Evolution Mining Flags Higher FY27 Costs and Capital as Ernest Henry Recovery Drags On, But Cowal Upside and Growth Studies Offer Offset
June quarter results call, July 14, 2026
Evolution Mining closed out fiscal 2026 with record cash flow and a net cash balance sheet, but the June quarter call was dominated less by the strong headline numbers than by a frank admission that FY27 all-in sustaining costs and capital spending will run meaningfully above what the market had modeled. Chief Executive Lawrie Conway and Chief Operating Officer Matthew O'Neill used the call to pre-position investors ahead of formal FY27 guidance, due with full-year results on August 19, and in doing so gave analysts enough detail to essentially back into the numbers themselves.
Cost Inflation Plus New Sustaining Capital Push AISC Toward $1,950/oz
The single most consequential disclosure was cost-related. Conway guided to a 4% to 5% increase in group all-in sustaining costs for FY27, equal to roughly $150 to $160 per ounce, driven by broad-based inflation and elevated diesel prices that remain above pre-February levels. Layered on top, the company disclosed a previously unbudgeted increase in sustaining capital of $50 million to $60 million, tied to fleet replacement and infrastructure renewal across a portfolio with mine lives stretching 10 to 30 years. Macquarie's Adam Baker did the math live on the call, arriving at an implied AISC near $1,950 per ounce for FY27. Conway's response left little doubt: "I think your math is right. We're very clear in terms of what we're seeing in terms of inflationary impact and cost escalation... those two combined does lift it by a couple of hundred dollars an ounce." Barrenjoey's Daniel Morgan pushed further, noting that Evolution had disclosed the cost side of new growth studies without yet quantifying the offsetting returns, a fair critique given the company could not yet size the upside from initiatives like Cowal's plant capacity options or Mungari's underground potential.
Ernest Henry Development Delay Extends Roughly 18 Months
The December rain event at Ernest Henry, previously flagged as a quarter-long production hit, is proving to have longer tail effects on development rather than output capacity. O'Neill explained that the sublevel cave operation is currently running two active levels instead of the targeted three, and that catching up on development, plus repairing infrastructure and modifying the ventilation circuit, will take "at least 12 or 18 months" before returning to normal run rates. Importantly, O'Neill clarified this is a grade dilution issue rather than a hoisting capacity constraint: "We will hoist the waste, but it obviously doesn't have a lot of grade in it. So the hoist is fine. It's just that some of the product coming out of it won't have the gold or the copper that we wanted." Conway added that because Ernest Henry was offline for roughly a quarter in FY26 and is expected to run full quarters in FY27, the year-on-year comparison should still show a net production benefit despite the extended development timeline.
Cowal Guidance Better Than Feared, With Underground Productivity Upside
Goldman Sachs' Hugo Nicolaci pressed on whether Cowal could still hit 300,000 ounces in FY27 given stronger underground productivity, progressing satellite pits, and one fewer planned mill shutdown. Conway pushed back on the market's working assumption of a 10% production decline, noting the removal of a smaller December shutdown and carryover of Stage H stockpiled ore into FY27 should soften the drop meaningfully, though he stopped short of confirming a number ahead of Board sign-off. The completion of Cowal's second underground portal, the Regal portal, is now expected to deliver a trucking-driven productivity uplift starting in the fiscal fourth quarter, addressing a bottleneck where ore haulage has been constrained by a single access point. O'Neill was careful to temper enthusiasm around an outsized June quarter underground run-rate of roughly 2.8 million tonnes annualized against a 2.4 to 2.5 million tonne target, attributing part of the beat to a temporary boost in contractor resources during a mining contract transition.
Mt Rawdon Pumped Hydro Project Officially Dead, Shifts to Closure Mode
In a notable strategic update, Conway confirmed that the Queensland government has deprioritized the Mt Rawdon pumped hydro project, which had been viewed as a potential second life for the asset given its existing pit and mill infrastructure. Evolution is now moving Mt Rawdon into closure and rehabilitation mode, with a prior estimate of roughly $100 million in closure and rehabilitation costs to be updated at the August results. Conway left the door open to alternative uses of the site, including a possible private-party pumped hydro partnership raised by an audience member, but signaled this is not a near-term priority.
Corella Project Emerges as Longer-Dated Ernest Henry Feed Option
Management provided fresh detail on the Corella project, tenements acquired from Rio Tinto last year sitting within trucking distance of the Ernest Henry plant. Drilling has commenced, and while Conway does not expect a production contribution within the next 18 months to two years, the project is positioned as one of several ore sources, alongside third-party toll treating discussions, being pursued to keep the Ernest Henry mill full ahead of and beyond the Bert cave ramp-up.
Capital Returns Framework Under Review, Buybacks in the Mix
With $1.35 billion of cash on hand, no debt maturities until FY29, and full exit from hedging completed in the June quarter, Evolution is entering FY27 with balance sheet flexibility that several analysts probed for capital return implications. Conway confirmed the dividend policy will be reviewed alongside August's full-year results, acknowledging shareholder feedback has been unusually vocal on this topic: "I have no doubt whatever Fran recommends will not please every single shareholder, but I'm very confident that she's going to come up with something that will make sure that we increase our returns to them." Buybacks are explicitly part of the framework under consideration. On M&A, Conway indicated the corporate development team continues to screen opportunities but has not identified anything that fits the portfolio despite softer metal prices creating a more opportunistic backdrop.