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