Dundee Precious Metals Inc. (TSX:DPM)(TSX:DPM.WT.A) -
(All monetary figures are expressed in U.S. dollars unless otherwise stated)
Financial and Operating Highlights:
-- Mines - Lower overall metals production and higher costs during the
quarter due to lower grades and recoveries in the areas mined at
Chelopech. 2014 guidance to be achieved through higher balance of year
production.
-- Smelter - 42% production increase and higher tolls fuelled significantly
higher EBITDA. Acid plant construction remains on track for completion
by year end.
-- Near term growth - Updated favourable project economics for Krumovgrad
released in February 2014. Constructive dialogue with government and
local officials is continuing to resolve outstanding community support
issues. Kapan underground expansion conceptual study to be completed
mid-year.
-- Financial results - Adjusted net loss of $2.3 million due to lower metal
prices and mine production offset by improved results from Tsumeb.
Exited first quarter with approximately $139 million of cash resources,
including undrawn portion of long-term revolving credit facility.
Dundee Precious Metals Inc. ("DPM" or the "Company") today reported first
quarter 2014 net earnings attributable to common shareholders of $10.0 million
($0.07 per share) compared to $0.7 million ($0.01 per share) for the same period
in 2013.
Net earnings attributable to common shareholders for the first quarter of 2014
were impacted by several items not reflective of the Company's underlying
operating performance, including unrealized losses attributable to DPM's equity
settled warrants, unrealized gains attributable to hedging future copper
production, and unrealized gains on Sabina warrants. Excluding these items,
adjusted net loss(1) during the first quarter of 2014 was $2.3 million ($0.02
per share) compared to adjusted net earnings of $6.6 million ($0.05 per share)
for the corresponding period in 2013. This decrease was due primarily to lower
metal prices, lower volumes of payable metals in concentrate sold and higher
depreciation following the completion of Tsumeb's Project 2012 in the fourth
quarter of 2013, partially offset by the favourable impact of a stronger U.S.
dollar relative to the ZAR and higher volumes of concentrate smelted and toll
rates at Tsumeb.
"We continue to focus on optimizing the performance of our existing operations.
While Chelopech's metals production was lower than expected as a result of the
areas mined during the quarter, it is not reflective of the balance of year
production we expect to see. We have already recovered one third of the gold
shortfall in April with improved grades and recoveries. Kapan is also making
progress with rebuilding its development inventory and delivered metals
production in line with our guidance," said Rick Howes, President and CEO.
"Tsumeb continues to make improvements to its operating performance as it ramps
up to full capacity, with first quarter concentrate volumes up 42% over last
year. Overall, we remain on track to achieve our 2014 guidance and focused on
further optimizing operational performance, reducing costs, and preparing for
the commencement of construction on our Krumovgrad Gold Project."
Adjusted EBITDA
Adjusted EBITDA(1) during the first quarter of 2014 was $16.7 million compared
to $26.5 million in the corresponding period in 2013, driven by lower metal
prices and lower volumes of payable metals in concentrate sold, partially offset
by a stronger U.S. dollar and higher volumes of concentrate smelted and toll
rates at Tsumeb.
All metals prices were down during the first quarter of 2014 relative to the
corresponding period in 2013. The average market price for gold during the first
quarter of 2014 decreased by 21% to $1,293 per ounce compared to $1,631 per
ounce in the corresponding period in 2013. The average market price for copper
during the first quarter of 2014 decreased by 11% to $3.19 per pound compared to
$3.60 per pound in the corresponding period in 2013. The average realized copper
price, including hedging gains, was $3.25 per pound (2013 - $3.64 per pound) in
the first quarter of 2014.
Production and Deliveries
Copper and zinc concentrate production in the first quarter of 2014 of 29,061
tonnes was 22% lower than the corresponding period in 2013 due primarily to
lower copper grades and recoveries at Chelopech and a mill relining it completed
in the period. The lower grades and recoveries at Chelopech were due primarily
to changes in the mine plan that resulted in the treatment of increased volumes
of ore characterized by a higher sulphur to copper ratio than planned. Quarterly
production over the balance of 2014 is expected to be higher with annual
production within guidance.
The commissioning of the pyrite recovery circuit was completed in the first
quarter of 2014. Gold contained in pyrite concentrate produced in the first
quarter of 2014 was 4,792 ounces (2013 - 300 ounces).
Concentrate smelted at Tsumeb during the first quarter of 2014 of 49,150 tonnes
was 42% higher than the corresponding period in 2013 supported by the
introduction of the second oxygen plant in late January 2014 and first quarter
2013 production being affected by Project 2012 tie-ins and the associated
downtime.
Deliveries of copper and zinc concentrates during the first quarter of 2014 of
31,192 tonnes was 14% lower than the corresponding period in 2013 due primarily
to decreased copper concentrate production at Chelopech as a result of lower
grades and recoveries.
Relative to the first quarter of 2013, payable gold in copper and zinc
concentrates sold in the first quarter of 2014 decreased by 27% to 27,325
ounces, payable copper in concentrate sold decreased by 15% to 9.6 million
pounds, payable silver in concentrate sold increased by 3% to 109,613 ounces and
payable zinc in concentrate sold decreased by 34% to 2.0 million pounds. These
decreases were consistent with the lower contained metals in concentrate
produced in the period. Payable gold in pyrite concentrate sold totalled 2,878
ounces in the first quarter of 2014 (2013 - 987 ounces).
Cash cost of sales per ounce of gold sold
Consolidated cash cost of sales per ounce of gold sold, net of by-product
credits(1), during the first quarter of 2014 was $563 compared to $273 for the
corresponding period in 2013. This increase was due primarily to lower volumes
of payable metals in concentrate sold as a result of lower grades and recoveries
at Chelopech, and lower metal prices.
All-in sustaining cost per ounce of gold
Consolidated all-in sustaining cost per ounce of gold(1) during the first
quarter of 2014 was $1,048 compared to $545 in the corresponding period in 2013.
This increase was due primarily to lower volumes of payable metals in
concentrate sold, lower metal prices and higher sustaining capital expenditures
at Kapan.
Cash provided from operating activities
Cash provided from operating activities during the first quarter of 2014 of
$11.6 million was $20.4 million lower than the corresponding period in 2013 due
primarily to lower metal prices, lower volumes of payable metals in concentrate
sold and an increase in working capital requirements, partially offset by higher
volumes of concentrate smelted and toll rates at Tsumeb. Cash provided from
operating activities, before changes in non-cash working capital(1), during the
first quarter of 2014 was $16.9 million down $7.4 million from the corresponding
prior year period due primarily to the same factors affecting adjusted EBITDA.
Capital expenditures
Cash outlays for capital expenditures during the first quarter of 2014 totalled
$50.6 million compared to $61.2 million in the corresponding period in 2013 due
primarily to timing of payments for work related to the construction of a new
acid plant at Tsumeb.
Financial position
As at March 31, 2014, DPM maintained a solid financial position with minimal
debt, representing 13% of total capitalization, a consolidated cash position of
$38.7 million, an investment portfolio valued at $19.4 million and $100.0
million of additional liquidity under the Company's $150 million long-term
committed revolving 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 a holding furnace at Tsumeb, are expected
to be staged over time based on their expected returns, market conditions, and
DPM having sufficient capital resources in place to support any one or more of
these projects. The Company is in the process of increasing its existing
revolving credit facility with terms extending out five years. This facility is
expected to be in place in the second quarter and will be used to support DPM's
discretionary growth capital requirements as well as for general corporate
purposes.
2014 Guidance
The Company's production and cash cost guidance for 2014 is set out in the
following table and is unchanged from the guidance issued in February 2014:
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2014 Production & Cash Cost Guidance
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Chelopech Kapan Tsumeb Consolidated
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Ore mined/milled ('000
tonnes) 1,900 - 2,050 475 - 525 - 2,375 - 2,575
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Concentrate smelted
('000 tonnes) - - 190 - 220 190 - 220
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Metals contained in
concentrate produced(1)
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Gold ('000 ounces) 126.0 - 138.0 29.0 - 36.0 - 155 - 174
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Copper (million
pounds) 42.7 - 46.2 2.8 - 3.8 - 45.5 - 50.0
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Zinc (million pounds) - 11.6 - 15.9 - 11.6 - 15.9
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Silver ('000 ounces) 210 - 230 468 - 640 - 678 - 870
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Cash cost/tonne of ore
processed ($)(2) 43 - 47 81 - 91 - 51 - 56
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Cash cost/ounce of gold
sold, net of by-product
credits ($)(1),(2) 285 - 430 485 - 855 - 335 - 505
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All-in-sustaining cost
per ounce of gold
($)(1),(2) - - - 710 - 815
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Cash cost/tonne of
concentrate smelted
($)(2) - - 280 - 350 280 - 350
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Payable gold in pyrite
concentrate sold ('000
ounces) 27 - 33 - - 27 - 33
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(1) Excludes metals in pyrite concentrate and, where applicable, the
treatment charges, transportation and other selling costs related to the
sale of pyrite concentrate, which is reported separately.
(2) Based on current exchange rates and, where applicable, a copper price of
$3.28 per pound, a silver price of $20.00 per ounce and a zinc price of
$0.90 per pound.
For 2014, the majority of the Company's growth capital expenditures(1) will be
focused on the construction of an acid plant at Tsumeb. Other growth capital
expenditures include the pyrite recovery circuit and margin improvement projects
at Chelopech, securing the remaining permits and planning for the commencement
of construction related to the Krumovgrad Gold Project, and exploration and
development work to enhance underground operations and advance a potential
expansion at Kapan. In aggregate, these expenditures are expected to range
between $160 million and $175 million. Sustaining capital expenditures(1) are
expected to range between $37 million and $45 million.
The 2014 guidance provided is not expected to occur evenly throughout the year
as a result of variations associated with areas being mined from quarter to
quarter, the timing of concentrate deliveries, planned outages, including the
annual maintenance shutdown at Tsumeb, which is currently scheduled for the
third quarter of 2014. Kapan has been successfully increasing the capital
development rates required to resume normal production levels. Production rates
are expected to range between 40,000 and 45,000 tonnes per month in the second
quarter of 2014 and reach full production in the third quarter of 2014. The
production guidance for Tsumeb assumed it would be capable of ramping up to full
capacity in the first quarter of 2014, which occurred with the commissioning of
the second oxygen plant in late January 2014. Despite lower metals in copper
concentrate produced in the first quarter of 2014 related to the areas mined at
Chelopech, quarterly production over the balance of the year is expected to be
higher with annual production and costs within guidance. 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. In the case of the acid plant, 2014 capital
expenditures could be lower than planned as a result of the recent report
received from Outotec, which indicates that heavy rain during the first quarter
and labour related shortages have resulted in some schedule delays. Further
details can be found in the Company's MD&A under the section "2014 Guidance".
(1) Adjusted net (loss) earnings, adjusted basic (loss) earnings per share,
adjusted earnings before interest, taxes, depreciation and amortization
("EBITDA"), cash from operating activities, before changes in non-cash working
capital, cash cost per tonne of ore processed, cash cost per ounce of gold sold,
net of by-product credits, all-in sustaining cost per ounce of gold, cash cost
per tonne of concentrate smelted, 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 months ended March 31,
2014 (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 Three Months
Ended March 31, 2014 2013
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Revenue 76.4 88.0
Gross profit (1) 12.8 24.3
Earnings before income taxes 12.1 4.4
Net earnings attributable to common shareholders 10.0 0.7
Basic earnings per share ($) 0.07 0.01
Adjusted EBITDA (2) 16.7 26.5
Adjusted net (loss) earnings (2) (2.3) 6.6
Adjusted basic (loss) earnings per share ($) (2) (0.02) 0.05
Cash provided from operating activities 11.6 32.0
Cash provided from operating activities, before changes
in non-cash working capital (2) 16.9 24.3
Copper and zinc concentrate produced (mt) 29,061 37,402
Metals in copper and zinc concentrate produced:
Gold (ounces) 26,607 44,472
Copper ('000s pounds) 9,355 12,602
Zinc ('000s pounds) 3,134 3,358
Silver (ounces) 130,323 155,404
Tsumeb - concentrate smelted (mt) 49,150 34,493
Deliveries of copper and zinc concentrate (mt) 31,192 36,403
Payable metals in copper and zinc concentrate sold:
Gold (ounces) 27,325 37,286
Copper ('000s pounds) 9,586 11,314
Zinc ('000s pounds) 1,980 3,003
Silver (ounces) 109,613 106,719
Deliveries of pyrite concentrate (mt) 16,468 7,738
Payable gold in pyrite concentrate sold (ounces) 2,878 987
Cash cost of sales per ounce of gold sold, net of by-
product credits ($) (2) 563 273
All-in sustaining cost per ounce of gold ($) (2) 1,048 545
Cash cost/tonne of concentrate smelted at Tsumeb($) (2) 307 486
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(1) Gross profit is regarded as an additional GAAP measure and is presented
in the Company's condensed interim unaudited consolidated statements of
earnings (loss). 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 (loss) earnings; adjusted basic (loss)
earnings per share; cash flow provided from operating activities, before
changes in non-cash working capital; cash cost of sales per ounce of gold
sold, net of by-product credits; all-in sustaining cost per ounce of gold;
and cash cost per tonne of concentrate smelted, 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 first quarter ended March 31, 2014, 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 2014 first quarter results on
May 7, 2014, at 9:00 a.m. (E.S.T.). Participants are invited to join the live
webcast (audio only) at: http://www.gowebcasting.com/5387. 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 1408597. 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 forward-looking statements, and other documents (including without
limitation the Company's 2013 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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