Endomines - Should deliver profitable growth in H2
Despite Pampalo’s profitability not meeting our expectations in H1, we anticipate substantial volume growth in H2 to enhance profitability, supported by sustained high gold prices.
Net sales met expectations, yet profitability fell short
Given the disclosed production volume of 7,019 oz for the first half of the year, our net sales prediction of EUR 13.3m was close to the actual figure of EUR 13.1m. In terms of profitability, we expected group EBITDA of EUR 3.3m, which was clearly higher than the actual figure of EUR 1.9m. The miss was mainly the result of higher-than-expected Pampalo cash cost. The ramp-up of Hosko and some preparatory work in the Pampalo open-pit affected the cash cost negatively. Overhead costs were only slightly higher than we estimated at EUR 2.1m (Evli est. EUR 1.8m).
Profitability should improve in H2 driven by volume growth
For the second half, we estimate y/y volume growth of nearly 50% to 8,903 ounces. For the full year, we expect production of 15,922 ounces, with a growth of 24% y/y. Endomines kept its guidance unchanged and estimates that the gold production will increase by 15-35%, therefore our current estimate is at the middle point of the guidance range. As our estimate for Pampalo’s profitability proved too optimistic for H1, we have increased our estimate for Pampalo cash cost for H2. Our FY 2024 net sales estimate is now at EUR 30.9m and group EBITDA at EUR 6.7m. In the Karelian gold line, we expect that the company is able to increase its resource base considerably in the Southern gold line as the results in Korvilansuo and Kuittila deposits have showed positive results, and the company continues resource growth drilling during the second half.
HOLD with a TP of EUR 7.3 (prev. EUR 7.5)
Driven by the slight net negative adjustments to our model, we decrease our TP to EUR 7.3 while keeping the rating at HOLD. We expect profitable production growth for H2 whilst the resource update should increase resources in the Karelian Gold Line. The destiny of the company’s assets in the United States remain unknown while the partnership negotiations remain an important priority during the second half.