(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.A)
today reported second quarter 2012 adjusted net earnings (1) of $9.4 million
($0.08 per share) compared to $6.0 million ($0.05 per share) for the same period
in 2011. Reported second quarter 2012 net earnings attributable to common
shareholders were $9.6 million ($0.08 per share) compared to $9.1 million ($0.07
per share) for the same period in 2011. Adjusted net earnings in the first six
months of 2012 were $40.7 million ($0.33 per share) compared to $15.8 million
($0.13 per share) for the same period in 2011. Net earnings attributable to
common shareholders in the first six months of 2012 were $17.8 million ($0.14
per share) compared to $23.2 million ($0.19 per share) for the same period in
2011.
The quarter over quarter increase in adjusted net earnings was driven by higher
volumes of payable gold and copper in concentrate sold, a stronger U.S. dollar
and higher gold prices. These favourable variances were partially offset by
lower copper prices, the deferral of Deno copper concentrate shipments to the
second half of the year, lower volumes of concentrate smelted at NCS as a result
of annual maintenance of the Ausmelt furnace, and higher exploration and
administrative expenses, mainly related to Avala and Dunav. The increase in gold
and copper sold primarily reflected an increase in production at Chelopech with
the continued ramp-up of the mine expansion. Net earnings attributable to common
shareholders were also impacted by unrealized net gains of $6.9 million (2011 -
$0.3 million) on derivative commodity contracts and unrealized mark-to-market
losses in respect of the Company's Sabina Gold & Silver Corp. ("Sabina") special
warrants of $6.7 million (2011 - unrealized gains of $2.0 million).
The increase in adjusted net earnings in the first six months of 2012 relative
to the same period in 2011 was due primarily to the same factors affecting the
quarter. Net earnings attributable to common shareholders were also impacted by
several items, including unrealized losses on derivative commodity contracts of
$7.7 million (2011 - $3.7 million) and unrealized losses related to the
Company's Sabina special warrants of $15.2 million (2011 - unrealized gains of
$5.8 million).
"Chelopech continues to deliver solid operating and financial results and is
doing an excellent job managing its expansion project, which is expected to be
completed under budget early in the fourth quarter. With the completion of the
lead circuit at Deno Gold in the third quarter, copper concentrate deliveries
should return to normal levels," said Jonathan Goodman, President and CEO. "Our
strategy to expand and upgrade our NCS facilities remains unchanged. We are
continuing to advance our detailed planning as well as our existing capital
projects and are pleased with the discussions and support we are receiving from
the Namibian Government. Overall, I am pleased with the progress we are making
across the organization and, with $140 million in cash and a solid balance
sheet, we are in a strong financial position to support our growth initiatives."
Adjusted EBITDA (1) in the second quarter and first six months of 2012 was $19.5
million and $60.3 million, respectively, compared to $14.6 million and $33.8
million in the corresponding periods in 2011. These increases were driven by the
same factors affecting adjusted net earnings.
Concentrate production for the three and six months ended June 30, 2012 was
30,479 tonnes and 67,457 tonnes, respectively, representing an 8% and 42%
increase relative to the corresponding periods in 2011 due primarily to higher
volumes of ore mined and processed at Chelopech as the mine production continues
to ramp-up. This was partially offset by lower concentrate production at Deno
Gold due primarily to lower copper and zinc grades and reduced loading and
haulage equipment availability. Concentrate smelted in the second quarter and
first six months of 2012 of 25,822 tonnes and 67,746 tonnes, respectively, was
34% and 13% lower than the corresponding periods in 2011 due primarily to NCS
advancing its annual maintenance of the Ausmelt furnace, which was originally
scheduled in the third quarter of 2012, to the second quarter, to mitigate the
impact of the Namibian Minister of Environment and Tourism's (the "Minister")
directive to reduce production by 50%, as announced on April 30, 2012.
Deliveries of concentrates for the three and six months ended June 30, 2012 were
33,584 tonnes and 67,753 tonnes representing a 34% and 39% increase,
respectively, relative to the corresponding periods in 2011 due to the ramp-up
of the mine expansion at Chelopech, partially offset by lower deliveries of
copper concentrate produced at Deno Gold as a result of the majority of its
shipments being scheduled for the second half of 2012 following the installation
of the new lead circuit. Payable copper and gold in concentrate sold were up
between 38% and 50% relative to the corresponding periods in 2011 due primarily
to increased production at Chelopech and higher gold grades. Payable zinc and
silver in the second quarter and first six months of 2012 were negatively
impacted by lower volumes of ore mined and lower grades at Deno Gold.
Consolidated cash cost of sales per ounce of gold sold, net of by-product
credits, in the second quarter of 2012 was $176 compared to $65 in the second
quarter of 2011. The quarter over quarter increase was due primarily to lower
copper prices partially offset by higher aggregate volumes of payable gold and
copper in concentrate sold and the favourable impact of a stronger U.S. dollar
on operating expenses. Cash cost of sales per ounce of gold sold, net of
by-product credits, in the first six months of 2012 was $32 compared to $50 in
the same period in 2011. This decrease was due primarily to higher aggregate
volumes of payable gold and copper and a stronger U.S. dollar partially offset
by lower copper prices.
Cash provided from operating activities, before changes in non-cash working
capital, during the second quarter and first six months of 2012 of $7.0 million
and $55.1 million, respectively, was $10.0 million lower and $16.2 million
higher than the corresponding prior year periods due to the same factors
affecting adjusted net earnings and higher income tax payments.
Capital expenditures in the second quarter and first six months of 2012 were
$33.2 million and $59.0 million, respectively, compared to $25.6 million and
$48.8 million in the corresponding periods in 2011. These increases were due
primarily to increased construction activities in connection with NCS' capital
program to increase capacity and improve environmental performance and
operational efficiency.
The permitting phase of the Krumovgrad Project was significantly advanced in the
period with the signing of the Concession Agreement with the Bulgarian Ministry
of Economy, Energy and Tourism and the positive final decision of the Bulgarian
Supreme Administrative Court on the preemptive execution of the environmental
impact assessment.
Exploration programs at and around the Company's existing sites in Bulgaria and
Armenia continue to advance the project pipeline, with the goal of delineating
additional Mineral Resources and Reserves, for the long-term future of the
Company. Exploration programs in Serbia, through DPM's interests in Avala and
Dunav, and in Nunavut, through Sabina, continue to look promising.
As at June 30, 2012, DPM maintained a solid financial position with minimal
debt, representing 10% of total capitalization, a consolidated cash position of
$139.6 million and an investment portfolio valued at $55.3 million.
The feasibility study for the acid plant in Namibia was completed in the second
quarter of 2012 and the first phase of this project, comprising basic
engineering, site preparation, final costing and detailed scheduling, has been
awarded to Outotec, the global leader in sulphuric acid plant design and
delivery. The capital cost estimate for the acid plant, based on the Outotec
tender, is approximately $170 million, which includes a 30% contingency and
excludes offsite infrastructure costs. Based on expected annual smelter
production capacity of 240,000 to 310,000 tonnes of concentrate, the acid plant
will produce in the range of 270,000 to 340,000 tonnes of sulphuric acid. This
project is expected to be financed from DPM's current cash position and free
cash flow generation which, even at significantly weaker commodity prices, is
sufficient to satisfy its existing operating and capital requirements.
Commissioning is currently expected to take place during the third quarter of
2014.
A preliminary economic assessment ("PEA") for the pyrite recovery project at
Chelopech, completed in July 2012, has confirmed the potential of both
recovering the pyrite as a secondary concentrate, and the on-site treatment of
the pyrite. At the expanded annual mine production rate of 2 million tonnes, the
PEA has confirmed the potential to recover approximately 400,000 tonnes of
pyrite concentrate from the mill feed as a separate concentrate product in
addition to the copper concentrate already produced. This pyrite concentrate
could contain between 75,000 and 90,000 ounces of gold, 130,000 to 190,000
ounces of silver and 4.5 million to 6.0 million pounds of copper. The pyrite
project is expected to be implemented in two stages. The first stage is a pyrite
concentrate circuit, which includes a new flotation, thickening and filtration
installation in the existing mill facility. The first stage requires minimal
capital and permitting and can immediately generate a pyrite concentrate for
sale. The second stage would be the construction of a pressure oxidation process
facility, which is expected to be done in two phases. Completion of a
feasibility study and environmental permitting is expected to take up to two
years from initial start in early 2013. Preliminary capital cost estimates are
as follows: i) $22 million for the first stage, ii) $93 million for the first
phase of the second stage, and iii) $87 million for the second phase of the
second stage.
On July 10, 2012, the Minister approved an immediate increase in production to
75% of the smelter's normal operating capacity over the balance of 2012, up from
the 50% rate specified under the Government's directive issued in April 2012. At
this level, NCS is capable of processing all current and future concentrate
production by Chelopech. Depending on the outcome of a further audit to measure
fugitive emissions inside the converter aisle, NCS will either be permitted to
return to full production or to remain operating at 75% of its normal operating
capacity over the balance of 2012 until further improvements on the fume
extraction systems are completed. The Committee will meet on a regular basis
with NCS to discuss progress.
Mr. Anthony Walsh joined the board of directors of the Company on July 12, 2012.
Mr. Walsh has over 25 years of experience in the mining industry and has held a
number of senior positions, including most recently, President and Chief
Executive Officer ("CEO") of Sabina, President and CEO of Miramar Mining
Corporation and Senior Vice President and Chief Financial Officer of
International Corona Corporation. He holds a chartered accountant designation.
The Company's outlook for 2012 has been updated to reflect the expected
production at the smelter based on the existing government directive, lower
production at Deno Gold and strong operating results achieved by Chelopech in
the first half 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. Mine output at Deno Gold is
expected to range between 500,000 and 550,000 tonnes. Based on the existing
government directive, concentrate smelted at NCS is expected to range between
145,000 and 155,000 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
concentrate
produced: Chelopech Deno Gold Total
----------------------------------------------------------------------------
Gold
(ounces) 110,000 - 120,000 22,000 - 25,000 132,000 - 145,000
Copper
(million pounds) 40.0 - 43.0 2.3 - 2.6 42.3 - 45.6
Zinc
(million pounds) - 16.0 - 18.0 16.0 - 18.0
Silver
(ounces) 190,000 - 205,000 450,000 - 510,000 640,000 - 715,000
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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 $68 and $73 at
Deno Gold. The cash cost per tonne of concentrate smelted at NCS is expected to
range between $370 and $390.
For 2012, the Company's approved growth capital expenditures (1) 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 undertaken to enhance underground operations and advance
the open pit project at Deno Gold. Sustaining capital expenditures (1) are
expected to range between $29 million and $35 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-GAAP Financial Measures" section of management's discussion and analysis
for the three and six months ended June 30, 2012 (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
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Three Months Six Months
----------------- -----------------
$ millions, except where noted
Ended June 30, 2012 2011 2012 2011
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Revenue 82.3 69.1 182.3 137.5
Gross profit 28.1 18.8 76.3 40.8
Earnings before income taxes 9.1 9.3 13.5 25.0
Net earnings attributable to common
shareholders 9.6 9.1 17.8 23.2
Basic earnings per share 0.08 0.07 0.14 0.19
Adjusted EBITDA (1) 19.5 14.6 60.3 33.8
Adjusted net earnings (1) 9.4 6.0 40.7 15.8
Adjusted basic earnings per share (1) 0.08 0.05 0.33 0.13
Cash flow from operations, before changes
in non-cash working capital 7.0 17.0 55.1 38.9
Concentrate produced (mt) 30,479 28,263 67,457 47,398
Metals in concentrate produced:
Gold (ounces) 34,053 27,907 75,963 47,492
Copper ('000s pounds) 10,188 8,944 22,422 14,726
Zinc ('000s pounds) 3,388 5,002 7,831 9,763
Silver (ounces) 149,058 182,418 336,584 340,084
NCS - concentrate smelted (mt) 25,822 39,274 67,746 77,806
Deliveries of concentrates (mt) 33,584 25,059 67,753 48,783
Payable metals in concentrate sold:
Gold (ounces) 33,314 22,885 66,899 44,467
Copper ('000s pounds) 10,215 7,379 20,628 14,104
Zinc ('000s pounds) 4,117 4,123 7,962 9,154
Silver (ounces) 96,537 144,630 210,936 279,766
Cash cost of sales per ounce of gold
sold, net of by-product credits (1)
Chelopech 108 80 (50) 15
Deno Gold 1,009 27 826 135
Consolidated 176 65 32 50
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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 condensed interim unaudited consolidated financial
statements and the notes thereto, and MD&A for the three and six months ended
June 30, 2012, 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 Thursday,
August 2, 2012, at 9:00 a.m. (EDT). The call will be webcast live (audio only)
at: http://www.gowebcasting.com/3421. Listen only telephone option at
416-340-8061 or North America Toll Free at 1-866-225-0198. 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 Deno Gold 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 47.3% interest in
Dunav Resources Ltd. ("Dunav") and its 10.7% 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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