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From the CEO

During 2023, we continued to create the foundation of the company to enable our future growth. At the same time, we invested heavily into the future and started large-scale exploration in the Karelian gold line area. Our long-term goal is to grow the company into a completely different size category. Our journey towards our goal progressed according to our plan during the year.

Our production in 2023 came entirely from Pampalo. Gold production increased by 49 % from the comparison period and was 12,790 ounces (397.8 kg) of gold. Pampalo’s net sales increased by 46 % to 19.7 MEUR due to higher production. Operating expenses grew moderately in relation to revenue growth, and Pampalo’s EBITDA improved to 17 % (5 %). It is worth noting that at the end of 2023, we changed our production method in the mine and focused on preparatory work for Hosko’s new production area. This temporary change phase had a negative impact on our EBITDA. The effects of the change phase on our EBITDA were approximately 2.0 MEUR which is approximately 10 % of our revenue.

Notwithstanding these end of the year changes, the production cost of 2023 without investments decreased by 15 % and was 1,278 EUR per ounce of gold produced. The biggest single factor in the decrease in unit cost was the significant increase in production volume. We are continuing our efforts to increase production towards the 20,000 oz annual production level, and then upwards. Hence our goal is to periodically run our processing plant in 2024 at a level required for 20,000 ounces annual production.

We believe that as the company goes through a significant phase of change and growth, the financial result will follow after. We have prepared for growth by creating future organizational structure early, our results are burdened by the costs of operations in the US and the production growth projects still cause us one-time costs. Every week, month, and year our operations become steadier and more predictable. The year 2023 was an operationally significant step towards the future Endomines. We believe that the path we have chosen will lead to a sustainable, profitable, and growing business.

The results of our strategic focus areas exploration exceeded our expectations in 2023. We performed active exploration by reprocessing historical results, conducting base of till sampling in the Kartitsa area and exploration drilling especially in the Korvilansuo-Kartitsa area. Korvilansuo’s resources increased as much as 307 % and Kuittila’s by 114 %. Muurinsuo-Korvisuo-Kuittila areas are located very close to each other and have a lot of geological similarities, and in the future, we will treat these as a single entity called the Southern Gold Line. In the area of the Southern gold line, the resource estimate is currently close to 150,000 ounces and it has more than doubled due to the work than was performed in 2023. We are well on our way to defining a deposit of more than one million ounces, which we believe will lay the groundwork for taking the company into a larger size category.

US operations are not a strategic focus area for Endomines. During 2023, we continued partnership negotiations with various parties, but unfortunately these were not completed during the year. We will continue negotiations in 2024 and our goal is to find a solution for the US operations as soon as possible.

In ESG matters, we implemented our measures in accordance with the plan. Our carbon dioxide emissions per ounce of gold produced decreased by approximately 31 % to 0.49 t/oz of gold produced. We continue our goal of reducing emissions by at least 5 % every year. We achieved the process water recycling goal and all our process water (100 %) was recycled water. Unfortunately, year 2023 was not successful in safety performance. During the year, there were seven lost time accidents, of which one happened to our own personnel and six to contractors. Safety is always the top priority for Endomines. We want to offer a safe and good working environment for both our personnel and our partners. On February 5, 2024, we started the safety development project together with DSS+ consulting.

Our vision is to grow Karelian gold line into an important responsible gold production area on a global scale. Now, the outlook for the gold market is very strong and several forecasts believe in a strong price development as the timing of interest rate cuts becomes more precise. Also, the geopolitical tension currently prevailing in the world, which is undesirable for all of us, supports the gold price outlook. On the cost side, we do not expect significant increases in the current cost levels. We are heading towards 2024 with a positive attitude.

Kari Vyhtinen, CEO of Endomines