Evolution Mining

[background chatter] Good morning, and, and thank you for the opportunity to speak to you today about Evolution Mining at the, at the thirty-eighth Mining Forum. And also congratulate Tim and everyone and wish you the best for the inaugural For- Mining Forum Australia, uh, next October. Highly likely it'll be known as the Mining Forum Down Under rather than Mining Forum Australia, Tim, so you might have to change the name. This morning, uh, I'll be giving you an overview of, of Evolution, where we've come from and, and where we're heading over the next five to ten years. Uh, so there are some forward-looking statements, and I, I do draw your attention to the disclaimer here in the presentation. Some key messages for you today is really about the organization and our strategy that we've executed consistently over the last fifteen years. [clears throat] We have acquired well. All of the assets in our portfolio today have been acquired since two thousand and fifteen. And all of the assets, uh, that were in our portfolio at the time of starting Evolution in two thousand and eleven have either been divested or Mount Rawdon, our last asset, will move to care and maintenance next quarter. But importantly, as we've acquired these assets, it's what we've done with them after we've acquired them and unlocked true value in improving our portfolio quality. We have delivered consistent growth, uh, from, from the continuing assets, and I'll show that a little bit shor-shortly. Importantly, though, our focus has been on margin over ounces. We've never set out to be a two-million-ounce producer or a one and a half million ounce producer. More importantly, we have focused on the margin that we get out of every ounce. A difference for us to a number of our peers is that we are leveraged to the s- co- structural demand change that's happening in copper right now, having two copper mine assets in the portfolio in Ernest Henry and North Parks. And what you'll also see today is that there is significant untapped upside in each and every one of our assets across the portfolio. So since two thousand and twenty-two, over the last five years, we have seen an increase in our production. We've grown that at an average rate of six percent per annum, taking us from six hundred and eighty thousand to nine hundred and twenty thousand gold equivalent ounces. And you can see on the chart there the, the differentiation between the, the gold and the copper. We've done that through inorganic growth, uh, through the acquisition of North Parks in December two thousand and twenty-three. We've done that through organic growth, through the expansion of the Mungari plant from two million tons per annum to four point two million tons per annum eighteen months ago. And at Cowal and Red Lake, we've just organically grown that production over the same timeframe. At Ernest Henry, we had a weather impact during FY twenty-six, which reduced the overall production, uh, the net production to eight hundred and ninety thousand gold equivalent ounces. But so what you've seen is over that five-year period, across the entire portfolio, we've been able to grow the production. As I said earlier, though, our focus has always been on margin rather than the production growth. And this chart, which is well done by Canaccord, looks at the industry and what is the industry all-in sustaining cost margin over the last ten to eleven years. And two things I draw your attention to is that over that period, in each and every year, Evolution's margin has been the best in that sector group. And then in that box there, you'll see the last five years, which matches to that growth in production that I just talked about. And there's a key thing to, to point out is that in two thousand and twenty-two, that's when we acquired a hundred percent ownership of, of Ernest Henry, and that started to increase our margin there with further exposure to copper. And then two thousand and twenty-three, twenty-four is when we acquired a hundred percent or eighty percent of, of North Parks. And then in the last couple of years, you've seen that margin growth and started to put a gap on the industry, and that's through the rising copper price, and which copper is important in our portfolio. So over those last five years, that discipline around our costs, the acquisition of North Parks, and the metal prices have seen our all-in sustaining cost margin exceed the sector and starting to differentiate ourselves in the last couple of years as the copper price has risen. So copper is a differentiator for us. If you look on the right-hand side, it, [clears throat] it makes up twenty-two percent of our revenue. And in that blue box there, it highlights Ernest Henry and North Parks are really low-cost, high-margin copper assets in their own right, with a C1 cost of between sixty-five and a dollar twenty-three cents per pound. Importantly for us, at, at Ernest Henry and North Parks, we've got about three million tons of latent mill capacity at these two assets. But just as significant is that at both of these operations, we've got near-term ore sources that are available to start to take up that latent capacity. At Ernest Henry, we're acquiring Carnaby Resources, which will go to vote on the twenty-sixth of October and likely to close on, uh, the tenth of November. The Burt Underground mine, which is separate from the existing Ernest Henry Cave, and Corella is all the land that is around Ernest Henry that allows us within trucking distance of, of Ernest Henry. Those three combined would take up about one point three to one point five million tons of that latent capacity at Ernest Henry. At North Parks, we've approved the E22 Block Cave establishment in February of this year, and work is already commencing on that. And in FY thirty-- thirty-one, that will come into production, and that will then lift the, the mining rates at North Parks. And we have a study going on, uh, to expand the production there anywhere between forty and a hundred percent. And so considering that that's happening with Ernest Henry and North Parks, and on the left-hand side, you see the structural difference that is happening between the supply and the demand side. The forecast, uh, through SA, uh, S&P is that there's a fifty percent increase in demand projected over the next fifteen years, which means there's an additional fourteen million tons of copper that is gonna be needed. Whereas on the supply side, this is the first time in a decade that production is actually gonna be negative compared to, to the previous year, and therefore, the supply side is not meeting the demand side. And that is a true benefit of what I've just talked about in terms of Ernest Henry and North Parks with that near-term increase in supply at those two operations. When we acquire assets and do our due diligence, it's not what the asset is on day one. It's what we actually do with the asset once we, uh, take ownership. And really, that value is derived straight after, uh, acquisition. And this chart here shows back in two thousand and fourteen where the po- portfolio sat just prior to the acquisitions commencing of those assets of Cowal and Mungari in two thousand and fifteen through to North Parks in two thousand and twenty-three. And what it shows there is that at that time, our, our reserve life average was five years. Average production was about a hundred thousand ounces. And as we've acquired and, and optimized these assets, what you now see is that we've lifted that reserve life from five years to seventeen years. We've increased production at each and every one of those assets, and we've certainly seen a significant rate of return on each of those assets, which the bubble chart sizes reflect. And you've also seen those assets repay everything in terms of what we've invested in them. And so a couple of highlights out of that. So Cowal, we purchased in two thousand and fifteen for sev-- just over seven hundred million dollars Australian. Since then, it's generated over five billion dollars of operating cash flow. It has done that at a rate of return of fourteen percent per annum, and at the current metal prices, that rate of return is going to start to increase. And it has fully repaid everything that we've invested in that asset from day one through till now. Ernest Henry, similarly, we invested about two billion dollars acquiring that asset. It's generated three point six billion dollars of operating cash flow and generated a rate of return of about twenty-four percent per annum since ownership. And North Parks, which we only acquired just under three years ago, has generated a rate of return of thirty percent per annum out of that operation, and that is after the triple flag stream. So it does demonstrate that when we acquire these assets, we extract maximum value out of those. But importantly, when you look at each of these assets now and the reserve lives that are remaining today, we have a seventeen-year reserve life and a lot more upside in each and every one of these assets. So having a look at a couple of the, the forward-looking now in terms of where we're going with some of our key assets and where they fit into the portfolio. Cowal is a significant cash generator, generated over one point two billion dollars of operating cash flow last year and eight hundred and fifty million dollars of net mine cash flow. So it's able to fund the growth that we are actually progressing here at, at Cowal. So in April last year, we approved the open pit continuation project, and that does extend the mining of, of the open pit by ten years. But I think really the thing that people have missed is that through-- And you can see that green line on the, on the, on the map there, where we've moved the, uh, the bund wall and creates, uh, E41 opportunities, E46, and the underground that are now all under land. And so therefore, there is far greater potential in this asset beyond the open pit continuation project. The drilling results over the last couple of years in the underground have shown there is significant potential for a second underground, where the reserve grade is twice the, uh, the reserve grade of the open pits. And we're, we're looking at lifting the production out of the underground from two point four million tons to two point six, and ultimately up towards three million tons per annum. And ov-over at E41, the exploration that we've been doing there is looking at the mineralization there between E41 and E42 and trying to close that gap between the two pits. And so we know that E41 will be significantly larger than what it was when we approved the open pit continuation project. So E42, E42 will be our base load production. And on the bottom of the slide, it sort of shows the sequencing of each of these open pits, along with the underground that now sees us looking at, instead of a three hundred and thirty thousand ounce average, uh, from about two thousand and twenty-nine, it's more likely that we're moving towards a four hundred thousand ounce plus at this operation. And as I've said, it's already a significant cash generator at three hundred thousand ounces per annum. I mentioned the copper leverage and the latent capacity. And so at Ernest Henry, those three projects that I was talking about earlier have the potential to add about twenty-five thousand tons of copper, which would be about forty to fifty percent additional production of copper by FY30. So that is going to be a material, uh, increase in our copper production over the next few years. But the mineralization that we're seeing, which is about nine hundred meters below where we're currently producing from, and we're getting grades that are significantly higher than what we're currently mining at, is giving us great confidence that Ernest Henry will go well beyond FY42. At North Parks, the same thing. We're expanding our copper production there. And in the near term, we've approved a coarse particle flotation project that will lift recoveries by about two percent and also enable us to lift production by half a million tons, and then through FY twenty-eight, about a million tons. We're currently constrained through the materials handling system in the underground at about six point five to six point eight million tons per annum, and we have the capacity to process around seven and a half million tons per annum, and we're looking to move that to eight million tons per annum post the coarse particle flotation project completing in FY twenty-eight. E22 does give us life of mine infrastructure underground, lifting that materials handling system capacity from six and a half million tons to over eleven million tons. And when E22 gets into full production, you're looking at somewhere between twelve and twelve and a half million tons per annum out of the underground. And so the mill expansion study that we're doing now will be completed at the end of FY twenty-seven. It's looking at a base case of ten to eleven million tons per annum and potentially up to fifteen million tons per annum. We've got the underground inventory that can support production out to two thousand and forty, but importantly, we've got a lot of small, shallow open pits that can complement and supplement the underground production that will give us the confidence about that production rate of between ten and fifteen million tons per annum. The two other assets in the portfolio at Mungari, we've completed that expansion that now gives us two hundred thousand ounces of production each year over the next five years. And our target is to lift the proportion of the underground material, which is at about four to four and a half times the grade that we get out of the open, open pit. And if we're able to lift that to twenty to twenty-five percent, that would see production at Mungari growing from two hundred thousand ounces to that two twenty to two twenty-five thousand ounces. It delivered over three hundred and sixty million dollars of cash flow in its first full year of, of production at that four point two million ton rate, and therefore it's gonna be a stable cash generator for us going forward. And at Red Lake, over the last couple of years, the focus there has been it to be stable quarter on quarter, delivering thirty to forty thousand ounces each quarter and generating, uh, cash positive. It was two hundred and sixty million dollars of cash last year, which represented about a twenty percent payback on all invested capital at Red Lake. And given the history of, of processing at about fifty to sixty grams per ton at, uh, Red Lake, we are doing a tails reprocessing study, which will look at, uh, increasing that production rate over time at, at Red Lake. At the same time, we've been making sure that through this metal price cycle that our shareholders have been rewarded. We've taken our gearing from thirty-three percent in FY thir- twenty-three, uh, down to net cash at the end of FY twenty-six. And through that period, as you'll see on the bottom chart, uh, our dividends have increased significantly over that time frame, making sure that our shareholders do benefit through this cycle. And in August this year, we approved an increase in our payout rate of our group cash flows from fifty percent to sixty percent, which is really sector-leading when you look across, uh, each of the companies in the, in the industry in terms of what they're returning to shareholders. And if you then look at in terms of our, our capital growth and our share price over the last, uh, couple of years, we've seen that at a fifty-three percent rate of return, uh, which is incredible for our shareholders. We are investing in that organic growth that I talked about, and this really highlights where our focus is on margin and returns, in that up until now, the group average has been eighteen percent rate of return. And each of these projects at a conservative metal price, uh, in the green bars, which is well below the current spot prices, are generating rates of returns of between twenty-three percent and seventy-seven percent. At spot prices, that's gonna generate rates of returns of between forty and a hundred and thirty percent. So it does mean our disciplined capital and cost allocation is gonna reward our shareholders by improving the quality of the portfolio over time. So when we look at it, each assets in our portfolio have got a role to play, and they know what that role is. Cowal, which is our largest, uh, production asset, is a significant cash generator with a lot of growth opportunity, and it can fund that growth. Ernest Henry gives us that compelling growth in copper, and we'll see that over the next five to ten years in a time when you see that supply-demand structural breakdown. And Mungari and Red Lake through that period have got to be that stable cash generator, uh, for the portfolio while we're going through those growth projects at Cowal, Ernest Henry, and North Parks. So in summary, as I said at the outset, you know, our strategy from day one has been very consistent. We've executed against that. We've acquired well. We've divested well. We've divested at the right time, and we've unlocked a lot of value in the assets when we've acquired them. We've had growth over the last five years, which does set up for the portfolio for that continued growth over the next five to ten years. Our focus will remain on margins, uh, over ounce production, and we are exposed and, and have leverage in the copper with Cowal and, uh, with Ernest Henry and North Parks. And as we continue to explore and drill at these assets, there's significant more upside that we're going to tap into across the portfolio in the next few years. So with that, I'll, uh, finish there. Great. Thanks, Laurie. Um, I think we have time for a question or two. So, uh, if you have a question, please raise your hand and, uh, we'll get you a mic. Maybe, uh, I've got one for you, um, [clears throat] where you, uh, talked about on Cowal, you know, things people miss in terms of resource expansion potential. Like, where in your portfolio do you most commonly see the market, um, underestimating the, the production growth potential or the NAV growth potential? I think it, it, it has been at Cowal until now, and we had a site visit there two weeks ago where people started to see that potential now that we're going, uh, through with our drilling programs at E41 and, and the underground. And those two alone will enable us to move the bottleneck from the mining to the processing and, uh, then ultimately over time look at expanding the processing capacity there. And then quite a few mentions of the copper, uh, in the portfolio. Do you think you get market recognition for the copper? I think, I think over time we are. I think there's, there's a lot better understanding now. I think for the first 12 to 18 months, there wasn't a good understanding of the potential of North Parks and what it could mean for our asset. I think the work that we did with Triple Flag over the last 12 months to, to come to an arrangement and amending the, the stream there for-- to allow for the expansion of the plant, the establishment of E22 as a block cave and, uh, and then the, uh, development of E44, now people see that North Parks and, and the copper that it can contribute is, is gonna be significant for us. Great. Thank you, Laurie. Thank you. [audience applauding]