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The year 2015 was an exciting and challenging year for Endomines and its Karelian Gold Line mining operations and especially for the Pampalo Gold mine. We started the year with lower than expected drilling results from the Hosko deposit, but during the year we had a positive turnaround with the exploration results from the Pampalo Deeps area. Due to positive drilling results from “Pampalo Deeps”, the company decided to concentrate exploration and development activities to Pampalo. Financial restructuring of the company and a new share issue at the end of 2015 together with a new mining approach at Pampalo mine were a vital part of this new strategy.

Hosko

Outcome of the Hosko core drilling encouraged further our opinion that we need to examine and re-evaluate our exploration strategy. As the Hosko deposit with high grade had been a vital part of our production schedule, our ability to produce sufficient volumes of gold to serve our hedge agreement was also put in jeopardy.

Karelian Gold Rush

Subsequently, early 2015 we decided to reduce our regional exploration activities and concentrate geological works to the Pampalo mining lease area. Also, as a part of this action, we decided to make our vast geological database accessible to “Karelian Gold Rush 2015” – a Global Exploration Challenge”. We invited geoscientists and other professionals to participate to a world-wide competition and published all relevant geological data from our fully controlled “Karelian Gold Line” – a 40 km long gold prospective Archean greenstone belt located in Eastern Finland. The leading idea with the competition was that we challenged the mining community to innovative and out-of-box thinking and to come up with new ideas for exploration targets and models.

The “Karelian Gold Rush 2015” challenge was completed early 2016. As a result of the competition, the company received 15 high-quality regional exploration proposals from individuals and project groups. Based on these proposals and other information, the company will evaluate and prepare a revised strategy for its regional exploration.

Turnaround with Pampalo exploration results

As we during 2015 decided to continue the decline development works and exploration at the Pampalo Mine, the deeper levels (“Pampalo Deeps”) of the mine became accessible for exploration. These combined efforts led to a turnaround of Pampalo exploration outcome.

Mid-2015 we started to receive our first encouraging diamond core drilling results from the Pampalo Deeps. After the first intercepts we intensified our exploration activities at Pampalo Deeps and as a result, during the autumn 2015 we were able to report a large number of high grade intercepts.

My view is that these intercepts are the best core drilling results since Endomines took over the Pampalo underground operations in 2006. We are currently heading to these high grade areas by deepening the decline and the near future will show how well we can realize the high in –situ grade of the resource in the mill feed head grade.  

Financial restructuring

As the high gold production originally anticipated and scheduled to be produced from the Hosko deposit was not possible, we had to enter into negotiations with our lender about our debt burden and hedge position. These negotiations resulted in an agreement and we were able to convert our remaining hedge position into a long-term loan and prolong our existing project loan. Amortizations will start in 2018 after a two year grace period.

Re-evaluation of strategy and Selective Mining

During summer and autumn we also re-evaluated our Pampalo Mine production strategy and decided to commence co-operation negotiations with our personnel. As a result of these co-operation negotiations all alternatives for the Pampalo operations were considered. These included putting the mill and the mines in a full care-and-maintenance mode. As an outcome of these negotiations we decided that the most feasible solution for the company was to temporarily lay-off some 50% of the personnel but at the same time continue exploration and mine deepening works to be ready for the expected and forecasted higher gold price at the end of the year 2016.

In October 2015 we decided that by early 2016 we will adapt our production strategy to the prevailing and short-term forecasted gold price development. Production in 2016 will be based on the “Selective Mining” principle. During 2016, the Company intends to mine and process approximately 125,000 tonnes of ore with higher grade. Mining will therefore be concentrated to earlier known as well as to the high-grade areas discovered in 2015. The reduced mine tonnage will be processed in campaigns, approximately for 7-10 days per month. The Pampalo underground mine will operate continuously during weekdays only.

“Selective Mining” and continued Pampalo exploration and mine deepening works are made possible as we successfully completed our share issue early 2016. The preceding loan restructuring and the hedge conversion was also a necessity for this option.

Equity raise

The positive turnaround in our exploration results, together with actions taken by the Board to secure our short-term and long-term financing was followed by the Board´s resolution to raise additional capital from our shareholders. The equity issue was heavily oversubscribed and totally 70 MSEK was raised in the share issue completed in February.   

Future

Early 2015 I wrote that we will see the gold price to improve towards the end of 2015.  This forecast was based on the expert’s opinions and views that physical flow of gold from West to East will continue and support the gold price improvement. The “Peak Gold 2015”, i.e. primary gold production from the mines peaking at the maximum was probably passed on the last quarter of 2015. In addition, ongoing geopolitical issues tend to support safe haven buying of gold.  All these facts have led to the recent gold price improvement, which we expect will continue. A weakening of the euro against the dollar would also be beneficial for Endomines by increasing our revenues in euro.

As we have earlier stated, Endomines vision is to participate in the future structural transformation and consolidation of the Nordic mining industry. Endomines is a small gold producer and during last year’s we have seen how risky and demanding the life of a small gold producer can be.

I personally believe that the way forward for Endomines should be either a merger with or an acquisition of another gold producing company. We will continue our dialogue with other gold miners and act once a suitable opportunity arises. 

Health and safety

Endomines personnel have shown great commitment to the work and the challenges have only increased that commitment. The last few years have also increased general working knowledge, manifested in the good safety statistics.

The mining and exploration operations of the Company are based on sustainable and responsible principles. We always try to minimize negative effects on the environment. The Company remains committed to a “Zero Harm”-policy, for both the environment and personnel. Early 2016 our operations achieved for the second time 365 days operational period without any Lost Time Injuries.

The authorities and local communities have also recognized our commitment to “Zero Harm”-policy and we can proudly say that Endomines and the Pampalo Mine has reconfirmed it’s a strong “Social License to Operate”.

Finally, and once again, my sincere thanks go to my colleagues at Endomines as well as our contractors and partners, whose dedication and hard work during this past year have made the achievements described above possible. I would also like to take this opportunity to thank our Board of Directors and our shareholders for their continuing support and commitment.

In March 2016

Markus Ekberg

CEO

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