Friday operations put under care and maintenance
Endomines reported weaker than expected Q3 results, as the operations at Friday were put under care and maintenance due to a very tight financial situation. Ramp-up at Friday was previously delayed by problems with the tailings dewatering system and although solving the problems would not have been a large investment, the limited cash flows and very tight cash position (Q3/20: SEK 12.0m) forced the company to take more drastic measures. Q3 revenue and EBITDA of SEK 1.9m and SEK -23.1m were as such clearly below our estimates (Evli SEK 11.1m and -15.6m respectively).
Taking measures to improve financial position
Endomines announced intentions to initiate a SEK 281m rights issue, at a subscription price of SEK 2.5 per share, along with possible directed share issues of near SEK 75m to cover guarantee undertakings and bridge financing claim set-offs. With some 60 percent of the rights issue covered by subscription undertakings and guarantee commitments Endomines should in our view be able to secure enough funding to restart operations at Friday and potentially also Pampalo if the gold price remains at >1,800 USD/oz levels. We estimate a six to eight month delay in ramp-up of Friday due to the funding challenges.
HOLD (SELL) with a TP of EUR 3.5 (5.5)
With the estimated impact of the rights issue on share amounts and net debt we adjust our TP to EUR 3.5 (5.5), assuming that the rights issue is subscribed in full. The gold price remains at beneficial levels and is continuing to see upwards pressure despite minor short-term declines. We raise our rating to HOLD (SELL).
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