(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 first quarter ended March 31, 2009. DPM reported a
first quarter net loss of $6.1 million (basic and diluted net loss
per share of $0.06). This compares with first quarter 2008 net
earnings of $8.4 million (basic and diluted net earnings per share
of $0.14).
"Higher mine output and lower unit operating costs contributed
to strong first quarter operating performance at Chelopech -
providing a strong foundation for the planned mine and mill
expansion," said Jonathan Goodman, President and CEO. "In addition,
restructuring activities, including cost savings initiatives, are
continuing throughout the organization with positive results."
The following table summarizes the Company's financial and
operating results for the periods indicated:
----------------------------------------------------------------------------
$ millions, except Three Months
per share amounts -------------------
Ended March 31, 2009 2008
----------------------------------------------------------------------------
Net Revenue $ 27.0 $ 39.8
Cost of Sales 23.4 21.9
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Gross Profit from Mining Operations 3.6 17.9
----------------------------------------------------------------------------
Investment and Other Income (Expense) (0.9) 2.4
Net Earnings (Loss) (6.1) 8.4
Basic Earnings (Loss) Per Share $ (0.06) $ 0.14
Diluted Earnings (Loss) Per Share $ (0.06) $ 0.14
Net Cash Used in Operating Activities (12.7) (7.4)
Capital Expenditures (8.5) (19.7)
Purchase of Short-term Investments (5.6) -
Other Investing Activities (1.3) 3.0
Financing Activities (0.9) (0.6)
----------------------------------------------------------------------------
Decrease in Cash $ (29.0) $ (24.7)
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Concentrate Produced (mt)
Chelopech 16,305 14,183
Deno Gold - 1,885
Cash Cost per tonne Ore Processed (US$/t)(1)
Chelopech $ 47.74 $ 59.38
Deno Gold $ - $ 107.54
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FIRST QUARTER 2009 - FINANCIAL HIGHLIGHTS
- First quarter of 2009 financial results, relative to first
quarter of 2008, benefited from improved operating performance,
including a 20% reduction in unit cash cost per tonne and reduced
exploration and administrative expenses due to ongoing
restructuring and cost savings initiatives.
- The net loss in the first quarter of 2009 was $6.1 million
compared to net earnings of $8.4 million in the corresponding prior
year period. The decrease in earnings was primarily due to lower
gross profit from mining operations and a foreign exchange loss
partially offset by a decrease in administrative and exploration
expenses. The decrease in gross profit from mining operations was
primarily due to lower deliveries of concentrates and lower selling
prices for copper, gold and silver partially offset by lower
production costs and favourable mark-to-market adjustments relating
to the open positions of provisionally priced concentrate sales,
net of losses on copper derivatives.
- The Chelopech operations reported net revenue of $26.4 million
on corresponding concentrate deliveries of 16,573 tonnes. Chelopech
cash cost per tonne of ore processed(1) in the period was 20% lower
than the corresponding prior year period due to the favourable
impact of a weaker Euro relative to the U.S. dollar (depreciation
of 13% period over period), higher volumes of material processed,
lower spending on services due to the implementation of cost
savings initiatives and lower prices for certain raw materials.
These favourable variances were partially offset by higher spending
on backfill due to the introduction of hydraulic backfill in the
second quarter of 2008 with higher volume of backfill placed in
stopes, and increased labour rates.
- The Deno Gold operation was on care and maintenance in the
first quarter of 2009 and reported a gross loss from mining
operations of $3.6 million.
- Working capital requirements in the first quarter of 2009
increased by $14.4 million due to a decrease in accounts payable,
an increase in accounts receivable and an increase in inventories
partially offset by an increase in deferred revenue.
- As at March 31, 2009, DPM had cash, short-term investments and
marketable securities of $82.2 million (market value) versus $108.6
million (market value) at the end of year 2008.
SIGNIFICANT ITEMS
- Results of the update to the 2005 definitive feasibility study
on the Chelopech Expansion Project confirmed the commercial
viability of the project and indicated an internal rate of return
of over 27%, future capital costs of US$216 million and a payback
period of approximately three years.
- Certain permits required to advance the construction of the
mine and mill expansion, including the semi-autogenous grinding
mill and concentrator expansion, have been received and work is
progressing. The metals processing facility is in the process of
being permitted with construction expected to commence in the year
2010, subject to financing and approval by DPM's board of
directors.
- DPM reached a definitive agreement with Sabina Silver
Corporation ("Sabina") for the sale of the Back River project in
exchange for $7 million cash, 17 million Sabina common shares and
10 million Special Warrants, consisting of one common share and 1/2
common share purchase warrant exercisable upon Sabina achieving
certain exploration and production milestones or upon the
occurrence of certain other events. The transaction is subject to
various conditions, including regulatory and shareholder
approvals.
- In response to the very positive regulatory and operational
advances made by Deno Gold in the five month period it was on care
and maintenance, DPM elected to restart operations at the Kapan
facilities in April 2009. At current metal prices, Deno Gold is
still expected to incur a financial loss in 2009 on its mining
operations. However, the benefits of restarting operations,
including the minimization of losses, outweigh the costs of
maintaining the operations on care and maintenance.
- The Company entered into certain cash settled derivative
transactions with respect to 2,900 tonnes of payable copper in
concentrate sold by Chelopech on a provisional pricing basis. The
derivative contracts were entered into to mitigate substantially
all of the copper price exposure and associated earnings volatility
as a result of the time lag between the receipt of provisional
sales revenue and the specified final pricing period. These
derivative contracts mature over the period of April through June
2009.
A complete set of DPM's Consolidated Financial Statements, Notes
to the Consolidated Financial Statements and Management's
Discussion and Analysis for the first quarter ended March 31, 2009
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 Wednesday, May 13,
2009 at 3:30 p.m. (EST) in conjunction with the Company's Annual
and General Meeting of Shareholders, to present these results and
will be webcast live at:
http://events.onlinebroadcasting.com/dundee/051309/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 numerous
exploration properties in one of the larger gold-copper-silver
mining regions in Serbia. On March 30, 2009, DPM announced that it
had entered into a definitive agreement to sell its Back River
properties.
SUMMARIZED FINANCIAL RESULTS
Net Revenue
Net revenue from the sale of concentrates of $27.0 million in
the first quarter of 2009 was $12.8 million or 32% lower than first
quarter of 2008 due primarily to a decrease in deliveries of
concentrates and lower selling prices for copper, gold and silver
partially offset by the favourable impact of a weaker Canadian
dollar relative to the U.S. dollar and favourable mark-to-market
adjustments, net of losses on copper derivatives. The weakening of
the Canadian dollar relative to the U.S. dollar increased revenue
by $5.0 million in the period.
The average London Metal Exchange ("LME") cash copper price(2)
in the first quarter of 2009 of US$1.55/lb was 56% lower than first
quarter of 2008 average price of US$3.54/lb resulting in a
significant decrease in revenue in the first quarter of 2009. The
average London Bullion gold price(2) in the first quarter of 2009
of US$908/oz was 2% lower than first quarter of 2008 average price
of US$927/oz. Favourable mark-to-market adjustments of $4.6
million, relating to the open positions of provisionally priced
concentrate sales, were recorded in the first quarter of 2009 as a
result of the increase in forward prices for copper and zinc as at
March 31, 2009 relative to December 31, 2008, compared to
favourable mark-to-market adjustments of $2.8 million recorded in
the first quarter of 2008. Partially offsetting the favourable
mark-to-market adjustments recorded in the first quarter of 2009
were losses on copper derivatives of $1.3 million.
Deliveries of concentrates produced at Chelopech of 16,573
tonnes in the first quarter of 2009 were 11% lower than first
quarter of 2008 deliveries of 18,529 tonnes due to a drawdown of
concentrate inventories in the first quarter of 2008. Deliveries of
concentrates produced at Deno Gold were nil in the first quarter of
2009 compared to deliveries of 872 tonnes in the first quarter of
2008 as Deno Gold operations were on care and maintenance in the
first quarter of 2009.
Cost of sales
Cost of sales of $23.4 million in the first quarter of 2009 was
$1.5 million or 7% higher than the corresponding prior year period
due primarily to the unfavourable impact of a weaker Canadian
dollar relative to the U.S. dollar partially offset by lower
deliveries of concentrates and lower production costs at Chelopech.
Cost of sales at Chelopech and Deno Gold are converted from Euro
and Dram to U.S. dollar and the U.S. dollar consolidated cost of
sales is converted to Canadian dollar. The weakening of the
Canadian dollar relative to the U.S. dollar increased cost of sales
by $3.4 million in the period.
Cash cost per tonne of ore processed(1) at Chelopech in the
first quarter of 2009 of US$47.74 was US$11.64 or 20% lower than
first quarter of 2008 cash cost per tonne of ore processed(1) of
US$59.38 due to the favourable impact of a weaker Euro relative to
the U.S. dollar (depreciation of 13% period over period), higher
volumes of material processed, lower spending on services resulting
from the implementation of cost savings initiatives introduced in
late 2008 and in the first quarter of 2009 and a decrease in prices
for certain raw materials. These positive variances were partially
offset by higher spending on backfill due to the introduction of
hydraulic backfill in the second quarter of 2008 with higher volume
of backfill placed in stopes, and increased labour rates.
Gross profit
Chelopech recorded a gross profit from mining operations of $7.3
million in the first quarter of 2009 compared to a gross profit of
$20.4 million in the first quarter of 2008. The decrease in gross
profit from mining operations was due to lower selling prices for
copper, gold and silver and lower deliveries of concentrates
partially offset by lower production costs and favourable
mark-to-market adjustments, net of losses on copper derivatives.
The average LME cash copper price(2) in the first quarter of 2009
was 56% lower than first quarter of 2008 average price. The average
London Bullion gold price(2) in the first quarter of 2009 was 2%
lower than first quarter of 2008 average price. Favourable
mark-to-market adjustments of $3.9 million relating to the open
positions of provisionally priced concentrate sales were recorded
in the first quarter of 2009, as a result of the increase in
forward prices for copper as at March 31, 2009 relative to December
31, 2008, compared to favourable mark-to-market adjustments of $1.5
million recorded in the first quarter of 2008. Offsetting the
favourable mark-to-market adjustments recorded in the first quarter
of 2009 were losses of $1.2 million related to the copper
derivatives.
Deno Gold recorded a gross loss from mining operations of $3.6
million in the first quarter of 2009, which was higher than the
gross loss from mining operations of $2.5 million recorded in the
first quarter of 2008. Deno Gold was on care and maintenance in the
first quarter of 2009. Favourable mark-to-market adjustments of
$0.7 million on the open positions of provisionally priced
concentrate sales were recorded in the first quarter of 2009
compared to favourable adjustments of $1.3 million in the first
quarter of 2008.
Investment and other income (expense)
Investment and other expense in the first quarter of 2009 was
$0.9 million compared to first quarter of 2008 investment and other
income of $2.4 million. The decrease was primarily due to lower net
realized gains from the sales of investments and an investment
write-down of $1.1 million as a result of the decline in market
value of one investment in the period.
Administrative expense
Administrative expense of $4.0 million in the first quarter of
2009 was $0.9 million lower than first quarter of 2008 due
primarily to a decrease in employment costs and associated expenses
and lower spending on outside services as a result of the cost
savings initiatives introduced in the first quarter of 2009.
Exploration expense
Exploration expense of $1.6 million in the first quarter of 2009
was $3.5 million lower than first quarter of 2008 due to a decrease
in the level of exploration activities in Serbia following the
suspension of activities in the fourth quarter of 2008.
Foreign Exchange
Monetary assets and liabilities denominated in foreign
currencies are translated into Canadian dollars at the period end
exchange rates, whereas non-monetary assets and liabilities and
related expenses denominated in foreign currencies are translated
at the exchange rate in effect at the transaction date. Income and
expense items are translated at the exchange rate in effect on the
date of the transaction. Exchange gains and losses resulting from
the translation of these amounts are included in the consolidated
statement of earnings. In the first quarter of 2009, there was a
foreign exchange loss of $2.7 million compared with a foreign
exchange gain of $0.5 million in the first quarter of 2008.
Income tax recovery
DPM's effective tax recovery rate of 10.0% for the first quarter
of 2009 was lower than the statutory rate of 33.0% primarily due to
the unrecognized tax benefits relating to operating losses and the
non-deductible write-downs of investments and stock option expense
partially offset by the benefit of profits earned in jurisdictions
having a lower tax rate.
Cash Flow (Shortfall) and Financial Condition
The following table summarizes the Company's cash shortfall from
operating activities for the periods indicated:
----------------------------------------------------------------------------
$ thousands Three Months
-------------------
Ended March 31, 2009 2008
----------------------------------------------------------------------------
Net earnings (loss) $ (6,100) $ 8,428
Non-cash charges (credits) to earnings:
Amortization of property, plant and equipment 4,568 3,529
Property impairment provisions 309 13
Net losses (gains) on sale of investments 47 (1,785)
Write-downs of investments to market value 1,130 -
Unrealized losses on copper derivatives 1,324 -
Other 423 211
----------------------------------------------------------------------------
Total non-cash charges to earnings 7,801 1,968
Increase in non-cash working capital (14,405) (17,744)
----------------------------------------------------------------------------
Net cash used in operating activities $(12,704) $ (7,348)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash used in operating activities in the first quarter of 2009
was $12.7 million, compared with cash used in operating activities
of $7.3 million in the first quarter of 2008. The increase in cash
used in operating activities in the first quarter of 2009 relative
to the corresponding prior year period was primarily due to the
decrease in gross profit from mining operations partially offset by
a decrease in working capital requirements.
The non-cash working capital requirements of $14.4 million in
the first quarter of 2009 was primarily due to a decrease in
accounts payable, an increase in accounts receivable and an
increase in inventories partially offset by an increase in deferred
revenue.
The following table summarizes the Company's investing
activities for the periods indicated:
----------------------------------------------------------------------------
$ thousands Three Months
-------------------
Ended March 31, 2009 2008
----------------------------------------------------------------------------
Proceeds on sale of portfolio investments $ 2,304 $ 2,977
Purchase of short-term investments (5,558) -
Loan advances (3,767) -
Capital expenditures (8,470) (19,723)
Other 94 -
----------------------------------------------------------------------------
Net cash used in investing activities $(15,397) $(16,746)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures at Chelopech in the first quarter of 2009
of $6.0 million were 48% lower than the corresponding prior year
period due to a reduction in non-critical expenditures, including
those related to the expansion project. Capital expenditures at
Deno Gold in the first quarter of 2009 of $2.5 million were 56%
lower than the corresponding prior year period due to lower level
of exploration activities in the first quarter of 2009 following
the suspension of activities in the fourth quarter of 2008.
Expenditures related to the Back River project incurred in the
first quarter of 2009 were expensed as the project was on care and
maintenance.
In the first quarter of 2009, DPM advanced $3.8 million (US$3.0
million) to Namibian Custom Smelters (Pty) Limited ("NCS"), a
subsidiary of Weatherly International plc, as per the agreement DPM
signed with NCS in December 2008 to advance up to US$7 million of
loans to NCS. Loan advances to NCS totalled US$6.0 million as at
March 31, 2009.
Financing Activities
The following table summarizes the Company's financing
activities for the periods indicated:
----------------------------------------------------------------------------
$ thousands Three Months
-------------------
Ended March 31, 2009 2008
----------------------------------------------------------------------------
Redemption of deferred share units $ - $ (58)
Repayment of debt (711) (563)
Repayment of lease (207) -
----------------------------------------------------------------------------
Net cash used in financing activities $ (918) $ (621)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
AVERAGE METAL PRICES
The following table, summarizing the average metal prices for
the London Bullion Market Association ("LBM") gold, LME copper
Grade A, LME special high grade ("SHG") zinc and LBM silver prices,
is used to illustrate the Company's average metal price exposures
based on its key reference prices for the periods indicated.
----------------------------------------------------------------------------
US$ Average Three Months
-------------------
Ended March 31, 2009 2008
----------------------------------------------------------------------------
London Bullion gold ($/oz) $ 908 $ 927
LME settlement copper ($/lb) 1.55 3.54
LME SHG zinc ($/lb) 0.53 1.10
LBM spot silver ($/oz) $ 12.61 $ 17.68
----------------------------------------------------------------------------
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:
----------------------------------------------------------------------------
$ thousands, unless otherwise indicated
For the quarter ended March 31, 2009 Chelopech Deno Gold Total
----------------------------------------------------------------------------
Ore processed (mt) 243,457 -
Cost of sales (Cdn$) $ 19,103 $ 4,345 $ 23,448
Cost of sales (US$) $ 15,996 $ 3,563 $ 19,559
Deduct:
Amortization (3,092) (361)
Reclamation costs and other (303) (128)
Care and maintenance costs - (3,074)
Change in concentrate inventory (979) -
----------------------------------------------------------------------------
Total cash cost of production (US$) $ 11,622 $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash cost per tonne of ore processed (US$) $ 47.74 $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$ thousands, unless otherwise indicated
For the quarter ended March 31, 2008 Chelopech Deno Gold Total
----------------------------------------------------------------------------
Ore processed (mt) 219,370 79,779
Cost of sales (Cdn$) $ 17,439 $ 4,477 $ 21,916
Cost of sales (US$) $ 16,750 $ 4,301 $ 21,051
Add/(Deduct):
Amortization and other (2,014) (546)
Change in concentrate inventory (1,711) 4,825
----------------------------------------------------------------------------
Total cash cost of production (US$) $ 13,025 $ 8,580
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash cost per tonne of ore processed (US$) $ 59.38 $ 107.54
----------------------------------------------------------------------------
(1) A reconciliation of the Company's cash cost per tonne ore
processed to cost of sales under Canadian GAAP for the first
quarters of 2009 and 2008 is shown in the table entitled "Non-GAAP
Financial Measures".
(2) Refer to the quarterly information section for the average
metal prices used to illustrate the Company's average metal price
exposures based on its key reference prices.
To view the Financial Statements, please click the following
link:
http://media3.marketwire.com/docs/dpm0512.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.
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. Lori Beak Vice President, Investor Relations and Corporate
Secretary (416) 365-5165 Email: lbeak@dundeeprecious.com Website:
www.dundeeprecious.com
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