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Evolution Mining

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September 16, 2024 at 10:40 AM (MDT)|Broadmoor Hotel & Resort

Lawrie Conway

Managing Director & Chief Executive Officer

Mr. Conway was appointed Managing Director and Chief Executive Officer of Evolution Mining on 1 January 2023. His previous positions at Evolution Mining Limited was Finance Director and Chief Financial Officer (1 August 2014) and before that a Non-executive Director.

Mr. Conway has more than 33 years’ experience in the resources sector across a diverse range of commercial, financial, and operational activities. He has held a mix of corporate, operational, and commercial roles within Australia, Papua New Guinea and Chile with Newcrest and prior to that with BHP Billiton.

His position immediately prior to joining Evolution was that of Executive General Manager – Commercial and West Africa with Newcrest Mining where he was responsible for Newcrest’s group Supply and Logistics, Marketing, Information Technology and Laboratory functions as well as Newcrest’s business in West Africa. Most recently, Mr Conway served as a non-executive director and chair of the audit committee for Aurelia Metals Limited until his retirement effective 31 August 2022.

Mr. Conway is Deputy Chair of the NSW Australia Minerals Council.

This is an automatically generated transcript. Denver Gold Group cannot accept responsibility for mistakes, errors, omissions, or any action taken in reliance thereon. Use of this transcript is governed by Denver Gold Group’s Terms of Use.

OK, thank you, Andrew and good morning everyone. Thank you, Andrew. Also for the ongoing support of stifle of the forum. Also very good to be back here in Colorado Springs and thank you to the Denver Gold Group for another very good conference in terms of the, the Gold Forum, Americas and hopefully companies and investors alike at this forum are are feeling good about the gold sector and the direction we're about to embark upon. We've been through a period of stubbornly high inflation which is now starting to ease that will lead to reducing interest rates. Government spending continues and with that debt increases, the geopolitical environment is not showing any signs of improving anytime soon. And the combination of these factors can only be positive for the gold sector this morning. I hope that you will see that evolution is a company that will be able to take advantage of these conditions and that will ultimately reward our shareholders. This contains the custom forward looking statements and please do not place undue reliance on the numbers in the deck. Our presentation today is is shown in US dollars except where, where otherwise noted, we're an Australian Doom company and we operate on a July to June financial year. So just a snapshot of evolution and where we are, we're the second largest gold producer on the Australian Stock Exchange. Since last year's conference. We've seen our market capitalization increase by 30 per cent to 5.8 billion. Our focus is to maintain our low cost position safely and consistently deliver to our guidance and bank the benefits of the high metal prices so that our shareholders are appropriately rewarded. Our focus is on margin over volume on quality over quantity that remains a key characteristic for the company. We generated over $1400 per ounce in operating cash flow last year at a very healthy margin of 47%. Our fy 25 guidance is 710 to 780,000 ounces at a sector leading low 995 to 1000 and $60 per ounce. We've a track record of paying dividends with our 23rd consecutive dividend declared last month and we operate in tier one jurisdictions of Australia and Canada. And as mentioned, we're certainly well positioned for success going forward. When you look at metal prices are moving higher. What this means for us. When you look at copper, the outlook for the demand supply position is very favorable to the long-term prices of copper for every 33 cent per pound movement in the copper price, our cash flow changes by around 55 million. While for every $100 an ounce movement in gold price, our cash flows change by around 70 million. Therefore, with our high quality high margin portfolio, we are well placed to take advantage of the positive outlook for the metal prices. We have an investment grade balance sheet which means that there's strong confidence, not only in our ability to service our debt, but also to fund our future growth options that I'll go through shortly in the last 12 months. We've strengthened our technical team and our leadership team with the appointment of Matt o'neill as our chief operating officer and Nancy G as our chief technical officer, Matt joined us following an extensive period in executive roles at Glencore. While Nancy brings enormous technical talent from Agnico, we've also made a number of key appointments at the general manager level in this period and the combination of the middle price outlook, our portfolio, our balance sheet position and the team that we've established will enable consistent delivery going forward of high cash generation in the coming years to enable us to operate safely and effectively sustainability has to be integrated into everything that we do. We've seen our drift reduced by 13% in the last year and by 28% in the last two years. At the same time, our team has done a great job in managing the material and critical risks that can have a far greater impact on our business. We continue to make great progress on our commitment to reducing the carbon footprint with a 14.3% reduction in emissions at the end of fy 24 against our target of a 30% reduction by 2030. So with six years to go, we're well and truly on the way to meeting that target. We also focus heavily on leaving lasting legacies for the communities in which we operate by having very strong relationships and partnerships with all of our stakeholders. It's really hard to choose between the next few slides which is the most important from an evolution perspective. They look at our portfolio, our exposure to copper, the cash generation and the return to shareholders. They are all important. But I believe this one really underpins all of the others because without a quality portfolio, you're not able to achieve the rest. Just to briefly explain the chart, the horizontal axis shows mine life, the vertical axis shows gold production, average annual gold production bubble size shows the annual rate of return those assets are generating and the color indicates how much of the capital invested has been repaid. While highlighting the quality of the portfolio. It also demonstrates the benefits of a clear and consistent strategy and executing against that. Since we started back in 2011, we've been able to increase the portfolio quality through acquisitions and divestments. Interestingly, none of these assets were in our portfolio when we started in 2011 and we've extended our mine life materially since their acquisition, the average mine life in 2011 was under five years. We now have an average mine life of 18 years with real potential to further extend this going forward. And no asset has less than a 14 year mine Life North Parks. Our most recent acquisition at the end of last calendar year has already been operating for 30 years and has at least another 30 years of high margin copper gold production ahead of it. At cow. We've just commissioned a new underground mine at a time when cow was supposed to be closing based on its life. When we acquired it back in 2015, it now has 16 years of mine life ahead of it at over 300,000 ounces per annum and has fully repaid all invested capital. It's expected to generate between 253 $150 million of free cash flow for the next five years before going even higher. After that, it truly is a world class asset. Ernest Henry has fully repaid all of the $2 billion acquisition capital and any subsequent capital we've invested in that asset at an average rate of return of 24%. It generates between 304 $100 million of free cash flow per annum. We've extended the mine life materially. And when we complete the feasibility study in March next year, there's potential for further increases in mine life. Mangare is halfway through an execution project which will double the processing rate and transition this asset back to a material cash contributor for the group. And lastly at Red Lake, it is starting to deliver sustained operational performance which help which will help it lift its rates of returns and pay back to summarize. We've got a portfolio with a mine life of 18 years at an annual asset production rate over 100,000 ounces with potential to extend life and increase production rates further at all assets and the average rate of return on those portfolio of assets is 15% per annum without our portfolio. We believe we have a great differentiator to those pure gold companies in that. We also produce copper. When you look at the gold and copper price movements over long-term, they move in different directions and therefore having copper in the portfolio provides stability in cash and enables us to prosper through the cycle. Be that the gold or copper cycle. We have two world class long life high margin assets in Ernest Henry and North Parks in our portfolio which have economies of scale and cash flow in tier one jurisdiction. From a cost perspective for copper assets, they produce at around a dollar to a dollar 50 per pound respectively. And that is very low cost. Approximately 29% of our revenue is from copper and it makes up just over a third of our mineral resources. We produce approximately 80,000 tons of copper and the cost of this production is very competitive at a dollar 18 per pound. And that would make us the lowest cost copper producer in Australia for these assets. Importantly, as I showed earlier, they have long life ahead of them and material upside in terms of resource conversion. Having laid the foundations in fy 24 for high margin, high cash generation. We expect this to continue in fy 25. Our production guidance of 710 to 7 80,000 ounces of gold and 70 to 80,000 tons of copper. Our all in sustaining cost will continue to be one of the lowest in the sector at 995 to 1000 60 per ounce. The guidance for Fy 25 will deliver high cash flows as evidenced on the charts on the right of this slide. Assuming the midpoint of our guidance and a range of metal prices, the operating and mine cash flow before major capital will be significantly higher at 1.1 to 1.2 billion. This means we'll continue to deleverage the balance sheet, be able to invest in our organic growth projects in the same disciplined approach we have in the past few years and increase our dividends all. At the same time, the cash flow we are now generating out of our portfolio will continue to provide us with greater flexibility in these three areas of capital management. Turning to our balance sheet last year, we said we'd be moving back to material cash generation which would reduce our leverage and enable increased returns to shareholders. Following the record financial performance. Last year, we declared a 23rd dividend and for the full year, our dividend increased by 75%. As the chart on the top right shows during periods of higher leverage, our dividends have been lower but in periods of lower leverage, our dividends have increased. Having gone through our peak leverage. Last year, the dividend payout has started to trend up and based on our projected cash flow in the current year and the years going ahead and the position of the balance sheet, we are planning to continue this trend. We are very pleased that our investment grade rating was reaffirmed during annual review process in July. This underscores the quality of our portfolio, the outlook for the business and the cash generation of the business we delivered on our promise at the start of fy 24 to deleverage with our gearing reducing from 33% to 25%. And this was achieved at gold and copper prices that are well below current spot prices. We are very comfortable with our debt position and it has matched to our cash flow generation. Over 74% of our debt is long dated and fixed at 3.7%. And our overall average cost of debt is 5%. We've limited gold hedging and no copper hedging in place which does provide further benefits to our cash flow in a market of expected higher metal prices. We're very fortunate to have a portfolio with extensive growth options across every one of the assets I've covered off on some of these earlier. But when you look at the growth options shown here, it reinforces the quality and the richness of options that we do have in the near term. It's about ramping up. Com recently completed projects, completing studies and executing, execute, executing projects that are already in train to budget and to schedule. During this doing, this will facilitate further potential. In the medium term, the cow underground will ramp up to 2 million tons this year before stabilizing at 2.4 million tons next year and be at that level for at least the next 10 years and supplement the open pit operations in the next 12 months. We will look at to approve the extensions of the open pit which will add 10 years to their life, taking cow out to 2042 at North Parks. We've recently approved a study to develop a sublevel cave at the existing E 48 mine which will be a low capital intensity option and production source for a period of at least eight years. The benefit of this decision is that we are able to maintain production rates in the near term where a gap was identified during the due diligence, we're able to generate strong cash flows and provide further time to really optimize the multiple medium term options. As shown on this slide including the additional exploration opportunities we identified during our due diligence. The extension at Ernest Henry is due for completion in March 25 with the expected outcome of that study being a mine life out to 2040 at full mining capacity, meaning it will be able to be a material cash generator for at least the new next two decades. Recent results of the Burt discovery provides an opportunity for additional production sources due to the availability of processing capacity at that operation. The expansion at MGA where the processing rate will double to 4.2 million tons per annum, lifting our production rate materially above the current 130,000 ounce annual rate will result in lower all in sustaining cost and importantly, transition this asset to a major cash contributor to the group going forward. The project remains on track and on budget for completion by March 2026 Red Lake is building on the consistency established over the past six months. So as to move to a stable and consistent delivery of production and more importantly, cash. All of these growth options to sustain the high cash flow and rates of return is a real luxury. However, we will maintain our discipline of only investing in projects when needed. In closing, evolution has worked hard in the last 12 months to improve the position of the business. And this has delivered outstanding record financial results. And we did so in a much safer manner. We set out at the start of FY 24 to move back into high cash flow generation. We achieved that and are well set up to deliver improved outcomes and particularly cash flows in fy 25. As I showed earlier, we have a portfolio which will generate high cash returns over a long period of time. This will build the cash flow including the differentiation to other gold producers with a good level of copper in the portfolio. We have a strong focus on capital management and believe we have the right capital allocation in terms of reinvesting in our organic growth options, deleveraging the balance sheet and increasing returns to our shareholders personally. It is really an exciting time to be in the gold sector and specifically at evolution. Thank you for your time this morning. Oh, you're off. We may have time for a quick question if if there are any questions from the audience.


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