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Endomines - Market tailwind persists

Endomines will publish H1/24 figures on Thursday 15th of August. Our focus is on the profitability and cash flow of the Pampalo operation as production growth coupled with high gold prices supported sales growth during H1.

Strong gold market continues to support

Endomines produced 7,019 ounces of gold during the first half of the fiscal year. Production during the second quarter missed our estimates yet we expect that production will grow at a considerably faster rate during the second half. Gold price has stayed at 2300-2400 USD/oz level during the start of the second half which incentivizes production growth further. Furthermore, the company reported that during July, it generated 858 ounces in two weeks, corresponding to an annual rate of 22,300 ounces. The production rate surpasses the company’s medium-term operational target rate of 20,000 ounces by the end of 2024. We now model annual production of 15,922 ounces for 2024E with growth of 24% y/y. We estimate net sales of EUR 31.0m and EBIT of EUR 7.0m for FY24E. We model some gold concentrate sales slippage from H2/23 for H1/24 which should increase net sales slightly. 

 

Exploration results showing future potential

Since our latest company report in May, Endomines has reported several new exploration results from the Karelian Gold Line. The company’s exploration efforts during the first half have focused on the Southern part of the Karelian Gold Line. The spring exploration campaign confirmed Kuittila’s mineralization extending deeper, and high-grade results near the surface were reported at Korvilansuo. We remain optimistic of the company's emphasis on the Southern Gold Line cluster. Developing and permitting one larger deposit is more cost and time efficient when compared to managing multiple smaller satellite deposits.

 

HOLD with a TP of EUR 7.5 (prev. EUR 6.5)

Endomines’ valuation is beginning to look elevated as the share price has surged nearly 30% since our recommendation upgrade in May. With the net positive changes to our estimates regarding 2024-2027E gold price level and FX, we increase our TP to EUR 7.5 while keeping rating at HOLD. 

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