Evolution Mining share price hits a multi-year high: Too late to invest?

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share price higher

The market may have crashed lower on Monday, but that didn’t stop the Evolution Mining Ltd (ASX: EVN) share price from storming higher.

In fact, at one stage the gold miner’s shares were up over 5% to a decade-high of $5.52.

When its shares hit this level, it meant they had recorded a gain of over 44% since the start of the year.

Why is the Evolution share price on fire?

As with fellow gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST), the main catalyst for Evolution’s strong gains has been a rise in the gold price.

Due to falling rates at home and abroad and trade war concerns, the price of the precious metal has risen strongly this year.

This has allowed Evolution to deliver bumper free cash flows despite its costs coming in ahead of expectations in FY 2019.

During the year the company produced 753,001 ounces of gold at an all-in sustaining cost (AISC) of A$924 per ounce. This compared to guidance of 720,000 to 770,000 ounces at an AISC in the range of A$850 to A$900 an ounce.

This led to Evolution generating operating mine cash flow of A$773.6 million and net mine cash flow of A$500 million.

And with management forecasting similar guidance of 725,000 to 775,000 ounces of gold with an AISC in the range of A$890 to A$940 per ounce in FY 2020, Evolution looks well-placed to deliver another year of bumper free cash flows.

Should you invest?

Given its status as one of the lowest cost producers across the globe, I think Evolution is a good option for investors looking for exposure to gold.

However, I would only recommend investing if you were confident that the gold price will continue its ascent over the next 12 months. Because if the gold price were to pullback materially, there’s a good chance its shares would do the same.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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