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Endomines - Eyeing production start in Q3

Endomines did not produce any gold concentrate in Q2, as expected. Furthermore, no production guidance was given. We have revised our 2019 production estimate slightly downwards to ~3,000oz, expecting a smaller production already in Q3. We revise our TP to SEK 4.8 (4.4) following NPV adjustments, retaining our SELL-rating.

No production in Q2, production guidance yet to be given

Endomines’ Q2 results were uneventful, as no gold concentrate production occurred during the quarter, as expected, and no new production guidance was given. Costs were limited compared to our expectations and EBITDA as such was SEK -9.3m compared to our estimate of SEK -15.0m. Ramp-up at Friday appears to be progressing rather well given the delays experienced so far. Based on the information given in Q2 we have, however, adjusted our Q3 production estimates further downwards, and now expect 2019 production of ~3,000oz.

Friday ramp-up key in the near-term

Endomines long-term plan is to produce over 40,000oz by the end of 2023, with near-term production relying on the Friday mine followed by the Rescue ore body (production in 2021). With essentially no production currently on-going the successful ramp-up of Friday remains vital to secure cash flows for on-going operations, although the recently completed rights issue substantially alleviated near-term financing concerns.

SELL with a TP of SEK 4.8 (4.4)

Our NPV values Endomines at SEK 4.8 per share, up from SEK 4.4 since our previous update following net debt adjustments based on the Q2 balance sheet and expected rights issue proceeds. We assume a 1,400USD/oz LT gold price, reflecting analyst estimates and the nature of the recent gold price increases. Drivers for long-term gold price through supply/demand remain in place but near-term gold price development remains uncertain following the more short-term macro event driven price increases.

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