still captured in terms of the cost of our business. It’s not the major part of it. Labor is still half, and then you’ve got power at around 9%, 10% and the like. We’re not seeing a material impact, but those rise and falls do come through. In terms of then the capital, yes, you look at the biggest mine development we’ve got going over the next couple of years is at Cowal with E46 stage I and the like.

In terms of the mining cost, the material movement isn’t going to be significantly higher or nothing that’s of consequence for us in terms of our cost there. We just have to monitor it over the next few months to see where it all lands, Matt.

Baden Moore, Analyst, CLSA1: understand. Thanks, Lawrie. Maybe secondly, just quickly, it’s not a particularly material one, but obviously noting that in Ernest Henry during the quarter, you kind of highlighted non-operating costs of AUD 26 million related to recovery from the December quarter. Presumably with the ongoing impacts in the March quarter in terms of whether there’ll be some ongoing, I guess, non-operational recovery costs in future quarters, can you give us a sort of indication of what we should expect there, whether that’s gonna be a bigger quantum in the June quarter or onwards? Yeah, I expect there’s some sort of tail costs there. Thanks.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah, Matt. It looks similar to what we had in March 2023. You’ll start out as a large amount of costs of recovery and getting equipment out and getting all the infrastructure back to normal, and then it tails off. I would say through the June quarter you’ll see some more. As Matt said, we’ve still got water at the bottom of the mine that we need to get out and the like. We’ve still got some equipment. It will trend out. I don’t think you’re going to see multiple quarters at AUD 25 million-AUD 26 million, but I think most of it is being captured in this first quarter.

Baden Moore, Analyst, CLSA1: Understood. Thanks, Lawrie.

Baden Moore, Analyst, CLSA2: Your next question comes from Adam Baker with Macquarie. Please go ahead.

Adam Baker, Analyst, Macquarie: Hey, Lawrie and team. Congrats on achieving your net cash position. Appreciate a new capital management plan will be provided with the financial results. I’m just keen to hear your initial thinking surrounding capital management moving forward. Do you think the current dividend policy fits the purpose or could we see a change to this current dividend policy or could we potentially see an implementation of a buyback like some of your peers have done? Thank you.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah, Adam, thanks for the acknowledgement of net cash. It’s actually really pleasing to see the business get to that point with what we’ve been able to do over the last couple of years. It does give us a good problem. I think it’s fair to say over the last two quarters, Fran and I have received the most amount of feedback from shareholders as to what to do with the cash versus increased dividends, reinvestments, specials, buybacks. We’ll take all of that into consideration into the June year-end and discuss it with the Board. As I said, it’s a good problem to have. It’s come earlier than we probably would have expected.

I think the interim dividend that we paid, which was a material lift based on the cash that we’ve generated, and we paid forward some of the second-half cash. I think that’s a good reflection of what shareholders should expect going forward.

Adam Baker, Analyst, Macquarie: That’s a positive signal. Thank you. Just a clarifying remark with Cowal. You mentioned 10% lower ounces for FY 2027. Just wondering, is that 10% lower versus the midpoint of current guidance or is that 10% lower versus the lower point of guidance? Just trying to get an understanding here. It could be anywhere between 275,000 and 286,000 ounces. Thank you.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: I’ll try and help you out here, Adam. I’d say if you work out your estimate for the June quarter and take 10% off the full year, that’s going to give you a pretty good estimate of how it would be for next year. Matt’s explained we’ve finished the shutdown. You’ll see an uplift in production in the fourth quarter. Work that one through and then that’ll give you the number for next year. Matt and Joe won’t like it.

Adam Baker, Analyst, Macquarie: Okay.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: It means their guidance for next year is almost being set.

Adam Baker, Analyst, Macquarie: Thank you very much. Cheers.

Baden Moore, Analyst, CLSA2: Your next question comes from Baden Moore with CLSA. Please go ahead.

Baden Moore, Analyst, CLSA: Morning, everyone. Thanks for your comments on your fuel supply situation. I was just wondering if you could talk a little bit more to the duration of your contract position, what sort of time frames that you have in place, and then maybe whether you’ve had any conversations with government about how all your suppliers on how you might be prioritized for fuel in the event there is any level of rationing in the country. I guess the third layer might be just how do you think about just resilience and planning around if there is any disruption to supply. How do you plan around that? What are the safeguards for you?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah. I’ll answer the second question first in terms of government. Our position has always been that we’re responsible for our operations and making sure that we’ve got continuity of supply. And that’s what Matt and Fran and the site teams are working through. We don’t put our reliance on in terms of that government support. In terms of if they make a decision on rationing, we would address what the impact is on our operations at that point in time. I think, the one thing I’d say is our open pits are the largest diesel consumers, and at both Mungari and Cowal, we do have stockpiled material that we’d be able to put through the plant. It would mean you would slow some of your mine development down to preserve that use of diesel.

When we then look at the other consumables and everything like that is the work that Matt and Fran have got in place around what are our response actions that we need to take as we see any issues with consumables. The good news is that through March, we had no interruptions on anything in terms of supply of consumables into the business, and the outlook into the June quarter is very similar. In the first part, the contracts are multi-year contracts. We’ve got very good relationships with the oil companies that are the distributors for us. We would see them, as I said on the call earlier, they’re fulfilling their obligations. We’re not trying to do anything outside of the contract, and that’s maintaining the really good relationship to guarantee our supply.

Baden Moore, Analyst, CLSA: Thanks, just a quick follow. Can you talk to how many months inventory you’d have at hand? With the stockpiles you mentioned, what’s the duration that that would run for before you’d have any sort of impact to your cash flow?

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Yeah. Look, in terms of volumes on-site, as we’ve said, we’ve got adequate volumes on-site and continual delivery to our orders. That’s not seen as an issue. Much relevance to say what the percentages are because they’ll change today and they’ll be different again next week as we either consume or get deliveries. We’ve got adequate coverage. If you look at it, the biggest one is at Cowal. We’ve got over 47 million tons of stockpiled ore. We run at 8.8 million tons per annum. I think it gives you enough understanding of the impact on our largest operating asset should we not be able to have fuel on-site.

Baden Moore, Analyst, CLSA: That’s a great answer. Thank you.

Baden Moore, Analyst, CLSA2: Your next question comes from Belinda Humphries with iQ Industry Queensland. Please go ahead.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Thank you very much for the briefing today. I just wanted to talk about the exploration efforts near Ernest Henry. Are you able to go into a bit more detail about what’s going to happen in the June and September quarters of meters drilled, budget, that sort of thing? I’ll hand that over to Glenn. I don’t think he’s going to talk through the meters. I think he’ll talk more to the programs are more important for us.

Glenton Masterman, VP Discovery, Evolution Mining: Thanks. Sorry. Yeah. Look, the real objective of the program, on not just the recent tenements, but the sort of overall package that we’ve been sort of building up over the last several years, is to identify new production opportunities that can support filling the mill at Ernest Henry. We have latent capacity there, and so we’re not looking for huge deposits, but if we find one, we absolutely take it. We’re looking for probably more modest-style deposits that can help achieve that goal, essentially. The drilling programs, they’ll commence in the next month or two. We’ve been basically waiting. There’s been a lot of weather up there. We need to wait until everything is completely dry. Very difficult to get any access, particularly equipment, until it is dry. As soon as it is, we’ll be drilling.

We gave some examples of the types of targets that we’re looking at this morning in our update. That gives you a bit of a sense, 10 km from Ernest Henry, previous drilling, identifying anomalies. The consolidation of the tenements up there is the really exciting thing that’s happening because bringing those together means that we can explore the full opportunity rather than piecemeal it on tenement to tenement. That’s actually really helped how we’re going to prioritize the drilling program over the dry season. I just advise to stay tuned. We would look to be talking more about what we’re getting at the end of the December quarter by the time we have some results from that drilling program.

Baden Moore, Analyst, CLSA2: Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We’ll pause a short moment for any final questions to register. Thank you. There are no further questions at this time. I’ll now hand back to Mr. Conway for closing remarks.

Lawrie Conway, Managing Director and Chief Executive Officer, Evolution Mining: Thanks, Ashley. It’s pleasing to have delivered another very good quarter, and we’re on track to deliver our group guidance and take full advantage of the current high metal prices. Having moved to net cash and no debt repayments left by 2029, we’re certainly building the flexibility. Upcoming, we’ll release our 2025 MRR report in the next month, and then we also have an investor briefing and visits to Cowal and Northparkes. Thank you for your time on the call today.

Baden Moore, Analyst, CLSA2: That does conclude our conference for today. Thank you for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.