Finance

Mining matters: EVN, SFR


News out on Tuesday from a couple of up-and-coming local miners, with Evolution Mining (ASX:EVN) and Sandfire Resources (ASX:SFR) each providing comprehensive updates to the market.

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Evolution Mining (ASX: EVN) has seen its Cowal Lake gold mine in central western NSW deliver its best quarterly performance in the seven years of ownership, despite encountering heavy rain from the La Niña event in Eastern Australia.

At the same time the company is now seeing the benefits of full ownership of the Ernest Henry mine in Queensland with access to all of its gold and copper output (especially the latter) and cash flow.

Evolution also revealed more interesting intersections in drilling at Ernest Henry that looks like boosting the size of quality of the resource in place at the veteran mine.

“The outstanding copper-gold grades and widths in the new drilling results demonstrate the exciting potential for mineralization to extend up-plunge and at depth,” said Evolution executive chair Jake Klein in a release on Tuesday.

Evolution said in its December quarter and half yearly report that Cowal Lake saw 2.4 million tonnes of gold processed in the three months up 16% from the September quarter.

This saw record gold production for the month of December of 28,285 ounces (oz) of gold as the mine’s operations were boosted by higher grades, with gold mined at 0.94 grams a tonne (g/t) in the three months to December, up from 0.8g/t in the September quarter.

The improvement at Cowal saw the company lift total gold production for the quarter 3% to 166,404 ounces from the September quarter while and copper production was 7% higher at 15,483 tonnes.

The higher tonnes helped in another way, pushing the all-in sustaining cost (AISC) at Cowal 23% lower than the quarter before at $A1,042/oz (September quarter: $A1,354/oz).

The company said its AISC fell 27% to $A1,099/oz ($US722/oz).

Evolution said its group 2022-23 production and AISC guidance remains unchanged at 720,000 ounces (+/- 5%) and $A1,240/oz (+/- 5%).

These results came despite Cowal experiencing 208 millimetres (more than 8 inches in the old money) of rain during the December quarter.

For the six months to December, Evolution produced 327, 502 ounces of gold, up slightly from the 318,766 ounces produced in the six months to December, 2021.

Copper production though leapt from 10,181 tonnes to nearly 30,000 tonnes with the Ernest Henry mine in northern Queensland ramping up in the intervening year.

Unlike the December, 2022 report which revealed the company produced 294,430 ounces of silver as a by-product, the 2022 report made no mention of the small but lucrative output that had a value of more than $A5 million.

Evolution said its operating mine cash flow increased by 31% to $270 million, led by the Ernest Henry mine which generated $142 million in mine cash flow before major capital spending. Cowal generated $93 million in mine cash flow before major capital spending.

“We generated very strong operating cash flow this quarter which reinforces our position as one of the lowest cost, highest margin global gold producers,” Evolution CEO Lawrie Conway said.

“We remain on track to deliver group FY23 production and cost guidance with planned quarterly performance weighted to the second half of the year.

“With available liquidity of $838 million, our balance sheet is well positioned to support our growth in low-cost production.”

The gold miner has also revealed the results from a new round of drilling at Ernest Henry, where it said it had intersected significant mineralisation below and within the pre-feasibility study (PFS) mine life extension area (that was used to support the acquisition of total control two years ago).

This included 118.1 metres at 0.79g/t gold and 1.15% copper, and 20.4 metres at 1.69g/t gold and 2.16% copper from two separate drill holes.

“Results confirm that strong mineralisation exists below the PFS area, indicating significant potential for mining beyond the current study,” Evolution said.

“As a result, a decision has been made to extend the PFS to incorporate the larger footprint in determining the optimal location of infrastructure with this work expected to be completed in the June quarter.”

The latest drilling results are the second lot in as many months that hint at a major area of mineralisation at depth under the known area at the mine. The November 22 results were an intersection of 157.0 metres grading 1.26 g/t gold and 1.62% copper; 102.0 metres grading 1.06 g/t gold and 1.39% copper and 90.8 metres grading 1.42 g/t gold and 1.54% copper.

“The outstanding copper-gold grades and widths in the new drilling results demonstrate the exciting potential for mineralization to extend up-plunge and at depth,” said Evolution executive chair Jake Klein in a release in November.

At late 2022, Ernest Henry had measured resources of 24.2 million tonnes grading 0.77 g/t gold and 1.38% copper; indicated resources of 38.5 million tonnes at 0.74 g/t gold and 1.29% copper; and inferred resources of 25.7 million tonnes grading 0.68 g/t gold and 1.16% copper.

Recent drilling allowed the company to make an increase of 28% to contained copper to 2.5 billion lb. copper and a 24% increased to 2.1 million oz. of gold (in all categories).

Evolution shares were up nearly 5% at $3.41.

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A mixed bag from Sandfire Resources (ASX: SFR) – rather weak news about quarterly production but then good news on the results of a new drilling campaign with the discovery of an intriguing new copper-zinc zone at its MATSA operations in southwestern Spain.

Sandfire said on Tuesday that drilling at the project has found a new zone of volcanic massive sulphide (VMS) copper-zinc-silver mineralisation, dubbed the San Pedro Zone. It’s likely connected to the operation’s Aguas Teñidas Deposit.

Acting Sandfire CEO Jason Grace said it was “the first significant exploration breakthrough” since the project’s acquisition in early 2022 at a cost of more than $US1.8 billion.

He told the ASX in the company’s quarterly statement that “The identification of the San Pedro Zone shows what can be achieved through a disciplined, systematic, and technically sound approach to exploration – and highlights the enormous exploration opportunity in front of us.”

But on the production side for the quarter and half year, a gloomier note with a 29% fall in total copper production to 20,031 tonnes from the September quarter, a small, 1% improvement in zinc output to 19,755 tonnes but a 22% slide in lead output to 1,921 tonnes.

Gold production fell 44% to 4,562 ounces and sliver output dropped 14% to 600,000 ounces.

With the Matsa mine not being included in Sandfire’s business operations until early 2022, there are no comparisons with the performance in the final quarter of 2021 or the six months to December, 2021 either.

For the December, 2022 half year, the company produced 48,088 tonnes of copper, 39,290 tonnes of zinc, 4,398 tonnes of lead, 12,777 ounces of gold, and 1.3 million ounces of silver.

Meanwhile, the construction of its Motheo Copper Mine remains on schedule on Botswana (and more good assays from a nearby zone of interest) and it has begun the process to sell its DeGrussa Copper mining operations in WA.

Sandfire said it ended the quarter with $US263.7 million of cash and $US378.3 million of net debt following a $200 million capital raising in late 2022.

Despite the weak quarterly production effort, Sandfire kept its June, 2023 financial year production guidance unchanged at 83,000 to 91,000 tonnes of copper, 78,000 – 83,000 tonnes of zinc, 6,000 to 10,000 tonnes of lead, 12 thousand ounces to 14 thousand ounces of gold, and 2.2 million ounces to 3.2 million ounces of silver. Its C1 unit cost of copper is tipped to come in at $US1.74 a pound.

However, because of changes to the mine plan at MATSA’s Magdalena Mine, Sandfire says it now expects the operation’s copper production to come in at the lower end of its guided­ 60,000 – 65,000 tonnes. Meanwhile, production at Motheo in Botswana is expected to begin in the coming months.

Sandfire shares edged up 0.8% to $6.30.





Glenn Dyer


Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.


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