(All monetary figures are expressed in Canadian Dollars unless otherwise stated)
Dundee Precious Metals Inc. ("DPM" or the "Company")
(TSX:DPM)(TSX:DPM.WT)(TSX:DPM.WT.A) today announced its unaudited results for
the fourth quarter and the year ended December 31, 2008. DPM reported a fourth
quarter net loss of $80.0 million (basic and diluted net loss per share of
$1.03), including a $47.0 million write-down in the carrying value of its Back
River project located in Nunavut, Canada. This compares with fourth quarter 2007
net loss of $9.5 million (basic and diluted net loss per share of $0.15). For
the year 2008, the Company had a net loss of $79.2 million (basic and diluted
net loss per share of $1.20). This compares with net earnings of $15.4 million
(basic net earnings per share of $0.27 and diluted earnings per share of $0.26)
for the year 2007.
"As we move through this period of low economic activity and metal prices, DPM
is taking steps to streamline and restructure the organization and its
operations and to realize value in the short to intermediate term, through cost
reductions and the sale of assets", said Jonathan Goodman, President and CEO of
DPM.
"We have placed the mine in Armenia on temporary care and maintenance and
suspended all exploration activity. In addition, we renegotiated certain terms
of our Deno Gold concession licensing agreements with the Republic of Armenia,
aimed at securing the long-term viability of this operation, and secured a
processing outlet for our Chelopech concentrate. We continue to develop
strategies to optimize the profitability of the Chelopech operation, including
the interim expansion of the mine and mill to 1.2 million tonnes of ore per
year, and to complete our project investment plans to bring the facility to two
million tonnes per year."
The following table summarizes the Company's financial and operating results for
the periods indicated:
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$ millions, except per share amounts Three Months Twelve Months
------------------ -------------------
Ended December 31, 2008 2007 2008 2007
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Net Revenue $ 15.9 $ 22.3 $ 105.0 $ 122.4
Cost of Sales 35.1 25.6 109.6 82.5
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Gross Profit (Loss) from Mining
Operations (19.2) (3.3) (4.6) 39.9
Property Impairment Provisions (48.8) (0.2) (48.8) (0.7)
Investment and Other Income (Loss) (5.8) 8.3 23.0 39.7
Net Earnings (Loss) (80.0) (9.5) (79.2) 15.4
Basic Earnings (Loss) Per Share $ (1.03) $ (0.15) $ (1.20) $ 0.27
Diluted Earnings (Loss) Per Share $ (1.03) $ (0.15) $ (1.20) $ 0.26
Net Cash Used in Operations (10.9) (21.1) (7.0) (52.6)
Capital Expenditures (15.5) (14.4) (82.2) (110.2)
Purchase of Short-term Investments (52.7) - (52.7) -
Other Investing Activities (5.8) 48.1 55.1 105.1
Financing Activities 75.6 (1.2) 89.0 74.9
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Net Increase (Decrease) in Cash $ (9.3) $ 11.4 $ 2.2 $ 17.2
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Concentrate Produced (mt)
Chelopech 14,931 18,344 54,669 65,060
Deno Gold 2,409 2,113 11,606 8,326
Cash Cost per tonne Ore Processed
(US$/t)(1)
Chelopech $ 54.52 $ 54.73 $ 61.38 $ 46.84
Deno Gold $ 108.03 $ 121.28 $ 109.40 $ 84.30
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FOURTH QUARTER 2008 - FINANCIAL HIGHLIGHTS
- The net loss in the fourth quarter of 2008 of $80.0 million was significantly
higher than the net loss of $9.5 million in the corresponding prior year period
due to a property impairment provision of $47.0 million to write-down the
carrying value of the Back River project and increased losses from mining
operations. The gross loss from mining operations in the fourth quarter of 2008
was greater than the corresponding prior year period due primarily to
significantly lower selling prices for copper, zinc and silver and unfavourable
marked-to-market adjustments relating to the open positions of provisionally
priced concentrate sales partially offset by higher deliveries of concentrates.
- The Chelopech operations reported net revenue of $10.6 million on
corresponding concentrate deliveries of 15,964 tonnes. Chelopech cash cost per
tonne of ore processed(1) in the period was comparable to the corresponding
prior year period due to the favourable impact of a weaker Euro relative to the
U.S. dollar partially offset by higher spending on hydraulic backfill and lower
volumes of material processed.
- The Deno Gold operation reported net revenue of $5.3 million on corresponding
concentrate deliveries of 4,528 tonnes. Cash cost per tonne of ore processed(1)
at Deno Gold was 11% lower than the corresponding prior year period due to lower
administrative expenses and mining costs partially offset by lower volumes of
material processed. An increase in payable metals in concentrate sold as a
result of improved grades and recoveries for all metals had a positive impact on
net revenue.
- Working capital requirements in the fourth quarter of 2008 decreased by $10.7
million due primarily to a decrease in concentrate inventories and an increase
in accounts payable partially offset by a decrease in deferred revenue.
- As at December 31, 2008, DPM had cash, short-term investments and marketable
securities of $108.6 million (market value) versus $115.2 million (market value)
at the end of year 2007.
SIGNIFICANT ITEMS
- Base metal prices in the first half of 2008 were strong but declined
significantly in the second half of 2008 with copper falling more than 60% to
US$1.32 per pound and zinc falling more than 40% to US$0.51 per pound at
December 31, 2008. In the same period, the gold price fell a modest 7% to US$865
per troy ounce, maintaining its safe haven status. Expectations are that gold
prices will continue to rally in the face of unstable currency and financial
markets but non-ferrous metal markets will remain at low levels pending an
economic recovery.
- Notwithstanding the substantial deterioration in the financial markets in the
fourth quarter of 2008, DPM successfully completed an equity offering that
raised net proceeds of $77.2 million (gross proceeds of $81.6 million) through
the sale and issuance of 35,556,000 common shares and 20,444,500 common share
purchase warrants which give the holder the right to purchase one common share
of the Company at the price of $3.25 per share until November 20, 2015. Proceeds
from the offering will be used for ongoing operating and working capital
requirements, potential strategic arrangements, capital expenditures, including
project capital for the Chelopech mine and processing plant expansion, and
general corporate purposes.
- In response to the slowdown in global markets, company-wide plans have been
formulated and steps have been taken to reduce, eliminate and/or defer all
non-critical expenditures and to identify potential strategic opportunities for
certain of its exploration assets. In the fourth quarter of 2008, DPM ceased all
exploration and drilling activities on its Armenian and Serbian properties and
at its Back River project. In addition, during this period, the Company entered
into discussions surrounding strategic opportunities for the advancement of the
Back River project.
- As previously announced, an orderly shutdown to place the Deno Gold operations
on care and maintenance, pending a significant improvement in metal prices, was
completed in November 2008. In an agreement reached on January 15, 2009 between
Deno Gold and the Republic of Armenia's ("RA") Ministry of Energy and Natural
Resources, amongst other items, it was agreed that:
(i) In accordance with the requirements of the RA Law on Concessions, Deno
Gold's Shahumyan mine license will be extended for an additional 12 years to
2032 and the license agreement will be extended to the full extent of the mining
license,
(ii) The annual mine production schedule, as defined by the License Agreement,
will be reduced to 300,000 tonnes (subject to automatic adjustment in the event
of unusual economic hardship including exceptionally low metal prices), and
(iii) The Centralni license will be terminated and all contractual
responsibility of Deno Gold, in its entirety, with respect to such license would
be waived with the exception of certain very limited reclamation/re-cultivation
works and the preparation and implementation of a mine underground closure and
conservation plan, all in compliance with RA legislation.
- While operations at the Chelopech mining facilities are continuing their
normal course, steps have been taken to reduce, eliminate and/or defer
non-critical expenditures. The Chelopech concentrate sales contract with
Namibian Custom Smelters ("NCS") was extended to 2013, giving Chelopech the
right to sell up to 120,000 tonnes of concentrate per year to NCS for the years
2011, 2012 and 2013 and to reduce concentrate sales on 12 months' notice to
allow for the start-up of the metals processing facility in Bulgaria. This
arrangement provides the Company with assurances regarding the processing of its
concentrate while it finalizes its plans for the construction and start-up of
the Chelopech expansion project. In December 2008, Chelopech signed a loan
agreement with NCS, a subsidiary of Weatherly International plc, to advance NCS
up to US$7 million of long-term debt. Proceeds from the loan will be used by NCS
for working capital purposes and improvements at NCS's Tsumeb smelter.
- Following the approval of the Chelopech environmental impact assessment
("EIA") by the Bulgarian Minister of Environment and Waters in July 2008, DPM
began the process of obtaining the necessary construction and operating permits
to expand the Chelopech project to, among other things, increase mine production
capacity to two million tonnes of ore per year and the construction of the metal
processing facility.
A complete set of DPM's Consolidated Financial Statements, Notes to the
Consolidated Financial Statements and Management's Discussion and Analysis for
the year ended December 31, 2008 will be posted on the Company's website at
www.dundeeprecious.com and will be filed on Sedar at www.sedar.com.
CONFERENCE CALL
An analyst conference call is scheduled for Friday, February 20, 2009 at 8:30
a.m. (EST) to present these results and will be webcast live at:
http://events.onlinebroadcasting.com/dundee/022009/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 (symbols: DPM; DPM.WT; DPM.WT.A)
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
concessions in one of the larger gold-copper-silver mining regions in Serbia.
SUMMARIZED FINANCIAL RESULTS
Net Revenue
Revenue from the sale of concentrates of $15.9 million in the fourth quarter of
2008 was $6.4 million or 29% lower than fourth quarter of 2007 due to
significantly lower selling prices for copper, zinc and silver partially offset
by higher deliveries of concentrates from Deno Gold and Chelopech. The average
LME cash copper price(2) and the average LME cash zinc price(2) in the fourth
quarter of 2008 were, respectively, 46% and 55% lower than fourth quarter of
2007 average prices resulting in a significant decrease in revenue in the fourth
quarter of 2008. In addition, unfavourable marked-to-market adjustments of $11.3
million relating to the open positions of provisionally priced concentrate sales
were recorded in the fourth quarter of 2008 as a result of the decline in
forward prices for copper and zinc as at December 31, 2008 relative to September
30, 2008. Unfavourable marked-to-market adjustments of $1.8 million were
recorded in the fourth quarter of 2007. Deliveries of concentrates produced at
Chelopech of 15,964 tonnes in the fourth quarter of 2008 were 7% higher than
fourth quarter of 2007 deliveries of 14,873 tonne due to a drawdown of
concentrate inventories in the fourth quarter of 2008 whereas in the fourth
quarter of 2007, there was a build-up of concentrate inventories. Deliveries of
concentrates produced at Deno Gold of 4,528 tonnes in the fourth quarter of 2008
were 69% higher than fourth quarter of 2007 deliveries of 2,678 tonnes as a
result of a drawdown of concentrate inventory. In addition, an increase in
payable metals in concentrate sold as a result of higher grades and recoveries
for all metals had a positive impact on revenue in the period.
Revenue from the sale of concentrates of $105.0 million in the year 2008 was
$17.4 million or 14% lower than the corresponding prior year period due to lower
deliveries of concentrates produced at Chelopech and lower selling prices for
zinc and copper partially offset by higher selling prices for gold and silver
and higher deliveries of concentrates produced at Deno Gold. The average LME
cash copper price(2) and the average LME cash zinc price(2) were, respectively,
2% and 42% lower than prior year average prices. The average London Bullion gold
price(2) was 25% higher than prior year average price. In addition, unfavourable
marked-to-market adjustments of $12.8 million relating to the open positions of
provisionally priced concentrate sales were recorded in the twelve months of
2008 as a result of the decline in forward prices for copper and zinc in the
year. Favourable marked-to-market adjustments of $6.9 million were recorded in
the year 2007. Deliveries of concentrates produced at Chelopech of 56,760 tonnes
in the year 2008 were 15% lower than the corresponding prior year deliveries of
66,712 tonnes due primarily to lower production of concentrates in the year 2008
as a result of lower volumes of material processed, lower copper and silver
grades and lower recoveries for all metals. Deliveries of concentrates produced
at Deno Gold of 10,777 tonnes were 41% higher than the corresponding prior year
deliveries of 7,662 tonnes due to increased production of concentrates in the
year 2008 as a result of improved grades and recoveries for all metals which
more than compensated for the lower volumes of material processed. In addition,
an increase in payable metals in concentrate sold as a result of improved grades
and recoveries for all metals in the twelve months of 2008 relative to the
corresponding prior year period had a positive impact on revenue in the period.
Cost of sales
Cost of sales of $35.1 million in the fourth quarter of 2008 was $9.5 million or
37% higher than the corresponding prior year period due primarily to higher
deliveries of concentrates.
Cost of sales of $109.6 million in the twelve months of 2008 was $27.1 million
or 33% higher than the corresponding prior year period due primarily to higher
operating costs at Chelopech and Deno Gold.
Cash cost per tonne of ore processed(1) at Chelopech in the fourth quarter of
2008 of US$54.52 was comparable to the fourth quarter of 2007 cash cost per
tonne of ore processed(1) of US$54.73 due to the favourable impact of a weaker
Euro relative to the U.S. dollar offset by higher spending on hydraulic backfill
(which commenced in the second quarter of 2008) and lower volumes of material
processed. Cash cost per tonne of ore processed(1) at Deno Gold in the fourth
quarter of 2008 of US$108.03 was 11% lower than fourth quarter of 2007 cash cost
per tonne of ore processed(1) of US$121.28. Lower spending on administrative
expenses and mining costs in the fourth quarter of 2008 relative to the
corresponding prior year period more than offset the lower volumes of material
processed.
Cash cost per tonne of ore processed(1) at Chelopech in the twelve months of
2008 increased by 31% relative to the corresponding prior year period due to
expenditures associated with cemented rockfill and hydraulic backfill in the
mine (which commenced in fourth quarter of 2007 and second quarter of 2008,
respectively), the appreciation of the Euro relative to the U.S. dollar, higher
employment expenses, higher royalties and higher rates for diesel and power.
Cash cost per tonne of ore processed(1) at Deno Gold increased by 30% in the
twelve months of 2008 compared with the corresponding prior year period due to
lower volumes of material processed, the increase in human resources and
materials required to improve the levels of safety, communications and general
operating standards consistent with the Company's required levels and higher
prices for fuel, diesel and some reagents.
Gross profit (loss)
Chelopech recorded a gross loss from mining operations of $11.4 million in the
fourth quarter of 2008 compared to a gross profit of $4.4 million in the fourth
quarter of 2007. The gross loss from mining operations was due to significantly
lower selling prices for copper and silver and higher cost inventories flowing
through the period partially offset by higher deliveries of concentrates. The
average LME cash copper price(2) in the fourth quarter of 2008 was 46% lower
than fourth quarter of 2007 average price resulting in a gross loss in the
fourth quarter of 2008. In addition, unfavourable marked-to-market adjustments
of $8.2 million on the open positions of provisionally priced concentrate sales
were recorded in the fourth quarter of 2008 compared to unfavourable adjustments
of $1.3 million in the fourth quarter of 2007.
Chelopech recorded a gross profit from mining operations of $16.8 million in the
twelve months of 2008 compared to a gross profit from mining operations of $53.8
million in the twelve months of 2007. The decrease in gross profit from mining
operations was primarily due to lower deliveries of concentrates and higher
production costs partially offset by higher selling prices for gold. The average
London Bullion gold price(2) was 25% higher than prior year average price. In
addition, unfavourable marked-to-market adjustments of $8.5 million relating to
the open positions of provisionally priced concentrate sales were recorded in
the twelve months of 2008 as a result of the significant decrease in copper
prices in the year 2008. Favourable adjustments of $7.8 million were recorded in
the twelve months of 2007.
Deno Gold recorded a gross loss from mining operations of $7.8 million in the
fourth quarter of 2008, which was comparable to a gross loss from mining
operations of $7.7 million recorded in the fourth quarter of 2007. Higher
deliveries of concentrates in the fourth quarter of 2008 relative to the
corresponding prior year period and lower production costs helped mitigate the
negative impact of lower selling prices for copper and zinc. The average LME
cash copper price(2) and the average LME cash zinc price(2) in the fourth
quarter of 2008 were, respectively, 46% and 55% lower than the fourth quarter of
2007 average prices resulting in a significant decrease in revenue in the fourth
quarter of 2008. In addition, unfavourable marked-to-market adjustments of $3.1
million on the open positions of provisionally priced concentrate sales were
recorded in the fourth quarter of 2008 compared to unfavourable adjustments of
$0.5 million in the fourth quarter of 2007.
Deno Gold recorded a gross loss from mining operations of $21.4 million in the
twelve months of 2008 compared to a gross loss from mining operations of $13.9
million in the twelve months of 2007. The increased loss from mining operations
was due to higher production costs and lower selling prices for zinc partially
offset by higher deliveries of concentrates. The average LME cash zinc price(2)
was 42% lower than prior year average price. In addition, unfavourable
marked-to-market adjustments of $4.3 million on the open positions of
provisionally priced concentrate sales were recorded in the twelve months of
2008 as a result of the significant decrease in copper and zinc selling prices
in the year 2008. Unfavourable adjustments of $0.9 million were recorded in the
twelve months of 2007.
Investment and other income (expense)
Investment loss in the fourth quarter of 2008 totalled $5.8 million, an increase
of $14.1 million compared to the fourth quarter of 2007 investment income of
$8.3 million due to lower net realized gains from the sales of investments
partially offset by lower write-downs of investments. Net realized gains on sale
of investments were nil in the fourth quarter of 2008 compared to net realized
gains on sale of investments of $18.8 million in the fourth quarter of 2007.
Write-downs of investments totalling $6.0 million were recorded in the fourth
quarter of 2008 as a result of the decline in market value of certain
securities. Write-downs of investments totalling $13.0 million were recorded in
the fourth quarter of 2007.
Investment income in the year 2008 totalled $23.0 million, a decrease of $16.7
million compared to the corresponding prior year investment income of $39.7
million due to lower net realized gains on the sales of investments partially
offset by lower write-downs of investments. Net realized gains on sale of
investments totalled $28.1 million in the twelve months ended December 31, 2008
compared to net realized gains on sales of investments of $53.7 million in the
twelve months ended December 31, 2007. Write-downs related to impaired
investments totalled $7.5 million in the twelve months ended December 31, 2008
compared to write-downs of $13.0 million in the twelve months ended December 31,
2007.
Administrative expenses
Administrative and other expenses were $4.3 million and $19.9 million for the
three and twelve months ended December 31, 2008, respectively, compared to $5.7
million and $21.2 million for the three and twelve months ended December 31,
2007, respectively.
Exploration expenses
Exploration expenses were $5.4 million and $26.8 million for the three and
twelve months ended December 31, 2008, respectively, compared to $7.7 million
and $29.2 million for the three and twelve months ended December 31, 2007,
respectively. Exploration activities in Serbia were placed on care and
maintenance in the fourth quarter of 2008.
Income tax expense
DPM's effective tax recovery rate of 5.7% for the year 2008 was lower than the
statutory rate of 33.5% primarily due to unrecognized tax benefits relating to
operating losses and valuation allowances against the future tax assets related
to investment and property write-downs partially offset by the non-taxable
portion of capital gains related to the sales of investments and the benefit of
profits earned in jurisdictions having a lower tax rate.
DPM's effective tax rate of 27.7% for the year 2007 was lower than the statutory
rate of 36.12% primarily due to the benefit of profits earned in jurisdictions
having a lower tax rate and the non-taxable portion of capital gains related to
the sales of investments. These benefits were partially offset by unrecognized
tax benefits relating to operating losses.
Cash Flow (Shortfall) and Financial Condition
The following table summarizes the Company's cash shortfall from operating
activities for the periods indicated:
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$ thousands Three Months Twelve Months
---------------------- ---------------------
Ended December 31, 2008 2007 2008 2007
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Net earnings (loss) $ (80,042) $ (9,494) $ (79,195) $ 15,375
Non-cash charges (credits) to
earnings:
Amortization of property,
plant and equipment 4,968 3,229 16,424 12,512
Property impairment provisions 48,780 188 48,780 732
Net realized gains on sale
of investments (64) (18,811) (28,069) (53,733)
Write-downs of investments to
market value 6,009 13,022 7,532 13,022
Other (1,283) (895) (590) 4,736
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Total non-cash charges (credits)
to earnings 58,410 (3,267) 44,077 (22,731)
Decrease (increase) in non-cash
working capital 10,718 (8,340) 28,086 (45,251)
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Net cash used in operating
activities $ (10,914) $ (21,101) $ (7,032) $ (52,607)
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Cash used in operating activities in the fourth quarter of 2008 was $10.9
million, compared with cash used in operating activities of $21.1 million in the
fourth quarter of 2007. The decrease in cash used in operating activities in the
fourth quarter of 2008 relative to the fourth quarter of 2007 was primarily due
to a decrease in working capital requirements partially offset by the loss from
mining operations. The decrease in working capital requirements in the fourth
quarter of 2008 was primarily due to a decrease in concentrate inventories and
an increase in accounts payable partially offset by a decrease in deferred
revenue.
Cash used in operating activities in the year 2008 was $7.0 million, compared
with cash used in operating activities of $52.6 million in the year 2007. The
decrease in cash used in operating activities in the twelve months of 2008
compared with the corresponding prior year period was due to a decrease in
working capital requirements partially offset by the loss from mining
operations. The decrease in working capital requirements in the twelve months of
2008 was primarily due to increases in accounts payable and deferred revenue and
a decrease in accounts receivable.
The following table summarizes the Company's investing activities for the
periods indicated:
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$ thousands Three Months Twelve Months
---------------------- ---------------------
Ended December 31, 2008 2007 2008 2007
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Purchase of portfolio
investments $ (3,872) $ (1,250) $ (3,872) $ (18,046)
Proceeds on sale of portfolio
investments 1,631 51,324 61,869 125,069
Purchase of additional interest
in company, net of share issue
of $2,464 - (2,199) - (2,199)
Purchase of short-term
investments (52,662) - (52,662) -
Loan advances (3,654) - (3,654) -
Capital expenditures (15,479) (14,386) (82,160) (110,209)
Other 18 273 732 273
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Net cash provided by (used in)
investing activities $ (74,018) $ 33,762 $ (79,747) $ (5,112)
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Capital expenditures at Chelopech in the twelve months ended December 31, 2008
of $41.1 million were 37% lower than the corresponding prior year period due to
lower spending on non-critical expenditures, including those related to the
expansion project, pending the approval of the EIA by the Bulgarian government,
which was received on July 30, 2008, and official recommencement of the
expansion project. Capital expenditures, including capitalized exploration, for
Deno Gold in the twelve months ended December 31, 2008 of $26.6 million were 22%
higher than the corresponding prior year period due to increased level of
exploration activities in the first nine months of 2008 relative to 2007.
Exploration activities at Deno Gold ceased in the fourth quarter of 2008.
Capitalized exploration at Deno Gold totalled $18.4 million in the twelve months
of 2008, respectively, compared to expenditures of $14.7 million in the twelve
months of 2007. Capital expenditures at Back River totalled $12.2 million in the
twelve months ended December 31, 2008 compared to expenditures of $21.4 million
in the corresponding prior year period.
For the three and twelve months ended December 31, 2008, DPM realized pre and
after tax cash proceeds of $1.6 million and $61.9 million, respectively, on the
disposition of certain shareholdings, including the sale of its holdings in
Eldorado Gold Corporation for cash proceeds of $41 million in July 2008. By
comparison, for the three and twelve months ended December 31, 2007, DPM
realized pre and after-tax cash proceeds of $51.3 million and $125.1 million,
respectively, on the disposition of certain shareholdings.
Financing Activities
The following table summarizes the Company's financing activities for the
periods indicated:
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$ thousands Three Months Twelve Months
---------------------- ---------------------
Ended December 31, 2008 2007 2008 2007
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Issue of common shares on
exercise of options $ - $ 140 $ - $ 1,380
Net proceeds of equity financing 77,175 - 77,175 77,474
Redemption of deferred share
units - (112) (58) (112)
Proceeds of debt financing - - 15,821 -
Repayment of debt (1,543) (1,263) (3,972) (3,841)
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Net cash provided by (used in)
financing activities $ 75,632 $ (1,235) $ 88,966 $ 74,901
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In the fourth quarter of 2008, DPM successfully completed an equity offering to
raise net proceeds of $77.2 million (gross proceeds of $81.6 million) through
the sale and issuance of 35,556,000 common shares and 20,444,500 common share
purchase warrants which give the holder the right to purchase one common share
of the Company at the price of $3.25 per share until November 20, 2015. Proceeds
from the offering will be used for ongoing operating and working capital
requirements, potential strategic arrangements, capital expenditures, including
project capital for the Chelopech mine and processing plant expansion, and
general corporate purposes.
AVERAGE METAL PRICES
The following table, summarizing the average metal prices for the London Bullion
gold, LME copper, LME zinc and LME silver prices, is used to illustrate the
Company's average metal price exposures based on its key reference prices for
the periods indicated.
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US$, Average Three Months Twelve Months
---------------------- ---------------------
Ended December 31, 2008 2007 2008 2007
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London Bullion gold ($/oz) $ 796 $ 788 $ 872 $ 697
LME cash copper ($/lb) 1.77 3.26 3.16 3.23
LME cash zinc ($/lb) 0.54 1.19 0.85 1.47
LME spot silver ($/oz) $ 10.20 $ 14.22 $ 15.02 $ 13.39
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NON-GAAP FINANCIAL MEASURES
We have referred to cash cost per tonne of ore processed because we understand
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 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
between the Company's cash cost measure and Canadian GAAP cost of sales:
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$ thousands, unless otherwise indicated
For the year ended December 31, 2008 Chelopech Deno Gold Total
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Ore processed (mt) 900,563 269,033
Cost of sales (Cdn$) $ 71,426 $ 38,194 $ 109,620
Cost of sales (US$) $ 67,423 $ 36,319 $ 103,742
Deduct:
Amortization (9,811) (2,560)
Reclamation costs and other (2,155) (1,108)
Care and maintenance costs - (1,732)
Change in concentrate inventory (178) (1,485)
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Total cash cost of production (US$) $ 55,279 $ 29,434
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Cash cost per tonne of ore processed (US$) $ 61.38 $ 109.40
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$ thousands, unless otherwise indicated
For the year ended December 31, 2007 Chelopech Deno Gold Total
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Ore processed (mt) 913,440 323,371
Cost of sales (Cdn$) $ 52,588 $ 29,900 $ 82,488
Cost of sales (US$) $ 47,944 $ 27,363 $ 75,307
Add/(Deduct):
Amortization (6,912) (1,612)
Reclamation costs and other (709) (170)
Change in concentrate inventory 2,459 1,678
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Total cash cost of production (US$) $ 42,782 $ 27,259
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Cash cost per tonne of ore processed (US$) $ 46.84 $ 84.30
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(1) A reconciliation of the Company's cash cost per tonne ore processed to cost
of sales under Canadian GAAP for the years 2008 and 2007 is shown in the table
entitled "Non-GAAP Financial Measures."
(2) Refer to the average metal prices section for the Company's key reference
prices.
To view the Financial Statements, please visit the following link:
http://media3.marketwire.com/docs/dpmfinq4.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. 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.
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