Endomines AB (publ)

Hello, everyone, and welcome to EndoMines' half-year results webcast. My name is Anni Turpeinen. I'm the chief communications officer here at EndoMines. And with me here in the studio, we have our CEO, Kari Vihtinen. and our CFO Minna Karttunen. Good afternoon. Our agenda today is that first Kari will share the highlights of the second quarter and the first half of the year. Then he will continue with an exploration update and after that Minna will give you a deeper look into the financials. Then Kari will come back to the stage with strategy and our future plans. As always, we are having questions and answers session at the end of the presentation. Feel free to send your questions via chat during the presentation. Please remember to type your questions in English. And before we start, I want to remind you that this event is recorded and the recording will be available on our website later today. So now it's time to start. Let's enjoy the great results. Go ahead, Kari.

Thank you, Anni. Extremely pleased to be here today. We had the best six months in the company history and very, very strong second quarter. If you look at the financial highlights of Q2 and H1, During Q2, we had a very high growth in the revenue, so 46% growth to 6.2 million euros. During the six months, the growth was even greater, so the revenue grew by 61% to 34.7 million euros, so very significant growth, very happy about it. This was also profitable growth so the group EBTA increased 38% during the second quarter to 5.5 million and if you look at the six months then the EBTA grew by 86% so very significant growth again to 14.3 million euros. and then the net result grew by almost 300% during the second quarter to 3.3 million and during the six months the net result grew by even 356% to 10.4 million which is close to 30% of the revenue And it's over 40% more than during the whole year, 25. So very, very happy about the financial result. And I want to thank the whole Endomines team for the great work done. It's really fantastic to see the progress. During the H1, we also had a strong operational cash flow, 11.2 million. We are a growth company, so the cash flow that we make, we invest to the future because our goals are very ambitious and the main goals lie a few years ahead. So we are investing the cash that we make to the future. Also, on top of the excellent financial result, there were many strategic milestones during the second quarter. We also had a lot of important milestones during the first quarter. For example, we sold three assets in Idaho. to simplify the company structure, but during the second quarter, there were industry-leading drilling results from the Ukko deposit, which is our main exploration target, and we will discuss about it a little bit later. We also received 1.5 million funding from the European Union and the state to develop our tungsten project within the Southern Gold Line. We also refinanced our financing, so we had a 12 million financing package before, and now we refinanced this package to 21 million with much better terms, so very happy about it. Our balance sheet is extremely strong, and Minna will share the details a little bit later in the presentation. And we also got the first tungsten and molybdenum results from the South End Gold Line. A lot of the activities we will discuss today, they focus on the South End Gold Line, which is the place that we are permitting to take us to the next level in the production volume. And these results that we got regarding tungsten and molybdenum, they clearly demonstrate the potential we have in the Southern Gold Line to actually produce also critical minerals in addition to gold. So the golden journey is accelerating. If we go back to the basics, what is Sendomines? Sendomines is a gold mining and exploration company. Our operations, they focus on the Karelian gold line. It's in the Eastern Finland. We are very focused to Finland, very focused to Karelian gold line. and it's a greenstone belt. Greenstone belts are very prospective for gold production and gold exploration. Like many of the largest gold production areas in the world, they are greenstone belts similar to ours. It's a 40 kilometer long belt. Our production facilities are located in Pampalo. Pampalo is also a ticker in NASDAQ. But that's the place where we have the production facilities, so we produce a gold concentrate. The feed to the mill comes from underground mine, open pit mine, and then we also have a small underground mine at Hosko. So those three different feed materials come to the processing plant at Pampalo. and then we produce the concentrate. We have two main exploration areas that we focus on, the Southern Gold Line and the Northern Gold Line. The Southern Gold Line is more advanced, so we are permitting the Southern Gold Line to be in production around 2030. We started the permitting in January 24, and that has gone according to our plan. and the plan is that that will take us our gold production to 70 to 100 000 ounces level if we think about last year's 16 630 ounces of production so it's approximately five times more so big step change and and then at the same time we will start to produce tungsten and molybdenum In our strategy, the growth is, of course, connected to production. So we have the existing facilities in Paambolo, there is spare capacity at the mill, and we have been increasing the production each year. And on the right side, you can actually see that from 22 to 25, we almost doubled our production. And if you think about this year, H1, Our production increased by 9.7% compared to last year and over 24% compared to previous six months, so July-December period last year. Last year, during the autumn, we acquired the business activities of our underground subcontractor. and that affected the production during the second half, but now we actually see the benefits. Now we see the benefits, that it was the right decision to acquire the activities so that we can invest and grow our production also in the future. Very positive about the production. And the comparison period now against H2 will be significantly lower, so we expect higher growth. The gold market has been very interesting lately. Historically, when Fed is lowering the interest rates, then the gold price increases. And there has been now the war in Iran, and that has affected gold prices due to the fact that these interest rate expectations, they have really changed. Like, there was the expectations that the interest rate will be lowered. Now, there has been... will be actually increased during 26. Despite this short-term volatility, our view is positive, and this is supported by many consensus forecasts. So if you look at the consensus forecast from different banks or financial institutes, the average consensus is that late in 26 and during 27, the gold price will be at higher level than today. So we also view that that's a realistic forecast and that's something that we have based our forecast on. So we also expect that there will be an increase in the gold price. Just lately, like in July after the reporting period, the gold price went to 4000, but since then it has recovered to almost 4,400 where it is today, so almost by 10% in a very, very short time. During the Q2, the gold price was $4,516 per ounce, so on a good level still, but much lower than what it was on the Q1. The key fundamentals haven't changed. That's the reason why the forecasts predict higher gold price levels. The key fundamentals are that there is a lot of global uncertainty, geopolitical uncertainty. It's very difficult to predict the future. The central banks, they are buying a lot of gold. China is buying a lot of gold. Poland is buying a lot of gold. So there is a lot of buying activities by the central banks. And also a lot of the nations, they are decreasing the dependency on the US dollar, because the US dollar is the main reserve currency, and countries are reducing the dependency, and gold is an excellent tool for that. And there is also elevated levels of debt, printing money and so on, which creates a perfect environment for a safe haven like gold. So the view on the future gold prices is positive. Sustainability, very important. That's the key. That's the backbone of our business. We want to do things in the right way. We want to take care of the environment. We want to take care of the people, also the people who live close by, and then the governance. And now, I'm very happy to inform we have had always ambitious plans, but now it's going to action. So a lot of we truly see that there is a very significant increase in the actions that we are doing. Like if you think about, for example, fossil free gold, it's one of our strategic targets to achieve fossil free gold production by 2035. And our CO2 emissions, they decreased to 0.22 tons of CO2 per ounce of gold. So the reduction was over 70%. So that's a very, very significant reduction. And it's well below global averages in gold production. We also completed the climate transition plan. Water. We are in Finland. People love the water. They have summer cottages near the lakes and so on. And we also personally feel that we really want to protect the waters. They are something that is very unique in Finland, very precious. So our target is that the discharge waters, they do not weaken the surrounding waterways or their ecosystems. We used 100% recycled water, so we didn't take any water from lakes or rivers or something like that. Everything is recycled. And we are currently running two water treatment plants. So we have one in Pampalo, we also have one in Hosko. Very excited about it. The first results, they have been really promising. And this is something that we will also take seriously. take into our expansion plans so this is something that we will we will publish information later when we have more results but I'm personally very very excited about it then biodiversity our idea is that we consider nature values throughout the mine life cycle So not just what is happening now, we think about the whole mine life cycle even after the mine is closed. And we completed the nature values roadmap. So that's very important item and very happy that also the biodiversity is moving forward. One key item why we have made a successful turnaround is the personnel. We have been able to recruit really the best team possible and we want to offer a place that is safe and pleasant place to work. And we had progress in both of those areas. So our accident rate, lost time accident rate, it decreased to 9.7. We had one lost time accident, which is too many. But anyway, we are moving to the right direction. And the people power index was AA+. And we got a recognition of Finland's most inspiring workplaces. So our employee satisfaction is on a high level and therefore we got also this recognition. The local community, we want to strengthen the local trust and vitality. During the second quarter, we purchased 5.5 million from local suppliers. That's always something we work with local businesses, ensure that everybody has work in the area. We keep a lot of events for stakeholders. Like, for example, tomorrow we have an open house at the mine site, so buses will come from Ilomansi and people can come to the mine site and see how we operate. And we also launched EndoMines News. It's something that is very unique. With the local newspaper, we deliver EndoMines News twice a year so that people know what we are doing. Because when the information is shared, then the people are happy also around the mine site. and then the good governance is basis for the company being a listed company so responsible and transparent operations we have updated policies and operating principles supporting responsibility and we have an active whistleblowing process where anybody can report something if they want to report that something is not done in the right way so Very happy about the sustainability side that it's moving to actions from the ambitious plan that we had previously. Expiration. The company growth is based on expiration. So the idea is that we have a production which is growing. We invest the money in expiration so that we have a higher amount of gold resource. So the amount of gold that we know is in the ground and can be later mined. and that will enable us to increase the production levels and grow the company significantly. And we started the exploration activities in 23 and it has been hugely successful. We have more than tripled our gold resource. So it was in 22 below 200,000 ounces. We are currently almost at 620,000 ounces of gold. So it has been very, very, very successful. It's worth noting that during the last three years we have drilled 52 500 meters in total and this year we are doing a record campaign so we are the biggest exploration company in Finland and we are drilling 50 000 meters in one year so that's something that is really huge amount and if we think about it that we had this success during the last three years in building the gold resource and now we are doing the amount of work in one year that we did in three years. We are well on track so we have drilled approximately half of the plant, 50 000 during H1 And the results, of course, because they go to laboratories, they come a little bit delayed. So I think the results that we have published is probably somewhere like one third. So there will be a busy autumn and busy winter ahead. And then the next resource update will be published during Q1-27. There is a slight chance that the Ukko resource would be published late this year, but most probably next year. Key exploration targets. There are two targets, like the southern gold line and northern gold line. During Q1, we did some drilling in Kartitsa. During Q2, everything was focused in the southern gold line as that is coming to production, so we need to increase the resource. We need more information to ensure that our plans are accurate. and there the ukko is the biggest item. It was discovered last year, I will come back to that, but that's something that, for example, currently we have two triller rigs at Ukko and we have one near Kuittila looking at the tungsten and molybdenum areas, so a big focus on the ukko. And if you think about token deposit, it is really almost unbelievable that we only discovered this in April last year, considering where we are now. So in a short time, we have advanced the exploration activities in the area. very, very much. Ukko is located 15 kilometers south from Pampalo. It's a very big area like we have done. We have done electromagnetic measurements and those show like in this map you can see these purple areas and those are anomalies which indicate that there is iron formation. And when we did the first drilling, then we noticed that with iron, there is also gold. And that's very, very common in the world. This is the first one in Finland, but it's a very common banded iron formation type of deposit. If you think about big gold deposits in Australia or Canada, for example, it's very common that the deposit type is this kind of banded iron formation where the gold is associated with the iron. What we did late last year, we also had a look, because it was discovered in the northern part, so we had a look if there is gold on the other sections. So we did some drilling on the other sections and we identified four more areas where there was gold in these anomalies. And now currently Ukko is approximately 650 meters long. And our plan is to connect those two locations where we have drilling results with gold. So now we target that we connect those two areas. That's the plan for the H2, that we drill the areas between the two sections and try to connect these together, which would almost double the size of Ukko, so make it really significant. If you think about million ounces, for example, million ounces is a deposit which is one kilometers long, 300 meters deep, 20 meters wide and has a grade of two grams per ton. So that's what is needed. And if you think about this area, with the iron anomalies for example that's seven kilometers long and there is two different sections like we have only discovered now gold on this section which is on the west side so on the east side there is no there hasn't been indications on the gold but this is a very significant seven kilometer long section on the west And if you look what's below the surface, like if you look at the previous slide and there is this anomalies and between the anomalies, it doesn't show that it would continue. But currently our view is that below the surface, It's a sort of wave type of folded structure where it comes to the surface and then it goes to the deeper levels, comes to the surface, goes to the deeper levels, but it continues. That's the current theory. The theories have changed many times during even the last 12 months, but that's the current theory. So we believe that these sections are connected. However, they just go between the sections where there is no electromagnetic anomalies it just dips into deeper levels and then it comes back to the surface so you can't see it when you do the surface measurements you can't see it see it between those those deeper when it goes to the deeper levels So there is currently approximately 600 meter gap between the section where the ukko was found and then the next one down south. So now we are drilling the area between. And that's something that is done to extend the structure or almost double the structure. And then we hope to get those results already in the first resource update, which will be done either late this year or early next year, most likely early next year. It's a very highly favorable place for gold mineralization. It's extensive, it's continuous, it's shallow. So we are very excited about it. This is something that hasn't been found before in the Karelian Gold Line. Then tungsten and molybdenum, still in the same area, the Southern Gold Line that we are permitting to be in production. There is Ukko, there is also the areas where we have tungsten and molybdenum. And the tungsten and molybdenum, they are located near a deposit called Kuittila in the Southern Gold Line. So we published the results and we are very pleased to see that there is tungsten and molybdenum also in the wider area. And we did sorting tests and we were very pleased very happy that the sorting test, they increased the grade by 3.1 times. So our idea is to mine fairly low grade deposit, then increase it by sorting before we feed it to the factory where we actually make the finished product that is sellable. And we received 1.5 million funding from the European Union and States to take this project forward. We are very happy about it. And that also, I think it gives the signal that this is important for Finland. This is important for the European Union. It's used in the defense industry. 80% is controlled by China. So there is a really need to have tungsten production within the European Union. We signed a non-binding letter of intent with Wolfram Bergbau und Hutten, which is Austrian company. It's part of the Sandvik Group. And that was done so that we can ensure that this end product that we make is sellable, because they can help us with the technical support so that we can achieve a sellable product. And that's one of the key items. If you look at the tungsten price, It has really increased since 24, and that's, of course, due to the fact that there is so much accents on the military side. Tungsten is used in the defense industry. It's very hard. It's one of the hardest metals in the world, so it's used there, and this demand is driving the price to new levels. During the summer, there was some decrease in the pricing, but if you look at the long-term view, it's really on a high level. And this is a map showing a little bit on the Kuittila where we had the gold deposit and we went to the northern side of the gold deposit. The gold deposit is here described with this black line. And then we tested that does the tungsten and molybdenum veins, do they continue to the northern side? And they do continue. We are planning to, we are drilling approximately 12,000 meters here in this area. We have completed completed more than half and now we will do the rest during this autumn just to see that how much tungsten and molybdenum there actually is and when we think about the mining when this goes to production like when we mine the gold ore from the pit then as the pit shape is always like that so a lot of the the material which is directly outside of the pit, you have to mine it anyway. And we see that a portion of this tungsten and molybdenum should be mined anyway, so the operational cost during the production is very low. And that's one of the benefits that we have, that we have a gold deposit next to the tungsten and molybdenum deposits. So exciting times ahead. The targets for this drilling program in Kuittila is to increase the size of the gold resource, so there will be some drilling done also to the gold resource, but then to actually increase the resource of tungsten and molybdenum, that's the most important. And then to increase the knowledge, because we are currently doing the environmental impact assessment report. So it's really crucial that we get a lot of information so that we can design the processing facilities for the permitting purposes. And now I give the floor to Minna.

Thank you. All right, good afternoon, everybody. I will go through the Q2 numbers a little bit more in detail. How the slides are structured here is that I have the first six-month highlight on the heading, and then in the graphs, you can see both the quarterly numbers as well as the comparison between age first halves of the years to year before. and mostly I will concentrate on the second quarter, on my commentary. So, as Kari mentioned already, half-year revenue was €34.7 million. That was a growth of 61% year-on-year, and from our production, 9.7% production growth year-on-year. Q2 revenue, €16.2 million, 46.1% growth year-on-year, and on these bullet points below, you can see how that is... divided between production and gold price, so 9.7% growth year-on-year on gold production and 37.6% year-on-year growth on average gold price for the quarter. And I also wanted to highlight here, because I anticipated it will... Thank you. 7%. And the production decline was due to this replacement of a jaw crusher at our crushing plant in May, which made us to use a lot more open pit ore with a lower gold grade. And then if we look at the EBITDA and profitability, so EBITDA for the first half 14.3 million, 86% growth and 41.2% margin. Q2 EBITDA 5.5 million and margin of 34 and in Pampala we made 7.8 million of EBITDA and margin of 48.5 and the operating expenses side now we have started to accumulate inventory or inventory in Pambalo. So that is something that will have an effect on our results. For the second quarter, it was a negative impact of about 700,000 euros. And I wanted to highlight here in comparison for Q1, the inventory actually improved our EVTA in Q1 by 1.4 million. So the difference in profitability or EBITDA in Euro terms is a lot affected by these changes on inventory levels. 5.4 million was spent on materials goods and services and our employee expenses increased mainly due to the increase in number of employees and the cost was 2.6 million. We have on average in queue to 37 more people than we did have a year ago in the second quarter and the total number of employees at the year at end of June was 108. Another operating expenses were 2.1 million euros. And here also want to highlight the mining mineral tax increase for this year. So we booked a tax of 0.5 million euros for the second quarter alone compared to 100,000 last year. so that's the biggest biggest impact there but we have also for example invested somewhat on new machine machinery and equipment at the mine and the leasing cost of those are already also included on these other operating expenses Cash cost in Bambalo, 1588 euros per ounce for the first half. Q2 was unfortunately even slightly higher. It was 1642. That's an increase of 23% year on year. and about 14% for the full year average compared to 2005 full year on average. And this was particularly affected by the higher use of open pit ore especially during May. And also want to bring up the electricity price, which has increased 35.6% on the quarter versus previous year. So this is also relatively big effect on the cash cost. Net result wise, we have done Well, not fairly well, very well this year. So we have nearly 30% net margin. We exceeded in the first half the net result we produced for the full year last year. I think it was 7.3 million for the full year last year, and now we made 10.4 million. just for the half year. Second quarter net result was nearly four times that of previous year at 3.3 million euros. Margin was 20.3. Net financial expenses are around 600,000 per quarter. Interest rates 0.4 million. And then we had a non-recurring financial item for this quarter, which was related to rearranging and paying back early the previous financing Agri facility we had in place. So the extra cost there was about 200,000 euros and the expenses were reduced by FX gains of about 100,000 for the quarter. The group EPS basic increased to 10 cents per share for Q2 and for the first half it's 30 cents per share and these numbers are now adjusted with the share split that took place this spring. BALANCE SHEET CASH FLOW IMPROVED ON ALL INDICATORS FROM YEAR END TOTAL OF THE BALANCE SHEET AT THE MOMENT IS 102.4 MILLION CASH AND EQUIVALENCE 4.8 AT THE END OF JUNE THE DECLINE FROM END OF MARCH IS BECAUSE WE HAD QUITE A FEW I would say exceptional cash payments made. For example, we did pay the power mine the remaining payments related to business acquisition of power mining. We paid those in advance. So that was about 1.9 million euros. And also we made a 1.5 million euro cash security deposit against bank guarantee facility. I will come back to that on the next slide. Interest bearing debt is 12 million at the moment. Long term is 5.6 and short term 6.4. All of our convertible notes are now rolled into short term, so they all fall due within the next 12 months. And net interest-bearing debt is 7.1 million euros. So our gearing increased slightly from March to 10.1%. That's because of the lower cash number. And then the equity ratio was 69.2, which is really on a healthy level. And net cash from operations 2.5 million for the quarter and 11.2 for the first half. Investing cash flow was 7 million, minus 7 million for the quarter. And that included this final payment for the power mining, this 1.9 million, but also then the positive about half a million of grant we received as an advance payment for the tungsten project. And then some details on the funding we signed. So at the bottom, here's a mention about this 1.5 million grant we received or decision. We received a decision on 1.5 million. We received funding of half a million so far. And the rest is payable against reported expenses. And they should come in. We haven't agreed on the reporting schedule yet, but they should come in latest by September 28. And those are most likely in several installments. And about the bank loan. So as Kari mentioned, we increased the facility size from 12 to 21 million euros. And we actually more than halved the margin from the previous facility. So it's structures as euro per 12 month plus margin. And all the other terms and conditions on the funding basically remained unchanged. and on the table you can see so we got the 21 million is divided between we have two secured senior loans two or five million each the one five million tranche we used to repay the earlier facility and that's with a three-year maturity and that is a bullet payment and the other loan is currently unused and when and if we will use it there will be quarterly installments made for that We have a bank guarantee facility, for example, the environmental guarantees. And we used this to I think 2.7, 2.8 million is used. And against that, we had to make a cash deposit of 1.5 million euros. But that will then also cover any further use of that. use of the facility, so no further guarantee is needed. And then the overdraft facility for our bank accounts, we increased from 3 million to 4 million, which is currently unused. And then there is still another 2 million that we need to decide where it is at best use. And I would think we will probably use it for leasing and new machinery purchases, as the case may be. All right. Thank you.