Endomines Finland Plc Financial Statement Release 2022

Endomines Finland Plc – Financial Statement Release, 15.2.2023, at 14.00 EET.

After structural strategic changes, we will focus on growth

July-December 2022 highlights

• Gold production at Pampalo grew by 47.3 % compared to January-June 2022 period, being 159.4 kg (5123 ounces).
• Pampalo EBITDA 0.5 MEUR (6.7 % of revenue). Adjusted EBITDA, excluding the impact of prior periods, was MEUR 0.7 i.e. approximately 9.1% of revenue.
• New mid-term targets and ESG-program defined to support strategy implementation.
• Production started at East open pit.
• Redomicile project completed, and headquarters moved to Finland.
• Parent company listing to Nasdaq Helsinki main market.
• Initial public offering successfully completed with 13 MEUR gross proceeds.
• Positive drilling results confirming the continuation of underground mineralisation.
• New gold mineralisation found North of Pampalo.

Group key figures

*) The share-specific key figures in the release have been reported according to the number of shares on 31 December 2022 also for the comparison period.

Dividends

The Board of Directors proposes that no dividend will be paid for the financial year 2022.

Outlook and guidance for the financial year 2023

• We expect the production of gold to increase by 35–55% at Pampalo from 2022.
• No production is expected to take place at the Friday mine.
• We expect our financial performance to improve considerably from 2022 for the following reasons:

• The positive development of energy prices and their positive outlook for 2023
• The positive development of the price of gold and its strong future outlook
• Lower production costs in the mine, especially during June–December
• The positive impact of higher production levels on unit costs

• The ESG programme guides the development of our company in various areas. Our operations are centred around employees’ safety and well-being and environmental responsibility, as well as good governance and ethical management in our company. During 2023, we will also start measures to reduce our carbon footprint. We are aiming for a 5% reduction in our CO2 emissions (scope 1 and scope 2) during 2023 (CO2 per ounce of gold produced).
• Ore exploration at the Karelian Gold Line is an important part of our future operations. During the year, we will actively engage in ore exploration through the reprocessing of old material, till samples and drilling.
• In our revised strategy, deposits in the United States are promoted through the partnership model. We believe that the partnership negotiations will be completed during 2023.

CEO Kari Vyhtinen comments on the July-December results and highlights

In 2022, we focused on laying a solid foundation for future growth. We revamped Endomines' strategy putting gold exploration and production in Finland at the centre of the strategy.  As part of the new strategy, we also defined key operational targets for 2023-2025

The ramp-up of Pampalo's production progressed as planned and our production increased by 47.3% to 159.4 kg (5123 oz). Our July-December EBITDA in Pampalo was EUR 0.5 million, approximately 6.7% of revenue. Adjusted EBITDA excluding the effect of previous periods was EUR 0.7 million, approximately 9.1% of revenue.

The operating environment at the end of 2022 was challenging. Our energy costs doubled in July-December compared to the beginning of the year, to 1.8 MEUR. In addition, general inflation and the temporary decline in gold prices towards the end of the year had a negative impact on Pampalo's operating profit margin. We believe these effects were temporary and we enter the year 2023 with high level of confidence.

In December 2022, we transferred our domicile to Finland and we are now proud to announce that we are a Finnish company. We are investing in Finland, especially in Pampalo, because our vision is to grow the Karelian gold line into one of the most important and sustainable gold production regions in the world. In addition, moving our domicile to Finland will simplify the company structure, reduce administrative costs and the workload of our employees.

The initial public offering (IPO) at the end of the year was also an important step in laying the foundation of the company. The IPO reduced the company's debt and significantly strengthened its balance sheet. Major changes in the company's operations impacted the financial results for 2022. However, we see the implementation of these changes as a necessary step to turn Endomines' operations into profitable growth.

We enter 2023 with a positive spirit

We estimate gold production in Pampalo increase by 35–55% from 2022.

We expect a substantial improvement in financial profitability as, for example, energy prices have fallen significantly from their year-end 2022 levels. High inflation last year pushed up the cost level of our mining operations with a rapid increase in cost indexes. We have initiated measures to reduce the cost level of our mining operations and expect to achieve significant cost savings from June 2023 onwards. In addition, we believe higher production levels at Pampalo will improve our overall cost efficiency.

Recent positive development of the gold price and strong short-term outlook also supports the outlook for Endomines.

A new ESG program at the heart of our operations in 2023

During 2022, we created the Endomines ESG program, which will strongly influence the company's operations. At the centre of our program, are the safety and well-being of our employees, keeping the environment and nature clean, and good and ethical governance of our company.

Exploration on the Karelian gold line is an important part of our future operations

We started exploration drilling in the Karelian gold line in late 2022. The potential of the area looks very good, and we see a realistic opportunity to define a significant deposit of over 1 million ounces. A large deposit would enable investments to increase future production levels above current medium-term target levels.

In addition, we explored previously unexplored areas in the Pampalo underground mine, 230-240 metres below the current production level. The high gold grade results in this area confirm our belief that the gold mineralisation at Pampalo will continue far below depth, providing a good basis for our gold production in the coming years.

In line with our new strategy, we will promote our US operations through a partnership model and will not invest significantly there in the near future. We selected an advisory team for this project in late 2022 and expect to complete the partnership negotiations during 2023.

I would like to thank our employees for a job well done. I would also like to thank our owners, partners, and other stakeholders for an interesting year. We have made some important changes, and it is good to continue together towards our strategic objectives.

 
 
Correction to the H1 2022 income statement

The company corrects the income statement for the H1 2022 period to correspond to the accounting principles for recording the FX rate difference of intragroup loans. According to the accounting principles, the exchange rate gain or loss of internal loans between the parent company and Endomines Idaho LLC are recorded directly in the balance sheet through the translation differences of the comprehensive income statement. In the previously published H1 2022 income statement, the exchange rate gain was presented in Financial income. The exchange rate difference and this correction has no cash flow effect. The change and correction have no effect on the figures for full year 2022. The change has no impact on the previously presented balance sheet for H1 2022 and not on the total amount of equity on 30 June 2022.

The effect of the change on the income statement for the H1 2022 period to the changed items only:

The change has no effect on the turnover, EBITDA or operating profit of the income statement for H1 2022 presented earlier.

Analysts, investors, and media are invited to participate in the webcast today 15th February 2023 at 15:00 EET.
 

The results will be presented (in Finnish) by the CEO Kari Vyhtinen and CFO Mikko Sopanen. The presentation can be followed live via the link: https://endomines.videosync.fi/results-q4-2022

During the webcast presentation, analysts and investors will also have the possibility to ask questions via chat. 

Media representatives, who wish to ask questions after the publication of the Financial Report, may contact Kari Vyhtinen, CEO of Endomines, on +358 40 585 0050.

The link to the webcast will also be available on Endomines website: https://endomines.com/investors/materials/financial-reports-presentations/

A recording of the presentation will be available at https://endomines.com/media/news-blog/

This release is a summary of Endomines Plc’s Financial Statement Release 2022. The complete report is attached to this release as a pdf file. It is also available on the company website at www.endomines.com

Endomines Finland Plc

Further information

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

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

Endomines

Endomines is a mining and exploration company with its primary focus on gold. Endomines is engaged in mining operations at the Pampalo mine in Ilomantsi, and in exploration activities along the Karelian Gold Line in Eastern Finland. Endomines also owns rights to several gold deposits in Idaho and Montana, US, where Endomines aims to continue the development work through partnership agreements. www.endomines.com

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