Endomines Finland Plc - Financial Statements Release - 15/2/2024, at 12.00 EET
Endomines' strong growth continued in 2023 - exploration results exceeded expectations
H2-2023 in brief
- Gold production in July-December was 187.8 kg (159.4 kg), or 6,038 ounces (5,123 ounces)
- The group's revenue increased by 14 % and was 9.0 MEUR (7.9 MEUR)
- The group's EBITDA was -1.0 MEUR (-2.9 MEUR)
- The Pampalo production segment's EBITDA was 0.9 MEUR (0.4 MEUR), or 10 % of revenue (6 %)
- The group's operating result was -2.2 MEUR (-4.5 MEUR)
- The group's net result was -3.5 MEUR (-7.0 MEUR)
- A significant mineralized zone was discovered in the Kuittila area in the Karelian gold line. The high gold content is found close to ground level, which facilitates further exploration and accelerates the possible start of production in the area. The discovery also contains very high grades of silver, significant grades of lead, zinc, and molybdenum, as well as a promising grade of copper. The best results from the drill hole KT-007 included a gold grade of 5.0 g/t over a length of 18 meters, a silver grade of 173.6 g/t, 1.2 % lead, 0.8 % zinc, 0.1 % copper, and 0.02 % molybdenum. Including, over a length of 4.3 meters, a gold grade of 12.2 g/t, a silver grade of 413.4 g/t, 3.2 % lead, 2.1 % zinc, 0.3 % copper, and 0.01 % molybdenum were found. The highest grade was found over a length of 1.2 meters, with an amazing gold grade of 19.8 g/t, a silver grade of 481.0 g/t, 4.5 % lead, 1.7 % zinc, 0.2 % copper, and 0.02 % molybdenum
- In November 2023, Endomines redeemed the remaining LDA Capital Limited convertible bond early, as a result of which the conversion of the convertible bond into shares ended immediately. The financing arrangement agreed between Endomines Ab and LDA Capital Limited in 2021 regarding convertible bonds has ended
- Endomines Finland Plc's board of directors has approved new convertible bonds with Finnish investors totalling a maximum of EUR 7.1 million during 2023. During 2023, 6.0 MEUR of convertible bonds were realized and 0.3 MEUR was converted into shares. 0.8 MEUR of the convertible bonds will be implemented in 2024. In addition, it has been agreed to extend the convertible bonds arranged in 2021 and 2022 by three years until the year 2027, which will contribute to improving the company's financial position in the coming years
- Endomines Finland Plc's board of directors decided on 30 November 2023 to start a share-based incentive system for its key employees for the years 2024-2026
- Preparatory work for the Hosko production area, located on the Karelian gold line, was started in October 2023. Hosko's production started on February 1, 2024
Fiscal year 2023 in brief
- Gold production from January to December 2023 increased by 49 percent. Production for the year 2023 was 397.8 kg (267.5 kg), or 12,790 ounces (8,601 ounces). 100 % of the group's production comes from the Pampalo production segment
- The group's revenue increased by 46 % and was 19.7 MEUR (13.5 MEUR). 100 % of the group's revenue comes from the Pampalo production segment's revenue
- The group's EBITDA was -0.7 MEUR (-6.4 MEUR)
- The Pampalo production segment's EBITDA was 3.3 MEUR (0.6 MEUR), or 17 % of revenue (5 %)
- The group's operating result was -3.0 MEUR (-14.7 MEUR)
- The group's net result was -5.3 MEUR (-17.5 MEUR)
Outlook for the financial year 2024
- We estimate that gold production will increase by 15-35 % from 2023
- We expect the financial result to improve from 2023
- Recent development in the gold price and strong short-term market outlook supports the outlook for 2024
Group's result
Key figures | Unit | 1.7.-31.12.2023 | 1.7.-31.12.2022 | 1.1.-31.12.2023 | 1.1.-31.12.2022 |
Revenue | MEUR | 9.0 | 7.9 | 19.7 | 13.5 |
Pampalo production revenue | MEUR | 9.0 | 7.9 | 19.7 | 12.7 |
% of revenue | % | 100 % | 100 % | 100 % | 94 % |
Operating expenses | MEUR | -10.0 | -10.9 | -20.3 | -19.9 |
EBITDA | MEUR | -1.0 | -2.9 | -0.7 | -6.4 |
Pampalo production EBITDA | MEUR | 0.9 | 0.4 | 3.3 | 0.6 |
% of revenue | % | 10 % | 6 % | 17 % | 5 % |
Depreciation and impairment losses | MEUR | -1.2 | -1.6 | -2.3 | -8.3 |
Operating result | MEUR | -2.2 | -4.5 | -3.0 | -14.7 |
Net result | MEUR | -3.5 | -7.0 | -5.3 | -17.5 |
Net gearing ratio | % | 46 % | 19 % | 46 % | 19 % |
Equity ratio | % | 55 % | 66 % | 55 % | 66 % |
Earnings per share | EUR | -0.4 | -1.0 | -0.6 | -2.7 |
Cash Cost in Pampalo, excl. investments | EUR/oz | 1,399.0 | 1,385.9 | 1,278.0 | 1,501.0 |
The consolidated revenue of the company increased by 46 % and was 19.7 MEUR (13.5 MEUR). 100 % of the consolidated revenue is generated from the Pampalo production segment's revenue. The increase in revenue is the result of an increase in production volumes. The consolidated EBITDA was -0.7 MEUR (-6.4 MEUR) and the Pampalo production segment's EBITDA was 3.3 MEUR (0.6 MEUR), which is 17 % of the revenue (5 %). The strong growth in EBITDA is due to the lower unit cost of production. The largest contracting contracts were tendered during spring 2023 in order to optimize the unit costs of production. During 2023, significant measures related to production efficiency have also been taken to lower unit costs. During autumn and winter, energy costs have not risen to the level of the previous year. The change in the production method of the Pampalo underground mine and the preparatory work in the Hosko production area affected the EBITDA for the end of the year by about -2.0 MEUR, which is about 10 % of the turnover. The effects are one-time.
CEO's review
During 2023, we continued to create the foundation of the company to enable our future growth. At the same time, we invested heavily in the future and started large-scale exploration in the Karelian gold line area. Our long-term goal is to grow the company into a completely different size category. Our journey towards our goal progressed according to our plan during the year.
Our production in 2023 came entirely from Pampalo. Gold production increased by 49 % from the comparison period and was 12,790 ounces (397.8 kg) of gold. Pampalo's revenue increased by 46 % to 19.7 MEUR due to higher production. Operating expenses grew moderately in relation to revenue growth, and Pampalo's EBITDA improved to 17 % (5 %). It is worth noting that at the end of 2023, we changed our production method in the mine and focused on preparatory work for Hosko's new production area. This temporary change phase had a negative impact on our EBITDA. The effects of the change phase on our EBITDA were approximately 2.0 MEUR which is approximately 10 % of our revenue.
Notwithstanding these end-of-the-year changes, the production cost of 2023 without investments decreased by 15 % and was 1,278 EUR (1,501 EUR) per ounce of gold produced. The biggest single factor in the decrease in unit cost was the significant increase in production volume. We are continuing our efforts to increase production towards the 20,000 oz annual production level, and then upwards. Hence our goal is to periodically run our processing plant in 2024 at a level required for 20,000 ounces annual production.
We believe that as the company goes through a significant phase of change and growth, the financial result will follow. We have prepared for growth by creating future organizational structure early, our results are burdened by the costs of operations in the US and the production growth projects still cause us one-time costs. Every week, month, and year our operations become steadier and more predictable. The year 2023 was an operationally significant step towards the future Endomines. We believe that the path we have chosen will lead to a sustainable, profitable, and growing business.
The results of our strategic focus areas exploration exceeded our expectations in 2023. We performed exploration by reprocessing historical results, conducting base of till sampling in the Kartitsa area and by performing exploration drilling especially in the Korvilansuo-Kartitsa area. At the same time, we increased the areas where we have reservations, permit applications or permits by 571 % to 87,407 hectares. The base of till results at Kartitsa indicate that there could be something very interesting in the area. It is noteworthy that the area with interesting results is approximately 2 km long, which is very significant in size.
Korvilansuo's resources increased as a result of exploration drilling by 307 % and Kuittila's by 114 %. Muurinsuo-Korvisuo-Kuittila areas are located very close to each other and have a lot of geological similarities. In the future, we will treat these as a single entity called the Southern Gold Line. In the area of ??the Southern gold line, the resource estimate is currently close to 150,000 ounces and it has more than doubled due to the work that was performed in 2023. We are well on our way to defining a deposit of more than one million ounces, which we believe will lay the groundwork for taking the company into a larger size category.
US operations are not a strategic focus area for Endomines. During 2023, we continued partnership negotiations with various parties, but unfortunately, these were not completed during the year. We will continue negotiations in 2024 and our goal is to find a solution for the US operations as soon as possible.
In ESG matters, we implemented our measures according to the plan. Our carbon dioxide emissions per ounce of gold produced decreased by approximately 31 % to 0.49 t/oz of gold produced. We continue our goal of reducing emissions by at least 5 % every year. We achieved the process water recycling goal and all our process water (100 %) was recycled water. Unfortunately, the year 2023 was not successful in safety performance. During the year, there were seven lost time accidents, of which one happened to our own personnel and six to contractors. Safety is always the top priority for Endomines. We want to offer a safe and good working environment for both our personnel and our partners. On February 5, 2024, we started the safety development project together with DSS+ consulting.
Our vision is to grow Karelian gold line into a significant and sustainable gold production area on a global scale. Now, the outlook for the gold market is very strong and several forecasts believe in a strong price development as the timing of interest rate cuts becomes more precise. Also, the geopolitical tension currently prevailing in the world, which is undesirable for all of us, supports the gold price outlook. On the cost side, we do not expect significant increases in the current cost levels. We are heading towards 2024 with a positive attitude.
I would like to thank our employees for a job very well done. I would also like to thank our owners, partners, and other stakeholders for the journey towards our strategic goals.
Kari Vyhtinen, CEO
Dividend
The board of directors proposes that no dividend shall be paid for the financial year 2023.
Financial statements release 2023
This stock exchange release is a summary of Endomines Finland Plc's financial statements release for 2023 and contains its essential information. The complete financial statements release is attached to this release as a PDF file and is available on the company's website https://endomines.com/en/for-investors/reports-and-presentations/.
Reporting in 2023
Endomines Finland Plc's Annual Report including a Board of Directors report and Financials Statements, Corporate Governance Report, Remuneration Report and Sustainability Report for 2023 will be published on 26 March 2024.
Financial releases in 2024
The Interim Report for January-June will be published on 15 August 2024.
Webcast for analysts, investors and media 15.2.2024 at 15.00 EET
The webcast for media and analysts will be held in Finnish, as a live webcast today 15 February 2024 at 15.00 EET. The event can be followed via this link. The recording and presentation material will be available after the event at: https://endomines.com/en/for-investors/reports-and-presentations/.
Endomines Finland Plc
Further information
Kari Vyhtinen, CEO Endomines Finland Plc, kari.vyhtinen@endomines.com, +358 40 585 0050
Minni Lempinen, CFO Endomines Finland Plc, minni.lempinen@endomines.com +358 40 769 3483
Endomines Finland Plc is a Finnish forerunner in sustainable mining. Our operations are focused on gold production and exploration in the Karelian Gold Line in Eastern Finland. We also own the rights to seven gold deposits in the US. We produce gold for the jewellery and electronics industries and create value by turning natural resources into wealth, and we also create value by transforming natural resources into wealth, an investment that can withstand the volatility of global politics. Our vision is to develop the Karelian gold line into one of the most important and sustainable gold-producing regions in the world. Endomines is listed on the OMX Helsinki main list (PAMPALO). www.endomines.com.
