Jake Klein – Executive Chairman Lawrie Conway – Chief Financial Officer and Finance Director

Michael Slifirski – Credit Suisse Sophie Spartalis – Merrill Lynch Angela East – S&P Global Peter Harris – AMP Capital Paul Garvey – The Australian

Ladies and gentlemen, thank you for standing by, and welcome to the Evolution Mining Full Year Financial Results Teleconference. [Operator Instructions] Please note that this conference is being recorded today, Thursday, August 17, 2017. I would now like to hand the conference over to your host today, Jake Klein, Executive Chairman. Thank you, sir. Please go ahead.

Thanks, Aaron. Good morning, everyone. Welcome to this morning’s call. We really do appreciate you joining us. During the call, we will be referencing the ASX presentation released this morning entitled 2017 Full Year Financial Results. I’ll make some brief introductory comments and then hand over to our CFO and Finance Director, Lawrie Conway, who’ll provide additional context and detail. We have often highlighted the very cyclical nature of the industry in which we operate, and we have stated our very clear objective of wanting to establish Evolution as a gold company that prospers through the cycle. Put very simply, we want to build an enduring and sustainable business. Today’s results are clear evidence of our success and progress in achieving this. Record profit, strong cash generation and very low cost gold production now makes us one of the lowest cost producers in the world. An increasing reserve base calculated at a very conservative gold price of AUD 1,350 an ounce, and increasing mine lives puts us in a very strong position to not only be proud of our success in FY 2017, but as you can see by our guidance for FY 2018, be confident that this is sustainable going forward. A special highlight for me is the fact that we’ve now met cost and production guidance for six consecutive years and are declaring our ninth consecutive dividend, a final dividend of $0.03 per share is a 50% increase on the interim dividend and, importantly, for the first time, is fully franked. This equates to a dividend yield of over 2.5% before taking into account the benefit of the franking credits. Turning to Slide 4 in the presentation. We highlight here our improving safety performance. We also recognize that this is an area where we can never do enough. It is a journey for us to move from a safety culture where people do the right thing for themselves and those around them because they believe in it, rather than because there is a rule in place. We are absolutely committed to this journey. With that, I will hand over to Lawrie.

Thank you, Jake, and good morning, everyone. It’s a pleasure to be able to present the outstanding financial results for FY 2017 today. The highlights on Slide 5 summarize the financial performance in terms of profit, cash flow, margin and the balance sheet. We delivered a record statutory profit after tax of $217.6 million driven by higher production, including additional copper from the Ernest Henry investment, lower unit cost, higher metal prices and no impairments which, in 2016, resulted in a net loss for the period. Underlying profit of $206.6 million was up 54%. I will discuss this in more detail shortly. The increased revenue from higher production and metal prices, along with lower unit cost, delivered a record mine operating cash flow of $706 million, which was up 12%. Group cash flow was up 5% to $382 million. The improved cash flow and excellent operational performance has generated very pleasing margins. Our EBITDA or operating cost margin was up 7% to 49%, while our all-in cost margin was up 23% to $568 per ounce. This margin was achieved in Australian dollar gold price, which is slightly above the current spot price. We used a strong cash flow to deleverage the balance sheet by repaying $325 million of our debt facility to finish the year with gearing of 15.9%. Having achieved a gearing around the targeted 15% level and the strong margins being delivered by the business, we have changed our dividend policy to a payout rate of 50% of net earnings. This has resulted in a 50% increase in the final dividend to $0.03 per share, and this dividend will be fully franked. Turning to Slide 5. It’s easy to look at a single year outcome or to compare against a prior year. However, in the context of our overall strategy, you need to look at the operational performance and transformation of the asset quality we’ve been able to achieve over an extended period. While a fairly full slide, the combination of production, unit cost and cash flow gives a good insight into the impact of our strategy to continually improve the quality of our portfolio. In terms of production, we achieved another record, up 5% on last year and have more than doubled in the last five years. To achieve the production growth, we have actively managed the portfolio through the development of the highly profitable Mt Carlton mine, the acquisition of Cowal, Mungari, Phoenix Gold, investing in Ernest Henry and selling Pajingo. The group all-in sustaining cost shows the results of the changed portfolio as well as the ability to capture the benefits of favorable market conditions for input costs. We are positioned as a very low-cost producer at $907 per ounce or U.S. $684 per ounce, having delivered year-on-year reductions in our all-in sustaining cost with 26% and 46% reductions in Australian dollars and U.S. dollar terms since FY 2013. This portfolio approach of introducing long life, low-cost assets and not being dependent on any single asset to drive cash flow has enabled us to deliver over $700 million of operating cash flow in FY 2017, which is up 12% against the 3% increase in gold price, but has also benefited from the exposure to copper revenue that the investment in Ernest Henry has provided. Since FY 2013, we have increased our operating cash flow fourfold, yet in this period, the net change in the Australian dollar gold price achieved has been 4%. Slide 7 looks at our cost profile in terms of C1 operating costs and all-in sustaining cost. The reduction of all-in sustaining cost position has been achieved due to the ability to reduce our C1 operating cost to now be a very low and globally competitive $625 per ounce. With the additions of Cowal and Mungari, we’ve used a leverage of combined volumes to achieve lower input costs. During FY 2017, we renegotiated a number of contracts, such as grinding media, chemicals and explosives, and we’re able to obtain reductions in the range of 5% to 35%. We’re starting to see upward pressure in some areas and, most notably, the current market for energy is having the biggest impact on our cost base. Over the past few months, we have renegotiated power contracts for most of our operations, and this has resulted in a 20% to 30% increase for the group. This will cause our annualized group all-in sustaining cost to increase by $10 to $20 per ounce. The outlook for FY 2018 is for our C1 and all-in sustaining cost to be in line or lower than FY 2017 at $590 to $650 and $850 to $900 per ounce, respectively. We will discuss FY 2018 guidance later in the presentation. However, these are very good unit cost positions. Turning to Slide 8, which looks at our EBITDA for the group. Prior to going into the details of our EBITDA performance, I want to touch on underlying profit. We generated an underlying profit of $207 million in FY 2017 with the acquisition and disposal of a number of assets in the last couple of years, along with the utilization of significant tax losses at the same time. We obviously had a number of non-cash accounting matters to navigate through. This included a purchase price allocation and fair value unwind. Following the completion of purchase price allocation, the fair value amortization is included in underlying profit. The amounts for FY 2017 were provided in our June quarterly and charged to depreciation and amortization. As presented in the 2016 financial statements, underlying profit exclude the fair value adjustments related to the acquisition of Cowal and Mungari. For consistency and transparency, management has amended the 2016 underlying profit to reflect the treatment – this treatment and associated tax impacts on adjustments. There’s been no change to statutory profit and all changes were on non-cash items. If the fair value amortization was excluded in 2017, underlying profit after tax would have been $238 million. Despite the complexities of all of the transactions, it is not ideal to be making these adjustments, and we would like to have completed the assessments sooner. That said, we are confident in the established position and always will be reported moving forward. Further details are provided in our 4E in the appendix of this presentation. On EBITDA. Our EBITDA increased by 18% to around $714 million. For 2016, continuing assets improved our EBITDA contribution with an increase of 9.3% predominantly through higher volumes and metal prices. Ernest Henry, which was only in the portfolio for eight months delivered just under $100 million of EBITDA. And as we move into FY 2018, we look forward to an increased contribution from this asset. The real value and quality of Ernest Henry will be seen going forward. Pajingo, which was sold in September 2016 and was only in the business for two months of the year, generated lower EBITDA, and this lowered our EBITDA by $48.5 million. Slide 9 looks at EBITDA margins. While the previous slide looked at gross EBITDA, it’s important to look at the cash margins being generated by the group and at each operation. We now have a group EBITDA margin which is approaching 50%. This margin is up 7% over FY 2016 and up 50% since FY 2014. This is against an increase in the average gold price achieved of 3% in FY 2017 and 14% since FY 2014. While the gold price is playing a role in margin improvement, the majority of the improvements have come from cost reductions, productivities and changes in the asset portfolio. When you look at this from a portfolio perspective, our longest life assets are generating the highest margins. Importantly, the mine life of our assets is all based on reserves. Cowal and Ernest Henry, with over 10 years of mine life, are generating margins around 60%, while Mt Carlton and Mt Rawdon, with mine lives of between six and eight years, are generating 55% to 65% margins. The other benefit shown here is that we are not dependent on 1 asset to generate the cash margins. Moving to Slide 10. We continue to invest in discovery and resource definition drilling to drive the resource base and extend mine life. We increased our expenditure by 19% to $58.4 million with increases in expenditure in both discovery and resource definition by 4% and 38%, respectively. In the discovery area, the focus has been on the regional areas of Mungari, and we also entered into early stage joint venture opportunities, such as South Gawler, where we have a pathway to earn up to 80% interest in that project. Expenditure and work in that area will begin in FY 2018. We saw success from the resource definition drilling program through the Stage H cutback adding an additional 679,000 ounces at $15 per ounce. Meanwhile, we delivered mine life extensions at Cracow and Mt Carlton, including an initial underground reserve. Overall, in the last couple of years, we’ve been able to increase reserves to 7 million ounces and improve mine life by over three years to now be at 8.3 years. We will invest between $35 million and $50 million during FY 2018 with the majority of the money going to Mungari and Cracow. Now to Slide 11, which outlines the group cash flow. We saw earlier that we generated record operating cash flow of $707 million. This is equivalent to approximately $865 per ounce sold, an outstanding unit operating margin. After investing $245 million of capital, $29 million of exploration, $29 million of corporate costs and $23 million of net interest expense, we were left with surplus cash of $382 million. This means that after meeting our investment, overheads and interest commitments, we were left with 54% of our operating cash flow. Having met our mandatory debt repayments and paid dividends, we had $229 million or 60% of our cash flow after investing available to the business. We’ll use this cash to accelerate our debt reduction over and above the mandatory repayments. Slide 12 provides an overview of the balance sheet, and as the heading states, it is in good shape. We have finished the year with around $337 million of liquidity through an undrawn $300 million revolver facility and $37 million in the bank. Gearing peaked at 24.3% following the increase in debt as a part of funding the investment in Ernest Henry. During the year, we repaid $325 million in debt with a year-end gearing level of 15.9%. While we have $435 million of debt outstanding, we remain ahead of our repayment commitments with only $50 million due in FY 2018, which is not due until the June 2018 quarter. Our leverage ratio is now 0.56 times EBITDA although in FY 2018, we do have higher major capital investment, increased dividends and initial tax payments. For this reason and the purpose of maintaining a good level of liquidity, we don’t plan to continue accelerated debt repayments in the first half of FY 2018. On taxation, we brought previously unrecognized tax losses associated with Conquest Mining, La Mancha and Phoenix Gold under the balance sheet as deferred tax loss assets. This results in a credit for the profit and loss. We have a combined $20.4 million of losses on the balance sheet, which will be available for use to offset future profits on an available fraction basis. Turning to Slide 13 and dividends. Dividends was another area that has benefited from the successful execution of our strategy over the last few years. With the changes during FY 2017 and the outlook from our latest life of mine plans matched with the generation of franking credits, it was appropriate to review our dividend policy. We have approved a new dividend policy which will have a payout based on 50% of net earnings. This new policy has been applied to the final event for FY 2017, which will be $0.03 per share fully franked. The outcome is a total dividend declared of $84 million for the year, and we have now declared over $170 million of dividends cumulatively since FY 2013. On Slide 14, we have our guidance for FY 2018. We’re forecasting gold production in the range of 820,000 to 880,000 ounces. Group C1 cash costs are expected to be in the range of $590 to $650 per ounce, while group AISC is expected to be in the range of $850 to $900 per ounce. Sustaining capital investment is guided to be in the range of $95 million to $125 million. The majority of the investment relates to tailings facilities where we have two lifts at Cowal, and lifts at Mt Carlton, Mt Rawdon and Mungari. Due to mine life extensions at Mt Carlton and Cracow, additional investment will be made on refurbishment or replacement of Mobile Fleets. Investment in major capital in FY 2018 is forecast to be in the range of $175 million to $215 million. The bulk of the major project capital investment is associated with the expansion projects at Cowal, with mine development of $45 million to $50 million for Stage H, and Float Tails Leach project investment of $30 million to $35 million. Major capital at Mt Carlton, Mungari and Mt Rawdon relates to mine development. Exploration investment is expected to total approximately $20 million to $30 million, with Mungari receiving the largest allocation at $10 million to $12 million. FY 2018 all-in sustaining cost guidance of $850 to $900 per ounce. This has the benefits of a full year production from Ernest Henry and a higher copper price assumption. However, these are being negated by lower production at Cowal and Mungari, higher Cowal cost across the group, which are adding $10 to $20 per ounce, and additional sustaining capital investment as mentioned above. In conclusion, Slide 15 summarizes the financial performance and position of the company which are all fully aligned to our business strategy. From a profit perspective, we’re generating healthy cash profit EBITDA and underlying net profit. The assets in the group have delivered record production at extremely low cost and improving margins. Our all-in cost margin is now a healthy $568 per ounce. This performance has strengthened our balance sheet with group cash flow of $382 million, which has allowed us to rapidly deleverage the balance sheet. It has also allowed us to increase our dividend payout rate by 50% under the new policy to declare a fully franked final dividend of $0.03 per share. Based on our FY 2018 guidance, we are well positioned to generate superior financial returns. With that, I’ll now hand back to Jake.

Thanks, Lawrie. At last week’s Diggers & Dealers conference, I spoke in some detail about what we believe are the 5 key attributes of enduring sustainable gold companies. They, in our analysis, are those common attributes that are displayed by those few gold companies that have been successful over the long term, thriving when the gold price is rising and being far more than just surviving when the gold price is falling. In other words, the ones that can prosper through the cycle and for which investors are consistently willing to pay a premium for. For your reference, these attributes are listed on Slide 16. I trusted those results in the presentation has highlighted our progress in at least four of them, building a portfolio of high-quality low cost, long-life assets; our continued focus – or our continued financial discipline and commitment to dividends; a strong culture and sense of purpose across our business; and our willingness to act boldly and decisively to continually improve the quality of our portfolio. As we build on our reputation of consistently and reliably delivering on these attributes, we are confident we will continue to get more interest from investors both taking exposure to high quality, profitable and sustainable dividend-paying gold companies like Evolution. Operator, will you please open the lines for questions? Operator, you can open the line for questions.

Our first question, Michael Slifirski from Credit Suisse. Please go ahead.

I’m interested in – having listened to your comments about your sensible approach, your through-the-cycle approach. To what extent – when I look at what you’ve achieved this year in debt repayments versus less debt repayments forecast for current year and more going back into capital, so to what extent do you manage that available cash cost? So has it been, to some extent, some deferral of CapEx activity, tailings dams so you could achieve your debt objectives to derisk the company, and is there a catch up? Or how should we think about that whole sort of allocation of cash between different operations with CapEx and so on and the broader debt objectives and shareholder return objectives? Just trying to get an idea, a sense of what really is the sustainable capital intention of the business on the portfolio that you’ve got going forward.

I’ll let Lawrie answer that question.

Thanks, Jake. Thank you, Michael. Now look, there hasn’t been any deferral or slowing down of capital investment at any of our sites. It’s more about, when we look at FY 2018 and having approved the Cowal investments, so our major capital will be $175 million to $215 million, which is up on last year by about $60 million to $70 million. So we need to allocate cash available for that. We’ll make our first tax repayments of about $35 million, $36 million in December. So we’re making sure we’ve got cash available for that. And then obviously, we’ve got the higher dividend which we’ll pay at the end of September. So what we’ve said is, yes, we will pay the $125 million in the June quarter. We’re going to make sure that we’ve got liquidity so that we don’t have to actually slow down any of our capital investments over the course of this year and – but we also protected ourselves. If you look at the gold price volatility in the last couple of months, that has – even if that continues to occur, that we don’t have to put any pressure on the balance sheet. So as we look at it, we’ve got $50 million during the second half of the year as our cash builds up over the course of the first half of the year and we execute our capital programs, if we have that excess cash available, obviously, into the second half of the year, we’re going to start reducing our debt position again to reduce our interest cost and everything like that.

To add to that – sorry, Michael. Just to add to that from a strategic perspective. I mean, when we talk about building a business that can prosper through the cycle, ultimately, that means putting ourselves in a position where we have long life, low-cost assets. At AUD 907 an ounce on an AIC basis and forecasting that to go between $850 and $900 next year, that makes us one of the lowest-cost gold producers in the world. So that will generate the cash. And then it’s a case of determining where best to allocate it. But just to emphasize again, there’s been no deferral of capital in any way. That cash generation and $650 million of debt repayment you’ve seen over the last few years has been cash generation from low cost gold production.

Understood. And then secondly, with respect to the evolution of the dividend policy, having broadly achieved your gearing target and being in a taxpaying position, is that where the – is the dividend policy now what you regard as sustainable? So as debt continues to come down, if there aren’t further reinvestment opportunities, what’s the ambition for the cash?

Well, the ambition is to generate as much cash as possible on a sustainable basis. We’ve moved through this dividend policy largely on the basis that we’re now a profitable company. We see that profitability going forward. And we thought that moving to a payout ratio of 50% of net earnings is – off tax earnings is the right policy. We were hopeful that, that will generate increased dividends in the future. And sorry, Michael, thanks. Just to add, I mean, obviously, being able to pay a franked dividend is very tax advantageous and we deem that one of the best ways of returning – giving shareholders returns.

And just one other point on that, too, Michael. As we move into a taxpaying position, where we’ve sort of set our dividend level is to allow us, if we end up with excess cash in the next few years, we will also be able to build up a franking credit balance that could give us opportunities to pay high dividends if the cash is not needed elsewhere in the business.

Thank you. Our next question, Sophie Spartalis from Merrill Lynch. Please go ahead.

Good morning guys. Just following on from the dividend question from Michael and the franking credit. This dividend, obviously, was franked given that you are now in a cash-paying position. How long do you think those franking credits will last and how long do you think you’ll be able to pay 100% franked dividend for?

Morning Sophie, from my perspective, if the business could keep delivering the cash they did in FY 2017 and FY 2018, we’ll see that as a sustainable one because that’s how we came to landing on our payout rate of 50% of net earnings. If we look at our final FY 2017 dividend, it won’t use up all of the franking credits that we’ll generate based on the $36 million that we pay in December. But what we see in setting that is that over the foreseeable future, in the next few years, we should be able to continue with fully franked dividends.

Okay, great. And then just a follow-up question, on Edna May, it was the only asset in the portfolio that was negative cash. Can you just give us an update on how the strategic review is going?

It’s an ongoing strategic review, and I guess I’m going to give the same answer that I gave at Diggers when asked this question several times that we’re going to continue to look at ways in which we can improve the quality of the portfolio. That means that all options are on the table right across the portfolio. Acquisitions which improve the quality and add value to our shareholders divestments and, as you can see, partnerships in other areas of the business. So I’m not going to comment specifically on Edna May other than to give you confidence and all the business confidence that we continue to implement our strategic objectives of working on all ways to improve the quality of our portfolio.

Okay. And then, also another follow-up question, if I can, on Mungari. You talked through putting the vast majority of the exploration spend into that asset over FY 2018. Can you just outline how much you’ve spent on exploration over the last few years at that asset?

I’m not totally sure. I know – I think we spent about $12 million or $13 million last year, and we’re expecting to spend the same this year. The Mungari site visit last week, which we did during Diggers, really did highlight a lot of exploration upside. We’ve only really had the Phoenix and the Mungari ground position for the last 12 months in a consolidated basis. And as you saw from that presentation that we released on the ASX last week, there’re really some very exciting emerging opportunities arising, both res def extension drilling at new sites; at White Foil, some deeper drilling and then some really new and interesting prospects. So we certainly see Mungari as one of the most prospective areas in our portfolio and are allocated. I think about 40% to 50% of our discovery budget to that in recognition of the prospectivity.

And just – the only thing I’d say, Sophie, is really the majority of the investments made since we took ownership. So the last two years is when you would have seen most of it because under La Mancha’s ownership, our focus is more on developing and building the processing plants, so there wasn’t much money spent at all on exploration.

Yes, no, I meant from when you acquired it, but that’s fine.

Our next question, Angela East from S&P Global. Please go ahead.

You’re saying you have rising power cost across some of your operations. Obviously, this is the case for many mining companies. How are you managing these rising costs? And are you looking at alternative options to secure maybe cheaper power? Or are you looking to more other areas to pull out cost and somewhat offset the rising power costs?

I mean, I think the rising cost – power costs have been well documented in the media and we’re facing the same thing. We’ve locked in longer-term contracts, so really we’re pretty comfortable that this is a one-off increase in the foreseeable future. And we’ll be containing that impact on our cost base.

Yes, and I think the other thing is that our biggest consumer is at Cowal, which was with a contract in place for the next three years. But at the same time, alternatives in terms of solar and the like, those studies are already underway or have been under way, and we’re looking at those. When we did this contract, the economics of it didn’t stack up against the traditional contracting for power. So – but it’s something over the next couple of years that we’re looking at addressing.

Our next question, Peter Harris from AMP Capital. Please go ahead.

Lawrie mentioned that the market will become or come to understand the real value of Ernest Henry. In FY 2018 guidance, you’ve got your copper price assumption of 7,700. At the current copper price, I’m going to put AUD 85 into that, to get that number. So and you made guidance previously on what’s arising or a different copper price goes to that, the cash cost there at Ernest Henry. You made it in the past, I just can’t remember.

Yes, Peter, the impact of, say, $1,100 of ton movement in the copper price on a group level would sort of be about $25 to $30 an ounce impact on the all-in sustaining cost. That would be the impact.

Perfect. Thank you.

Our next question, Paul Garvey from The Australian. Please go ahead.

Jake, if I could just go back to the dividend side of things. I remember a few years ago when you announced the old policy, you made the point that you wanted it to be linked to revenue because it’s you saw dividends as part of the cost of being in business. Does this new position potentially sort of weaken in that perhaps just enough dividends within the business? Does that mindset shift here? What do you sort of see as the advantages and disadvantages of shifting away from the revenue-linked model?

Thanks, Paul, and good morning. I suppose it’s part of the evolution of Evolution or the maturity of Evolution that as far as we can see now, and if we look at the next foreseeable future, the next five years, we’re going to be a very profitable company. And therefore, moving towards a profit linked dividend just seem to be an appropriate recognition of this. As Laurie said, we’re now in a position of franking our dividends. Again when we looked at the options of how to adjust our dividend policy, we see that we can pay a fully franked dividend going forward on the basis of this policy. And it’s certainly no indication that we don’t deem dividends as an absolutely critical and mandatory part of our business.

Yes, okay. And if I could just also go back to the power question around Cowal in particular. So you’re saying 80% higher cost there. What would that transact to in terms of actual total dollars that you have to pay extra? And has the power supply changed or is this just a renegotiation of the previous agreement with the existing supplier there?

I’ll let Lawrie answer in detail. But I mean, I think what you’re seeing is absolutely consistent with what you’ve probably written about many times. Power costs have gone up. There was a long-term contract in place, which is renegotiated. And that’s resulted in the increase in our cost base there.

Yes, Paul. I mean, it was a – we went to the market to renegotiate the contract which is expiring this year. And I think the one thing is it was an old legacy contract, long-term contract expiring, which had very favorable unit rates similar to what was experienced at Cadia earlier this year upon expiring all contract. So in terms of that, we’ve seen an 80% increase in cost there at Cowal. In terms of gross dollars, it’s going to be dependent on usage and demand there. So we’ve generally – beforehand, we’re spending between $15 million and $20 million on power at Cowal.

Previously?

Yes.

[Operator Instructions] There are no further questions at this time. I would now like to hand the conference back to Jake today. Please continue.

Thanks, Aaron, and thanks everyone for listening in. Look, I think – I hope what we’ve been able to say today reflects just how pleased and proud we are of our past performance and our confidence in the future performance of this company which is now, without doubt, a lowest cost quartile gold producer globally. So thanks very much for joining.