2019 Annual Report
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Inspired People Creating Australia’s Premier Gold Company We are a leading, growth-focused Australian gold miner We are committed to deliver long-term stakeholder value through safe, low- cost gold production in an environmentally and socially responsible manner. ERNEST HENRY (Economic interest 100% future gold 30% future copper and silver from agreed life of mine area) MT CARLTON (100%) Darwin Townsville Rockhampton MT RAWDON (100%) Brisbane CRACOW (100%) Perth Sydney Melbourne MUNGARI COWAL (100%) (100%) Contents Executive Chairman’s Report 4 Innovation and Asset Optimisation 48 Sustainability Report 6 Discovery 52 Our People 17 Mineral Resources and Ore Reserves 56 Environment 24 Chief Financial Officer’s Review 61 Social Responsibility 31 Annual Financial Report 67 Sustainability Performance Data 36 Shareholder Information 149 Chief Operating Officer’s Review 42 Corporate Information 153 Overview Our story In 2010, an opportunity was identified to fill a vacuum in the Australian gold mining sector by creating a new mid-tier gold producer. Executive Chairman and founder, Jake Klein, with the assistance of a small management team, pursued a series of bold and complex deals to form Evolution in November 2011. Since then, we’ve weathered some storms and by delivering a reliable operating performance and executing on a clear strategy of upgrading the quality of the asset portfolio, Evolution has grown to become a leading global mid-tier gold mining company. We are now one of the lowest cost gold producers in the world and have built a business that will prosper through the cycle. Inspired People Creating Australia’s Premier Gold Company 1 Evolution Mining Limited Annual Report 2019 FY19 highlights Continued delivery Sector leading cash generation ACHIEVED PRODUCTION GUIDANCE OPERATING MINE CASH FLOW 8YEARS A$771M 2ND LOWEST COST GOLD NET MINE CASH FLOW PRODUCER IN TOP 10 GOLD MINERS (VAN ECK GOLD MINER INDEX [GDX]) 1 AISC A$498M A$2B OF NET MINE CASH FLOW BETWEEN FY15-19 A$924/OZ FULLY FRANKED 13TH CONSECUTIVE DIVIDENDS DIVIDEND FY19 GOLD PRODUCTION A$127M A$459M KOZ 753 2ND HIGHEST EBITDA MARGIN IN TOP 10 GDX FY20 GUIDANCE 725-775KOZ 48% History of creating value Group delivering strong EBITDA margins 554% FY19 48% 95% FY183 53% 26% FY173 49% 1 YEAR 3 YEARS 5 YEARS FY16 46% TOTAL SHAREHOLDER RETURN2 FY15 40% 1. Includes C1 cash cost, plus royalties, sustaining capital, general corporate and administration expense. Calculated per ounce sold 2. TSR for period ending 30 June 2019 3. FY18 excludes Edna May, FY17 excludes Pajingo 2 Evolution Mining Limited Annual Report 2019 FY19 highlights (continued) Sustainable long-life asset portfolio Innovative culture GROUP AVERAGE ORE RESERVE LIFE ~10 YEARS MINERAL RESOURCES 480KOZ TOTAL 14.73MOZ CONTRIBUTION TO AUSTRALIAN ECONOMY ORE RESERVES 410KOZ TOTAL A$1.28B FAST FIRST AND EARLY ADOPTER OF NEW TECHNOLOGIES DRIVING ASSET OPTIMISATION 7.46 MOZ TO IMPROVE SAFETY AND EFFECIENCY SIGNIFICANT INVESTMENT IN COWAL TO EXTEND MINE LIFE AND INCREASE PRODUCTION TO ABOVE SHARED VALUE 9 PROJECTS 300KOZPA Continuing to deliver MROR growth Continuing to increase returns to shareholders 14.73 9.5 14.24 7.5 14.01 14.18 7.27 5 7.19 7.19 3 5.08.16 2 5.0 2 459 1 298 171 2.76 6.99 7.05 7.46 87 5.85 43 2.24 7 21 DEC 14 DEC 15 DEC 16 DEC 17 DEC 18 FY13 FY14 FY15 FY16 FY17 FY18 FY19 ORE RESERVES (Moz) MINERAL RESOURCES CULMINATING DIVIDENDS CENTS PER SHARE (Moz) DECLARED A$M (PRE-DRP) See website for details on Mineral Resources and Ore Reserves at The FY19 dividend was paid on 27 September 2019 (MROR) December 2018 3 Evolution Mining Limited Annual Report 2019 Executive Chairman’s Report Inspired people creating Australia’s premier gold company On behalf of the Board of Directors of Evolution Mining Limited, I am proud to present you with the Company’s 2019 Annual Report. This incorporates our annual Sustainability Report which supports our objective to deliver long-term stakeholder value through safe, low-cost gold production in an environmentally and socially responsible manner. I am pleased to report that we delivered another strong During the last five years we have generated over performance from our quality portfolio of assets in the A$1.5 billion in free cash flow which has enabled us to 2019 Financial Year. repay A$910.0 million of debt, return A$345.0 million in dividends to our shareholders, and grow our cash balance Evolution was formed in 2011 at a time when nearly by over A$300.0 million. This was all achieved with Mungari three quarters of Australia’s annual gold production was and Cowal being in the portfolio for around four years and owned by foreign operators. From the very beginning we Ernest Henry’s contribution has been for less than three developed a clear and consistent strategy to capitalise years. This was also with a weighted average gold price on what we felt would be a transformational period in the of A$1,638 per ounce which is substantially below the Australian gold industry. We set out to build and upgrade current spot price. the quality of our asset portfolio and become a globally relevant, mid-tier Australian gold company that prospers Our Mineral Resources and Ore Reserves are perhaps the through the cycle. best gauge of the sustainability of this cash generation. In FY19 we were again successful at adding to resources and In the years that followed we had the courage to act reserves after allowing for mining depletion. Over the last countercyclically to acquire great assets from offshore five years our discovery budget has grown from A$20.0 companies which found themselves divesting mines in million to more than A$80.0 million, our average reserve Australia to repair their balance sheets. Through focus and life has increased from five years to ten years, and reserves commitment, we have added significant value to these per share have increased by 42%. It’s important to note operations which now cornerstone our portfolio. that we use a very conservative A$1,350 per ounce to Today we are a very different company, but our vision and estimate Ore Reserves and A$1,800 per ounce to estimate strategy has not changed. Mineral Resources. In FY19 we produced 753,001 ounces of gold at an In 2019 Evolution reported a record statutory net profit of All-in Sustaining Cost (AISC) of A$924 per ounce A$218.2 million. This was achieved on the back of operating (US$661/oz). This ranks Evolution as one of the lowest mine cash flow of A$771.5 million, net mine cash flow cost gold producers in the world. of A$497.8 million, and Group free cash flow of A$291.6 million. These continued strong results moved the balance No amount of financial or operational success is worth sheet to a net cash position and allowed us to further anything if we can’t keep our people safe. In FY19 the Total increase the final dividend declared in August 2019 by 50% Recordable Injury Frequency (TRIF) rose to 8.3 (30 June to 6 cents per share fully franked. 2018: 5.5). We are disappointed with this performance and people across all of our sites and offices have refocused Our portfolio of assets again demonstrated the benefits of their efforts on embedding behavioural safety initiatives diversification, delivering another consistent operational performance. We continue to focus on the transformation to drive improvements. On a positive note, we have seen and effectiveness of our business with our innovation an improvement in the reporting culture, a reduction in pipeline delivering a number of projects into operating the severity of injuries, and improved responsiveness phase including the high intensity grinding mill at Cracow, to investigating significant incidents and implementing the Float Tails Leach plant at Cowal and tele-remote drilling corrective actions. at Mt Rawdon. With the Australian dollar gold price trading around record Cowal continued to deliver reliable, low-cost production highs, there is no doubt that it’s a fantastic time to be an with 251,500 ounces of gold produced at an AISC of Australian gold producer. But if history is any guide, we A$995 per ounce. Mt Carlton also had another strong year are entering a challenging period if we wish to remain a with production of 106,646 ounces at an AISC of A$737 credible and margin focused business. As has been the per ounce. Ernest Henry continued to be an impressive case in past cycles, we are already seeing signs of cost contributor to the portfolio, producing 98,689 ounces of inflation creeping back into the industry. At Evolution we gold at an AISC of A$(539) per ounce to generate net mine dare to be different. We cannot use industry headwinds as cash flow of A$222.2 million. an excuse and concede higher costs are inevitable. The vast majority of our cost base is within our control, and we must We continue to invest capital in projects that improve continue to be laser focused on finding innovative ways to our business and generate an appropriate return on our reduce or at least maintain our low-cost base. shareholders’ funds. In FY19 capital expenditure totalled 4 Evolution Mining Limited Annual Report 2019 Executive Chairman’s Report (continued) A$273.6 million of which A$180.5 million was major capital. and we want to make every person’s time at Evolution The main major capital projects included the Cowal Stage a highlight of their career.