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Dundee Precious Metals Continues Record of Strong Free Cash Flow Generation; Announces 2023 Financial Results and Updated Three-Year Outlook

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Dundee Precious Metals Continues Record of Strong Free Cash Flow Generation; Announces 2023 Financial Results and Updated Three-Year Outlook

 

 

 

 

 

Dundee Precious Metals Inc. (TSX: DPM) announced its operating and financial results for the quarter and year ended December 31, 2023.

 

Highlights

 

(Unless otherwise stated, all monetary figures in this news release are expressed in U.S. dollars, and all operational and financial information contained in this news release is related to continuing operations.)

  • Strong metals production: Produced 296,072 ounces of gold and 30.5 million pounds of copper, in line with 2023 guidance.
  • All-in sustaining cost: Reported cost of sales per ounce of gold sold1 of $919 and an all-in sustaining cost per ounce of gold sold2 of $849, in line with 2023 guidance.
  • Significant free cash flow: Generated $261.6 million of cash provided from operating activities and free cash flow2 of $227.9 million.
  • Solid adjusted net earnings: Reported net earnings of $182.0 million ($0.98 per share) and adjusted net earnings2 of $180.0 million ($0.97 per share2).
  • Growing financial position: Ended the year with a strong balance sheet, including $595.3 million of cash, a $150.0 million undrawn revolving credit facility, and no debt.
  • Return of capital to shareholders: Returned $95.8 million, or 42% of free cash flow, to shareholders during 2023 through dividends paid and shares repurchased. Declared fourth quarter dividend of $0.04 per common share payable on April 15, 2024 to shareholders of record on March 31, 2024.
  • Strong sustainability performance: DPM scored in the 91st percentile among metals and mining companies in the 2023 S&P Global Corporate Sustainability Assessment for the third consecutive year, and was included in the 2024 Sustainability Yearbook.
  • Chelopech life of mine (“LOM”) plan: Updated Mineral Reserve and Mineral Resource estimate and LOM plan with improved grades and recoveries support a mine life that now extends to 2032.
  • Strong 2024 guidance and updated three-year outlook: 2024 production expected to be between 245,000 and 285,000 ounces of gold at an all-in sustaining cost of between $790 to $930 per ounce of gold sold.
  • Strategic review of the Tsumeb smelter: DPM has decided to undertake a strategic review of the Tsumeb smelter, including a potential sale, as the smelter is no longer seen as strategic to DPM’s asset portfolio.
  • Acquisition of Osino: On December 18, 2023, DPM announced an agreement to acquire Osino Resources Corp. (“Osino”), which holds the advanced-stage Twin Hills gold project. Completion of the acquisition remains subject to certain customary conditions, including approval of Osino securityholders and regulatory approval under the Namibia Competition Act.
  • Čoka Rakita: In December 2023, announced a maiden Mineral Resource estimate (“MRE”) of 1.78 million ounces for the Čoka Rakita project in Serbia and continues to advance the preliminary economic assessment (“PEA”), which is on-track for completion in Q2 2024. DPM is continuing the drilling program focused on extending the limits of Čoka Rakita, which remains open to the northeast and southwest, and is also aggressively pursuing additional skarn targets on four licences.
  • Loma Larga: At the Loma Larga project in Ecuador, progressed activities related to permitting and stakeholder relations.

 

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 IFRS Accounting 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 21 of this news release for more information, including reconciliations to IFRS measures.

 

CEO Commentary

 

“2023 was an exceptional year for DPM. We delivered strong operating results, achieved our gold production and all-in sustaining cost guidance, generated $228 million of free cash flow, significantly increased our return of capital to shareholders and further strengthened our balance sheet,” said David Rae, President and Chief Executive Officer. “We also continued to deliver on our ESG priorities and scored in the 91st percentile among metals and mining companies in the S&P Global Corporate Sustainability Assessment for the third consecutive year.

 

“During the year, we significantly transformed our growth pipeline by advancing the Čoka Rakita project in Serbia from discovery to a 1.8 million ounce gold deposit within 11 months.

 

“As we enter 2024, DPM is in a unique position in the industry, with a strong base of production, attractive all-in sustaining costs, significant free cash flow generation and the financial strength to internally fund our growth pipeline and exploration prospects while continuing to return capital to shareholders through our quarterly dividend.”

 

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 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 22 of this news release.

Key Operating and Financial Highlights

 

$ millions, except where noted   Fourth Quarter   Full Year
  2023 2022 Change   2023 2022   Change
Operating Highlights                
Ore Processed t         735,524 759,241 (3 %)           2,952,711 2,991,782   (1 %)
Metals contained in concentrate produced:                
Gold                
Chelopech oz         41,871 45,339 (8 %)           161,872 179,135   (10 %)
Ada Tepe oz         35,212 28,081 25 %           134,200 93,974   43 %
Total gold in concentrate produced oz         77,083 73,420 5 %           296,072 273,109   8 %
Copper Klbs         8,229 7,436 11 %           30,547 30,835   (1 %)
Payable metals in concentrate sold:                
Gold                
Chelopech oz         36,276 39,203 (7 %)           135,862 151,580   (10 %)
Ada Tepe oz         33,288 26,628 25 %           129,881 91,117   43 %
Total payable gold in concentrate sold oz         69,564 65,831 6 %           265,743 242,697   9 %
Copper Klbs         7,009 6,726 4 %           26,651 27,224   (2 %)
Cost of sales per tonne of ore processed(1):                
Chelopech $/t         64 71 (10 %)           63 63   0 %
Ada Tepe $/t         146 125 17 %           140 120   17 %
Cash cost per tonne of ore processed(2):                
Chelopech $/t         51 51 0 %           50 50   0 %
Ada Tepe $/t         72 58 24 %           67 55   22 %
Cost of sales per ounce of gold sold(3) $/oz         877 990 (11 %)           919 975   (6 %)
All-in sustaining cost per ounce of gold sold(2) $/oz         876 1,008 (13 %)           849 885   (4 %)
Financial Highlights                
Revenue           139.3 113.0 23 %           520.1 433.5   20 %
Cost of sales           61.0 65.1 (6 %)           244.2 236.7   3 %
Earnings (loss) before income taxes(4)   63.9 37.6 70 %   216.7 58.7   269 %
From continuing operations   58.5 26.4 122 %   205.7 139.4   48 %
From discontinued operations   5.4 11.2 (52 %)   11.0 (80.7 ) 114 %
Net earnings (loss)(4)   57.5 33.3 72 %   192.9 35.9   437 %
From continuing operations   52.1 22.1 136 %   182.0 116.6   56 %
From discontinued operations   5.4 11.2 (52 %)   10.9 (80.7 ) 114 %
Basic earnings (loss) per share(4)   0.32 0.18 78 %   1.04 0.19   447 %
From continuing operations   0.29 0.12 142 %   0.98 0.61   61 %
From discontinued operations   0.03 0.06 (50 %)   0.06 (0.42 ) 114 %
Adjusted EBITDA(2),(4)   79.6 58.3 37 %   287.2 252.9   14 %
From continuing operations   72.0 45.5 58 %   268.4 222.9   20 %
From discontinued operations   7.6 12.8 (41 %)   18.8 30.0   (37 %)
Adjusted net earnings(2),(4)   55.5 33.3 66 %   190.9 129.0   48 %
From continuing operations   50.1 22.1 127 %   180.0 118.9   51 %
From discontinued operations   5.4 11.2 (52 %)   10.9 10.1   8 %
Adjusted net earnings per share(2),(4)   0.31 0.18 72 %   1.03 0.68   51 %
From continuing operations   0.28 0.12 133 %   0.97 0.62   56 %
From discontinued operations   0.03 0.06 (50 %)   0.06 0.06   (1 %)
Cash provided from operating activities(4)   78.2 49.3 59 %   275.7 232.1   19 %
From continuing operations   71.3 48.5 47 %   261.6 209.6   25 %
From discontinued operations   6.9 0.8 807 %   14.1 22.5   (37 %)
Free cash flow(2),(4)   51.8 33.3 56 %   231.9 166.4   39 %
From continuing operations   49.3 30.0 64 %   227.9 150.5   51 %
From discontinued operations   2.5 3.3 (24 %)   4.0 15.9   (75 %)
Capital expenditures incurred(5):                
Sustaining(6)           8.0 12.9 (38 %)           31.2 39.4   (21 %)
Growth(7)           10.0 11.2 (11 %)           29.3 31.4   (7 %)
Total capital expenditures           18.0 24.1 (25 %)           60.5 70.8   (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 22 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) These measures include discontinued operations.
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 quarter and year ended December 31, 2023 against 2023 guidance is located on page 18 of this news release.

 

In the fourth 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, and production from Chelopech was in-line with expectations.

 

For the full year, DPM achieved its annual guidance for the gold and copper production as well as all-in sustaining cost per ounce of gold sold.

 

Highlights include the following:

 

Chelopech, Bulgaria: Gold contained in concentrate produced in the fourth quarter and full year of 2023 of 41,871 ounces and 161,872 ounces, respectively, was 8% 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 fourth quarter of 2023 of 8.2 million pounds was 11% higher than the corresponding period in 2022 due primarily to higher copper grades. Copper production in 2023 of 30.5 million pounds was comparable to 2022 due primarily to lower copper grades largely offset by higher volumes of ore processed.

 

All-in sustaining cost per ounce of gold sold in the fourth quarter of 2023 was $985 compared to $1,127 in the corresponding period in 2022 due primarily to lower cash outlays for sustaining capital expenditures, higher by-product credits reflecting higher volumes and prices of copper sold and lower prices for power, partially offset by 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 2023 was $955 compared to $858 in 2022 due primarily to lower volumes of gold sold, lower by-product credits reflecting lower volumes and prices of copper sold, higher prices for labour and direct materials and a stronger Euro relative to the U.S. dollar, partially offset by lower treatment and freight charges as a result of increased deliveries to third-party smelters and lower prices for power, as well as lower cash outlays for sustaining capital expenditures.

 

Ada Tepe, Bulgaria: Gold contained in concentrate produced in the fourth quarter and full year of 2023 of 35,212 ounces and 134,200 ounces, respectively, was 25% and 43% 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 year.

 

All-in sustaining cost per ounce of gold sold in the fourth quarter and full year of 2023 of $475 and $500, respectively, was 14% and 26% lower than the corresponding periods in 2022 due primarily to higher volumes of gold sold, as well as the timing of cash outlays for sustaining capital expenditures.

Consolidated Operating Highlights

 

Production: Gold contained in concentrate produced in the fourth quarter and full year of 2023 of 77,083 ounces and 296,072 ounces, respectively, was 5% and 8% 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 fourth quarter of 2024 of 8.2 million pounds was 11% higher than the corresponding period in 2022 due primarily to higher copper grades. Copper production in 2023 of 30.5 million pounds was comparable to 2022 due primarily to lower copper grades largely offset by higher volumes of ore processed.

 

Deliveries: Payable gold in concentrate sold in the fourth quarter and full year of 2023 of 69,564 ounces and 265,743 ounces, respectively, was 6% and 9% higher than the corresponding periods in 2022 primarily reflecting higher gold production.

 

Payable copper in concentrate sold in the fourth quarter of 2023 of 7.0 million pounds was 4% higher than the corresponding period in 2022 due primarily to higher copper production, partially offset by the timing of deliveries. Payable copper in 2023 of 26.7 million pounds was comparable to 2022, consistent with copper production.

 

Cost measures: Cost of sales in the fourth quarter of 2023 of $61.0 million decreased compared to $65.1 million in the corresponding period in 2022 due primarily to lower prices for power and lower depreciation expenses. Cost of sales in 2023 of $244.2 million increased compared to $236.7 million in 2022 due primarily to higher local currency mine operating costs reflecting higher costs for labour and direct materials, partially offset by lower prices for power.

 

All-in sustaining cost per ounce of gold sold in the fourth quarter of 2023 of $876 was 13% lower than the corresponding period in 2022 due primarily to higher volumes of gold sold, lower cash outlays for sustaining capital expenditures, lower prices for power, and higher by-product credits as a result of higher volumes and realized prices of copper sold, partially offset by a stronger Euro relative to the U.S. dollar.

 

All-in sustaining cost per ounce of gold sold in 2023 of $849 was 4% lower than 2022 due primarily to higher volumes of gold sold, lower treatment and freight charges at Chelopech and lower prices for power, partially offset by 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 expenses reflecting DPM’s strong share price performance.

 

Capital expenditures: Capital expenditures incurred in the fourth quarter and full year of 2023 of $18.0 million and $60.5 million, respectively, were 25% and 15% lower than the corresponding periods in 2022 of $24.1 million and $70.8 million.

 

Sustaining capital expenditures incurred the fourth quarter of 2023 of $8.0 million were 38% lower than the corresponding period in 2022 of $12.9 million due primarily to the planned upgrade of the tailings management facility at Chelopech, which occurred throughout 2022 and was completed in the second quarter of 2023. Sustaining capital expenditures in 2023 of $31.2 million were 21% lower than 2022 of $39.4 million due primarily to the completion of the tailings management facility upgrade at Chelopech, as well as the inclusion of the capitalized lease and leasehold improvements related to the new head office in 2022.

 

Growth capital expenditures incurred during the fourth quarter and full year of 2023, primarily related to the Loma Larga gold project, were $10.0 million and $29.3 million, respectively, compared to $11.2 million and $31.4 million in the corresponding periods in 2022.

Consolidated Financial Highlights

 

Financial results in 2023 reflected higher volumes and realized prices of gold sold, partially offset by higher planned exploration and evaluation expenses.

 

Revenue: Revenue in the fourth quarter of 2023 of $139.3 million was 23% higher than the corresponding period in 2022 due primarily to higher volumes and realized prices of gold sold.

 

Revenue in 2023 of $520.1 million was 20% higher than 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 and realized prices of copper sold.

 

Net earnings: Net earnings from continuing operations in the fourth quarter of 2023 of $52.1 million ($0.29 per share) increased compared to $22.1 million ($0.12 per share) in the corresponding period in 2022 due primarily to higher volumes and realized prices of gold and copper sold, partially offset by higher planned exploration and evaluation expenses. Net earnings from continuing operations in 2023 of $182.0 million ($0.98 per share) increased compared to $116.6 million ($0.61 per share) in 2022 due primarily to 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, and higher share-based compensation expenses reflecting DPM’s strong share performance.

 

Adjusted net earnings: Adjusted net earnings from continuing operations in the fourth quarter and full year of 2023 of $50.1 million ($0.28 per share) and $180.0 million ($0.97 per share), respectively, increased compared to $22.1 million ($0.12 per share) and $118.9 million ($0.62 per share) in the corresponding periods in 2022 due primarily to the same factors affecting net earnings, except for adjusting items mainly related to gains or losses on derivatives.

 

Earnings before income taxes: Earnings before income taxes from continuing operations in the fourth quarter and full year of 2023 of $58.5 million and $205.7 million, respectively, increased compared to $26.4 million and $139.4 million in the corresponding periods in 2022, reflecting the same factors that affected net earnings from continuing operations, except for income taxes, which are excluded.

 

Adjusted EBITDA: Adjusted EBITDA from continuing operations in the fourth quarter and full year of 2023 was $72.0 million and $268.4 million, respectively, compared to $45.5 million and $222.9 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 of continuing operations in the fourth quarter of 2023 of $71.3 million was 47% higher than the corresponding period in 2022 due primarily to higher adjusted EBITDA from continuing operations generated in the quarter, as well as the timing of deliveries and subsequent receipt of cash partially offset by the timing of payments to suppliers. Cash provided from operating activities of continuing operations in 2023 of $261.6 million was 25% higher than 2022 due primarily to higher adjusted EBITDA from continuing operations generated in the year, partially offset by the timing of deliveries and subsequent receipt of cash and the timing of payments to suppliers.

 

Free cash flow: Free cash flow from continuing operations in the fourth quarter and full year of 2023 of $49.3 million and $227.9 million, respectively, was $19.3 million and $77.4 million higher than the corresponding periods in 2022 due primarily to higher adjusted EBITDA from continuing operations generated in the periods and lower cash outlays for sustaining capital expenditures. Free cash flow is calculated before changes in working capital.

 

Discontinued Operations

 

In 2023, the Company decided to undertake a strategic review of its Tsumeb operation, including a potential sale, given that the smelter is no longer expected to process any Chelopech concentrate commencing in 2024 and as a result, it is no longer seen as strategic to DPM’s asset portfolio. As a result, the assets and liabilities of Tsumeb have been presented as held for sale in the consolidated statement of financial position as at December 31, 2023 and the operating results and cash flows of Tsumeb have been presented as discontinued operations in the consolidated statements of earnings (loss) and cash flows for the years ended December 31, 2023 and 2022. As a consequence, certain comparative figures in the consolidated statements of earnings (loss) and cash flows have been reclassified to conform with current year presentation.

 

Complex concentrate smelted in the fourth quarter of 2023 of 67,891 tonnes was 26,056 tonnes higher than the corresponding period in 2022 reflecting improved operating performance as a result of the maintenance work which occurred in the third quarter of 2023, compared to a 17-day shutdown to repair a water leak in the off-gas system and instability in the power grid as a result of abnormally heavy rainfall in December 2022. Complex concentrate smelted in 2023 of 188,803 tonnes was 14,681 tonnes higher than the corresponding period in 2022 due primarily to increased plant availability following the completion of the maintenance work in the third quarter of 2023.

 

Cash cost per tonne of complex concentrate smelted in the fourth quarter of 2023 of $320 was $123 lower than the corresponding period in 2022 due primarily to higher volumes of complex concentrate smelted reflecting improved operating performance following the Ausmelt furnace maintenance shutdown, partially offset by lower sulphuric acid by-product credits. Cash cost per tonne of complex concentrate smelted in 2023 of $414 was $49 lower than 2022 due primarily to higher volumes of complex concentrate smelted and a weaker ZAR relative to the U.S. dollar, partially offset by lower sulphuric acid by-product credits.

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 $162.1 million to $595.3 million in 2023 due primarily to earnings generated in the year and 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 (“NCIB”).

 

During 2023, the Company returned a total of $95.8 million to shareholders through payments for shares repurchased under the NCIB of $65.6 million and dividends paid of $30.2 million, representing approximately 42% of its free cash flow generated during the year.

 

Share Repurchases

 

During the year ended December 31, 2023, the Company purchased a total of 9,738,063 shares with a total cost of $65.6 million at an average price per share of $6.74 (Cdn$9.10).

 

The Board of Directors has approved the renewal of the NCIB (the “New Bid”) and the Company expects to seek acceptance thereof from the TSX in due course during the first quarter of 2024. If accepted, the New Bid will be made in accordance with the applicable rules and policies of the TSX and applicable Canadian securities laws, and the Company expects be able to purchase up to 10% of the public float of common shares over a period of twelve months commencing after the receipt of TSX approval.

 

In the event that the New Bid is accepted by the TSX, the actual timing and number of common shares that may be purchased thereunder 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. The Company is currently reviewing its capital allocation strategy in balancing between the capital required for its growth projects and return of capital to shareholders.

Quarterly Dividend

 

On February 14, 2024, the Company declared a dividend of $0.04 per common share payable on April 15, 2024 to shareholders of record on March 31, 2024.

Development Projects Update

 

Čoka Rakita, Serbia

 

In December 2023, DPM announced an Inferred Mineral Resource of 9.79 Mt at a grade of 5.67 g/t for 1.78 million ounces of gold at Čoka Rakita, and subsequently filed a technical report entitled “Maiden Mineral Resource Estimate – Čoka Rakita Gold Project, Serbia”, with an effective date of November 26, 2023, (the Čoka Rakita Technical Report”). The maiden MRE was completed after only one full year of drilling on the project, and is based on approximately 81,000 metres of drilling in 173 holes. The Inferred Mineral Resource contains a significant portion of gold ounces within a continuous high-grade core of mineralization that amounts to 2.81 Mt at a grade of 10.12 g/t Au for 0.914 million ounces of gold.3

 

Based on the favourable size and quality of the MRE, DPM will continue to accelerate the project and expects to complete a PEA in the second quarter of 2024, targeting a throughput rate of 850,000 tonnes per annum.

 

Čoka Rakita benefits from good infrastructure, including existing nearby roads and power lines. The project is located in close regional proximity to DPM’s existing operations in Bulgaria and is a strong fit with the Company’s underground mining and processing expertise, with metallurgical test work demonstrating gold recoveries of approximately 90% by gravity concentration and conventional flotation.

 

The Company has budgeted between $10 million and $13 million on the PEA for the project in 2024.

 

Loma Larga, Ecuador

 

At the Loma Larga project in Ecuador, the Company continued to progress activities related to permitting and stakeholder relations. In October 2023, a new President of Ecuador was elected and the Company is working with the newly formed government to fulfill the requirements of the August 2023 ruling by the Provincial Court of Azuay, which found that free, prior and informed consultation of certain local indigenous populations must be carried out by the state and 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.4

 

In line with this ruling, the Government of Ecuador commenced the environmental consultation process for the Loma Larga project. DPM will continue to support the Government of Ecuador and proactively engage with stakeholders for the fulfillment of the conditions established by the court.

 

As previously reported, DPM will continue with the optimization phase of the updated FS in order to evaluate additional opportunities and to potentially incorporate the results of drilling, once these activities are able to recommence. 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, overall operating environment in-country, and other capital allocation priorities.

 

The Company maintains a constructive relationship with government institutions and other stakeholders involved with the development of the project.

 

The Company has budgeted between $10 million and $11 million for the project in 2024, approximately half of the amount spent in 2023.

 

______________________
3  For further details, refer to the technical report “Maiden Mineral Resource Estimate – Čoka Rakita Gold Project, Serbia,” dated January 24, 2024, available on Company’s website at www.dundeeprecious.com and on SEDAR+ at www.sedarplus.ca.
4  For further details , 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 on SEDAR+ at www.sedarplus.ca.

Exploration

 

Čoka Rakita, Serbia

 

In the fourth quarter, exploration activities in Serbia continued to focus on an accelerated drilling program at the Čoka Rakita deposit, with approximately 19,500 metres completed.

 

The Company also continued scout drilling to test other camp-wide targets near Čoka Rakita and completed additional deep magneto-telluric (MT) survey covering the Čoka Rakita and Dumitru Potok targets, which highlighted a deep, high-conductivity anomaly that is currently being tested. Scout drilling intercepted favourable geological indicators on the north and north west flank of the system where additional marble hosted skarn mineralization was encountered.

 

Following the grant of the two new exploration licences over the area hosting the Timok gold project, the Company is currently preparing an aggressive exploration program and plans to start testing the favourable stratigraphy for carbonate replacement and skarns on the new Potaj Čuka exploration licence, located to the north of Čoka Rakita, as well as on the new Pešter Jug exploration licence, which is to the west of Čoka Rakita. This program is expected to commence in early 2024, pending approval of the work program and permitting procedures, with approximately 25,000 meters of drilling planned for the first year of exploration at these targets.

 

In 2024, the Company has budgeted a total of $20 million to $22 million for Serbian exploration activities.

 

Tierras Coloradas, Ecuador

 

At the Tierras Coloradas licence in Ecuador, DPM completed a total of approximately 6,500 metres of a planned 10,000-metre campaign during 2023 with assay results pending. The primary focus of the drilling campaign is further assessing the extension and geometry of the Aparecida and La Tuna vein systems and testing additional recently-discovered high-grade vein and soil anomalies related with signatures for high-sulphidation epithermal or porphyry deposits. During 2023, detailed surface mapping was performed in conjunction with soil and rock chip-channel sampling, in order to determine the surface footprint and identify additional targets. Additional field work will continue in the first quarter of 2024.

 

The Company invested approximately $5 million at Tierras Coloradas in 2023 and has budgeted another $4 million to $5 million in 2024 to support the expanded drilling program and anticipates that the remainder of the 10,000-metre drilling campaign will be completed by the end of the first quarter of 2024. DPM will also take a disciplined approach with respect to future investment in Tierras Coloradas, based on the the drilling results, overall operating environment in-country and other capital allocation priorities.

 

Chelopech, Bulgaria

 

DPM continues to focus on extending Chelopech’s mine life through it successful in-mine exploration program and an aggressive brownfield exploration program. Positive results from drilling at the Sharlo Dere West and Sharlo Dere prospects, located within the mine concession and proximal to existing Chelopech underground development, highlight potential for further mine life extensions. DPM has completed its initial phase of infill drilling at Sharlo Dere, with the objective of including a Mineral Resource estimate for Sharlo Dere within its next Mineral Resource update for the Chelopech mine.

 

In January 2024, the Company received the Commercial Discovery Certificate from the Bulgarian authorities for the Sveta Petka exploration licence, which includes the Wedge, West Shaft, Krasta and Petrovden prospects. This allows the Company to apply for concession rights in 2024 for the area which is now designated as Chelopech North.

 

In 2024, the Company has budgeted a total of $2 million to $3 million for in-mine exploration activities, which is included in the guidance for growth capital expenditures, and $4 million to $5 million for brownfield exploration activities at Chelopech.

 

Ada Tepe, Bulgaria

 

During the fourth quarter of 2023, exploration activities at the Ada Tepe camp were focused on a target delineation campaign and scout drilling at the new Krumovitsa exploration licence. Scout drilling of several epithermal sediments-hosted targets was advanced in the fourth quarter, and is planned to continue in the first quarter of 2024.

 

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.

 

The Company has planned a total of $4 million to $5 million for Ada Tepe brownfield exploration activities and another $1 million to $2 million for Ada Tepe greenfield exploration activities in 2024.

Detailed 2024 Guidance

 

The following sections of this news release, under the headings “Detailed 2024 Guidance” and “Three-Year Outlook (2024 to 2026)”, represent forward-looking information and readers are cautioned that actual results may vary materially from the Company’s expectations. Refer to the “Cautionary Note Regarding Forward Looking Statements” located on page 20 of this news release and the “Risks and Uncertainties” section of the MD&A issued on February 14, 2024, available on the Company’s website (www.dundeeprecious.com) and filed on SEDAR+ (www.sedarplus.ca).

 

The Company’s detailed guidance for 2024 is set out in the following table:

 

$ millions, unless otherwise indicated Chelopech Ada Tepe Tsumeb Corporate and Other Consolidated
Guidance
Ore processed Kt 2,090 – 2,200 710 – 800 2,800 – 3,000
Cash cost per tonne of ore processed(1) $/t 53 – 58 68 – 75
Metals contained in concentrate produced(2),(3)            
Gold Koz 155 – 175 90 – 110 245 – 285
Copper Mlbs 29 – 34 29 – 34
Payable metals in concentrate sold(3)            
Gold Koz 130 – 145 80 – 100 210 – 245
Copper Mlbs 23 – 27 23 – 27
All-in sustaining cost per ounce of gold sold(1),(4) $/oz 650 – 790 710 – 830 790 – 930
Complex concentrate smelted(5) Kt 200 – 230 200 – 230
Cash cost per tonne of complex concentrate smelted(1),(5) $/t 310 – 360 310 – 360
Corporate general and administrative expenses(6)   24 – 27 24 – 27
Exploration expenses(1)   33 – 39
Evaluation expenses(1),(7)   10 – 13
Sustaining capital expenditures(1),(5),(8)   14 – 18 11 – 14 9 – 11 2 – 3 36 – 46
Growth and other capital expenditures(1),(5),(8),(9)   2 – 3 0 – 1 0 – 1 14 – 15 16 – 20

1) Based on a Euro/US$ exchange rate of 1.10, a US$/ZAR exchange rate of 18.00, a copper price of $3.75 per pound and a sulphuric acid price of $105 per tonne, where applicable.
2) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
3) Gold produced includes gold in pyrite concentrate produced of 50,000 to 55,000 ounces and payable gold sold includes payable gold in pyrite concentrate sold of 35,000 to 39,000 ounces.
4) Allocated general and administrative expenses are reflected in consolidated all-in sustaining cost per ounce of gold sold; however are not reflected in the all-in sustaining cost per ounce of gold sold for Chelopech and Ada Tepe, given that the nature of such expenses is more reflective of the Company’s consolidated all-in sustaining cost and not pertaining to the individual operations of the Company.
5) These measures relate to or include discontinued operations.
6) Excludes share-based compensation expense of approximately $6 million, before mark-to-market adjustments from movements in the Company’s share price, given the volatile nature of this expense.
7) Guidance on evaluation expenses relates to Čoka Rakita gold project which was initiated in 2023.
8) Represents capital expenditures on an accrual basis and do not represent the cash outlays for the capital expenditures.
9) Growth and other capital expenditures in Corporate and Other include the estimated running cost for the Loma Larga gold project of $10 million to $11 million, as well as a capitalized lease related to electric mobile equipment carried from 2023 of $4 million as part of the Company’s ESG initiatives.

 

Acquisition of Osino

 

In December 2023, the Company announced that it had entered into a definitive agreement to acquire Osino. The acquisition of Osino is subject to the approval of Osino’s securityholders as well as applicable regulatory approvals, including approval under the Namibia Competition Act. In addition, each of DPM and Osino has the right to terminate the transaction in certain circumstances. Provided that all approvals are obtained and neither party exercises its right to terminate, the transaction is expected to close in the first half of 2024, following which DPM will provide an update to its 2024 guidance and three-year outlook in due course.

 

Key Assumptions and Sensitivities

 

Certain key cost measures in the Company’s detailed guidance for 2024 are sensitive to market assumptions, including copper price and foreign exchange rates. The following table demonstrates the effect of a 10% change in these market assumptions on the consolidated all-in sustaining cost as well as the smelter cash cost from discontinued operations provided in the 2024 guidance.

 

  2024 assumptions Hypothetical
change
All-in
sustaining cost
($/oz)
Smelter
cash cost
($/t)
Copper $3.75/lb +/- 10% +/- $44/oz N/A
Euro/US$ 1.10 +/- 10% +/- $108/oz N/A
US$/ZAR(1),(2) 18.00 +/- 10% N/A -$35/t /+ $31/t

1) Relates to discontinued operations.
2) As at December 31, 2023, approximately 62% of projected Namibian dollar operating expenses related to discontinued operations for 2024 have been hedged with option contracts providing a weighted average floor rate of 17.94 and a weighted average ceiling rate of 20.24.

Three-Year Outlook (2024 to 2026)

 

Highlights of the Company’s updated three-year outlook include:

 

  • Maintains strong gold production levels: Over the next three years, gold production is expected to average approximately 240,000 ounces per year based on current mine plans, with a forecasted reduction in the current 2026 outlook as Ada Tepe reaches the end of its mine life. The outlook for production will be updated, pending the completion of the Osino acquisition, which is targeted for the first half of 2024.
  • Stable copper production: Copper production over the next three years is expected to average approximately 33 million pounds per year based on current mine plans, with higher forecasted production in 2025 as compared to the previous outlook.
  • All-in sustaining cost: All-in sustaining cost per ounce of gold sold is expected to range between $790 and $930 in 2024, which is higher than previously expected due primarily to lower by-product credits reflecting a lower copper price assumption and lower volumes of copper sold, and higher local currency operating costs. 2025 outlook for all-in sustaining cost per ounce of gold sold remains unchanged from the previous outlook range of $720 to $880, which is lower than 2024 due primarily to higher anticipated volumes of copper sold. All-in sustaining cost per ounce of gold sold in 2026 is expected to be between $760 and $900, higher than 2025 due primarily to lower volume of gold sold from Ada Tepe.
  • Sustaining capital expenditures: Sustaining capital expenditures are expected to trend lower over the next three years due primarily to the gradual reduction in activities at Ada Tepe as the mine approaches its end of life in 2026.

 

The Company’s three-year outlook is set out in the following table:

 

$ millions, unless otherwise indicated   2023
Results
2024
Guidance
2025
Outlook
2026
Outlook
Gold contained in concentrate produced(1),(2)          
Chelopech Koz 162 155 – 175 160 – 185 140 – 155
Ada Tepe Koz 134 90 – 110 70 – 85 50 – 65
Total Koz 296 245 – 285 230 – 270 190 – 220
Copper contained in concentrate produced(1)          
Chelopech Mlbs 31 29 – 34 31 – 36 30 – 35
All-in sustaining cost per ounce of gold sold(3),(4) $/oz 849 790 – 930 720 – 880 760 – 900
Complex concentrate smelted(5) Kt 189 200 – 230 200 – 230 200 – 230
Cash cost per tonne of complex concentrate smelted(3),(5) $/t 414 310 – 360 310 – 360 310 – 360
Sustaining capital expenditures(3),(6)          
Chelopech   19 14 – 18 12 – 15 12 – 15
Ada Tepe   10 11 – 14 8 – 10 4 – 5
Tsumeb(5)   14 9 – 11 12 – 15 10 – 12
Corporate digital initiatives   2 2 – 3 2 – 3 2 – 3
Consolidated   45 36 – 46 34 – 43 28 – 35

1) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
2) Gold produced includes gold in pyrite concentrate produced of 50,000 to 55,000 ounces for 2024, 48,000 to 54,000 ounces in 2025, and 45,000 to 49,000 ounces in 2026.
3) Based on, where applicable, a Euro/US$ exchange rate of 1.10, a US$/ZAR exchange rate of 18.00, and a copper price of $3.75 per pound for all years, and a sulphuric acid price of $105 per tonne for 2024, $79 per tonne for 2025 and $82 per tonne for 2026, where applicable.
4) Reflects DPM general and administrative expenses being allocated based on Chelopech and Ada Tepe’s proportion of total revenue, including discontinued operations. Removing Tsumeb from the allocation would increase all-in sustaining cost by an average of $35 per ounce of gold sold for each of the three years.
5) Related to discontinued operations.
6) Represents capital expenditures on an accrual basis and do not represent the cash outlays for the capital expenditures.

 

The estimated metals contained in concentrate produced and payable metals in concentrate sold detailed in the Company’s 2024 guidance and three-year outlook are not expected to occur evenly throughout the period and are forecast to vary from quarter to quarter depending on mine sequencing, 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 and copper contained in concentrate produced are expected to be consistent with production schedules and expected grades outlined in the most recently issued technical report. Gold contained in concentrate produced remains unchanged from the previous outlook for 2024 and 2025, with the outlook for 2026 slightly below the 2025 production level, in-line with the mine plan. The outlook for copper contained in concentrate produced remains unchanged in 2024 and 2025 from the previous outlook and is expected to remain at the consistent production level in 2026.

 

Cash cost per tonne of ore processed in 2024 is expected to be higher than 2023, due primarily to higher local currency operating costs.

 

All-in sustaining cost per ounce of gold sold in 2024 is expected to be lower than 2023, due primarily to lower treatment charges as all Chelopech concentrates will now be delivered to third-party smelters, partially offset by higher local currency operating costs.

 

Sustaining capital expenditures in 2024 are expected to be lower than 2023 results, mainly due to the completion of the tailings management facility in 2023. Sustaining capital expenditures are expected to trend lower in 2025 and 2026 due primarily to lower expenditures related to mobile equipment. Growth capital expenditures related to resource development drilling and margin improvement projects are expected to be between $2 million and $3 million in 2024, relatively consistent year over year.

 

Ada Tepe

 

Gold contained in concentrate produced remains unchanged from the previous outlook for 2024 and 2025 and is expected to be lower in 2024, in-line with the mine plan as the mine reaches its end of life before the end of 2026.

 

Cash cost per tonne of ore processed is expected to be higher in 2024 as compared to 2023, due primarily to higher local currency operating costs.

 

All-in sustaining cost per ounce of gold sold is expected to be higher in 2024 as compared to 2023, due primarily to lower volumes of gold sold and higher local currency operating costs.

 

Sustaining capital expenditures are expected to be slightly higher than the previous outlook range of $10 million to $12 million in 2024 due primarily to higher deferred stripping costs and increased costs related to Ada Tepe’s integrated waste management facility, before reducing to a range of $8 million to $10 million in 2025, in line with the previous outlook, and reducing further to a range of $4 million to $5 million in 2026 as the mine reaches the end of its life.

 

Loma Larga gold project

 

Growth capital expenditures for 2024 associated with the Loma Larga gold project are expected to be between $10 million and $11 million, approximately half of the amount spent in 2023, covering the estimated running costs for the year, which mainly include general and administrative expenses, certain permitting, social and environmental related activities. In 2023, higher spend was a result of the additional scope of work related to the updated FS work as well as increased activities related to stakeholder engagement. DPM will continue to take a disciplined approach with respect to future investments in the Loma Larga gold project, based on the receipt of key milestones, overall operating environment in-country and other capital allocation priorities.

 

Exploration and evaluation expenses

 

Exploration expenditures in 2024 are expected to be between $33 million and $39 million due primarily to higher expected drilling activities at Čoka Rakita and at the new Potaj Čuka prospect located to the north of Čoka Rakita in Serbia, as well as a new drilling program at the new Krumovitsa licence at Ada Tepe in Bulgaria.

 

Evaluation expenditures in 2024 are expected to be between $10 million and $13 million related to the PEA for the Čoka Rakita project, which is expected to be completed in the second quarter of 2024. If positive results are achieved from the PEA and the Company decides to proceed with a pre-feasibility study (“PFS”), the Company may increase its guidance for evaluation expenditures. The amount and timing for this additional funding is dependent on the timing of the completion of the PEA.

 

 

Selected Production, Delivery and Cost Performance versus Guidance

 

    Q4 2023 2023 2023 Consolidated Guidance
  Chelopech Ada Tepe Tsumeb Consolidated Chelopech Ada Tepe Tsumeb Consolidated
Ore processed Kt 564.8 170.7 735.5 2,205.1 747.6 2,952.7 2,820 – 3,010
Metals contained in concentrate produced                    
Gold Koz 41.9 35.2 77.1 161.9 134.2 296.1 270 – 315
Copper Mlbs 8.2 8.2 30.5 30.5 30 – 35
Payable metals in concentrate sold                    
Gold Koz 36.3 33.3 69.6 135.9 129.9 265.8 245 – 290
Copper Mlbs 7.0 7.0 26.7 26.7 26 – 31
All-in sustaining cost per ounce of gold sold(1) $/oz 985 475 876 955 500 849 700 – 860
Complex concentrate smelted(2) Kt 67.9 67.9 188.8 188.8 200 – 230
Cash cost per tonne of complex concentrate smelted(2) $/t 320 320 414 414 340 – 410

1) The guidance ranges for all-in sustaining cost per ounce of gold sold for Chelopech and Ada Tepe for 2023 were $700 to $880 and $530 to $630, respectively.
2) Related to discontinued operations.

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, Serbia and Ecuador. 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 February 15, 2024

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