Why is the Evolution (ASX:EVN) share price sinking 10% today?

Key points

• FY 22 guidance maintained
• Gold production slipped
• Cash in bank up

The Evolution Mining Ltd (ASX: EVN) share price is taking a tumble today, down 10.13% to $3.51 per share.

Below we take a look at the ASX gold miner’s quarterly activity report for the period ending 31 December, which appears to be driving today’s losses.

What did Evolution report?

• Gold production of 148,084 ounces, down from 170,681 ounces the prior quarter
• Improved All-in Sustaining Cost (AISC) of $1,347 per ounce
• Evolution maintained guidance for FY22 of 670,000–725,000 ounces with a forecast AISC of $1,135–1,195 per ounce.
• Cash in bank of $1.150 billion as at 31 December, up from $422 million the previous quarter

What else happened in the quarter?

The Evolution share price is under pressure today, despite the gold miner reporting year-to-date production of 318,766 ounces at an AISC of $1,381 per ounce and maintaining its guidance for the 2022 financial year.

Investors may be selling Evolution shares on the 13% quarter-on-quarter reduction in gold production.

The average gold price the company received increased from $2,364 per ounce in the September quarter to $2,378 in the December quarter. But the amount of gold sold dropped from 163,046 ounces in the prior quarter to 155,287 ounces in the quarter just past.

One of the factors hampering gold production during the quarter was heavy rains at Evolution’s Cowal and Mt Rawdon projects, which impacted access to the pits during the quarter.

Evolution also said labour shortages are creating challenges at its Mungari mine in Western Australia.

As for the pandemic, the company reported that, “COVID-19 continues to be proactively managed with limited impact on operational performance in the December quarter. However, positive cases and isolation of close contacts has resulted in periods where up to 15% of the workforce has been unavailable at Red Lake and Cowal.”

Mine operating cash flow increased 5% quarter-on-quarter to $203 million.

Evolution had a net debt position (excluding pre-paid loan fees) of $449 million as at 31 December.

What’s next?

Looking ahead, Evolution said it’s continuing to upgrade the quality of its asset portfolio.

Among those, it pointed to its “transformational acquisition of Ernest Henry”, which was completed on 6 January.

According to the company, “An immediate increase in copper production will reduce Group All-in Sustaining Costs and positions Evolution as one of the lowest cost gold producers in the world.”

Evolution’s current guidance and outlook “include the benefit of this acquisition”.

Evolution share price snapshot

The Evolution share price has struggled over the past 12 months, down 25%. That compares to a gain of 1% posted by the S&P/ASX 200 Index (ASX: XJO) over that same time.

So far in 2022, Evolution shares have slipped 14%.

The post Why is the Evolution (ASX:EVN) share price sinking 10% today? appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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