Endomines - Volume growth supports exploration
Endomines’ Q3 production was fairly well in line with our estimates at 4,191 ounces (Evli est. 4,411 ounces). The company is in an ideal spot as the current production should finance the exploration efforts given the volumes and prevailing gold price. We increase our TP to EUR 8.1 (prev. EUR 7.3), while keeping rating at HOLD.
Market tailwinds persist
Gold has continued its impressive run after our latest update as the spot price has gained almost 10% since (nearly 30% YTD). The major driver behind the gold spot price gain was first the anticipation of Fed rate cut and more recently, the 50bps cut in September. Global central banks, especially on the emerging markets have continued to add to their gold position driven by the need for portfolio protection and diversification. In addition to rate cuts, gold price has been supported by the ongoing geopolitical turmoil. While the demand picture is generally positive, the current price levels are starting to affect jewellery demand which has traditionally been half of total demand. According to the World Gold Council, jewellery demand volumes fell 19% y/y to a four-year low in Q2/24.
Q3 production fairly well in line with our estimates
Endomines produced 4,191 ounces of gold during July-September with an increase of 21% y/y. The actual volumes were fairly well in line with our estimate of 4,411 ounces. We anticipated an increase in volume, as the company began mining at the Hosko satellite deposit in early 2024. During the quarter, the company showed its capability to increase production as Endomines was able to run its production at an annual rate of roughly 22,300 ounces during July for two weeks. With the current production levels and gold price the company should be able to fund its exploration efforts well which lowers the need for costly and potentially dilutive external financing.
HOLD with a TP of EUR 8.1 (prev. EUR 7.3)
We have updated our estimates for market parameters and production volumes. With the net positive changes to our SOTP-model, we increase our TP to EUR 8.1 (prev. EUR 7.3), while keeping rating at HOLD.