Endomines - Strategy updated, implementation ahead

The updated strategy sets the company’s focus back to Finland. We see potential upside through successful exploration and mining efforts in the Karelian gold line, on the other hand, we see clear risks in the value realization of the company’s United States asset portfolio. The increasing real interest rates put further pressure to gold prices and the investment case. We decrease our TP to SEK 1.6 (1.7), HOLD-rating intact.

Issues in the United States have continued to weaken the performance
During the recent years, the company has faced issues in the Friday mine and processing plant ramp-up. According to the new strategy, the company’s assets in the United States are developed through partnerships, additionally, divestments are considered as a potential option. In our view, the company’s ability to realize value in the United States is essential for the investment case.

Focus on the Karelian gold line
Production in Pampalo mine was commenced in Q1 2022 supported by the current favorable gold prices. Endomines was able to produce 2 227 ounces of gold in the second quarter of 2022 and posted a positive EBITDA for the Pampalo operations. In the coming years, Endomines is planning to commence production from the satellite deposits and conduct a wide scale exploration campaign in the Karelian gold line. There is also likely to be life of mine increases in Pampalo underground mine as the company is currently extending the decline deeper. We see potential upside for the valuation via successful exploration and mining efforts.

HOLD with a target price of SEK 1.6 (1.7)
We decrease our target price to SEK 1.6 (1.7). The positive assumptions changes regarding the Pampalo underground potential and the Karelian Gold Line satellite deposits are outweighed by adjustments to gold price estimates driven by souring gold market sentiment.

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