Business
21 August, 2024
Evolution makes record profit as company considers growth plans
The decision to purchase Ernest Henry mine is looking better every day, the company says.
Evolution Mining executive chairman Jake Klein says the decision to purchase Ernest Henry is looking better every day after the company recorded a net profit of $422 million last financial year.
The Australian miner took the keys off Glencore in November 2021 after five years of operating side-by-side at the Cloncurry site.
“It is an outstanding asset and it was a great decision to buy it ... it’s proving to be a better decision every day,” Mr Klein said.
“Our original decision to acquire Ernest Henry was effectively about the gold ... we had long coveted a gold and copper asset.”
The chairman said the 2016 joint venture, which basically gave Evolution 100 per cent of the gold and some copper, was a win-win.
“It was helped by the fact that Glencore needed to de-leverage and raise some money,” he said.
“We came to them with a unique and innovative structure that allowed them to retain most of the copper.
“It all still went to Mount Isa’s smelter, but they gave up some of the gold, which appealed to them, and that got us traction in the asset.
“So we had five years experience in the asset where Glencore ran it very well; they’re good operators.
“It made great returns on that original $880 million investment but when the opportunity came to acquire the balance, we leapt at it.
“And of course, it was a big decision. It was a lot of money ($1 billion), but having had experience with the asset, we knew there was more potential and that’s been proven day by day.”
Mr Klein said Evolution’s record year of profit could be attributed to the success of Ernest Henry’s gold and copper production.
“We are (happy with the year). We are even more happy about how the business is positioned for the future,” he told North West Weekly.
“The portfolio is well positioned, the team is in place and the gold and copper prices are high.”
Despite a downturn in nickel and a downwards trend in iron ore, Mr Klein believed that North West Queensland was in clear air.
“I think with copper, the supply and demand story is much more positive,” he said.
“And gold is $3700 an ounce at the moment and I think there’s a good case to be made that it will go higher.”
High copper and gold prices have not made a mark on the share price of Evolution, however. At the time of writing, shares were $4.25 and well below the 2020 price of $6.20.
“No, I’m not happy,” Mr Klein said when asked about this view of the share price.
“We should be higher given the current gold and copper prices.
“Some of that is operational challenges we’ve had over the last couple of years. You know, Ernest Henry flooded in March last year and it was out for three months.
“We’ve had some challenges at Red Lake (underground gold mine in Canada) but as I said, I feel that the portfolio has never been better positioned to benefit from these gold and copper prices.
“So if we can deliver, I’m very confident that our share price will reflect that.”
While Mr Klein would not be drawn on whether Evolution was interested in taking a look at Mount Isa Mines, with Glencore set to shut the underground copper operations next year, he said the company wanted to expand.
“We would like to grow our exposure in North Queensland; it’s one of the great places in the world to mine,” he said.
“It has a community that is understanding and supportive.
“The community understands the benefits that mining brings.
“Copper is a strategic mineral and we would love to increase our exposure.
“At this stage with Northparkes (mine site in NSW) and 100 per cent of Ernest Henry, we produce 75,000 tonnes of copper.
“(Copper) is around 30-plus per cent of our revenue base.
“75,000 tonnes of copper with long-life assets makes us one of the larger copper producers on the ASX outside of obviously Rio Tinto, BHP and the like.”
Mr Klein said he had no reason to fear that Glencore would close its smelter in Mount Isa, despite some community concerns.
“We have a good relationship with Glencore and we’ve always had a strong personal and commercial relationship and we respect them as operators,” he said.
“Obviously the best place to create the concentrate is Mount Isa, so we hope that it stays open for many years to come – decades to come.”
The chairman said Evolution had embraced the Cloncurry and surrounding communities and that was reflective in the workforce.
“We generally find that people love working at Ernest Henry,” Mr Klein said.
“It is a great site and it has a really bright future.
“So we haven’t found it a very significant challenge from that perspective (finding a workforce).”