Australian gold miner Evolution has warned production costs at its Mt Carlton site in Queensland are set to surge more than 40 per cent after drilling discovered orebodies to be narrower than first thought, with forecast full-year gold production volumes also flagged to come in well below earlier estimates.
Evolution’s Mt Carlton had been forecast to produce 95,000 to 105,000 ounces in the year to June 30, but in an update to the market on Friday, the company revealed the mine’s forecast output had been slashed by 27 per cent to between 70,000 and 75,000 ounces for the full year, driving down the group’s overall gold production.
The $6 billion gold miner said drilling in sections of the pit at the Mt Carlton mine had found the orebodies were narrower than expected, meaning the cost of mining the gold would increase from less than $850 an ounce to between $1150 and $1225 an ounce.
“Mt Carlton was scheduled to produce significantly higher ounces in the June 2020 quarter from the mining of thick, high-grade areas in the pit and underground,” Evolution said.
“However … the unanticipated loss of ore tonnes in areas that were planned to be mined over the remainder of financial year 2020 are expected to result in an estimated production range of 70,000 to 75,000 ounces for Mt Carlton.”
Evolution said production for the three months to December was 170,890 ounces, down from 199,967 ounces the previous quarter.
Shares in Evolution fell sharply on the news and ended the session 6 per cent lower at $3.58.
As investors turn to gold as a hedge against policy and economic uncertainty, Australian miners of the safe-haven metal have emerged as beneficiaries of the protracted period of geopolitical tensions and market disruption driven by ongoing US-China trade tensions.
The Australian dollar-denominated gold price reached a record high this week of $2288 an ounce amid investor anxiety about the potential for military conflict between the US and Iran. A subsequent de-escalation pushed gold prices lower on Friday from its mid-week highs.
Evolution on Friday said its six Australian mines had been expected to produce 725,000 to 775,000 ounces of gold for the financial year. As a result of the Mt Carlton setback, group production would now be at the lower end of guidance, the company said.
RBC Capital Markets analyst Paul Hissey said the news at Mt Carlton, although one of Evolution’s smaller assets, could offset the usually solid and consistent performances of the company’s larger assets including Cowal and Ernest Henry.
“Some of Evolution’s smaller, more-mature assets have the potential to offset some of the upside – as demonstrated by this announcement,” he said.
“We continue to think Evolution’s strong cash flow generation is likely to maintain appeal for generalists seeking gold exposure given their track record and diverse asset base.”
Source: Thanks smh.com