TORONTO, ONTARIO (TSX: DPM)(TSX: DPM.WT) -
(All monetary figures are expressed in Canadian Dollars unless
otherwise stated)
Dundee Precious Metals Inc. ("DPM" or the "Company") (TSX:
DPM)(TSX: DPM.WT) today announced its unaudited results for the
second quarter ended June 30, 2008. DPM reported a second quarter
net loss of $14.1 million (basic and diluted net loss per share of
$0.23). This compares with second quarter ended June 30, 2007 net
earnings of $23.5 million (basic and diluted net earnings per share
of $0.43 and $0.42, respectively).
"With the approval of the Environmental Impact Assessment and
signing of the Memorandum of Understanding with the Bulgarian
government, we look forward to advancing the expansion of our
Chelopech operation and finalizing our partnership with the
Bulgarian government", said Jonathan Goodman, President and CEO of
DPM. "We are also encouraged by very favourable drill results at
our Serbian molybdenum project confirming significant resource
potential. Advancing the project to prove up additional resources
is a clear priority."
The following table summarizes the Company's financial and
operating results for the periods indicated:
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$ millions, except Three Months Six Months
per share amounts -----------------------------------
Ended June 30, 2008 2007 2008 2007
----------------------------------------------------------------------------
Net revenue (gold/copper/zinc
concentrates) $ 32.7 $ 52.5 $ 72.5 $ 73.4
Cost of sales 28.8 26.7 50.7 39.1
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Gross profit from mining operations 3.9 25.8 21.8 34.3
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Investment income (expense) (1.4) 16.2 1.0 33.3
Net earnings (loss) (14.1) 23.5 (5.7) 34.5
Basic net earnings (loss) per share $ (0.23) $ 0.43 $ (0.09) $ 0.64
Diluted net earnings (loss) per share $ (0.23) $ 0.42 $ (0.09) $ 0.62
Net cash provided by (used in) operating
activities 21.7 (6.9) 14.3 (23.1)
Capital expenditures (27.6) (31.7) (47.4) (53.3)
Other investing activities 16.9 21.0 20.0 53.8
Financing activities (1.3) 69.2 (1.9) 68.9
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Net increase (decrease) in cash $ 9.7 $ 51.6 $ (15.0) $ 46.3
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Concentrate produced (mt)
Chelopech 11,987 14,396 26,170 33,432
Deno Gold 2,704 2,341 4,589 4,289
Cash cost per tonne ore processed
(US$/t)(1)
Chelopech $ 68.03 $ 44.46 $ 63.52 $ 42.66
Deno Gold $ 110.65 $ 62.85 $ 109.05 $ 62.23
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SECOND QUARTER OF 2008 - FINANCIAL HIGHLIGHTS
- Net loss for the second quarter of 2008 was $14.1 million
compared with net earnings of $23.5 million in the second quarter
of 2007. Lower gross profit from mining operations and lower net
realized gains on sales of investments in the second quarter of
2008, relative to the second quarter of 2007, largely contributed
to the net loss. The decrease in gross profit from mining
operations was due to lower deliveries of concentrate and higher
production costs at Deno Gold and Chelopech partially offset by
stronger prices for gold, copper and silver. Included in the second
quarter of 2008 results was a loss of $1.9 million on the sale of
the Company's holdings in Crescent Gold Limited.
- The Chelopech gold/copper operation reported net revenue of
$24.7 million on corresponding concentrate deliveries of 11,891
tonnes. Chelopech cash cost per tonne of ore processed(1) was
negatively impacted by the appreciation of the Euro relative to the
U.S. dollar, lower volumes of material processed, expenditures
associated with cemented rock fill and hydraulic fill in the mine
(which commenced in the fourth quarter of 2007 and second quarter
of 2008, respectively), higher employment expenses and rising
prices for diesel and power. Approximately 41% of the increase in
cash cost per tonne at Chelopech was due to the appreciation of the
Euro relative to the U.S. dollar, 21% to lower volumes of material
processed, 17% to the introduction of cemented rock fill and
hydraulic fill, 14% to higher employment expenses and 7% to higher
rates for diesel and power.
- The Deno Gold operation reported net revenue of $8.1 million
on corresponding concentrate deliveries of 3,592 tonnes. Cash cost
per tonne of ore processed(1) at Deno Gold was negatively impacted
by the addition of human and material resources required to improve
the levels of safety, communications and general operating
standards, lower volumes of material processed, the appreciation of
the Armenian dram relative to the U.S dollar, higher mining costs,
as a result of poor ground conditions in the mines, and rising
prices for fuel, diesel and some reagents.
- As at June 30, 2008, DPM had cash and marketable securities of
$84.4 million (market value) versus $115.2 million (market value)
at December 31, 2007.
- Cash provided by operating activities in the second quarter of
2008 totalled $21.7 million due primarily to a decrease in working
capital of $30.2 million partially offset by the pre-tax loss.
SIGNIFICANT ITEMS
- On July 30, 2008, the Company announced that the Bulgarian
Minister of Environment and Waters signed the Environmental Impact
Assessment ("EIA") for the Company's Chelopech expansion project.
The approved EIA contemplates the expansion of the Chelopech Mine
to an annual processing rate of up to 2 million tonnes per year in
its first stage (the permit allows for an expansion up to 3 million
tonnes per year) and the construction of a metals processing
facility at the site. With this approval, DPM is now in a position
to obtain the construction and operating permits required to
complete the project. The definitive feasibility study is currently
being updated to reflect current circumstances and will be
finalized during the fourth quarter of 2008.
- On July 10, 2008, the Company announced that, further to a
resolution of the Council of Ministers announced in its press
release of June 26, the Minister of Economy, in representation of
the Government of Bulgaria, signed its Memorandum of Understanding
("MOU") with DPM. The MOU sets out the principles of partnership
between DPM and the Bulgarian Government and defines the conditions
for the establishment of a new company to treat the Chelopech
gold/copper concentrate and the corresponding amendments to the
concession agreement. On March 10, 2008, the Company had entered
into an agreement-in-principle with the Bulgarian Government
concerning the proposed expansion of the Chelopech gold/copper mine
and processing facility.
- On July 24, 2008, Chelopech concluded an amendment and
restatement agreement with the European Bank for Reconstruction and
Development to amend and restate its existing US$10 million
long-term loan agreement, increasing it to an aggregate amount of
US$25 million. Proceeds from the financing will be used to fund
ongoing and project related capital expenditures.
- Following the July 3, 2008 announcement by Eldorado Gold
Corporation ("Eldorado") of its successful bid to acquire greater
than 66(2/3)% of the issued and outstanding shares of Frontier
Pacific Mining Corporation ("Frontier Pacific"), DPM received
5,117,021 common shares of Eldorado and a minimal amount of cash in
exchange for its shares in Frontier Pacific. On July 22, 2008, DPM
sold its holdings in Eldorado for cash proceeds of $41 million.
- An independent National Instrument 43-101 ("NI 43-101")
resource estimate, for the Surdulica Molybdenum ("Mo") - Rhenium
("Re") project in Serbia, was completed by Coffey Mining Pty Ltd
using the exploration data collected during 2007. The resource
estimate, based on the 26,400 metres of diamond drilling, reverse
circulation drilling and trench sampling carried out in 2007, has
returned an Inferred Resource of 106 million tonnes grading 518
parts per million Mo (0.052%) and 0.16 ppm Re, based on a 300 ppm
Mo cut-off grade. Over 90% of the geochemical anomalies identified
at Surdulica remain to be drill tested. Review of the soil sampling
data has shown excellent correlation with the resource drilled to
date reinforcing the potential of the project. An aggressive
program of follow-up drilling is underway in order to determine the
extent of the mineralization at Surdulica.
A complete set of DPM's Consolidated Financial Statements, Notes
to the Consolidated Financial Statements and Management's
Discussion and Analysis for the second quarter ended June 30, 2008
are posted on the Company's website at www.dundeeprecious.com and
have been filed on Sedar at www.sedar.com.
SECOND QUARTER RESULTS BROADCAST
DPM will be hosting an analyst meeting to present its 2008
second quarter financial results on Thursday, July 31, 2008 at 8.30
am (Toronto time). The meeting will be webcast live (audio only)
at:
http://events.onlinebroadcasting.com/dundee/073108/index.php
The audio webcast for this conference call will be archived and
available on the Company's website at www.dundeeprecious.com.
OVERVIEW
DPM is a Canadian based, international mining company engaged in
the acquisition, exploration, development and mining of precious
metal properties. Its common shares and share purchase warrants
(symbol: DPM and DPM.WT) are traded on the Toronto Stock Exchange
("TSX"). DPM's business objectives are to identify, acquire,
finance, develop and operate low-cost, long-life mining
properties.
The Company's operating interests include its 100% ownership of
Chelopech Mining EAD ("Chelopech"), a gold, copper, silver
concentrates producer, owner of the Chelopech mine located
approximately 70 kilometres east of Sofia, Bulgaria, and a 95%
interest in Vatrin Investment Limited ("Vatrin"), a private entity
which holds 100% of Deno Gold Mining Company CJSC ("Deno Gold"),
its principal asset being the Kapan mine, a gold, copper, zinc,
silver concentrates producer located about 320 kilometres south
east of the capital city of Yerevan in Southern Armenia. DPM's
interests also include a 100% interest in the Krumovgrad
development stage gold property located in south eastern Bulgaria,
near the town of Krumovgrad, a 100% interest in the Back River gold
project located in Nunavut in the Canadian Arctic and three
significant exploration and exploitation properties in one of the
larger gold-copper-silver mining regions in Serbia.
SUMMARIZED FINANCIAL RESULTS
Net Revenue
Net revenue from the sale of concentrates of $32.7 million in
the second quarter of 2008 was 38% lower than second quarter of
2007 due to lower deliveries of concentrates from Chelopech
partially offset by stronger metal prices for gold, copper and
silver. Deliveries of gold/copper concentrates produced at
Chelopech totalled 11,891 tonnes in the second quarter of 2008 and
were 55% lower than second quarter of 2007 deliveries of 26,580
tonnes. Net revenue in the second quarter of 2007 reflected a
drawdown of concentrate inventory of 12,184 tonnes, whereas in the
second quarter of 2008, there was no drawdown of concentrate
inventory. Deliveries of concentrates produced at Deno Gold
totalled 3,592 tonnes in the second quarter of 2008 and were 36%
higher than second quarter of 2007 deliveries of 2,643 tonnes.
Net revenue from the sale of concentrates of $72.5 million in
the first half of 2008 was comparable to the net revenue in the
corresponding prior year period. The benefits of stronger metal
prices in 2008 were offset by lower deliveries of concentrates as a
result of lower production of concentrate in 2008. Deliveries of
gold/copper concentrates produced at Chelopech totalled 30,420
tonnes in the first half of 2008 and were 19% lower than first half
of 2007 deliveries of 37,744 tonnes as a result of lower production
of concentrate in 2008. Deliveries of concentrates produced at Deno
Gold totalled 4,464 tonnes in the first half of 2008 and were 20%
higher than first half of 2007 deliveries of 3,721 tonnes.
Cost of sales
Cost of sales of $28.8 million in the second quarter of 2008 was
$2.1 million or 8% higher than the corresponding prior year period
due primarily to higher operating costs at Chelopech and Deno Gold
partially offset by lower deliveries of concentrates. Higher cash
cost per tonne of ore processed(1) increased cost of sales by
approximately $8.9 million and lower volumes of concentrate
deliveries resulted in a decrease in cost of sales of approximately
$6.8 million.
Cost of sales of $50.7 million in the first half of 2008 was
$11.7 million or 30% higher than the corresponding prior year
period due to higher operating costs at Chelopech and Deno Gold
partially offset by lower deliveries of concentrates. The increase
in cash cost per tonne of ore processed(1) resulted in an increase
in cost of sales of approximately $14.0 million and lower volumes
of concentrate deliveries resulted in a decrease in cost of sales
of approximately $2.3 million.
Cash cost per tonne of ore processed(1) at Chelopech in the
second quarter and first half of 2008 increased by 53% and 49%,
respectively, relative to the corresponding prior year periods due
to the appreciation of the Euro relative to the U.S. dollar, lower
volumes of material processed, expenditures associated with
cemented rock fill and hydraulic fill in the mine (which commenced
in the fourth quarter of 2007 and in the second quarter of 2008,
respectively), higher employment expenses and rising prices for
diesel and power. Cash cost per tonne of ore processed(1) at Deno
Gold increased by 76% and 75%, in the second quarter and first half
of 2008, respectively, relative to the corresponding periods in
2007 due to the significant increase in human and material
resources required to improve the levels of safety, communications
and general operating standards towards the Company's required
levels, the appreciation of the Armenian dram relative to the U.S.
dollar, lower volumes of material processed, higher mining costs as
a result of poor ground conditions in the mines and rising prices
for fuel, diesel and some reagents.
Investment income (expense)
Investment expense in the second quarter of 2008 totalled $1.4
million compared to investment income of $16.2 million in the
second quarter of 2007. The decrease was primarily due to lower net
realized gains on sales of investments and write-down of
investments totalling $1.0 million in the second quarter of 2008.
Included in the second quarter of 2008 results was a loss of $1.9
million on the sale of DPM's holdings in Crescent Gold Limited.
Investment income in the first half of 2008 totalled $1.0
million, a decrease of $32.3 million relative to investment income
of $33.3 million in the first half of 2007. The decrease was
primarily due to lower net realized gains on sales of investments
in the six months ended June 30, 2008.
Exploration expense
Exploration expense was $8.9 million and $14.0 million in the
second quarter and first half of 2008 compared with $7.6 million
and $12.0 million in the corresponding prior year periods,
respectively. The higher spending in 2008 was related to an
increased level of exploration activity in Serbia.
Income tax expense
The Company's effective tax recovery rate of 0.6% in the second
quarter of 2008 was lower than the statutory rate of 33.5% due to
unrecognized tax benefits related to losses partially offset by the
benefit of profits earned in jurisdictions having a lower tax rate.
The Company's effective tax rate for the second quarter of 2007 was
13.8% due to the non-taxable portion of capital gains related to
the sales of investments and the benefit of profits earned in
jurisdictions having a lower tax rate partially offset by
unrecognized tax benefits relating to operating losses.
Cash Flow and Financial Condition
The following table summarizes the Company's cash flow from
operating activities for the periods indicated:
----------------------------------------------------------------------------
$ thousands Three Months Six Months
-------------------------------------
Ended June 30, 2008 2007 2008 2007
----------------------------------------------------------------------------
Net earnings (loss) $ (14,118) $23,506 $ (5,690) $ 34,521
Non-cash charges (credits)
to earnings:
Amortization of property,
plant and equipment 3,613 2,904 7,142 5,902
Net realized (gains) losses on
sale of investments 1,289 (17,331) (496) (36,844)
Other 662 868 886 4,799
----------------------------------------------------------------------------
Total non-cash charges (credits)
to earnings 5,564 (13,559) 7,532 (26,143)
Decrease (increase) in non-cash
working capital 30,225 (16,840) 12,481 (31,521)
----------------------------------------------------------------------------
Net cash provided by (used in)
operating activities $ 21,671 $(6,893) $ 14,323 $ (23,143)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash provided by operating activities in the second quarter of
2008 was $21.7 million, compared with cash used in operating
activities of $6.9 million in the second quarter of 2007. The
increase in cash provided by operating activities in the second
quarter of 2008, relative to the second quarter of 2007, was due to
a decrease in working capital requirements, whereas in the second
quarter of 2007, there was an increase in working capital
requirements. This was partially offset by lower gross profit from
mining operations in the second quarter of 2008. The decrease in
working capital requirements in the second quarter of 2008 was
primarily due to a decrease in trade receivables as a result of
timing of cash receipts from customers and an increase in deferred
revenue related to a shipment to one of our customers.
Cash provided by operating activities in the first half of 2008
was $14.3 million, compared with cash used in operating activities
of $23.1 million in the first half of 2007. The increase in cash
provided by operating activities in the first half of 2008,
relative to the first half of 2007, was primarily due to a decrease
in working capital requirements, whereas in the first half of 2007,
there was an increase in working capital requirements. This was
partially offset by lower gross profit from mining operations in
the first half of 2008. The decrease in working capital
requirements in the first half of 2008 was primarily due to an
increase in deferred revenue and an increase in accounts payable
partially offset by an increase in supplies inventory.
The following table summarizes the Company's investing
activities for the periods indicated:
----------------------------------------------------------------------------
$ thousands Three Months Three Months
------------------------------------
Ended June 30, 2008 2007 2008 2007
----------------------------------------------------------------------------
Purchase of investments $ - $(11,580) $ - $ (11,796)
Proceeds on sale of investments 16,214 32,558 19,191 65,624
Capital expenditures (27,637) (31,680) (47,360) (53,345)
Proceeds on disposal of fixed assets 709 - 709 -
----------------------------------------------------------------------------
Net cash provided by (used in)
investing activities $(10,714)$(10,702) $(27,460) $ 483
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures for the Chelopech mine in the second
quarter and first half of 2008 of $12.6 million and $24.3 million
were 32% and 27% lower, respectively, than the corresponding prior
year periods due to lower spending on non-critical capital
expenditures, including those related to the expansion project
which were deferred while waiting for the environmental impact
assessment to be approved by the Bulgarian government. Capital
expenditures for Deno Gold in the second quarter and first half of
2008, including capitalized exploration, of $7.7 million and $13.3
million were 97% and 70% higher, respectively, than the
corresponding prior year periods due to increased spending on
exploration and mining equipment. Capitalized exploration at Deno
Gold totalled $4.3 million and $9.0 million in the second quarter
and first half of 2008 compared with expenditures of $1.3 million
and $1.8 million in the second quarter and first half of 2007,
respectively.
(1) A reconciliation of the Company's cash cost per tonne ore
processed to cost of sales under Canadian GAAP for the second
quarters of 2008 and 2007 is shown in the section entitled
"Non-GAAP Financial Measures."
NON-GAAP FINANCIAL MEASURES
The Company refers to cash cost per tonne of ore processed
because it understands that certain investors use this information
to assess the Company's performance and also determine the
Company's ability to generate cash flow for investing activities.
This measurement captures all of the important components of the
Company's production and related costs. In addition, management
utilizes this metric as an important management tool to monitor
cost performance of the Company's operations. This measurement has
no standardized meaning under Canadian generally accepted
accounting principles ("GAAP") and is therefore unlikely to be
comparable to similar measures presented by other companies. This
measurement is intended to provide additional information and
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with Canadian
GAAP.
The following table provides, for the periods indicated, a
reconciliation of the Company's cash cost measure to its Canadian
GAAP cost of sales:
----------------------------------------------------------------------------
$ thousands, unless otherwise indicated
For the quarter ended June 30, 2008 Chelopech Deno Gold Total
----------------------------------------------------------------------------
Ore processed (mt) 201,887 74,955
Cost of sales (Cdn$) $ 15,346 $ 13,454 $ 28,800
Cost of sales (US$) $ 14,905 $ 13,069 $ 27,974
Add/(Deduct):
Amortization and other non-cash charges (2,423) (733)
Change in concentrate inventory 1,251 (4,042)
----------------------------------------------------------------------------
Total cash cost of production (US$) $ 13,733 $ 8,294
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash cost per tonne of ore processed (US$) $ 68.03 $ 110.65
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ thousands, unless otherwise indicated
For the quarter ended June 30, 2007 Chelopech Deno Gold Total
----------------------------------------------------------------------------
Ore processed (mt) 220,963 92,731
Cost of sales (Cdn$) $ 19,280 $ 7,380 $ 26,660
Cost of sales (US$) $ 16,813 $ 6,462 $ 23,275
Deduct:
Amortization and other non-cash charges (2,293) (342)
Change in concentrate inventory (4,697) (291)
----------------------------------------------------------------------------
Total cash cost of production (US$) $ 9,823 $ 5,829
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash cost per tonne of ore processed (US$) $ 44.46 $ 62.85
----------------------------------------------------------------------------
----------------------------------------------------------------------------
To view the Financial Statements, please click on the following
link:
http://media3.marketwire.com/docs/dpm20730.pdf
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" that
involve a number of risks and uncertainties. Forward-looking
statements include, but are not limited to, statements with respect
to the future price of gold, copper, zinc and silver, the
estimation of mineral reserves and resources, the realization of
mineral estimates, the timing and amount of estimated future
production, costs of production, capital expenditures, costs and
timing of the development of new deposits, success of exploration
activities, permitting time lines, currency fluctuations,
requirements for additional capital, government regulation of
mining operations, environmental risks, unanticipated reclamation
expenses, title disputes or claims, limitations on insurance
coverage and timing and possible outcome of pending litigation.
Often, but not always, forward-looking statements can be identified
by the use of words such as "plans", "expects", or "does not
expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates", or "does not anticipate", or
"believes", or variations of such words and phrases or state that
certain actions, events or results "may", "could", "would", "might"
or "will" be taken, occur or be achieved. Forward-looking
statements are based on the opinions and estimates of management as
of the date such statements are made, and they involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be
materially different from any other future results, performance or
achievements expressed or implied by the forward-looking
statements. Such factors include, among others: the actual results
of current exploration activities; actual results of current
reclamation activities; conclusions of economic evaluations;
changes in project parameters as plans continue to be refined;
future prices of gold, copper, zinc and silver; possible variations
in ore grade or recovery rates; failure of plant, equipment or
processes to operate as anticipated; accidents, labour disputes and
other risks of the mining industry; delays in obtaining
governmental approvals or financing or in the completion of
development or construction activities, fluctuations in metal
prices, as well as those risk factors discussed or referred to in
Management's Discussion and Analysis under the heading "Risks and
Uncertainties" and other documents filed from time to time with the
securities regulatory authorities in all provinces and territories
of Canada and available at www.sedar.com.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results
not to be anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Unless
required by law, the Company undertakes no obligation to update
forward-looking statements if circumstances or management's
estimates or opinions should change. Accordingly, readers are
cautioned not to place undue reliance on forward-looking
statements.
Contacts: DUNDEE PRECIOUS METALS INC. Jonathan Goodman President
and Chief Executive Officer (416) 365-2408 Email:
jgoodman@dundeeprecious.com DUNDEE PRECIOUS METALS INC. Stephanie
Anderson Executive Vice President and Chief Financial Officer (416)
365-2852 Email: sanderson@dundeeprecious.com DUNDEE PRECIOUS METALS
INC. Gabriela M. Sanchez Vice President, Investor Relations (416)
365-2549 Email: gsanchez@dundeeprecious.com
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