Endomines - Focus on production in Finland

Endomines is ramping up production at Pampalo, while the Friday operations remain uncertain. Recent macroeconomic development is causing some potential headwind.

Building up production volumes at Pampalo
Endomines has seen continued two-fold progress during H1 so far, with ramp-up of operations at Pampalo progressing quite as planned while the mining operations at the Friday mine appear to be halted for a prolonged period of time. At Pampalo, Endomines produced 1259oz of gold during Q1. Focus has been on achieving a state of steady gold production at the processing plant. Endomines also announced plans to open the East open pit at Pampalo, which according to the company would increase gold production volumes with 10-20%. Operations at the open pit are expected to continue for approx. two years. At Friday, Endomines has carried out an underground diamond drilling campaign, with promising results. Further drilling is however still required and will be considered in late 2022.

Investigating potential in Finland amid macro uncertainty
Our estimates for Friday now assume production to be restarted during H1/2023 (earlier assumption mid-2022). The company noted that it is investigating partnership options, which could be beneficial given the company’s current lack of cash flows and continued need for additional financing. Production ramp-up at Pampalo and the assumed start-up of the East open pit this year provides some additional leeway but further financing will in our view be needed to further increase production. Endomines has also investigated possibilities to develop known deposits within the Karelian Gold Line. Gold is still enjoying rather favourable price levels, but precious metals have as safe haven assets been under pressure due to a stronger dollar and anticipated interest rate hikes. Any gold price deterioration would in our view clearly limit the economic feasibility of the other assets in Finland.

HOLD with a target price of SEK 2.2 (2.3)
With estimates revisions both operatively and due to completed and anticipated financing arrangements along with gold price uncertainty we adjust our TP to SEK 2.2 (2.3), HOLD-rating intact.

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