EVN

2.09%

$4.88 evolution mining limited

Ann: DRP Price and Participation Rate, page-38

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FarmerGeorge

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25/03/16

10:13

Post #: 17360583
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Originally posted by elphamale ↑

Hi all,

The average spot price of Gold for the March quarter is virtually set between @A$1635-A$1640. And with only 4 trading days remaining for the quarter, EVN has itself an outstanding average sale price which it will report in a little over a months time.

Based on a A$1625 average (note: I've reduced the average sale price a little to reflect hedgebook sales @A$1600 as part of the mix), record revenue and record positive cash flow will be generated this quarter.

Compare this to an avg. realised price of A$1536 for Dec qtr and A$1559 for Sept qtr and you can understand why March qtr sales and margins are set to bolster the balance sheet like never before.

Digging deeper, let's assume that EVN has sold 220koz at A$1625 average (note: the company has a track record of delivering an average sale price above that of the spot market average i.e. even with hedgebook sales included. Therefore I am optimistic that A$1625 will prove to be conservative and on top of this I am hopeful that management were able to deliver further cost reductions and lower their ASIC below $A975 this qtr).

At an ASIC of A$975, the net operating margin should be @A$650 per oz or A$143 million for the quarter. That's almost $600 mil annualised.

So despite the pullback in the spot price this week, I am not overly concerned as I am more focussed on quarterly averages, company results and the big picture.

And further fundamental analysis suggests;

*market conditions continue to present cost reduction opportunities for EVN with no signs of upward pressure evident

*net mine cash generation should comfortably increase this quarter and all assets will remain cash flow positive

*balance sheet gearing is set to continue to decrease dramatically.

*organic growth announcement/s and/or increase in dividend very likely within the next few months due to improved cash flows positively impacting the balance sheet, providing greater flexibility to add or return value to shareholders.

*EVN's SP is IMO way oversold relative to the average spot price of gold for the March qtr. Yes, the market is forward looking however even at A$1500 average price for the June qtr, EVN is still likely to generate well over A$100 million in net operating cash flows. That is why I purchased more shares today and will continue to add to my position if we see further weakness in the weeks ahead.

*EVN's hedging program (improved this quarter) provides excellent insurance against a weaker gold price in AUD.

*EVN's geographically diverse suite of mines across Australia means that in the event of any production issues, the company is very well placed to weather any storm. Therefore operational risk is less than say the majority of its local peers including RRL and SBM as examples.

Summary: As the market has not been informed of any major production issues this quarter, April's quarterly report should be within current guidance figures and will therefore likely provide the re-rate (or SP recovery) some of us are looking for.

In turn the GDX index will need to increase its exposure/weighting by purchasing additional shares on market in the June quarter.

Prediction: EVN is set to outperform real soon IMHO.

Happy Easter and GLTA.

Elpha

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Silly question - what is ASIC? I assume it's an all-in cost acronym, but just not sure what it actually means - thanks!

EVN Price at posting: $1.51 Sentiment: Hold Disclosure: Held
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(20min delay)
Last $4.88		Change 0.100(2.09%)		Mkt cap ! $9.707B

Open	High	Low	Value	Volume
$4.99	$5.01	$4.84	$39.38M	8.016M

Buyers (Bids)

No.	Vol.	Price($)
1	17864	$4.87

Sellers (Offers)

Price($)	Vol.	No.
$4.89	162298	8

View Market Depth

No.	Vol.	Price($)
1	17864	4.870
3	95912	4.860
2	5421	4.850
3	14650	4.840
2	111637	4.830

Price($)	Vol.	No.
4.890	106102	6
4.900	199203	6
4.910	31141	1
4.940	500	1
4.950	5918	1

Last trade - 16.10pm 08/11/2024 (20 minute delay)

EVN (ASX) Chart

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