Why did the Evolution share price crash 47% in FY22?

The Evolution Mining Ltd (ASX: EVN) share price was among the worst performers on the ASX 200 during the 2022 financial year.

The gold miner’s shares lost 47% of their value during the 12 months.

Why did the Evolution share price get crushed?

Interestingly, the majority of this decline came in the final month of the financial year following the release of an abject update.

Investors were selling down the Evolution share price in June after the company revealed that it expects to record a decline in production in FY 2022 with higher than expected costs.

Evolution is forecasting total production of 640,000 ounces with an all-in sustaining cost (AISC) of approximately $1,250 an ounce.

This compares to 680,788 ounces and an AISC of $1,215 an ounce a year earlier.

What are brokers saying?

This update didn’t go down well with analysts at Credit Suisse. In response, the broker reiterated its underperform rating and slashed its price target by 28% to $2.70.

Elsewhere, analysts at Citi responded by retaining their neutral recommendation (now with a high risk rating) and cutting their price target by 28% to $3.30.

Citi appears to believe the company’s outlook is extremely cloudy and isn’t expecting any cash generation for a few years.

Citi explained:

There’s a lot to unpack after today’s higher-cost, lower ounce outlook including read-through to the rest of our coverage. In Nov’21, EVN had expected to do +900koz in FY24 @ A$1050/oz vs today’s 800koz @ $1240/oz. We’ve cut our TP from $4.60/sh to $3.30/sh trimming EBITDA by almost 20% next year.

After today’s +21% sell off vs XGD -7%, EVN is now trading on ~0.90x P/NAV. EVN’s usually hefty valuation premium is gone. On our gold deck and including debt repayments, we’re not expecting EVN to make any cash until FY25, and that hinges on Red Lake. We thus assign a High Risk rating; without conviction on the Red Lake turnaround, Mungari plus our sideways tracking gold price it’s hard to be more positive here.

All in all, it looks set to be a tough few years for the company. In light of this, it isn’t overly surprising to have seen the Evolution share price fall so hard over the last 12 months.

The post Why did the Evolution share price crash 47% in FY22? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 no position in any of the stocks mentioned. 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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