ENDOMINES Half-year interim report 2022 Steady gold production and new corporate strategy

Endomines AB (publ), Stock Exchange Release 18 August 2022 at 13:00 CET

 
H1 2022 (vs. H1 2021)

Highlights

• Gold production of 108,2 kg (3 478 oz) at Pampalo
• Decision to start East open pit to increase future production volumes at Pampalo.
• Starting East open pit ahead of the planned schedule.
• Increase of underground gold reserves by 49 % (in ounces) at Pampalo and encouraging high-grade drilling results at Friday mine
• Company long-term strategy updated with clear focus on development of the known deposits at Karelian Gold line, exploration to define >1M oz deposit and partnership approach in the USA
• The rolling twelve-month LTI rate (lost-time injuries per one million working hours) of 8.4
• 34 MSEK new funding in June and 63 MSEK direct issue in February for strategic activities and to deepen the Pampalo underground mine 

Financial highlights

• Revenue was 59.1 MSEK (0.01)
• EBITDA was -38.0 MSEK (-40.3)
• Pampalo operations profitability improved during the period, Pampalo operations EBITDA (non-IFRS, non-audited) Q1 2022 -5.7 MSEK, Q2 2022 7.7 MSEK
• Total cash flow was 24.1 MSEK (16.5)
• Earnings per share was -0.22 SEK (-0.59)

Significant subsequent events

LDA Capital has converted its convertible loan to shares at three occasions which has been published on 6 July, 9 August and 11 August.  One investor participating financing package published on 22th June 2022 converted 0.1 MEUR (1.0 MSEK) convertible loan to shares which conversion was published on 17th August 2022.

Outlook

It is estimated that the production ramp-up will continue at Pampalo and ore production from the East open pit will increase production volumes by 10-20 %. Endomines estimates that H2 production will be 30-70 % higher than production during H1 2022. No gold production will be realized from Friday during H2 2022. Currently the focus is to investigate partnership options for Friday mine and the Orogrande processing plant operations.

During Q3 2022 Endomines is going to commence the second phase of underground core drilling program, 4000 meters in total, at the Pampalo mine targeting the deep extensions of the deposit. During Q3 2022, the company also plans to start a significant surface exploration drilling program at the Karelian Gold Line. The program will concentrate on Pampalonlammit, Pampalo and Rämepuro areas, and selected regional exploration targets in the Korvilansuo and Kartitsa areas.

Comments by CEO Kari Vyhtinen

During H1 2022 uncertainty in Europe increased significantly following the unexpected war in Ukraine. Our hearts and minds are with the people of Ukraine. We sincerely hope this brutal war will soon come to an end and peace will return to Ukraine.

Despite this unwanted development in the world, the first half of 2022 was good for Endomines. Pampalo ramp-up proceeded well and Pampalo production during H1 was 108,2 kg or 3 478 oz of gold. Production during Q2 2022 grew by 78 % to 69,3 kg (or 2 227 oz) compared to production levels achieved during Q1 2022. Higher production levels also resulted in improved EBITDA. Pampalo EBITDA during Q2 was 7.7 MSEK or 21.6 %, compared to -5.7 MSEK or –28.8 % during Q1 2022. Pampalo forms a foundation for our business, and we are proud of the development we achieved during the first half of the year.

We also have the Friday project in ramp-up phase in Idaho, USA.  During the spring it was noticed that the gold mineralisation is more irregular than originally estimated and we need to perform underground drilling before continuing the production. Therefore, production was temporarily halted in early 2022 and situation remains the same. Currently the focus is to investigate partnership options for the mine and the Orogrande processing plant. The Orogrande plant is located in an area where other companies could potentially utilize the processing plant for ore treatment. During Q2, we also performed significant actions to lower the cost base to a level where delays in income will not jeopardise the company. We are pleased how quickly and significantly we managed to lower the costs at USA operations. Non-audited EBITDA of USA operations during Q2 2022 amounted to –3.9 MSEK.

Endomines owns other potential gold assets in the USA. During H1 2022 all deposits were reviewed and financially assessed. From the assessments it was concluded that US Grant and Rescue projects are the medium-term development projects with the most potential. The Rescue Mine project is located next to the Unity Mine in the Warren district of Idaho. We are investigating partnership options also for the Rescue (and Unity) development in Idaho. At US Grant we are planning to undertake initial permitting activities and continue studies to define necessary development steps during H2 2022.

During the last months we have updated our long-term strategy and we feel that this will create a growth path for Endomines which will significantly increase shareholder value. Our new strategy is based on the principles below:

• Pampalo production offers the foundation for the business

• We actively develop other known Karelian Gold Line deposits to increase production at Pampalo

• We actively perform exploration at Karelian Gold Line to define a deposit with more than 1M oz of gold resources

• We actively look for a partner for the USA operations to gain more local operational knowledge and local financing

• ESG activities guide the general development of the company

During H1 we started to take initial steps to implement the new strategy. Improved profitability at Pampalo started to form a foundation for the business. In May 2022 Endomines decided to take the first steps to develop parts other than the underground mine and a decision to open the East open pit was made. Preparation work at the East open pit has proceeded ahead of schedule and production has now started at the open pit. It is estimated that this will increase gold production levels at Pampalo by 10-20 %. Our plan is to continue developing other known and permitted parts of the gold line to further increase production levels at Pampalo.

Other significant changes in the company strategy are a strong focus on exploration at the Karelian Gold Line and a strong focus on ESG. Endomines prepared a long-term ESG plan during H1 2022 and now has a road map to improve the company during the coming months and years. We aim to be amongst leading companies in the field of ESG and will ensure that ESG activities are a part of our future reporting.

Regarding exploration, at current gold prices it is feasible to develop gold mineralisation's with lower gold grades than before. In the past, exploration activities have focused on high grade gold lenses and now the focus will be shifted to high volume and lower gold grade mineralisations. The Karelian Gold Line is an area with great potential to develop this kind of deposit, and this will be a key focus area for the company in the future. Similar greenstone belts are significant gold production areas in the world, eg the Kalgoorlie area in Australia, Abitibi area in Canada and Witwatersrand area in South Africa. Endomines has defined a strategic target to determine a gold resource with 1M oz or more of gold resources. We commenced an exploration drilling campaign in August and will investigate financing options to continue large scale drilling campaigns during 2023-2024. We believe this would take the company to a new level, increase shareholder value and open opportunities for large scale partnerships.

I would like to sincerely thank our employees who have worked hard during these unusual times. We believe in our strategy and will continue to work hard to achieve our strategic targets. I would also like to thank our shareholders, partners and other stakeholders for walking this journey together with us.

The complete half year report release is attached to this release (pdf) and is also available at our website:

https://endomines.com/investors/materials/financial-reports-presentations/2022-2/
 

Contact person

Kari Vyhtinen, CEO, kari.vyhtinen@endomines.com, +358 40 585 0050

Mikko Sopanen, CFO, mikko.sopanen@endomines.com, +358 50 434 7439

This information was submitted for publication through the contact person set out above at 13:00 CET on 18 August 2022.

About Endomines

Endomines is a mining and exploration company with its primary focus on gold. The Company explores for gold along the Karelian Gold Line in Eastern Finland and develops mining operations in Idaho, USA and Finland. Endomines aims to improve its long-term growth prospects by increasing its exploration activities and through acquisitions. Endomines aims to acquire deposits that are situated in stable jurisdictions and can be brought to production rapidly with limited investments.

The shares trade on Nasdaq Stockholm (ENDO) and Nasdaq Helsinki (ENDOM).

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