Gold Output Expansion And Tungsten Potential Will Support Stronger Long Term Earnings Visibility

Catalysts

About Endomines Finland Oyj

Endomines Finland Oyj is a Finnish gold mining and exploration company focused on developing and operating deposits along the Karelian Gold Line and related mineral areas.

What are the underlying business or industry changes driving this perspective?

• Scaling of drilling activity on the Karelian Gold Line, including intensified work at the Ukko discovery and Kartitsa, is positioned to expand the resource base toward the 1.5 million to 2 million ounce target by 2030. This supports sustained revenue growth and higher earnings visibility.
• Bringing the Southern Gold Line into production around 2030 and ramping group output from about 25,000 ounces toward 70,000 to 100,000 ounces first leverages existing mill capacity and then larger expansions. This should materially increase absolute EBITDA and improve operating leverage on fixed costs.
• High and structurally supported gold prices in a geopolitically uncertain world, combined with Endomines’ growing low cost Pampalo production and in house underground operations, are likely to enhance net margins and cash flow as volumes rise and cash cost per ounce declines from 2026.
• Advancement of tungsten and molybdenum in the Southern Gold Line, with potential to supply a notable share of global tungsten demand and possible access to critical mineral producer status in the EU, introduces an additional revenue stream and may lower the effective cost of capital. This supports long term earnings expansion.
• Resolution of capital intensive, non core U.S. assets, particularly Idaho, is expected to reduce ongoing operating expenditure and FX related losses. This allows more capital to be directed to Finnish exploration and development, which should support higher group profitability and stronger free cash flow.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Endomines Finland Oyj's revenue will grow by 31.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.7% today to 45.3% in 3 years time.
• Analysts expect earnings to reach €37.9 million (and earnings per share of €3.45) by about December 2028, up from €3.6 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €46.1 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11.2x on those 2028 earnings, down from 85.8x today. This future PE is lower than the current PE for the FI Metals and Mining industry at 81.7x.
• Analysts expect the number of shares outstanding to grow by 1.78% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.93%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The current profitability and investment case rely heavily on exceptionally high gold prices that are being supported by geopolitical tension, central bank buying and expectations of prolonged interest rate cuts. Any normalization in these macro trends could compress the gold price and drive down revenue and EBITDA margins.
• The long-term plan assumes that scaling exploration will reliably convert drilling meters into new resources along the Karelian Gold Line and Southern Gold Line. Early stage targets such as Ukko and Kartitsa may ultimately underdeliver or prove harder to convert into economic reserves, which would limit growth in production volumes and earnings.
• The company is committing to higher exploration intensity, larger drilling programs and more in house underground operations at the same time it seeks financial stability. Cost overruns, higher sustaining capital and delayed productivity gains could erode net margins and free cash flow.
• Permitting and environmental processes for the Southern Gold Line, including tungsten and molybdenum projects, are lengthy and politically sensitive. Any delays or stricter regulation related to mining taxes, electricity taxation or sustainability targets would push out the production ramp up and depress revenue growth.
• The strategy assumes a clean exit or value creating solution for the U.S. assets, particularly Idaho. Protracted negotiations, further foreign exchange losses or an unfavorable divestment outcome could continue to weigh on net profit and constrain capital available for core Finnish projects.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €29.93 for Endomines Finland Oyj based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €83.7 million, earnings will come to €37.9 million, and it would be trading on a PE ratio of 11.2x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of €27.0, the analyst price target of €29.93 is 9.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.