Endomines - Promising signs from Pampalo

Pampalo’s profitability was better than expected excl. NRIs

Revenue in H2 amounted to EUR 9.0m, slightly lower than we had expected (EUR 9.7m). Despite production figures published prior, the payability of gold concentrate was lower than we estimated due to the production method change in Pampalo, in addition, some of the produced gold was left to inventory at the end of the FY. EBITDA in H2 was at EUR -1.0 m (-2.9m H2 2022), lower than our estimate of EUR 0.4m. EBITDA included roughly EUR 2.0m negative effect from production method change in mine and preparatory work for Hosko. NRIs ignored, the EBITDA would have been around EUR 1m, which was higher than our estimate. In the Karelian Gold Line, Endomines was able to increase Korvilansuo resources by 307% and Kuittila by 114% in 2023. In 2024, the plan is to expand Kuittila’s mineralization further by 300-400%. Endomines will treat the Muurinsuo-Korvilansuo-Kuittila area as one entity called Southern Gold Line.

Production to grow at a slightly slower pace than estimated

Endomines aims to grow its production 15-35% y/y in 2024, in addition, it expects financial result to improve from 2023. The new production outlook is lower than we had estimated. We lower our production estimate to 15 701 ounces (prev. 17 613 ounces). The first half of the year is slower in our estimates as we expect lower production, especially in Q1 as production from Hosko was launched only in February and the production method change was completed in Pampalo. With the new production estimate, our group EBITDA estimate is at EUR 4.6m for FY 2024 (prev. EUR 5.1m).

SELL with a TP of EUR 5.6

Our SOTP-based valuation range is EUR 5.6-7.6 per share. SOTP was positively affected by the increase in resources for Southern Gold Line, yet the lower production estimate for 2024E and higher net debt affected the model negatively. We continue to base our TP at the lower end of the range driven by the uncertainties.