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Dundee Precious Metals Announces 2023 Third Quarter Results; Strong Operating Performance Drives Robust Free Cash Flow Generation

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Dundee Precious Metals Announces 2023 Third Quarter Results; Strong Operating Performance Drives Robust Free Cash Flow Generation

 

 

 

 

 

Dundee Precious Metals Inc. (TSX: DPM) announced its operating and financial results for the third quarter and first nine months ended September 30, 2023.

 

Highlights


(Unless otherwise stated, all monetary figures in this news release are expressed in U.S. dollars.)

  • Strong metals production: Produced 74,102 ounces of gold and 7.2 million pounds of copper.
  • All-in sustaining cost: Reported cost of sales per ounce of gold sold1 of $901 and an all-in sustaining cost per ounce of gold sold2 of $911.
  • On track to achieve 2023 guidance: Both mining operations are on track to achieve their 2023 production and cost guidance, while Tsumeb is forecast to be below its 2023 production guidance range and at the high end of its cash cost per tonne guidance range.
  • Significant free cash flow: Generated $67.4 million of cash provided from operating activities and quarterly free cash flow2 of $44.6 million, bringing year-to-date cash provided from operating activities to $197.5 million and year-to-date free cash flow to $180.1 million.
  • Solid adjusted net earnings: Reported net earnings of $27.1 million ($0.15 per share) and adjusted net earnings2 of $27.1 million ($0.15 per share2).
  • Growing financial position: Ended the quarter with a strong balance sheet, including $562.7 million of cash, a $150.0 million undrawn revolving credit facility, and no debt.
  • Increasing return of capital to shareholders: Returned $76.1 million, or 42% of free cash flow, to shareholders during the first nine months of 2023 through dividends paid and payments for shares repurchased. Declared fourth quarter dividend of $0.04 per common share payable on January 15, 2024 to shareholders of record on December 31, 2023.
  • Development projects: Completed an investment protection agreement (“IPA”) for the Loma Larga gold project and advanced permitting for the 69 kV power line. DPM will continue to progress the updated feasibility study (“FS”) beyond the previously stated timeline ending in 2023 to pursue additional optimization opportunities and potentially incorporate the results of drilling once these activities are able to resume.
  • Strong results from exploration activities: Results from ongoing drilling activities at the Čoka Rakita exploration prospect in Serbia locally extended the deposit to the west and continue to confirm the continuity of the mineralization. DPM expects to complete a maiden Mineral Resource estimate by the end of 2023 and is progressing activities to accelerate the advancement of the project.

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1   Cost of sales per ounce of gold sold represents total cost of sales for Chelopech and Ada Tepe, divided by total payable gold in concentrate sold, while all-in sustaining cost per ounce of gold sold includes treatment and freight charges, net of by-product credits, all of which are reflected in revenue.
2   All-in sustaining cost per ounce of gold sold, free cash flow, adjusted net earnings and adjusted basic earnings per share are non-GAAP financial measures or ratios. These measures have no standardized meanings under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other companies. Refer to the “Non-GAAP Financial Measures” section commencing on page 16 of this news release for more information, including reconciliations to IFRS measures.

 

CEO Commentary

 

“With strong gold production, including record quarterly performance from Ada Tepe, we generated over $180 million of free cash flow year-to-date, demonstrating the quality of our assets and strength of our operating teams,” said David Rae, President and Chief Executive Officer. “Our mining operations are on track to achieve their 2023 guidance for production and all-in sustaining cost, and we continue to be well-positioned as one of the lowest-cost gold producers.

 

“During the quarter, we continued to return a significant portion of our free cash flow to our shareholders, approximately 42% year-to-date, through our enhanced share buyback program and our sustainable quarterly dividend.

 

“Our infill and extensional drilling programs at the Čoka Rakita project are advancing well, and we are on track to deliver the maiden Mineral Resource estimate for the project before the end of 2023. We continue to be excited by Čoka Rakita’s potential and we are progressing activities to accelerate the development of this high-quality organic growth prospect.”

 

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:

  • mine cash cost
  • cash cost per tonne of ore processed
  • mine cash cost of sales
  • cash cost per ounce of gold sold
  • all-in sustaining cost
  • all-in sustaining cost per ounce of gold sold
  • smelter cash cost
  • cash cost per tonne of complex concentrate smelted
  • adjusted earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”)
  • adjusted net earnings
  • adjusted basic earnings per share
  • 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 commencing on page 16 of this news release.

 

Key Operating and Financial Highlights

 

$ millions, except where noted
Ended September 30,
  Three Months   Nine Months
  2023 2022   Change   2023 2022 Change
Operating Highlights                
Ore Processed t    738,614 731,880   1 %                   2,217,187 2,232,542 (1 %)
Metals contained in concentrate produced:                
Gold                
Chelopech oz      40,280 43,051   (6 %)      120,001 133,796 (10 %)
Ada Tepe oz      33,822 20,819   62 %        98,988 65,893 50 %
Total gold in concentrate produced oz      74,102 63,870   16 %      218,989 199,689 10 %
Copper Klbs        7,228 6,897   5 %        22,318 23,399 (5 %)
Payable metals in concentrate sold:                
Gold                
Chelopech oz      34,660 36,383   (5 %)        99,586 112,377 (11 %)
Ada Tepe oz      32,955 20,393   62 %        96,593 64,489 50 %
Total payable gold in concentrate sold oz      67,615 56,776   19 %      196,179 176,866 11 %
Copper Klbs        6,699 6,715   (0 %)        19,642 20,498 (4 %)
Cost of sales per tonne of ore processed(1):                
Chelopech $/t             63 63   0 %               63 60 5 %
Ada Tepe $/t           138 122   13 %             138 119 16 %
Cash cost per tonne of ore processed(2):                
Chelopech $/t             50 51   (2 %)               50 49 2 %
Ada Tepe $/t             65 55   18 %               66 54 22 %
Cost of sales per ounce of gold sold(3) $/oz           901 1,039   (13 %)             934 970 (4 %)
All-in sustaining cost per ounce of gold sold(2) $/oz           911 991   (8 %)             840 839 0 %
Complex concentrate smelted t      21,782 63,990   (66 %)      120,912 132,287 (9 %)
Cost of sales per tonne of complex concentrate smelted(4) $/t        1,061 481   121 %             589 717 (18 %)
Cash cost per tonne of complex concentrate smelted(2) $/t           921 297   210 %             467 470 (1 %)
Financial Highlights                
Revenue          135.0 128.6   5 %          458.4 416.9 10 %
Cost of sales            84.0 89.8   (6 %)          254.4 266.3 (4 %)
Earnings before income taxes            34.5 (53.7 ) 164 %          152.8 21.1 624 %
Net earnings            27.1 (57.7 ) 147 %          135.5 2.6 5,104 %
Per share            0.15 (0.30 ) 150 %            0.72 0.01 7,100 %
Adjusted EBITDA(2)            52.5 56.4   (7 %)          207.5 194.5 7 %
Adjusted net earnings(2)            27.1 25.3   7 %          135.5 95.6 42 %
Per share(2)            0.15 0.13   15 %            0.72 0.50 44 %
Cash provided from operating activities            67.4 31.5   114 %          197.5 182.8 8 %
Free cash flow(2)            44.6 43.2   3 %          180.1 133.2 35 %
Capital expenditures incurred(5):                
Sustaining(6)            16.8 11.6   45 %            33.4 41.5 (20 %)
Growth(7)              6.4 7.5   (14 %)            19.7 21.2 (7 %)
Total capital expenditures            23.2 19.1   22 %            53.1 62.8 (15 %)

1)  Cost of sales per tonne of ore processed represents cost of sales for Chelopech and Ada Tepe, respectively, divided by tonnes of ore processed.
2)  Cash cost per ounce of gold sold, cash cost per tonne of ore processed, all-in sustaining cost per ounce of gold sold, cash cost per tonne of complex concentrate smelted, adjusted EBITDA, adjusted net earnings, adjusted basic earnings per share and free cash flow are non-GAAP financial measures or ratios. Refer to the “Non-GAAP Financial Measures” section commencing on page 16 of this news release for more information, including reconciliations to IFRS measures.

3)  Cost of sales per ounce of gold sold represents total cost of sales for Chelopech and Ada Tepe, divided by total payable gold in concentrate sold.
4)  Cost of sales per tonne of complex concentrate smelted represents cost of sales for Tsumeb, divided by tonnes of complex concentrate smelted.
5)  Capital expenditures incurred were reported on an accrual basis and do not represent the cash outlays for the capital expenditures.
6)  Sustaining capital expenditures are generally defined as expenditures that support the ongoing operation of the asset or business without any associated increase in capacity, life of assets or future earnings. This measure is used by management and investors to assess the extent of non-discretionary capital spending being incurred by the Company each period.
7)  Growth capital expenditures are generally defined as capital expenditures that expand existing capacity, increase life of assets and/or increase future earnings. This measure is used by management and investors to assess the extent of discretionary capital spending being undertaken by the Company each period.

 

Performance Highlights


A table comparing production, sales and cash cost measures by asset for the third quarter and nine months ended September 30, 2023 against 2023 guidance is located on page 12 of this news release.

 

In the third quarter of 2023, the Company’s mining operations continued to perform well and delivered another quarter of strong production. Ada Tepe achieved record quarterly gold production, reflecting higher grades in-line with the mine plan, and production from Chelopech was in-line with expectations. At Tsumeb, the planned Ausmelt furnace maintenance was completed during the quarter and the smelter resumed operations and ramped up to full production towards the end of September. Both mining operations are on track to achieve their 2023 production and cost guidance, while Tsumeb is forecast to be below its 2023 production guidance range and towards the high end of its cash cost per tonne guidance range.

 

Highlights include the following:

 

Chelopech, Bulgaria: Gold contained in concentrate produced in the third quarter and first nine months of 2023 of 40,280 ounces and 120,001 ounces, respectively, was 6% and 10% lower than the corresponding periods in 2022 due primarily to lower gold grades, partially offset by higher volumes of ore processed, in-line with the mine plan. Copper production in the third quarter of 2023 of 7.2 million pounds was 5% higher than the corresponding period in 2022 due primarily to higher volumes of ore processed. Copper production in the first nine months of 2023 of 22.3 million pounds was 5% lower than the corresponding period in 2022 due primarily to lower copper grades, partially offset by higher volumes of ore processed.

 

All-in sustaining cost per ounce of gold sold in the third quarter of 2023 of $1,120 increased compared to $1,046 in the corresponding period in 2022 due primarily to lower volumes of gold sold and a stronger Euro relative to the U.S. dollar.

 

All-in sustaining cost per ounce of gold sold in the first nine months of 2023 of $944 increased compared to $765 in the corresponding period in 2022 due primarily to lower by-product credits, lower volumes of gold sold, higher costs for labour and direct materials, and higher cash outlays for sustaining capital expenditures, partially offset by lower treatment and freight charges.

 

Ada Tepe, Bulgaria: Gold contained in concentrate produced in the third quarter and first nine months of 2023 of 33,822 ounces and 98,988 ounces, respectively, was 62% and 50% higher than the corresponding periods in 2022 due primarily to mining higher grade zones, partially offset by lower volumes of ore processed, in-line with the mine plan. The Ada Tepe mine achieved record production for both the quarter and the first nine months of the year.

 

All-in sustaining cost per ounce of gold sold in the third quarter and first nine months of 2023 of $509 and $508, respectively, was 32% and 30% lower than the corresponding periods in 2022 due primarily to higher volumes of gold sold.

 

Consolidated Operating Highlights

 

Production: Gold contained in concentrate produced in the third quarter and first nine months of 2023 of 74,102 ounces and 218,989 ounces, respectively, was 16% and 10% higher than the corresponding periods in 2022 due primarily to mining in higher grade zones at Ada Tepe, partially offset by lower gold grades at Chelopech, in-line with the mine plans for both operations.

 

Copper production in the third quarter of 2023 of 7.2 million pounds was 5% higher than the corresponding period in 2022 due primarily to higher volumes of ore processed. Copper production in the first nine months of 2023 of 22.3 million pounds was 5% lower than the corresponding period in 2022 due primarily to lower copper grades, partially offset by higher volumes of ore processed.

 

Deliveries: Payable gold in concentrate sold in the third quarter and first nine months of 2023 of 67,615 ounces and 196,179 ounces, respectively, was 19% and 11% higher than the corresponding periods in 2022 primarily reflecting higher gold production.

 

Payable copper in concentrate sold in the third quarter of 2023 was comparable to the corresponding period in 2022. Payable copper in the first nine months of 2023 of 19.6 million pounds was 4% lower than  the corresponding period in 2022 primarily reflecting lower copper production.

 

Complex concentrate: Complex concentrate smelted in the third quarter of 2023 of 21,782 tonnes was 42,208 tonnes lower than the corresponding period in 2022 due primarily to the timing of the Ausmelt furnace maintenance shutdown, which was completed during the third quarter of 2023 compared to the second quarter of 2022. Complex concentrate smelted in the first nine months of 2023 of 120,912 tonnes was 11,375 tonnes lower than the corresponding period in 2022 due primarily to unplanned downtime earlier in 2023, which was related to water leaks in the off-gas system. Following the completion of the maintenance work in the third quarter of 2023, Tsumeb resumed operations and ramped up to full production towards the end of September. While complex concentrate smelted is expected to increase in the fourth quarter, reflecting improved operating performance as a result of the maintenance work, it is forecast to be below the guidance range for the year.

 

Cost measures: Cost of sales in the third quarter of 2023 of $84.0 million decreased compared to $89.8 million in the corresponding period in 2022 due primarily to lower depreciation expense as a result of the impairment charge in respect of Tsumeb taken in the third quarter of 2022 and lower operating costs at the smelter as a result of the maintenance shutdown in the third quarter of 2023. Cost of sales in first nine months of 2023 of $254.4 million decreased compared to $266.3 million in the corresponding period in 2022 due primarily to lower depreciation expense and lower operating costs at the smelter as a result of unplanned downtime at Tsumeb, partially offset by higher local currency mine operating costs reflecting higher costs for labour and direct materials.

 

All-in sustaining cost per ounce of gold sold in the third quarter of 2023 of $911 was 8% lower than the corresponding period in 2022 due primarily to higher volumes of gold sold, partially offset by a stronger Euro relative to the U.S. dollar.

 

All-in sustaining cost per ounce of gold sold in the third quarter of 2023 was $178 higher compared to the second quarter of 2023 due primarily to higher treatment charges as all of the gold-copper concentrate was delivered to Tsumeb this quarter, while all deliveries were to third-party smelters in the second quarter. Going forward, DPM expects all gold-copper concentrate to be delivered to third-party smelters.

 

All-in sustaining cost per ounce of gold sold in the first nine months of 2023 of $840 was comparable to the corresponding period of 2022 due primarily to higher local currency mine operating costs reflecting higher costs for labour and direct materials, lower by-product credits as a result of lower volumes and realized prices of copper sold, and higher share-based compensation reflecting DPM’s strong share price performance, largely offset by higher volumes of gold sold and lower treatment and freight charges at Chelopech.

 

Cash cost per tonne of complex concentrate smelted in the third quarter of 2023 of $921 was $624 higher than the corresponding period in 2022 due primarily to lower volumes of complex concentrate smelted as a result of the timing of the Ausmelt furnace maintenance shutdown. Cash cost per tonne of complex concentrate smelted in the first nine months of 2023 of $467 was comparable to the corresponding period in 2022 due primarily to lower volumes of complex concentrate smelted, largely offset by a weaker South African Rand (“ZAR”) relative to the U.S. dollar. Tsumeb is tracking towards the high end of its 2023 cash cost guidance range.

 

Capital expenditures: Capital expenditures incurred in the third quarter and first nine months of 2023 of $23.2 million and $53.1 million, respectively, were 22% higher and 15% lower than the corresponding periods in 2022 of $19.1 million and $62.8 million.

 

Sustaining capital expenditures incurred in the third quarter of 2023 of $16.8 million were 45% higher than the corresponding period in 2022 of $11.6 million due primarily to the timing of the Ausmelt furnace maintenance shutdown. Sustaining capital expenditures in the first nine months of 2023 of $33.4 million were 20% lower than the corresponding period in 2022 of $41.5 million benefited primarily from the cost optimizations of the Ausmelt furnace maintenance shutdown in 2023. Sustaining capital expenditures incurred in the first nine months of 2022 also included the capitalized lease and leasehold improvements related to the new head office lease.

 

Growth capital expenditures incurred during the third quarter and first nine months of 2023, primarily related to the Loma Larga gold project, were $6.4 million and $19.7 million, respectively, compared to $7.5 million and $21.2 million in the corresponding periods in 2022.

 

Consolidated Financial Highlights

 

Financial results from operations in the third quarter of 2023 reflected higher volumes of gold sold and higher realized gold and copper prices, partially offset by lower volumes of complex concentrate smelted and higher planned exploration and evaluation expenses.

 

Revenue: Revenue in the third quarter of  2023 of $135.0 million was 5% higher than the corresponding period in 2022 due primarily to higher volumes of gold sold, higher realized gold and copper prices, partially offset by lower volumes of complex concentrate smelted reflecting timing of the Ausmelt furnace maintenance shutdown.

 

Revenue in the first nine months of 2023 of $458.4 million was 10% higher than the corresponding period in 2022 due primarily to higher volumes and realized prices of gold sold, and lower treatment and freight charges at Chelopech as a result of increased deliveries to third-party smelters, partially offset by lower volumes of complex concentrate smelted at Tsumeb and lower volumes and realized prices of copper sold.

 

Net earnings (loss): Net earnings in the third quarter of  2023 of $27.1 million ($0.15 per share) increased compared to a net loss of $57.7 million ($0.30 per share) in the corresponding period in 2022 due primarily to the Tsumeb impairment charge of $85.0 million taken in the third quarter of 2022, together with higher volumes of gold sold and higher realized gold and copper prices, partially offset by lower volumes of complex concentrate smelted and higher planned exploration and evaluation expenses. Net earnings in the first nine months of 2023 of $135.5 million ($0.72 per share) increased compared to $2.6 million ($0.01 per share) in the corresponding period in 2022 due primarily to the Tsumeb impairment charge of $85.0 million, higher volumes and realized prices of gold sold, lower treatment and freight charges at Chelopech and higher interest income, partially offset by higher planned exploration and evaluation expenses, higher local currency mine operating expenses, lower volumes and realized prices of copper sold, higher share-based compensation expenses reflecting DPM’s strong share performance, as well as restructuring costs related to a cost optimization initiative at Tsumeb taken in 2022.

 

Adjusted net earnings: Adjusted net earnings in the third quarter and first nine months of 2023 of $27.1 million ($0.15 per share) and $135.5 million ($0.72 per share), respectively, increased compared to $25.3 million ($0.13 per share) and $95.6 million ($0.50 per share) in the corresponding periods in 2022 due primarily to the same factors affecting net earnings, except for adjusting items primarily related to the Tsumeb impairment charge and restructuring costs in 2022. Adjusted net earnings in the third quarter of 2023 was $35.1 million lower compared to the second quarter of 2023 due primarily to lower volumes of complex concentrate smelted at Tsumeb reflecting timing of the Ausmelt furnace maintenance shutdown, combined with higher treatment charges at Chelopech as all of the gold-copper concentrate was delivered to Tsumeb this quarter.

 

Earnings before income taxes: Earnings before income taxes  in the third quarter and first nine months of 2023 of $34.5 million and $152.8 million, respectively, increased compared to a loss before income taxes of $53.7 million and earnings before income taxes of $21.1 million in the corresponding periods in 2022, reflecting the same factors that affected net earnings, except for income taxes, which are excluded.

 

Adjusted EBITDA: Adjusted EBITDA in the third quarter and first nine months of 2023 was $52.5 million and $207.5 million, respectively, compared to $56.4 million and $194.5 million in the corresponding periods in 2022, reflecting the same factors that affected adjusted net earnings, except for interest, income taxes, depreciation and amortization, which are excluded from adjusted EBITDA.

 

Cash provided from operating activities: Cash provided from operating activities in the third quarter of 2023 of $67.4 million was 114% higher than the corresponding period in 2022 due primarily to the timing of deliveries and subsequent receipt of cash and the timing of payments to suppliers. Cash provided from operating activities in the first nine months of 2023 of $197.5 million was 8% higher than the corresponding period in 2022 due primarily to higher adjusted EBITDA generated in the period, partially offset by the timing of deliveries and subsequent receipt of cash.

 

Free cash flow: Free cash flow in the third quarter of 2023 of $44.6 million was comparable to the corresponding period in 2022. Free cash flow in the first nine months of 2023 of $180.1 million was $46.9 million higher than the corresponding period in 2022 due primarily to higher adjusted EBITDA generated and lower cash outlays for sustaining capital expenditures. Free cash flow is calculated before changes in working capital.

 

Balance Sheet Strength and Financial Flexibility

 

The Company continues to maintain a strong financial position, with a growing cash position, no debt and a $150 million revolving credit facility which remains undrawn.

 

Cash and cash equivalents increased by $129.5 million to $562.7 million in the first nine months of 2023 due primarily to earnings generated in the period, plus the cash proceeds from the disposition of B2Gold Corp shares following its acquisition of Sabina Gold and Silver Corp (“Sabina”), partially offset by cash outlays for capital expenditures, dividends paid and payments for shares repurchased, as well as changes in working capital.

 

Return of Capital to Shareholders

 

In line with its disciplined capital allocation framework, DPM continues to return excess capital to shareholders, which currently includes a sustainable quarterly dividend and periodic share repurchases under its normal course issuer bid.

 

During first nine months of 2023, the Company returned a total of $76.1 million to shareholders through payments for shares repurchased of $53.3 million and dividends paid of $22.8 million, representing approximately 42% of its free cash flow generated during this period.

 

During the nine months ended September 30, 2023, the Company purchased a total of 8,431,871 shares with a total cost of $57.5 million at an average price per share of $6.82 (Cdn$9.18). As at September 30, 2023, the Company had an active automatic share repurchase plan in place under the NCIB with its designated broker which terminated on November 2, 2023, pursuant to which the Company repurchased an additional 1,306,192 shares, all of which were cancelled as at November 7, 2023.

 

Enhanced NCIB

 

The Company renewed its NCIB in February 2023 and is able to purchase up to 16,500,000 common shares, representing approximately 10% of the public float as at February 16, 2023, over a period of twelve months which commenced on March 1, 2023, and terminates on February 28, 2024.

 

The Company’s Board of Directors has authorized management to repurchase up to $100 million of the Company’s shares through the NCIB. As at November 7, 2023, the amount of shares repurchased totalled $65.5 million. The actual timing and number of common shares that may be purchased pursuant to the NCIB will be undertaken in accordance with DPM’s capital allocation framework, having regard for such things as DPM’s financial position, business outlook and ongoing capital requirements, as well as its share price and overall market conditions.

 

Quarterly Dividend

 

On November 7, 2023, the Company declared a dividend of $0.04 per common share payable on January 15, 2024 to shareholders of record on December 31, 2023.

 

Development Projects Update

 

Loma Larga, Ecuador

 

During the third quarter of 2023, the Company entered into an IPA with the Government of Ecuador for Loma Larga, a significant milestone for the project. The IPA provides tax stability and certain tax incentives, as well as legal protections including stability of the regulatory framework and resolution of disputes through international arbitration.

 

Drilling activities, as well as the public consultation for the Environmental Impact Assessment, remain paused following the decision on the appeal of the Constitutional Protective Action, which was delivered by the Provincial Court of Azuay in August 2023. Based on the Company’s preliminary analysis, the decision reaffirmed DPM’s concessions for the Loma Larga project and clarified that free, prior and informed consultation of certain local indigenous populations must be carried out by the state, which the Company had already planned as part of its development of the project. The decision also held that environmental consultation with communities in the project’s area of influence and certain additional reports on the impact of the project on water resources and the Quimsacocha National Recreation Area would need to be provided by the Ministry of Environment, Water and Ecological Transition to the court prior to advancing the project to the exploitation phase.

 

As it completes its legal assessment of the decision, DPM is seeking clarification on the requirements for the additional reports, the indigenous and environmental consultations and the steps needed for DPM to resume the planned drilling campaign in support of the updated FS for the project, in order to assess the associated impact on the project’s development timeline.3

 

In parallel, DPM continues to advance the FS optimization work to leverage the Company’s expertise with similar deposits, including its Chelopech mine in Bulgaria, and to incorporate certain scope changes to enhance project execution and meet DPM’s operating standards. These scope changes, combined with inflationary pressures consistent with general industry trends, are expected to result in significant increases to the estimated initial capital and operating costs for the project. This may impact the project economics and other parameters, including the Mineral Resource and Mineral Reserve estimate, which are being assessed as part of the ongoing optimization phase of the updated FS.

 

DPM will continue with the optimization phase of the updated FS beyond the previously stated timeline ending in 2023, in order to evaluate additional opportunities and to potentially incorporate the results of drilling, once these activities are able to recommence. DPM views the Loma Larga gold project as a high‐quality advanced stage project with the potential to generate strong economic returns following the results of the ongoing optimization work. DPM will continue to take a disciplined approach with respect to future investments in the Loma Larga project, based on the receipt of key milestones and the overall operating environment in-country. The Company’s level of spending in 2024 related to Loma Larga is anticipated to be materially lower compared to the 2023 guidance range.

 

The Company maintains a constructive relationship with government institutions and other stakeholders involved with the development of the project. The EIA for the 69 kV power line for the project received technical approval during the second quarter of 2023, and the associated consultation process is currently ongoing.

 

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3  For further details on the Action, please see the news releases issued on February 24, 2022, July 13, 2022, and August 18, 2023, which are available on the Company’s website at www.dundeeprecious.com and have been filed on SEDAR+ at www.sedarplus.ca.

 

Exploration

 

Čoka Rakita, Serbia

 

In Serbia, exploration activities continued to focus on an accelerated drilling program at the Čoka Rakita deposit, with 11 drill rigs currently in operation. In the first nine months of the year, DPM has drilled 63,500 metres. Infill drilling at a 30-metre by 30-metre spacing is well advanced, covering the core of the system, in order to provide additional confidence in the continuity and high-grade nature of the mineralization.

 

DPM expects to complete a maiden Mineral Resource estimate for Čoka Rakita by the end of the year, and is progressing activities to accelerate the advancement of the project, including geotechnical drilling, metallurgical test-work and evaluation of potential surface locations for the exploration decline portal, mine infrastructure and processing facilities.

 

DPM also commenced additional scout drilling to test other camp-wide targets near Čoka Rakita, and is continuing its 10,000-metre scout drilling program on the Umka licence. Scout drilling intercepted favourable geological indicators on the north-west flank of the system about 600 metres to the north-east of the current limit of the deposit, as well as 500 metres to the south of the main Čoka Rakita target, which indicate further extension potential.

 

Timok, Serbia

 

In October 2023, DPM was granted new exploration licences for the area hosting the Timok gold project, providing additional exploration potential on prospective targets to be developed and tested by the Company following the discovery at Čoka Rakita announced at the beginning of the year.

 

The Company is currently preparing an aggressive exploration program and plans to test the favourable stratigraphy for carbonate replacement and skarns on the new Potja Cuka exploration licence, located to the north of Čoka Rakita, as well as on the new Pester Jug exploration licence, which is to the west of Čoka Rakita. This program is expected to commence in late 2023 or early 2024, pending approval of the work program and permitting procedures, with approximately 25,000 meters of drilling planed for the first year of exploration at these targets.

 

Tierras Coloradas, Ecuador

 

At the Tierras Coloradas licence in Ecuador, DPM commenced a 10,000-metre drilling program in August 2023, completing approximately 2,300 metres during the third quarter. This program is designed to follow-up results reported during the first quarter which confirmed two well-mineralized high-grade vein systems that remain open in multiple directions. The primary focus will be to further assess the extension and geometry of the Aparecida and La Tuna vein systems and to test additional recently discovered high-grade vein and soil anomalies. Detailed surface mapping in conjunction with soil and rock chip-channel sampling is ongoing in order to determine the surface footprint and identify additional targets.

 

Chelopech, Bulgaria

 

During the third quarter of 2023, DPM continued to advance the Chelopech brownfield exploration program, with eight drill rigs currently drilling along the Brevene exploration licence and Sharlo Dere target within the mine concession. Approximately 18,500 metres of surface diamond drilling were completed, with 28 holes completed and 20 holes ongoing. At Sharlo Dere, a 50-metre by 50-metre infill drilling program aimed at fully evaluating the economic potential of the prospect was initiated during the quarter.

 

Ada Tepe, Bulgaria

 

During the third quarter of 2023, exploration activities at the Ada Tepe camp were on the Krumovitsa exploration licence, where scout drilling of several epithermal sediment hosted targets commenced in August. The  target delineation and scout drilling program at Krumovitsa is ongoing, with 15,000 metres expected to be completed by the end of 2023.

 

Permitting for drilling at the Kara Tepe prospect, located on the Chiirite licence, is ongoing and pending the positive outcome of the EIA process, drilling is expected to commence in the second quarter of 2024.

 

2023 Guidance and Three-year Outlook

 

With solid operating performance from the Chelopech and Ada Tepe mines in the third quarter and first nine months of 2023, DPM is on track to meet its 2023 guidance for both its mining operations, including expected gold production of 270,000 to 315,000 ounces, copper production of 30 to 35 million pounds, and an all-in sustaining cost of $700 to $860 per ounce of gold sold.

 

While complex concentrate smelted is expected to increase in the fourth quarter, reflecting improved operating performance as a result of the maintenance work completed during the third quarter, it is forecasted to be below the guidance range for the year.

 

For additional information regarding the Company’s detailed guidance for 2023 and current three-year outlook, please refer to the “Three-Year Outlook” section of the MD&A.

 

Selected Production, Delivery and Cost Performance versus Guidance

 

 

    Q3 2023 YTD September 2023 2023
Consolidated
Guidance
  Chelopech Ada Tepe Tsumeb Consolidated Chelopech Ada Tepe Tsumeb Consolidated
Ore processed Kt 543.3 195.4 738.6 1,640.3 576.9 2,217.2 2,820 – 3,010
Metals contained in concentrate produced                    
Gold Koz 40.3 33.8 74.1 120.0 99.0 219.0 270 – 315
Copper Mlbs 7.2 7.2 22.3 22.3 30 – 35
Payable metals in concentrate sold                    
Gold Koz 34.7 33.0 67.6 99.6 96.6 196.2 245 – 290
Copper Mlbs 6.7 6.7 19.6 19.6 26 – 31
All-in sustaining cost per ounce of gold sold(1) $/oz 1,120 509 911 944 508 840 700 – 860
Complex concentrate smelted Kt 21.8 21.8 120.9 120.9 200 – 230
Cash cost per tonne of complex concentrate smelted $/t 921 921 467 467 340 – 410

1)      All-in sustaining cost per ounce of gold sold guidance for Chelopech and Ada Tepe is expected to be $700 to $880 and $530 to $630, respectively.

This news release and DPM’s unaudited condensed interim consolidated financial statements and MD&A for the three and nine months ended September 30, 2023 are posted on the Company’s website at www.dundeeprecious.com and have been filed on SEDAR+ at www.sedarplus.ca.

 

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 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.

 

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.

 

Posted November 8, 2023

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