Evolution Mining Limited (EVN), a prominent gold and copper producer, has announced a year of record financial achievements in its full-year 2024 earnings call. The company reported substantial increases in net profits, underlying EBITDA, and earnings per share. Additionally, shareholders were rewarded with a final dividend that doubled the previous year's payout. Evolution Mining's acquisition of Northparkes has outperformed expectations, contributing significantly to the company's cash flow and enabling further reductions in debt levels.
Key Takeaways
- Evolution Mining reported record net profits and underlying EBITDA for the full-year 2024.
- The final dividend doubled, reflecting a strong financial position and commitment to shareholder returns.
- Northparkes acquisition exceeded expectations, contributing to the company's cash flow.
- The company's production guidance for FY '25 includes 710,000 to 780,000 ounces of gold and 70,000 to 80,000 tons of copper.
- Evolution Mining is focusing on sustainability, reducing emissions, and supporting social initiatives.
- The company plans for significant cash generation and further debt reduction in FY '25.
Company Outlook
- Evolution Mining is set to achieve its FY '25 production guidance, aiming for 710,000 to 780,000 ounces of gold and 70,000 to 80,000 tons of copper.
- The company maintains a strong balance sheet with an investment grade rating and aims to further reduce gearing, which has already been decreased from 33% to 25%.
Bearish Highlights
- Weather impacts and regulatory approvals may delay the Cowal Stage I expansion, with capital expenditures for Cowal pushed out by 6 to 9 months.
- Non-cash impacts on all-in-sustaining costs are expected to be around $30 million to $50 million, primarily at Rawdon and Cowal.
Bullish Highlights
- The Mungari 4.2 expansion is on schedule and budget, expected to increase production and lower processing costs.
- Red Lake is focusing on cash generation, with gold production guidance for FY '25 set at 125,000 to 145,000 ounces.
- The company is experiencing early exploration success and expects to include earnings from Mt Rawdon in the underlying financials for FY '25.
Misses
- The company acknowledged that weather is a major risk factor that could impact production and costs in the future.
Q&A Highlights
- Lawrie Conway confirmed that the forecast for Red Lake is to be cash positive, including major CapEx for tailings consolidation.
- The company assumes a copper price of $7,500 per ton and an exchange rate of 67.5 for the Australian dollar.
- Regulatory consent for the Cowal project is pending, but the company expects conditions to be consistent with previous projects.
Evolution Mining's financial resilience and strategic investments have positioned the company for continued success. With a robust balance sheet and a clear focus on sustainability and shareholder returns, Evolution Mining is navigating the challenges and opportunities of the mining sector with confidence. The company's commitment to delivering on its guidance and generating cash while maintaining responsible operations underscores its stable outlook for the future.
InvestingPro Insights
Evolution Mining Limited's (EVN) impressive full-year 2024 financial performance is mirrored in the broader market trends, as seen by the real-time data and insights from InvestingPro. The company's strategic acquisitions and operational efficiencies have set the stage for continued financial growth and shareholder returns.
InvestingPro Data shows that Evolution Mining's market capitalization stands strong at $5.37 billion USD. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, is 47.01, reflecting investor confidence in its earnings potential. Moreover, the adjusted P/E ratio for the last twelve months as of Q2 2024 has improved to 36.08, indicating a more favorable valuation in the recent period.
InvestingPro Tips highlight the company's ability to maintain dividend payments for 12 consecutive years, which aligns with Evolution Mining's recent announcement of doubling its final dividend. Additionally, the company is trading near its 52-week high, with a price 90.39% of this peak, showcasing the market's bullish sentiment towards Evolution Mining.
For readers looking to delve deeper into the financial intricacies of Evolution Mining, InvestingPro offers a wealth of additional tips. There are currently 8 more tips available on InvestingPro that can provide a more comprehensive understanding of the company's financial health and market position.
To explore these further insights and make more informed investment decisions, readers can visit the InvestingPro platform for Evolution Mining at https://www.investing.com/pro/EVN.
Full transcript - Evolution Mining Ltd (CAHPF) Q4 2024:
Operator: Thank you for standing by. And welcome to the Evolution Mining Limited Full Year 2024 Financial Results. [Operator Instructions] I would now like to hand the conference over to Mr. Jake Klein, Executive Chair. Please go ahead.
Jake Klein: Thanks, Kelly. Good morning, everyone, and thank you for joining us. We do really appreciate your interest in our company. I will make some very brief introductory comments, which will be starting on Slide 3, which we've titled Positioned for Success, before handing over to Lawrie Barrie to take you through our FY '24 annual results and our FY '25 guidance. Any set of results that headline record net profits, record underlying EBITDA, record earnings per share, and a more than doubling of our final dividend are a pleasure to present. I think this is the 13th set of annual results for the company that we are presenting and I honestly feel that Evolution has never been better positioned to benefit from the very favorable markets that we find ourselves in. Gold and copper prices are very high and as I articulated in my Diggers and Dealers presentation last week, I believe there is very good reason to believe they will go even higher. The acquisition of Northparkes in December last year has exceeded our expectations in almost every aspect in the first 7 months of our ownership and it adds to the outstanding portfolio of gold and copper assets we have assembled. Our balance sheet is strong and we are particularly pleased that our investment grade rating was reaffirmed last month. We continue our track record of being a dividend payer with our 23rd consecutive dividend declared today, noting that as our cash generation increases as planned, so will our dividends. Our team is well-positioned and in place. The introduction recently of Matt O'Neill as Chief Operating Officer, and Nancy Guay, Chief Technical Officer, meaning that all our key leadership positions are filled with highly talented individuals. And finally, we know all eyes are on us to deliver FY '25 guidance. I want to assure you, we are absolutely focused on delivery, will not be distracted, and are looking forward to the challenge. With that, I'll hand over to Lawrie.
Lawrie Conway: Thank you, Jake, and good morning, everyone. It's a pleasure to present the FY '24 results and where we are heading into FY '25. The past year, through a number of challenges at us and the way the team has responded to deliver right across the business is a credit to the all involved. Even in the past week, where we experienced a cyber incident, our team has been able to respond quickly to contain the incident while protecting the health, safety and privacy of our people, together with the company's systems and data. We do not anticipate this incident to have any material impact on operations. As Jake mentioned, we've laid the foundations for more consistent delivery in FY '25, and with the outlook on metal prices, this is only going to reward our shareholders further. As shown on Slide 4, there were many highlights and records during the past year. In the sustainability area, we saw improvement in all key metrics, which I will touch on soon. Our low-cost production of 717,000 ounces at a sector-leading all-in sustaining cost of $1,477 per ounce delivered over $1.5 billion and $580 million of operational and net mine cash flow, respectively. The operational performance resulted in a record underlying net profit which was up 135% to $482 million. There were multiple financial records achieved in the year and Barrie will be taking us through these very shortly. We said last June that the cash generation would build through the year and we delivered that. We committed to deleverage the balance sheet even while investing in our organic projects which we also delivered. Our gearing is now down to 25% and expected to move below our next target range of 20%. We also said last year we would start to see improved returns for our shareholders. Our full year [indiscernible] is up 75% to $0.07 per share. As we continue to deleverage the balance sheet and maintain a disciplined approach to our capital investment, we expect to see further improvements in our dividends. Turning to Slide 5 and our sustainability performance. To enable us to operate safely and effectively, sustainability has to be integrated in everything we do. We have seen our total recordable injury frequency reduced by 13% in the last year and 28% in the last 2 years. At the same time, the team have done a great job in managing all the material and critical risks that can have a far greater impact on our business. We continue to make great progress on our commitment to reducing our carbon footprint with a 14.3% reduction in emissions as at the end of FY '24 against the target of 30% reduction by 2030. So with 6 years to go, we are already nearly halfway to the target. We also focus heavily on leaving lasting legacies in the communities in which we operate. I've highlighted one here because it has had a profound impact not only on our team at Mungari, but the Kalgoorlie community. Last year we committed funding to support the development of housing for women and children affected by domestic violence or homelessness. This is up and running now and what leaves me a little sad is that the number of people needing to use the facility has increased, which correlates to increased abuse. We remain committed to the cause, providing further funding in FY '25, as well as continuing to advocate against domestic violence. Moving into FY '25 and Slide 6. Having laid the foundations in FY '24 for high margin, high cash generation, we expect this to continue in FY '25. Our production guidance is 710,000 to 780,000 ounces of gold and 70,000 to 80,000 tons of copper. Our all-in sustaining costs will continue to be one of the lowest in the sector at $1,475 to $1,575 per ounce. This cost guidance is for our continuing operations as it reflects the position going forward where Mt Rawdon will cease operations this year. Further details of our guidance are provided in the appendix of the presentation and our release. The guidance is fully aligned to all information that we have publicly released in the last few months. The guidance for FY '25 will deliver high cash flows as evidenced on the charts on the right of this slide. These charts, I think, are the most important part of today's presentation. Assuming the midpoint of guidance and a range of metal prices, from what we achieved in FY '24 to current spot prices, the operating and mine cash flow before major capital, can be significantly higher up to $1.8 million and $1.6 million, respectively. This means we will continue to deleverage the balance sheet, be able to invest in our organic major projects in the same disciplined approach we have for the past few years, and increase our dividends, all at the same time. The cash flow we are now generating out of the portfolio will continue to provide us with great flexibility in these three areas of capital management. Lastly, on Slide 7, for a little bit more detail on FY '25. In terms of production, which I reiterate aligns to all previously released information, we will have a full year of Northparkes, but with a higher proportion of gold production due to the mining of the E31 open pits. The planned major shaft maintenance was successfully completed in July, which now sets up the shaft for the current life of mine. Cowal underground will ramp up to 2 million tons during the year. The margin on these ounces will continue to improve as the operation ramps up to its full production rate of 2.4 million tons in FY '26. Red Lake is expected to have higher production building on the consistency established over the past 3 to 6 months. Importantly, our planned metal price assumptions -- pardon me, at [indiscernible] metal price assumptions, the operation will be cash positive this year. As in prior years, the two largest operations in Cowal le and Ernest Henry will complete their planned major shutdowns in August and March. As outlined during the Cowal site visit, the March shutdown is a longer shutdown at 28 days as we refurbish the mill for the next phase of mine life. Thus, the March quarter will be our lowest production quarter. In terms of major capital, we maintain the discipline of only investing in the projects when they are needed. We have not approved any new major projects in execution for FY '25. The 4.2 project at Mungari remains on schedule and budget, as does the project to establish the new mining centers for the increased tonnage required post-expansion. [Indiscernible] at Ernest Henry and Northparkes will continue as planned this year, while at Red Lake, as previously announced, we will be consolidating to one tailings facility over the next 18 months to both plants being utilized at near capacity going forward. On our cost and revenue sensitivities to cash flow and all-in sustaining costs, they are well-known and this allows us to focus on the right things to ensure that we maintain a low cost position. I'll now hand over to Barrie to go through the financial results.
Barrie Van Der Merwe: Thank you, Lawrie, and good morning, everyone. It's so exciting to present the set of results this morning of which many are all-time records for Evolution. Turning to Slide 8, the record financial performance. Underlying profit after tax, the record performance is up 135% on last year at $482 million. Underlying EBITDA at just over $1.5 billion is another record and up 67% on last year driven by higher production, higher metal prices and good cost control. After investing $740 million into our long life, high margin business and paying $80 million in dividends during the year, gearing reduced from 33% to 25%. We are delivering on our commitment to deleverage the balance sheet, while continuing to invest in the business and pay dividends. On Slide 9 now, delivering improved margins. In FY '24, the EBITDA margin increased materially from 38% to 47%. This resulted in significant cash generation for FY '24. Group cash flow improved by $483 million from an outflow in FY '23 to an inflow of $367 million this year. It was driven by a $600 million increase in operating mine cash flow that translated into a 16-fold increase in net mine cash flow. As Lawrie pointed out earlier, we expect this cash generating momentum to continue. At spot prices, we will generate even more cash in FY '25. As presented at our recent site visit, Cowal is expected to be a consistent, strong cash generator over the coming years, returning $250 million to $350 million per year of cash flow to the Group after paying for the capital of the next phase of open pit development. Ernest Henry will continue to reliably and predictably contribute to cash and will be able to self fund the planned expansion project while returning cash to the Group. Northparkes made a significant cash contribution in the first 6 months of ownership and the E48 sub level cave that is being developed will maintain the production profile at a low capital intensity. Mungari 4.2 expansion is on schedule and budget. This will transition the asset to a major cash generator to increase production and lower processing costs. Red Lake focuses on cash generation, not volume. And this will be underpinned by the operational stability that was established in FY '24. As mining at Mt Rawdon is completed and we mill the stockpiles, it will make a good final cash contribution. Now turning to Slide 10, increasing shareholder returns as we deleverage. Following the record financial performance, the Board declared a 23rd consecutive dividend of $0.05 per share, fully franked. It amounts to $100 million payout in total and is a 150% increase on the FY '23 final dividend. It will be paid on 4 October, to shareholders registered on 30 August. Our policy of paying around 50% of the cash flow is unchanged and we consider gearing as well as reinvesting in the business when declaring dividends. The chart on the top right illustrates that. In times when gearing is higher and deleveraging is a priority, dividends are generally lower. As gearing peaked in FY '23 and started to reduce, dividends started to pick up in FY '24. As we continue to deleverage, we would expect this trend to continue. We are very pleased that our investment grade credit rating was affirmed during the annual review in July. This underscores the quality of our portfolio and strong outlook from our high-quality, high-margin business. We delivered on our promise to start deleveraging in FY '24 and gearing reduced from 33% to 25%. This was achieved at gold and copper prices that were well below current spot prices, and as explained earlier, at current spot prices, we expect to generate more cash in FY '25 that will drive gearing down further. Reflecting on my first whole year at Evolution, I'm very proud of what the whole team achieved. What stands out to me is that we doubled our liquidity position to almost $1 billion and made significant progress with deleveraging while investing in our organic growth project and continuing to pay dividends. With that, I'll hand you back to Lawrie. Thank you.
Lawrie Conway: Thanks, Barrie. Slide 11 summarizes well the past year and where we are heading. The combined efforts of everyone in the last year delivered outstanding record financial results and did this in a much safer manner than last year. We set out at the start of FY '24 to move back into high margin cash generation. We achieved this and the plan we have in FY '25 is set to continue that momentum. Having reduced gearing significantly and with the high margins we've been able to increase our dividends. The acquisition of Northparkes has only further enhanced the existing long life high returning portfolio. We've made a number of organizational changes and improvements in planning, which puts us in a much better position to deliver in FY '25. With that, Kelly, please open the line for questions.
Operator: [Operator Instructions] Your first question comes from Rahul Anand with Morgan Stanley (NYSE:MS).
Rahul Anand: Hi, good morning, Jake, Lawrie and Barrie. Thanks for the call. First question perhaps for Barrie. Barrie, thanks for clarifying that 50% payout is still the policy for the dividend going forward and higher gearing is keeping it lower this year. But at what point do you think you've reached your target gearing or your target net debt? Are you able to perhaps spell it out for us as to what that level is when we return to that 50% payout? And in the event that the target gearing moves lower than your target rate, do we expect further dividends over and above the 50% payout?
Lawrie Conway: Yes. Thanks, Rahul. I'll hand it to Barry in a minute to talk on the deleveraging and the gearing. But I think if we look at the policy that we've had in place for a number of years, as Barrie mentioned, in periods of lower gearing, we've paid higher dividends and in periods where they've had the elevated gearing, the dividends are a bit lower. But if we look at it over the entire period of this policy, we've actually averaged well above 50% payout. So we again demonstrate that capital management of disciplined capital investment, keeping the debt position right and keeping the dividends. So I think it's not that we'll return back to that, it's that we've actually got an average above it. But as these cash flows continue to increase, there'll be further dividend improvement. Barrie, you want to talk on the gearing levels?
Barrie Van Der Merwe: Thanks. Thanks, Lawrie. So firstly, very happy with the trajectory of the gearing, kind of down a lot this year, and that actually happened in 9 months. So at the end of the September quarter, we were at 33. As we go into FY '25, as Lawrie explained with the guidance, we expect the cash generation to continue building and be strong, so we are driving that gearing further down. I think we kind of think about it in 5% increments. So I think the next stope that we'd be targeting is getting to 20, which will be a good outcome. And then, I think on a long-term sustainable basis where we believe it sits comfortable, is around that 15% or just below that level. So when you look forward on gearing, kind of working hard towards that 20% and then down to 15%.
Rahul Anand: Got it. Okay. So basically 20% is where you can start thinking about the 50% and then once you're below 15%, you start thinking about higher numbers than the 50% cash flow.
Barrie Van Der Merwe: I mean, just to reiterate what Lawrie said, if we look at it over time, we actually -- the average payout is more than 50%. So we are there, there's just swings and roundabouts depending on leveraging and investment priorities. But over time, we are over 50% of Group cash flow.
Rahul Anand: Got it. Okay. Look -- sorry, go ahead.
Barrie Van Der Merwe: You're good to go, Rahul. That's good.
Rahul Anand: Okay, yes. So the next question was on Northparkes, perhaps one for Lawrie and Jake. Look you've talked about how Northparkes has exceeded expectations in the first 7 months of ownership. Can you help me perhaps test that comment a bit more? Where have you seen the exceeding of expectations mainly coming from? I note your guidance for next year is markedly higher. What's driving that? Is that better grades from the open pit? Or perhaps if you want to shed a bit of color as to those comments, please. Thanks.
Jake Klein: Yes, Rahul, it's Jake. Look, it's a 500 million ton ore body -- ore bodies field. It's got a 30-year reserve life. It's got a team of people with deep knowledge of technical -- technical knowledge of caving, block and sub level caving. It's been cash generative from day one, $75 million in the first 7 months. We are -- we have -- we identified in the due diligence and are now implementing a lower capital intensive approach to the E48 sub level cave option. And to me, what's really exciting is the early exploration success we're having, noting that it is such a large ore, what is 70 years of mine life, if you mine all the resources. So we're looking for a geological upside that will leapfrog into the production profile earlier. And there is exciting early stage results coming through, which I think you would have seen on site that Major Tom and various other ore bodies. So very happy with the assets, the people, our joint venture partners being Sumitomo and Triple Flag as the stream partners. And just the way the site has gone about professionally, they manage the shaft maintenance very efficiently and effectively and it's just been a great asset to add to our portfolio.
Rahul Anand: Got it. And next year's guidance, better grades from the open pit?
Lawrie Conway: Yes, so what it is Rahul is that as I mentioned when we've got E31 there's two pits there, one of them is dominant in gold. So the gold production to the copper ratio is higher, therefore you're spreading those copper by-product credits over more ounces. That's why the cost change is. That's the only change in cost for Northparkes in '25 versus '24.
Rahul Anand: Got it. Okay. Am I allowed to ask one more or are you keeping it to two?
Jake Klein: It's up to the moderator. You can ask the other question.
Rahul Anand: Look, you've got a chart in there which has got the highest sensitivity to operating costs, obviously, even higher than the gold price. That's obvious, I guess. But yes, the question is around where are you seeing the pressures on that cost base into 2025? Obviously, we've talked a bit about labor in the past. Second half of FY '25, a good period to see some of that labor inflation slow down, I believe. Is that still the thinking and then any other things to call out specifically in terms of the inflation in that cost base? That's the final thing.
Lawrie Conway: The cost guidance for FY '25 is in line with everything we said a couple of months ago. So we'll see labor, we've allowed for labor total of movement of 5% for the year. We've then seen most of the others around 3%. Labor is 50% of our cost base. So it's an average of about a 4% increase, '25 over '24. And that's what we've allowed for. And then if we look at it as we go into FY '25 at the back end, so our labor for our employees is for the full financial year, so we review our salaries now, and that applies for the full year, so it's about 12 months' time we'd be looking at what's the impact on '26. If the economy does slow as predicted, then we would expect labor rates to not go at the rate that they did for this year. In the other areas, we are seeing it start to stabilize, but it is dependent on what happens in the overall global economy in terms of inflation. And you're right, it does show that that's the larger one. That's a 5% movement in our costs. So if we saw a whole 5% inflation, that's what that would be. But it's not a 5% movement in the gold price that we've used as a sensitivity. That would be a lot higher than the costs.
Rahul Anand: Got it. Yes, fair. All right. I'll pass it on, thank you.
Operator: Your next question comes from George Eadie with UBS.
George Eadie: Yes, good day, gents. First question on Ernest Henry. Could you please just remind us the story here? So the expansion phase studies due in March quarter next year, next calendar year that is, and major CapEx won't come till FY '25, is that still right? And just on the CapEx, will any of the tailings event spend this year potentially fall in a FY '26?
Lawrie Conway: Okay. So just checking there, George, you said a spend in '25, what do you mean '26 after the study? So the study will finish in March '25 for Ernest Henry. There is capital in our major capital this year that we've made the decision to invest around ventilation, refrigeration and trucking as we move down to the 1175, the extension area. We received approvals to go below the 1,200 during FY '24 and given the value of the project and the results we're seeing between Ernie Jr and Ernie, the main ore body, we've made that decision to put some of that infrastructure in earlier. So that is where you'll see that different capital. After the study, we then move into more that development, but the main infrastructure around crushing and conveying is still out in that 27, 28 and 29 years, but mainly 27, 28.
George Eadie: Yes, thanks, Lawrie. And just clarifying on that, so the infrastructure you're putting in now, vent, refrigeration and trucking and that, is that in this year's CapEx, the 140, or could there be a bit slip in the next financial year?
Lawrie Conway: Look, in terms of Ernest Henry, I would expect that anything that could slip would be just delivery of the trucks. We are working on the ventilation as we spoke, we really want to have that in place by the end of the March quarter and the refrigeration by the end of June is really what we'd like to see because we're already starting to move down below the 1,200 by the end of now and we'll be going lower by the end of the year.
George Eadie: Yes. Okay. Thanks for that. And maybe just a second kind of similar line of thought now to ‘Cowal. So we've spoken to $200 million to $230 million major CapEx a year here. FY '25 is clearly a lot below. Can you maybe just give us again a bit more color on the timeline of the CapEx spend over the coming years? I know it's hard to predict, but rather than just sort of straight line, what limit for [indiscernible]?
Lawrie Conway: I'll do the first part, but not maybe the second part. This year, as we talked about on site with the visit, where we are with Stage H, it is unlikely that we'll be moving into Stage I in FY '25 because of the weather impacts last year, the mine plan now will move through to the end of this year. We are still waiting for regulatory approval which we are expecting in the December quarter. We will assess that when that comes through. So when we look at it for this year, there isn't anything in there for the open pits at Cowal. What we do have in there is the closeouts on the IWL and the underground surface infrastructure is the main pieces for this year. So if you look at the $200 million to $230 million over 5 years still remains, but it's probably pushing out 6 to 9 months based on where we are in the planning and approval. So you would assume that Cowal will make more cash than what was originally planned for '25 and then that $200 million to $230 million will average over '26 in the next 5 years.
George Eadie: [Indiscernible]. Thanks for that Lawrie.
Operator: Your next question comes from Kate McCutcheon with Citi.
Kate McCutcheon: Hi. Good morning, Lawrie, Jake and Barrie. Slide 6 in your deck, I like [ph] it, arrows going up. So I can try to reconcile, can you remind me what the non-cash impacts in the all-in-sustaining costs are? If I remember it's Rawdon and Cowal that have the non-cash stock pile adjustment. Anything to call out, please.
Lawrie Conway: Yes. Look, I didn't expect the non-cash, but we would expect that it's about this year somewhere between $30 million and $50 million, Kate, will be the non-cash that will hit the AISC.
Kate McCutcheon: Okay. And it's mainly Rawdon and Cowal?
Lawrie Conway: Yes.
Kate McCutcheon: Okay, got it. And then guidance for the FY, what are you spending on exploration at the Group? How much is Ernest Henry and then can I use that as a segue to Bert or has there been any further thinking on whether it could work as a separate access or whether it could also be accessed from the cave to take pressure off development?
Jake Klein: I'll talk on Ernest Henry and Barrie will get the exploration spend which is not much different to what we talked on at Mungari. So the thinking there with Bert is that drilling is continuing. Glen's wanting to see the results over the next 3 to 6 months. It takes him a bit to get him to commit, but I think he still believes that there's access coming off the pit wall, going in via a decline at some point, but we're probably 18 months away from finishing that program and study work before we were doing anything there. And in terms of the exploration, I mean it's around 60 [technical difficulty] this year. Mungari was around that 20 million, 25 million that we talked about on site. Ernest Henry would be the next one in sort of around that 20 million mark. And then there's the other sort of green fields and the light that's going on.
Kate McCutcheon: Okay, cool. And then -- so Red Lake as well I think there's a concern in the market that there's a risk of maybe an impairment there moving forward. I would have thought the resources were still there, but maybe if there's some comments that you can make to reassure the market it's something that I keep hearing which I'm not sure is entirely correct.
Lawrie Conway: I just say Kate that we've just been through our Board meetings, the audit committee meetings with PwC as auditors. There is no impairment at Red Lake and that's been signed off by PwC.
Kate McCutcheon: Okay, thank you.
Operator: Your next question comes from Jarrod Lucas with ABC News.
Jarrod Lucas: Yes, good morning guys. I just wanted to ask about the cybersecurity incident this week. You've obviously said no material impact on operations is expected, but obviously concerning enough that you had to release a statement to the ASX.
Lawrie Conway: Yes Jarrod, I mean I think the reason for releasing the statement is that the minute we had to report it to the authorities we were therefore making something public. So in regards to the sensitivities around cyber incidents, we and the Board made the decision to put that information out there. I mean, through the period from the 8th till Monday, we clearly worked through that containment and understanding impacts on systems and people, and we now believe that we've got that well under control and the like. And I think from our perspective around material impact a number of these systems require connections to the external world through the internet and everything and some of those systems get cut off for a period which had a very minor impact on the operational assets for a couple of days.
Jarrod Lucas: Are you aware of any data that's been lost to the hackers?
Lawrie Conway: Look, we're aware of all of the different servers and information. There's nothing in there that is material, private or personal that has been lost. And in reality when we look at all of our backup systems there's probably nearly nothing that's going to be lost other than say for that period for the 8th till the 10th where you're going back to backups from a few days before that, but that's all that we're seeing at the moment.
Jarrod Lucas: Thanks guys. Appreciate it.
Operator: Your next question comes from Matthew Frydman with MST Financial.
Matthew Frydman: Sure. Thanks. Good morning all. Firstly can I ask on Red Lake, your FY '25 guidance for gold production 125,000 to 145,000 ounces. Lawrie, previously you've talked to 140,000 to 150,000 as a sort of base case expectations for the asset. The market may have wrongly interpreted that as the run rate to expect for FY '25 rather than the exit rate. Is that a fair assessment? Does the second half in FY '25 look better than the first half as the asset continues to stabilize and improve and is that medium term sort of base case expectation still 140,000 to 150,000 ounces in your mind?
Lawrie Conway: Matt, there's two short parts to that. Yes to the 140,000 to 150,000. And in terms of this year we're basically making sure that the site is able to deliver as a bare minimum into that 125,000 to 145,000 maintain the consistency. From my perspective, March was a good quarter, June had a little bit of an impact with seismicity. We want to see it consistent for a couple more quarters. So we're being a little bit conservative there.
Matthew Frydman: Okay, got it. Thanks, Lawrie. And you've said that asset is going to be cash positive next year based on obviously your budget and your guidance. I'm guessing that's before the 65 million to 75 million of major project capital which you've called out as primarily going towards the tailing stamp [ph]. Can I ask when that -- when does that project finish and is that the entirety of that major project CapEx budget? Is there anything we need to sort of think about over the medium term in terms of major project CapEx spend. Thanks.
Lawrie Conway: No. So the forecast and plan for Red Lake this year at our metal prices is it will be cash positive -- net cash positive for the year.
Matthew Frydman: Including the major project CapEx?
Lawrie Conway: Yes.
Matthew Frydman: Okay, thanks.
Lawrie Conway: And it's not significant, but it is cash positive which is the first thing they need to get to. And in terms of that tailings, as I said, it's over the next 18 months that we will be investing in that consolidation of the facility.
Matthew Frydman: Okay, got it. Thank you. And then maybe just finally, maybe a bit more of a mechanical one, but Mt Rawdon, you've excluded that from all-in sustaining cost guidance. Will that be included in your underlying earnings that you report for FY '25? I guess maybe one for Barrie. How do we think about the reporting of that as a sort of continuing or discontinued operation? Thanks.
Lawrie Conway: So Barrie will deal with the underlying. So it is excluded from the AISC. We will report both, but at the end of the day when you've got an asset that's moving into processing stockpiles in that from the second quarter, AISC of 3,000 to 3,500, but it's going to make $15 million $20 million of free cash when the AISC is the same as the revenue side. Our view is that that's not a reflection of where the asset is going forward. It means including it in the AISC is about a $75 to $100 delta for the Group. And that for us is when you go into FY '26 and beyond, Mt Rawdon [indiscernible]. You want to talk about the earnings?
Barrie Van Der Merwe: Yes, so I mean in terms of [indiscernible] stat P&L view on earnings, we usually exclude a lot of things of a once-off type nature in there. So from a stat P&L point of view, I think the earnings would stay in the underlying, but we're providing this guidance, excluding Rawdon to enable a modeling forward of the ongoing cost base, but stat P&L, I'd see the earnings in the underlying next year.
Matthew Frydman: Okay, thanks. That's pretty clear. And as you say, Lawrie, it's cash positive, so that's the important thing. Cheers.
Lawrie Conway: Thanks, Matt.
Operator: Your next question comes from Daniel Morgan with Barrenjoey. Mr. Morgan, your line is open.
Daniel Morgan: Sorry, can you hear me?
Lawrie Conway: Yes, Dan.
Daniel Morgan: Yes, sorry, I was on mute. Could you just talk about the process that you undertook to set this guidance? Was it, I guess, a little bit more conservative than you might have done in previous years? And what are the major drivers within the business that might cause you to be at the most optimistic part of guidance, i.e. at the top end on production and low end on costs? And what are the risks, the major risks in the business that would maybe see the reverse? Thank you.
Lawrie Conway: Okay, Dan. I'll try and keep it to a couple because if you talk to the operations they could give me a list of 10 on the negative and one on the positive. I think when we look at it, if you're looking at it, it's weather. Weather certainly at Cowal, it does -- it will impact Mt Rawdon but it's got time to finish mining and processing through the course of the year. We've had some unseasonal weather and rainfall over in the west in Mungari and the like. So weather has a role to play. I think when we look at it there's nothing much from a mining perspective. We've got the large shutdown at Cowal in March and April, so that one needs to run to plan because that links into feeding the underground. So we need to make sure that that does -- that comes through. I think on the upside is making sure that the stability that we've started to see at Red Lake continues and builds that momentum. We've talked about it where they used to need 3,000 tons a day out of the mines. They're now working on the basis of build to stockpile, maintain a stockpile. So they've got to be able to consistently be above that 3,000 tons a day. And then I just think if we look at it, we've got Ernest Henry and Northparkes as caving operations. If they can continue their consistency and reliability that gives us a base going forward and then the up this could be if the underground at Cowal is able to get above the 2 million tons earlier than what we had expected through the year.
Daniel Morgan: Okay. Thank you so much for your perspectives Lawrie.
Operator: Your next question comes from Al Harvey with JPMorgan (NYSE:JPM).
Q - Al Harvey: Good morning Lawrie and team, just one from me. Just looking at the copper price assumed in all-in sustaining costs, [indiscernible] a ton, thanks for that. I guess I'm just thinking about spot, not that we like to latch too much onto spot, at A$1,500 a ton, just want to step through the processes. How you landed at that. I assume it's kind of semi-related to consensus. And just as a follow-up, just wondering if you'd be willing to share the Aussie dollar assumption underpinning that copper price. I think it was $0.65 in last year's guide.
Lawrie Conway: Yes. So, Al, quite simply in terms of setting that price that was based on consensus and actually by the time we were finished consensus had gone above that and we decided not to lift our planned assumption. We felt it was actually easier to go with what all of the market consensus was rather than choosing our own just to make it simple. That sensitivity is sitting on Slide 7 as to where you can see what the copper price movement is. Yes, it is below at the moment, but we're looking at the range over the full year and the analysts have it at that sort of rate. And the second part of the exchange rate is about 65.5 …
Barrie Van Der Merwe: I think 67.5.
Lawrie Conway: 67.5 for the year.
Al Harvey: Great. Thanks for that Lawrie.
Operator: Your next question comes from John Bishop with Jarden Group.
Jon Bishop: Good morning, guys. Thanks for taking the questions and well done on the result. Just a couple for me. Regarding Ernest Henry, I know the work's still in progress around development of Bert, but could you sort of give us a bit of a guide as to how the team's feeling around what Bert does to either the tons throughput, longer term or indeed grade. Because from what I can recall from your reserve and resource statement, we should expect Ernest Henry grades to sort of soften over the balance of life of mine, if I think I'm correct?
Lawrie Conway: Yes. So in terms of Ernest Henry, yes we have seen as we've gone down the cave that grades come down, you've seen our production guide from 95 down to sub 80 now over the last 5 years. But the drill results we've got in the extension are actually saying that the grades are holding up and the ratio of copper and gold is actually also holding up. So we sort of see that we're probably around the level of where Ernest Henry production rate out of the mine ore body would be going forward if we're able to keep that mill running at full capacity. In terms of Bert, that still hasn't changed from what Glen's talked about at the June quarterly. We either come off the pit wall and put a decline down that then gives us capacity to go above the 6.8 million ton processing rate or if it does extend down and connect into the main ore body it provides flexibility as to how we fully extract Bert. But as I said just earlier to Kate, we'd say that that's at least 18 months away from having a full picture. We're going as quick as we can on the drilling given the great results that we saw in the June quarterly.
Jon Bishop: Yes that's evident cracking results. And just switching to Cowal, obviously still pending approvals. You probably articulated this before, but can you sort of indicate what the key risks are for final approval here?
Lawrie Conway: So where we're at is we're in the dance with the regulator about providing us with what they would see as consent conditions. So they're requesting some further information. So the public display piece is closed and strong support for the project. We now wait for them to give us the consent conditions on which then we have to respond and then they make their final determination. So they are sort of the last three steps in that part of the process. On achieving that then the project team needs to make the recommendations to the Board around proceeding and the Board needs to decide when to proceed forward.
Jon Bishop: Okay. Forgive my ignorance, but what does a consent condition look like? Is it environmental or is it water management or is it all of the above?
Lawrie Conway: It's all of those. So if we look at, as an example when we got Stage H approval we needed to move some of the [indiscernible] route that was a concession -- consent condition we had to agree to. We had to provide support for road maintenance for some roads that we would be using. So it then comes back to us to [technical difficulty] and accept those conditions or discuss them with the regulator to see if there's alternatives.
Jon Bishop: Okay I'm sorry to keep burying down, but is there anything that you’ve seen in your discourse with the regulator to date or specific areas of focus or are these fairly banal kind of conditions you're expecting here?
Lawrie Conway: No, at the moment it's not much different to other consent conditions [indiscernible] and the like that we had for Stage H and for the underground.
Jon Bishop: Awesome. Thank you very much.
Operator: Your next question comes from Mitch Ryan with Jefferies.
Mitch Ryan: Good morning, gents. Thanks for taking my question. I’m just trying to reconcile today's guidance to the presentation on the 8th of May which you released to ASICs. When guidance was 50,000 ounces for FY '24 and you made a statement that FY '25 guidance would be, Group production would be higher. Why is the bottom of the range so far below that today? What's changed between -- over the intervening period?
Lawrie Conway: Mitch, the short answer is nothing has changed. If we look at 710 to 780, midpoint is 745 and I'll quote Jake here that to him 5,000 ounces is roundings. So there's nothing that's really changed. Yes, it's a little bit lower in terms of the Red Lake in its range, but a couple of the other assets are actually higher, one of them being Northparkes with the 831. So we see that. And if you look at last year's guidance, where we used the plus minus five, you would have had it less than the 749, down to that lower number. So it's the same approach, nothing different from what we said on the 3rd of May.
Jake Klein: I'll just add one build on that, Mitch. I'm very comfortable that this is consistent with all the outlook statements and conversations we've had with respect to guidance and outlook for FY '25.
Mitch Ryan: Yes, okay. Sorry, I just thought growth would have implied that was your baseline. That's it for me. Thank you.
Operator: There are no further questions at this time. I'll now hand back to Mr. Klein for closing remarks.
Jake Klein: Thanks Kelly and thanks everyone for listening. We appreciate it. I do want to shout out to the team at Evolution, Lawrie and the whole team, it's been a huge effort to deliver these results. It's taken a lot of effort from a lot of people across all of our sites and on behalf of the Board, we really appreciate that. I also just want to finish off with the same sentence and message that I gave in my introductory comments. We absolutely know that all eyes are on us to deliver FY '25 guidance. We are focused on that delivery. We won't be distracted and we're up for the challenge. Thanks everyone.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
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