Evolution Mining Limited (EVN) Earnings Call Transcript
October 13, 2026
Earnings Call Speaker Segments
Thank you for standing by, and welcome to the Evolution Mining Limited September 2026 Quarterly Results. All participants is only mode. [Operator Instructions] I'd now like to hand the conference over to Mr. Lawrie Conway. Managing Director and Chief Executive Officer. Please go ahead.
Thank you, Darcy, and good morning, everyone. I'm joined on the call today by Matt O'Neill, our Chief Operating Officer; and Peter Rocio Connor, our GM, Investor Relations. Firstly, I want to thank everybody who participated in our investor briefing and tours to Cowal and North Park's operations last month. We appreciate you taking the time to engage with us to better understand our business and its direction. Today, we released our September quarterly report on the ASX, and this will be the reference point for the call. We are on track to deliver all of our FY '27 group guidance measures. September quarter production was a slower start than planned, mainly due to impacts of weather and grid power interruptions at a couple of operations. Production is planned to grow through the year and is weighted to the second half, as outlined when we released our guidance in August. Key production drivers for the remainder of the year include access to the Regal underground decline and higher tonnes out of E46 at Cowal, higher grades out of Castle Hill at Mungari and accessing new mining areas with higher grade at Red Lake. Matt will go through these shortly. Our safety performance was pleasing with our total recordable injury frequency improving to 5.8 and it remains very low. We produced 154,000 ounces of gold and 18,000 tonnes of copper at a very low all-in sustaining cost of $1,653 per ounce. This is one of the lowest in the sector. Our sustained cost control complemented by the upside from our copper exposure were the key drivers to the all-in sustaining cost, which is below the low end of guidance. The low-cost position resulted in mine cash flows of $775 million and $466 million of operating and net mine cash flows, respectively. All operations were net cash positive for the quarter, with Ernest Henry a standout, delivering a record net mine cash flow of $186 million. The charts on Page 1 of the report clearly shows our high margin and cash generation with our all-in sustaining cost margin improving to 73%. The cash flow potential is significant. At Q1 achieved prices, FY '27 operating mine cash flow would be around $3.6 billion, which is $200 million higher than FY '26 even allowing for cost escalation during FY '27. Group cash flow for the quarter was $185 million at a rate of $1,185 per ounce, while our cash balance at the end of September was $1.47 billion, improving our net cash position to $141 million. We have no debt repayments until FY '29 and are fully unhedged. All our organic growth projects remain on schedule and on budget. Last week, the Board approved the concentrate regrind and filtration project at North Park that will further improve recoveries by 2% and 1% for gold and copper by the start of FY '29. This is another high return project with an IRR of between 30% to 37%. Evolution's share of investment is $72 million, and this is included in our existing group capital outlook. Exploration continues to strengthen our growth pipeline with an excellent result at Ernest Henry where we intersected mineralization up to 900 meters below the current mining area. This included 61.3 meters at 1.26 and 0.77 tonnes gold. It gives us confidence that Ernest Henry is likely to be operating well beyond the current mine plan to 2042. At Cowal in North Park, we continue to see encouraging results for further organic growth. All of this aligns with what Glen presented last month at the investor briefing. The acquisition of Carnaby Resources remains on track for completion by mid-November, subject to Canopy shareholders vote in favor of the scheme. With that, I'll now hand over to Matt to take through the operational performance.
Thanks, Lawrie. The September quarter has demonstrated the value of our diversified portfolio. From an overall business perspective, the strong performances from the Ernest Henry and North Park operations have helped to mitigate the slower-than-planned start across our other assets. Pleasingly, group production performance improved through the quarter with all assets now back operating at planned rates. Our rolling 12-month recordable injury frequency rate improved again to 5.8 and while we're encouraged by this progress, we remain focused on building a safe and predictable rating culture across every site. Turning to the operations. There were a number of temporary factors that influenced the quarter. At Cowal, we are now firmly in the transition phase with the E42 cutback well underway and the ramp-up of the E46 pit now complete, allowing it to contribute 25% of the feed to the mill to partially offset the lower grade feed from the surface stockpiles. Over the first half of the quarter, we experienced higher-than-average rainfall resulting in more feed from the lower grade stockpiles than planned. And this was visible to those of you who joined the tour last month. Compounding this, we had a slower-than-planned ramp-up of the new mining contractor, reducing the output from the underground mine. Production from the underground mine is back in line with plan and tracking well over the first few weeks of this quarter. The Regal portal remains on track for completion by the end of December and remains a key component in increasing the productivity of the underground mine and Cowal's ramp-up in the back half of this financial year. Mungari's slow start to the year, reflected ongoing regional power interruptions and reduced processing rates and downtime through July. The operation has recovered over the quarter and is now operating at planned rates. As outlined on the site tour during Diggers, studies are underway to improve our resilience to the regional power interruptions. Mining works to access the higher grade zones at Cartlehille in the second half of the financial year remain on track. With development ramping up well, the team at Red Lake remain on track to bring on the 2 planned additional mining areas at HGI and Upper Barma by the end of the December quarter. Throughout the quarter, the operation was impacted by an unusually high number of grid power outages due to instability of the external network, also impacting was reduced availability from our frontline production fleet. We also completed our regular shutdown schedule. Collectively, these factors hindered the mining team's ability to remain on plan resulting in disruptions to the mining sequence and creating the variance in grade seen through the quarter. As noted earlier, North Park continued to deliver in line with plan with the E48 sublevel cave ramping up well and the growth projects on track. Ernest Henry had a fantastic quarter, exceeding its plan across a range of metrics and is on track for a good year. The record cash flow reaffirms the quality of the asset and shows its back to full capacity. To conclude, this quarter demonstrated the strength of Evolution's portfolio. While gold production was impacted by a number of temporary factors, margin performance and cash generation remained strong on the back of operational performance of Ernest Henry and North Park, and we remain on track to deliver the full year guidance. As Lawrie noted earlier, over the quarter, we have strengthened the balance sheet, delivered positive cash flow across every operation, and at the same time, continued to invest in a pipeline of projects we believe will generate meaningful value for shareholders over the coming years and in financial year 2017. I'll now hand back to Darcy to open the line for questions.
[Operator Instructions] Your first question today comes from Kate McCutcheon from Bank of America.
Lawrie and team -- so just in North part, the concentrate rebrand and filtration projects. I've not heard you mentioned that before. So if I add that together with the Plocicuit plan, net-net, we're looking at a circa 4% uplift to gold versus today? And then we're expecting you to make a submission to the regulator for being on a big mill North Park later this calendar year. How do we marry in the improvements that you're making in terms of expansions there, if that makes sense.
Yes, the project was being studied through last year, and it was one that we're always planning to. This project is in addition to the course particle. So you're correct in terms of the improvement in the recovery. In terms of the plant upgrade, as the study finishes by the end of FY '27, and we land on what will be the size of the plant that we want to take it to that's when we'll make that submission. We're currently permitted to 8.5 million tonnes. These 2 projects will actually allow us to lift the processing rate above the sort of million tonne per annum level.
Okay. Good. And then if we think about how you push the stepdown from September quarter into next quarter, can you just remind me how big that will be? And what we expect to volume today or to step up quarter-on-quarter. I'm just trying to think about how production moves quarter-on-quarter, and you get to that 2H uplift?
Yes. Kate, it's Matt here. So with E46 coming in line, essentially most of the feed out of 46 is the oxides. So we are limited in the volumes that we can put through in terms of a percentage. So we targeting around 25% or above if we can push a percentage of the feed into the mill to be from E46. That obviously then leaves the underground as the other primary feed and then we'll make up with the lower grade stockpiles as required to fill the mill. So that's essentially the path forward until we get the stage back online.
Your next question comes from Hugo Nicolaci from Goldman Sachs.
Look, first one for me, just on Red Lake. You touched on the power and the mill throughput issues and the mine sequencing resulting in that lower sort of mid-3s grade. -- sort of back it out against the guidance for the full year, it sort of implies you need to average sort of 5 grams plus for the rest of the year or if we're assuming there's a bit of a progressive improvement through 2Q than the second half probably. Like 5.5% to 6%. So I guess the question is what gives you sort of the confidence with where the mine is at today that you can ramp up and get the tonnes out of Upper Campbell and Walmart to deliver that grade into the second half? .
Yes. Again, Matt here, the driver for that -- the grade when you've done the calculation there is correct. So 1 of the challenges of a mitigant that we're looking for there is additional volume because that grade will be a stretch. We will -- it is in the plan, and that's how it will come through. But the contingency that we're working on is we've got additional volume available to us for the mills. And so that's essentially the work that we're doing through Q2 and Q3 to fill those mills to make sure we've got some of that contingency in play because that grade is there. It's in the sequence, but that's what we want to make sure we get some contingency in place. So that's where that comes from.
Got it. That's helpful. And then probably a similar line of thinking around Mungari, just provide a bit more color in terms of the timing and that magnitude of expected grade uplift going forward with Stage 2 at Castle Hill and just the increasing tonnes and grade performance at the underground as well? Yes.
The Castle Hill is essentially a sequencing of Stage 2. We made some modifications through the first quarter to assist the mill with the downtime it was experiencing through July, and that did have a negative impact on the grade for the quarter. That material scheduled for the back end. So back into quarter 3, early into quarter 4. So that's where the Castle Hill grade uplift comes from. In terms of the underground, a lot of the work around Kundana is where we expect to see the uplift. The story again for Mungari is obviously in the margin driver for us. So what we've been seeing is some issues again with people in the region and absenteeism. We've addressed that with the team on site and recruiting additional people across there. That plus the productivity that we're looking to get from having everybody on site and working is essentially where we get the uplift in the underground over the back end of the year as well.
And then just maybe lastly on that, I mean, where are you seeing turnover and sort of productivity pieces, particularly around underground we're seeing a number of your peers sort of highlight productivity and people issues there. So I would just broadly comment how have you seen that improve? Or is that maybe worsened more recently? Is that sort of pull for labor and talent only increased?
Yes. It's probably stayed about the same from what we talked about last quarter. We're still seeing turnover around the same rate. We are very clear on our strategy around that is that we don't want to chase for an extra $1 or $2 for every hour of what people are chasing. So we are sticking to what we've got. We think we've got something more to add in terms of security and culture of the site. So we are following that strategy. We do see people come back to us but we still are seeing that turnover of people chasing the extra money that's on offer in some other parts of the region. So about flat is probably how I would describe that.
Your next question comes from Jonathon Sharp from JPMorgan.
Lawrie, Matt and Rocky. Just first question on Ernest Henry. Some good grades coming out of there. Is that -- how does that look for the remainder of the year? Is that sustainable? And then also just the first raise ball, when is that being commissioned.
Yes. I'll cover that one. So in terms of the grade, it was scheduled that we're not in some of the lower grade areas in the first quarter. So yes, over the course of the year, it will soften slightly, keeping us well within the guidance ranges. So that's planned and it won't stay as high as you've seen over the first quarter. In terms of then the raise boring in the ventilation circuits, -- we have -- we sourced an additional raise boring unit, and we have maxed out, if you like, the raise boring capacity on the site. The Northeast block ventilation is on track for completion. So once that opens up, it really does allow us to increase the productivity below that crushing horizon. So all of that's in place, if you're on site in the tool, we've got 2 raise bores running pretty hard together right beside each other on the surface.
Okay. Great. And while I've got you, Matt, just on Mungari. I mean that's ramping up. I think it's getting close to capacity now. Just how do you think about sort of ore sequencing getting higher grade ore through the mill, the optionality there, potential where would you look at anything around the area to acquire to potentially fill that mill with high grade as well?
Yes. No, in terms of the strategy at Mungari, it is that anything higher grade than what we have coming out of Castle Hill, which is our baseload feed we will preferentially feed. And so the underground and the productivity from that still maintain as the highest priority there. In terms of around the region and whatever else, there are a number of opportunities and not things that we are discussing with different people in the region. We don't need it at the moment, but the grade and the commercial sort of side of where it sits is, yes, we're open to those sorts of discussions.
Your next question comes from Daniel Morgan from Barrenjoey.
Matt, I just want to chase up that grade question Ernest Henry a little more. So in the quarter, just the grades that you had and the production outcomes at Ernest Henry were a bit higher than I would have thought. Was there any, if at all, benefit from positive reconciliation or anything that led to this result? Or was it just purely mine sequencing and therefore, we should expect it to soften in the quarters ahead?
Yes, Dan, it's essentially the second option that you described there is no, there wasn't a reconciliation from the processing plan over the quarter that contributed to the uplift. It was where we are in the cave and the grade zones we're not in that barren zone at the moment. We will move through that over the course of the year. So yes, the grades will soften over the next couple of quarters.
And then just at Cowal, obviously, the shut has been moved to the December quarter. I can see that, but a very strong milling outcome for the September quarter over a 9 million tonne rate. Is there benefits from this oxide material coming through that means you can mill more? And obviously, there's problems at the back end, but can you just talk about what's happening on the mill on throughput? What was experienced through the quarter for the throughput outcome you've got and where you see that going in future quarters?
So yes, in terms of the mill throughput, 1 of the benefits that we're seeing is that the E46 pit is predominantly an oxide feed, and we do see that go through the mill better than what we're seeing in the fresh rock in terms of that. So that is what's contributing to the uplift along with the normal reliability and programs the team have on site. That will continue. So we look over the course of the next probably 12, 18 months, we will have oxide feed available to us. So our planning at the moment is up to 25% of the feed into that mill can be oxide. The reason we limited to that is it starts to cause a few concerns for us in the back end in terms of mass flows and viscosity of material. We have seen periods depending on the type of oxide where we can run above that. Correspondingly, we do have and then we already struggle through that and we have to reduce below the 25%. So we'll look to continue that oxide feed at least until Stage I comes back online. And it's also the benefit for us in the other area Cowal where some of the other closer to surface feed is the oxide of oil, which helps us with our throughput rates. But that's the key driver in terms of the uplift you've seen.
Okay. And just last question, just the Red Lake Power issue, I mean, a hell of a lot of interruptions. It's -- I've heard that, that is partly an integration of local communities into the grid. Is that accurate? And then -- what is -- what's been the experience month to date? And what is an improvement and so on.
So yes, your description is accurate. That's what we're feeling has caused some of the instability in the line. Without getting too technical, a lot of the trips have sort of been under over voltage trips. And so working -- we're working with Hydro One and the lines around really understanding what the set points are in the settings on the network and marrying them up to the same ones that protect our equipment on site. So that's the main level of work that's occurring. So we are expecting to see that improve as we essentially operate as a unit rather than independently. And that's important for us, obviously, as we enter into winter. So -- there's a lot of work going on there. They've been quite open in discussing the topic with us, and we'll work through that over the course of the next probably month or 2.
Our next question comes from Levi Spry from UBS. Our next question will come from Mitch Ryan from Jefferies..
Just with Ernest Henry, you'd called out that, that was also going to undertake a shut during the quarter. Did it undertake a shot. Obviously, you had very strong volumes. I just wanted to confirm that.
It did, and we've completed a minor 1 in the last week as well in October, but yes, it ran exactly to plan over that quarter.
Okay. Perfect. And we've talked about the grid stability and the remedies for that around Mungari, but can you just talk to the Red Lake grid and stability? How far what's remediation are you? And are you comfortable that, that has now been fixed?
I think the Red Lake one is probably closer than the Mungari issue. The Red Lake one is really around the additional load on a spur line on the network and causing it to fluctuate differently to what it has in the past. -- and we're working through that with the provider there. In terms of the Mungari one, that's been an ongoing one for the region that people will be intimately familiar with. The work that we're doing at the moment on that are really around limiting the impact of the hard stops. The softer stops where we get a little bit of notice are a little easier for us to manage operationally because we can wind down the plants, and we don't sort of have some of the after effects in that scenario. What we want to try and do is have that same scenario for hard stop. So we're investigating installing a battery to help us, if you like, softly close the plant when we have those events. So that 1 is still a little way away, 12 to 18 months probably at best. That's the 2 scenarios in terms of power.
Your next question comes from Matthew Frydman from MST Financial.
Matt, Lawrie and Rocky. Maybe just rounding out that Red Lake power discussion, sorry to labor on it. But just to tie in with the early discussion, I guess, on the second half weighting in terms of volumes and grade. Yes, I guess, what's the risk that if you have ongoing issues that second half weighting or some of that guidance starts to be put at risk. Are you already at a point where that's a consideration? Or are you comfortable that it's manageable from here on out if things can correct themselves. .
Yes. Look, Matt outlined the issues that we're dealing with the power instability. I think, Matt, you, Matt. The plant has the capacity, as Matt has outlined, our when we looked at the full year and the guidance and where we're at, at the end of the first quarter, we're working on the basis that the remediation work that Matt said we're working with the power provider come through, then we have the capacity in the plant to put more tonnes through if we continue to have the power outage, then that's beyond our control, and we'll process whatever we can through the plants, and we'll assess it as each quarter goes by.
Yes. Got it. Maybe moving on to, I guess, the cash movements during the quarter and I guess on a forward-looking basis as well. Obviously, a pretty big working capital drawdown during the quarter, which you highlighted or working cap build, I should say. Do you expect, I guess, further unwind of payables looking forward? Or will that normalize in the December quarter, do you think? And then also just any other kind of significant cash movements that you think are worth flagging. Am I right to say that you guided for a payment from Triple Flag in December. And yes, I guess any other general comments on sort of cash tax catch-ups or anything to give us a bit of a guide on cash movements, please?
Yes. So in terms of the first quarter, yes, $136 million outflow, September last year was over $100 million outflow. So September is generally an outflow quarter and quite significant in terms of year-end capital that comes in the June quarter, and this was significant $40 million to $45 million worth of equipment at Cowal and other things at the year-end underground transition and the like. So that will depend on where each of the projects are at. Our short-term incentives are paid annually and September for the entire company that are on that scheme. So that's what impacts in terms of the September quarter. And then we did have an agreement on an insurance receivable for Ernest Henry at the end of the quarter. So when you look at the short-term incentives and the insurance for Ernest Henry, you're getting about $60 million, $65 million that won't be an outflow in the December quarter. And in fact, the $25 million at Ernest Henry will be received in the quarter. So you'll see Q2, Q3 lower generally, depending on the copper price and then Q4 as per sort of the June quarter. Other cash items, you're right, so we have the $120 million receipt from Triple Flag in the December quarter. In terms of tax, it's about $100 million a quarter. We have to make our final payment the FY '26 tax year in December of this year, and that's what does impact it. And you'll see last December, that tax payment was about $200 million. You're probably going to see something around that again where we paid $100 million this quarter. So that's normal in the quarter plus the top-up in December. Then the main ones that you're going to see.
Got it. That's really helpful. And then maybe just finally on the smaller end of things, but I noticed you guys made an equity investment in Arizona during the quarter. Can you maybe expand on the interest there? And yes, that's why that was an attractive investment.
Yes. So Glenn touched on it a little bit, the Philadelphia project with Arizona gold and silver. When we looked at the project, way that their farm-in was structured was through the equity. So we took a 9.9% equity holding in Arizona, gold and silver for the Philadelphia project. It's something that's not had deep drilling. We believe, with deeper drilling, there's an opportunity. It's about a 3-kilometer strike. It's got capacity to be size that would fit for Evolution, and that drilling program is commencing now and that's how we've invested in that project through equity.
Your next question comes from Levi Spry from UBS.
Apologies. This is just Ben. I just don't want to harp on the power discussion too much more. But at Mungari, what we saw regionally there? Is there any sort of read-through to leasing expanded case. Just looking for any risk or insight there, please?
Sorry, Levi, I didn't quite catch that -- some of that broke up is go apologies. But would you mind repeating that? I think you were talking about how do we see the regional power scenario in Kalgoli, but if you can confirm that?
Yes, that's -- that's correct. Just sort of wondering the regional power outlook at Kooly, just how that's effective on going the past quarter and sort of whether there's risk to do with the KCGM mill ramp-up just looking for your insights there.
Yes. I think a lot of the issues in that region are being caused by the capacity and where the generation sits. So additional load is a risk region. That said, there's additional behind the meter in the region as well. So there's probably an offset in that what we are really wanting to do, there's 2 things. The way we're approaching it is the shorter-term one, which I talked about with the battery. And then the longer-term one, we're doing a lot of work around what does that look like for us. I think we're not expecting necessarily the regional situation to change or get a lot better in the short term. So that leaves us with a couple of options around where we put it.
Your next question comes from David Coates from Bell Potter.
Thanks very much for the opportunity this morning. Just sticking a little bit with the regional or the -- sorry, the exploration development topic, which you just touched on. The -- what are you going to complete on Canopy in the current quarter? What is first steps going to be on completion of that acquisition?
Yes, Dave, first step is to finish the study, which will run for about 12 to 18 months and in parallel to that, we'll be working through permitting and other requirements that we'll need to start mining so that when the study is finished, we're able to move straightforward with that. And I think we talked a little bit about it in the net the plan for the project by Carnaby versus us where they were going to toll treat and the like versus we're going to bring it down to our operation. Therefore, the study has to adjust to that. So the first step is to finish that study over the first 12 to 18 months.
Sure. And then again, just on exploration. What you had a number of projects on the books. What are the key ones that we should be looking at for perhaps the most -- the pig through the most material results, I suppose, that predicting drill hole results and stuff, but which are the programs sort of coming up in the next 6 months, do you think might have the greatest materiality?
Yes, Dave. So area, all the land in and around Ernest Henry in the Australian operations, that's what we're focused heavily on here. And then we've got 4 opportunities in Canada at the moment that we're working through. So 2x Fred Clisbacco in British Columbia. Those programs will finish through the course of this year. And then we've got Lakes and Joe in October over in Ontario and Quebec, and then the Philadelphia project that we've just talked about that we've taken an investment in with Arizona gold and silver. That's the ones that will be in the in the greenfields in the Americas. And really, as Glenn sort of talked to a little bit last month, in the greenfields, our focus is more on the Americas because of ease of access, the amount of opportunities and entry costs. In Australia, we're going to be very heavily focused on the Corella land in and around Ernest Henry.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Conway for any closing remarks.
Thank you, Darcy, and thank you, everyone, for your time on the call today. As I said at the outset, a slow start, but we're still on track to deliver all of our FY '27 guidance measures, and it is weighted to the second half -- we are in good shape. We are delivering significant cash flows with a very low all-in sustaining cost, and we look forward to updating you at the next quarter. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.
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