Endomines - Funding secured
Endomines agreed on a new long-term financing arrangement of up to EUR 12m. The current strong market conditions should aid the company to record profitability this year while the financing gives the company ability to invest in future growth.
Funding gives opportunity to accelerate growth
Endomines has secured a financing arrangement of up to EUR 12 million, comprising a secured loan facility of up to EUR 8 million, an account limit of EUR 3 million, and bank guarantees and financing limits totaling a maximum of EUR 1 million. Historically, the company has relied on equity issuance and convertible loans for its funding needs. While the release did not disclose the cost of financing, we anticipate the secured loan to be relatively expensive. The arrangement provides Endomines with financial flexibility, allowing the company to choose not to fully utilize the available limits should favorable market conditions persist. The company is currently building its production towards annual production of 70,000 – 100,000 ounces by around 2030. We note that the current financing is just the first step in the journey and likely used for exploration and permitting purposes.
Firing on all cylinders
Endomines produced 4,513 ounces during the first quarter, our previous estimate for H1/25E was at 8,444 ounces, therefore the production rate exceeded our estimates slightly. Endomines currently expects that it will produce 16,000 – 22,000 ounces of gold this year. After updates, we expect gold production of roughly 19,300 ounces for the year. We have also increased gold production estimates for the coming years as we expect that the company can commence production in its satellite deposits such as Rämepuro. The average gold price for Q1 was at approximately 2900 USD/oz which exceeds our estimate of 2775 USD/oz for the first half. Currently, market price for gold is approximately 3250 USD/oz. On the negative side, USD has weakened against EUR, working against the company. We have increased our gold price estimates going forward as we expect average price of nearly 3200 USD/oz for the full year and approximately 3100-3200 USD/oz for the coming years. We estimate the Pampalo operation to be very profitable at the current gold prices as the company has effectively managed the cash cost level of the operation.
ACCUMULATE (prev. REDUCE), with a TP of EUR 15.9 (EUR 10.8)
The current pricing appears neutral given the strong gold market as our SOTP fair value range is at EUR 14.4-17.5 per share. We continue to base our TP in the middle of the fair value range. The main downside risks relate to the prevailing gold price, potential issues in Pampalo production and lower than expected value recovered from the United States.