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00:00TELL US MORE ABOUT THIS WINDFALL WE ARE SEEING FROM GOLD PRICES? WHAT DOES A PRODUCER LIKE YOURSELF DO IF THE BEST STRATEGY IS TO HAND IT BACK TO SHAREHOLDERS? OR DO YOU USE IT FOR GROWTH? > > IT IS A GREAT TIME TO BE A GOLD MINER. WE ARE IN A CYCLICAL SECTOR. THERE'S NO DOUBT THAT TODAY, THERE WERE MORE REASONS TO BE BULLISH GOLD FROM THE FISCAL DEBT ENVIRONMENT TO THE GEOPOLITICAL TENSIONS. THERE ARE REASONS TO BE VERY OPTIMISTIC AND BULLISH. TODAY IT IS TRADING AT $2030 IN AUSTRALIA. AROUND A RECORD LEVEL. THREE MONTHS AGO, IT WAS $1800 A MONTH IT IS GREAT TO BE OPERATING IN THIS ENVIRONMENT. AT EVOLUTION, WE WANT TO BE A BUSINESS THAT OPERATES THROUGH THE CYCLES AND PROSPERS. THAT MEANS FOCUSING ON MARGINS AND NOT VOLUME, FOCUSING ON CASH FLOW. AS YOU CAN SEE IN OUR RESULTS, IN THE LAST FIVE YEARS, WE HAVE GENERATED OVER 1.5 BILLION DOLLARS OF FREE CASH. THAT HAS ALLOWED US TO PAY OVER $900 MILLION IN DEBT, $345 MILLION TO SHAREHOLDERS IN DIVIDENDS, AND BUILD A CASH BALANCE OF $300 MILLION. THAT IS AT A MUCH LOWER GOLD PRICE. WE'RE FOCUSED ON MARGINS AND QUALITY PRODUCTION RATHER THAN VOLUME. DAVID: ARE YOU THINKING ABOUT TRANSACTIONS AT THIS POINT, IN TERMS OF M & A? WE HAVE NOT SEEN THE MEGA MERGER ENVIRONMENT THAT MANY ANALYSTS WERE EXPECTING LAST YEAR AND THIS YEAR. DOES THAT MAKE SENSE FOR YOU GUYS? > > YOU DID SEE TOWARDS THE END OF LAST YEAR AND EARLY THIS YEAR THE 4 COMPANIES MOVING TO THE SECTOR. FROM OUR PERSPECTIVE, THE DISCIPLINE AND FOCUS IS VERY IMPORTANT. WE ARE VERY OPEN TO M & A, THEY JUST HAVE TO BE CREATIVE FOR OUR SHAREHOLDERS AND IMPROVE THE STRENGTH AND QUALITY OF OUR BUSINESS. WE ARE VERY MATCH FIT. WE ARE KICKING A LOT OF TIRES, BUT WE HAVE NOT FOUND ANYTHING THAT MEETS MOST CRITERIA. YVONNE: I WANT TO FOCUS ON YOUR PRODUCTION NUMBERS. ONE THING THAT WE SAW WAS YOU ARE ALL IN SUSTAINING COSTS, WHICH HAVE GONE UP. 924 AUSSIE DOLLARS. WE HAVE A CHART THAT SHOWS HERE. IT IS ABOVE YOUR GUIDANCE RANGE THAT YOU GAVE US EARLIER. WHAT WERE THE KEY FACTORS THAT ARE PRESSURING COSTS AT THE MOMENT? HOW DO YOU OFFSET THAT? > > WE WERE DISAPPOINTED TO MISS OUR GUIDANCE. IT WAS ONLY A 2.5% MISS. WE PRIDE OURSELVES ON NOT MISSING. $924 ANNOUNCED STILL IT EQUATES TO ONE OF THE LOWEST COST OLD PRODUCERS IN THE WORLD. THE U.S. DOLLAR TURNED AROUND 660 U.S. DOLLARS. WE ARE FORECASTING AN ABILITY TO CONTAIN THE COST INCREASE IN 2020. WE SEE IT AT 2.5% TO 3.5% BY OPERATING IMPROVEMENTS AND INCREASING THROUGH OUR OPERATIONS. IF BY 2020 WE ARE GUIDING TO $940, WHICH IS STILL EXTREMELY LOW. DAVID: THE INCREASE -- SO WE CAN LEAVE THE COST PART OF THE CONVERSATION IT IS DUE TO WHAT -- CONVERSATION -- IT IS DUE TO WHAT? > > THERE WERE A COUPLE OF OPERATIONAL FACTORS THAT IMPACTED 2 OF OUR OPERATIONS. THERE WERE SOME NONOPERATIONAL THINGS, LIKE INCREASED ROYALTIES, WHICH IS GOOD WHEN GOLD IS HIGHER. ALSO, SOME NON-CASH ITEMS THAT WE NEEDED TO EXPENSE FOR THIS FINANCIAL YEAR. DAVID: AS YOU MENTIONED, IT IS A GOOD TIME TO BE A GOLD PRODUCER, ESPECIALLY IN AUSTRALIA, BECAUSE COSTS ARE DENOMINATED IN THE CURRENCY. ARE YOU OPERATING ON SPECIFIC KEY ASSUMPTIONS FOR THE AUSSIE DOLLAR? > > THE SHORT ANSWER TO THAT IS WE REALLY DON'T SPEND A LOT OF TIME TRYING TO PREDICT THE GOLD PRICE. WE ARE VERY FORTUNATE TO BE OPERATING IN THIS ENVIRONMENT. I HAVE BEEN IN THIS INDUSTRY FOR 20 YEARS. NORMALLY THERE IS A VERY GOOD CORRELATION BETWEEN THE U.S. DOLLAR GOLD PRICE AND STRENGTH IN THE AUSSIE DOLLAR. NOW WE MIGHT BE GETTING INTO AND OUT OF SYNC SITUATION WHERE THE AUSSIE CANNOT SEEM TO FIND A FLOOR, AND THERE ARE GOOD REASONS WHY THE U.S. DOLLAR GOLD PRICES ARE GOING UP. WE MAY BE IN AN ENVIRONMENT WHERE AUSTRALIAN GOLD PRODUCERS ARE BETTER POSITIONED THAN OUR GLOBAL PEERS? YVONNE: DO YOU THINK GOLD PRICES CAN RISE FURTHER? I KNOW YOU DON'T HAVE TARGETS, BUT WHAT WILL DRIVE THE PRICE HIGHER? > > THERE ARE A NUMBER OF FACTORS. ALL YOU NEED TO LOOK AT IS THE DEBT OF THE PUBLIC SECTOR AND PRIVATE SECTOR, THE GLOBAL DEBT NUMBERS. WHAT SEEMS TO BE A SUSTAINED LOW INTEREST RATE ENVIRONMENT. THOSE ARE THE FISCAL FACTORS. YOU LOOK AT THE GEOPOLITICAL TENSIONS, YOU WERE TALKING ABOUT THE TENSIONS BETWEEN CHINA AND THE U.S., AND MULTIPLE OTHER GLOBAL TENSIONS. IT SEEMS TO SUGGEST THAT FROM A $1400 U.S. GROWTH, IT IS NOT HARD TO SEE THE GOLD PRICE RISING. THE HIGH WAS CLOSE TO $1900 AN OUNCE IN 2011, 2012. DAVID: THE NEXT 12 MONTHS, THERE MUST BE A KEY CONCERN, DESPITE THE GOLD ENVIRONMENT WE ARE IN, WHAT IS ONE THING YOU ARE KEEPING AN EYE ON? > > I THINK YOU ARE ABSOLUTELY RIGHT. THE GOLDILOCKS ENVIRONMENT IS A GOOD DESCRIPTION. SO MANY TIMES, THE GOLD INDUSTRY HAS MANAGED TO SNATCH DECEIT FROM THE JAWS OF VICTORY, BECAUSE WE HAVE LOST OUR DISCIPLINE, FOCUS, WE HAVE INVESTED IN PRODUCTS THAT ARE SUB ECONOMIC. WE FORGET THE GOLD PRICE IS CYCLICAL. WE HAVE BEEN THROUGH ALLOCATORS OF SHAREHOLDERS CAPITAL. EVOLUTION HAS OUR EYES WIDE OPEN TO THESE RISKS. WE ARE VERY FOCUSED ON MARGIN. WE ARE VERY FOCUSED ON DISCIPLINE. WE ARE VERY FOCUSED ON THE FACT THAT WE ARE CUSTODIANS OF THE SHAREHOLDERS CAPITAL. WE SHOULD NOT BE INVESTING IN THINGS BECAUSE WE THINK THE GOLD PRICE IS GOING UP. WE SHOULD BE GIVING IT BACK TO THE SHAREHOLDERS IF WE CANNOT FIND THINGS THAT ARE CREATIVE IN IMPROVING THE QUALITY OF OUR BUSINESS. DAVID: WHAT WILL BE THE TRIGGER OF THAT, IN TERMS OF THE KEY DECISION -- KEY COMPONENTS OF THAT DECISION? GOLD AND AUSSIE DOLLARS, $2000. I WOULD IMAGINE US GOING UP IS NOT INCREMENTALLY AFFECTING THE DECISION FOR YOU? > > $250 HIGHER THAN WE ACHIEVED LAST YEAR, WHICH WAS A TERRIFIC AND FANTASTIC CAST GENERATED YEAR. WE DON'T WANT TO ACCUMULATE CASH ON THE BALANCE SHEET. WE HAVE JUST MOVED TO A NET CASH POSITION. THAT'S THE FIRST TIME IN THE LAST FOUR YEARS THAT WE HAVE PAID DOWN OVER $900 MILLION OF DEBT. WE ARE READY TO REVISIT OUR DIVIDEND POLICY AND LOOK AT WAYS IN WHICH WE CAN RETURN CAPITAL

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Gold Miner Evolution Says Ready to Revisit Dividend Policy

Jake Klein, executive chairman of Evolution Mining Ltd. an Australian gold producer, talks about the demand for the precious metal, output, and the company's strategy. He speaks on "Bloomberg Markets: Asia." (Source: Bloomberg)

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