Evolution Mining Limited

Thank you for standing by and welcome to the Evolution Mining FY25 Full Year Financial Results. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Laurie Conway, Managing Director and Chief Executive Officer. Please go ahead.

Thank you Kayleigh and good morning everyone. I'm joined on the call today by Matt O'Neill, our Chief Operating Officer and Peter O'Connor, our GM, Investor Relations. Today we released our FY25 full year financial results and an excellent set of results they are with many new records established and increased returns for our shareholders. These results were achieved through the efforts of our employees and contractors who I sincerely thank for their contribution during the year. To release our financial results today has also taken many long hours by the finance and investor relations team, so an extra special thanks to them. I'll be talking to the presentation we released on the ASX this morning. Slide 3 summarises well the benefits of safely delivering to guidance, maintaining a strong cost and capital discipline and banking the cash in a high middle price environment. Our statutory profit was up 119% to $926 million and our underlying profit doubled to $958 million. Our earnings per share of $0.46 per share was up 111%. All of these are records. EBITDA or operating cash flow was also a record at $2.2 billion at a very strong margin of 51%. A group cash flow of nearly $800 million was a record and an improvement of 114% on last year against only a 35% increase in the gold price. With the improvement in cash flows and the balance sheet position, we have today announced a final dividend of $0.13 per share fully franked, which is about three times last year's dividend. Therefore, our shareholders are benefiting from the quality of our portfolio, including the successful progressing of key projects at Mangari and Cow, which enable us to sustain these types of returns. I remind you that these record results have been delivered at an achieved gold price that was $800 per ounce below the spot price, which is very promising for FY26. Moving to slide four. We've said this for many years now that sustainability is integrated into everything we do and the results in FY25 show that this work is paying off. Our TRIF of five improved 35% over the prior year and reached its lowest point, meaning we delivered our plan with a strong focus on safety. We are tracking well on our net zero commitment. We are now over halfway towards our 30% reduction by 2030 at 16%. We're also making sure that the communities where we operate are benefiting from our presence and our success through the delivery of at least six high impact community projects over the last year. Turning to slide five. And this is probably one of the best slides in the deck. We're continuing to demonstrate that our margin over ounces approach is working with high margins at all levels, be that EBITDA, operating mine cash flow, net mine cash flow and group cash flow. The chart on the top right shows that we are banking the upside of the high price achieved last year with a margin ranging from $1,050 to $3,050 per ounce. As I said earlier, these were all delivered at an achieved price that was $800 per ounce below the current spot. Every $100 per ounce equates to $70 to $80 million additional cash flow and remember that 50% of this goes to shareholders per our dividend policy. Importantly, our portfolio is delivering great cash margins with an EBITDA margin ranging from 37% to 64% and the group average of 51%. Some highlights for the year included our Cash Cow Cow operation, generating $185 million. North Parks has delivered $182 million of net cash in the first 18 months of ownership, while Red Lake had a full-year net positive cash flow of $74 million. Most importantly, with an average mine life of 18 years and a sector-leading cost position, we can sustain these margins and cash flows over the long term. To slide six, we said last year as our gearing improved from 33% to 25%, we would start increasing our returns to shareholders. We have met that commitment. Our 25th consecutive dividend of 13 cents per share fully franked is a record, as is the full-year dividend of 20 cents per share. Both are about three times last year's dividend. It equates to about $400 million, which is approximately 32% of the total of all dividends up to 2024 being paid in one year. The DRP will be available for this dividend. Our balance sheet is in excellent shape with our investment grade rating reaffirmed last month in the normal annual review process. Our record financial performance improved our gearing to 15% and we are back into the normal operating gearing range. We should remember that our gearing was 25% at the start of the year which means we have improved by 10 percentage points or reduced it by 40%. We are basically unhedged, meaning we benefit from the current spot price, and then with our low-cost position, we can adequately withstand a drop in the gold price. Moving to guidance on slide 7. Our group guidance was previously announced last month. Today, we have provided detailed guidance by operations, and this is contained in the appendix of the presentation pack. As I said last month, FY26 is expected to be similar to FY25 where we are planning to safely deliver high margin significant cash flow. I'm not going to go through the details again but do want to reiterate a few things. Our all-in sustaining cost will see us remain as one of the lowest cost producers in the sector and we continue to control our costs. Our group capital investment will be around 200 and 100 million lower than our FY25 investment at the midpoint and top end of guidance respectively. We continue to have discipline in sequencing our capital projects. Our five-year plan total capital investment remains unchanged at 750 to 950 million per annum. However, the most important thing I want to highlight on this slide is the cash flow opportunity. At the midpoint of guidance and at the current spot price, we would generate over 2.75 billion and 2.5 billion of operating mine cash flow and mine cash flow before major capital, respectively. This is about 20% higher than FY25. And remember, our shareholders would receive half of that extra $500 million cash flow in dividends over and above the $400 that we declared for FY25. I think it is very clear that we are ensuring our shareholders are going to benefit from this cycle. Finally on slide 8, I just talked about the rewards we're able to provide for our shareholders. This is because our continued focus on safe and reliable delivery to plan, margin over ounces and making sure the cash from the higher metal prices hit the bank account. By doing that, we've declared dividend that is three times last year's dividend. We have a balance sheet with far greater flexibility but with the overarching discipline of sequencing the multiple growth projects appropriately. though we are going to be able to sustain this for many years given we have an 18-year mine life from a high-margin portfolio of assets. With that, Kayleigh, please open the line for questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Kate McCutcheon with Citi.

Sorry. Morning, Laurie and Matt. Congrats on the results, and we like a concise lot of opening comments. Can I just narrow in on FY26 guidance at North Park, please? Can you just talk through the moving pieces for the lower gold production? You've got the open cuts that's ended E48 sub-level case coming this half. Is the lower gold a function of deliberate mine scheduling to maximise copper and how do we think about that profile looking ahead?

Thanks Kate. I'll give Matt the opportunity to speak on the call but I'll just open it by saying that the lower gold production is linked predominantly to E31. and that is that there were two pits there. The gold dominant one was mainly processed in 25 and then the stockpiles which will be the lower grade will come through in 26 and it won't be for the full year. Matt, do you want to just talk about the other mining areas going forward?

Yes. Like you said, that's the driver of the gold production. We still are finishing off the E26 area and the E48 sub-level cave comes online. The gold production is just really a sequence in that mining operation. It's not a conscious process at this stage in terms of trying to do that, but that's where it sits, and then we'll work out what goes forward from there.

Okay, cool. And then a similar question on Ernest Henry, I guess. Is that production lower a function of tonnes because of where you are in the cave this year, or is it grade, or I guess how much ore do you expect to pull up from the 6.5 million tonne per annum shaft this year?

Do you want me to cover that one off, Laurie? Yeah, Matt. Yeah, so there's a function of grade, not volume. The driver there is there's a section of the cave that we're working through that's got a barren part in it, and obviously as a cave, you need to pull all of that. So it's just purely grade that's driving that variance at this stage. And it comes back as we come back over the next couple of years as well. It's not a permanent thing. It's just that when we work through those levels, we pull that through.

Okay, thank you. And just finally, so just the debt, the $280 million of term debt that you've got left, what's the appetite to repay that early given the free cash or how do you think about that?

I'll take that one, Matt. Okay, the appetite there is strong. I mean, we've demonstrated that we're balancing investing in the business, paying down debt and increasing dividends. So you should expect that we'll continue to reduce that

Okay, thank you. Your next question comes from Hugo Nicolasi with Goldman Sachs.

Morning, Laura and Matt Roche. Congrats on a strong FY25 and all the records that you set. First one from me, just looking at the major projects, Ben, you've outlined for tailing storage facilities, vent raisers and that sort of thing. Maybe just across the group, can you call out which of those major projects wrap up in FY26 and what we should expect to continues on into FY27 and beyond?

Yeah, Hugo, if I look at it, those ones, the North Parks one will be over a couple of years. Ernest Henry will also be over a couple of years. And the metals work and tailings at Red Lake are more in FY26 and a little bit in FY27.

Got it. That's helpful, Ari. And then just one on exploration. I think you noted at the site visit, Mangari is getting a larger share, but what is the group exploration budget for FY26?

I'll come back to you through Rocky, but my view, ex-remembrance, is that it's around $75 million for the year.

Got it. And do you expect that to sort of stay at that level going forward as you sort of drill out some more of these projects and firm-up studies and things?

Yeah, I think if we look at it, at Mangari, you know, and from the previous site visits, people would understand the underground, you've got to keep reinvesting every year to have that incremental growth. So I think... You won't see much of a change there. When we look at similarly at Red Lake, similar, it's very much like Mangari where you've got to keep that drilling going. And at Cowell and Ernest Henry, it's really going to be based on where we are in the mines, particularly the underground, whereas at North Park, I think it'll just be constant every year there.

I can squeeze in one more, so a similar line of questioning to Kate's around early debt repayments. You've also got the stream there. Is that something you'd consider consolidating back in as well and then simplifying that arrangement at North Park?

No, I think if you look at it for Triple Flag, it's one of their most valuable streams and so it's not something that we'd look to bring into there. I think we'll continue to work as we have with them collaboratively about what role the stream has in what we do with that operation and where we mine and what role they've got to play.

Excellent. Thanks, Laura.

Your next question comes from Al Harvey with JP Morgan.

Good morning, team. Another one on North Park. So I suppose we are heading towards completion of the hybrid study in coming months. Are you guys able to put a timeframe on that? And I suppose just how you're thinking about the gold-copper trade-off from going for a block K versus sub-level K, and then just a bit of a repression on how much of either scenario is incorporated into your $750 million to $950 million CAPEX guidance over the next five years?

Thanks, Al. Good to see we've moved to looking forward and the financial results. So E22, look, the study's finished. We're discussing that with the board now in the coming months, and when we've made a decision or anything on that, we'll let it know. We'll let the market know. In terms of our capital guidance of the 750 to 950, we've allowed for that to be as a block cave to the feasibility study that finished last year, and that hasn't changed at this point. And that is because it allows for the higher capital intensity into our forecasting.

Great. Thanks, Laurie. And apologies then. Another forward-looking one, just with Mount Rawdon. low grade stocks, any help here on the throughput rates, is it front end loaded and also if you've got any guide on when the ounces that might come out of a pumped hydro cutback would flow through. It's a fair bit longer dated but just trying to get a steer here.

Jake will be very glad that you asked about pumped hydro. The second one, that is That's a few years off and it really relates to the work that Jake and the team are doing with the Queensland government around a solution for that project which is advancing well with the government and we expect that to sort of come to fruition in this financial year in terms of an outcome. In terms of this year, I mean, as you see in the guidance range, it's not a lot of production. That'll run through probably until Q3 and it'll just be consistent rates through till Q3.

All right. Thanks, Laurie.

Your next question comes from Matthew Friedman with MST Financial.

Sure, thanks. Morning, Laurie and team. A couple of questions. I might firstly continue on Al's questions on Mount Rawdon. Can you give us a bit more of a steer on, I guess, what the all-in-sustaining cost for that asset looks like through FY26, I guess, given that it's excluded from FY26 guidance and maybe making a comment on, obviously, all-in-sustaining cost is one thing, but presumably there's a lot of inventory charge in there, so what the actual sort of cash cost might look like. And then maybe also on timing, I mean, is there kind of an end date for the operation there and then sort of any care and maintenance costs that we should consider beyond that? Thanks.

Yeah, Matt, look, firstly, Mount Rawdon is not going to be deemed as a continuing operation for us, so we're not actually reporting the all-in sustaining cost because it's going to be extremely high and it should not impact on the Group AISC because it's using low-grade stockpiles and then your emitter. asset in one year. So I'm not going to give you a number on that because we won't be reporting it. What I can say is that the cash contribution out of it, given it is all non-cash on 15,000 to 20,000 ounces, you should expect that it'll probably make about $1,000 an ounce based on our guidance assumption price. and that will be pretty steady throughout the year. In terms of closure and rehab, we'll do a little bit in the back end of this year, but not a lot, and it will be in the future years in terms of that. But what I would say around that is that that is very much linked to the pumped hydro because as a part of the agreement we're working with the government, those closure and rehab costs would be covered by the proceeds we'd receive for selling the pumped hydro project.

Yeah, I understand. Okay, thanks for that, Laurie. And thanks for the sort of steer on the cash margins there. Obviously, the risk is that analysts, you know, put the revenues from your production guidance in there but not put any sort of cash costs associated with that production as well. So that's quite helpful. Thank you for that. The second question, and maybe looking at slide seven, so, you know, obviously, you know, big kind of – The kind of theme in the presentation today which is understandable is the cash generation that you're expecting in FY26 and clearly on slide 7 there, even if we back out growth capex and the corporate and central costs that aren't necessarily included in those bars, clearly very significant cash generation to expect in FY26 and no debt repayments. But I guess the question is that even if you return half of that through a dividend, the cash position is still going to clearly increase significantly. So I'm really trying to understand the rationale that drives the capital management decisions in the business. So firstly, where do you see cash as being access to your reinvestment needs, given the context of that cash generation that you're expecting? And then how do you weigh up the attractiveness of using that excess cash to repay debt, relatively low cost debt, which you've highlighted as a priority, compared to doing a buyback You know, why isn't a buyback attractive but a discounted BRP and repaying relatively low cost debt is attractive? Thanks.

Yeah, Matt. So the question in short was what's our capital management plan? Is that what you're saying?

Yeah, but more I understand that clearly you're saying that you're going to prioritise repaying debt and that a 50% dividend is attractive, but I'm just trying to understand where you see that cash as being excess to needs and why other options aren't more attractive than repaying that debt. Thanks.

Sorry, Matt, I should have kept going. It was rhetorical. The focus is on that term debt facilities because it is our highest cost debt. So we'll continue to pay that. Then when we look at it as the USPPs come in and you can't prepay those, we've got one large lump sum that's due in FY28. So we've got to make sure that no matter what the gold price is, we meet that repayment. So we always take that into consideration. We then also make sure that we've got adequate cash for if we have any issues similar to say the Ernest Henry outage we had a couple of years ago. So that's why we always want to make sure we've got that buffer and we also want to make sure that we don't have to halt any of these projects as they get approved to go into execution because We want to make sure that Cal OPC, $430 million over the next seven years, it's actually able to run unhindered by what's going on with the balance sheet. So therefore, we still believe that 50% of our cash flow back to shareholders is well liked by the shareholders. And as I said earlier on the call, we want to make sure that through this high price cycle, that that cash does flow back to them. We're able to invest in the business at the same time so that the shareholders are going to see that this is sustainable through our 18-year mine life. If the gold price stays at $5,100 for the next 12 months, it's a good problem for us to have when we're sitting down with the board in six and 12 months' time to say, well, what's the next thing we do in terms of our capital management? But right now, we're not changing from that position of reinvest for the growth, pay off the debt and return 50% to shareholders.

I understand. Thanks, Laurie. That's pretty clear. Cheers.

Your next question comes from Daniel Morgan with Baron Jelly.

Hi, Laurie. Mark Rockish. The question relates to CAL and guidance. It might seem small, but I think CAL is a little bit better on the production and the guidance than I think many had thought, maybe perhaps yourself, a few months ago. Can we just talk about what you're seeing at CAL regarding the stage H cutback, how that interplays with grade sequencing through the year? And, you know, is it slightly better than your expectations maybe a few months ago? Thank you.

Thanks, Dan. I will hand to Matt other than to say that, you know, it's not really on the grade expectations. I think, you know, as we finished the year, we did well both from the open pit and the underground, and that gave us a good outcome. And then I think as we go into this year, we expect the stage H into the into the March quarter, so probably a little bit longer. But Matt, do you want to maybe talk through stage H into the cut back to stage I, stockpiles and the underground?

Yeah, no, that's fine. I think what Laurie just noted there, Dan, compared to maybe some of the early conversations, stage H is performing a little better for us. And so it will run through into that quarter and you'll see a little bit extra above on that. The other items in terms of stockpile, when we start to draw down on that after Stage H and then the Underground, are all pretty much in line, I think, with where we thought they'd be. Underground has come up well and continues to do that. It's going to be a focus for us this year and over the future. It's where I think we can see some growth. So that's probably the key focus for us there. But in terms of variance to where you thought it might be, that's probably the only one is that Stage H has performed a little better over the back half of... and then we expect that, like we said, to run through until March quarter.

So just drawing a little bit more on that, I imagine that you'll be mining more than you can process on stage H during the first nine months of this year and so you'll have some high-grade stockpiles generated during that period which you'll unwind in perhaps the next couple of quarters after that. Is that a fair summation?

It is. A lot of the high-grade stockpiles, again, in relative terms, but we do put the high-grade through first, and then we'll work through the stockpiles after that. But, yeah, we will be working through those stockpiles, and, like you'll see, you'll run those for three quarters, maybe a bit longer, actually, after that.

Yeah, Dan, I mean, the short answer there is that highest-grade material will go through the plant this year. We are not going to leave it on the ground as we finish stage H and draw down the stockpiles. Whatever comes out of stage H will end up predominantly through the plant this year. The highest grade will go first. Yeah. And that's what's driving the all-in sustaining costs for the year.

Yeah, thank you. And last question, just anything lumpy to note in your guidance through the year? I mean, obviously you had a major shot at Cal last year, which was sort of straddled that March-April period. Is there anything material that you'd like to call out that maybe people should think about on just sequencing grade or shuts or anything through the year? Thank you.

Matt, do you want to just touch on the key shutdowns? Because I don't think there's anything material other than that.

Have I lost you, Matt? My apologies.

Yep. No, I still had my button pressed on mute in front of me. No, there's nothing that's materially lumpy. The normal shutdown processes every couple of months at the different plants. Probably one of the bigger items might be the Red Lake Tails treatment plant. And that's largely in the first quarter of this year. Outside of that, there's nothing that stands out. OPC will continue as per normal through the course of the year. North Pass, we've got a couple of tailings, lifts in terms of the infill, but again, it should be relatively steady. And then Mungare would be the same, Castle Hill and the normal bits and pieces. So no, nothing hugely lumpy there.

Okay, I appreciate it. The only thing just to take there, Dan, is the second half of the year mungaree is when it ramps to the 200. So you see a pickup there and then you obviously see some slightly lower at, you know, say cow and certainly at North Parks as they finish processing the E31 material. So that's the only sort of thing you'd see second half versus first half. But when we look at a quarter on quarter at a group level, there's not going to be a lot of variability.

Very clear. Thank you very much, Laurie, Mark, Tim.

So our next question comes from Andrew Bowler with Macquarie.

Gail, I think you've answered most of the operational questions I had. So maybe just move into some financial ones and noted you might have to take some notice. But just sort of looking at your guidance for DNA for FY26, up a little bit on a per ounce basis from last year. Can you just give us a bit of an indication as to where that will be for the next few years? Is that something you expect to be up at around $1,000 an ounce? for the next few years or is there, you know, a roll-off expected to take place in terms of DNA? Cheers.

Thanks, Andrew. My answer to that is it would be good that... we can continue to grow the resource base and therefore you amortise it over a longer period. So that will be the one key driver to it. I think what you're seeing there is you've got the higher rates at Red Lake and North Parks. But I think as we can grow the resource base, it will come down. I don't see it changing until that's in place. There's nothing else that's going to drive the DNA profile more than that.

Well that's all from me. Thanks guys.

Your next question comes from Baden Moore with CLSA.

Good morning everyone. Thanks for the great results. I just noticed a lot of questions from the sector around or investors on cost inflation and you've highlighted you've managed to control costs to sort of 4%. I was wondering if you had any comments on how you see costs moving? more broadly in the global sector, whether you sort of – how much do you think you're outperforming or what are the key drivers from that perspective? And then just a second one would be just around your gross capex pipeline. I mean, you've got a lot of cash coming in. Do you think your plate's full in terms of your capex pipeline from an organic perspective at this point?

Thanks, Maiden. In terms of cost inflation, I think, yeah, when we look at it, labour's 50% of our We've got assets on the east coast of Australia, west coast in Canada, and they are a little bit different in terms of what's happening in the market. But overall, we'll see that moving 3.5%, 4.5%, and it's 50% of our cost base. What will happen in the next... One to two years after this year is going to depend on where inflation is in each of the economies and what is happening in terms of demand in the industry. So we believe that that is about right. I mean, our focus is heavily on the variable component, so we're able to keep it within a tight band that's linked to the inflation rates. There are other costs. We've seen some costs coming down in the last few months, but we're certainly seeing other costs keeping at or below CPI. So our expectations, you know, 4% this year. It was 5% last year on our operating costs. We would see it's probably going to be, you know, around the 3% to 4% for the next couple of years, and our focus is more around productivity. In terms of the CapEx, yes, we've got the capacity. Yes, the prices are holding up. But I think our projects are well sequenced and that 750 to 950 isn't changed because as Mangari's just finished, Cow will ramp up, then next year we've got a decision on North Parks. So those projects are more around when we need to do them, not just because we've got the money and that's going to be the discipline we keep applying to it.

Thank you.

Your next question comes from David Coates with Bell Potter Securities.

Hi, good morning. Thanks for the presentation. Congratulations on the results and good punchy divvy. Speaking of capital management, it's a bit of a philosophical question, but maybe an opportunity to reinforce that message a bit. We've seen some of your peers lowering cut-off grades to extend my lives or increased production but potentially sacrificing margins. How do you guys kind of consider that sort of temptation, I guess, in the higher goldfish environment?

Yeah, look, for us that's not something that we heavily focus on, Dave. I mean we've lifted our MROR pricing this year in line with what's happened with inflation and the capital that's needed to bring those ounces on. But other than that, you know, $2,500 an ounce in spots, $5,000 plus, we're not doing that. Now, as we mine out areas, certainly we'll take material that if it's economic right now and put that through, but we're not really changing dramatically our mine plans just because of where the price is today.

Cool. And is that really just sort of that focus on maintaining margins that you've sort of talked about a couple of times or quite a bit on the call?

Yeah, I think that's right, Dave. You know, if we look at it over the last, you know, 10 years, we've been able to outperform our peers in terms of margin year in, year out. And that's going to be maintained going forward.

Excellent. Thanks very much, Larry. Thanks, Dave.

There are no further questions at this time. I'll now hand back to Mr. Conway for closing remarks.

Thank you, Hayley, and thank you, everyone, for joining us on the call today. We're very pleased to have delivered an excellent set of results for FY25 and set about doing the same, but at a higher gold price, delivering more cash this year and doing it safely. So thank you for your time.

That does conclude our conference for today. Thank you for participating. You may now disconnect.