Dundee Precious Metals Inc. (TSX: DPM) (“DPM” or
the “Company”) today announced its operating and financial results
for the fourth quarter and twelve months ending December 31, 2021.
All operational and financial information contained in this news
release are related to continuing operations, unless otherwise
stated.
Highlights:
- Record gold
production – Produced a record 309,965 ounces of gold, at
the upper end of 2021 guidance. Copper production of 34.7 million
pounds was in line with 2021 guidance;
- Strong cost performance at
all operations – Reported cost of sales of $359.9 million,
and an all-in sustaining cost per ounce of gold of $657 and a cash
cost per tonne of complex concentrate smelted of $479, in line with
2021 guidance;
- Record free cash
flow – Generated a record $253.1 million in cash provided
from operating activities and a record $252.4 million of free cash
flow;
- Record adjusted net
earnings – Generated net earnings
attributable to common shareholders from continuing operations of
$190.7 million and record adjusted net earnings of $202.0 million
or $1.09 per share;
- Growing financial
strength – Ended the year with $334.4
million in cash, an investment portfolio of $48 million, an undrawn
$150 million long-term revolving credit facility (“RCF”) and no
debt;
- Returning capital to
shareholders – Declared 2022 first quarter dividend of
$0.04 per common share payable on April 18, 2022 to shareholders of
record on March 31, 2022. For 2021, dividends distributed totalled
$22.4 million ($0.12 per share) and common shares repurchased
totalled $10.4 million for an aggregate of $32.8 million of capital
returned to shareholders, representing 13% of free cash flow;
- Strong sustainability
performance – Scored in the 91st percentile for ESG
performance among companies in the metals and mining industry in
the 2021 S&P Global Corporate Sustainability Assessment.
- Strong 2022 guidance and
three-year outlook – Expected gold production of between
250,000 and 290,000 ounces in 2022 at an all-in sustaining cost of
between $750 and $890 per ounce of gold, with continued solid
production in 2023 and 2024 as outlined in the three-year
outlook.
- Board refreshment process
– As part of the Board of Director’s ongoing succession
and refreshment process, Jonathan Goodman, Chair of DPM’s Board
since 2013, will not stand for re-election at the 2022 Annual
Meeting of Shareholders (“Annual Meeting”). The Board has
determined that Peter Gillin, currently serving as Deputy Chair,
will assume the Chair position, subject to his re-election at the
Annual Meeting.
“Overall, 2021 was another very strong year for
DPM as we delivered record annual gold production for the third
consecutive year and generated record free cash flow of $252
million. Earlier in the year, we increased Mineral Reserves and
extended mine life at Chelopech, and added the high-quality Loma
Larga project to our portfolio.” said David Rae, President and
Chief Executive Officer.
“We also continue to deliver on our ESG
priorities and scored in the 91st percentile among mining and
metals companies in the S&P Global Corporate Sustainability
Assessment, a strong independent validation of our efforts in this
important area.
“With a solid production profile, significant
free cash flow generation and a strong balance sheet, DPM is
well-positioned to continue delivering value for our
stakeholders.
“On behalf of the Board and DPM management, I
would like to acknowledge and thank Jonathan Goodman for the
pivotal contributions he has made since 2003 in his capacity as
founder, shareholder, CEO, and now as Chair of DPM’s Board of
Directors. Starting with the acquisition of the Company’s Bulgarian
assets and their transformation into world class operations,
Jonathan has been an integral part of DPM’s growth into the leading
environmentally and socially responsible mid-tier producer we are
today.
“His strong leadership and guidance over the
years established a strong foundation for the Company’s values,
which has been critical to our success and will continue to serve
us well going forward.”
“I am extremely proud of what we accomplished at
DPM since the Company was founded in 2003,” said Jonathan Goodman,
Chair of the Board of Directors. “I believe we have built an
exceptional company with a promising future, consisting of
world-class assets, strong partnerships with stakeholders and a
very unique culture. I have full confidence that DPM’s Board and
management will continue to build on these successes to deliver
value for all stakeholders.”
Use of Non-GAAP Financial
Measures
Certain financial measures referred to in this
news release are not measures recognized under IFRS and are
referred to as Non-GAAP financial measures or ratios. These
measures have no standardized meanings under IFRS and may not be
comparable to similar measures presented by other companies. The
definitions established and calculations performed by DPM are based
on management’s reasonable judgment and are consistently applied.
These measures are intended to provide additional information and
should not be considered in isolation or as a substitute for
measures prepared in accordance with IFRS. Non-GAAP financial
measures and ratios, together with other financial measures
calculated in accordance with IFRS, are considered to be important
factors that assist investors in assessing the Company’s
performance.
The Company uses the following Non-GAAP
financial measures and ratios in this news release:
- cash cost per
tonne of ore processed
- cash cost per
tonne of complex concentrate smelted
- cash cost per
ounce of gold sold
- all-in sustaining
cost per ounce of gold sold
- adjusted net
earnings
- adjusted basic
earnings per share
- adjusted earnings
before interest, taxes, depreciation and amortization
(“EBITDA”)
- cash provided
from operating activities, before changes in working capital
- free cash
flow
- average realized
metal prices
For a detailed description of each of the
Non-GAAP financial measures and ratios used in this news release
and a detailed reconciliation to the most directly comparable
measure under IFRS, please refer to the “Non-GAAP Financial
Measures” section contained in this news release.
Key Financial and Operational
Highlights
$ millions, except where notedEnded December
31, |
Three Months |
Twelve Months |
2021 |
2020 |
2021 |
2020 |
Revenue |
166.4 |
151.8 |
641.4 |
609.6 |
Cost of sales |
96.8 |
81.1 |
359.9 |
330.9 |
Earnings before income taxes |
60.3 |
52.6 |
229.4 |
217.9 |
Net earnings attributable to
common shareholders from continuing operations |
52.1 |
50.2 |
190.7 |
199.1 |
Net earnings attributable to common shareholders(1) |
51.5 |
50.3 |
210.1 |
196.0 |
Basic earnings per share from continuing operations |
0.27 |
0.28 |
1.02 |
1.10 |
Basic earnings per share(1) |
0.27 |
0.28 |
1.12 |
1.08 |
Adjusted EBITDA |
84.3 |
74.8 |
336.9 |
319.3 |
Adjusted net earnings |
51.4 |
44.0 |
202.0 |
188.4 |
Adjusted basic earnings per
share |
0.27 |
0.24 |
1.09 |
1.04 |
Cash provided from operating
activities |
88.8 |
70.5 |
253.1 |
197.0 |
Free cash flow(2) |
65.8 |
39.3 |
252.4 |
211.4 |
Metals contained in
concentrate produced: |
|
|
|
|
Gold (ounces) |
|
|
|
|
Chelopech |
49,050 |
38,020 |
177,001 |
179,562 |
Ada Tepe |
33,774 |
26,097 |
132,964 |
118,727 |
Total gold in concentrate produced |
82,824 |
64,117 |
309,965 |
298,289 |
Copper (‘000s pounds) |
9,151 |
7,659 |
34,688 |
35,642 |
Payable metals in concentrate
sold: |
|
|
|
|
Gold (ounces) |
|
|
|
|
Chelopech |
40,538 |
37,399 |
149,297 |
150,764 |
Ada Tepe |
33,282 |
25,169 |
129,754 |
120,070 |
Total payable gold in concentrate sold |
73,820 |
62,568 |
279,051 |
270,834 |
Copper (‘000s pounds) |
8,175 |
7,766 |
32,680 |
33,389 |
Cash cost per tonne of ore
processed: |
|
|
|
|
Chelopech |
53.65 |
41.78 |
47.12 |
38.42 |
Ada Tepe |
60.27 |
42.17 |
52.18 |
40.07 |
All-in sustaining cost per
ounce of gold |
757 |
651 |
657 |
654 |
Complex concentrate smelted
(tonnes) |
51,932 |
52,484 |
189,705 |
231,890 |
Cash
cost per tonne of complex concentrate smelted |
445 |
406 |
479 |
377 |
1) These measures include discontinued
operations.
Fourth Quarter and Annual Operating
Highlights
In the fourth quarter of 2021, Ada Tepe
delivered impressive performance, including record quarterly gold
production, as a result of higher grades. Production at Chelopech
was significantly higher than the fourth quarter of 2020, as a
result of mining in higher grade zones and improved recoveries. The
Tsumeb smelter delivered performance that was in line with the
fourth quarter of 2020, reflecting an 8-day maintenance shutdown to
repair a water leak in the off-gas system.
For the full year, DPM met its metals production
guidance and achieved record gold production. Complex concentrate
smelted at Tsumeb was slightly below revised guidance.
Net Earnings and Adjusted Net Earnings
Net earnings attributable to common shareholders
from continuing operations in the fourth quarter and twelve months
of 2021 were $52.1 million ($0.27 per share) and $190.7 million
($1.02 per share), respectively, compared to $50.2 million ($0.28
per share) and $199.1 million ($1.10 per share) in the
corresponding periods in 2020.
Net earnings attributable to common shareholders
from continuing operations in the fourth quarter and twelve months
of 2021 and 2020 were impacted by unrealized gains or losses on
Sabina Gold and Silver Corp. (“Sabina”) special warrants and
deferred income tax adjustments not related to current period
earnings, both of which are not reflective of the Company’s
underlying operating performance and are excluded from adjusted net
earnings.
Adjusted net earnings in the fourth quarter of
2021 were $51.4 million ($0.27 per share) compared to $44.0 million
($0.24 per share) in the corresponding period in 2020 due primarily
to higher volumes of metal sold and lower share-based compensation
as a result of changes in DPM’s share price, partially offset by
higher local currency operating expenses in Bulgaria reflecting
higher prices for electricity and direct materials and higher
labour costs.
Adjusted net earnings in 2021 were $202.0 million ($1.09 per
share) compared to $188.4 million ($1.04 per share) in 2020 due
primarily to higher realized gold and copper prices, higher volumes
of gold sold and lower share-based compensation as a result of
changes in DPM’s share price, partially offset by the planned
maintenance shutdown at Tsumeb in the first quarter of 2021, as
well as unplanned maintenance downtime due to water leaks in the
off-gas system during the second half of 2021, higher local
currency operating expenses in Bulgaria reflecting higher prices
for electricity and direct materials and higher labour costs, a
weaker U.S. dollar and higher royalties at Ada Tepe reflecting a
higher profit-based royalty rate.
Adjusted EBITDA
Adjusted EBITDA in the fourth quarter and twelve
months of 2021 was $84.3 million and $336.9 million, respectively,
compared to $74.8 million and $319.3 million in the corresponding
periods in 2020, reflecting the same factors that affected adjusted
net earnings, except for interest, income tax, depreciation and
amortization, which are excluded from adjusted EBITDA.
Production, Delivery and Cost Measures
Gold contained in concentrate produced in the
fourth quarter of 2021 increased by 29% to 82,824 ounces relative
to the corresponding period in 2020 due primarily to higher gold
grades at Ada Tepe and improved gold recoveries at Chelopech. Gold
contained in concentrate produced in 2021 increased by 4% to
309,965 ounces relative to 2020 due primarily to higher gold grades
at Ada Tepe and improved gold recoveries from pyrite concentrate at
Chelopech, partially offset by mining in lower grade zones at
Chelopech in the third quarter of 2021.
Copper production in the fourth quarter of 2021
increased by 19% to 9.2 million pounds relative to the
corresponding period in 2020 due primarily to higher copper grades.
Copper production in 2021 decreased by 3% to 34.7 million pounds
relative to 2020 due primarily to mining in lower grade zones,
partially offset by higher copper recoveries.
Payable gold in concentrate sold in the fourth
quarter of 2021 of 73,820 ounces was 18% higher than the
corresponding period in 2020 due primarily to higher gold grades at
Ada Tepe, and mining in higher grade zones and higher gold
recoveries at Chelopech. Payable copper in concentrate sold in the
fourth quarter of 2021 of 8.2 million pounds was 5% higher than the
corresponding period in 2020 due primarily to higher copper
recoveries.
Payable gold in concentrate sold in 2021 of
279,051 ounces was 3% higher than 2020 due primarily to higher gold
grades at Ada Tepe, partially offset by mining in lower gold grade
zones at Chelopech. Payable copper in concentrate sold in 2021 of
32.7 million pounds was 2% lower than 2020 due primarily to mining
in lower grade zones at Chelopech, partially offset by the timing
of deliveries.
Complex concentrate smelted at Tsumeb during the fourth quarter
of 2021 of 51,932 tonnes was comparable to the corresponding period
in 2020. Complex concentrate smelted at Tsumeb in 2021 of 189,705
tonnes was 18% lower than 2020 due primarily to the planned first
quarter Ausmelt furnace maintenance shutdown, as well as unplanned
maintenance downtime due to water leaks in the off-gas system
during the second half of 2021.
Cost of sales in the fourth quarter of 2021 of
$96.8 million was $15.7 million higher than the corresponding
period in 2020 due primarily to higher local currency operating
expenses in Bulgaria reflecting higher prices for electricity and
direct materials and higher labour costs.
Cost of sales in 2021 of $359.9 million was
$29.0 million higher than 2020 due primarily to higher local
currency operating expenses in Bulgaria reflecting higher prices
for electricity and direct materials and higher labour costs,
higher royalties at Ada Tepe reflecting a higher profit-based
royalty rate, and a weaker U.S. dollar, partially offset by lower
local currency operating expenses at Tsumeb and lower
depreciation.
All-in sustaining cost per ounce of gold in the
fourth quarter of 2021 of $757 was 16% higher than the
corresponding period in 2020 due primarily to higher local currency
operating expenses in Bulgaria and higher treatment charges at
Chelopech, partially offset by higher volumes of gold sold.
All-in sustaining cost per ounce of gold in 2021
of $657 was comparable to 2020 due primarily to higher by-product
credits reflecting higher realized copper prices, partially offset
by higher local currency operating expenses in Bulgaria, higher
royalties at Ada Tepe, and higher cash outlays for sustaining
capital expenditures.
Cash cost per tonne of complex concentrate
smelted in the fourth quarter of 2021 of $445 was $39 higher than
the corresponding period in 2020 due primarily to higher local
currency operating expenses as a result of higher maintenance
costs, partially offset by higher sulphuric acid by-product credits
reflecting higher sulphuric acid prices.
Cash cost per tonne of complex concentrate
smelted in 2021 of $479 was $102 higher than 2020 reflecting the
fixed cost nature of the facility and the impact of lower volumes
of complex concentrate smelted, combined with a stronger ZAR
relative to the U.S. dollar.
A table comparing production, delivery and cash
cost measures for the fourth quarter and twelve months of 2021
against 2021 guidance can be found on page 13 of this news
release.
Cash Provided from Operating Activities
Cash provided from operating activities in the
fourth quarter of 2021 of $88.8 million was $18.2 million higher
than the corresponding period in 2020 and higher than the $7.7
million increase in earnings before taxes, due primarily to the
prepaid forward gold sales agreement at Ada Tepe being fully
satisfied with the final delivery in December 2020 and lower income
taxes paid, partially offset by an unfavourable period over period
change in working capital mainly related to an increase in accounts
receivables as a result of the timing of deliveries.
Cash provided from operating activities in 2021
of $253.1 million was $56.1 million higher than 2020 and higher
than the $11.5 million increase in earnings before income taxes,
due primarily to the prepaid forward gold sales agreement at Ada
Tepe being fully satisfied with the final delivery in December
2020.
During the fourth quarter and twelve months of
2020, Ada Tepe delivered 6,993 ounces and 34,087 ounces of gold,
respectively, pursuant to the prepaid forward gold sales
arrangement which resulted in $9.6 million and $46.7 million of
deferred revenue being recognized in revenue during the fourth
quarter and twelve months of 2020, respectively, with no
corresponding impact on cash as these deliveries were in partial
satisfaction of the $50.0 million of upfront proceeds received in
2016. In December 2020, the Company completed its final delivery of
gold under this arrangement.
For a detailed discussion on the factors
affecting cash provided from operating activities, refer to the
“Liquidity and Capital Resources” section contained in the
Management’s Discussion and Analysis for the three and twelve
months ended December 31, 2021 (the “MD&A”).
Free Cash Flow
Free cash flow in the fourth quarter of 2021 of
$65.8 million was $26.5 million higher than the corresponding
period in 2020 and higher than the $7.6 million increase in
earnings before taxes, due primarily to the fulfillment of the
prepaid forward gold sales agreement at Ada Tepe in December 2020
and lower income taxes paid.
Free cash flow in 2021 of $252.4 million was
$41.0 million higher than 2020 and higher than the $11.5 million
increase in earnings before income taxes, due primarily to the
fulfillment of the prepaid forward gold sales agreement at Ada Tepe
in December 2020, partially offset by higher cash outlays for
sustaining capital expenditures.
Financial Position and Liquidity
As at December 31, 2021, the Company had cash of
$334.4 million, investments valued at $48.0 million primarily
related to its 8.9% interest in Sabina, as well as $150.0 million
of available capital under its RCF, and no debt.
Capital expenditures
Capital expenditures incurred during the fourth
quarter and twelve months of 2021 were $19.7 million and $69.6
million, respectively, compared to $15.7 million and $49.3 million
in the corresponding periods in 2020.
Sustaining capital expenditures incurred during
the fourth quarter and twelve months of 2021 were $12.3 million and
$52.5 million, respectively, compared to $12.3 million and $40.8
million in the corresponding periods in 2020. The year-over-year
increase was due primarily to the planned maintenance shutdown at
Tsumeb in the first quarter of 2021 and the accelerated grade
control drilling at Ada Tepe initiated in September 2020. Growth
capital expenditures incurred during the fourth quarter and twelve
months of 2021 were $7.4 million and $17.1 million, respectively,
compared to $3.4 million and $8.5 million in the corresponding
periods in 2020 due primarily to work related to the development of
the Timok and Loma Larga gold projects.
Loma Larga gold project, Ecuador
Following the acquisition of the Loma Larga gold
project in July 2021, the Company has focused on integration
activities, stakeholder engagement and a review of technical
studies and permitting schedule for the project. DPM is targeting
completion of a revised feasibility study (“FS”) in 2022 and has
commenced scoping for the FS optimization work. A drilling program
of 15,800 metres including hydrogeological, geotechnical,
metallurgical, condemnation and extension drilling commenced in the
first quarter of 2022 and is expected to be completed in the third
quarter of 2022. The Company is also progressing discussions for
the execution of an investor protection agreement with the
government of Ecuador prior to making any significant capital
commitments. Based on the revised permitting schedule, DPM is
targeting to receive the major environmental permits towards the
end of 2022, followed by finalization of the exploitation agreement
and construction permits.
For more information, including key assumptions,
risks and parameters relating to the FS, refer to the technical
report “NI 43-101 Feasibility Study Technical Report, Loma Larga
Project, Azuay Province, Ecuador” dated April 8, 2020 and re-issued
by DPM on November 29, 2021, which has been posted on the Company’s
website at www.dundeeprecious.com and has been filed on SEDAR at
www.sedar.com.
Timok gold project, Serbia
On February 23, 2021, DPM released the positive
results of a pre-feasibility study (“PFS”) on the Timok gold
project and initiated a FS. The Company continues to progress with
the FS focused on the oxide portion of the deposit, which is on
track for completion in the second quarter of 2022.
For additional details, including key
assumptions, risks and parameters relating to the PFS, refer to the
news release entitled “Dundee Precious Metals Announces Positive
Pre-Feasibility Study and Encouraging New Exploration Results for
the Timok Gold Project in Serbia” dated February 23, 2021 and the
Technical Report entitled “NI 43-101 Technical Report, Timok
Project, Pre-Feasibility Study, Zagubica, Serbia” effective March
30, 2021, which have been posted on the Company’s website at
www.dundeeprecious.com and have been filed on SEDAR at
www.sedar.com.
Exploration
During 2021, a total of 41 drill holes (37,925
metres) were completed as part of the brownfield exploration
program at Chelopech, focused on:
- Target
delineation drilling at the Wedge and West Shaft prospects within
the Sveta Petka exploration licence;
- Drill testing of
conceptual targets within the Brevene exploration licence (Bridge,
Kazana, Aramu South, Chapel, Murgana) as well as grade/model
evaluation drilling at the Vozdol prospect;
- Scout drill
testing of the Petrovden gold-copper-molybdenum porphyry prospect,
aiming to delineate higher grade zones that may potentially be
amenable to underground mining; and
- Exploration
drilling to re-evaluate the high-sulphidation type copper-gold
mineralization defined historically at the Sharlo Dere prospect
within the mine concession area.
The Company’s application for a one-year
extension to the Sveta Petka exploration licence, which surrounds
the Chelopech mine, was approved in November 2021, allowing DPM to
commence work related to the commercial discovery phase. Permitting
is underway and a 35,000-metre drilling campaign, with focus on
Sveta Petka, is anticipated to be completed in 2022.
At Ada Tepe, a total of 65 exploration drill holes (11,622
metres) were drilled in the Khan Krum mining concession and
surrounding licences during 2021. Drilling focused on infill and
targeting delineation on the Surnak, Synap and Kuklitsa
prospects.
At the Timok project, a scout drilling program commenced on the
Umka exploration licence, with five drill holes completed for a
total of 5,279 metres. Plans for 2022 include follow-up target
delineation and drilling based on the results to date.
In Ecuador, a review of the mineral potential and the legal,
administrative and social obligations is underway in order to
develop a strategy for the exploration concessions held by DPM.
Prospecting, mapping and sampling have been undertaken on the
Tierras Coloradas licence in 2021 and a 450-kilometre line HD
Magnetic helicopter-borne survey was completed in January 2022.
Capital Allocation – INV Metals Inc. (“INV”)
Acquisition, Share Repurchases and Declaration of Dividend
As part of its strategy, the Company adheres to
a disciplined capital allocation framework that is based on three
fundamental considerations – balance sheet strength, reinvestment
in the business, and the return of capital to shareholders.
INV acquisition
On July 26, 2021, the Company acquired all of
the issued and outstanding shares it did not already own of INV,
the principal assets of which are comprised of the Loma Larga gold
project and certain other exploration licences. This acquisition
leverages DPM’s proven strengths in developing world-class assets
and applying industry-leading ESG solutions to unlock the
significant potential of the Loma Larga gold project.
Share repurchases under the Normal-Course Issuer Bid
(“NCIB”)
In 2021, DPM repurchased a total of 1,723,800
common shares at an average price of $6.02 (Cdn$7.64) per share,
for a total value of $10.4 million (Cdn$13.2 million).
The Board of Directors has approved the renewal
of the NCIB (the “New Bid”), however, the renewal is subject to
acceptance by the TSX. If accepted, the New Bid will be made in
accordance with the applicable rules and policies of the TSX and
applicable Canadian securities laws. Pursuant to the New Bid, it is
expected that the Company will be able to purchase up to 9,000,000
common shares, representing approximately 5% of the total issued
and outstanding common shares as of February 17, 2022, over a
period of twelve months commencing after the TSX approval. The New
Bid will also allow the Company to enter into an Issuer Repurchase
Agreement and an automatic share repurchase plan with its
designated broker in order to facilitate the purchase of its
shares.
The actual timing and number of shares that may
be purchased pursuant to the NCIB will be subject to DPM’s ongoing
capital requirements and management’s view that, from time to time,
DPM’s shares may trade at prices well below the underlying value of
the Company and during these periods the repurchase of shares
represents an excellent opportunity to enhance shareholder
value.
Declaration of dividend
In 2021, the Company declared a quarterly
dividend of $0.03 per common share to its shareholders of record
resulting in total dividend distributions of $22.4 million (2020 –
$16.3 million).
On February 17, 2022, the Company declared a
dividend of $0.04 per common share payable on April 18, 2022 to
shareholders of record on March 31, 2022, representing a 33%
increase over the previous quarterly dividend.
The Company’s dividend has been set at a level
that is considered to be sustainable based on the Company’s free
cash flow outlook and is expected to allow the Company to build
additional balance sheet strength to support the estimated capital
funding associated with Loma Larga, Timok and other growth
opportunities, which represent a key element of DPM’s strategy. The
declaration, amount and timing of any future dividend are at the
sole discretion of the Board of Directors and will be assessed
based on the Company’s capital allocation framework, having regard
for the Company’s financial position, overall market conditions,
and its outlook for sustainable free cash flow, capital
requirements, and other factors considered relevant by the Board of
Directors.
Three-Year Outlook and Detailed 2022
Guidance
DPM continues to focus on increasing the
profitability of its business by optimizing existing operating
assets, which are expected to maintain high levels of gold
production as highlighted in the 2022 to 2024 outlook and
supplemental detailed 2022 guidance below.
2022 to 2024 Outlook
Highlights of the three-year outlook
include:
- Continued solid gold
production: Over the next three years, gold production is
expected to average approximately 270,000 ounces per year based on
current mine plans. Gold production is expected to be between
250,000 and 290,000 ounces in 2022, between 265,000 and 310,000
ounces in 2023, and between 230,000 and 265,000 ounces in
2024.
- Stable copper
production: Copper production between 2022 and 2024 is
expected to average approximately 35 million pounds per year, based
on current mine plans.
- Attractive all-in
sustaining cost: All-in sustaining cost per ounce of gold
is expected to be between $750 and $890 in 2022, between $630 and
$760 in 2023, and between $720 and $850 in 2024. The year over year
variations in all-in sustaining cost reflect expected gold grades
in concentrate produced and volumes of gold-copper concentrate
delivered to third party smelters, with an overall increase
reflecting higher ocean freight and higher prices for electricity
and direct materials.
- Stable smelter
performance: Annual estimates for complex concentrate
smelted vary due to the timing of scheduled furnace maintenance
shutdowns, with the next shutdown scheduled to occur during the
second quarter of 2022. Based on an expected 18-month operating
cycle, complex concentrate smelted is expected to be between
210,000 and 240,000 tonnes in each of 2022 and 2023, and between
220,000 and 250,000 tonnes in 2024. Cash cost per tonne of complex
concentrate smelted is expected to be between $380 and $460 in
2022, between $350 and $450 in 2023, and between $340 and $440 in
2024, reflecting the impact of increased throughput, as well as
estimated cost savings from a comprehensive initiative directed at
optimizing the cost structure of the smelter.
- Sustaining capital
expenditures: Sustaining capital expenditures vary due to
the timing of certain projects and are expected to be between $57
million and $66 million for 2022, between $46 million and $54
million for 2023, and between $42 million to $49 million for
2024.
The Company’s three-year outlook is set out in the following
table:
$ millions, Unless otherwise indicated |
|
2021 Results |
2022 Guidance |
2023Outlook |
2024 Outlook |
Gold contained in concentrate produced (‘000s
ounces)(1),(2) |
|
|
|
|
|
Chelopech |
|
177 |
169 – 191 |
150 – 170 |
161 – 182 |
Ada Tepe |
|
133 |
81 – 99 |
115 – 140 |
69 – 83 |
Total |
|
310 |
250 – 290 |
265 – 310 |
230 – 265 |
Copper contained in concentrate
produced (million pounds) |
|
|
|
|
|
Chelopech |
|
35 |
32 – 37 |
32 – 39 |
30 – 35 |
All-in sustaining cost per ounce
of gold(3) |
|
657 |
750 – 890 |
630 – 760 |
720 – 850 |
Complex concentrate smelted
(‘000s tonnes) |
|
190 |
210 – 240 |
210 – 240 |
220 – 250 |
Cash cost per tonne of complex
concentrate smelted(3) |
|
479 |
380 – 460 |
350 – 450 |
340 – 440 |
Sustaining capital
expenditures(3) |
|
|
|
|
|
Chelopech |
|
19 |
24 – 27 |
20 – 22 |
16 – 17 |
Ada Tepe |
|
18 |
11 – 13 |
9 – 10 |
9 – 10 |
Tsumeb |
|
13 |
15 – 18 |
15 – 18 |
15 – 18 |
Corporate digital initiatives |
|
3 |
7 – 8 |
2 – 4 |
2 – 4 |
Consolidated |
|
53 |
57 – 66 |
46 – 54 |
42 – 49 |
1) Gold produced includes gold in pyrite
concentrate produced of 48,000 to 54,000 ounces for 2022, and
50,000 to 57,000 ounces in each of 2023 and 2024.2) Metals
contained in concentrate produced are prior to deductions
associated with smelter terms.3) All costs and capital
expenditures are based on, where applicable, a Euro/US$ exchange
rate of 1.16, a US$/ZAR exchange rate of 15.00, a copper price of
$4.25 per pound, and an average sulphuric acid price of $105 per
tonne in 2022, $95 per tonne in 2023 and $75 per tonne in 2024, and
have not been adjusted for inflation in 2023 and 2024.
The outlook is based on historical performance
and experience at DPM’s operations and is consistent with the
production schedules outlined in the technical report for Chelopech
entitled “NI 43-101 Technical Report - Mineral Resource and Reserve
Update, Chelopech Mine, Chelopech, Bulgaria” dated March 30, 2020
(the “Chelopech Technical Report”), and the technical report for
Ada Tepe entitled “NI 43-101 Technical Report – Mineral Reserve and
Mineral Resource Update for the Ada Tepe Mine, Krumovgrad,
Bulgaria” dated November 23, 2020 (the “Ada Tepe Technical
Report”). For 2023 and 2024, all production and cost estimates do
not yet incorporate operating performance improvements in respect
of mine and smelter throughput and potential improvements to mine
grades and recoveries. The Chelopech Technical Report and the Ada
Tepe Technical Report have been filed on SEDAR (www.sedar.com) and
are posted on the Company’s website (www.dundeeprecious.com). The
outlook is forward looking and based on certain estimates and
assumptions which involve risks and uncertainties. Actual results
may vary materially from management’s expectations. See the
“Cautionary Note Regarding Forward Looking Statements” and “Risks
and Uncertainties” sections later in this news release for further
information.
The Company’s detailed guidance for 2022 is set
out in the following table:
$ millions, unless otherwise indicated |
Chelopech |
Ada Tepe |
Tsumeb |
ConsolidatedGuidance |
Ore processed (‘000s tonnes) |
2,090 – 2,200 |
810 – 900 |
- |
2,900 – 3,100 |
Cash cost per tonne of ore
processed |
48 – 53 |
54 – 60 |
- |
- |
Metals contained in
concentrate produced(1)(2) |
|
|
|
|
Gold (‘000s ounces) |
169 – 191 |
81 – 99 |
- |
250 – 290 |
Copper (million pounds) |
32 – 37 |
- |
|
32 – 37 |
Payable metals in concentrate
sold(1) |
|
|
|
|
Gold (‘000s ounces) |
140 – 160 |
80 – 95 |
- |
220 – 255 |
Copper (million pounds) |
28 – 32 |
- |
- |
28 – 32 |
All-in sustaining cost per
ounce of gold(3) |
740 – 900 |
770 – 880 |
- |
750 – 890 |
Complex concentrate smelted
(‘000s tonnes) |
- |
- |
210 – 240 |
210 – 240 |
Cash cost per tonne of complex
concentrate smelted(3) |
- |
- |
380 – 460 |
380 – 460 |
Corporate general and
administrative expenses(4) |
- |
- |
- |
26 – 30 |
Exploration expenses(3) |
- |
- |
- |
16 – 19 |
Sustaining capital
expenditures(3)(5) |
24 – 27 |
11 – 13 |
15 – 18 |
57 – 66 |
Growth
capital expenditures(3)(6) |
2 – 4 |
- |
1 – 2 |
31 - 49 |
1) Gold produced includes gold in pyrite
concentrate produced of 48,000 to 54,000 ounces and payable gold
sold includes payable gold in pyrite concentrate sold of 31,000 to
36,000 ounces.2) Metals contained in concentrate produced are
prior to deductions associated with smelter terms.3) Based on
a Euro/US$ exchange rate of 1.16, a US$/ZAR exchange rate of 15.00,
a copper price of $4.25 per pound and an average sulphuric acid
price of $105 per tonne, where applicable.4) Excludes
mark-to-market adjustments on share-based
compensation.5) Consolidated sustaining capital expenditures
include $7 million to $8 million related to corporate new office
lease and digital initiatives.6) Consolidated growth capital
expenditures include estimated costs related to the technical and
permitting work for the Loma Larga gold project of $21 million to
$31 million and estimated costs related to the FS for the Timok
gold project of $8 million to $12 million (as detailed below).
The foregoing three-year outlook and
supplemental detailed 2022 guidance are not expected to occur
evenly throughout the year. The estimated metals contained in
concentrate produced, payable metals in concentrate sold and
volumes of complex concentrate smelted are expected to vary from
quarter to quarter depending on the areas being mined, the timing
of concentrate deliveries and planned outages, including furnace
maintenance shutdowns at Tsumeb. The rate of capital expenditures
is also expected to vary from quarter to quarter based on the
schedule for, and execution of, each capital project.
Additional detail on the Company’s three-year
outlook is set out below:
Chelopech
Gold contained in concentrate produced in 2022
is expected to be between 169,000 and 191,000 ounces, which has
improved relative to the previous 2022 outlook of 145,000 to
165,000 ounces as a result of higher recoveries. Gold contained in
concentrate produced is expected to be between 150,000 and 170,000
ounces in 2023, and between 161,000 and 182,000 ounces in 2024.
Copper contained in concentrate produced in 2022
is expected to be between 32 and 37 million pounds declining
slightly from the previous 2022 outlook of 32 to 39 million pounds
reflecting mining in lower grade zones. Copper contained in
concentrate produced is expected to be between 32 and 39 million
pounds in 2023, and between 30 and 35 million pounds in 2024.
Cash cost per tonne of ore processed is expected
to be between $48 and $53 in 2022 primarily reflecting recent price
increases for electricity and direct materials.
Sustaining capital expenditures in 2022 are
expected to be between $24 million and $27 million, including
approximately $6 million for the next phase of work to continue the
upgrade of Chelopech’s tailings management facility, a portion of
which represents 2021 capital deferred to 2022. Growth capital
expenditures related to resource development drilling and margin
improvement projects are expected to be between $2 million and $4
million in 2022. Sustaining capital expenditures are expected to
trend lower in 2023, ranging between $20 million and $22 million,
including approximately $4 million to complete the upgrade of the
tailings management facility. In 2024, sustaining capital
expenditures are expected to decline further to between $16 million
and $17 million.
Ada Tepe
Gold contained in concentrate produced in 2022
is expected to be between 81,000 and 99,000 ounces, which is
approximately 14% below the previous 2022 outlook of 95,000 to
115,000 ounces reflecting the results from the accelerated grade
control drilling program conducted in 2021. Gold contained in
concentrate produced is expected to be between 115,000 and 140,000
ounces in 2023, and 69,000 and 83,000 ounces in 2024, which will be
reviewed and updated, if necessary, following the completion of the
assessment of the accelerated grade control drilling program in the
third quarter of 2022.
Cash cost per tonne of ore processed is expected
to be between $54 and $60 in 2022 primarily reflecting recent price
increases for electricity and direct materials.
Sustaining capital expenditures in 2022 are
expected to be between $11 million and $13 million, up relative to
previous 2022 outlook, including approximately $7 million related
to Ada Tepe’s integrated waste management facility. Sustaining
capital expenditures are expected to decline to between $9 million
and $10 million in 2023 and remain at this level in 2024.
Tsumeb
Complex concentrate smelted is expected to be
between 210,000 and 240,000 tonnes in each of 2022 and 2023, down
from the previous 2022 outlook of 220,000 to 250,000 tonnes and
2023 outlook of 230,000 to 265,000 tonnes, reflecting scheduled
furnace maintenance shutdowns in the second quarter of 2022 and at
the end of 2023 based on an expected 18-month operating cycle, as
well as the recent operating performance at the smelter. In 2024,
complex concentrate smelted is expected to be between 220,000 and
250,000 tonnes reflecting no scheduled furnace maintenance shutdown
in 2024. Over 90% of concentrate feed is currently contracted
through to the end of 2023, with the remaining feed in 2022 and
2023 and additional feed thereafter expected to be contracted in
the normal course.
Cash cost per tonne of complex concentrate
smelted is expected to be between $380 and $460 in 2022, between
$350 and $450 in 2023, and between $340 and $440 in 2024,
reflecting the impact of increased throughput, as well as estimated
cost savings from a comprehensive initiative directed at optimizing
the cost structure of the smelter.
Sustaining capital expenditures are expected to
be between $15 million and $18 million for each of 2022, 2023 and
2024, down from the previous outlook of $16 million to $20
million.
Loma Larga gold project
With positive results from the FS completed by
INV prior to the acquisition, the Company is proceeding with the
permitting process while performing technical reviews to optimize
the FS, and drilling to further advance the project. The cost
associated with these activities in 2022 is expected to be between
$21 million and $31 million and is included in growth capital
expenditures.
Timok gold project
The Company is progressing FS work in respect of
the Timok gold project which is expected to cost between $8 million
and $12 million in 2022 and is included in growth capital
expenditures.
Exploration and evaluation expenditures
Expenditures related to exploration in 2022 are
expected to be between $16 million and $19 million and will be
directed primarily toward a 60,000-metre brownfield drilling
program on mine concessions and exploration licences at, or around,
the Chelopech and Ada Tepe mines in Bulgaria and the Timok project
in Serbia.
At Chelopech, exploration efforts will
concentrate on near mine exploration drilling related to the Sveta
Petka commercial discovery application, with 35,000 metres of
drilling planned in 2022.
At Ada Tepe, where 20,000 metres of drilling is
planned, almost half of which is dedicated to near-mine target
delineation and drilling within the mining concession and the
surrounding Krumovitza exploration licence. The rest of the budget
will be allocated to scout and target delineation drilling on the
other regional licences in the Krumovgrad district, with a focus on
the Chiriite exploration licence, where several new vein targets
were identified in 2021.
At Timok, studies to progress Bigar Hill to a
mining concession are underway. The exploration program will focus
on the nearby Umka exploration licence as well as other early-stage
licences in Serbia.
At Loma Larga, all geological data will be
integrated and reviewed to develop a drilling program focused on
extending the existing mineral resources, which are open in all
directions. The Tierras Coloradas concessions will be transferred
to an advanced exploration phase, and a 2,000 metre scout drilling
program is planned in 2022.
COVID-19
To date, with the proactive measures taken by
each of the Company’s operations, the COVID-19 pandemic has had
minimal impact on DPM’s production. DPM is closely monitoring the
COVID-19 situation and has put measures in place to safeguard the
health of its workforce and support the continuity of its
operations. Given the highly uncertain and evolving nature of this
situation, the Company is not able to reliably estimate the
likelihood, timing, duration, severity and scope of this pandemic
and the potential impact it could have on the Company’s future
operating and financial results. As a result, the 2022 guidance,
and outlook for 2023 and 2024, is predicated on the COVID-19
pandemic continuing to be effectively managed with minimal impact
on DPM’s operations. For additional details on COVID-19, including
the related risks faced by the Company, refer to the “Overview –
Operational and Financial Highlights” and “Risk and Uncertainties”
sections contained in the MD&A.
Board Update
As part of the Board of Directors’ ongoing
succession and refreshment process, Jonathan Goodman, Chair of
DPM’s Board since 2013, will not be standing for re-election at the
Company’s 2022 Annual Meeting. The Board has determined that Peter
Gillin, currently serving as Deputy Chair, will assume the Chair
position, subject to his re-election as a director at the Annual
Meeting of Shareholders to be held on May 5, 2022.
Mr. Goodman founded DPM in 2003, serving as
President and CEO until 2013, Executive Chair from 2013 to 2017 and
as Chair since 2017. During his tenure, the Company has transformed
the Chelopech mine into a world-class underground operation,
successfully developed Ada Tepe, Bulgaria’s first new mine in over
40 years, and has overseen the growth of DPM into a leading
environmentally and socially responsible mid-tier gold
producer.
Selected Production, Delivery and Cost Performance Versus
Guidance
|
Q4 2021 |
2021 |
2021 Consolidated Guidance |
Chelopech |
Ada Tepe |
Tsumeb |
Consolidated |
Chelopech |
Ada Tepe |
Tsumeb |
Consolidated |
Ore processed (‘000s tonnes) |
562 |
219 |
- |
781 |
2,199 |
866 |
- |
3,065 |
2,925 – 3,125 |
Metals contained in
concentrate produced |
|
|
|
|
|
|
|
|
|
Gold (‘000s ounces) |
49 |
34 |
- |
83 |
177 |
133 |
- |
310 |
271 – 317 |
Copper (million pounds) |
9 |
- |
- |
9 |
35 |
- |
- |
35 |
34 – 39 |
Payable metals in concentrate
sold |
|
|
|
|
|
|
|
|
|
Gold (‘000s ounces) |
41 |
33 |
- |
74 |
149 |
130 |
- |
279 |
243 – 285 |
Copper (million pounds) |
8 |
- |
- |
8 |
33 |
- |
- |
33 |
31 – 36 |
All-in sustaining cost per
ounce of gold(1) |
833 |
665 |
- |
757 |
722 |
583 |
- |
657 |
625 – 695 |
Complex concentrate
smelted(‘000s tonnes)(2) |
- |
- |
52 |
52 |
- |
- |
190 |
190 |
195 – 200 |
Cash
cost per tonne of complex concentrate smelted |
- |
- |
445 |
445 |
- |
- |
479 |
479 |
450 – 520 |
- All-in sustaining
cost per ounce of gold was expected to be $685 to $755 for
Chelopech and $560 to $630 for Ada Tepe, respectively, in 2021
guidance.
- Previous 2021
guidance was 200,000 to 220,000 tonnes.
This news release and DPM’s audited consolidated
financial statements and MD&A for the three and twelve months
ended December 31, 2021 are posted on the Company’s website at
www.dundeeprecious.com and have been filed on SEDAR at
www.sedar.com.
Qualified Person
The technical and scientific information in this
news release has been prepared in accordance with Canadian
regulatory requirements set out in National Instrument 43-101
Standards of Disclosure for Mineral Projects (“NI 43-101”) of the
Canadian Securities Administrators and the Canadian Institute of
Mining, Metallurgy and Petroleum Definition Standards for Mineral
Resources and Mineral Reserves, and has been reviewed and approved
by Ross Overall, B.Sc. (Applied Geology), Corporate Mineral
Resource Manager of DPM, who is a Qualified Person as defined under
NI 43-101, and who is not independent of the Company.
Fourth Quarter 2021 Results Conference Call and Webcast
On Friday, February 18, 2022 at 9 AM EST, DPM
will host a conference call and audio webcast to discuss the
results, followed by a question-and-answer session. Participants
are encouraged to dial into the call 15 minutes before its
scheduled start time or to join via the audio webcast to reduce
hold time in advance of the call.
The call-in numbers and webcast details are as
follows:
Date: |
Friday, February 18, 2022 |
Time: |
9:00 AM EDT |
Webcast: |
https://edge.media-server.com/mmc/p/gxj23aqa |
|
|
North America Toll Free: |
1-844-402-0878 |
International: |
1-478-219-0512 |
|
|
Toll Free Replay: |
1-855-859-2056 |
International Replay: |
1-404-537-3406 |
Passcode: |
7972723 |
Replay Available Until: |
Friday, February 25, 2022 (available for 7 days following the
call) |
For further information, please contact:
David
RaePresident and Chief Executive OfficerTel: (416)
365-5092drae@dundeeprecious.com |
Hume
KyleExecutive Vice President and Chief Financial
OfficerTel: (416) 365-5091hkyle@dundeeprecious.com |
Jennifer
CameronDirector, Investor RelationsTel: (416)
219-6177jcameron@dundeeprecious.com |
About Dundee Precious
Metals
Dundee Precious Metals Inc. is a Canadian-based
international gold mining company with operations and projects
located in Bulgaria, Namibia, Ecuador and Serbia. The Company’s
purpose is to unlock resources and generate value to thrive and
grow together. This overall purpose is supported by a foundation of
core values, which guides how the Company conducts its business and
informs a set of complementary strategic pillars and objectives
related to ESG, innovation, optimizing our existing portfolio, and
growth. The Company’s resources are allocated in-line with its
strategy to ensure that DPM delivers value for all of its
stakeholders. DPM’s shares are traded on the Toronto Stock Exchange
(symbol: DPM).
Cautionary Note Regarding Forward Looking
Statements
This news release contains “forward looking
statements” or “forward looking information” (collectively,
“Forward Looking Statements”) that involve a number of risks and
uncertainties. Forward Looking Statements are statements that are
not historical facts and are generally, but not always, identified
by the use of forward looking terminology such as “plans”,
“expects”, “is expected”, “budget”, “scheduled”, “estimates”,
“forecasts”, “guidance”, “outlook”, “intends”, “anticipates”,
“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, or the negative
of any of these terms or similar expressions. The Forward Looking
Statements in this news release relate to, among other things:
measures the Company is undertaking in response to the COVID-19
outbreak, including its impacts on the Company’s global supply
chains, the level of and duration of reductions or curtailments in
operating levels at any of the Company’s operations or in its
exploration and development activities; expected cash flows; the
price of gold, copper, silver and sulphuric acid; toll rates,
metals exposure and stockpile interest deductions at Tsumeb;
Tsumeb’s ability to continue to benefit from the Export Processing
Zones Act / Sustainable Special Economic Zone tax incentives in
Namibia; the estimation of Mineral Reserves and Mineral Resources
and the realization of such mineral estimates; estimated capital
costs, all-in sustaining costs, operating costs and other financial
metrics, including those set out in the outlook and guidance
provided by the Company; currency fluctuations; the impact of any
impairment charges; the processing of Chelopech concentrate; timing
of further optimization work at Tsumeb; potential benefits of any
upgrades and/or expansion, including the potential rotary holding
furnace installation at the Tsumeb smelter; DPM’s strategy, plans,
targets and goals in respect of environmental, social and
governance issues, including climate change, greenhouse gas
emissions reduction targets, tailings management facilities and
human rights initiatives; results of economic studies (including
the Timok PFS and the Loma Larga FS); expected milestones; success
of exploration activities; the timing of the completion and results
of a FS for the Timok gold project; expectations with respect to
the potential to incorporate additional existing Mineral Resources
into the Timok mine plan by processing the sulphide portion of the
ore body; development of the Loma Larga project, including expected
production, successful negotiations of an investment protection
agreement and exploitation agreement and granting of environmental
and construction permits in a timely manner; success of permitting
activities; permitting timelines; success of investments, including
potential acquisitions; requirements for additional capital;
government regulation of mining and smelting operations;
environmental risks; reclamation expenses; potential or anticipated
outcome of title disputes or claims; benefits of digital
initiatives; the timing and amount of dividends; the timing and
number of common shares of the Company that may be purchased
pursuant to the NCIB; and timing and possible outcome of pending
litigation or legal proceedings, if any.
Forward Looking Statements are based on certain
key assumptions and the opinions and estimates of management and
Qualified Person (in the case of technical and scientific
information), 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. In addition to factors already
discussed in this news release, such factors include, among others:
risks relating to the Company’s business generally and the impact
of global pandemics, including COVID-19, resulting in changes to
the Company’s supply chain, product shortages, delivery and
shipping issues, closure and/or failure of plant, equipment or
processes to operate as anticipated, employees and contractors
becoming infected, low vaccination rates, lost work hours and
labour force shortages; fluctuations in metal and sulphuric acid
prices, toll rates and foreign exchange rates; regulatory changes,
including changes impacting the complex concentrate market;
inability of Tsumeb to secure complex copper concentrate on terms
that are economic; possible variations in ore grade and recovery
rates; inherent uncertainties in respect of conclusions of economic
evaluations and economic studies, including the Timok PFS and the
Loma Larga FS; uncertainties with respect to timing of the Timok
FS; changes in project parameters, including schedule and budget,
as plans continue to be refined; uncertainties with respect to
realizing the anticipated benefits from the acquisition of INV and
the development of the Loma Larga project; uncertainties with
respect to actual results of current exploration activities;
uncertainties and risks inherent to developing and commissioning
new mines into production, which may be subject to unforeseen
delays; 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; limitations on insurance coverage; 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; actual results of
current and planned reclamation activities; opposition by social
and non-governmental organizations to mining projects and smelting
operations; unanticipated title disputes; claims or litigation;
failure to achieve certain cost savings or the potential benefits
of any upgrades and/or expansion, including the potential rotary
holding furnace installation at the Tsumeb smelter; increased costs
and physical risks, including extreme weather events and resource
shortages, related to climate change; cyber-attacks and other
cybersecurity risks; there being no assurance that the Company will
purchase additional common shares of the Company under the NCIB;
risks related to the implementation, cost and realization of
benefits from digital initiatives; uncertainties with respect to
realizing the targeted MineRP earn-outs 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 most recent Annual Information Form) 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.
The reader has been cautioned that the foregoing
list is not exhaustive of all factors and assumptions which may
have been used. Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in Forward
Looking Statements, there may be other factors that cause actions,
events or results not to be anticipated, estimated or intended.
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. The
Company’s Forward Looking Statements reflect current expectations
regarding future events and speak only as of the date hereof. Other
than as it may be required by law, 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.
Non-GAAP Financial Measures
Certain financial measures referred to in this
news release are not measures recognized under IFRS and are
referred to as Non-GAAP financial measures or ratios. These
measures have no standardized meanings under IFRS and may not be
comparable to similar measures presented by other companies. The
definitions established and calculations performed by DPM are based
on management’s reasonable judgment and are consistently applied.
These measures are used by management and investors to assist with
assessing the Company’s performance, including its ability to
generate sufficient cash flow to meet its return objectives and
support its investing activities and debt service obligations. In
addition, the Human Capital and Compensation Committee of the Board
of Directors uses certain of these measures, together with other
measures, to set incentive compensation goals and assess
performance. These measures are intended to provide additional
information and should not be considered in isolation or as a
substitute for measures prepared in accordance with IFRS. Non-GAAP
financial measures and ratios, together with other financial
measures calculated in accordance with IFRS, are considered to be
important factors that assist investors in assessing the Company’s
performance.
Non-GAAP Cash Cost and All-in Sustaining
Cost Measures
Cash cost per tonne of ore processed, all-in
sustaining cost per ounce of gold and cash cost per tonne of
complex concentrate smelted are Non-GAAP ratios. These measures
capture the important components of the Company’s production and
related costs. Management and investors utilize these metrics as an
important tool to monitor cost performance at the Company’s
operations. In addition, the Human Capital and Compensation
Committee of the Board of Directors uses certain of these measures,
together with other measures, to set incentive compensation goals
and assess performance.
The following tables provide a reconciliation of
the Company’s cash cost per tonne of ore processed and cash cost
per tonne of complex concentrate smelted to its cost of sales:
$ thousands, unless otherwise indicatedFor the three months
ended December 31, 2021 |
Chelopech |
|
Ada Tepe |
|
Tsumeb |
|
Total |
Ore processed (mt) |
561,986 |
|
219,325 |
|
- |
|
|
Metals contained in
gold-copper concentrate produced(1): |
|
|
|
|
Gold (ounces) |
33,149 |
|
33,774 |
|
- |
|
|
Copper (pounds) |
9,150,837 |
|
- |
|
- |
|
|
Complex concentrate smelted
(mt) |
|
|
51,932 |
|
|
Cost of sales |
35,546 |
|
27,736 |
|
33,564 |
|
96,846 |
Add/(deduct): |
|
|
|
|
Depreciation, amortization & other |
(7,683 |
) |
(14,264 |
) |
(3,734 |
) |
|
Change in concentrate inventory |
2,289 |
|
(253 |
) |
- |
|
|
Total cash cost before by-product credits |
30,152 |
|
13,219 |
|
29,830 |
|
|
By-product credits |
- |
|
- |
|
(6,695 |
) |
|
Total cash cost, net of by-product credits |
30,152 |
|
13,219 |
|
23,135 |
|
|
Cash cost
per tonne of ore processed(2) |
53.65 |
|
60.27 |
|
- |
|
|
Cash
cost per tonne of complex concentrate smelted(3) |
- |
|
- |
|
445 |
|
|
$ thousands, unless otherwise indicatedFor the three months
ended December 31, 2020 |
Chelopech |
|
Ada Tepe |
|
Tsumeb |
|
Total |
Ore processed (mt) |
541,066 |
|
213,428 |
|
- |
|
|
Metals contained in
gold-copper concentrate produced(1): |
|
|
|
|
Gold (ounces) |
27,852 |
|
26,097 |
|
- |
|
|
Copper (pounds) |
7,659,384 |
|
- |
|
- |
|
|
Complex concentrate smelted
(mt) |
- |
|
- |
|
52,484 |
|
|
Cost of sales |
30,898 |
|
22,006 |
|
28,213 |
|
81,117 |
Add/(deduct): |
|
|
|
|
Depreciation, amortization & other |
(7,841 |
) |
(13,132 |
) |
(2,777 |
) |
|
Change in concentrate inventory |
(453 |
) |
126 |
|
- |
|
|
Total cash cost before by-product credits |
22,604 |
|
9,000 |
|
25,436 |
|
|
By-product credits |
- |
|
- |
|
(4,102 |
) |
|
Total cash cost, net of by-product credits |
22,604 |
|
9,000 |
|
21,334 |
|
|
Cash cost per tonne of ore
processed(2) |
41.78 |
|
42.17 |
|
- |
|
|
Cash
cost per tonne of complex concentrate smelted(3) |
- |
|
- |
|
406 |
|
|
1) Excludes metals contained in pyrite
concentrate produced.2) Cash costs are reported in U.S.
dollars, although the majority of costs incurred are denominated in
non-U.S. dollars, and consist of all production related expenses
including mining, processing, services, royalties and general and
administrative.3) Total cash cost is net of by-product
sulphuric acid revenue.
$ thousands, unless otherwise indicatedFor the twelve
months ended December 31, 2021 |
Chelopech |
|
Ada Tepe |
|
Tsumeb |
|
Total |
Ore processed (mt) |
2,199,155 |
|
865,587 |
|
- |
|
|
Metals contained in
gold-copper concentrate produced(1): |
|
|
|
|
Gold (ounces) |
116,433 |
|
132,964 |
|
- |
|
|
Copper (pounds) |
34,687,982 |
|
- |
|
- |
|
|
Complex concentrate smelted
(mt) |
|
|
189,705 |
|
|
Cost of sales |
130,798 |
|
100,480 |
|
128,662 |
|
359,940 |
Add/(deduct): |
|
|
|
|
Depreciation, amortization & other |
(23,980 |
) |
(55,065 |
) |
(18,853 |
) |
|
Change in concentrate inventory |
(3,196 |
) |
(247 |
) |
- |
|
|
Total cash cost before by-product credits |
103,622 |
|
45,168 |
|
109,809 |
|
|
By-product credits |
- |
|
- |
|
(18,921 |
) |
|
Total cash cost, net of by-product credits |
103,622 |
|
45,168 |
|
90,888 |
|
|
Cash cost
per tonne of ore processed(2) |
47.12 |
|
52.18 |
|
- |
|
|
Cash
cost per tonne of complex concentrate smelted(3) |
- |
|
- |
|
479 |
|
|
$ thousands, unless otherwise indicatedFor the twelve
months ended December 31, 2020 |
Chelopech |
|
Ada Tepe |
|
Tsumeb |
|
Total |
Ore processed (mt) |
2,201,220 |
|
890,738 |
|
- |
|
|
Metals contained in
gold-copper concentrate produced(1): |
|
|
|
|
Gold (ounces) |
124,060 |
|
118,727 |
|
- |
|
|
Copper (pounds) |
35,642,083 |
|
- |
|
- |
|
|
Complex concentrate smelted
(mt) |
- |
|
- |
|
231,890 |
|
|
Cost of sales |
113,481 |
|
92,450 |
|
124,926 |
|
330,857 |
Add/(deduct): |
|
|
|
|
Depreciation, amortization & other |
(29,926 |
) |
(54,351 |
) |
(15,063 |
) |
|
Change in concentrate inventory |
1,011 |
|
(2,410 |
) |
- |
|
|
Total cash cost before by-product credits |
84,566 |
|
35,689 |
|
109,863 |
|
|
By-product credits |
- |
|
- |
|
(22,370 |
) |
|
Total cash cost, net of by-product credits |
84,566 |
|
35,689 |
|
87,493 |
|
|
Cash cost per tonne of ore
processed(2) |
38.42 |
|
40.07 |
|
- |
|
|
Cash
cost per tonne of complex concentrate smelted(3) |
- |
|
- |
|
377 |
|
|
1) Excludes metals contained in pyrite
concentrate produced.2) Cash costs are reported in U.S.
dollars, although the majority of costs incurred are denominated in
non-U.S. dollars, and consist of all production related expenses
including mining, processing, services, royalties and general and
administrative.3) Total cash cost is net of by-product
sulphuric acid revenue.
The following table provides, for the periods
indicated, a reconciliation of Chelopech’s all-in sustaining cost
per ounce of gold to its cost of sales:
$ thousands, unless otherwise indicatedEnded December
31, |
Three Months |
|
Twelve Months |
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|
Cost of sales |
35,546 |
|
30,898 |
|
|
130,798 |
|
113,481 |
|
Add/(deduct): |
|
|
|
|
|
Depreciation, amortization & other |
(7,683 |
) |
(7,841 |
) |
|
(23,980 |
) |
(29,926 |
) |
Treatment charges, transportation and other related selling
costs(1) |
29,571 |
|
20,211 |
|
|
102,901 |
|
99,604 |
|
By-product credits(2) |
(31,703 |
) |
(26,230 |
) |
|
(128,636 |
) |
(94,613 |
) |
Cash cost of sales, net of by-product credits |
25,731 |
|
17,038 |
|
|
81,083 |
|
88,546 |
|
Rehabilitation related
accretion expenses |
70 |
|
81 |
|
|
256 |
|
317 |
|
General and administrative
expenses(3) |
3,568 |
|
4,732 |
|
|
10,019 |
|
13,807 |
|
Cash outlays for sustaining
capital |
4,158 |
|
4,267 |
|
|
15,511 |
|
11,616 |
|
Cash
outlays for leases |
237 |
|
211 |
|
|
936 |
|
645 |
|
All-in sustaining costs |
33,764 |
|
26,329 |
|
|
107,805 |
|
114,931 |
|
Payable gold in concentrate
sold (ounces)(4) |
40,538 |
|
37,399 |
|
|
149,297 |
|
150,764 |
|
All-in
sustaining cost per ounce of gold |
833 |
|
704 |
|
|
722 |
|
762 |
|
1) Includes treatment charges,
transportation and other selling costs related to the sale of
pyrite concentrate of $8.0 million (2020 – $6.8 million) and $24.9
million (2020 – $24.7 million) in the fourth quarter and twelve
months of 2021, respectively.2) Represents copper and silver
revenue.3) Represents an allocated portion of DPM’s general
and administrative expenses, including share-based compensation,
based on Chelopech’s proportion of total revenue.4) Includes
payable gold in pyrite concentrate sold in the fourth quarter and
twelve months of 2021 of 11,331 ounces (2020 – 9,334 ounces) and
37,747 ounces (2020 – 36,111 ounces), respectively.
The following table provides, for the periods
indicated, a reconciliation of Ada Tepe’s all-in sustaining cost
per ounce of gold to its cost of sales:
$ thousands, unless otherwise indicatedEnded December
31, |
Three Months |
|
Twelve Months |
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|
Cost of sales |
27,736 |
|
22,006 |
|
|
100,480 |
|
92,450 |
|
Add/(deduct): |
|
|
|
|
|
Depreciation, amortization & other |
(14,264 |
) |
(13,132 |
) |
|
(55,065 |
) |
(54,351 |
) |
Treatment charges, transportation and other related selling
costs |
964 |
|
819 |
|
|
4,310 |
|
3,579 |
|
By-product credits(1) |
(285 |
) |
(169 |
) |
|
(1,038 |
) |
(732 |
) |
Cash cost of sales, net of by-product credits |
14,151 |
|
9,524 |
|
|
48,687 |
|
40,946 |
|
Rehabilitation related
accretion expenses |
32 |
|
38 |
|
|
125 |
|
121 |
|
General and administrative
expenses(2) |
2,361 |
|
2,913 |
|
|
7,847 |
|
10,300 |
|
Cash outlays for sustaining
capital |
5,235 |
|
1,559 |
|
|
17,469 |
|
9,514 |
|
Cash
outlays for leases |
347 |
|
388 |
|
|
1,466 |
|
1,290 |
|
All-in sustaining costs |
22,126 |
|
14,422 |
|
|
75,594 |
|
62,171 |
|
Payable gold in concentrate
sold (ounces) |
33,282 |
|
25,169 |
|
|
129,754 |
|
120,070 |
|
All-in sustaining cost per ounce of gold |
665 |
|
573 |
|
|
583 |
|
518 |
|
1) Represents silver
revenue.2) Represents an allocated portion of DPM’s general
and administrative expenses, including share-based compensation,
based on Ada Tepe’s proportion of total revenue.
DPM’s all-in sustaining cost per ounce of gold
calculations are set out in the following table:
$ thousands, unless otherwise indicated |
Three Months |
|
Twelve Months |
Ended December 31, |
2021 |
|
2020 |
|
|
2021 |
2020 |
|
Cost of sales(1) |
63,282 |
|
52,904 |
|
|
231,278 |
|
205,931 |
|
Add/(deduct): |
|
|
|
|
|
Depreciation, amortization & other(1) |
(21,947 |
) |
(20,973 |
) |
|
(79,045 |
) |
(84,277 |
) |
Treatment charges, transportation and other related selling
costs(1) |
30,535 |
|
21,030 |
|
|
107,211 |
|
103,183 |
|
By-product credits(2) |
(31,988 |
) |
(26,399 |
) |
|
(129,674 |
) |
(95,345 |
) |
Cash cost of sales, net of by-product credits(1) |
39,882 |
|
26,562 |
|
|
129,770 |
129,492 |
|
Rehabilitation related
accretion expenses(1) |
102 |
|
119 |
|
|
381 |
438 |
|
General and administrative
expenses(3) |
5,929 |
|
7,645 |
|
|
17,866 |
24,107 |
|
Cash outlays for sustaining
capital(1) |
9,393 |
|
5,826 |
|
|
32,980 |
21,130 |
|
Cash outlays for
leases(1) |
584 |
|
599 |
|
|
2,402 |
1935 |
|
All-in sustaining costs |
55,890 |
|
40,751 |
|
|
183,399 |
177,102 |
|
Payable gold in concentrate
sold (ounces) |
73,820 |
|
62,568 |
|
|
279,051 |
270,834 |
|
All-in
sustaining cost per ounce of gold |
757 |
|
651 |
|
|
657 |
654 |
|
1) Represents costs specific to Chelopech
and Ada Tepe.2) Represents copper and silver
revenue.3) Represents an allocated portion of DPM’s general
and administrative expenses, including share-based compensation,
based on Chelopech and Ada Tepe’s proportion of total revenue.
Adjusted net earnings and adjusted basic
earnings per share
Adjusted net earnings is a Non-GAAP financial
measure and adjusted basic earnings per share is a Non-GAAP ratio
used by management and investors to measure the underlying
operating performance of the Company. Presenting these measures
from period to period helps management and investors evaluate
earnings trends more readily in comparison with results from prior
periods.
Adjusted net earnings are defined as net
earnings attributable to common shareholders, adjusted to exclude
specific items that are significant, but not reflective of the
underlying operations of the Company, including:
- impairment
charges or reversals thereof;
- unrealized and
realized gains or losses related to investments carried at fair
value;
- significant tax
adjustments not related to current period earnings; and
- non-recurring or
unusual income or expenses that are either not related to the
Company’s operating segments or unlikely to occur on a regular
basis.
The following table provides a reconciliation of
adjusted net earnings to net earnings attributable to common
shareholders from continuing operations:
$ thousands, except per share amounts |
Three Months |
|
Twelve Months |
Ended December 31, |
2021 |
|
2020 |
|
|
2021 |
2020 |
|
Net earnings attributable to common shareholders from continuing
operations |
52,108 |
|
50,176 |
|
|
190,750 |
199,074 |
|
Add/(deduct): |
|
|
|
|
|
Net (gains) losses related to Sabina special warrants, net of
income taxes of $nil for all periods |
(659 |
) |
(3,124 |
) |
|
6,312 |
(5,640 |
) |
Deferred tax expense (recovery) adjustments not related to current
period earnings(1) |
- |
|
(3,015 |
) |
|
5,019 |
(5,019 |
) |
Adjusted net earnings |
51,449 |
|
44,037 |
|
|
202,081 |
188,415 |
|
Basic earnings per share |
0.27 |
|
0.28 |
|
|
1.00 |
1.10 |
|
Adjusted basic earnings per share |
0.27 |
|
0.24 |
|
|
1.09 |
1.04 |
|
1) Represents changes in unrecognized tax
benefits included in net earnings related to unrealized gains
(losses) on publicly traded securities, which, together with the
related deferred income tax expense (recovery), were recognized in
other comprehensive income (loss).Adjusted
EBITDA
Adjusted EBITDA is a Non-GAAP financial measure
used by management and investors to measure the underlying
operating performance of the Company’s operating segments.
Presenting these measures from period to period helps management
and investors evaluate earnings trends more readily in comparison
with results from prior periods. In addition, the Human Capital and
Compensation Committee of the Board of Directors uses adjusted
EBITDA, together with other measures, to set incentive compensation
goals and assess performance.Adjusted EBITDA excludes the following
from earnings before income taxes:
- depreciation and
amortization;
- interest
income;
- finance
cost;
- impairment
charges or reversals thereof;
- unrealized and
realized gains or losses related to investments carried at fair
value; and
- non-recurring or
unusual income or expenses that are either not related to the
Company’s operating segments or unlikely to occur on a regular
basis.
The following table provides a reconciliation of
adjusted EBITDA to earnings before income taxes:
$ thousands |
Three Months |
|
Twelve Months |
Ended December 31, |
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|
Earnings before income taxes |
60,274 |
|
52,588 |
|
|
229,418 |
|
217,923 |
|
Add/(deduct): |
|
|
|
|
|
Depreciation and amortization |
23,533 |
|
23,984 |
|
|
96,207 |
|
100,211 |
|
Finance cost |
1,380 |
|
1,481 |
|
|
5,549 |
|
7,022 |
|
Interest income |
(254 |
) |
(87 |
) |
|
(632 |
) |
(194 |
) |
Net (gains) losses related to Sabina special warrants |
(659 |
) |
(3,124 |
) |
|
6,312 |
|
(5,640 |
) |
Adjusted EBITDA |
84,274 |
|
74,842 |
|
|
336,854 |
|
319,322 |
|
Cash provided from operating activities,
before changes in working capital
Cash provided from operating activities, before
changes in working capital, is a Non-GAAP financial measure defined
as cash provided from operating activities excluding changes in
working capital as set out in the Company’s consolidated statements
of cash flows. This measure is used by the Company and investors to
measure the cash flow generated by the Company’s operating segments
prior to any changes in working capital, which at times can distort
performance.
Free cash flow
Free cash flow is a Non-GAAP financial measure
defined as cash provided from operating activities, before changes
in working capital, less cash outlays for sustaining capital,
mandatory principal repayments and interest payments related to
debt and leases. This measure is used by the Company and investors
to measure the cash flow available to fund the Company’s growth
capital expenditures.
The following table provides a reconciliation of
cash provided from operating activities, before changes in working
capital and free cash flow to cash provided from operating
activities:
$ thousands |
Three Months |
|
Twelve Months |
Ended December 31, |
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|
Cash provided from operating activities |
88,777 |
|
70,536 |
|
|
253,126 |
|
196,965 |
|
Add: |
|
|
|
|
|
Changes in working capital |
(8,877 |
) |
(20,412 |
) |
|
55,469 |
|
51,640 |
|
Cash provided from operating activities, before changes in working
capital |
79,900 |
|
50,124 |
|
|
308,595 |
|
248,605 |
|
Cash outlays for sustaining
capital |
(12,724 |
) |
(9,180 |
) |
|
(49,758 |
) |
(30,478 |
) |
Principal repayments related
to leases |
(1,165 |
) |
(1,076 |
) |
|
(4,455 |
) |
(4,008 |
) |
Interest payments |
(204 |
) |
(571 |
) |
|
(1,989 |
) |
(2,692 |
) |
Free cash flow |
65,807 |
|
39,297 |
|
|
252,393 |
|
211,427 |
|
Average realized metal
prices
Average realized gold and copper prices are
Non-GAAP ratios used by management and investors to highlight the
price actually realized by the Company relative to the average
market price, which can differ due to the timing of sales, hedging
and other factors.
Average realized gold and copper prices
represent the average per unit price recognized in the Company’s
consolidated statements of earnings (loss) prior to any deductions
for treatment charges, refining charges, penalties, freight and
final settlements to adjust for any cost differences relative to
the provisional invoice.
The following table provides a reconciliation of
the Company’s average realized gold and copper prices to its
revenue:
$ thousands, unless otherwise indicated |
Three Months |
|
Twelve Months |
Ended December 31, |
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|
Total revenue |
166,433 |
|
151,751 |
|
|
641,443 |
|
609,558 |
|
Add/(deduct): |
|
|
|
|
|
Tsumeb revenue |
(33,574 |
) |
(34,818 |
) |
|
(119,350 |
) |
(147,130 |
) |
Treatment charges and other deductions |
30,535 |
|
23,096 |
|
|
107,211 |
|
95,831 |
|
Silver revenue |
(1,127 |
) |
(1,103 |
) |
|
(4,831 |
) |
(3,740 |
) |
Revenue from gold and copper |
162,267 |
|
138,926 |
|
|
624,473 |
|
554,519 |
|
Revenue from gold |
131,407 |
|
113,629 |
|
|
499,630 |
|
462,916 |
|
Payable gold in concentrate
sold (ounces) |
73,820 |
|
62,568 |
|
|
279,051 |
|
270,834 |
|
Average realized gold price
per ounce |
1,780 |
|
1,816 |
|
|
1,790 |
|
1,709 |
|
Revenue from copper |
30,860 |
|
25,297 |
|
|
124,843 |
|
91,603 |
|
Payable copper in concentrate
sold (‘000s pounds) |
8,175 |
|
7,766 |
|
|
32,680 |
|
33,389 |
|
Average
realized copper price per pound |
3.77 |
|
3.26 |
|
|
3.82 |
|
2.74 |
|
Dundee Precious Metals (TSX:DPM)
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