Evolution chair backs mid-tier strategy in gold sector

Surface activities at Mt Carlton. Image: Evolution Mining.

Evolution Mining executive chair Jake Klein believes the gold industry is suffering from “cognitive bias” regarding prices for the precious metal.

Klein, speaking at the International Mining and Resources Conference (IMARC) in Melbourne, addressed general concerns raised by gold investors that the modern gold industry wasn’t providing significant returns.

“I started in the gold industry 25 years ago and gold prices were around US$250 an ounce and gold companies were able to make money. So, what has happened?” said Klein.

“While we operate in a cyclical sector, I think we suffer from a cognitive bias in that we think the gold price is going to go up.

“In reality that is not a very good strategy, because the only thing we really know about the gold price in 12 months time is that it is going to be different. We hope it will go up but often it is lower.”

Australian gold operators are generating record profits this year. In the last month alone, Kirkland Lake Gold and Doray Minerals have delivered production records.

Evolution also achieved a quarterly record of 220,971oz in the 2017 September quarter, and a still-impressive 200,218oz in its latest quarter.

Klein suggested that maintaining its mid-tier status was a deliberate move as it allowed the company to generate enough capital by itself without depending on markets, while simultaneously generating growth.

“You can invest in an exploration find if there are more ounces. If there are not more ounces you can spend as much money as you like, you are not going to find them,” Klein explained.

“We need to get more comfortable telling investors it is better not to spend money if that asset is going to run out.”