(All amounts have been expressed in US Dollars except where
otherwise indicated)
Dundee Precious Metals Inc. (TSX: DPM)(TSX: DPM.WT)(TSX:
DPM.WT.A) ("DPM" or "the Company") is pleased to report the results
of the update to the existing definitive feasibility study (the
"DFS") of the Chelopech mine expansion and metals plant project
(the "Project") in Bulgaria undertaken in cooperation with GRD
Minproc Ltd. ("Minproc") and Coffey Mining Pty Ltd. ("Coffey").
"We are extremely pleased with the results of the update to the
2005 feasibility study on our Chelopech expansion project which
confirms the commercial viability of the project and indicates an
internal rate of return of over 27%", stated Jonathan Goodman,
President and CEO. The company is now working on completion of
permitting, project financing and the implementation plan for the
project taking into account the flexibility that we have gained
from our smelter agreement announced in late December. This will
enable us to focus our spending on maximizing cash flows from the
mine and allow an orderly construction of the metals plant, in a
manner that best enhances shareholder value."
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Project Highlights 2012 - 2018(1)
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Average annual mine production 2 million tonnes
Average annual concentrate production 150,000 tonnes
Average annual gold production 139,568 oz
Average annual copper production 47.9 million lbs
Total cash cost/tonne ore processed(2) $52.40
Total cash cost per oz gold (copper co-product basis)(2) $430
Total cash cost per oz gold (net of copper credit)(2) $152
Total cash cost per lb copper (copper co-product basis)(2) $0.94
Capital costs from January 2009(2),(3) $216 million
Sustaining capital(2) $63 million
Average annual EBITDA(4) $90 million
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Item Life of Mine
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Total gold production (oz) 1,506,179
Total copper production (M lbs) 517.7
NPV at a discount rate of 7.5%, after tax $238 million
Internal Rate of Return, after tax (IRR) (5) 27.7%
Payback Period, after tax (from 2011 startup) 2.8 years
Mine Life 12 years
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(1) Representative period. Based on current Mineral Reserves, the Project
has a mine life of 12 years assuming an annual operating rate of 2
million tonnes ore.
(2) Accuracy of +/- 10%, assumes US$1.35 equals 1 Euro.
(3) Excludes sunk capital of $101.5 million.
(4) Assuming gold, copper and silver prices of $800/oz, $1.75/lb and
$11.00/oz, respectively.
(5) IRR sensitivity to: (i) +/- $100/oz change in average gold price
is +/- 6.4%; (ii) +/- $0.15/lb change in copper price is +/- 3.3%;
and (iii) +/- 10% change in Euro exchange rate is +/-6%.
Mineral Reserves and Resources
The updated Chelopech mineral resource envelope prepared by
Coffey was optimized using Datamine's Mineable Resource Optimizer
software. This software program is designed to produce an optimum
ore boundary based on specified mining constraints. The stope
optimization process, combined with the selection of a lower
cut-off grade of 3.2 g/t gold equivalent (versus 4.0 g/t gold
equivalent), has increased the Mineral Reserves of the Project from
approximately 22 million tonnes, as reported in December 2005, to
over 24 million tonnes, taking mining depletion into account.
Contained metal has increased from 2.5 million ounces of gold and
661.4 million pounds of copper, as reported in December 2005, to
2.9 million ounces of gold and 687.9 million pounds of copper. Over
the three year period since December 2005, replacement of the
reserve tonnage has exceeded depletion by 12% and contained gold
and copper metal in reserves have increased by approximately 17%
and 4%, respectively.
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Chelopech - Mineral Reserves as at December 2008
3.2g/t AuEq Cut-Off Grade
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Gold Copper
Tonnes ---------------------------------------------------
Category (M) Grade (g/t) Ounces (M) Grade(%) Pounds (M)
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Proven 11.68 3.89 1.46 1.42 366.03
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Probable 12.69 3.53 1.44 1.15 321.86
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Total 24.37 3.70 2.90 1.28 687.89
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(1) Cut-off Grade Equivalent Gold is based on the following formula:
Au (g/t) + 2.5 x Cu (%).
(2) Stated Mineral Reserves are completely included within the quoted
Mineral Resources.
The Measured and Indicated Resources reported below were used as the basis
of the Mineral Reserve determination.
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Chelopech - Mineral Resources as at December 2008
3.2g/t AuEq Cut-Off Grade
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Gold (Au) Copper (Cu) Silver (Ag)
----------------------------------------------------
Tonnes Ounces Pounds Ounces
Category (M) (g/t) (M) (%) (M) (g/t) (M)
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Measured 15.70 4.1 2.07 1.47 508.9 10.8 5.45
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Indicated 19.08 3.52 2.16 1.10 462.6 7.42 4.55
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M&I 34.78 3.78 4.23 1.27 971.5 8.94 10.00
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Inferred 9.79 2.72 0.86 0.87 187.8 11.44 3.60
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Project Background
DPM has operated the copper/gold mine and ore concentrating
facility located at Chelopech, Bulgaria, since late 2003. The
concentrate produced contains a high concentration of arsenic which
limits the opportunities for sales to third party smelters and
reduces the realizable return on the value of the metals contained
in the concentrate. To overcome these constraints, and maximize the
potential economic value of the complex, DPM proposes to increase
mine production and construct a facility to produce copper and gold
metals for direct sale to end users. This process will also convert
the arsenic present in the concentrate into an environmentally
stable form suitable for safe disposal into a tailings management
facility ("TMF") located on site.
This proposal was originally presented in 2005, in the form of a
definitive feasibility study (the "2005 DFS"), also prepared by
Minproc, which covered the proposed Project. This Project has
continuously advanced since then. Detailed engineering is now
complete and permitting has progressed since the approval of the
environmental impact assessment ("EIA") by the Bulgarian Government
in July 2008.
The updated DFS includes the upgrade of the existing mine and
concentrator, the new metals production facility ("MPF"), upgrade
of existing infrastructure and associated facilities proposed to be
added or upgraded as part of the Project.
The Project
The Project is anticipated to produce, on average, 47.9 million
pounds of copper metal and 139,568 ounces of gold dore per annum,
from 2012 to 2018, at the designed mining rate of two million
tonnes of ore per annum. Processing will be carried out by
grinding, flotation, pressure oxidation ("POX"), solvent extraction
and electrowinning ("SX/EW") for copper, and carbon in leach
("CIL") cyanidation of the residue for gold recovery. Following
CIL, the solid tailings containing the stabilized arsenic minerals
will be subjected to "cyanide destruction" to ensure compliance
with the maximum levels allowed by European Union and Bulgarian
legislation, prior to deposition in a fully lined tailings
depository.
The Project comprises:
- Expansion of mine production capacity to 2.0 million tonnes
per year (Mt/a);
- Modernization and upgrade of the existing concentrator to
treat the mined tonnage and produce up to 150,000 tonnes of
concentrate per year;
- Installation of an MPF that incorporates POX, CIL and SX/EW to
treat the copper gold concentrate and produce copper cathode and
gold dore; and
- Upgrade of the existing TMF and construction of a new facility
for storage of POX-CIL tailings.
The engineering for the mine, process plant and infrastructure
has been developed to support a capital cost estimate, as well as
an operating cost estimate, to an accuracy of +/-10%. The capital
and operating costs consider the mining, processing, general
administration costs and environmental implications and are in
fourth quarter 2008 ("Q4 2008") United States Dollars (US$).
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Life of Mine Production Assumptions
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Item Through 2020
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Total Quantity Ore Mined/Milled 21.9 million tonnes
Average Grades
Gold 3.84 g/t
Copper 1.31%
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Concentrate Recoveries
-----------------------------------------------------------
Gold 58.2%
Copper 85.3%
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MPF Recoveries
-----------------------------------------------------------
Gold 95.0%
Copper 95.0%
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Metal Processing Facility
Several comprehensive testwork programs have been completed on
samples representing various Chelopech ore types. The testing
included batch and continuous pilot scale programs for the mineral
processing and hydrometallurgical aspects of the concentrator
upgrade and MPF.
These results were used as the basis for development of the MPF
process flow sheet, process design criteria, mass balance model and
equipment sizing.
Minproc commenced and managed a comprehensive testwork program
as part of the 2005 DFS. This program followed on from a limited
batch testing program conducted during 2003 as part of the earlier
pre-feasibility level due diligence study and continued until
November 2005.
The key results of the testwork program were:
- Confirmation that the high copper and gold extraction results
obtained in earlier due diligence phase batch testing
(approximately 95% Cu, and 90-95% Au) are achievable on a range of
Chelopech concentrates, including future samples derived from bulk
flotation of representative composites of drill core from the three
major ore zones of the deposit (Blocks 19, 150 and 151);
- Identification of process conditions and an overall process
flow sheet which can deliver these extractions at optimal reagent
consumptions and, preferably, in a single train POX plant; and
- Confirmation of the process performance and design criteria of
the key circuits.
Included in this program was characterization and flotation of
run-of-mine ore and a number of stope and drill core ore samples
from the Chelopech resource, characterization of two limestone
samples from potential Bulgarian suppliers near the Chelopech site
and environmental testing of barren liquors and residues following
the recovery of copper and gold. Commissioned by DPM, the bulk of
this testwork was conducted in three laboratories: SGS
Lakefield-Oretest and Ammtec in Perth, Australia and Dynatec at
Fort Saskatchewan in Canada.
Tailings Management
Two TMFs will be operated for the Project. The existing TMF
("Flotation TMF") will be upgraded to meet modern environmental
standards and will continue to be used for storage of the flotation
tailings together with a gypsum waste stream from the new facility.
This facility has sufficient storage to provide over 20 years life
at the proposed production rate.
A new TMF ("New TMF"), in two separate cells, will be built
upstream of the Flotation TMF to provide storage for the tailings
from the cyanide circuit. This will be a fully lined facility.
The Project engineering and planning have been certified by The
International Cyanide Management Institute as being compliant with
the International Cyanide Management Code. The New TMF and water
balance for the Project were included in this certification. An
operating audit is scheduled to be carried out once the Project is
in operation to provide for an operational certification. The New
TMF is also engineered to be compliant with the European directives
on safety and the management of waste from the extractive
industry.
Community Consultation
The Chelopech mine is located in an area with a large mining
industry and currently employs over 900 people. DPM has made a
great effort to improve community consultation and involvement
since taking over ownership of the mine.
Land Purchase
The implementation of the Project requires acquisition of land
for the New TMF, site access, expansion of the new MPF and some
buffer zones adjacent to the TMFs and site access areas.
Approximately 75% of all required 160 hectares of land in the
Municipalities of Chelopech and Chavdar has been purchased from
private owners and both municipalities. The acquisition of the
remaining 25% of land, 26 hectares of which is municipal, is in
progress and is expected to be complete mid-2009. Re-designation of
land from agricultural into industrial is the next step and is a
prerequisite for issuance of the construction permit for project
implementation. It is estimated that the land re-designation
process will be complete at the beginning of 2010.
Permitting
The permitting process for project implementation in Bulgaria is
complex, involving various ministries and government agencies. The
environmental permits, such as the EIA, The Integration Pollution
and Prevention Control ("IPPC") and Working with Hazardous
Substances ("Seveso"), are prerequisites for issuance of the
construction permit. The EIA, completed by the Balkan Science and
Education Centre of Ecology and Environment in November 2005, and
registered in February 2006, was approved by the Bulgarian Ministry
of Environment and Waters ("MoEW") in July 2008. The IPPC
application has been filed with the MoEW and the Seveso application
is in progress. Both the IPPC and Seveso permits are expected to be
issued by or in the third quarter of 2009. The Company is currently
preparing a detailed development and implementation plan for the
Project and site areas, which is also a prerequisite for issuance
of a construction permit. The Project is fully compliant with all
European safety and environmental directives and industry Best
Available Techniques requirements, as determined by IPPC, and the
engineering has passed through rigorous audit and been certified by
The International Cyanide Management Institute as being compliant
with the International Cyanide Management Code.
Bulgarian Public Private Partnership
As announced in July 2008, the Company signed an MOU with the
Bulgarian authorities outlining the terms of modified royalty
provisions, a Project reclamation bond and the formation of a new
joint stock Bulgarian company to be owned 75% by DPM and 25% by the
Republic of Bulgaria for the purpose of financing, constructing and
operating the MPF.
The Company will pay a higher royalty in accordance with the
Bulgarian Ordinance on Royalty Computation for all the metals that
can be mined economically from the Chelopech deposit. The royalty
will be calculated on a sliding scale of 2% to 8% at a
profitability ratio of 10% to 60%. The new royalty, which came into
effect on July 31, 2008, replaced the 1.5% fixed rate entered into
in 2004. The royalty in excess of 1.5% will be accrued but is
payable only after the start of construction of the MPF.
DPM has also agreed to provide a financial guarantee for
environmental closure and rehabilitation costs for the Chelopech
mine. The Company will prepare and submit for approval to both the
Ministry of Economy and Energy and the MoEW a closure and
rehabilitation plan within 18 months of July 10, 2008, the date of
the amended concession agreement. The Company is moving forward
with the development of this agreement.
Capital Cost
As of December 31, 2008, the Company had invested $102 million
in the Project for engineering, procurement and construction
management on the MPF, mine upgrades, the construction of the
decline for access from surface to underground, acquisition and
refurbishment of an oxygen plant and the first phase of the mine
backfill plant. The increase in estimated capital cost to complete
the Project reflects the price escalations for equipment, services
and materials experienced globally by the mining industry since the
original DFS was prepared in 2005.
The updated DFS and the related financial analysis include only
incremental costs and exclude sunk costs. The table below is a
summary of the estimated additional capital costs required to
complete the Project, excluding closure costs:
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CAPITAL COST ESTIMATE SUMMARY
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Item Total ($M)
-----------------------------------------------------------
Capital Expenditure (to end 2010)
Mine 54.33
Concentrator 15.70
Metal Production Facility 70.54
Environmental (including TMFs) 9.68
Infrastructure and Services 35.10
Owners Costs 30.90
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Total Capital 216.25
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Sustaining Capital 62.75
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TOTAL CAPITAL - Life of Mine 279.00
-----------------------------------------------------------
The capital cost estimate has a level of accuracy of +/-10% and
is expressed in Q4 2008 US dollars. Approximately 50-60% of the
capital cost is expected to be incurred in Euro. For the purpose of
this study an exchange rate of US$1.35 equals 1 Euro was used.
Operating Costs
Operating costs are based on the mining and treatment of 2.0
million tonnes ore per year, producing an average of 47.9 million
pounds of copper and 139,578 oz gold per year, for the period
indicated. Costs for the new facilities are based on Q4 2008
quotations for all materials and consumables, while the current
site costs for labour and consumables have been used, as
applicable.
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SUMMARY OF ESTIMATED OPERATING COSTS
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2012 - 2018
Item Average
-----------------------------------------------------------
Operating Costs ($/t ore processed)
Mine 21.52
Concentrator 6.55
Services 3.18
General & Administration 4.16
Metal Production 12.20
Royalty 4.78
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Total 52.39
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Technical Information
The independent technical report in support of this DFS, which
has been prepared by Brett Gossage and Peter Wade of Coffey, Gary
Jobson of Minproc, Brett Stevenson of Knight Piesold Pty Ltd. and
J. Fergus Anckorn of AMEC Earth & Environmental UK Ltd., all of
whom are Qualified Persons under National Instrument 43-101 ("NI
43-101"), will be filed on Sedar at www.sedar.com by the end of
March 2009. Investors should review the detailed information
contained in the technical report for the key assumptions,
parameters and additional information relevant to the matters
discussed in this press release. The Summary of the DFS will be
posted on the Company's website at www.dundeeprecious.com.
Dr. Simon Meik, Operations Manager, Processing of Chelopech
Mining EAD, who is a Qualified Person under NI 43-101, has
supervised the preparation of the technical data included in this
news release.
FORWARD LOOKING STATEMENTS
This news release contains certain "forward-looking information"
under applicable Canadian securities legislation. Except for
statements of historical fact relating to the Company, information
contained herein constitutes forward-looking statements, including
any information as to the Company's strategy, plans or future
financial or operating performance. Forward-looking statements are
characterized by words such as "plan", "expect", "budget",
"target", "project", "intend", "believe", "anticipate", "estimate"
and other similar words, or statements that certain events or
conditions "may" or "will" occur.
Forward-looking statements are based on the opinions,
assumptions and estimates of management considered reasonable (some
of which are outlined herein and in the technical report to be
filed in connection with this press release) at the date the
statements are made, and are inherently subject to a variety of
risks and uncertainties and other known and unknown factors that
could cause actual events or results to differ materially from
those projected in the forward-looking statements. These factors
include, but are not limited to, the advantages determined based on
findings of the current feasibility study conducted on the Project
proving to be accurate, the Company's expectations in connection
with the Project discussed herein being met, the impact of general
business and economic conditions, global liquidity and credit
availability on the timing of cash flows and the values of assets
and liabilities based on projected future conditions, possible
variations in ore grade or recovery rates, fluctuating metal prices
(such as gold and copper), currency exchange rates, changes in the
Company's accounting policies, changes in the Company's corporate
resources, changes in Project parameters as plans continue to be
refined, changes in Project development and production time frames,
risk related to the possibility of Project cost overruns or
unanticipated costs and expenses, higher prices for fuel, steel,
power, labour and other consumables contributing to higher costs
and general risks of the mining industry, failure of plant,
equipment or processes to operate as anticipated, unexpected
changes in mine life, final pricing for concentrate sales,
unanticipated results of future studies, seasonality, costs and
timing of the development of new deposits, success of exploration
activities, permitting time lines, 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 and
labour disputes, as well as those risks and uncertainties discussed
or referred to in the Company's annual Management's Discussion and
Analysis and Annual Information Form filed with the securities
regulatory authorities in 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, assumptions or opinions
should change, except as required by applicable law. The reader is
cautioned not to place undue reliance on forward-looking
statements. The forward-looking information contained herein is
presented for the purpose of assisting investors in understanding
the Company's expected operational performance and the Company's
plans and objectives related to the projects discussed herein and
may not be appropriate for other purposes.
NON-GAAP MEASURES
This press release refers to estimated EBITDA, cash cost per
tonne of ore processed, cash cost per pound of copper, cash cost
per ounce of gold because certain investors may use this
information to assess the Company's ability to generate cash flow
for investing activities. In addition, management utilizes these
metrics as an important management tool to project and monitor
performance of the Company's operations. These measurements have no
standardized meaning under Canadian GAAP and are therefore unlikely
to be comparable to similar measures presented by other companies.
These measurements are 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.
Dundee Precious Metals Inc. is a Canadian based, international
mining company engaged in the acquisition, exploration, development
and mining of precious metals. DPM owns the Chelopech Mine, a
producing gold/copper mine, and the Krumovgrad Gold Project, a
mining development project, both located in Bulgaria, and is
engaged in mineral exploration activities in Serbia. In addition,
Dundee Precious owns the Back River gold exploration project in
Nunavut, Canada and a 95% interest in the Kapan Mine in
Armenia.
Contacts: DUNDEE PRECIOUS METALS INC. Jonathan Goodman President
& Chief Executive Officer (416) 365-2408 Email:
jgoodman@dundeeprecious.com DUNDEE PRECIOUS METALS INC. Lori Beak
Vice President, Investor Relations and Corporate Secretary (416)
365-5165 Email: lbeak@dundeeprecious.com
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