The Australian gold stocks have endured a shocking 2022 to date with all the big names retreating while gold remains basically unchanged e.g., Newcrest (NCM) -12%, Evolution Mining (EVN) -41%, Northern Star (NST) -25% and Regis Resources (RRL) -30%. The Top 50 Australian miners have been delivering some bad news of late with even top quality companies such as OZ Minerals (OZL) caught up in the confession trend, a troublesome backdrop when fund managers have been heavily overweight over recent months due to their bullish commodities viewpoint – another example of the crowd being in a vulnerable position.
There have been a number of issues weighing on performance. For WA miners, it’s been Covid & rising energy costs i.e large open-pit mines draw on lots of energy while underground mines require skilled labour, whilst offshore operations have also been caught in the downdraft i.e. St Barbara (SBM) last week and Evolution (EVN) this week downgrading, both operating in Canada.
- Inflationary pressures are increasing costs for gold miners with some citing examples such as fuel costs up over 40% and a +60% increase in contractor load and haul rates (excluding fuel).
Gold miner Evolution (EVN) which had been struggling for the last 2-years shocked investors on a few fronts this week which resulted in the stock plunging ~30%:
- They threw in production and pricing issues with only a slight dip in Capex helping, also, we saw downgrades to FY23 & 24 production and an increase in cost guidance.
The gold miner may screen cheaply on many people’s radar but with the current awful sentiment, this is one falling knife where MM feels the risks outweigh the rewards i.e. it could fall another 20% in the blink of an eye.
MM is neutral/negative EVN ~$2.50
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