Endomines AB (publ)

Hyvää iltapäivää kaikille. Tervetuloa EndoMinds'in tammikesäkuun tuloskatsaukseen. Mun nimi on Karvi Yhtinen. Mä oon EndoMinds'in toimitusjohtaja. Mun kanssa täällä tänään on Minni Lempinen, meidän VTN CFO.

Tervetuloa munkin puolesta.

Today's agenda is to start with an overview of the CEO, where I will go through the endomyses in general. After that, we will look at the main events during the beginning of the year. After this report, we will go through the most important events of the year. After that, we will focus on our strategic focus areas, which are production, research, USA and ESG. In the end, we will talk about our long-term operational and strategic goals. After that, Minni will continue and go through H1's financial review. During this presentation, please post questions in the chat. After the official presentations, we will answer them. Let's start with who we are. We are a Finnish company. Last year we moved to a Finnish company. We produce gold. We have a gold mine in Pampalo, located on the Karelian Gold Line. There is a gold mine and a gold production facility. The Gold Line is a very potential place for gold mining. It's a geologically similar area to the world's largest mining areas. If you think of Abitibi in Canada, or Witwatersrand in South Africa, or Kalkuli in Australia, it's a very similar green stone mine. That's why we're there. Our vision is to build a significant and responsible gold production area. We want to be and grow the same area. Me ollaan kasvuyhtiö. Me ollaan sen kokonen, että me voidaan tehdä asioita kunnianhimoisesti. Ja jos ajattelee vaikka ESGtä ja esimerkiksi CO2-päästöjä, niin me voidaan kunnianhimoisesti vähentää niitä johtuen meidän koosta ja meidän myöskin kulttuurista. There are four main points in our strategy. This is a new strategy in the sense that it was approved in June last year. After that, it was sent to implementation. Pampalo is the basis of our basic Kalleo operation. We have a good production facility there. It has free capacity, which enables production to grow. A new thing in our strategy compared to the previous one is that we have a very strong focus in the search for Malmi in the gold line. This is due to the fact that the potential there is great. Our goal is to define the presence of over a million ounces. The reason why we always talk about a million ounces is that it is a significant presence in the world's scale. If you think about the world's production, it could be about 1% in 10 years. the production of such a performance. And how it serves the owner is that such a significant performance is also visible in the value of the company. It doesn't have to be in production yet, it's very important The company that has this kind of presentation in an area where it can be potentially used, such as Kultalinja in Ilomantsi, can also be seen in the company's appreciation. In our strategy, the third point is the USA. Previously, the idea was to grow production in the USA. It has been changed so that we focus on Finland and the USA. We are looking for a partner model where local partners have operational knowledge and economic resources. We don't invest in the USA. And then ESG is a central part of our strategy. We want to do things right, take care of the environment, people, local residents and our partners. And this guides the operation of how Endomysia will become a better company in different areas. Let's move on to the May-September review. This was the first stage in the change process. The results began to show. Last year, we made a huge change in many ways. A new strategy, a new home. We started to grow our production, and we started to use the Avalos. In January and June, we started to see the results. Our production grew to 210 kg, which is about 6753 ounces. It increased significantly, to 94.1%. We are very satisfied with that. Our turnover grew by 10.7 million, which is 91.1%. Last year, we had a bit of turnover from Genkai. The turnover in Pampalo doubled. That's important to know. At the group level, our turnover was €0.4 million. Last year, it was €-3.5 million, which is a nearly €4 million improvement. This is very significant in the sixth month. Pampalo's turnover was €2.4 million, an improvement of over €2 million last year. Now the turnover was 22.4% of the turnover. This is a significant change, but it is not ready yet. We are still on the way. If we think about the level of our concert, there are still things that make it worse. We still have the cash flows that make it worse. We still had a lot of work to do with the relocation of the premises and related reporting and so on. over time. We also had other important decisions that we made in the beginning. We decided to start production in Hosko. It will be produced from the beginning of 2024. Pampalo's reserves were updated. They increased by 60% in the last update. Then, with full force, we conducted a Malmi-research. We can also be happy to say that Kuittila's discovery was published in February. It was also a very significant event. Unfortunately, we had two emergency-related accidents, which is important to us, that we don't have any accidents and that people are safe at work. We will strongly invest in that in the future. If we look at the discovery of Kuittila, which happened after this June, this is a very interesting thing. The history of Kuittila goes like this. When the Geological Research Center came to the Golden Line area, they started its work from Kuittila. I've been thinking about it during the summer. There must have been a reason why they started there. I believe there's a lot of potential there. In 1989, we determined the historical value of 23,000 tons, which is 2.6 grams per ton. But what we have learned is that during history, this area has been interpreted a little wrong. Now that we have been on the Gold Line for a long time, we have a pretty good understanding of how geology is going there. We believe that there is a lot of potential in the area in the future. It has not been properly studied for more than 20 years. The first hole, 007, was made of 18.5 grams of gold. There was 170 grams of silver. There was also lead and zinc. copper and molybdenum, which is a very significant density. If you think about the fact that in the Avalos region of Pamplona, we have 1.2 grams per tonne of copper, which is economically profitable, and that density is also higher than in our global mining. In mining, the term gold equivalent is often used. It means that if there was only gold, what would it mean in just gold? If there is 5 grams of gold in a ton, 173 grams of silver. If the value of silver changes to gold, it means that there is 7 grams of gold in a ton. It is really amazing. Other metals can also benefit from this. Our guidance for this year. We have said that our production is growing by 35-55%. Now we have checked that it is close to the upper edge of the exchange rate. All production comes from Pampalo. We don't know any production from Friday at all. The economic result is expected to improve significantly, because on the consumption side, for example, the energy costs are quite positive. We also have a higher production volume. And then the price of gold is at a pretty good level. We will continue our search for Malmi. We will return to the different sub-areas. We believe that the partnership negotiations will be in the US this year. ESG is a big part of our strategy. It guides how we work. We take into account the environment, people, partners, and local residents. That is the only right way. If we look at the production, as mentioned, 94.1% growth. If we look at the volumes in the six-month periods, we produced a little over 100 kg in H1 in 2022. Then H2 produced a little over 150 kg and now we have over 200 kg. We have a pretty good rise there. We believe that the production levels for H2 will remain the same. Next year, we will start growing again. That's our idea for this development. The strategic part of the area where Pampalo is located is our basis. We need two things for the growth of the production. We need the global mining, and we also need the nearby areas. In January this year, we also studied below the current production level of over 200 meters. and we made a research hole in it. What was very positive was that the gold was exactly where we thought it was, and it was of good durability. In that sense, we were very satisfied with this, and we believe that this land-based mining will continue into the depths. On the other hand, we have six individuals in the area that we know. Now, Kuittila has become the seventh in the list, but we have had six. The idea has been that because we have free capacity in Pampalo, we can bring Malmi from this area and process it in Pampalo and grow our Pampalo production through it. HOSCO is now the second one. Last year, we took over Pampalo East in August. It is the Avolo OS. Now HOSCO is the second one. We have the idea that in September, we will start preparing the work. In the beginning of the year, in 2024, we will produce there. We have thought that 10-30% of our production will be from next year's HOSCO. This is a much bigger example than the Pampalo East, for example. On the other hand, there is a lot of potential. We will also investigate the area. When we go there, we will investigate where there is as much gold as possible. Malmi's research is an extremely interesting area and one that is strongly invested in. We have three things that we do, and we mainly operate in these three areas this year. We process old data again. This means that in the 80s and 90s, when there was a geological research center in this area, or Outokumpu, and later there was Endomines and other companies, there was a lot of data. It is a kind of a palace here and there. There may be magnetic measurements, electrical guidance measurements, or oreni imaging results. These have been treated as very different fields, but nowadays computer systems can be used in such a way that the data is fed to the software, which then combines this data, and on that basis, the results can be used from each data part area and the whole thing can be analyzed. We believe that the first results will be released in June, October and March. We have done it in the beginning of the year. We have a good partner who is working on it. The results will be released soon. The second thing we do is the Morni sample. It is called the BOT, the Base of Deal sample. It means that in the search for gold, It starts by going through the ground and taking a small sample from the rock surface. If there is surface soil on the ground, we go through it and take a small sample from the rock surface. Then it is analyzed to see if there is gold in it. These are usually taken between 10 and 20 meters. We go through lines in the soil. Then analysis begins to come that there is gold in this area and there is no gold in that area. Then the larger studies, called mining, are conducted in the areas where there is gold. We have made a lot of Morni exhibitions in the beginning of the year. Nearly 1,500 exhibitions have been taken. We have already received about 1,200 results. We will be in Kartitsa. We see that it is a very potential place, which has been researched a bit. At the moment, our Morheni exhibition machine is in an area where nothing has ever been done. We see that there is a lot of potential there. There have been areas where the surface of Kalle has been visible and exhibitions have been taken, and there has been gold and so on. We believe that there is a lot of potential there. Even though the company is old, there are still areas to explore. This year, we have concentrated on Korvilansuoja and Kuittila. We have covered about 5,000 metres in Korvilansuoja and Kuittila. Our initial plan was to cover about 2,000 metres. We have increased it to 5,000 and have already done 3,600. We have already done quite a lot of work. But it seems very interesting for both areas. We have the idea that they are quite close, and the idea has been that, because we know that both have gold, the interstate is not really studied, we have had the idea that whether these two will unite or how they will go. But there our focus has been very strongly and will also be in the near future. We have an idea that in October we would have an update where we would get Corvillansuo. And then we would get, let's say, about 2,000 m2. But we would get the entire Corvillansuo. We have almost all the results, but not all of them yet. Then, if you think about the Malmi research, Malmi-etsintää vaatii se, että on oikeus mennä sinne alueelle, tekemään sitä Malmi-etsintää. Jos katsoo sitä, että paljon on tällaisia varauksia, lupahakemuksia tai lupia tuolla kultalinjalla, niin tuossa vasemmalla puolella, The colourful areas, that's the situation, how many we had of them. The first of the first this year. We had about 13,000 hectares, the area that we managed, so to speak. And now the first of August, we have 87,000 hectares. That's more than six times. And if you look at the Korvilansuo and Kuittila area, for example, When we got the clearance, we planned everything around it. That's how we did it. We have planned several kilometers in every direction. We believe that this is the right way to ensure this, because there is a lot of potential. USA. We have seven performances, five in Idaho and two in Montana. They have been awarded 44 million taalas over the years. Last year we reorganized the operation. At the moment we have seven people to keep the performances in order. So that everything stays in order and everything is in order. Our focus is on the partnership model. We want the partner to have local operational knowledge and funding for the project. There is gold here. The historical reserves are over half a million ounces. Last Friday, 5 out of 8 rows had very high durations. The US Grant still has silver. The reason why it makes sense to focus on Finland is that- we are a small company and we need to focus somewhere. We are going to grow- We don't see any reason why we can't do it in Finland. The potential of the gold line is great, and the concentration brings cost benefits and so on. At the moment, we still have it in such a format that we have all the expenses. We have seven performances and so on. Our expenses are about a million a year. With H1, it would be slightly less than half a million, but we are moving forward. We made a lot of initial negotiations with potential partners in the beginning of the year. Based on them, Our goal this year is to reach a consensus and a joint decision. We don't have a concrete result yet, but we believe we will get it by the end of the year. The ESG programme. Last year, we did an analysis of the importance of it. We looked at the key issues that we should focus on. We asked our partners, customers, people in the area, officials, owners and employees. In terms of the environment, we are focusing on CO2 emissions. Our emissions were 0.48 tons of CO2 per ounce of gold. Last year's emissions were 0.71 tons. This is a significant decrease due to energy efficiency. Of course, the volume of production is positive. Then we want to circulate all our water, so that we don't take the process as new water, but what goes in the process has already been in use in the process before. We also invest in these post-treatment plans, i.e. the lifeboat planning, that now we are here, where we are five years from now, what it looks like ten years from now, and so on, and that we get them very clear. We intend to update them this year. Safety is always number one. Our accident prevention rate is 11.8, which is something we need to achieve. We are a zero-accident company. Työtyytyväisyys, yhtiön menestyminen lähtee työntekijöistä ja tyytyväisistä työntekijöistä. Siinä se pääasia on, meidän ajatus on, että tehdään vuosittainen kysely ja sitten kyselyn pohjalta toimenpiteitä siitä, että miten tehdään parempi endomainos työntekijöille. Then, the residents of the nearby area are organized into information channels, so that they can get a look at the site and so on. We communicate all the time about what we are doing, what the concerns are, how we can respond and that the operation is transparent. In a good way, we plan to update our risk assessment this year. We focus on having a dialogue with our partners all the time. One significant improvement in visibility is our new websites, which came out in October. You should check them out if you haven't yet. A clear improvement in visibility. We also intend to to show our KPIs and tell us about the events that we are doing. In the longer term, last year we did the importance analysis and created an ESG program. This year the goals are to follow our measurements, start reporting, focus on development next year and create the longer term. The long-term goal is 2030 and then 2026. We will start reporting according to the CSDR directive. Our long-term operational and strategic goals. We want to show that we have set them by the end of 2025. We want to increase the production of gold and raise it to the level of 20,000 ounces by next year. On the other hand, we want to achieve operational efficiency and an economic result. We want to be a good company. We also want to get the USA agreement approved this year. This year, we want to be among the leading mining companies in ESG matters. This year has been a year of change. The change we made last year is now starting to show results. We are still in the early stages. Our staff has done a very good job. We have reached this point. We still have a long way to go. When we achieve these results and increase our production, we will get a clear picture of the USA. It will also strongly reflect our economic results, if we think about the year 2024, for example, and beyond. We have been too small. We need to get to the next class. Then, through MalmiNet, we bring the greater potential, where we see that there is no other class than where we are today. Last but not least, we want to sell some of our gold to consumers. We strongly believe that consumers would like to have gold donated from Ilomants, for example from KORU. KORU planners would also like to know where the gold has come from. On the other hand, it would be good for us as a company and as a brand, but it could also be a business idea to do this. This is something we are committed to. We are still in the early stages, But we will hear more about this in future reviews. This was my part. I will now give the floor to Minna.

Thank you. Let's move on to the numbers. When production grows, the turnover also grows. The turnover of the company was 10.7 million. That's almost double compared to last year. The turnover comes from Pampalo. For the first time ever, the company's operating budget was positive, €0.4 million, which is 3.7% of the turnover. The operating income after withdrawals was negative, €-2.3 million, and net income after the financing series was €-3.3 million. In Pampalo, the turnover was €10.7 million, It is a total sale of gold in Finland. In terms of turnover, we see a huge change compared to last year. The turnover was 2.4 million, which is 22.4% of the turnover. A very good result. Also in Pampalo, the operating income after the evictions was positive, €0.5 million, and the net income was also €0.5 million. At the beginning of this year, Endomines has moved from one reporting segment to three. Our most important segment, cotton production, has been limited to red. In addition, we are also following the Karelian Gold Line and United States activities as our own segments. In the Pampalo figures, we see our commitment to increase production and to develop production. Even though the turnover increases significantly, the costs do not increase at the same rate, which is due to smaller unit costs. We will continue to optimize production and, especially, to develop Rikastamo operations during the rest of the year. Karjalan Kultaliinialla kustannukset koostuu pääosin palkoista. Samoin Yhdysvalloissa suurin osa kustannuksista on palkkoja. Yhdysvalloissa ei oo tuotantotoimintaa, ja kustannukset on pyritty karsimaan mahdollisimman alas. Jonkun verran on odotettavissa loppuvuodelle kertaluonteisia kustannuksia kumppanuusneuvotteluihin liittyen. In the same way, in joint operations, most of it is salary costs, but the income is still reduced by the disposable costs related to moving to a home. Here is Pampalo's cash cost without investments. In terms of costs, we have gone down a lot compared to the comparison period. The price of gold has gone up a bit. Our goal is to get Pampalo's cash cost to a lower level, which will make it easier to make bigger investments without external funding. A few words about the financial status of the consortium. The investment option for the LDA funding agreement has ended at the end of March. Before that, an exchange loan of €2 million was made. In August, the exchange loan is still €0.4 million, and everything else has already been changed to shares. At the end of June, we agreed on a 1.8 million euro exchange loan with a Finnish investor group. We also have an option for another exchange loan in October 2023. We agreed on this because we can start production in Moscow in the beginning of 2024 and at the same time increase the production level in the Pampalo archipelago. The company's operating cash flow was positive, €0.4 million, but we still need external funding for investment. The company's net retirement rate and its own capital was very good and better than it has been in the comparison period. We are very satisfied. We are optimistic about the end of the year. The whole year's production is expected to grow according to the guidance, and to be at the top of the exchange rate. Naturally, it can also be seen in the trade. The price of gold is expected to be at a good level. The dollar has been quite stable. According to estimates, the dollar will drop somewhat during the end of the year. But we estimate the price of gold and exchange of the euro-dollar rate daily, and then we do the necessary activities. The price of electricity is not expected to rise to the same level as last winter, which in part lightens the cost structure during the rest of the year. But I am positive that we will be close to the end of the year. Thank you. Let's move on to questions.

Kiitos Karja Minni. Täällä on muutamia kysymyksiä tullut. Otetaan tästä ensimmäinen. Oletteko Pampalon osalta tyytyväisiä tämän hetken kannattavuustasoon? Käyttöpääomaan sitoutui ensimmäisellä vuosipuoliskolla 2,5 miljoonaa euroa. Mitkä on syyt taustalla? Tuleeko poistot olemaan vastaavalla tasolla myös toisella vuosipuoliskolla?

As I mentioned, we are satisfied with the current level, but we want to be on a different level in the future. We see that as production grows, profitability also improves. We are still on the way to the initial stage. Last year we started production and this year it has risen. It has risen significantly to 94% this year. We want to take it to other levels to improve profitability. We still have a lot to do. We have had a cost-efficiency program. It brings results all the time. We are working on it all the time. But we still have to do more. Do you have any comments?

Yes, most of the emissions are high, and we do it according to how much is emitted from the Earth. But we are also discussing whether we should re-evaluate it. How do we do it? We still need the wine tunnel. It has to be eliminated as soon as possible. We have to see if there is a possibility to change the method of elimination. Unfortunately, eliminations are high.

Kassavarat periodin lopussa 1,2 miljoonaa euroa. Onko tässä jo kesäkuun 1,8 miljoonaa vaihtovelkakirjalainaa mukana? Oliko rahoituskustannuksissa mukana järjestelykuluja?

Siinä on osittain sitä mukana, mutta ei taida olla kaikki. Tähän ei tullut järjestelykuluja tähän 1,8 miljoonaan erään.

What is the current situation in the United States regarding the joint consultations between Idaho and Montana, and is Endomise's role in these projects clear ahead of the consultations?

We have looked at all options. On the basis of negotiations, Idaho is of the greatest interest to me. That is because there are more presentations. It's a bigger entity. For us, Idaho is also better. We can get a solution there, because our costs are in Idaho. There are no costs in Montana. If you think about the US grant, there's a lot of money in it. There's a lot of potential. There are rich people and so on. In that sense, we have been more interested in Idaho, but we have always been open-minded.

One more question. Are other possible minerals easily enriched in the same process as gold, or do we have to make some additional investments or actions to get, for example, silver out of stock? And here we refer to the Kuittila 007 mining hole.

Yes, it should be enrichable. This is a very common combination. Gold and silver are presented at the same time. They are enriched in the same process. process that we have. At that point, when we start to use this, we have to see if we need to update the equipment, but it shouldn't be a question of millions, but a reasonable investment, if we need to add more equipment to the reinforcement side and so on.

I have one more question. The results of Endomys have improved significantly this year. How do you see the development in the long term?

Yes, we have improved a lot. Our results have improved a lot. But we are still at the beginning of the change process. We believe that... As you can see, our operating budget improved by almost 4 million euros in January. More than half of it came from the improvement in Pampalo. This led to a growth in production. In the beginning of last year, the energy costs were not high. There were no differences in conditions. Our production grew, and that led to improved results. Our idea is that now, We want to speed things up and increase production. That way, we can bring the revenue to even higher levels. On the other hand, we have issues that stress our revenue. If we think about the United States, we want to be clear about that. We want to turn the outgoing cash flow into a positive one, which also supports us. We also have issues related to last year's changes. with exceptional costs, for example, when moving to a new home. For example, financial reporting has changed radically, the currency has changed, and so on. It caused a lot of work. There were a lot of consultants and a group to deal with it. It was very expensive. At the end of the year, as Minni mentioned, the U.S. economy will have some kind of a once-in-a-lifetime effect, but we believe that it is reasonable. are a good model. If we think about next year, higher production, higher consumption, hopefully in the US, cash flow positive, and also less interest rates, I see it as very positive. After that, in the coming years, we will try to reach new levels.

There are all the questions.

Thank you all for your questions. I hope this interview answered your questions and gave you a good picture of the current situation.

Thank you.