Dundee Precious Metals Inc. (TSX:DPM) (TSX:DPM.WT.A)
(All monetary figures are expressed in U.S. dollars unless otherwise stated)
Financial and Operating Highlights:
-- Mines - Higher metals production and lower costs achieved at Chelopech
during the quarter. Kapan production negatively impacted by temporary
shutdown in June.
-- Smelter - Record production and higher tolls fuelled higher EBITDA in
the period. Acid plant construction remains on track for completion by
year end.
-- Near term growth - Krumovgrad Municipal Council approved the Company's
terms of reference allowing DPM to proceed with the preparation and
submission of a detailed development plan.
-- Impairment loss - Kapan's exploration and evaluation assets related
primarily to a previously contemplated open pit expansion were reduced
by $70 million.
-- Financial results - Exited second quarter with approximately $225
million of cash resources, including $200 million from undrawn portion
of long-term revolving credit facility.
Dundee Precious Metals Inc. ("DPM" or the "Company") today reported a second
quarter 2014 net loss attributable to common shareholders of $79.7 million
($0.57 per share) compared to net earnings of $15.9 million ($0.12 per share)
for the same period in 2013. Net loss attributable to common shareholders in the
first six months of 2014 was $69.7 million ($0.50 per share) compared to net
earnings of $16.6 million ($0.13 per share) for the same period in 2013.
Net loss attributable to common shareholders for the second quarter of 2014 was
impacted by several items not reflective of the Company's underlying operating
performance, including impairment losses primarily taken in connection with
certain exploration and evaluation assets, unrealized gains and losses
attributable to hedging future copper and gold production, unrealized losses
attributable to DPM's equity settled warrants, and net gains on Sabina warrants.
Excluding these items, adjusted net earnings(1) during the second quarter of
2014 were $9.3 million ($0.07 per share) compared to $3.6 million ($0.03 per
share) for the corresponding period in 2013. This increase was due primarily to
higher volumes of concentrate smelted at higher toll rates at Tsumeb and lower
third party treatment charges at Chelopech, partially offset by higher
depreciation following the completion of Tsumeb's Project 2012 in the fourth
quarter of 2013.
In the first six months of 2014, adjusted net earnings were $7.0 million ($0.05
per share) compared to $10.2 million ($0.08 per share) in the corresponding
period in 2013. This decrease was due primarily to lower metal prices, lower
volumes of payable metals in concentrate sold and higher depreciation, partially
offset by higher volumes of concentrate smelted at higher toll rates at Tsumeb,
lower third party treatment charges at Chelopech and the net favourable impact
of a stronger U.S. dollar.
"Our flagship asset, Chelopech, performed well in the quarter, with metals
production higher than in the first quarter as a result of higher grades and
recoveries. We continue to see improvements at Tsumeb, where increased
production and higher toll rates contributed to significantly higher EBITDA.
Despite numerous improvements made at Kapan, we experienced a set-back in the
second quarter as a result of a fatality sustained at the mine, which triggered
a temporary shutdown of the operation and has impacted the ramp-up to full
production" said Rick Howes, President and CEO. "At Krumovgrad, we received a
positive signal with the approval from the Krumovgrad Municipal Council and are
now able to proceed with filing our development plans to move the project
forward."
Impairment losses
At June 30, 2014, the Company reduced the carrying value of Kapan's exploration
and evaluation assets by $70.0 million, with the resulting impairment loss
recognized through other expense (income). This loss reflects management's
determination that capitalized exploration and evaluation costs incurred
primarily to support the merits of an open pit expansion, initially the
preferred option, should be written-off. The assessment work being conducted in
support of a potential underground expansion is progressing well and expected to
be completed later this year.
The Company also recognized a $6.8 million impairment loss during the second
quarter of 2014 in respect of certain equipment that was to have been used by
Chelopech for a metals processing facility.
Adjusted EBITDA
Adjusted EBITDA(1) during the second quarter and first six months of 2014 was
$32.2 million and $48.9 million, respectively, compared to $20.8 million and
$47.3 million in the corresponding periods in 2013, driven by the same factors
affecting adjusted net earnings, except for depreciation which is excluded from
adjusted EBITDA.
The average market price for gold during the second quarter and first six months
of 2014 decreased by 10% and 16%, respectively, compared to the corresponding
periods in 2013. The average market price for copper during the second quarter
and first six months of 2014 decreased by 5% and 8%, respectively, compared to
corresponding periods in 2013. The average realized copper price, including
realized hedging gains, for the second quarter and first six months of 2014 was
$3.34 and $3.30 per pound, respectively, compared to $3.33 and $3.49 per pound
in the corresponding periods in 2013.
Production and Deliveries
Copper and zinc concentrate production in the second quarter and first six
months of 2014 of 34,341 tonnes and 63,402 tonnes, respectively, was 4% and 14%
lower than the corresponding periods in 2013. The quarter over quarter decrease
was due primarily to lower volumes of ore mined and processed at Kapan partially
offset by higher volumes of ore processed at Chelopech. The decrease in the
first six months of 2014 relative to the corresponding period in 2013 was due
primarily to lower copper grades and recoveries at Chelopech and lower volumes
of ore mined and processed at Kapan. The lower recoveries at Chelopech in the
second quarter and first six months of 2014 were due primarily to the treatment
of increased volumes of ore characterized by a higher sulphur to copper ratio
than originally anticipated. This material has a higher intrinsic pyrite
content, which increases the load on downstream sections once recovered in the
flotation circuits. Important mechanical and operating parameters affecting the
recoveries in the first six months of 2014 have now been corrected. Further
optimization of the new circuits is ongoing and is expected to continue over the
balance of 2014.
Gold contained in pyrite concentrate produced in the second quarter and first
six months of 2014 was 10,188 ounces and 14,980 ounces, respectively.
Concentrate smelted at Tsumeb during the second quarter and the first six months
of 2014 of 60,322 tonnes and 109,472 tonnes, respectively, was 30% and 35%
higher than the corresponding periods in 2013 supported by the introduction of
the second oxygen plant in late January 2014 and the completion of Project 2012,
which negatively impacted 2013 production due to the downtime associated with
commissioning activities.
Deliveries of copper and zinc concentrates during the second quarter of 2014 of
35,513 tonnes were comparable to the deliveries in the corresponding period in
2013. Deliveries of copper and zinc concentrates during the first six months of
2014 of 66,705 tonnes were 7% lower than the corresponding period in 2013 due
primarily to lower concentrate production at Chelopech as a result of lower
copper grades and recoveries, and lower volumes of ore mined and processed at
Kapan.
Relative to the second quarter of 2013, payable gold in copper and zinc
concentrates sold in the second quarter of 2014 decreased by 5% to 35,411
ounces, payable copper in concentrate sold increased by 7% to 11.2 million
pounds, payable silver in concentrate sold decreased by 9% to 126,760 ounces and
payable zinc in concentrate sold decreased by 36% to 3.0 million pounds. The
increase in payable copper in concentrate sold was due primarily to increased
copper concentrate deliveries at Chelopech. The decreases in payable gold and
silver in concentrate sold were due primarily to lower recoveries at Chelopech.
The decrease in payable zinc in concentrate sold was due primarily to lower
volumes of ore mined and processed at Kapan.
Relative to the first six months of 2013, payable gold in copper and zinc
concentrates sold in the first six months of 2014 decreased by 16% to 62,736
ounces, payable copper in concentrate sold decreased by 5% to 20.8 million
pounds, payable silver in concentrate sold decreased by 4% to 236,373 ounces and
payable zinc in concentrate sold decreased by 35% to 5.0 million pounds. These
decreases were consistent with the lower contained metals in concentrate
produced in the first six months of 2014 relative to the corresponding period in
2013.
Payable gold in pyrite concentrate sold in the second quarter and first six
months of 2014 was 8,115 ounces (2013 - 843 ounces) and 10,993 ounces (2013 -
1,830 ounces), respectively.
Cash cost of sales per ounce of gold sold
Consolidated cash cost of sales per ounce of gold sold, net of by-product
credits, during the second quarter of 2014 of $277 was 20% lower than the cash
cost of sales of $346 for the corresponding period in 2013 due primarily to
lower treatment charges and higher volumes of payable copper in concentrate
sold.
Consolidated cash cost of sales per ounce of gold sold, net of by-product
credits, during the first six months of 2014 of $402 was 30% higher than the
cash cost of sales of $309 for the corresponding period in 2013 due primarily to
lower volumes of payable metals in concentrate sold and lower metal prices,
partially offset by lower treatment charges.
All-in sustaining cost per ounce of gold
Consolidated all-in sustaining cost per ounce of gold, net of by-product
credits, in the second quarter of 2014 was $581 compared to $650 in the
corresponding period in 2013. This decrease was due primarily to the same
factors affecting cash cost of sales per ounce of gold sold and lower cash
outlays for sustaining capital expenditures, partially offset by higher general
and administrative expenses.
Consolidated all-in sustaining cost per ounce of gold, net of by-product
credits, in the first six months of 2014 was $794 compared to $617 in the
corresponding period in 2013. This increase was due primarily to the same
factors affecting cash cost of sales per ounce of gold sold and higher general
and administrative expenses.
Cash provided from operating activities
Cash provided from operating activities in the second quarter of 2014 was $24.1
million compared to $11.5 million in the corresponding period in 2013 due
primarily to the same factors affecting adjusted EBITDA and lower income taxes
paid, partially offset by higher working capital requirements. Cash provided
from operating activities in the first six months of 2014 was $35.7 million
compared to $43.5 million in the corresponding period in 2013 due primarily to
the same factors affecting adjusted EBITDA and higher working capital
requirements, partially offset by lower income taxes paid.
Cash provided from operating activities, before changes in non-cash working
capital, during the second quarter and first six months of 2014 of $32.4 million
and $49.3 million, respectively, was $23.5 million and $16.1 million higher than
the corresponding periods in 2013 due primarily to the same factors affecting
adjusted EBITDA and lower income taxes paid.
Capital expenditures
Cash outlays for capital expenditures during the second quarter and first six
months of 2014 totalled $52.1 million and $102.7 million, respectively, compared
to $40.6 million and $101.8 million in the corresponding periods in 2013 due
primarily to timing of payments for work related to the construction of a new
acid plant at Tsumeb, partially offset by the completion of Project 2012 in
December 2013.
Financial position
In June 2014, DPM increased its revolving credit facility ("RCF") by $125.0
million to $275.0 million with the existing consortium and one new bank. The
expanded RCF is comprised of a $150.0 million (previously $125.0 million)
tranche maturing early 2017, a $45.0 million (previously $25.0 million) tranche
maturing early 2019 and a new $80.0 million tranche maturing mid-2019 that has
quarterly reductions of $4.0 million beginning in the third quarter of 2016. As
at June 30, 2014, DPM maintained a consolidated cash position of $24.7 million,
an investment portfolio valued at $21.9 million and $200 million of additional
liquidity under its RCF. These cash resources, together with the cash flow
currently being generated, support the continued development of the Company's
business.
2014 Guidance
The Company's production and cash cost guidance for 2014 is set out in the
following table and is unchanged from the guidance issued in April, except for
ore mined/milled and metals contained in concentrate produced which have been
updated to reflect the first six months of 2014 performance.
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Prior 2014
Current 2014 Guidance Guidance
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Chelopech Kapan Tsumeb Consolidated Consolidated
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Ore mined/milled 1,900 - 420 - - 2,320 - 2,375 -
('000s tonnes) 2,050 440 2,490 2,575
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Concentrate smelted - - 190 - 190 - 220 190 - 220
('000s tonnes) 220
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Metals contained in
concentrate
produced(1):
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Gold ('000s ounces) 126.0 - 23.0 - - 149 - 157 155 - 174
130.0 27.0
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Copper (million 42.7 - 2.4 - - 45.1 - 49.0 45.5 - 50.0
pounds) 46.2 2.8
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Zinc (million - 11.6 - - 11.6 - 15.9 11.6 - 15.9
pounds) 15.9
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Silver ('000s 210 - 230 430 - - 640 - 698 678 - 870
ounces) 468
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Cash cost/tonne of 43 - 47 81 - 91 - 51 - 56 51 - 56
ore processed ($)(2)
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Cash cost/ounce of 285 - 430 485 - - 335 - 505 335 - 505
gold sold, net of 855
by-product credits
($)(1),(2)
----------------------------------------------------------------------------
All-in-sustaining - - - 710 - 815 710 - 815
cost per ounce of
gold ($)(1),(2)
----------------------------------------------------------------------------
Cash cost/tonne of - - 280 - 280 - 350 280 - 350
concentrate smelted 350
($)(2)
----------------------------------------------------------------------------
Payable gold in 27 - 33 - - 27 - 33 27 - 33
pyrite concentrate
sold ('000s ounces)
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1. Excludes metals in pyrite concentrate and, where applicable, the
treatment charges, transportation and other selling costs related to the
sale of pyrite concentrate, which is reported separately.
2. Based on current exchange rates and, where applicable, a copper price of
$3.36 per pound, a silver price of $20.53 per ounce and a zinc price of
$1.03 per pound.
The Chelopech mine performed well in the second quarter of 2014, with metals
production well above first quarter levels. However, gold recoveries in the
copper concentrate have not yet reached the levels expected from the new
flotation circuits. Further optimization of the new circuits is ongoing and is
expected to continue over the balance of 2014. As a result, the upper end of the
guidance for 2014 gold production has been reduced to 130,000 ounces from
138,000 ounces. In the interim, additional gold is reporting to the pyrite
concentrate, which partially offsets this impact. Metals production in the third
quarter of 2014 is expected to be lower than metals production in the fourth
quarter of 2014 as a result of mine sequencing and the associated variation in
grades.
In May 2014, an underground worker was fatally injured in the Kapan mine.
Operations were immediately suspended and, over the course of a three week
period, an investigation was initiated, involving company officials, government
representatives and outside experts to ensure any recommended changes to the
mine's work and safety procedures were implemented prior to resuming operations.
Production has resumed but has not yet returned to expected levels resulting in
production guidance being reduced to reflect this lower level of production.
For 2014, the majority of the Company's growth capital expenditures(1) will be
focused on the construction of an acid plant at Tsumeb. Other growth capital
expenditures include the pyrite recovery circuit and margin improvement projects
at Chelopech, securing the remaining permits and planning for the commencement
of construction related to the Krumovgrad Gold Project, and exploration and
development work to enhance underground operations and advance a potential
expansion at Kapan. In aggregate, these expenditures are expected to range
between $160 million and $175 million. Sustaining capital expenditures(1) are
expected to range between $37 million and $45 million.
The 2014 guidance provided is not expected to occur evenly throughout the year
as a result of variations associated with areas being mined from quarter to
quarter, the timing of concentrate deliveries, planned outages, including the
annual maintenance shutdown at Tsumeb, which this year is occurring in July.
Also, the rate of capital expenditures may vary from quarter to quarter based on
the schedule for, and execution of, each capital project and, where applicable,
the receipt of necessary permits and approvals. Further details can be found in
the Company's MD&A under the section "2014 Guidance".
(1) Adjusted net earnings, adjusted basic earnings per share, adjusted earnings
before interest, taxes, depreciation and amortization ("EBITDA"), cash from
operating activities, before changes in non-cash working capital, cash cost per
tonne of ore processed, cash cost per ounce of gold sold, net of by-product
credits, all-in sustaining cost per ounce of gold, cash cost per tonne of
concentrate smelted, and growth and sustaining capital expenditures are not
defined measures under International Financial Reporting Standards ("IFRS").
Presenting these measures from period to period helps management and investors
evaluate earnings and cash flow trends more readily in comparison with results
from prior periods. Refer to the "Non-GAAP Financial Measures" section of the
management's discussion and analysis for the three and six months ended June 30,
2014 (the "MD&A") for further discussion of these items, including
reconciliations to net (loss) earnings attributable to common shareholders and
(loss) earnings before income taxes.
Key Financial and Operational Highlights
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$ millions, except where noted
Ended June 30, Three Months Six Months
2014 2013 2014 2013
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Revenue 98.0 80.2 174.4 168.2
Gross profit (1) 30.4 16.4 43.2 40.6
(Loss) earnings before income taxes (82.1) 16.7 (70.0) 21.1
Net (loss) earnings attributable to
common shareholders (79.7) 15.9 (69.7) 16.6
Basic (loss) earnings per share ($) (0.57) 0.12 (0.50) 0.13
Adjusted EBITDA (2) 32.2 20.8 48.9 47.3
Adjusted net earnings (2) 9.3 3.6 7.0 10.2
Adjusted basic earnings per share ($)
(2) 0.07 0.03 0.05 0.08
Cash provided from operating
activities 24.1 11.5 35.7 43.5
Cash provided from operating
activities, before changes in non-
cash working capital (2) 32.4 8.9 49.3 33.2
Copper and zinc concentrate produced
(mt) 34,341 35,925 63,402 73,327
Metals in copper and zinc concentrate
produced:
Gold (ounces) 38,835 40,617 65,442 85,089
Copper ('000s pounds) 11,600 11,431 20,955 24,033
Zinc ('000s pounds) 2,990 5,844 6,124 9,202
Silver (ounces) 168,612 215,009 298,935 370,413
Tsumeb - concentrate smelted (mt) 60,322 46,393 109,472 80,886
Deliveries of copper and zinc
concentrate (mt) 35,513 35,211 66,705 71,614
Payable metals in copper and zinc
concentrate sold:
Gold (ounces) 35,411 37,282 62,736 74,568
Copper ('000s pounds) 11,173 10,465 20,759 21,779
Zinc ('000s pounds) 3,051 4,794 5,031 7,797
Silver (ounces) 126,760 139,568 236,373 246,287
Payable gold in pyrite concentrate
sold (ounces) 8,115 843 10,993 1,830
Cash cost of sales per ounce of gold
sold, net of by-product credits ($)
(2) 277 346 402 309
All-in sustaining cost per ounce of
gold ($) (2) 581 650 794 617
Cash cost/tonne of concentrate
smelted at Tsumeb($) (2) 296 389 301 431
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1. Gross profit is regarded as an additional GAAP measure and is presented
in the Company's condensed interim unaudited consolidated statements of
(loss) earnings. Gross profit represents revenue less cost of sales and
is one of several measures used by management and investors to assess
the underlying operating profitability of a business.
2. Adjusted EBITDA; adjusted net earnings; adjusted basic earnings per
share; cash flow provided from operating activities, before changes in
non-cash working capital; cash cost of sales per ounce of gold sold, net
of by-product credits; all-in sustaining cost per ounce of gold; and
cash cost per tonne of concentrate smelted, are not defined measures
under IFRS. Refer to the MD&A for reconciliations to IFRS measures.
DPM's condensed interim unaudited consolidated financial statements, and MD&A
for the second quarter and first six months ended June 30, 2014, are posted on
the Company's website at www.dundeeprecious.com and have been filed on SEDAR at
www.sedar.com.
The Company will be holding a call to discuss its 2014 second quarter results on
July 31, 2014, at 9:00 a.m. (E.S.T.). Participants are invited to join the live
webcast (audio only) at: http://www.gowebcasting.com/5622. 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 2783756. The
audio webcast for this conference call will also be archived and available on
the Company's website at www.dundeeprecious.com.
Dundee Precious Metals Inc. is a Canadian based, international gold mining
company engaged in the acquisition, exploration, development, mining and
processing of precious metals. The Company's principal operating assets include
the Chelopech operation, which produces a copper concentrate containing gold and
silver, located east of Sofia, Bulgaria; the Kapan operation, which produces a
copper concentrate and a zinc concentrate, both containing gold and silver,
located in southern Armenia; and the Tsumeb smelter, a concentrate processing
facility located in Namibia. DPM also holds interests in a number of developing
gold properties located in Bulgaria, Serbia, and northern Canada, including
interests held through its 53.1% owned subsidiary, Avala Resources Ltd., its
45.5% interest in Dunav Resources Ltd. and its 12.1% interest in Sabina Gold &
Silver Corp.
Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward looking statements" that involve a number
of risks and uncertainties. Forward-looking statements include, but are not
limited to, statements with respect to the future price of gold, copper, zinc
and silver, the estimation of mineral reserves and resources, the realization of
such mineral estimates, the timing and amount of estimated future production and
output, costs of production, capital expenditures, costs and timing of the
development of new deposits, success of exploration activities, permitting time
lines, currency fluctuations, requirements for additional capital, government
regulation of mining operations, environmental risks, reclamation expenses, the
potential or anticipated outcome of title disputes or claims and timing and
possible outcome of pending litigation. Often, but not always, forward looking
statements can be identified by the use of words such as "plans", "expects", or
"does not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "does not anticipate", or "believes",
or variations of such words and phrases or that state that certain actions,
events or results "may", "could", "would", "might" or "will" be taken, occur or
be achieved. Forward looking statements are based on the opinions and estimates
of management as of the date such statements are made and they involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any other future results, performance or achievements expressed or implied
by the forward looking statements. Such factors include, among others: the
actual results of current exploration activities; actual results of current
reclamation activities; conclusions of economic evaluations; changes in project
parameters as plans continue to be refined; future prices of gold, copper, zinc
and silver; possible variations in ore grade or recovery rates; failure of
plant, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry; delays in
obtaining governmental approvals or financing or in the completion of
development or construction activities, uncertainties inherent with conducting
business in foreign jurisdictions where corruption, civil unrest, political
instability and uncertainties with the rule of law may impact the Company's
activities; fluctuations in metal prices; unanticipated title disputes; claims
or litigation; limitation on insurance coverage; as well as those risk factors
discussed or referred to in the Company's MD&A under the heading "Risks and
Uncertainties" and under the heading "Cautionary Note Regarding Forward-Looking
Statements" which include further details on material assumptions used to
develop such forward-looking statements and material risk factors that could
cause actual results to differ materially from forward-looking statements, and
other documents (including without limitation the Company's 2013 AIF) filed from
time to time with the securities regulatory authorities in all provinces and
territories of Canada and available on SEDAR at www.sedar.com. There can be no
assurance that forward looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in such
statements. Unless required by securities laws, the Company undertakes no
obligation to update forward looking statements if circumstances or management's
estimates or opinions should change. Accordingly, readers are cautioned not to
place undue reliance on forward looking statements.
FOR FURTHER INFORMATION PLEASE CONTACT:
Dundee Precious Metals Inc.
Rick Howes
President and Chief Executive Officer
(416) 365-2836
rhowes@dundeeprecious.com
Dundee Precious Metals Inc.
Hume Kyle
Executive Vice President and Chief Financial Officer
(416) 365-5091
hkyle@dundeeprecious.com
Dundee Precious Metals Inc.
Lori Beak
Senior Vice President, Investor & Regulatory Affairs
and Corporate Secretary
(416) 365-5165
lbeak@dundeeprecious.com
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