(All monetary figures are expressed in U.S. dollars unless otherwise stated)
Dundee Precious Metals Inc. ("DPM" or the "Company")
(TSX:DPM)(TSX:DPM.WT)(TSX:DPM.WT.A) today reported 2011 fourth quarter adjusted
net earnings (1) of $31.9 million ($0.25 per share) compared to $6.7 million
($0.05 per share) for the same period in 2010. Reported fourth quarter 2011 net
earnings attributable to common shareholders were $22.7 million ($0.18 per
share) compared to $21.5 million ($0.17 per share) for the same period in 2010.
The quarter over quarter increase in adjusted net earnings was driven by higher
volumes of payable metals in concentrate sold, higher volumes of concentrate
smelted at NCS, and higher metal prices partially offset by higher exploration
expenses. The increase in concentrate sales reflects increased production at
Chelopech resulting from the continued ramp-up of the mine and mill expansion.
Net earnings attributable to common shareholders were also impacted by
unrealized net losses of $9.2 million ($11.3 million pre-tax) during the
quarter. These losses were comprised of unrealized mark-to-market losses of
$19.3 million (2010 - $0.1 million unrealized losses) related to copper hedges,
the vast majority of which were entered into in the second half of 2011,
partially offset by unrealized mark-to-market gains in respect of the Company's
Sabina Gold & Silver Corp. ("Sabina") special warrants of $8.0 million (2010 -
$11.1 million unrealized gains).
For 2011, adjusted net earnings increased to $80.1 million ($0.64 per share)
compared with $22.6 million ($0.19 per share) in 2010. This increase was due
primarily to favourable metal prices and higher concentrate sales partially
offset by higher exploration and general and administrative expenses. Relative
to 2010, 2011 quoted prices for gold increased by 28%, copper prices increased
by 17% (25% including copper hedges) and silver prices increased by 74% while
concentrate sales increased by 36%. 2011 net earnings attributable to common
shareholders of $86.1 million ($0.69 per share) compared to $22.9 million ($0.20
per share) in 2010 were also impacted by several items, including unrealized
gains on copper hedges of $23.2 million (2010 - $0.1 million unrealized losses),
unrealized losses related to the Company's Sabina special warrants of $22.8
million (2010 - $49.7 million unrealized gains), and a net impairment charge of
$50.6 million taken in 2010 against the planned construction of a metals
processing facility.
"2011 was a very good year for DPM from both an operating and financial
perspective. Increasing production at Chelopech and Deno and stronger metal
prices contributed to record earnings and cash flow," said Jonathan Goodman,
President and CEO. "Our projects at Chelopech and NCS to expand and upgrade
these facilities are progressing as planned and remain on budget. We are in a
strong financial position with a consolidated cash position of $173 million and
are well positioned to fund our current capital expansion programs, exploration
drilling activities and to advance our planned Krumovgrad Gold Project, which
continues to progress through the approval process. We expect that 2012 will be
an even better year for DPM and its shareholders."
Adjusted EBITDA (1) in the fourth quarter and twelve months of 2011 was $37.0
million and $117.5 million, respectively, compared to $15.0 million and $45.3
million in the corresponding periods in 2010. These increases were driven by the
same factors affecting adjusted net earnings.
Concentrate production for the three and twelve months ended December 31, 2011
was 43,151 tonnes and 125,253 tonnes, respectively, representing a 58% and 30%
increase relative to the corresponding periods in 2010. The continued ramp-up of
mine production at Chelopech and the completion of the mine and mill expansion
at Deno Gold in the fourth quarter of 2010 contributed to these increases
although lower grades and recoveries for copper and zinc in the second half of
2011, relative to the corresponding period in 2010, due primarily to disruptions
in equipment availability, resulted in a decrease in concentrate production
quarter over quarter at Deno Gold.
Deliveries of concentrates for the three and twelve months ended December 31,
2011 were 36,864 tonnes and 123,789 tonnes representing a 58% and 36% increase,
respectively, relative to the corresponding periods in 2010 due to increased
production. Relative to the fourth quarter of 2010, 2011 fourth quarter payable
gold in concentrate sold increased by 54% and payable copper in concentrate sold
increased by 64%. Payable silver in concentrate sold decreased by 22% and
payable zinc in concentrate sold decreased by 31% due to lower grades and
recoveries for silver and zinc at Deno Gold. Relative to 2010, 2011 payable gold
in concentrate sold increased by 37%, payable copper in concentrate sold
increased by 35%, payable zinc in concentrate sold increased by 19% and payable
silver in concentrate sold increased by 27%.
Consolidated cash cost of sales per ounce of gold sold, net of by-product
credits, in the fourth quarter of 2011, was negative $147 compared to negative
$34 in the fourth quarter of 2010. The quarter over quarter decrease was due
primarily to higher aggregate volumes of payable metals in concentrate sold and
generally stronger metal prices. Cash cost of sales per ounce of gold sold, net
of by-product credits, in 2011, was negative $57 compared to cash cost of $238
in 2010. The year over year decrease was due to the same factors affecting the
fourth quarter.
Cash provided from operating activities before changes in non-cash working
capital during the fourth quarter and twelve months of 2011 of $41.8 million and
$123.6 million was $24.3 million and $69.7 million higher, respectively, than
the corresponding periods in 2010 due primarily to stronger metal prices, higher
volumes of payable metals in concentrate sold and proceeds from settlement of
copper derivative contracts.
Capital expenditures in the fourth quarter and twelve months of 2011 of $30.2
million and $117.6 million increased by 11% and 47%, respectively, over the
corresponding periods in 2010 due primarily to increased growth capital
expenditures associated with the mine and mill expansion project at Chelopech
and the upgrades being made at NCS to improve the smelter's environmental
performance, efficiency and output.
As at December 31, 2011, DPM maintained a strong financial position with minimal
debt, representing 10% of total capitalization, a consolidated cash position of
$172.8 million and an investment portfolio valued at $107.6 million.
In December 2011, an independent and technically competent review team was
brought in to perform a review to ensure that both the Namibian government and
the Company had properly identified the issues in respect of concerns raised
regarding the disposal and management of arsenic in concentrate processed at
NCS. The review was completed in January 2012 and the report to the Namibian
government is expected to be issued in the near future. The Company believes
that the program of upgrades and improvements completed to date and scheduled
over the coming years properly addresses the issues and concerns raised and that
the report will support this view.
Strong near-mine exploration results were achieved in Bulgaria and Armenia as
well as continued success in Serbia, through its interest in Avala and Dunav,
and in Nunavut, through Sabina.
At Deno Gold, the discovery of "Shahumyan East", a newly defined mineralized
domain adjacent to the Shahumyan deposit contains potential for extensions to
the existing underground operation as well as expansion to the open pit project
currently under study. Shahumyan East is located east of the Shahumyan east
fault under 60 to 150 metres of cover. The development of this area from surface
is in its infancy as its discovery was made in 2011 as part of the 160 metre by
160 metre drill out for the open pit project. The open pit project drilling
program to date continues to outline wide (10 to 35 metres) zones of
economically viable mineralization over an area of 2.5 kilometres by 1.5
kilometres while regional mapping and geophysics results on the Kapan
Exploration license returned drill-ready targets. Conventional underground
exploration at the Shahumyan mine commenced in September 2011 with all holes to
date extending known mineralization to the 550 mining level. It has also defined
new vein sets and confirmed the existence of extensive low-grade halos around
vein sets seen in the surface drilling. Previous Soviet era drilling (surface &
underground) had only sampled the veins and had not fully defined the
mineralization of the Shahumyan deposit. Further information can be found in a
separate press release issued by the Company today concerning Deno Gold's open
pit project drilling and underground drilling results.
Underground drilling at Chelopech also defined extensions to Blocks 19 and 147
and identified encouraging intercepts in Chelopech North. Overall, the Company's
increased exploration activities are an important component of its growth
strategy and continue to show potential to add significant value to the Company
over time.
The Company also made good progress on a potential project to economically
recover the 40% to 45% of the gold contained in the Chelopech ore mined that is
currently being rejected and placed into tailings or returned underground as
paste fill. This project has the potential to economically recover most of this
gold as well as additional silver and copper which is associated with the
rejected pyrite minerals. At the full production rate of two million tonnes per
annum of ore mined, approximately 400,000 tonnes of pyrite concentrate can be
produced containing 77,000 to 90,000 ounces of gold, 128,000 to 193,000 ounces
of silver, and 4.4 million to 6.2 million pounds of copper. A conceptual study
and initial testing was completed in the third and fourth quarters of 2011,
respectively. This work indicates that a pressure oxidation (autoclave) process
can be used to produce a low mass, metals rich residue containing gold and
silver, which in turn could be sold to existing smelters or leach plants. A
scoping study to determine the optimal processing configuration and the
associated capital and operating costs is currently underway and is expected to
be completed in the second quarter of 2012.
For 2012, mine output at Chelopech is expected to range between 1.7 million and
1.85 million tonnes of ore, in line with its planned ramp-up to an annualized
production rate of two million tonnes of ore, which remains on track. Mine
output at Deno Gold is expected to range between 550,000 and 610,000 tonnes.
Concentrate smelted at NCS is expected to range between 174,000 and 184,000
tonnes.
The Company's estimated metals contained in concentrate produced for 2012 is set
forth in the following table:
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Metals contained in Chelopech Deno Gold Total
concentrate
produced:
----------------------------------------------------------------------------
Gold (ounces) 103,000 - 115,000 25,000 - 28,000 128,000 - 143,000
Copper (million 38.0 - 43.0 2.9 - 3.2 40.9 - 46.2
pounds)
Zinc (million pounds) - 18.0 - 20.0 18.0 - 20.0
Silver (ounces) 186,000 - 206,000 473,000 - 526,000 659,000 - 732,000
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The estimated metals contained in concentrate produced for 2012 are in line with
previously released life of mine production numbers for Chelopech as per the NI
43-101 Technical Report for the Chelopech Project, Bulgaria, filed on Sedar on
March 25, 2011. In the third quarter of 2012, the mine is expected to reach the
full production run rate of two million tonnes per annum following the
installation of the underground crusher and conveyor, which is expected to be
completed in July 2012.
Assuming current exchange rates, 2012 unit cash cost per tonne of ore processed
is expected to range between $46 and $50 at Chelopech and between $59 and $65 at
Deno Gold. The cash cost per tonne of concentrate smelted at NCS is expected to
range between $325 and $345.
For 2012, the Company's approved growth capital expenditures are expected to
range between $150 million and $175 million and relate primarily to the mine and
mill expansion at Chelopech, the plant upgrade and expansion at NCS, the
development work related to the Krumovgrad Gold Project, and exploration or
development work being done to enhance underground operations and advance the
open pit project at Deno Gold. Sustaining capital expenditures are expected to
range between $30 million and $37 million. Further details can be found in the
Company's MD&A under the section "2012 Outlook".
(1) Adjusted net earnings, adjusted basic earnings per share and adjusted
earnings before interest, taxes, depreciation and amortization ("EBITDA"), and
growth and sustaining capital expenditures are not defined under International
Financial Reporting Standards ("IFRS"). Presenting these measures from period to
period helps management and investors evaluate earnings and cash flow trends
more readily in comparison with results from prior periods. Refer to the
"Non-IFRS Financial Measures" section of management's discussion and analysis
for the three and twelve months ended December 31, 2011 (the "MD&A") for further
discussion of these items, including reconciliations to net earnings
attributable to common shareholders and earnings before income taxes.
Key Financial and Operational Highlights
----------------------------------------------------------------------------
$ millions, except where noted Three Months Twelve Months
------------------- -------------------
Ended December 31, 2011 2010 2011 2010
----------------------------------------------------------------------------
Revenue 88.5 61.5 338.5 202.0
Gross profit 38.9 16.6 130.8 51.2
Earnings before income taxes 16.6 14.9 88.6 10.4
Net earnings attributable to common
shareholders 22.7 21.5 86.1 22.9
Basic earnings per share 0.18 0.17 0.69 0.20
Adjusted EBITDA (1) 37.0 15.0 117.5 45.3
Adjusted net earnings (1) 31.9 6.7 80.1 22.6
Adjusted basic earnings per share
(1) 0.25 0.05 0.64 0.19
Cash flow from operations, before
changes in working capital 41.8 17.5 123.6 53.9
Concentrate produced (mt) 43,151 27,228 125,253 96,035
Metals in concentrate produced:
Gold (ounces) 41,044 27,030 120,757 94,728
Copper ('000s pounds) 13,928 8,350 39,794 30,373
Zinc ('000s pounds) 5,130 6,380 19,585 19,089
Silver (ounces) 177,870 203,161 670,819 640,454
NCS - concentrate smelted (mt) 47,588 37,635 180,403 119,557
Deliveries of concentrates (mt) 36,864 23,346 123,789 91,157
Payable metals in concentrate sold:
Gold (ounces) 31,434 20,469 110,026 80,352
Copper ('000s pounds) 11,324 6,905 36,838 27,364
Zinc ('000s pounds) 2,826 4,114 16,898 14,252
Silver (ounces) 117,254 150,556 595,914 470,735
Cash cost of sales per ounce of
gold sold, net of by- product
credits(1)
Chelopech (190) (73) (112) 210
Deno Gold 120 34 115 311
Consolidated (147) (34) (57) 238
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(1) Adjusted EBITDA; adjusted net earnings; adjusted basic earnings per
share; and cash cost of sales per ounce of gold sold, net of by-product
credits are not defined measures under IFRS. Refer to the MD&A for
reconciliations to IFRS measures.
A complete set of DPM's audited consolidated financial statements and the notes
thereto, and MD&A for the year ended December 31, 2011, are posted on the
Company's website at www.dundeeprecious.com and have been filed on Sedar at
www.sedar.com.
An analyst conference call to discuss these results is scheduled for Friday,
February 17, 2012, at 9:00 a.m. (EST). The call will be webcast live (audio
only) at: http://www.gowebcasting.com/3030. Listen only telephone option at
416-340-2218 or North America Toll Free at 1-866-226-1793. Replay available at
905-694-9451 or North America Toll Free at 1-800-408-3053, passcode 6563704. The
audio webcast for this conference call will be archived and available on the
Company's website at www.dundeeprecious.com.
Dundee Precious Metals Inc. is a well-financed, Canadian based, international
gold mining company engaged in the acquisition, exploration, development, mining
and processing of precious metals. The Company's principal operating assets
include the Chelopech operation, which produces a gold, copper and silver
concentrate, located east of Sofia, Bulgaria; the Kapan operation, which
produces a gold, copper, zinc and silver concentrate, located in southern
Armenia; and the Tsumeb smelter, a concentrate processing facility located in
Namibia. DPM also holds interests in a number of developing gold properties
located in Bulgaria, Serbia, and northern Canada, including interests held
through its 51.4% owned subsidiary, Avala Resources Ltd., its 47.7% interest in
Dunav Resources Ltd. ("Dunav") and its 11.5% interest in Sabina Gold & Silver
Corp.
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 and
output, 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 securities laws, 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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