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Financial overview

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Endomines - Growth story in need of financing

14.02.2020 | Company update

Endomines is nearing commercial production at Friday, after several bumps on the road, and ramp-up to design capacity is expected in March 2020. The production delay has put a clear dent in Endomines’ financial situation and additional financing will in our view be needed in the near-term to bring further assets into production. With the financing risk overshadowing the future potential we downgrade to SELL (HOLD) with a TP of SEK 5.0 (4.7).

Nearing commercial production at Friday

Endomines continued to post meager figures in Q4, as gold concentrate sales from Friday have not yet commenced. Bottom-line figures were as a result clearly in the red, with EBITDA at SEK -15.1m. Endomines expects to ramp-up production at Friday to design capacity (3,445 tonnes/month) in March 2020. The concentrate sales agreement is yet to be confirmed but should in our view be signed during Q1. Built up ore stockpiles will speed up production ramp-up, but we expect head grades to be well below expected typical grades during the first half of 2020.

Financial position again at risk

Endomines financial situation has again become a reason for concern, as group cash fell to SEK 15.7m (Q3/19: SEK 61.9m) in Q4. The Friday production facility investments are largely behind and cash flows will improve once production at Friday picks up. Friday cash flows will however not suffice to develop new assets and Endomines will in our view seek additional financing in the near future. Previous debt-financing options have not been favourable and a rights issue could be on the table.

SELL (HOLD) with a target price of SEK 5.0 (4.7)

Endomines is finally nearing production start at Friday and has continued consolidating its land assets in Idaho and is seeking to expand further through the transaction with Transatlantic. The gold price development has further remained favourable. The positive drivers are in our view, however, overshadowed by the near-term financial risks. We adjust our target price to SEK 5.0 (4.7) and downgrade to SELL (HOLD).

Endomines - Full production at Friday sought during Q1

13.02.2020 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q4, with commercial production expected to commence in March 2020. Full production at Friday is sought to be achieved during Q1. No numeric production guidance was given but ramp-up to design capacity (3,445 tonnes per month) is expected in March 2020.

  • Endomines did not sell any gold concentrate from Friday in Q4 and had in early February announced the expected start-up of commercial production in March 2020, which was not included in our estimates.
  • Revenue* amounted to SEK 0.7m, with our estimates at SEK 22.0m, as we had expected gold concentrate sales from Friday.
  • EBITDA* in Q4 was at SEK -15.1m, below our estimate of SEK -0.8m given the lack of gold concentrate sales.
  • (*Not reported, derived from H1 and Q1-Q3 figures)
  • During December Endomines processed 420.5 ore tonnes with a head grade of 2.65g/t Au (low-grade pre-production development ore) resulting in 2.65 tonnes of concentrate grading 189.2g/t Au. In December Endomines took over all mining activities from the mining contractor at Friday. Endomines has mined approx. 5,000 tonnes of ore up to date, stockpiled at the mine and mill areas. Full mining production delayed to coincide with mill commissioning.
  • Endomines did not give a numeric production guidance for 2020, expecting ramp-up to design capacity (3,445 tonnes per month) in March 2020.
  • The BoD expectedly proposed that no dividend will be paid for 2019.

Endomines - Upgrade to HOLD

08.11.2019 | Company update

Endomines’ Q3 results were clearly below our estimates, as no concentrate from Friday was sold during the quarter. Mining operations have progressed well but issues with the commissioning of the mill delayed concentrate production. Full forecasted production rates at Friday are expected by the end of the year. We adjust our TP to SEK 4.7 (4.8) and upgrade to HOLD (SELL) following share price declines.

Estimates miss from mill commissioning delays

Endomines Q3 results fell clearly below our estimates, as no gold concentrate from the Friday-mine was yet sold, whereas we had expected minor sales. The gold concentrate production was affected by issues with commissioning the mill at Friday, which delayed previous plans of commencing production during Q3. Revenue amounted to SEK 1.6m (Evli 10.9m) and EBIT to SEK -16.4m (Evli -7.2m). Revenue was generated from gold recovered from the clean-up at Pampalo. Production at the Friday-mine has progressed well and a significant ore stockpile has been built up and Endomines expects to be reaching full forecasted production rates by the end of the year.

Bumps on the road in the near-term not unlikely

We have slightly revised our 2019 estimates downwards following the delay in concentrate production. The issues relating to the commissioning of the mill continue to pose risks for concentrate production in Q4. The impact of any further delays are however essentially not of any major importance and would only shift cashflows to a slightly later stage and the improved financial situation from the completed rights issue allows for some headwind.

HOLD (SELL) with a TP or SEK 4.7 (4.8)

Our view on Endomines post-Q3 in general remains intact. Our SOTP (Gold spot price) implies a value of SEK 5.4 per share but with the production uncertainty still present we continue to justify a discount and check our target price to SEK 4.7 (4.8) per share following SOTP adjustments. Due to a near 10% share price decline since our previous update we upgrade our rating to HOLD (SELL).

Endomines - No gold concentrate production in Q3

07.11.2019 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q3, as the commissioning of the mill was delayed. Mining operations have progressed well, and an ore stockpile has been built up. Due to the lack of gold concentrate sale from Friday, Endomines’ Q3 figures were clearly below our estimates.

  • Endomines did not sell any gold concentrate from Friday in Q3, while gold recovered from the clean-up at Pampalo generated some revenue. Mining has progressed well at Friday and a significant ore stockpile at the mine and the mill sites has been produced.
  • Revenue* amounted to SEK 1.6m, with our estimates at SEK 10.9m. We had expected minor gold concentrate sales from Friday, while Q3 revenue consisted solely of sale of clean-up gold from the Pampalo mill.
  • EBITDA* in Q3 was at SEK -13.2m, below our estimate of SEK -3.2m given the limited gold concentrate sales. (*Not reported, derived from H1 and Q1-Q3 figures)
  • In the third quarter Endomines was able to commence the ramp-up of the Friday mining and milling operations and the work is now fully ongoing. Issues relating to the commissioning of the mill delayed the start of gold concentrate production. Successful commissioning of the mill is expected to take place during Q4.
  • Endomines did not give an updated production guidance for 2019. The ramp-up of the Friday mine is on-going and an updated guidance will be given once completed the mill is successfully commissioned and ramp-up completed

Endomines - Eyeing production start in Q3

19.08.2019 | Company update

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.

Endomines - Production guidance update not yet given

16.08.2019 | Earnings Flash

Endomines’ revenue and EBITDA in Q2 amounted to SEK 1.4m (Evli 0.0m) and SEK –9.3m (Evli -15.0m) respectively. There was no gold concentrate production during Q2. Endomines did not give an updated production guidance for Q2.

  • Endomines did not produce any gold concentrate in Q2.
  • Revenue amounted to SEK 1.4m (42.1m in Q2/18), while we had not estimated any revenue for Q2. The Q2 revenue derived from clean-up gold from the Pampalo mill.
  • EBITDA in Q2 was at SEK -9.3m, above our estimate or SEK -15.0m.
  • Construction of the Mill was ongoing and developmental drifting at the Friday Mine was the focus for Q2.
  • Endomines did not give an updated production guidance for 2019. A production plan is being worked on based on the results of the drilling campaign and test mining as well as the commissioning of the plant and an updated guidance will be given once completed.

Endomines - Friday production further delayed

12.08.2019 | Company update

Endomines’ announced that the ramp-up of production at Friday will be further delayed and the earlier production guidance for 2019 will not be achieved. Recent increases in gold prices are a welcome development but has bloated valuation. We re-establish our rating with SELL (N/A) and a target price of SEK 4.4 (N/A).

Production to fall short of 2019 guidance

Endomines announced on August 9th that its production guidance for 2019 (5,000-8,000oz gold) will not be achieved due to reparations of damages to Friday’s tailings pond causing longer than expected delays to production. Ramp-up of the processing plant is expected to take a couple of weeks before being fully commissioned. No new guidance was given. We now estimate a gold production in 2019 of 4,340oz. Although the added delay to production timewise is relatively short, this will cause additional strain on the already limited near-term cash flows.

Sounder financial situation following the rights issue

With the completion of Endomines’ rights issue, having raised gross proceeds of SEK 156m, the company’s financial situation is now at a much sounder level. The raised funds should as such cover the by the company earlier estimated next twelve-month capital need of SEK 100m. Proceeds will mainly be used to short-term debt repayment and ramp-up of Friday as well as start-up of other assets.

SELL (N/A) with a target price of SEK 4.4 (N/A)

Endomines’ share price has seen recent rapid increases, as the gold price has climbed to levels last seen in 2019, driven by macroeconomic uncertainties. Although the rise in gold prices certainly is a welcome development, the current valuation in our view does not reflect the high uncertainty relating to Endomines’ gold production, with Friday having seen several delays and additional costs, and production has not yet commenced. We re-establish our rating with SELL (N/A) and a target price of SEK 4.4 (N/A), in line with our SOTP.

Endomines - Rights issue on-going

17.06.2019 | Company update

The subscription period of Endomines’ rights issue commenced on June 14. Endomines is seeking to raise gross proceeds of SEK 165m. The proceeds of the rights issue are intended to be used to repay debt and interest of existing debt and development of its assets in Idaho, as well as exploration along the Karelian Goldline and for general corporate costs.

Seeking to raise SEK 165m

Endomines is through a rights issue seeking to raise gross proceeds of around SEK 165m, with expenses related to the rights issue estimated at SEK 10m. Endomines has estimated that its current financial position does not cover the capital needs for the following twelve months. Trading in subscription rights will take place during the 14-25 June 2019 while subscription using the subscription rights will take place from the 14th of June to the 1st of July, 2019.

Proceeds mainly to cover debt and project development

Of the proceeds some SEK 36m would be used to repay debts and interest relating to the TVL Gold acquisition. The larger share of the proceeds from the rights issue are intended to be used for development of its projects in Idaho. To our understanding some of the proceeds would be used for further development of the Friday mine while the bulk would be allocated to development of the Rescue, Kimberly, and Unity projects. Furthermore, part of the proceeds would be used to continue exploration along the Karelian Goldline as well as to cover general corporate costs. The cost allocation and project timelines are described in further detail in figures 1 and 2.

Rating withdrawn during rights issue

Evli Bank is the financial advisor of the rights issue, and although a segregation of duties is followed, we refrain from expressing our views on the rights issue. Our estimates have not been revised to include any new information given in the prospectus and we withdraw our rating and target price (prev. HOLD, TP SEK 6.0). We will publish an updated view after the rights issue.

Endomines - Downgrade to HOLD

09.05.2019 | Company update

Endomines’ revenue in Q1 was limited to SEK 2.1m due to lack of production at Friday and as such profitability remained weak, with EBIT at SEK -13.0m. Ramp-up of production at Friday is expected in Q2. With Endomines’ financial situation becoming a concern we downgrade to HOLD (BUY) with a target price of SEK 6.0 (8.0).

Friday production expected in Q2

Endomines’ Q1 revenue and EBIT amounted to SEK 2.1m and -13.0m respectively. Ore production at the Friday mine is on-going but due to damage to the processing facility no new gold concentrate was produced and revenue was only generated from sales of remaining concentrate from Pampalo. Ramp-up of gold concentrate production at the Friday site is expected to start in Q2. Although the concentrate production was delayed Endomines has remained on schedule with the mining of ore and retained its 2019 guidance production for Friday of 5,000-8,000 oz gold concentrate.

Financial situation concerning

Endomines’ financial situation has increased causes for concern. The liquid funds at the end of the period amounted to SEK 7.8m, despite issuance of the EUR 3.7m bond, as Q1 cash flow after investments amounted to SEK -46.7m. The situation should be alleviated with the ramp-up of production at Friday, with the larger investments also having been done. With the additional costs of the processing plant at Friday the financial situation is in our view now even more fragile and Endomines can’t really afford more setbacks in production start-up without additional financing.

HOLD (BUY) with a target price of SEK 6.0 (8.0)

Endomines is in our view in a delicate situation financially and the need for additional financing, at least to finance any new projects, seems inevitable. Endomines already issued a rather expensive bond and further financing will likely not come easily or cheap. We downgrade to HOLD (BUY) with a target price of SEK 6.0 (8.0).

Endomines - Concentrate production missing in Q1

08.05.2019 | Earnings Flash

Endomines’ revenue and EBITDA in Q1 amounted to SEK 2.1m (Evli 8.0m) and SEK -11.5m (Evli -3.9m) respectively, below our estimates mainly due to our estimates not accounting for the processing plant damage during Q1 and revenue only generated from sale of remaining Pampalo concentrate. No gold concentrate was produced at Friday in Q1 but production is expected to commence in Q2.

  • Endomines did not produce any gold concentrate in Q1. The revenue was generated by sales of remaining Pampalo gold concentrate. Gold concentrate production at Friday has been delayed due to damage to the tailings area of the processing plant. Concentrate production is expected to commence in Q2.
  • Revenue amounted to SEK 2.1m (29.4m in Q4/18), below our estimates of SEK 8.0m due to our estimates not having accounted for the processing plant damage.
  • EBITDA in Q1 was at SEK -11.5m, below our estimates of SEK -3.9m, mainly due to the lower revenue.
  • Friday’s processing plant repairs expected to amount to USD 400,000 and to take four to six weeks to complete.
  • Guidance reiterated: Annual gold production at the Friday mine in Idaho, USA, is expected to be approximately 9,000oz at a cash cost of 650-900 USD/oz, depending on the area of production, over the life time of the mine. Endomines anticipates production of 5,000 – 8,000oz gold (~156-249kg) in concentrate during the year.

Endomines - Minor bumps on the ramp-up road

15.02.2019 | Company update

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).

Endomines - No major surprises

14.02.2019 | Earnings Flash

Endomines’ revenue and EBITDA in Q4 amounted to SEK 7.9m (Evli 5.4m) and SEK -6.1m (Evli -6.4m) respectively. Endomines expects to produce 5,000-8,000 oz gold (~156-249kg) in concentrate during 2019. Endomines further announced that it has commenced the sale of a up to EUR 5 million senior secured bonds and warrants.

  • Endomines gold production in Q4 amounted to 27.9kg (98.7kg), affected by the suspension of the Pampalo mine in October. Milled ore amounted to 7,559 tonnes (39,692), at head grades of 2.6g/t (3.0g/t). Cash cost was 948 USD/oz (1,264).
  • Revenue amounted to SEK 7.9m (28.5m in Q4/17), above our estimates of SEK 5.4m.
  • EBITDA in Q4 was at SEK -6.1m (Evli -6.4m) and EBIT at SEK -14.2m (Evli -11.7m).
  • Total cash flow was SEK -43.5m (1.8m).
  • Guidance: Annual gold production at the Friday mine in Idaho, USA, is expected to be approximately 9,000oz at a cash cost of 650-900 USD/oz, depending on the area of production, over the life time of the mine. In the first quarter of 2019, Endomines has commenced ramp-up of the mine and anticipates producing 5,000 – 8,000oz gold (~156-249kg) in concentrate during the year.
  • Endomines has commenced the sale of a up to EUR 5 million senior secured bonds and warrants. The bond carries a coupon of 12.0 per cent and has 3-year maturity. The number of the associated warrants is 5,555,555 and their exercise price is EUR 0.90 per warrant.

Endomines - Ramp-up phase ahead

15.11.2018 | Company update

Endomines’ gold production in Q3 amounted to 81.6kg and revenue to SEK 25.9m. EBITDA remained barely positive at SEK 0.6m, aided by higher head grades and lower costs due to suspension of the mining operations. Production at the Friday mine is expected to begin in December 2018. We retain our BUY rating with a target price of SEK 7.2 (7.8).

EBITDA positive despite mining operation suspension

Endomines gold production amounted to 81.6kg in Q3. Production figures were aided by the high head grades of 3.9g/tonne. Revenue and EBITDA in Q3 were SEK 25.9m and 0.6m respectively. Mining operations at the Pampalo mine were suspended in mid-September, which along with the higher head grades contributed to a positive EBITDA, despite lower volumes. Gold production during 1-9/2018 was 303.5kg, with another 15kg produced in October and the total 2018 output expected to exceed 320kg.

Limited new information in the earnings release

Endomines’ third quarter earnings release contained limited new information regarding the Idaho projects. The start-up timetable of the Friday mine was updated, with production anticipated to start in December. Details on the progress of the exploration activities in the vicinity of Pampalo were given, noting some samples with anomalies warranting further evaluation. Endomines had earlier specified the expected cash costs of the Friday mine, estimated to be around USD 650-900 per oz following ramp-up. We have updated our estimates for the cash costs for Friday and expect levels of around 900 USD/oz during 2019 and a decrease to 700-800 USD/Oz levels towards later production phases.

BUY with a target price of SEK 7.2 (7.8)

Following our revised estimates, we lower our target price to SEK 7.2 (7.8) but retain our BUY rating. The gold price has hovered at around 1,200 USD/oz following declines in Q3 but has seen slight upward pressure following recent stock market uncertainty.

Endomines - EBITDA remained positive

14.11.2018 | Earnings Flash

Endomines’ revenue and EBITDA amounted to SEK 25.9m and SEK 0.6m respectively. Initial production at Friday is anticipated to commence in December 2018 but no substantial volumes are expected until 2019.

  • Endomines had pre-announced Q3 production figures, with gold production of 81.6kg (94.1kg). Milled ore amounted to 26,876 tonnes (37,422), at head grades of 3.9g/t (3.0g/t). Cash cost was 768 USD/oz (1,081).
  • Revenue amounted to SEK 25.9m (26.7m in Q3/17), above our estimates of SEK 21.1m, driven by the higher head grades.
  • EBITDA in Q3 was at SEK 0.6m (Evli -11.4m) and EBIT at SEK -11.2m (Evli -21.7m), with depreciations and write-downs of assets of SEK -11.8m. The suspension of mining activities in mid-September and higher revenue contributed to the higher than anticipated EBITDA. Adjusted EBITDA, excluding costs associated with the TVL acquisition and co-operation negotiations amounted to SEK 4.3m.
  • Total cash flow was SEK -27.7m (1.6m).
  • Guidance: Gold production in January-October amounted to 318.5kg. Total output from Pampalo, including additional gold recovery in connection with maintenance of the processing facility, is expected to exceed 320kg.
  • Initial production at Friday is anticipated to commence in December 2018. No substantial production volumes are expected before the year-end.

Endomines - Initiate coverage with BUY

22.03.2018 | Company report

Through a recent transaction Endomines acquired American entity TVL Gold and the five gold assets it holds. Along the completed rights issue and financing arrangements the company is in a stronger position to continue production as resources at the Pampalo mine have neared depletion. We initiate coverage of Endomines with a BUY rating and target price of SEK 9.3

Acquisition and strengthening of balance sheet

Endomines recently acquired TVL Gold and its five gold projects in the Orogrande mining district in Idaho, USA. In conjunction with the acquisition and completed rights issue, with net proceeds of some SEK 180m, Endomines completed a series of financial transactions after which the company has no remaining bank debt.

Production focus to shift to the acquired assets

With the current reserves Endomines targets production of 250-300kg gold at the Pampalo mine after which investments into an extension would need to be made. Production at the first of the acquired assets is expected within a year of the acquisition and within 2-5 years at the other assets.

Potential coupled with uncertainty

The acquisition and a planned expansion of the exploration program offer increased potential but we note a high uncertainty relating to the TVL Gold assets as resource estimates are limited and no production is currently on-going at the assets and resources at Pampalo are nearing depletion.

Initiate coverage with BUY and target price of SEK 9.3

We initiate coverage of Endomines with a BUY rating and a target price of SEK 9.3. Our target price is based on a 0.95x multiple to our NAVPS estimate, taking into consideration the stability of the operating jurisdictions and the early stages of the assets.

Annual and sustainability reports

14.05.2019

Annual report summary 2018

Company news

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