Earnings call transcript: Evolution Mining Q1 2025 sees strong cash flow, stock dips

Evolution Mining Ltd (EVN) reported robust financial performance for Q1 FY26, with significant cash flow achievements. The stock, currently trading near its 52-week high of $11.23, has demonstrated strong momentum with a 13.71% return over the past six months according to InvestingPro data. Despite these gains, the company’s stock saw a 2.28% decline, closing at $11.42, possibly reflecting investor concerns about operational challenges.

Key Takeaways

• Record net mine cash flow of $366 million.
• Completion of Mungari plant expansion under budget.
• Copper prices increased by 15% during the quarter.
• Stock price fell by 2.28% following earnings release.
• Operational challenges at Mungari and Cowal noted.

Company Performance

Evolution Mining demonstrated strong financial performance in the first quarter of fiscal year 2026. With a market capitalization of $440.31 million and operating with moderate debt levels, the company produced 174,000 ounces of gold and 18,000 tonnes of copper, with an all-in sustaining cost of $17.24 per ounce. The record net mine cash flow of $366 million reflects a 23% increase against a 4% rise in gold prices, highlighting efficient operations. For deeper insights into EVN’s financial health and valuation metrics, check out the comprehensive Pro Research Report available on InvestingPro.

Financial Highlights

• Net mine cash flow: $366 million, up 23%.
• Operating mine cash flow: $676 million, second highest on record.
• Group cash flow for the quarter: $196 million.
• Cash balance: $780 million.
• Gearing reduced to 11%.

Outlook & Guidance

Evolution Mining remains on track to meet its FY26 commitments, with group guidance set between $1.72 billion and $1.88 billion. The company maintains a healthy current ratio of 1.35 and offers an attractive dividend yield of 5.55%. With a beta of 0.65, indicating lower volatility than the broader market, and no debt repayments anticipated until FY29, the company is considering potential capital returns and dividend distributions in the next 6 to 9 months. InvestingPro subscribers can access 10+ additional financial tips and detailed analysis about EVN’s growth potential.

Executive Commentary

CEO Laurie Conway emphasized, "We’re on track to deliver on our FY ’twenty six commitments." He also highlighted the strategic advantage in the current metal price environment, stating, "Evolution with a long life, low margin portfolio... is able to take advantage of the current metal price environment."

Risks and Challenges

• Operational disruptions, such as power supply issues at Mungari and weather impacts at Cowal.
• Dependence on copper and gold market conditions.
• Strategic execution of ongoing projects, such as the Cowal Open Pit Cutback.
• Potential challenges in sourcing alternative ore for Ernest Henry.

Q&A

During the earnings call, analysts inquired about the Ernest Henry ore sourcing strategy and the potential for early development of the Southern Lake Bund. Discussions also covered Mungari’s processing costs and Cowal’s stockpile management strategies.

Full transcript - Evolution Mining Ltd (EVN) Q1 2026:

Laurie Conway, CEO, Evolution Mining: Thank you, Darcy, and good morning, everyone. I’m joined on the call today by Matt O’Neill, our Chief Operating Officer Peter Rocky O’Connor, our General Manager, Investor Relations and Fran Summerhays, who joined us a month ago as our CFO. It’s great to have Fran on board, and she’s made an impressive start in her first month. I will have Fran make a couple of introductory comments about herself soon. Today, we released the September quarterly report, which will be the reference point for the call.

There are three key things to take away from the call today. Firstly, we’re on track to deliver on our FY ’twenty six commitments. That is for group guidance, production, costs and capital. Our projects are on schedule and on budget, and our five year capital outlook remains unchanged. Secondly, there’s been a structural shift in the sector both for gold and copper.

Gold as a financial reserve has accelerated with central banks being net buyers of gold for 27 of the last twenty eight months. For the first time since 1996, central banks are holding more gold in reserves than US treasuries. In terms of copper, short term supply issues matched with an increasing long term demand forecast, but no clear pathway for increased supply is seeing rising near term and long term copper prices. Lastly, evolution with a long life, low margin portfolio, including two high quality copper assets and minimal hedging, is able to take advantage of the current metal price environment, invest for future growth, generate high margin returns for our shareholders for the long term, not just the next few years. The September was another quarter where we safely delivered to plan and start FY ’twenty six very well for Evolution.

On the safety front, we maintained the improving trend with our TRIF remaining below five. Production for the quarter was 174,000 gold ounces and 18,000 copper tonnes at a very low all in sustaining cost of $17.24 dollars per ounce for continuing operations. This performance delivered record net mine cash flow of $366,000,000 and our second highest operating mine cash flow of $676,000,000 Net mine cash flow for the quarter was up 23% against only a 4% increase in the achieved gold. The benefit of copper in the portfolio is further evidenced with the price up 15% in the quarter. A couple of record net mine cash flows to call out include $55,000,000 at North Parks and $39,000,000 at Red Lake, with that operation continuing their safe and reliable delivery of positive cash.

Importantly, the cash generated in the September was at prices well below the current spot prices. Spot prices are $1,200 per ounce and $1,300 per tonne above what we achieved in the September. The two cash flow charts on the first page clearly demonstrate the potential for the year should these high prices remain. It means we would generate over $3,300,000,000 in operating mine cash flow and around $3,100,000,000 in mine cash flow before major capital, an improvement of around $570,000,000 compared to where the spot prices were when we released our FY ’twenty six guidance in August. It would also be $1,000,000,000 more cash flow than what we generated in FY ’twenty five.

Group cash flow for the quarter was $196,000,000 As outlined at the June call, we expected a working capital unwind in September. In the June quarter, we had higher capital predominantly associated with the plant expansion completion at Mungari, the commencement of the OPC project at Cowal and ventilation and truck work at Ernest Henry. This resulted in $35,000,000 in high liabilities balance at the June, which were paid in the September. We also had $26,000,000 in high receivables at the September due to higher volumes of concentrate sales outstanding compounded by the rising copper price in the quarter. This is actually a positive, though, as we will receive those proceeds in the December.

We now expect working capital movements to return back to a normal rhythm where on a full year basis, the movement would each either in an inflow or an outflow. Our balance sheet flexibility further improved with gearing now at 11% and a cash balance of $780,000,000 Our disciplined capital management continued during the quarter, repaying $170,000,000 off our term loans. Post the quarter end, we paid the remaining $110,000,000 These loans are now fully repaid, and we have no debt repayment commitments until FY ’twenty nine. On the projects front, Mungari has successfully completed commissioning the expanded plant and will be in commercial production this month. The final project cost is now forecast at $212,000,000 which is 15% below the original budget.

Given the $43,000,000 of net mine cash flow for the quarter, Mungari is well on its way back to being a material cash contributor for Evolution and quickly paying back the project investment. At Cowal, the OPC made a solid progress during the quarter with commissioning of the open pit trucks and completion of the Northern Lake Protection Bond. The project remains on schedule and on budget. With that, I’ll now hand over to Fran to introduce herself before Matt takes us through the operational performance.

Fran Summerhays, CFO, Evolution Mining: Thanks, Laurie. I’m delighted to have joined Evolution Mining at a pivotal time for both the business and the broader industry, especially with the structural change happening with gold and the supply disruptions in copper. With increasing metal prices and a clear strategic focus, Evolution is well placed as one of the lowest cost gold producers consistently and safely delivering robust margins and cash flows. In my first month, I’ve had the opportunity to visit three of the operations and participate in board meetings. What stood out to me is the depth of the safety culture and the openness and enthusiasm people have across the business for being part of evolution.

As the CFO, my initial focus is on listening, learning, and building relationships, including with our current and future investors and the analysts who cover us. I bring a disciplined, value driven approach to capital allocation and operational efficiency. It’s an exciting time to be part of the Evolution team, and I am committed, along with the management team, in elevating the business and making a meaningful contribution to Evolution. Thank you. Over to you now, Matt.

Matt O’Neill, Chief Operating Officer, Evolution Mining: Thanks, Fran. As Laurie noted, the September was in line with our full year plan, and we remain on track to meet full year guidance, allowing us to continue to benefit from the rising metal price environment. We produced 174,000 ounces of gold and 18,000 tonnes of copper over the quarter, and pleasingly, we did this at a lower than planned AISC, helping us to generate a second consecutive record net mine cash flow. Despite these positive metrics, the area I remain most proud of is our safety performance. Happily, I’m able to repeat a message I’ve given a number of times in these updates, which is to report that our performance in this area continues to be strong as evidenced by our total recordable injury frequency rate for the group dropping below five.

The consistency and predictability we are seeing in the operation continues to be built on the back of teamwork and collaboration across the entire Revolution team, and it’s a credit to everyone involved. Our goal remains the same. We say we do, we deliver, and I’m very pleased to say that I think we’ve done that this quarter. As I noted earlier, our operations have started the year in line with plan and remain on track to meet full year guidance. Some items sorry, some items for note for the quarter were Cowal and Ernest Henry completing their regular biannual shutdown activities.

We also had some minor interruptions to the open pit activities or the mining activities at Cowal due to wet weather. However, it was pleasing to see the work the team have been doing on improving resilience pay off as we were able to feed the processing plant from our mine surface stocks, ensuring no mill downtime or feeding of subgrade stocks. Works are progressing well on the OPC projects. And as Lori noted, the Lake Protection Barn has been completed ahead of schedule within the September. Red Lake, North Parks and Mt Rawdon continued to deliver in line with their plans.

The ramp up of the mill at Mungari continued through the final commissioning on track to be completed this month. And I’m happy to be able to report the true our expectations, and the team on-site are very excited to see what they can achieve with the new plant. This brings the formal part of our update to an end. I’ll now hand back to Darcy for questions.

Darcy, Conference Call Moderator: Thank you. Your first question comes from Kate McCutcheon from Citi. Please go ahead.

Fran Summerhays, CFO, Evolution Mining: Hi. Good morning, Laurie and Matt. Just starting at Ernest Henry, you gave us the update. So now that shaft is full to 2,040 plus and you pushed out that $200,000,000 of CapEx outside the next five year profile, so that’s a great outcome. How do I think about the incremental cost of that AOS material that will be tracked?

Because I imagine that will be higher cost. So if we looked at $1 per tonne mining cost to Ernest Henry today, say, mid-30s, in real terms, what does that look like on the revised plan, or is there anything you can talk to about that?

Laurie Conway, CEO, Evolution Mining: Yeah. Okay. I’ll I’ll I’ll hand that one to Matt.

Matt O’Neill, Chief Operating Officer, Evolution Mining: Yep. Thanks, Laura. So the alternate ore sources, there’s a variety of places that they’re coming from, Kate. So a lot of them are actually gonna be used through the old materials handling systems that they’re going to be through passes back to the crusher in the same way that we mined those levels initially. There are a couple that we will track, they’ll track a little bit further into those passes.

So it’s not a material shift. We’re not trucking the material out of the pit, but when that first that operation first started, we were trucking all the way to the surface, which obviously almost doubles the unit cost. That’s not what we’re doing with the alternate ore sources. We would do a bit of rehab, and we’ll get back to the old systems of of using the passes. What about the last Below?

Below. Oh, sorry. Yeah. Below the so when we get below the crushing horizon, which is where we’re into that area now, we are going to be trucking back up to the crushing horizon, and that’s got a dedicated truck loop. Again, it’s only a pretty short level.

Like, it’s 25 meters between levels. So, obviously, the further we go, we’ll increase the number of trucks and ventilation, which we’ve sort of documented pretty well over time. But again, they’re not going out of the pit, so it’s not a material step change in unit cost.

Fran Summerhays, CFO, Evolution Mining: Okay. Got it. That is helpful. And then at Cal, now that you finished that Northern Lake Protection Fund, is there scope to pull forward the Southern bond and putting that together? I don’t mean to put the cart before the horse, but do you see scope to reduce that open cut fee gap later this year or a risk to the upside?

Laurie Conway, CEO, Evolution Mining: So Kate spoken like a good engineer. Yes. The work is finished. The site team is looking at whether we continue and do this, the Southern Lake Bund. But it’s not needed, but given the works and the progress we’ve made on the Northern, they’ll have a look at it.

We know, and we’ve said this previously, if we do need to do it as a wet move on the Southern Bun, the project allowed for dry. You’re talking about 40,000,060 million dollars of incremental capital over and above the project budget, but it does give us access to the Southern area. So that’s something that we’ll assess over the next three to six months.

Darcy, Conference Call Moderator: Thank you. Thank you. Your next question comes from Daniel Morgan from Baron Joey. Please go ahead.

Daniel Morgan, Analyst, Baron Joey: Hi, Laurie and Tim. I guess my focus is also on the bond and the OPC. What would be the benefits of bringing forward the southern access, getting access to those open pits? Can you help us think about timing of grade, of magnitude? I mean, I know that you’ve just outlined an additional cost if it’s a wet move, but with gold prices where they are bringing forward, that potential production would seem to me pretty beneficial, would it not?

Laurie Conway, CEO, Evolution Mining: Yes. Look, I’ll hand that to Matt, Dan. I’d say that one there’s two things from an overall perspective for the operation is that when we’re timed to do that in a few years, if you do have a couple of wet seasons, then what does that do to the to the time the time that it takes and the cost of actually doing that burn versus now while we’ve got the access? It does give us greater flexibility on

Matthew Friedman, Analyst, MST Financial: the site, but, Matt, do you want

Matt O’Neill, Chief Operating Officer, Evolution Mining: to talk about what it does operationally with the pits? Yes. It’s really around flexibility, Dan, but you wouldn’t see anything materially increase in the next twelve to eighteen months. Obviously, we’re trying to work towards the northern area being pulled forward, and that works that they’ve completed in the first quarter have allowed us to go a bit further in front than we were. The southern one will also open up some additional different opens up some oxides, which we do like treating.

It does help with our throughput. So it’s an option for us that we’re going to be chasing. But again, it comes with that price tag. So it’s a question of when the extra ounces come through to offset the stockpiles that we’re planning on trading now. And at the moment, it’s not within the next sort of twelve or eighteen months just in terms of where you’d sit it.

Laurie Conway, CEO, Evolution Mining: So Dan, in short, for your models, as Matt said, nothing over the next couple of years. If we did make that decision and let the market know, we would sort of say, what does it do in terms of years three to five?

Daniel Morgan, Analyst, Baron Joey: Yes, that’s very clear for now. Just staying on CAL and just the more immediacy, obviously, weather looks like you’ve had some impacts in the bottom of the pit just having access to it temporarily. Where is access at currently? And should we expect that high grade ore to come through this quarter or perhaps in the second half of the fiscal year?

Matt O’Neill, Chief Operating Officer, Evolution Mining: Yes. So we’ve got access back. We were out for between a week and a half and two weeks of impact in the pit over the course of the quarter, mainly in September. We have got ourselves back where it’s pretty tight. I think as people would most be aware of when we get to the bottom of that pit, it gets pretty tight.

Normal operations have resumed. We’re expecting to see a kick up in the next quarter, and then we’ll continue that through until that pit’s finished. There’s no change to the fact that, that pit will be finished this financial year, and then we’ll go to the stockpiles after that.

Daniel Morgan, Analyst, Baron Joey: And then just last question on Mungari, just the latest live update of the ore sources ramping up in sympathy with the mill expansion.

Matt O’Neill, Chief Operating Officer, Evolution Mining: Yes. So we’re in front on the ore sources. So Carthagell has gone really well. The team out there with NRW have done a fantastic job, so very happy where that is, and we’ve got enough stocks in front of the mill now. We’re running it through its final sort of stages of commissioning almost as we speak with different types of material and hardness and locations.

So everything’s performing quite well, and that’s I’m I’m pretty comfortable that by the October, we’re in a good position with that mills commissioned and we’re away, and we’ve got enough feed to to to achieve what we need to achieve.

Darcy, Conference Call Moderator: Your next question comes from Andrew Bowler from Macquarie.

Andrew Bowler, Analyst, Macquarie: Just a question for me on capital returns.

Laurie Conway, CEO, Evolution Mining: I mean you outlined on

Andrew Bowler, Analyst, Macquarie: the front page, and I think it’s pretty clear to everyone that if gold prices continue to be in a net cash position by the end of the financial year, Is the review of the capital returns policy something you consider once you get back to that net cash position? Or is it very much a reinvestment story for some other projects potentially, for example, bringing a block cave on a little bit sooner than expected at North Fox, etcetera? Or would you look

Matthew Friedman, Analyst, MST Financial: to that capital returns line item with that excess cash?

Laurie Conway, CEO, Evolution Mining: Yes. Andrew, look, it’s a good problem to have with the rapid rise in the gold price. I mean, we said at the August call that as we’ve now got to 15%, we’re now touching down to 10% gearing. That means we’ve got to look at what we do in terms of that capital returns for shareholders. We’ll be doing that at the half year when we look at the interim and also as we go into the second half of the year.

Our policy of paying out around 50% of cash flows, I think, still works very well, and that means we’ve got some opportunities to look that. I mean when you talk about the capital, our five year capital outlook allows for a block cave at E ’twenty two. Moving it forward, I mean it was due to for decision in FY ’twenty seven, so it wouldn’t really change our capital spend over the next five years anyway. But as I said, when we get to the half year, we’ll discuss with the Board as to what we do around those returns.

Andrew Bowler, Analyst, Macquarie: Understood. And just one more from me. Obviously, it was reported by the media during the quarter, there was some continued issues with the power supply in the Kalgoorlie region. From memory, Mungari is running off that local grid out near Kalgoorlie. Can you just talk through if there was any impact from that and what sort of mitigation strategies there are?

Are you looking at adding a backup plant or potentially increasing renewable penetration there to sort of help smooth out those reliability issues exactly what we’re seeing at the moment?

Matt O’Neill, Chief Operating Officer, Evolution Mining: Yeah. It’s Matt here. Yeah. We we did see interruptions at Mungari with the power issues that have been occurring there. So we had a number of shutdowns, some of them planned, but with relatively short notice and others load shedding events where we we had to take the plant down.

Laurie Conway, CEO, Evolution Mining: We do have partial backup supply there.

Matt O’Neill, Chief Operating Officer, Evolution Mining: So we’ve got some generators as a result of the the new investment, and so we use that to keep the plant alive, but it doesn’t run the mill. For one of the better term, it stops us standing and creating operational problems. So, yeah, it did have an impact. We lost we lost quite a few days, almost a week, if you like, with the interruptions from the power side there as well. In terms of options going forward, we’re like everybody else in that region, we’d like the government to do something about it, but also we would we’re looking at what options do we have.

I know a lot of companies have done things themselves, so we’re we’re looking at all their options because those interruptions, we don’t see them change in the short term.

Daniel Morgan, Analyst, Baron Joey: No worries. That’s all for me. Thanks.

Andrew Bowler, Analyst, Macquarie: Thanks, Andrew.

Darcy, Conference Call Moderator: Your next question comes from Hugo Nicolache from Goldman Sachs.

Hugo Nicolache, Analyst, Goldman Sachs: Just first one for me on Mungari. It looks like your processing costs are still largely being capitalized. Should we expect that to normalize from this quarter forward, just given your processing rates ramped up? And where do you see those processing costs, maybe on a per tonne basis, normalizing to?

Matt O’Neill, Chief Operating Officer, Evolution Mining: Yes. You want to cover that? Yes. You will see it ramp up sorry, ramp up. You’ll see it capitalizing and you’ll see it come up.

We had a a forecast of reducing the AOIC by about 16%, I think, was the number, which at the moment we see it in line with when we we’re looking at what we’re looking at. So we’ll keep running it in full mode for the next probably two quarters before we can give you a really good steer on where it is. But yes, it’s in line with what the project expected. And at this stage, we haven’t come up with any material variances in what we thought it would cost.

Hugo Nicolache, Analyst, Goldman Sachs: Got it. And then just one on cash generation. I guess understanding sort of where the costs may be normalized going forward. Just you highlighted at the start, obviously, the commodity price strength in both gold and copper. But with the major cash generation before major capital, that’s obviously down quarter on quarter.

Are you able to just give us more color on the timing of those copper payments you highlighted and then where the costs maybe normalize going forward from here?

Laurie Conway, CEO, Evolution Mining: Yeah. So two things there, Hugo. I mean, the the costs yeah. The only real change you’ll see in the operating costs as as we go forward is what Matt talked about as we as we ramp up production at Mungari. And so those processing costs will be sort of in the $16 to $18 a tonne in the second half of the year, and their all in sustaining cost comes down.

The actual operating costs as we go forward, the other main driver will be obviously royalties on the gold and copper revenue. So we don’t see a lot of change through the balance of the year. The guidance, as we’ve said, $1,720,000,000 to $1,880,000,000 dollars remains in place. In terms of then the concentrate, so it’s different at each of the operations. So Ernest Henry has now reverted back to a one month quotational pricing period.

It was at the June, it was on a four month. So the shipments, therefore, will be settled within basically sixty days rather than one hundred and twenty. So that is why that receivable balance will come down through the December quarter. Northparks is on a three month pricing period, so that’s not going to change too much in terms of the 10% final payments that we receive, and it is then going to be driven on shipments. So we had a big shipment quarter.

We had four shipments this quarter at North Parks as opposed to only, I think it was two in the previous quarter. So that will sort of start to normalize, as I said, around our working capital.

Hugo Nicolache, Analyst, Goldman Sachs: Thanks a lot, Laurie. And then just lastly on CAL and the throughput there, obviously, sort of lower throughput this quarter. Are you able to give us a steer in terms of what the profile in terms of tonnes and grade looks like for the rest of the year in and around that guidance? Should we expect you to continue to process the higher grade material of the stockpile to keep that sort of 1.3,

Matthew Friedman, Analyst, MST Financial: 1.4 throughput grade?

Matt O’Neill, Chief Operating Officer, Evolution Mining: Yes. The short answer is yes. We’ll see it come back into that range a bit higher. And where we sit in the pit and access back in the year, it will return to the normal operating range until probably quarter four where we see the pit completing, but we also see that being offset by the underground ore sort of ramping up through there, that’s going according to plan as well. So yes, it will kick up from first quarter, but it’s going fit in the normal ranges that you’d expect for the guidance.

Darcy, Conference Call Moderator: Your next question comes from Baden Moore from CLSA. The

Baden Moore, Analyst, CLSA: CapEx guidance sounded like you’re looking at bringing forward some production or at least looking at your growth options. Five year guide at $750,000,000 to $950,000,000 Do think that’s still appropriate now just given where your cash flow is running to and the market seems to be signaling its time to produce more? And maybe just a second question, was wondering if there’s any change to how you’re thinking about increasing utilization on your Ernest Henry mill. Now you’ve got some certainty around what’s happening in Mount Isa.

Laurie Conway, CEO, Evolution Mining: Yes. So, Baden, the CapEx profile, the seven fifty to nine fifty over the next five years as we’ve outlined previously, and certainly, you look at the deck that we issued at Denver, it outlines all of the projects. I mean, we’ve got, you know, the the E22 at at North Parks, the OPC at at at Cowal, the Burt ore body at Ernest Henry, all of those projects are in there. So any acceleration of capital just because of the metal pricing would be incremental at this stage. And then when you talk about the utilization at Ernest Henry, that is the study that is going on at at Bert, which allows us to go in from the open pit and come out through there rather than using materials handling system to enable us to get high utilization of the installed capacity there.

Baden Moore, Analyst, CLSA: So just just to confirm, no this is no no read through here that you’d necessarily be reviewing that seven fifty to nine fifty over over over the next twelve months?

Laurie Conway, CEO, Evolution Mining: Not unless there’s other projects. And as I mentioned just earlier, yeah, we bring forward that work on the Southern Lake Bund at Cowal, that is additional capital that we would have to bring in that’s not in the five year outlook. And then if we make any other decisions across each of the assets, then we would update if there is a change in that capital. But the capital we put out there for the next five years allows us to deliver those growth projects at each of the assets.

Darcy, Conference Call Moderator: Your next question comes from Matthew Friedman from MST Financial.

Laurie Conway, CEO, Evolution Mining: Maybe

Matthew Friedman, Analyst, MST Financial: firstly, a bit of a two parter on costs at Cowal. Clearly, a pretty big step up in AISC quarter on quarter, running a little bit above your guidance range. Can you step us through the drivers behind that? I mean, it purely just the shutdown activity and the rain that you alluded to? Or is there anything else that really needs to kind of normalize across the coming quarters in order to bring unit costs back into the guidance range?

And I guess the second part of the question is maybe thinking a little bit more longer term. How should we be thinking about the mining cost and the AISC as we come to the end of the year when the open pit finishes? And obviously, you transition to more stockpiles, clearly, quite a few moving parts there with the stockpile drawdown, the OPC being capitalized, etcetera. So what does that all mean for how we should think about unit costs compared to, I guess, the actual cash expenses coming out of the business into the back end of the year?

Laurie Conway, CEO, Evolution Mining: Matt, that was a lot of questions in one. I’ll try and address it for you. And and then if Matt wants to add anything on Matt, on our side, not you, wants to add anything, we will. I mean, the first thing I’d say is you you got to look at Cowal. Over the years, it has delivered to its numbers.

It’s on track to deliver the guidance. It was expected in the first quarter that you have the maintenance shutdown with lower production, but there, the maintenance costs. So that’s driven up the all in sustaining cost. As Matt mentioned, we lost one weeks, point two weeks on having to use stockpiles due to the wet weather. That’s a noncash use of lower it for the cost for this quarter, but the costs will come down as we mine the pit out through the rest of this year and displace that stockpile material.

So if you look at it, we’re going to deliver to the guidance range. We’re on track for that. The costs were expected to be higher in the first quarter. As you go into the next year, we then are processing stockpiles as we finish mining E42. That will be for about eighteen months, two years.

So therefore, your costs on an AISC basis are going to be fairly similar, if not a little bit higher because you’re going down in terms of the grade of that stockpile material. But I just bring you back to the bigger picture. I get it. Look at Cowal, operating cash flow this quarter of $215,000,000 so that’s an annualized rate of $860,000,000 which is more than what we generated last year. And if you take overlay it with the gold prices, for the rest of the year, you’re probably looking about $250,000,000 to $270,000,000 extra cash flow.

So it’s almost like a cow, you buy four quarters and you get a fifth quarter free because it would generate over $1,000,000,000 of operating cash flow for the $100 to $200 an ounce on the noncash inventory that it does to the AISC. I’ll take the operating cash flow every day.

Matthew Friedman, Analyst, MST Financial: Yes. Got it. And sort of alluded to the fact that going into next year with the lowest stockpile grade, the AISC will be broadly flat or maybe actually a little bit higher. But in terms of the actual cash generation of the businesses you’re alluding to, it should actually improve materially given that you’re on a kind of expensing basis, those stockpiles are already you’ve already paid for them.

Laurie Conway, CEO, Evolution Mining: Absolutely. And being clear that next year, do a full year on lower grade stockpiles, so production is going to be lower. Therefore, AISC will be a bit higher on a noncash basis, but I’d expect it’s going to make fairly similar cash flows before, obviously, the investment in the OPC. The operating cash flows will be very solid.

Matthew Friedman, Analyst, MST Financial: Yes. Yes, exactly. Okay. Thank you. That makes perfect sense.

And then maybe just quickly, you alluded to in the text there that the underground at Cowal ramping up to 30% of mill feed. I think previously, you’d said the target was 2,400,000 tonnes per annum. Is that number still right? It sounds like if you’re feeding depending on your throughput rate, if you’re feeding 30% of mill feed there, that maybe there’s actually a little bit of upside risk to the underground. How should we, I guess, yes, think about what your aspirations there are?

I’ll hand this to Matt

Laurie Conway, CEO, Evolution Mining: just to talk about where the underground will fit. We’re not sort of upgrading that. That was this quarter. And so therefore, obviously, as we had the mill outage for the maintenance for the quarter, therefore, as we brought that online, the underground got priority feed over the open pit. And certainly, when we’re out for the wet weather, the underground got priority feed.

But, Matt, you wanna talk about the big picture of the underground feed? Yeah. So we had a we had

Matt O’Neill, Chief Operating Officer, Evolution Mining: a pretty strong quarter at the underground with the total material move increasing to

Laurie Conway, CEO, Evolution Mining: the point where we’re we’re pretty comfortable. 2.3,

Matt O’Neill, Chief Operating Officer, Evolution Mining: 2.4 is what we’re gonna be running it at, and we’ve seen the the team on-site able to deliver that. So no plans to go further than that at this stage. Obviously, investigating what can we do with where everything sits, but that’s that’s where it still sits and comfortable that that’s achieved or achievable with the team we’ve got.

Daniel Morgan, Analyst, Baron Joey: Got it. Okay.

Matthew Friedman, Analyst, MST Financial: Thank you, Matt. Thank you, Larry.

Laurie Conway, CEO, Evolution Mining: Thanks, Matt.

Darcy, Conference Call Moderator: Thank you. Your next question comes from Alex Barclay from RBC.

Andrew Bowler, Analyst, Macquarie: A question on the Ernest Henry feasibility study. Just firstly confirming if that was completed and might get released at some point. And then are you able to talk about some of the updates versus the PFS, maybe around life extensions or grade changes? Just any detail.

Laurie Conway, CEO, Evolution Mining: Yes. Thanks, Alex. I’ll get Matt to add to this. The feasibility study finished. And as we’ve said, essentially, with the amount of ore that we found below the existing eleven seventy five and where we’re planning to put the materials handling infrastructure, it’s now filled with ore.

So that means that infrastructure has to go lower down in the cave and that work will be done over the next sort of twelve to eighteen months. But essentially, the outcome is that we continue mining. We mine below the 1175 and we truck back up to the materials handling system. And as Matt said earlier, we’ll also be mining additional ore sources that have been identified that we can use the existing materials handling system for. So there’s no real outcome on the study per se because essentially, all we’re doing is increasing ventilation, refrigeration, adding in trucking and doing development.

So it’s just a continuation of the mining because we’re not adding any of that infrastructure, which pushes the $200,000,000 out of the next five year capital profile. And so that’s really what the outcome of the study will be. I’ll

Hugo Nicolache, Analyst, Goldman Sachs: talk about

Laurie Conway, CEO, Evolution Mining: then just the mining. And one of the main things that came out of the study is that we actually keep the plant filled through to 02/1938, whereas the PFS had it declining from about 2033 through to 02/1938. So it now does keep it filled at 6.8 till 02/1938. I’ll talk about just sort of the mining and

Matt O’Neill, Chief Operating Officer, Evolution Mining: Yes. I mean, same mining method at the moment. The mining below the crusher horizon, sublevel caving truck back to the crushing horizon. Grade’s not changing materially. To be honest, there’s a little bit more gold in some of the the places that we’ve seen, but it’s you wouldn’t see it as a material variance to what we’ve been mining so far.

So all in all, the drilling that we did for that study sort of, in a good way said there’s a lot more there. It’s just now we’re to work at where we put the infrastructure. So that work is ongoing, and it doesn’t interrupt the existing operations for quite a few years yet.

Andrew Bowler, Analyst, Macquarie: Okay. That’s all very helpful. Just a last one on the Mt. Lawton hydro project. Were talking last quarter, you had a comment around the Queensland investments, but not this quarter.

Why is that? Is it possible to get a quick update on the project and the timing there?

Laurie Conway, CEO, Evolution Mining: Yes, Alex. Look, it’s continuing to work to plan. I think if you look at news out of Queensland in the last sort of four to six weeks, they’re doing a full relook around some older or other renewable energy projects and focusing on all of that. Ours is still tracking to plan the commitment to the project. We’re doing work on-site that’s being funded by the government.

And the expectations are that in the March, we’d get a sort of a final outcome on terms of the government exercising that option on the project.

Darcy, Conference Call Moderator: Your next question comes from Ben Wood from UBS.

Andrew Bowler, Analyst, Macquarie: Thanks for your time. A few of the questions have already been asked. But I guess one for me is on the gross debt. From here, that there are no obligations until FY ’twenty nine as sort of outlined in the release, But the continuation of the 100% annual paydown this quarter, how are you sort of thinking, I guess, about the gross debt paydown from here in respect to the capital allocation piece sort of asked by Dan before. And just sort of noting that the gearing situation has greatly improved from even twelve months ago.

So how do you think about that?

Laurie Conway, CEO, Evolution Mining: Yeah, Ben. I mean, it’s as

Matt O’Neill, Chief Operating Officer, Evolution Mining: I said earlier, it’s a it’s a

Laurie Conway, CEO, Evolution Mining: good problem to have. I mean, in terms of the gross debt, the next repayment is due in FY ’29. And as it’s in our US private placement notes, you can’t prepay those. So we won’t be paying off any more gross debt between now and FY ’twenty nine. That’s a $273,000,000 payment in the ’9.

That would sort of be the next repayment. What we do with the cash that we’re generating now is something that we will take and discuss with the Board as we come into the half year and again as we come to the full year. Certainly, as you would have seen over the last two years, as the gearing has come down, the dividends have gone up as the cash flow has increased because of the pricing. We’ve also been increasing the dividend. So that’s expected to continue.

What we do with the extra cash is going to be discussed in the next six to nine months.

Andrew Bowler, Analyst, Macquarie: Thanks, Tim. Helpful to know that the early prepayment is not an option for the ’29. Thank you. Thanks, Ben.

Darcy, Conference Call Moderator: Thank you. There are no further questions at this time. I’ll now hand back to Mr. Conway for closing remarks.

Laurie Conway, CEO, Evolution Mining: Thank you, Darcy, and thanks, everyone, for your time on the call today. We’ve had another safe and consistent quarter, setting the foundations for FY ’twenty six and on track to deliver guidance and certainly make sure we take advantage of the current high metal prices, be that gold, copper and silver. Thank you for your time today.

Darcy, Conference Call Moderator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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