Dundee Precious Metals Inc. (TSX:DPM)(TSX:DPM.WT.A) -
HIGHLIGHTS
-- Higher metals production year over year - Chelopech continued to perform
well, more than offsetting lower production in the short-term at Kapan
to rebuild development inventory, which is underway.
-- Lower mine cash costs - third quarter and year-to-date costs decreased
by 10% and 11% relative to 2012, driven by realized benefits from
Chelopech mine/mill expansion.
-- Smelter approaching ramp-up stage - Second oxygen plant commissioning
issues continued to constrain throughput during the quarter. Production
ramp up expected during the fourth quarter. Physical construction of
acid plant on track.
-- Near term growth opportunities are progressing - Kapan released its
first underground Mineral Resource estimate in August. Underground
expansion conceptual study to be completed in the first quarter of 2014.
Krumovgrad permitting is progressing slower than anticipated but
community support is building.
-- Financial results in line with consensus estimates - Adjusted net
earnings of $0.07 per share. Exited quarter with close to $200 million
of cash resources, including short-term investments and undrawn long-
term revolving credit facility.
Dundee Precious Metals Inc. ("DPM" or the "Company") today reported a third
quarter net loss attributable to common shareholders of $13.3 million ($0.10 per
share) compared to net earnings attributable to common shareholders of $21.9
million ($0.18 per share) for the same period in 2012. Net earnings attributable
to common shareholders for the first nine months of 2013 were $3.3 million
($0.02 per share) compared to $39.7 million ($0.32 per share) for the same
period in 2012.
Net (loss) earnings attributable to common shareholders for the third quarter
and first nine months of 2013 were impacted by several items not reflective of
the Company's underlying operating performance, including unrealized gains and
losses attributable to DPM's equity settled warrants, derivative commodity
contracts covering future periods, Sabina special warrants, and an impairment
charge on a refurbished oxygen plant no longer expected to be used at Chelopech.
Excluding these items, DPM reported adjusted net earnings in the third quarter
and first nine months of 2013 of $10.1 million ($0.07 per share) and $20.3
million ($0.15 per share), respectively, compared to $18.7 million ($0.15 per
share) and $59.4 million ($0.47 per share) for the corresponding periods in
2012. The year over year declines were driven primarily by lower metal prices,
higher local currency operating costs at Tsumeb, and higher depreciation,
partially offset by higher volumes of payable metals sold, reduced exploration
costs and administrative expenses, and a stronger U.S. dollar relative to the
ZAR.
"Our third quarter and year to date results reflect consistent operating results
from Chelopech, our flagship operation. Short-term issues at Kapan and Tsumeb
have impacted their operating results, however each is making good progress
toward achieving higher anticipated levels of production," said Rick Howes,
President and CEO. "In this challenging market environment, we remain focused on
optimizing operational performance, reducing costs, and advancing our growth
projects."
Adjusted EBITDA(1) in the third quarter and first nine months of 2013 was $26.5
million and $73.8 million, respectively, compared to $26.5 million and $86.8
million in the corresponding periods in 2012, driven by the same factors
affecting adjusted net earnings, with the notable exception of depreciation.
Concentrate production in the third quarter of 2013 of 31,718 tonnes was 12%
lower than the corresponding period in 2012 due primarily to lower volumes of
ore mined and processed at Kapan, where production was reduced to support
rebuilding development inventory in advance of resuming normal operating levels
in the second quarter of 2014 and a contemplated expansion of its production
capacity, and lower copper grades at Chelopech, partially offset by higher
volumes of ore mined and processed at Chelopech. Concentrate production in the
first nine months of 2013 of 105,045 tonnes was 2% higher than the corresponding
period in 2012 due primarily to higher volumes of ore mined and processed at
Chelopech, partially offset by lower copper grades at Chelopech, and lower
volumes of ore mined and processed at Kapan.
Concentrate smelted at Tsumeb in the third quarter of 2013 of 33,090 tonnes was
28% lower than the corresponding period in 2012 due primarily to the timing of
the annual maintenance shutdown of the Ausmelt furnace. In 2012, the shutdown
took place during May and June, whereas in 2013 it took place in July.
Concentrate smelted in the first nine months of 2013 was 113,976 tonnes, up
slightly from 2012.
Concentrate sales in the third quarter and first nine months of 2013 of 38,749
tonnes and 110,363 tonnes, respectively, were up 14% and 9% over the
corresponding periods in 2012 due primarily to a drawdown of concentrate
inventories at Chelopech and Kapan and timing of shipments at Kapan. Relative to
the third quarter of 2012, third quarter 2013 payable gold sold increased by 24%
to 40,006 ounces, payable copper sold increased by 18% to 12.4 million pounds,
payable silver sold increased by 2% to 158,572 ounces and payable zinc sold
decreased by 11% to 2.8 million pounds. For the first nine months of 2013,
payable gold sold increased by 18% to 116,404 ounces, payable copper sold
increased by 10% to 34.2 million pounds, payable silver sold increased by 10% to
404,859 ounces and payable zinc sold decreased by 5% to 10.6 million pounds,
compared to the first nine months of 2012. These changes reflect increased
concentrate deliveries and lower zinc production.
Consolidated cash cost of sales per ounce of gold sold, net of by-product
credits, in the third quarter and first nine months of 2013 was $352 and $320,
respectively, compared to $213 and $89 for the corresponding periods in 2012.
These increases were due primarily to lower realized copper and silver prices,
partially offset by higher volumes of payable metals.
Cash provided from operating activities during the third quarter and first nine
months of 2013 was $15.7 million and $59.2 million, respectively, compared to
$38.1 million and $51.3 million in the corresponding periods in 2012. Cash
provided from operating activities, before changes in non-cash working
capital(1), during the third quarter and first nine months of 2013 was $30.6
million and $63.8 million, respectively, down $4.7 million and $26.6 million
from the corresponding prior year periods due primarily to lower metal prices
and higher local currency operating costs at Tsumeb, partially offset by higher
volumes of payable metals sold, reduced exploration activities, lower
administrative expenses and a stronger U.S. dollar relative to the ZAR.
Cash outlays for capital expenditures in the third quarter and first nine months
of 2013 totalled $63.7 million and $165.5 million, respectively, compared to
$39.0 million and $98.0 million in the corresponding periods in 2012 due
primarily to the construction activity related to the new acid plant at Tsumeb
scheduled to commence operation in the fourth quarter of 2014.
As at September 30, 2013, DPM maintained a solid financial position with minimal
debt, representing 9% of total capitalization, a consolidated cash position,
including short-term investments, of $46.7 million, an investment portfolio
valued at $23.7 million and a $150 million undrawn long-term committed credit
facility. These cash resources, together with the cash flow currently being
generated, are expected to be sufficient to fund all non-discretionary capital
projects through to completion. The Company's discretionary growth projects,
which include the Krumovgrad Gold Project, a Kapan underground mine expansion,
and the electric holding furnace at Tsumeb, are expected to be staged over time.
The selection and staging of each of these projects, and other potential
projects, will ultimately be based on their expected returns, market conditions,
and DPM having sufficient capital resources to support any one or more of these
projects. The Company will consider raising additional capital, if required, to
ensure it maintains its financial strength and has sufficient liquidity to meet
the needs of the business.
The second stage of the Pyrite Project contemplated in the Technical Report,
which was issued in September 2012, is the construction of a pressure oxidation
process facility ("Pyrite Treatment"). Based on the results of the recently
completed work to assess the feasibility of the Pyrite Treatment facility, the
Company concluded that the Pyrite Treatment component of the Pyrite Project will
not be commercially viable under current market conditions. It is, therefore,
the Company's intention to defer any further work on the Pyrite Treatment
project until market conditions warrant a re-evaluation of the economics of this
project. As a result, the disclosure relating to the Pyrite Treatment component
of the Pyrite Project contained in previous disclosure and the "Preliminary
Economic Assessment Report for the Chelopech Pyrite Recovery Project" filed on
SEDAR on September 10, 2012, in accordance with National Instrument 43-101
Standards of Disclosure for Mineral Projects, is no longer to be relied upon.
The Company is still proceeding with the initial stage of the Pyrite Project, to
generate a pyrite concentrate for sale, and is scheduled for completion in
January 2014.
2013 Outlook
The Company's production guidance for 2013 is set out in the following table:
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Guidance
as at
2013 Production Guidance Sept. 16, 2013
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Chelopech Kapan Tsumeb Total Total
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Ore mined/milled
('000 tonnes) 1,900-2,050 450-465 - 2,350-2,515 2,370-2,550
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Concentrate
smelted ('000
tonnes) - - 155-162 155-162 172-178
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Metals contained
in concentrate
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Gold ('000
ounces) 125-143 23-25 - 148-168 148-168
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Copper (million
pounds) 43.0-46.0 2.3-2.5 - 45.3-48.5 45.3-48.5
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Zinc (million
pounds) - 14.5-15.0 - 14.5-15.0 14.5-15.0
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Silver ('000
ounces) 210-230 420-435 - 630-665 630-665
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Concentrate smelted at Tsumeb is now expected to range between 155,000 and
162,000 tonnes in 2013, down from the prior guidance of 172,000 to 178,000
tonnes issued in September 2013, due primarily to further delays associated with
the construction of the second oxygen plant related to a fabrication issue with
a transformer detected during commissioning. Commissioning of this oxygen plant
is now expected to be completed by the end of December 2013, after which Tsumeb
is expected to ramp up to its full operating capacity.
Ore mined at Kapan is now expected to range between 450,000 and 465,000 tonnes
in 2013, down from the prior guidance of 470,000 to 500,000 tonnes reflecting
lower than anticipated third quarter production. This has not impacted the
expected metals contained in concentrate produced due to higher than anticipated
grades. Consistent with the guidance issued in September 2013, production is
expected to range between 30,000 and 35,000 tonnes per month in the fourth
quarter of 2013, as a result of a decision to reduce production to rebuild
Kapan's development inventory and improve development performance in advance of
resuming normal sustainable operating levels in the second quarter of 2014.
Assuming current exchange rates and expected production levels, 2013 unit cash
cost per tonne of ore processed is unchanged from prior guidance and is expected
to range between $42 and $46 at Chelopech and between $71 and $80 at Kapan. The
cash cost per tonne of concentrate smelted at Tsumeb is expected to range
between $415 and $435, up from the prior guidance of $345 to $370, primarily as
a result of lower than anticipated volumes of concentrate smelted.
For 2013, the Company's growth capital initiatives continue to be focused on the
construction of an acid plant at Tsumeb, stage 1 of the Pyrite Project at
Chelopech, securing the remaining permits and completing detailed engineering
related to the Krumovgrad Gold Project, and exploration and/or development work
to enhance underground operations and advance a potential expansion at Kapan. In
aggregate, these expenditures are expected to range between $210 million and
$240 million, which is consistent with previous guidance. Sustaining capital
expenditures(1) are expected to range between $35 million and $45 million.
Further details can be found in the Company's MD&A under the section "2013
Outlook".
The 2013 outlook provided above may not occur evenly throughout the year. The
estimated metals contained in concentrate produced and volumes of concentrate
smelted may vary from quarter to quarter depending on the areas being mined, the
timing of concentrate deliveries, planned outages, and, in the case of Tsumeb,
the existing temporary curtailment not impacting planned levels of production.
Also, the rate of capital expenditures may vary from quarter to quarter based on
the schedule for, and execution of, each capital project and, where applicable,
the receipt of necessary permits and approvals.
(1) Adjusted net earnings, adjusted basic earnings per share, adjusted earnings
before interest, taxes, depreciation and amortization ("EBITDA"), cash from
operating activities, before changes in non-cash working capital, and growth and
sustaining capital expenditures are not defined measures under International
Financial Reporting Standards ("IFRS"). Presenting these measures from period to
period helps management and investors evaluate earnings and cash flow trends
more readily in comparison with results from prior periods. Refer to the
"Non-GAAP Financial Measures" section of the management's discussion and
analysis for the three and nine months ended September 30, 2013 (the "MD&A") for
further discussion of these items, including reconciliations to net earnings
attributable to common shareholders and earnings before income taxes.
Key Financial and Operational Highlights
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$ millions, except where noted
Ended September 30, Three Months Nine Months
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2013 2012 2013 2012
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Revenue 92.0 99.3 260.2 281.6
Gross profit (1) 29.2 41.3 69.8 117.8
(Loss) earnings before income taxes (13.9) 19.9 7.2 33.4
Net (loss) earnings attributable to
common shareholders (13.3) 21.9 3.3 39.7
Basic (loss) earnings per share (0.10) 0.18 0.02 0.32
Adjusted EBITDA (2) 26.5 26.5 73.8 86.8
Adjusted net earnings (2) 10.1 18.7 20.3 59.4
Adjusted basic earnings per share (2) 0.07 0.15 0.15 0.47
Cash provided from operating activities 15.7 38.1 59.2 51.3
Cash provided from operating activities,
before changes in non-cash working
capital (2) 30.6 35.3 63.8 90.4
Concentrate produced (mt) 31,718 35,924 105,045 103,381
Metals in concentrate produced:
Gold (ounces) 32,298 33,844 117,387 109,807
Copper ('000s pounds) 10,851 11,865 34,884 34,287
Zinc ('000s pounds) 2,419 4,714 11,621 12,545
Silver (ounces) 127,180 185,772 497,593 522,356
Tsumeb - concentrate smelted (mt) 33,090 45,787 113,976 113,533
Deliveries of concentrates (mt) 38,749 33,934 110,363 101,687
Payable metals in concentrate sold:
Gold (ounces) 40,006 32,134 116,404 99,033
Copper ('000s pounds) 12,405 10,495 34,184 31,123
Zinc ('000s pounds) 2,820 3,160 10,617 11,122
Silver (ounces) 158,572 156,102 404,859 367,038
Cash cost of sales per ounce of gold
sold, net of by-product credits ($) (2) 352 213 320 89
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1. Gross profit is regarded as an additional GAAP measure and is presented
in the Company's condensed interim consolidated statements of (loss)
earnings. Gross profit represents revenue less cost of sales and is one
of several measures used by management and investors to assess the
underlying operating profitability of a business.
2. Adjusted EBITDA; adjusted net earnings; adjusted basic earnings per
share; cash flow provided from operating activities, before changes in
non-cash working capital; and cash cost of sales per ounce of gold sold,
net of by-product credits, are not defined measures under IFRS. Refer to
the MD&A for reconciliations to IFRS measures.
DPM's condensed interim unaudited consolidated financial statements, and MD&A
for the three and nine months ended September 30, 2013, are posted on the
Company's website at www.dundeeprecious.com and have been filed on SEDAR at
www.sedar.com.
The Company will be holding a call to discuss its 2013 third quarter results on
November 7, 2013, at 9:00 a.m. (E.S.T.). Participants are invited to join the
live webcast (audio only) at: http://www.gowebcasting.com/4925. Alternatively,
participants can access a listen only telephone option at 416-340-2219 or North
America Toll Free at 1-866-226-1798. A replay of the call will be available at
905-694-9451 or North America Toll Free at 1-800-408-3053, passcode 2723701. The
audio webcast for this conference call will also be archived and available on
the Company's website at www.dundeeprecious.com.
Dundee Precious Metals Inc. is a Canadian based, international gold mining
company engaged in the acquisition, exploration, development, mining and
processing of precious metals. The Company's principal operating assets include
the Chelopech operation, which produces a copper concentrate containing gold and
silver, located east of Sofia, Bulgaria; the Kapan operation, which produces a
copper concentrate and a zinc concentrate, both containing gold and silver,
located in southern Armenia; and the Tsumeb smelter, a concentrate processing
facility located in Namibia. DPM also holds interests in a number of developing
gold properties located in Bulgaria, Serbia, and northern Canada, including
interests held through its 53.1% owned subsidiary, Avala Resources Ltd., its
45.5% interest in Dunav Resources Ltd. and its 12.1% interest in Sabina Gold &
Silver Corp.
Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward looking statements" that involve a number
of risks and uncertainties. Forward-looking statements include, but are not
limited to, statements with respect to the future price of gold, copper, zinc
and silver, the estimation of mineral reserves and resources, the realization of
such mineral estimates, the timing and amount of estimated future production and
output, costs of production, capital expenditures, costs and timing of the
development of new deposits, success of exploration activities, permitting time
lines, currency fluctuations, requirements for additional capital, government
regulation of mining operations, environmental risks, reclamation expenses, the
potential or anticipated outcome of title disputes or claims and timing and
possible outcome of pending litigation. Often, but not always, forward looking
statements can be identified by the use of words such as "plans", "expects", or
"does not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "does not anticipate", or "believes",
or variations of such words and phrases or that state that certain actions,
events or results "may", "could", "would", "might" or "will" be taken, occur or
be achieved. Forward looking statements are based on the opinions and estimates
of management as of the date such statements are made and they involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be
materially different from any other future results, performance or achievements
expressed or implied by the forward-looking statements. Such factors include,
among others: the actual results of current exploration activities; actual
results of current reclamation activities; conclusions of economic evaluations;
changes in project parameters as plans continue to be refined; future prices of
gold, copper, zinc and silver; possible variations in ore grade or recovery
rates; failure of plant, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry; delays in
obtaining governmental approvals or financing or in the completion of
development or construction activities, uncertainties inherent with conducting
business in foreign jurisdictions where corruption, civil unrest, political
instability and uncertainties with the rule of law may impact the Company's
activities; fluctuations in metal prices; unanticipated title disputes; claims
or litigation; limitation on insurance coverage; as well as those risk factors
discussed or referred to in the Company's MD&A under the heading "Risks and
Uncertainties" and under the heading "Cautionary Note Regarding Forward-Looking
Statements" which include further details on material assumptions used to
develop such forward-looking statements and material risk factors that could
cause actual results to differ materially from the forward-looking statements,
and other documents (including without limitation the Company's 2012 AIF) filed
from time to time with the securities regulatory authorities in all provinces
and territories of Canada and available on SEDAR at www.sedar.com. There can be
no assurance that forward looking statements will prove to be accurate, as
actual results and future events could differ materially from those anticipated
in such statements. Unless required by securities laws, the Company undertakes
no obligation to update forward looking statements if circumstances or
management's estimates or opinions should change. Accordingly, readers are
cautioned not to place undue reliance on forward looking statements.
FOR FURTHER INFORMATION PLEASE CONTACT:
Dundee Precious Metals Inc.
Rick Howes
President and Chief Executive Officer
(416) 365-2836
rhowes@dundeeprecious.com
Dundee Precious Metals Inc.
Hume Kyle
Executive Vice President and Chief Financial Officer
(416) 365-5091
hkyle@dundeeprecious.com
Dundee Precious Metals Inc.
Lori Beak
Senior Vice President, Investor & Regulatory Affairs and
Corporate Secretary
(416) 365-5165
lbeak@dundeeprecious.com
Dundee Precious Metals (TSX:DPM)
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