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Endomines rejuvenated, as US gold portfolio takes centre stage

Endomines is now in production at the Friday mine, with more to come from other US projects
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Gold production from the Friday mine will bring welcome cashflow

There’s been a turnaround in the fortunes of Endomines AB (STO:ENDO) over the last year or so, as the company has shifted its gaze, at least temporarily, away from an underperforming asset in Finland, and has instead focussed on growing a new position in gold exploration in Idaho.

“In Finland our producing mine wasn’t profitable at the prevailing gold price,” explains chief executive Saila Miettinen-Lähde.

“We set out to fix the situation. We decided to put the mine in Finland on care and maintenance and we are now focussing on exploration.”

In Finland, that exploration involves serious fieldwork across a forty kilometre stretch of Greenstone belt.

But there’s more to the company than just Finland now. Because, after the balance sheet had been cleaned up and the cash drain stemmed, Endomines went out and acquired five gold projects in Idaho, and not just bluesky either.

“Mine development is now complete,” says Miettinen-Lähde, “and we have started ore production.”

That’s at the Friday mine, the most advanced of the Idaho portfolio. But the others won’t be too far behind. Miettinen-Lähde speaks of ongoing drill plans and an aspiration to bring them all into production within three to five years.

Admittedly, these are all relatively small-scale operations. The first mine is likely to produce around 10,000 ounces of gold per year, on a somewhat limited production schedule, although once in operation the plan is to boost output.

More to the point, costs will be attractively low at between US$600 and US$900 an ounce all-in, allowing for considerable margin.

“We’re looking at generating positive cashflow over the next year,” says Miettinen-Lähde. And that cashflow will in turn feed into the plans to get the next projects up and running.

To be sure, additional funding is likely to be required in 2019, but investors can take considerable comfort from the contribution the upcoming cashflow is likely to make.

The Buffalo and Gulch and Deadwood projects are all likely to come on within a three-to-five year timeline, while the Rescue and Kimberley projects are existing old mines with high historical grade numbers that could be rehabilitated relatively quickly.

Indeed, once investors get an eyeful of the historic grades, which ran as high as 19 ounces per tonne, it wouldn’t be surprising if some serious finance swung behind their development. But that remains to be seen.

For now, Endomines is looking to consolidate its position in the area and move into early cashflow next year. The €19mln rights issue that took place in February 2018 sets the company firmly on that path, and once the cashflow is rolling in financial stability will lay the foundations for further expansion in Idaho.

And further out, Endomines is likely to return its gaze to its earlier stomping grounds.

“Primarily the short-term focus is on Idaho,” says Miettinen-Lähde. “But I wouldn’t want to forget the Finnish exploration assets.”

The shares have dropped significantly over the past year or so, but a run of positive newsflow could quite easily reverse that trend, now that the refinancing is receding into the past and positive cashflow is looming on the horizon.

 

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