Atte has published a comprehensive report on Endomines, which, like other comprehensive reports, is available for everyone to read—meaning there are no paywalls. 
Thanks to strong operational performance and a favorable gold price trend, Endomines has transformed from a turnaround case into a growth company in recent years. We forecast the Pampalo production cluster to move toward full capacity in the coming years, and we also expect the company to achieve its reserve targets during the current strategy period. In our view, the share price cannot be justified by current production or reserves; instead, the valuation relies heavily on the progress of the Southern Gold Line project according to plan. Considering the uncertainties related to the project as well as the massive investments, we believe the risk-adjusted return expectation remains too low. As a result of forecast changes and updated parameters in our valuation model, we are lowering our target price to EUR 8.60 (previously EUR 11.00). Our recommendation remains at ‘reduce’.
Excerpts from the report:
Future investment partially self-funding
We expect Endomines to continue its investments in exploration and the development of the Karelian Gold Line in the coming years as well. In addition, we forecast the company to invest in Pampalo production to increase production volumes in line with our forecasts. Despite the investments, we estimate that the company’s operating cash flow will remain clearly positive throughout the entire forecast period. The strong earnings level and cash flow we forecast will also strengthen balance sheet ratios. We estimate the company’s equity ratio will rise to 83 percent by 2029, and with continued strong cash generation, the balance sheet will remain firmly in a net cash position. Despite the strong cash flow, we believe the company will require significant external financing to cover the planned investment of approximately EUR 200 million for the Southern Gold Line.
Significant uncertainty remains regarding the company’s value drivers. In terms of Endomines’ potential, the gold price is the most important parameter, to which our sum-of-the-parts model is also quite sensitive. Changes in the gold price affect not only the profitability of the company’s production but also the feasibility of projects under development and planned exploration investments. We see the exploration and development of the Southern and Northern Gold Lines as Endomines’ main value drivers for the coming years. Developing a relatively early-stage mining project involves many uncertainties, the most significant of which relate to the project’s schedule, the permitting process, the scale of the investment, financing, and the project’s operational parameters (including production capacity and cost profile). It is still difficult to take a definitive stance on the project’s ultimate potential and exact schedule, and, for example, the gold price trend toward the end of the decade will have a major impact on this, in addition to the operational parameters. Overall, there is still a long way to go to reach the scenario, and it contains many question marks (including the financing of a significant investment) that require patience and risk tolerance from investors.
