No gold concentrate sales in Q1
Endomines Q1 report contained limited new information of value. No gold concentrate sales from Friday occurred and revenue amounted to SEK 3.1m due to Pampalo clean up gold. Lesser cost activation saw costs higher than our estimates and as a result a weaker EBITDA, at SEK -27.8m (Evli -13.6m). 3,700 tonnes of lower grade (5.7 g/t) ore was mined during the first quarter. Design capacity (3,445 tonnes/month) at Friday is sought to be reached in Q2, however, COVID-19 impacts on staff and component availability may cause delays. The first gold concentrate shipment from Friday was made during Q2.
Financing arrangements to aid cash position
Post-Q1 financial transactions will bring much needed relief to Endomines’ strained cash position (Q1/20: SEK 1.3m), raising some SEK 81m through two loans and a rights issue. We expect further financing to be needed during 2020, as evident by the signing of an engagement letter with a financial advisor for long-term financing. Closing of the transaction with Transatlantic Mining provides additional production potential, although little is yet known of the assets. 2020 will in our view revolve around ramping-up production at Friday and planning for production at other assets from 2021 onwards.
SELL with a target price of SEK 5.5 (5.0)
Following adjustments to our valuation approach following the favourable gold price development and taking into account the transactions in Q2 we raise our target price to SEK 5.5 (5.0). Our SELL-rating remains intact.
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