Evolution Mining Ltd

ASX:EVN

Earnings Call Transcript 2021-Q2

[Operator]

Thank you for standing by, and welcome to the Evolution Mining December 2020 Quarter Results. [Operator Instructions] I would like to hand the conference over to Mr. Bryan O'Hara.

[Bryan O'Hara, General Manager of Investor Relations]

Thanks, Bernadette. Good morning, and welcome to the Evolution Mining December 2020 Quarter Results. [indiscernible] Lawrie Conway, CFO; [indiscernible] development, who are all with me here in the group office in Sydney. We also have Bob Fulker, COO, who's dialing in from Brisbane on the line. The gold price has recently taken a breather after achieving an impressive run of 8 consecutive quarters of rising prices in Australian dollar terms through to the September 2020 quarter. And although we've seen a correction from the record highs near AUD 2,900 per ounce posted mid last year, the current spot price of around $2,400 an ounce is still delivering a very healthy cash margin for our business which is focused on producing low-cost ounces. We look forward to catching up with a number of investors over the weeks ahead. Coming up in the calendar, we'll be reporting our half year financials and the annual mineral resources and ore reserve statement on Wednesday, the 17th of February. This will include our first dual compliant ore reserve at Red Lake post announcing the 11 million-ounce mineral resource in August last year, and will also provide an opportunity for us to give a more comprehensive update on the progress we're making towards restoring Red Lake to the premier Canadian gold mine it once was. Thank you. And I'll hand you over to Jake.

[Jacob Klein, Executive Chairman]

Thanks, Bryan. Good morning, everyone. Thanks for joining us and taking the time to join us on the call today. We really do appreciate it. Let me start by wishing you all a very Happy New Year. I hope you're all well and healthy in navigating through the ongoing COVID pandemic successfully. Evolution has delivered another excellent quarter that builds on a very good start to the financial year we delivered last quarter. I'm pleased that we are firing on all cylinders and making meaningful progress across our entire business. We have consistently said that we want to be a safe, sustainable, high margin, low-cost gold business. Our success at delivering on this is clearly demonstrated again this quarter. The numbers in today's quarterly speak for themselves. A 6% increase in ounces produced to 180,000 ounces at sector-leading, low all-in sustaining costs of $1,166 per ounce on USD 852 per ounce. AUD 259 million in operating cash flow, net mine cash flow of $170 million or a massive $946 for every ounce we produced in the December quarter. At Evolution, we believe the ability to generate and bank cash from ounces produced is an absolutely critical ingredient to success in the gold sector. From the numbers released today, it is clear that we are leaders in our sector in this area. The superior cash generation has allowed us to reduce our net debt to only $87 million with a further reduction of over $90 million just this quarter.I trust you agree that this is outstanding achievement when you consider that only 9 months ago, we 100% debt finance the $550 million Red Lake acquisition and have also, during this time, rewarded our shareholders with a fully franked final dividend of $154 million. We have only owned Red Lake for 9 months, but in this short time, the operation has consistently exceeded our expectations in almost every respect. Red Lake has been able to generate significant net mine cash flow even after the heavy investment in its future growth, something we definitely did not anticipate happening so quickly at the time we acquired the assets. The momentum we are building at this operation is exciting. Beyond cash flow delivered in banks, which we have clearly demonstrated, investors and shareholders should and do also focus on the sustainability of these cash flows over the long term. In this regard, I am confident that our mineral resource and reserve statement that will be released with our half year results next month, will clearly demonstrate the quality of our portfolio and the progress we are making in this area. We continue to implement a strategy that prioritizes margin over volume and will use consistent conservative price assumptions for calculating our resources and reserves of AUD 2,000 and AUD 1450 per ounce, respectively. Not because we have a negative view on the gold price, but because we believe this strategy and approach creates a better, more resilient business over the long term. Evolution is very well positioned to prosper through the cycle. During good times, like we are currently experiencing, we are banking sector-leading returns, rewarding our shareholders with dividends, and investing in our future growth. This is a great position to be in. Combine this with a fantastic team of people who are passionate about both our values and creating value. Now I am confident that Evolution is in very good shape. With that, I will hand over to Bob to provide more detail on our operational performance and growth projects.

[Robert Stanley Fulker, Chief Operating Officer]

Thanks, Jake, and good morning, everybody. Starting with the health and safety of our people. We made some important strides in this area. Highlights include Mt. Rawdon going over 12 months without a recordable injury, the longest run in its history. The team have embraced the mantra, we are only as good as today's performance, and I continue to focus on extending this record. Our active COVID response continues, and we can report non-material impact to any of our operations or our businesses. The quarter have seen change within our operational team, 3 new general managers. I'm very pleased that 2 of these were internal appointments, speaking to the bench strength we have built at Evolution. In the December quarter, we delivered 180,000 ounces at $1,166 per ounce all-in sustaining cost and over $170 million of net mine cash flow, taking the half year to over 350,000 ounces at an all-in sustaining cost of $1,182 per ounce and $354 million of net mine cash flow. I think everyone will agree, a strong result and a credit to our focused and engaged site teams. Turning to Page 6. Cowal delivered nearly 55,000 ounces at an all-in sustaining cost of $958 an ounce, generating a net mine cash flow of $39.2 million, capital investment of $38.3 million focused on the underground study works, Stage H stripping and the IWL tails facility. The underground study works have included optimization of the mine plan and advancing the planned Galway decline. The contract for this decline has been awarded with work commencing in the March quarter. This will provide additional drill platform to further evaluate deposit ahead of the study completion in the June quarter. The Cowal orebodies continue to excite us with their quality and the progress towards an operation of plus 350,000 ounces of low-cost production is very foreseeable. Importantly, the regulatory approval process is continuing. The quarter highlight was the public engagement sessions that have received overwhelmingly positive submissions. I'm confident we will secure the required approvals in our early works program, and planning to deliver first production within 12 months of approvals are on track. Ernest Henry, once again, made a significant contribution to the group, producing 24,500 ounces at an all-in sustaining cost of negative $710 an ounce, whilst generating a net mine cash flow of $73.7 million. Red Lake's production quarter-on-quarter has increased by 27% to just shy of 34,000 ounces at an all-in sustaining cost of $1,937 per ounce with a net mine cash flow of $10.3 million. Red Lake continues to improve. Underground development meters averaged 985 meters per month for the quarter, up 10% on the previous quarter, seeing a steady month-on-month increase towards our long-term objective of 1,200 meters per month. January has continued this improvement with a 40-meter per day average being achieved over the last 18 days. The underground delivered an Evolution record of 71,000 tonnes of ore mined in December with the surface stockpile under 22,000 tonnes. This will enable a Red Lake mill to start-up on plan in the June quarter to allow Red Lake to end the financial year very strong. During the quarter, the Board approved the commencement of the Campbell Young Dickinson Box cut in portal to allow the surface decline to commence. This decline will enable us to decouple mine production from the installed shaft hoisting capacity and underground mining equipment size constraints. It is a key step in our vision for Red Lake. Box cut construction will begin in the March quarter with decline development expected to commence in the June quarter. Our vision for Red Lake has advanced with the establishment of the value realization project. This study aims to determine the optimal pathway for Red Lake to materially increase production margins to between 300,000 to 500,000 ounces per year. The study is expected to conclude in the June quarter with a positive outcome progressing to prefeasibility study. In mid-December, we welcomed Kirsty Liddicoat, General Manager, Red Lake. Kirsty recently has been with Suncor and BHP. I want to take this time to thank Amber Adams, the interim General Manager post-transaction, for her leadership and dedication over the past 9 months, has been -- her leadership has been key to the success for improvements that are already getting locked into Red Lake plans. Mungari produced over 30,000 ounces at an all-in sustaining cost of $1,402 an ounce and delivered a net mine cash flow of $22.7 million. Milled tonnes for the half year were 999,000 tonnes, showing the work to improve the plant throughput to 2 million tonnes per annum is sustainable. Study work continues to develop to advance the processing strategy for the cardinal region. The preliminary leach test work expected to be completed and engineering packages awarded in the March quarter. December saw the departure of Andrew Millar, the General Manager in Mungari for the last 3 years. I'd like to thank Andrew for his tireless work and we will miss him. The new General Manager for Mungari is Greg Walker. Greg was previously the Integrated Planning Manager and the interim General Manager at Cowal and brings a wealth of experience to the team. At Mt Rawdon, production was over 24,000 ounces at an all-in sustaining cost of $1,170 per ounce, realizing a net mine cash flow of $24.2 million. Heavy rainfall caused a short-term geotech issue on the Eastern ramp which slowed production ex pit mid-December. Remediation is complete and general production has been via low-grade stockpiles. This will continue through Q3. Mt Rawdon also sees a change in leadership with the outgoing General Manager, Jamie Rawdon, taking a position at Red Lake to assist Kirsty and the team in their transition. I'd like to thank Jamie for his achievements at Mt. Rawdon, in particular, to steering the team to an all-time best safety performance which continues under the new leadership of the new General Manager, Thomas Westbridge. Thomas was the previous operation manager at Mt. Rawdon and brings both continuity and a fresh perspective to the operation. Mt Carlton delivered over 12,000 ounces at an all-in sustaining cost of $2,214 million an ounce mine operating cash flow of $1.3 million. Ongoing plant optimization work resulted in the second consecutive quarter of record mill throughput of 246,000 tonnes. In addition, preparatory work commenced in the open pit to commence a decline in the second half to access high grades overall. In summary, our operations continue to perform well, they are all delivering either at or above our expectations, and I'm confident we are well placed to deliver a successful FY '21. We see improvements in our safety across the board and look forward to continuing these as we progress through the year. Thank you for your time, and I'd like to hand it over to Glen.

[Glenton J. Masterman]

Thank you, Bob, and good morning. We occupied most of November and December, modeling results from key drill programs across the portfolio, which are being incorporated in our Annual Mineral Resource and Ore Reserve statement for the 2020 calendar year. Results of the MROR update will be released in the March 2021 quarter. I'd like to acknowledge the enormous efforts of the discovery and resource definition drilling teams on safely managing through a COVID-interrupted 2020 to complete their planned programs that deliver into our MROR. At Red Lake, work progressed on the ore reserve, which is optimizing the 11-million-ounce resource, released in August last year. The focus areas include the Upper Campbell and Red Lake areas of the mine, where we saw the most material resource increases in the new model. Drilling continued with 6 underground rigs, 4 on resource definition to convert additional resources to reserves and 2 rigs on step out drilling. Highlights of the program at Cochenour and lower Red Lake are illustrated on Page 12 of this morning's report. Discovery drilling at Red Lake is focused on extensions of high-grade mineralization along strike at Cochenour. We are also exploring for repeats of the geological architecture that hosted mineralization in the high-grade zone along the relatively undertested Northwest corridor located between Red Lake and Cochenour. At Cowal, results of surface drilling continued to support resource growth at Dalmeny South. Recent intercepts illustrate mineralization remains open in the down plunge direction. We aim to complete future step-out drilling from underground, where we can establish more optimal drilling positions. Full results from the underground infill program were received in the quarter and are being modeled to inform an update of the GRE46 mineral resource. We are expecting a significant classification upgrade from inferred to indicated resources in the new model. The model also includes results from a close space grade control simulation which was designed to evaluate model reconciliations from a volume of rock in the mine plan, representing 3 months production at PFS production rates. Results showed a positive reconciliation to the resource model for that specific parcel of mineral inventory and indicate there are opportunities for further grade optimization as we continue to infill the resource. Further drilling underground will recommence in the June quarter, and we will continue focusing on reserve conversion. In Northeast Queensland, we completed acquisition of a 100% interest in the Crush Creek project in December last year. Drilling continued to progress the delta and BV7 prospects with potential to extend mineralization along strike at those targets. Results from recent holes at the gamma target, located 500 meters east of delta, are shown on Page 15 of this morning's report. The attractive wins and grades at gamma highlight future growth potential as we continue testing additional vein targets. Overall, we are very pleased with results from Crush Creek, which are matching our initial expectations and confirm that the project will play an important role in extending mine life at Mt Carlton. We recently commenced PFS study work that will examine integration of Crush Creek into the life of mine plan at Mt Carlton. And lastly, over in Western Australia, our joint venture partner, Musgrave Minerals, yesterday released full results of the 49,000-meter aircore drilling program completed at the key project late in 2020. Several multi kilometer long gold anomalies have been prioritized for follow-up diamond drilling, which is expected to commence next week. I look forward to providing an update from Q at the end of next quarter. With that, I'll hand over to Lawrie.

[Lawrence John Conway, Finance Director, CFO & Director]

Thank you, Glen, and good morning, everyone. Today, I'll cover off on the financial performance for the December quarter, ahead of more detailed analysis when we release our half year financial results next month. Summary is outlined on Pages 9 and 10 of the report. The December quarter saw us maintain our cash generation momentum with just under $100 million of group cash flow generated before debt, dividends and any business development activities. The $118 per ounce lower gold price achieved in the quarter was the main driver to the lower group cash flow. However, the group cash flow equates to over $562 per ounce sold being banked and reflects our focus on producing high-margin ounces. Despite the drop in the gold price, we delivered a net cash margin of over 23%. All operations were, again, net cash flow positive for the quarter, generating over $170 million of mine cash flow after investing around $174 million on sustaining and major projects. Capital investment for the group remains on track for full year guidance. Sustaining capital is tracking towards the lower end of the $113 million to $138 million guidance range, while major capital is still in the $260 million to $290 million range, depending on the timing of our major growth projects. As outlined in the September quarterly call, our production for the second half of the year will be stronger than the first half of the year. Full year production will be within the 670,000 to 730,000 ounce range. The split over the next 2 quarters will see the March quarter lower than the December quarter and then increase materially in the June quarter. The drivers to the March quarter are mine sequencing at Mt Rawdon over the next 2 quarters, as mentioned by Bob, and planned shutdowns in this quarter, which is similar to what happens in the September quarter. The increase in the June quarter will be driven mainly by the increased tonnes processed at Red Lake with the planned use of the Red Lake mill in that quarter. The production mix will drive some variability to the group AISC and AIC quarter-on-quarter. Overall, though, we remain on track to deliver group AISC guidance of $1,240 to $1,300 per ounce. At this stage, we are trending towards the bottom end of guidance. The current high copper price is providing benefit to unit costs and cash flow. Should this be maintained for the remainder of the year, we would see an annual benefit of $35 per ounce and $30 million to AISC and cash flow, respectively. This provides an opportunity for us to be at or below the bottom of our AISC guidance. The balance sheet strengthened further in the quarter with our cash balance increasing to $438 million and net bank debt reducing to $87 million. The business as it stands today remains on track to be net cash by the end of the financial year, even allowing for the upcoming interim dividend expected to be paid in the March quarter. I look forward to updating you on our half year financial results next month. Thank you for your time this morning. And Bernadette, please open the line for questions.

[Operator]

[Operator Instructions] Your first question comes from Nick Herbert of Crédit Suisse.

[Nick Herbert, Research Analyst]

Jake and team, a few questions for me, please, just on Red Lake, starting there. So pleasing to see it's tracking ahead of schedule. Just wondering if you can give some more concrete targets in terms of mining and production rate targets and timing of ramp-up of those beyond this year's guidance. Perhaps a bridge to getting the productivity targets you mentioned and whether the timing of that's been brought forward, given that you seem to be ahead of expectation in most of your measures there.

[Jacob Klein, Executive Chairman]

Thanks, Nick, and good morning. I'll make a couple of comments and then hand over to Bob. As I said in my introduction, Red Lake is an asset that's exceeding our expectations in almost every respect. The first part was this upgrade in resources. Obviously, the reserve number. Now the reserve base, which we indicated when we acquired, it was 1.2 million to 1.4 million ounces. We've said today that we expect a material upgrade to that. We've obviously made a decision to start and commence a decline. That clearly gives you an indication of our view of those Upper Campbell areas and our access to that. But those are kind of high-level comments, which don't really speak to the number of very significant changes and improvements that have been made at the site. These are productivity changes, which Bob can talk to briefly. I'm cautious about bringing forward or changing our outlook that said it would take us 3 years to deliver the 200,000 ounces at less than USD 1,000 an ounce. I think we should stay with that. But obviously, we'll be trying our best to accelerate it and deliver as soon as we can, and things are going better than we anticipated. Bob, over to you to make a few comments.

[Robert Stanley Fulker, Chief Operating Officer]

Thanks, Jake, and thanks, Nick. I'll start with development. Look, I didn't say that 40 meters per day is actually 1,200 meters per month because when you're doing these improvement projects, you do get some periods of really good, and then you get some periods of where you need to fix more individual problems that are recurring. But the good thing about development is that we're actually starting to see a nice uplift in consistency about the rhythm that the guys are getting into. So us getting that 40 meters for what is nearly 3 weeks now, really has given me confidence that, that 1,200, which was our aim and it's been our own for quite a period of time. We'll actually start to get a stockpile or a store of mining blocks and accessible development stocks in front of us. The next stage after that, obviously, is to get the production up to match the development. And that is obviously a process as well. And the guys have been working on the production drilling effectiveness as well as the blasting and loading of the explosives and then moving on to the production, 70,000 or 71,000 tonnes for a month. That's the best we have done. You can see as we get the development stocks improving as we roll at 1,200 meters per month. That ruling can improve as well. So all those things are coming together. The positive about the hoisting system. At this stage, the hosting is not our constraint. It's been the internal trucking and the systems internal of the mine, and that's what we're working on. So there's a whole lot of different things that the guys have been working on, both at Cochenour and at Red Lake and Campbell. Did I answer you the question?

[Nick Herbert, Research Analyst]

Yes. That's helpful, Bob. Staying on Red Lake, I understand that sort of the study is still to come. But in terms of the mill expansion, can you talk a bit to how your thinking has developed there and what scale you're potentially tending towards? And then also, just a comment on focus of additional drilling to get to that decision, whether you're seeking to add new resource or whether it's all just around infilling from here? Just trying to get a sense sort of, I guess, the scale of the opportunity that you're assessing against potentially what your reserve might come out as in this quarter, but recognizing that, ultimately, the opportunity might be well ahead of what that is presented in that reserve.

[Jacob Klein, Executive Chairman]

Nick, I'll again make a few comments and then maybe hand over to Bob and Glen to provide further detail. As we've said, that when we took it over the -- and as Bob has indicated, the mine has been -- or the operation has been mine-constrained and we're making good progress at changing that. And ultimately, we want to shift to make it a mill-constrained operation. As you know, there were 2 mills. There are 2 mills that were there, and we've decommissioned the Red Lake mill or we put on care and maintenance and said, "We'll only use it when we build up the stockpile." I think really pleasingly, at the end of December, there was some stockpile in front of the Red Lake mill for the first time in a long time, and that gives us confidence that the fourth quarter, and we're not going to start the wet sale at Red Lake with a stockpile there ready to be processed. So we're starting to shift the needle. So obviously, depending on those development rates, the mining stocks and the underground drilling, and that's all part of the Phase 1 transformation plan. It is early days talking about kind of what do we -- what scale should this operation be. And we are looking at all the options around that. We do think we have a reserve base that definitely supports more than 200,000 ounces of production. The longer-term target remains 300,000 to 500,000 ounces and that's going to be part of the study that we're doing at the moment that, as Bob said, will go into the PFS phase post in the second half of this year. Bob, Glen, do you want to make any comments?

[Robert Stanley Fulker, Chief Operating Officer]

Glen, did you want to comment on the resource before I comment on the rest?

[Glenton J. Masterman]

Yes, sure, Bob. So Nick, just with respect to your earlier question on whether there's a requirement for more drilling and what we need to do to convert further resource to reserve. I think in the area that we're particularly going to focus on, which is the Upper Campbell, it's already really well drilled. In the core of that Upper Campbell area, in the resource, we're almost down to a 6-meter drill spacing. So there's not really even much more we can do with grade control that will give us better definition there. I think a couple of things we do need to do. One is to sort of start to validate some of the geological geometries because that's going to influence sort of final state designs as we go. So there's a bit of work to do there. But as you might expect with that density of drilling, there are not too many alternative solutions and to the ones that we've already delivered. I think with respect to the reserve and before I hand back to Bob, we've taken a fairly conservative approach, particularly with our modifying factors. Because it's part of the ore body that hasn't previously been mined, you're getting into some of these newer areas. And so we're not -- we're taking the conservative approach before we sort of really understand how it's going to perform against the model. So things like geotech considerations where we're going to be mining next to sort of open voids, et cetera, we need to be -- we've taken a cautious approach there. Along with how we've -- our views on mining recoveries and dilution as we do approach in those old mining areas. So it's, like I said, fairly conservative. I expect as we get in there and start to understand it, that will start to change, and we will be able to then sort of probably revise the modifying factors to allow us to convert more of that resource into reserve. Over to you, Bob.

[Robert Stanley Fulker, Chief Operating Officer]

Thanks, Glen. Scale, focus, size of the plant, that really is the focus of the study to actually come up with those. But the prime overarching objective is to take the resource that Glen was just talking about. And look, I'm not going to foretell the reserve that we're bringing out next month. But to try and understand what is the reserve and what is the potential conversions and bring value and lower our costs in all the areas. So that really is the focus of how we'll get the scale. The scale will come out of the study. And it's a little bit early to actually talk about at the moment.

[Jacob Klein, Executive Chairman]

But as with everything we've done, since we made the announcement about our acquisition at Red Lake, we want to be appropriately conservative and be in a position where we're not overpromising and under delivering, but in fact, the opposite of that.

[Operator]

[Operator Instructions] The next question comes from Al Harvey of JPMorgan.

[Alistair Harvey, Research Analyst]

Jake and team, just on following -- up on Red Lake. So you got the resource reserve that's coming out this quarter. I'm assuming you're expecting a material upgrade to the non [indiscernible] reserve you got on the acquisition. I'm assuming this is mainly driven by the larger resource base. But are you expecting any contribution related to tweaking estimation techniques or economic assumptions? I know Glen just mentioned a couple before being a little more conservative. But are there any other drivers like maybe using a bit higher gold price or any factors like that?

[Jacob Klein, Executive Chairman]

Al, no, we're staying to AUD 1,450 an ounce. That's our conservative price assumption on gold. We -- as Glen said, we've got a number of modifying factors that we've reassessed and looked at. We think we're being appropriately conservative in our estimation, but we'll run through all of that when we release the reserves next month.

[Alistair Harvey, Research Analyst]

Yes, no worries. And just switching over to Mungari. Development into Boomer looks to be progressing pretty well. Can you remind me when this will be fully ramped up, what expected ounce contribution and mine life is, especially given the indication and the exploration results that not quite as much along strike there at Boomer?

[Jacob Klein, Executive Chairman]

Bob, do you want to take that one?

[Robert Stanley Fulker, Chief Operating Officer]

Thanks, Al. The underground at Mungari has got a life, which is a couple of years. Boomer is actually part of that. We expect Boomer will come into production sometime in the next 6 months or so. The reason for that, Al, is that we're driving the second-strike driver now. So we've done the first one, we've done additional drilling. We're now driving the second level, and that will actually inform more about exactly what is a long strike glen, did you want to talk about any more of the drilling that's been done?

[Glenton J. Masterman]

Yes. Sure, Bob. I guess, results of the drilling along strike haven't been as, I guess, as good as we would have liked to have seen. The targets are still there. There's more work to do. But I guess the reality is that the space for material increases is getting smaller as we sort of start -- continue plugging the gap. So it'll be, like I said, more work to do, we're going to assess that as we work through our FY '22 budgets and understand what program we want to design and put in place for next year.

[Operator]

[Operator Instructions] Your next question comes from Matthew Frydman of Goldman.

[Matthew Frydman, Research Analyst]

Jake and team, Happy New Year to everyone. Just a couple of questions from me. Firstly, on Red Lake and specifically the restarting of the Red Lake mill. Just wondering if the plan there is to restart that mill and keep it running into FY '22? Or is that -- is the plan there to have a bit of a fixed campaign in terms of the stockpiles built up in the June quarter? Just wondering if that's going to be a permanent restart. And then I guess, secondly, if you can put that in the context of how you guys see the combined milling capacity at Red Lake at the moment, I guess, given the improvement work you've done so far and where those -- where the infrastructure is sitting at the moment.

[Jacob Klein, Executive Chairman]

Thanks, Matt. Happy New Year, nice change of name. I'll let Bob answer that question.

[Robert Stanley Fulker, Chief Operating Officer]

Thanks, Jake. Thanks, Matt. Restarting at the mill. The idea is that we'll build the stockpile. And as we build our production rate, we'll keep it going for as long as possible. And at this stage, it's just north of the quarter. But the idea is that the periods between the actual shutdowns will decrease as our production profile increases over the coming 18 months to 2 years, so that we can get up to a full capacity at both mills in that time frame. Total mill capacity at Red Lake is between 1.1 million and 1.3 million tonnes. And that's what we're working to try and fit on that and combined capacities around that sort of level. But we will be stopping the rebate. Now again, the reason we're running it at the moment, running it in that quarter, we winterize it, shut it down so that it doesn't cost us that much money over winter.

[Matthew Frydman, Research Analyst]

Right. That's very helpful, Bob. Second question I had...

[Jacob Klein, Executive Chairman]

Matt, one of the -- sorry, Matt. I was just going to say, one of the things we're definitely going to do when we release the financials and the MROR is take people through the changes that have occurred at Red Lake and really the outlook and the decline development and what the opportunities are there. Because the change has been fundamental and transformative in the last 9 months. It's very impressive when you look at what's been done by the team on site.

[Matthew Frydman, Research Analyst]

Sure. Jake, looking forward to that detail. Second question for me is on Cowal. It was a strong grade performance in the quarter, certainly above our expectations anyway. Just wondering whether that was as planned or as budgeted? Or has that been driven by, I guess, potentially the Stage H cutback running a bit ahead of schedule? Are you getting into that ore earlier than expected? And has that contributed to the strong quarter?

[Jacob Klein, Executive Chairman]

Bob, another one for you.

[Robert Stanley Fulker, Chief Operating Officer]

Thanks, Matt. I think it's a combination of both. It's a little bit of a combination of Stage H, a little bit of a combination of some positive reconciliation from the initial ore zones out of Stage H, but also a little bit of a positive reconciliation from our stockpile grades that we've been feeding. So it's a combination of the 3 of them. Currently, it's certainly in line with where we want it to be for the full year. So we're not expecting major uplifts for the whole year.

[Operator]

[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Klein for closing remarks.

[Jacob Klein, Executive Chairman]

Thanks, Bernadette. So thanks, everyone, for joining us. It is a busy day. I guess the one question which I was hoping to get but didn't, but I'd just make one comment on it is, Ernest Henry delivered $74 million of cash flow this quarter, delivered $150 million over the first 6 months. And it's asset that doesn't get a lot of commentary because we don't operate it. But it's a wonderful asset to own and is incredibly cash generative. It must be one of the most cash-generative assets in a gold company around. So appreciate your attention and the attendance on the call. Look forward to updating you on the financials and the MROR. And I think the key takeaway for -- from us at Evolution is this is a company in great shape. Speak soon.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now disconnect.