Evolution says gold production up 27% in Red Lake

Evolution Mining Ltd. [EVN-ASX] said gold production at its Red Lake, Ontario mine rose 27% in Q4 2020, compared to the previous quarter to 33,709 ounces.

That material was produced at an all-in-sustaining cost of A$1,937/oz (US$1,479.67), generating net mine cash flow of A$10.3 million (US$7.8 million).

The company said this places Red Lake ahead of scheduled for Stage 1 of a transformation plan to increase annual production to 200,000 ounces at an AISC of less than US$1,000/oz.

Evolution is an Australian company that bought the Red Lake complex in northwestern Ontario from Newmont Corp. [NGT-TSX; NEM-NYSE] in November, 2019 for $375 million in cash. Under the deal, Newmont Goldcorp can receive contingent payments of up to an additional $100 million. The additional payments are tied to new resource discoveries.

Red Lake is an underground gold mining complex, which has been in production since 1949, producing 25 million ounces of gold at an average grade of 20 g/t. It now consists of the Red Lake and Campbell complexes.

Each complex consists of an underground mine and associated processing facility as well as the nearby Cochenour mine. At the time of the acquisition, there were 1,180 employees and contractors on the payroll.

The complex was a key asset in the portfolio of Vancouver-based Goldcorp before the company was acquired by US giant Newmont in April, 2019. The combined company now ranks as the world’s largest gold producer.

In fiscal 2020, Red Lake was expected to produce 150,000 to 160,000 oz gold at an AISC of ~US$1,600/oz.

When Evolution acquired the mine from Newmont, ore reserves were estimated to be approximately 1.2 million to 1.4 million ounces. A material increase is expected with the release of Evolution’s annual group mineral resources and ore reserves statement in the March, 2021 quarter.  Results of definition drilling are expected to support resource classification at Cochenour and the Twin Otter Zone.

Under terms of the $100 million contingent payment, Evolution agreed to pay Newmont $20 million for each one million ounces of new gold resources added to the existing Red Lake resource base over 15 years. The contingent payment is applicable to the first five million ounces of new resources.

Evolution has committed to spend US$50 million on exploration at Red Lake over three years following the mine acquisition. Evolution said it is planning to complete over 100,000 metres of drilling annually.