Endomines - Growth story in need of financing

Endomines is nearing commercial production at Friday, after several bumps on the road, and ramp-up to design capacity is expected in March 2020. The production delay has put a clear dent in Endomines’ financial situation and additional financing will in our view be needed in the near-term to bring further assets into production. With the financing risk overshadowing the future potential we downgrade to SELL (HOLD) with a TP of SEK 5.0 (4.7).

Nearing commercial production at Friday

Endomines continued to post meager figures in Q4, as gold concentrate sales from Friday have not yet commenced. Bottom-line figures were as a result clearly in the red, with EBITDA at SEK -15.1m. Endomines expects to ramp-up production at Friday to design capacity (3,445 tonnes/month) in March 2020. The concentrate sales agreement is yet to be confirmed but should in our view be signed during Q1. Built up ore stockpiles will speed up production ramp-up, but we expect head grades to be well below expected typical grades during the first half of 2020.

Financial position again at risk

Endomines financial situation has again become a reason for concern, as group cash fell to SEK 15.7m (Q3/19: SEK 61.9m) in Q4. The Friday production facility investments are largely behind and cash flows will improve once production at Friday picks up. Friday cash flows will however not suffice to develop new assets and Endomines will in our view seek additional financing in the near future. Previous debt-financing options have not been favourable and a rights issue could be on the table.

SELL (HOLD) with a target price of SEK 5.0 (4.7)

Endomines is finally nearing production start at Friday and has continued consolidating its land assets in Idaho and is seeking to expand further through the transaction with Transatlantic. The gold price development has further remained favourable. The positive drivers are in our view, however, overshadowed by the near-term financial risks. We adjust our target price to SEK 5.0 (4.7) and downgrade to SELL (HOLD).

Open Report