Gold producer Evolution Mining used its 2023 investor day on Monday to unveil a series of significant announcements, including news about life extensions at two of its Australian mines.  

At Mungari, Evolution has committed $250-million for a process plant expansion that will unlock a large regional resource base, lower all-in sustaining costs (AISC) and boost production, CEO Lawrie Conway said.

The Mungari plant will be expanded from two million-tonnes yearly to 4.2-million tonnes yearly, boosting gold production from 135 000 oz/y to 200 000 oz/y between 2027 and 2032.

The expansion would reduce the AISC by $340/oz (18%) to $1 750/oz (life-of-mine).

“The expansion was always envisaged and formed part of our due diligence when we acquired the Kundana and East Kundana properties in 2021. Having successfully integrated the operations, this is now the next logical phase of making Mungari a cornerstone asset of Evolution,” Conway highlighted.

“We have rigorously tested the capital cost estimate and are confident in our capacity to deliver this project on time and budget. We are also confident that we will be able to discover additional ounces which will add further to the value of the project and are excited about the future at Mungari,” he added.

The feasibility study for the expansion delivered an internal rate of return (IRR) of 19% to 28% with a three-year payback and incremental net present value (NPV) of $260-million to $600-million.

Further, Evolution announced that its board had approved the Ernest Henry extension project to progress to the feasibility study phase following completion of the prefeasibility study (PFS), which is said to have demonstrated a compelling opportunity to extend the Ernest Henry sub-level cave operation.

“In under 18 months of owning 100% of Ernest Henry, we have doubled copper and gold reserves and extended the mine life out to 2040. By any measure this is an outstanding achievement.

“The PFS demonstrates excellent financial returns, but the most exciting aspect is that all of the outstanding exploration success we are enjoying is not yet captured and will be included in the feasibility study that we are now commencing,” said Conway.

The PFS indicates the base case has an incremental NPV of $690-million, with an IRR of 28%.

The PFS delivers an additional around 11 years of mine life, compared to a ‘do nothing’ case that would have mining conclude in full year 2029. 

The PFS will deliver an increase of about 56-million tonnes for 343 000 t of copper and 609 000 oz of gold.

There is also an associated increase in ore reserve of 44.7-million tonnes at 0.70% copper and 0.44 g/t gold.

The mine extension PFS evaluated options for the continuation of sub-level cave mining below the 1 125 mRL, assessing conventional trucking against a crushing and conveyor (C&C) system, with due consideration for future geological upside.

The PFS has determined both options are value accretive, but the C&C option provides greater economic upside and optionality than anticipated, the company says.

While not included in the current PFS, there is a high likelihood of mineralisation extensions and associated mineral resource growth from the current drilling, the company points out.

The C&C option provides the optimal way to access potential value from future orebody extensions of the cave zone at increased depth, it adds.

The PFS has used the December 2022 mineral resource estimate (MRE).  An updated MRE will be completed in the September quarter to incorporate new drill data and will be used in the feasibility study.

The ore reserve grade is expected to revert to the current mine grade when new drilling is included.

DEBT PROFILE RESTRUCTURE

Also, Evolution has successfully restructured its debt maturity profile to increase balance sheet flexibility.

This restructure involved a $200-million US Private Placement (USPP) and the replacement of the existing A$590-million term loan facilities with a reduced $300-million four-year term loan facility.

There is no increase to Evolution’s overall debt level. The result of this restructure and rescheduling will be an additional $445-million of liquidity available over the next three years that was previously scheduled for term loan repayments.

On June 1, Evolution priced a USPP totalling $200-million. The transaction is subject to standard closing conditions with proceeds expected to be drawn in August.

The investment grade placement reflects the note investors’ view on the quality of the Evolution asset, the company highlights.

Proceeds will be used to retire A$300-million from the existing term loan facilities.

Evolution says its average cost of debt is very low at 4.7% with an average debt maturity profile increasing from 5.5 to 7.5 years to better align with the longer mine life of the portfolio and further growth options.

Following settlement in August, Evolution will not have any funding maturities falling due in full year 2024.