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Endomines - Minor bumps on the ramp-up road

Endomines commenced mining operations at the Friday-mine. Equipment delivery delays have put production ramp-up slightly behind schedule. Production of gold concentrate at the Friday-mine in 2019 is estimated at 5,000-8,000oz. The leasing rights to the Unity mine were acquired, which we expect to be the next area of focus in Idaho along with the adjacent Rescue property. Endomines commenced the sale of a EUR 5m bond, which we expect to cover near-term needs but anticipate a need for additional financing.

Friday gold production 5,000-8,000oz in 2019

Endomines’ gold production in Q4 amounted to 27.9kg (98.7kg), impacted by the suspension of mining operations at Pampalo. Revenue and EBITDA in Q4 amounted to SEK 7.9m (Evli 5.4m) and SEK -6.1m (Evli -6.4m) respectively. Mining operations at the Friday-mine have commenced but production has seen slightly behind schedule due to delays in equipment deliveries at the processing plant. The project’s capex estimate was revised to USD 9.5-10m (prev. 7.7m) due to cost overruns. Production of gold concentrate in 2019 is estimated at 5,000-8,000oz.

Acquired additional assets, seeking to secure financing

Endomines acquired leasing rights to the Unity mine adjacent to its Rescue property. We expect the company’s development operations during 2019 to focus on Unity/Rescue along with Friday. We have shifted our production estimates as we view any significant production figures (apart from Friday) to be achieved during 2020 unlikely. Endomines commenced the sale of an up to EUR 5m bond with associated warrants (strike price EUR 0.90). Although the financing covers at least the near-term investment needs we expect Endomines to need additional financing to develop additional assets.

BUY with a target price of SEK 8.0 (7.2)

The gold price saw favourable development during H2/2018, returning to above 1,300USD/oz levels, driven by the increased market uncertainty. Our revised estimates put our NAVPS at SEK 8.5. We retain our BUY-rating with a target price or SEK 8.0 (7.2).

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