Evolution Mining Limited

Thank you for joining us today on this very important Evolution FY20 results call and business update. This morning on the call I'm joined by Laurie Conway, Finance Director and CFO, and Glen Masterman, VP Discovery and Business Development. As you have seen in the announcement we made on the ASEC yesterday, forest fires have been burning around the Red Lake community and the area has been evacuated on Tuesday evening. The safety of our people is our highest priority, and I am pleased that all of our employees and contractors are safe. The operation has been temporarily suspended, but we did not expect this event to have a material impact on Red Lake September quarter production. At Evolution, we have made a strategic decision to operate in the Tier 1 mining-friendly jurisdictions of Australia and Canada, and we are fortunate that the COVID-19 pandemic is being well managed in both of these countries. Evolution's management of the COVID-19 pandemic has also been very successful so far. To date, we have not had any material impact on our production due to COVID-19. Our safety performance is improving. Performance in this area can never be good enough, but the signs are encouraging. Our culture of engaging, reporting and learning from every incident is also improving markedly. I am pleased to report that in the last MSCI ESG report issued two weeks ago, evolutions had its rating confirmed at A, being upgraded from BBB in the last 12 months, and we were placed in the top five industry leaders in the areas of health and safety and business ethics. Community support and our social licence to operate are amongst our most valuable assets. Beyond the many positive interactions and contributions our people make as Evolution employees and, in the majority of cases, as members of the communities near our operations, we measure our social licence through a stakeholder perception survey completed by Deloitte every two years. I'm pleased to say that our latest results showed our overall social licence to operate score has risen from 4.06 out of 5 in 2018 to 4.21 in 2020, with all evolution operations falling within the high approval category. At Cal, we're on track to submit the regulatory development application to the New South Wales Government for the underground mine early in the December quarter. We expect up to 300 jobs will be created in the central west of New South Wales near West Weilong during the construction phase and up to 100 new long-term jobs will be created for the life of the underground mine. Turning to the FY20 financial results, it is very pleasing to be reporting record statutory and underlying net profit after tax and record cash flow. Yes, we have had the tailwind of a higher gold price But as these results reflect, we have consistently delivered our strategy of upgrading the quality of our asset portfolio and have built a sustainable high margin long term business. Group free cash flow for the last 12 months after investing significant capital to enhance our future was $542 million. As a point of comparison, five years ago in FY15, our mine operating cash flow was $306 million versus $1.1 billion in the last 12 months. Our net mine cash flow five years ago was $138 million. In FY20, it was $736 million. This is a five-fold increase as compared to the Australian dollar gold price rising 52% in the same period. We believe our shareholders should directly benefit from this journey. That is why I'm particularly pleased that the Board has declared our 15th consecutive dividend of $0.09 per share fully franked. This brings total dividends for the last 12 months to $0.16 per share, an increase of almost 70%. Cumulatively, once this final dividend is paid, we will have rewarded shareholders with $732 million in dividends. But we understand that the market is forward looking. These results are history and I now want to shift gears and talk about our future. Using the terminology and concept made famous by the legendary investor Warren Buffett, during these good times we need to build out and widen our economic moat. At Evolution we are doing this by continually focusing on improving the quality of our portfolio by extending mine life without compromising margins. Through our strategy of concentrating our business on a small number of high quality assets, we have now grown our mineral resource inventory to 30 million gold equivalent ounces. Over the next three years, the outlook we have provided today is one of an increasing production profile at reducing costs. The cost outlook means we will remain one of the highest margin, lowest cost gold producers in the world. The growth is all coming from near-term organic opportunities already in our portfolio. Importantly, it is mostly being driven by our long-life assets in Cal and Red Lake. And if we look beyond the three-year outlook horizon, we can see even more upside and growth at these important cornerstone assets. This three-year outlook includes what I have described as our initial investment case at Red Lake. a three-year transformation plan to deliver a sustainable 200,000 ounces per annum at an oil and sustaining cost of less than US$1,000 an ounce. This base case will deliver appropriate returns to our shareholders and is what motivated us to make the investment and acquire the assets. As we described in our June quarterly report issued three weeks ago, we are pleased with the progress we are making are well on track and confident that this initial investment case is deliverable. However, what the three year outlook does not capture is what I believe to be the most transformative value creating opportunity in the history of evolution. That is the 11 million ounce JORC compliant resource that we have announced today at Red Lake. As a reference, the last mineral resource issued publicly for the operation estimated the resource inventory to be 2.9 million ounces. This new resource estimate does not trigger any of the contingent payment consideration to Newmont. Let me hastily add that the contingent payments are ones I'll be very happy to make, as it will mean that we have been successful and discovered even more ounces at this exciting property. Red Lake can best be described as applying a different lens to an opportunity and emerging with a completely different, and I add, much better, result. To date, Red Lake's history has been viewed and structured as a narrow vein, very high grade underground mine. The site geologists tell us that generally anything less than three to four grams per tonne was considered waste and often not sampled in the drilling, and until recently, only material above 15 grams per ton was considered for inclusion in the mine plan. That strategy and approach worked well for long periods in the mine's history, particularly from the early 2000s to 2016, when the famous high-grade zone was mined. An incredible 7 million ounce ore body grading 50 to 60 grams per ton, with a footprint of only 200 meters by 200 meters, and extending over one kilometer down plunge. During this phase, there wasn't a strong need to think differently as this ore body propelled Goldcorp to be one of the most highly valued gold companies in the world. For the last four to five years as the high-grade zone was depleting, operating at Red Lake has been tough. The cost base was too high and was suited to the Bonanza-style grades. The mine consistently missed its forecasts as a corporate strategy of trying to increase production, reduce costs, and minimize investment collided with a site situation that required a reset of expectations, investment in underground development and exploration, and most importantly, a rethink of what the future could look like if the operating model was changed. Again, as a point of reference and a different perspective, it's worth noting that a head grade of seven to eight grams per ton This mine, Red Lake, will be the highest grade mine within Evolution's portfolio. Being the new owner, we have had the opportunity to undertake a major reset. Firstly, we have tackled some of the things that were considered obstacles in the past. We have reduced the workforce by 20%. We are optimizing the plants, rationalizing the equipments. simplifying the planning and mining fronts, and most critically, have a motivated workforce up for the challenge of change. We are five months into a three-year process, but we are well on our way. Now with an 11 million ounce mineral resource and lots of exploration upside yet to be tested, we have an opportunity, really the luxury, to completely rethink the future of this mine and consider what is possible. The mineral inventory is only the first step in reimagining the future of Red Lake. We expect a step change in our reserve base and work has commenced on optimizing this into a new life of mine plan with the view that we will be able to be ready to declare a reserve update in our 2020 MROR statement. At our Investor Day on the 1st of September, we are looking forward to articulating some of the exciting upside opportunities we plan to investigate as to how this materially larger resource base could deliver a completely different future for Red Lake. Our portfolio now has a resource base of 30 million gold equivalent ounces. All of these resources are economically constrained at a 2000 Australian dollar per ounce gold price. At today's gold price, this resource base is equivalent to over 80 billion Australian dollars of in-ground revenue. Our job going forward is to continue to grow our resources and bring the maximum of this in-ground value to account, converting it safely, efficiently, and responsibly into cash in our bank accounts and then ultimately into yours as a shareholder of evolution. With that, I will hand over to Laurie.

Thank you Jake and good morning everyone. It's a pleasure to be presenting the FY20 financial results as well as our guidance for FY21 and three year outlook to FY23. Turning to slide 7 which outlines the financial highlights for the year. The results really reflect a very good year for the company with all metrics improving on the previous year and a number of records being set. In a profit sense our statutory and underlying profit were both records at $302 and $405 million respectively. The main difference between the statutory and underlying profit was an impairment of the Mount Carlton asset which involved a non-cash write down of $101 million post tax. While it is a non-cash item this outcome is a disappointing one. Fortunately though this is the only real negative in the financials. I'll go through the drivers to our improved profit performance on the next slide. The cash generation of the business continues to reflect the quality of the portfolio that we have established over the past few years. Our operating cash profit and cash flow were up by about 40% to 45%, while group cash flow was up 86% to $542 million. Reflecting the increase in underlying profit, our underlying earnings per share were up 84% to around $0.24 per share. On the back of these exceptional financial results and cash generation, we have increased our final dividend by 50% to $0.09 per share fully franked. While our policy is based on cash flow, this dividend also represents two thirds of our underlying profit. Moving to slide 8 and the drivers to our profit. Our underlying profit of $405 million was up 86% driven by higher revenue that was up 29% which was the same increase as our achieved gold price. Our royalties were up by 20% to a total of $76 million. The standout in our profit result was that we effectively maintained our operating costs flat with just over a 1% increase. Considering that labour comprised approximately 45% of our cost base and this increased by 4% over the year, we had additional costs such as the full year of Float Tiles Leach at Cowell and commencement of the Mount Carlton Underground. The savings in other costs have enabled us to maintain a low cost position. Red Lake delivered over $15 million in the first quarter while at Cowell and Mount Rawdon planned drawdowns of stockpiles added a non-cash charge of $49 million to costs. Turning to slide 9 which really demonstrates that our low cost position is translating to real cash generation. The cash operating margin or EBITDA margin for the group increased by 10% to 53%. As the charts on the right demonstrates our assets are individually contributing to this Red Lake delivered well in its first quarter at a 37% EBITDA margin and over time we expect to see this achieve the levels of our high margin long life assets Cal and Ernest Henry. They delivered margins of 60% and 69% respectively. Pleasingly, Mangari and Mount Rawdon also delivered improved results. A critical component to managing our capital allocation is that assets need to fund their own investment requirements. With the exception of Mount Carlton, all assets delivered positive and record cash flows during the year. It also should recognise the reliability being achieved by the Mangari team as the reward for effort was over $113 million of net cash flow delivered for the year. On slide 10, we have our group cash flow. This is essentially the net cash we are generating to fund acquisitions, service debt and pay dividends. We generated over $542 million, which continues our sustained high cash generation. It means we are putting cash in the bank. Importantly, it is being done at a very high margin, as shown in the chart on the top right, which breaks down our cash flow on a per ounce produced basis. Every ounce produced delivered $726 into the bank. This is a net margin of 32%, and an increase of 88% over last year which is significant since we only achieved a 29% increase in our achieved gold price. We have maintained our discipline on debt and the balance sheet is solid. On closing the Red Lake acquisition our gearing went to 14% and we have now halved this to a very manageable 7%. The good news for our business and shareholders is that this was all delivered at a gold price which is $400 Australian below the current spot price. Moving to slide 11. Given the strength of the balance sheet and record cash generation we have declared a final dividend of $0.09 per share. This dividend will be fully franked and paid on the 25th of September. The dividend is based on our policy of targeting a payout ratio of 50% of group cash flow. This brings the full year dividend up to $0.16 per share fully franked which is up 68% on last year. It equates to $365 per ounce produced which is an excellent return for our shareholders as is the yield at just under 3%. I'll now move to our guidance for FY21 and the outlook for the next three years. On slide 12 is our production and cost guidance for FY21. We are guiding production of 670 to 730,000 ounces at an all-in sustaining cost of $1,240 to $1,300 per ounce. The main drivers to the production include cow, which will be lowered due to the processing of low-grade stockpiles until the end of the year when Stage H ore becomes available. We will see Red Lake increase on an annualised basis from the June 20 quarter to 125,000 to 135,000 ounces. At the other sites there will be some declines and some increases but overall there will be no material net change. On costs Red Lake will initially add $200 to $215 per ounce to our AISC and then trend down as the cost benefits and higher production from the transformation program are realised. We're not expecting any material increase in operating costs through the year as we see recently negotiated savings on input costs negating any increase in labour or other costs. Lower copper production will add $30 to $35 per ounce to our AISC. A point of note is our guidance and outlook is based on a gold price of AU$2,200 per ounce and AU$8,400 per tonne of copper. This impacts our AIS3 through royalties and by-product credits. Turning to slide 13 and capital guidance. We are guiding sustaining capital to be approximately AU$113 to AU$138 million and major capital to be AU$260 to AU$290 million. The only thing of note in sustaining capital is at Red Lake where the ramp up is due to the transformation program which will see us invest $55 to $60 million this year. The main items of this investment are shown on the slide. In terms of major capital, the investment is predominantly at Cowell, Red Lake and Mangaree. These investments are either for continuation of previously approved projects such as Stage H and the IWL at Cowell or the advancement of growth projects such as the underground feasibility study at Cal, mine development at Red Lake to rebuild ore stocks for increased production and the mine development of satellite pits at Mangari. Moving to our outlook to FY23 on slide 14. Production is planned to increase to over 800,000 ounces by FY23 while the AISC will decline over this period to 1,125 to 1,185 per ounce. Production growth will be driven by the commencement of the Cowl Underground planned for the end of FY22 and the successful completion of the transformation plan at Red Lake. Meanwhile we now expect Mungaree to be able to achieve 110,000 to 120,000 ounces over an extended period through satellite pits, regional resources and the improved plant throughput rates. As mentioned earlier the main driver to the higher AISC in the next couple of years will be the lower grade material processed at Cal until stage H ore and underground higher grade ore becomes available and the lower cost and higher production at Red Lake is delivered in FY23. Again we do not expect to see any significant cost inflation across the portfolio in the next few years. Lastly the capital outlook on slide 15. Sustaining capital is expected to range between 95 and 138 million with no significant projects outside of those mentioned for Red Lake in FY21. Major capital investment is based around our significant growth projects at Cowell and Red Lake which will materially increase production for the long term and further add to the quality of the portfolio. Investment at Cowell is focused on increasing production above 300,000 ounces per annum through development of a new underground mine with between 100 and 130 million to be invested annually over FY22 and FY23. At Red Lake we continue to invest in mine development with between 70 and 85 million planned for the next three years to enable production to increase in excess of 200,000 ounces. Prior to handing over to Glenn I want to take the opportunity to thank all the evolution team who have put a lot of time and effort in over the last month or so in compiling the full year financial results, the FY21 guidance and three year outlook. We really do appreciate their considerable contribution. With that thank you for your time and I hand over to Glenn.

Thank you Laurie and good morning. It gives me great pleasure to introduce results of our mineral resource update at Red Lake. which has delivered 11 million ounces of gold grading 7.1 grams per tonne with details summarised on slide 16. The modernisation of the resource gives evolution an outstanding opportunity to step back and optimise a life of mine plan that fully unlocks the potential of this world class geological address. The hard work and long hours by the team on site in conjunction with our expert consultants have produced a result consistent with what we believed was possible over time. But this outcome has been delivered well ahead of any schedule we'd imagined. Turning to slide 17, which gives a breakdown of the individual numbers across the various all-body groupings at Red Lake. The most significant result comes from the Upper Campbell area of the operation, from which we are reporting a new resource of 4.3 million ounces grading 10.5 grams per tonne gold. This resource starts from surface and extends to a depth of 1200 metres below. I will come back to Upper Campbell later in the presentation. A revision of the mineral resources commenced back in February when we decided we would completely modernise the resource model. We went back to first principles and built geological models from scratch which included re-wireframing of mineralised domains, grade estimation into the block model and thorough model validation followed by resource classification. We utilised information from 47,000 drill holes, totaling over 7 million metres of drilling, of which 85% has been drilled in the last 20 years. The drilling database is one of the largest we have ever worked with and includes just short of 6 million samples. Given the magnitude of the project we were undertaking, we engaged Toronto-based mining consulting firm Roscoe Postle & Associates to initiate a full rebuild of the mineral resource. Over 10,000 hours have been committed to the project over a five-month period since February. The modernisation exercise resulted in consolidation of 142 individual block models developed by previous owners to a more manageable 19 models. Classification of each model was completed by evolution geologists in conjunction with RPA. We constrained the resources reported this morning by an underground mining shape optimizer that assumed a gold price of $2,000 Australian. A conventional mechanized mining technique and parameters typical of current underground mining operations which is consistent with Evolution's approach across all its assets of constraining resources at $2,000 an ounce and estimating reserves at $1450 per ounce Australian. We have adopted a conservative approach to grade estimation by accounting for geological contact dilution between our wireframe and block model volumes. Our classification methodology has also been conservative, particularly in the Upper Campbell and Red Lake areas of the mine. A two metre wide buffer was created around all old openings in these areas which we have excluded from the models and are reflected in the numbers reported this morning. The two metre buffer has not been applied to the lower areas of the mine where we have modern survey control. In the upper Campbell area of the mine over 61% of the total volume is classified indicated resource where the average drill spacing is six metres. 30% of the resource is classified inferred, informed by an average drill spacing of 17 metres. This leaves 9% of the resource remaining unclassified as a result of insufficient drilling to satisfy our minimum standards of geologic confidence. So how and why have we been able to identify this opportunity in a mine with a 70-year history? To understand this, I think one needs to reflect on the past which we show on the timeline in slide 18. We find the history of the Red Lake camp incredibly fascinating. The two most important takeaways for us was the operation of two mines by separate owners producing from the same group of ore bodies. The Campbell operation, which would eventually be owned and operated by Placer Dome in the 1980s, was historically a larger producer than the adjacent Red Lake mine and when I describe it as adjacent I mean it is the same mineral system containing the same ore bodies that are continuous from mine to mine but separated by a tenement boundary affectionately termed the party wall. The party wall caused a blind spot initially for the operators at Campbell and eventually under the consolidated ownership of Goldcourt where it continued as a divide of the same ore bodies. we've been able to widen the field of view and identify a significant high-grade resource that daylights its surface and extends to a depth of 1,200 metres. The luxury of a long history of high-grade production from Campbell and then the high-grade zone has been a blessing and a curse for the Red Lake operation. Production of very high-grade mineralisation cemented a cost profile only supportable by mining these very high-grades. As well, drilling that identified mineralisation with less than double digit grades was classified sub-economic. This is the unexpected opportunity we have surfaced in modernising the resource base. It is also fair to reflect on the fact that the gold price we are assuming today is multiples higher than that in the early 2000s. The next five slides will illustrate what we have uncovered in the Upper Campbell area of the mine. Slide 19 shows the Red Lake operation with the underlying mineralisation and mine workings projected to surface. Koshner is situated in the west, left of the airport. Campbell and Red Lake are situated on the right and the old party wall that separated historic ownership of the mines is also highlighted. Turning to slide 20, We're going to look at a window through the upper Campbell side of the party wall, sliced at the 9510 level, which is 150 metres below surface. This view is cut from a 100 metre vertical section through the upper Campbell mine and illustrates how grade control was done in the past, with each of the coloured points representing an individual underground face sample. Stokes and development drives are highlighted by the blue-grey as-built shapes Referring to the legend on the top left, it is evident that incredibly high grades were mined from narrow structures now represented by mining voids in the grey panel shapes. This type of oil control sampling historically substituted for more expensive grey control drilling. Drilling eventually caught up with mining, which you can see by turning to slide 21. Here are the results of clearly delineated new areas of mineralisation that lie outside of and beyond the mined-out high-grade shear zones. Interestingly, the mineralised volume in the centre and to the left of the party wall, that is on the old placer side, has been delineated by very close-based drilling, giving us high confidence in the geological continuity of mineralisation. However, grades in the drilling results are lower than those historically mined. Our onsite enquiries suggest that this was an area that has been largely overlooked because of the luxury of the very high grades that were being produced from the high grade zone. Slide 22 is a slice of our new block model with estimated block grades filtered above 3 grams per tonne gold. Block model grades are informed by historic drilling outside of and excluding previous production. Slide 23 shows outlines generated by the mining shape optimiser from which we can strain and report resources for inferred or better grade blocks that are above a cut-off grade of 3.4 grams per tonne. We have applied the same methodology to the Lower Campbell, Upper and Lower Red Lake and Koshner ore bodies, resulting in similar resource uplifts as we have seen at Upper Campbell. I believe the opportunity for us at Red Lake is a great example of where the whole is greater than the sum of the parts. We've been able to bring a different lens and approach to the mineral resource solution. For the first time the mineral resources have been evaluated under a rationalised geological framework and by applying a wider range of cut off grades than is considered by previous owners. With that operator I will open the line to questions.