Are ASX gold miners printing money again?

The past four years have been incredibly tough for gold miners as cost inflation and CAPEX commitments have more than offset higher bullion prices.

This dynamic resulted in most large-cap gold miners reporting negligible (if not negative) cash flows. But times might be changing.

Evolution Mining (ASX: EVN) is one of the first major ASX-listed gold miners to report its FY24 results and the data tells a compelling turnaround story as costs stabilise and gold prices soar.

FY24 at a glance

"The record financial performance and excellent progress we have made on deleveraging the balance sheet and the more than doubling of the final dividend while continuing to invest in our various project opportunities," said Chief Executive Lawrie Conway.

• Underlying EBITDA up 67% to $1.51 billion

• EBITDA margin up 900 bps to 47%

• Net mine cash flow up 1,533% to $583.7 million

• Underlying profit after tax up 135% to $481.8 million

• Earnings per share up 147% to 22 cents (6.8% beat)

• Average gold selling price up 23% to A$3,190

• All-in sustaining cost down 2% to A$1,477

• Final dividend up 150% to 5 cents per share

• Full-year dividend of 7 cents per share

The underlying EBITDA and profit after tax figures were 4.9% and 17.5% ahead of Macquarie estimates (as at 18 July 2024).

Look at that cash flow

Evolution's group cash flow has flipped from $116 million in outflows in FY23 to $367 million in inflows in FY24. This was driven by:

• Gold production up 10% to 716,700 ounces

• Copper production up 43% to 67,862 ounces

• Higher gold and copper prices

• Stabilising costs, with AISC up just 2% year-on-year to A$1,477

• Capital investment eased 7% to $739.6 million

To add some perspective, Evolution's AISC was just A$924 an ounce in FY19.

Where to from here

Gold stocks are starting to post some meaningful cash flows after a prolonged period of non-existent earnings.

One of my favourite cash flow turnarounds was from the world's largest gold miner, Newmont (ASX: NEM). The stock also trades on the NYSE with a market cap of around US$56 billion.

For the six months ended 30 June 2024, the company reported US$520 million in free cash flow. This compares to cash outflows of US$5 million in the prior corresponding period.

So where to from here? The key things to look out for include:

• Capital commitments: For example, Newmont delivered a mere US$88 million in free cash flow in 2023 as it bogged down hefty CAPEX commitments. This included US$2.7 billion of reinvestment to sustain current operations and advance near-term projects. So keep an eye out for what companies have in the pipeline and whether or not capex is rising/falling year-on-year.

• Production: The more gold you produce, the more leverage you have to the gold price. But that's easier said than done. During the March quarter, gold miners including Regis Resources, Gold Road, Capricorn Metals and Westgold all downgraded their FY24 production guidance due to adverse weather conditions.

• Gold price: Gold prices are up almost 20% year-to-date from US$2,050 to US$2,460 an ounce. And what a big difference this makes for company earnings. There are plenty of reasons why gold could tick higher on the back of rising geopolitical tensions in the Middle East, US elections and looming Fed interest rate cuts. As Evolution's Executive Chair Jake Klein puts it, "Gold and copper prices are very high. And as I articulated in my biggest Diggers and Dealers presentation last week, I believe there is very good reason to believe they will go even higher."