Dundee Precious Metals Announces 2024 Third Quarter Results; Continuing Track Record of Strong Free Cash Flow Generation
TORONTO, Nov. 05, 2024 (GLOBE NEWSWIRE) -- Dundee Precious Metals Inc. (TSX:DPM) ("DPM" or the "Company") announced its operating and financial results for the third quarter and nine months ended September 30, 2024.
Third Quarter Highlights(Unless otherwise stated, all monetary figures in this news release are expressed in U.S. dollars, and all operational and financial information contained in this news release is related to continuing operations.)
On track to meet 2024 guidance: With production of 60,145 ounces of gold and 7.3 million pounds of copper in the third quarter, and 190,516 ounces of gold and 21.9 million pounds of copper in the first nine months of 2024, DPM is well-positioned to achieve its annual production guidance.
Generating robust margins: Reported all-in sustaining cost per ounce of gold sold1 of $1,005, and cost of sales per ounce of gold sold2 of $1,265. All-in sustaining cost per ounce of gold sold in the first nine months of 2024 was $859, and is expected to be within the annual guidance range for the year.
Advancing growth pipeline: The Čoka Rakita project pre-feasibility study ("PFS") is progressing well, with infill drilling completed and an updated Mineral Resource Estimate in progress. The PFS is on track for completion in the first quarter of 2025.
Free cash flow: Generated $70.9 million of free cash flow1 and $52.5 million of cash provided from operating activities from continuing operations.
Adjusted net earnings: Reported adjusted net earnings1 of $46.2 million ($0.26 per share1) and net earnings from continuing operations of $46.2 million ($0.26 per share).
Continued capital discipline: Returned $49.5 million, or 23% of free cash flow, to shareholders year-to-date through dividends paid and shares repurchased.
Substantial liquidity for growth: Ended the quarter with a strong balance sheet, including a total of $658.2 million of cash, a $150.0 million undrawn revolving credit facility, and no debt.
High-grade copper-gold discoveries: Announced high-grade copper-gold Dumitru Potok and Frasen discoveries, which are located within one kilometre of the Čoka Rakita project.
Sale of Tsumeb smelter completed: DPM closed the sale of the Tsumeb smelter for a net cash consideration of $15.9 million, subject to normal post-closing adjustments ("Tsumeb Disposition").
__________________1 All-in sustaining cost per ounce of gold sold, free cash flow, adjusted net earnings and adjusted basic earnings per share are non-GAAP financial measures or ratios. These measures have no standardized meanings under IFRS Accounting Standards ("IFRS") and may not be comparable to similar measures presented by other companies. Refer to the "Non-GAAP Financial Measures" section commencing on page 13 of this news release for more information, including reconciliations to IFRS measures.2 Cost of sales per ounce of gold sold represents total cost of sales for Chelopech and Ada Tepe, divided by total payable gold in concentrate sold, while all-in sustaining cost per ounce of gold sold includes treatment and freight charges, net of by-product credits, all of which are reflected in revenue.
CEO Commentary
"We generated $213 million of free cash flow year-to-date, demonstrating the quality of our assets, our low cost structure and the benefit of higher metal prices," said David Rae, President and Chief Executive Officer. "We are well-positioned to continue our ten-year track record of achieving our gold production and all-in sustaining cost guidance.
"We continue to advance Čoka Rakita, our high-grade, low-cost growth project in Serbia, with the PFS on track for completion in Q1 2025. Our scout drilling programs continue to return strong results confirming the large-scale potential for further high-grade copper-gold mineralization, as demonstrated by the Dumitru Potok and Frasen discoveries we announced in September.
"DPM is in a unique position in the industry, with a strong base of high-margin production driving significant free cash flow generation, and the balance sheet strength to internally fund our growth pipeline and exploration prospects while continuing to return capital to shareholders."
Use of non-GAAP Financial Measures
Certain financial measures referred to in this news release are not measures recognized under IFRS and are referred to as non-GAAP financial measures or ratios. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Non-GAAP financial measures and ratios, together with other financial measures calculated in accordance with IFRS, are considered to be important factors that assist investors in assessing the Company's performance. The Company uses the following non-GAAP financial measures and ratios in this news release:
mine cash cost
cash cost per tonne of ore processed
mine cash cost of sales
cash cost per ounce of gold sold
all-in sustaining cost
all-in sustaining cost per ounce of gold sold
adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA")
adjusted net earnings
adjusted basic earnings per share
cash provided from operating activities, before changes in working capital
free cash flow
average realized metal prices
For a detailed description of each of the non-GAAP financial measures and ratios used in this news release and a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the "Non-GAAP Financial Measures" section commencing on page 13 of this news release.
Key Operating and Financial Highlights from Continuing Operations
$ millions, except where noted
Three Months
Nine Months
2024
2023
Change
2024
2023
Change
Operating Highlights
Ore Processed
t
711,090
738,614
(4
%)
2,167,831
2,217,187
(2
%)
Metals contained in concentrate produced:
Gold
Chelopech
oz
43,899
40,280
9
%
125,128
120,001
4
%
Ada Tepe
oz
16,246
33,822
(52
%)
65,388
98,988
(34
%)
Total gold in concentrate produced
oz
60,145
74,102
(19
%)
190,516
218,989
(13
%)
Copper
Klbs
7,318
7,228
1
%
21,890
22,318
(2
%)
Payable metals in concentrate sold:
Gold
Chelopech
oz
37,725
34,660
9
%
105,142
99,586
6
%
Ada Tepe
oz
15,503
32,955
(53
%)
64,121
96,593
(34
%)
Total payable gold in concentrate sold
oz
53,228
67,615
(21
%)
169,263
196,179
(14
%)
Copper
Klbs
6,484
6,699
(3
%)
18,410
19,642
(6
%)
Cost of sales per tonne of ore processed(1):
Chelopech
$/t
79
63
25
%
72
63
14
%
Ada Tepe
$/t
136
138
(1
%)
140
138
1
%
Cash cost per tonne of ore processed(2):
Chelopech
$/t
61
50
22
%
57
50
14
%
Ada Tepe
$/t
71
65
9
%
69
66
5
%
Cost of sales per ounce of gold sold(3)
$/oz
1,265
901
40
%
1,151
934
23
%
All-in sustaining cost per ounce of gold sold(2)
$/oz
1,005
911
10
%
859
840
2
%
Financial Highlights
Average realized prices(2):
Gold
$/oz
2,548
1,921
33
%
2,347
1,933
21
%
Copper
$/lb
4.24
3.72
14
%
4.25
3.85
10
%
Revenue
147.3
121.9
21
%
427.9
380.8
12
%
Cost of sales
67.3
60.9
10
%
194.8
183.2
6
%
Earnings before income taxes
55.3
44.1
25
%
181.8
147.2
23
%
Net earnings
46.2
36.7
26
%
156.5
129.9
20
%
Basic earnings per share
$/sh
0.26
0.20
30
%
0.87
0.69
26
%
Adjusted EBITDA(2)
68.5
59.6
15
%
216.1
196.3
10
%
Adjusted net earnings(2)
46.2
36.7
26
%
149.6
129.9
15
%
Adjusted basic earnings per share(2)
$/sh
0.26
0.20
30
%
0.83
0.69
20
%
Cash provided from operating activities
52.5
70.1
(25
%)
214.1
190.4
12
%
Free cash flow(2)
70.9
46.1
54
%
213.4
178.6
20
%
Capital expenditures incurred(4):
Sustaining(5)
10.8
9.7
11
%
24.4
23.1
5
%
Growth and other(6)
3.2
6.1
(48
%)
15.1
19.4
(22
%)
Total capital expenditures
14.0
15.8
(11
%)
39.5
42.5
(7
%)
(1) Cost of sales per tonne of ore processed represents cost of sales for Chelopech and Ada Tepe, respectively, divided by tonnes of ore processed.(2) Cash cost per ounce of gold sold, cash cost per tonne of ore processed, all-in sustaining cost per ounce of gold sold, average realized metal prices, adjusted EBITDA, adjusted net earnings, adjusted basic earnings per share, and free cash flow are non-GAAP financial measures or ratios. Refer to the "Non-GAAP Financial Measures" section commencing on page 13 of this news release for more information, including reconciliations to IFRS measures.(3) Cost of sales per ounce of gold sold represents total cost of sales for Chelopech and Ada Tepe, divided by total payable gold in concentrate sold.(4) Capital expenditures incurred were reported on an accrual basis and do not represent the cash outlays for the capital expenditures.(5) Sustaining capital expenditures are generally defined as expenditures that support the ongoing operation of the asset or business without any associated increase in capacity, life of assets or future earnings. This measure is used by management and investors to assess the extent of non-discretionary capital spending being incurred by the Company each period.(6) Growth capital expenditures are generally defined as capital expenditures that expand existing capacity, increase life of assets and/or increase future earnings. This measure is used by management and investors to assess the extent of discretionary capital spending being undertaken by the Company each period.
Performance HighlightsA table comparing production, sales and cash cost measures by asset for the third quarter and first nine months ended September 30, 2024 against 2024 guidance is located on page 9 of this news release.
In the third quarter of 2024, Chelopech continued to deliver strong operating results. Gold production at Ada Tepe was impacted by temporary operational challenges during the quarter, which have been resolved. With strong year-to-date results and production expected to increase in the fourth quarter, both mines remain on track to achieve their respective 2024 production and cost guidance.
Highlights include the following:
Chelopech, Bulgaria: Gold contained in gold-copper and pyrite concentrates produced in the third quarter of 2024 was 9% higher than 2023 due primarily to higher gold recoveries and ore grades. Gold contained in gold-copper and pyrite concentrates produced in the first nine months of 2024 was 4% higher than 2023 due primarily to higher gold recoveries. Copper production in the third quarter and first nine months of 2024 was comparable to 2023.
All-in sustaining cost per ounce of gold sold in the third quarter and first nine months of 2024 was 43% and 30% lower than 2023, respectively, due primarily to lower treatment charges as a result of DPM having secured more favourable commercial terms for the year under the current tight market for copper concentrates, higher volumes of gold sold, and higher by-product credits reflecting higher realized copper prices, partially offset by higher labour cost, as well as lower cash outlays for sustaining capital expenditures.
The Company is assessing the potential impact of a proposed change by China's tax authority to the applicability of value-added taxes ("VAT") and import duties on gold-copper concentrates. While this change is not yet confirmed, and Chelopech's sales contracts currently provide that taxes and duties in China are for the buyer's account, the Company will continue to monitor the situation and to assess any potential impact on the future demand and commercial terms, including alternative buyers, for Chelopech's gold-copper concentrates.
Ada Tepe, Bulgaria: Gold contained in concentrate produced in the third quarter and first nine months of 2024 was 52% and 34% lower than 2023, respectively, due primarily to mining in lower grade zones in the first six months of the year, in line with mine plan, and lower than expected grades, recoveries and fleet availability in the third quarter. The Company expects increased production in the fourth quarter as mining has transitioned to an area of the pit with higher grades and recoveries, and fleet availability has improved. Ada Tepe remains on track to achieve its guidance for gold production.
All-in sustaining cost per ounce of gold sold in the third quarter and first nine months of 2024 was 130% and 51% higher than 2023, respectively, due primarily to lower volumes of gold sold.
Consolidated Operating Highlights
Production: Gold contained in concentrate produced in the third quarter and first nine months of 2024 was 19% and 13% lower than 2023, due primarily to lower gold production at Ada Tepe, partially offset by higher gold recoveries at Chelopech.
Copper production in the third quarter and first nine months of 2024 was comparable to 2023.
Deliveries: Payable gold in concentrate sold in the third quarter and first nine months of 2024 was 21% and 14% lower than 2023, consistent with lower gold production.
Payable copper in concentrate sold in the third quarter of 2024 was comparable to 2023. Payable copper in the first nine months of 2024 was 6% lower than 2023, due primarily to the timing of deliveries.
Cost measures: Cost of sales in the third quarter and first nine months of 2024 increased 10% and 6%, respectively, compared to 2023, due primarily to higher labour costs.
All-in sustaining cost per ounce of gold sold in third quarter and first nine months of 2024 was 10% and 2% higher than 2023, respectively, due primarily to lower volumes of gold sold, higher share-based compensation expenses reflecting DPM's strong share price performance, and higher labour costs, partially offset by lower treatment charges at Chelopech and higher by-product credits as a result of higher realized copper prices.
Capital expenditures: Sustaining capital expenditures incurred in the third quarter and first nine months of 2024 were comparable to 2023.
Growth and other capital expenditures incurred during the third quarter and first nine months of 2024 decreased 48% and 22%, respectively, compared to 2023, due primarily to lower expenditures related to the Loma Larga gold project, as expected.
Consolidated Financial Highlights
Financial results in the third quarter and first nine months of 2024 reflected higher realized metal prices and lower treatment charges at Chelopech, partially offset by lower volumes of gold sold at Ada Tepe and higher planned exploration and evaluation expenses.
Revenue: Revenue in the third quarter and first nine months of 2024 was 21% and 12% higher than 2023, respectively, due primarily to higher realized metal prices and lower treatment charges at Chelopech, partially offset by lower volumes of gold sold at Ada Tepe.
Net earnings: Net earnings from continuing operations in the third quarter and first nine months of 2024 increased 26% and 20%, respectively, compared to 2023 due primarily to higher revenue and interest income, partially offset by higher planned exploration and evaluation expenses, higher labour costs including higher share-based compensation expenses reflecting DPM's strong share performance, and higher income taxes.
Adjusted net earnings: Adjusted net earnings from continuing operations in the third quarter and first nine months of 2024 increased 26% and 15%, respectively, compared to 2023 due primarily to the same factors affecting net earnings from continuing operations, with the exception of adjusting items primarily related to the net termination fee received from Osino Resources Corp. ("Osino").
Cash provided from operating activities: Cash provided from operating activities of continuing operations in the third quarter of 2024 was 25% lower than 2023 due primarily to the timing of deliveries and subsequent receipt of cash, partially offset by higher earnings generated from continuing operations in the quarter. Cash provided from operating activities of continuing operations in the first nine months of 2024 was 12% higher than 2023 due primarily to higher earnings generated from continuing operations in the period and the timing of payments to suppliers, partially offset by the timing of deliveries and subsequent receipt of cash.
Free cash flow: Free cash flow from continuing operations in the third quarter and first nine months of 2024 was 54% and 20% higher than 2023, respectively, due primarily to higher earnings generated in the periods. Free cash flow is calculated before changes in working capital.
Balance Sheet Strength and Financial Flexibility
The Company continues to maintain a strong financial position, with a growing cash position, no debt and an undrawn $150 million revolving credit facility.
Cash and cash equivalents increased from $595.3 million as at December 31, 2023 to $658.2 million as at September 30, 2024 due primarily to earnings generated in the period, and cash proceeds from the disposition of Osino shares and the Tsumeb smelter, partially offset by a net cash outflow of $94.8 million related to the DPM Tolling Agreement, cash outlays for capital expenditures, payments for shares repurchased under the Normal Course Issuer Bid ("NCIB") and dividends paid.
Return of Capital to Shareholders
In line with its disciplined capital allocation framework, DPM continues to return excess capital to shareholders, which currently includes a sustainable quarterly dividend and periodic share repurchases under the NCIB.
During the first nine months of 2024, the Company returned a total of $49.5 million to shareholders through dividends paid of $21.7 million, as well as payments for shares repurchased of $27.8 million following the renewal of the NCIB in late March.
Share Repurchases
During the nine months ended September 30, 2024, the Company purchased a total of 3,399,511 shares with a total cost of $28.3 million at an average price per share of $8.32 (Cdn$11.36).
The actual timing and number of common shares that may be purchased under the NCIB will be undertaken in accordance with DPM's capital allocation framework, having regard for such things as DPM's financial position, business outlook and ongoing capital requirements, as well as its share price and overall market conditions.
Quarterly Dividend
On November 5, 2024, the Company declared a dividend of $0.04 per common share payable on January 15, 2025 to shareholders of record on December 31, 2024.
Development Projects Update
Čoka Rakita, Serbia
DPM continues to focus on advancing the high-quality Čoka Rakita project, which has rapidly progressed since the announcement of the initial discovery in January 2023.
The PFS remains on track for completion in the first quarter of 2025. At the end of the third quarter, the PFS design and engineering was approximately 80% complete. Market and vendor engagement for pricing and cost estimates has commenced and will continue into the fourth quarter. During the third quarter of 2024, the PFS infill drilling program was completed, whereby results continued to confirm the continuity of the high-grade mineralization, and an updated Mineral Resource estimate is underway. In addition, the geotechnical and hydrogeological drilling program, which will support the PFS design and cost estimates, is nearing completion.
In parallel, permitting activities have continued to advance. Environmental and other baseline studies, which form part of the environmental and social impact assessment, are ongoing and expected to be submitted in early 2026. Permitting preparation activities are underway, with a detailed timeline focused on supporting commencement of construction in mid-2026.
The Company has had a local presence in Serbia since 2004, has developed strong relationships in the region, and will continue its proactive engagement with all stakeholders as the project advances.
The Company has planned to spend a total of $30 million to $35 million for the Čoka Rakita project in 2024, with $17.3 million incurred in the first nine months of the year as a result of the timing of expenditures.
Loma Larga, Ecuador
At the Loma Larga gold project in Ecuador, the Company continued to progress activities related to permitting and stakeholder relations. The Company continues to support the government in fulfilling the requirements of the August 2023 ruling by the Provincial Court of Azuay in connection with the Constitutional Protective Action that was filed in 2022. In October 2024, the baseline ecosystem and water studies, as required by the ruling, were submitted to the court by the Ministry of Environment, Water and Ecological Transition. On October 31, 2024, the environmental consultation process was completed, with local communities voting overall in favour of the development of the project. Issuance of the environmental licence is expected once the prior informed indigenous consultation is concluded.
The Company maintains a constructive relationship with government institutions and other stakeholders involved with the development of the project.
The Company has budgeted between $10 million and $11 million for the project in 2024, with $8.4 million incurred in the first nine months of the year.
Exploration
Čoka Rakita, Serbia
Exploration activities in Serbia continued to focus on an accelerated drilling program at the Čoka Rakita licence, as well as scout drilling at the Dumitru Potok and Frasen targets, with 28,775 metres completed during the third quarter of 2024.
In September 2024, DPM reported results from drilling at the high-grade copper-gold Dumitru Potok and Frasen discoveries, which are located approximately one kilometre north of the Čoka Rakita project. Results at Dumitru Potok confirm the presence of high-grade copper-gold-silver stratabound skarn mineralization, with drilling demonstrating a continuous zone of strong mineralization along a 250-metre corridor open to the north, south and east. At Frasen, drilling returned manto-like carbonate-hosted replacement and skarn copper-gold mineralization at the conglomerate-marble contact over an area of 700 metres by 500 metres at Frasen West, with the potential to extend this zone southeast towards to the stratabound skarn copper-gold mineralization intersected by deep drilling at Čoka Rakita North.
Additionally, drilling has commenced at the Valja Saka and Dumitru West prospects, targeting the stratigraphy in the area known for porphyry and skarn mineralization.
The Company has budgeted between $20 million and $22 million for Serbian exploration activities, with $15.6 million spent in the first nine months of the year.
Chelopech, Bulgaria
DPM remains committed to extending the life of the Chelopech mine through its focused in-mine exploration program which targets resource development. During the third quarter of 2024, the Company completed 8,195 metres of exploration drilling, which included infill and extensional drilling aimed at discovering new mineralization along identified geological trends as well as testing potential exploration targets.
The Company successfully completed the defence of the Geological Report for the Brevene exploration licence at the end of June 2024. DPM expects to obtain the Geological Discovery certificate in the fourth quarter of 2024, which provides a one-year extension of the exploration rights for the Brevene licence to complete additional work targeting a Commercial Discovery.
Ada Tepe, Bulgaria
During the third quarter of 2024, exploration activities at the Ada Tepe camp were focused on target delineation at the Krumovitsa exploration licence, including systematic geological mapping, geophysical surveys, stream sediments, soil and rock sampling, scout drilling and 3D modelling and interpretation.
A scout drilling campaign is ongoing at the Krumovitsa licence with a total of 5,169 meters of drilling completed during the quarter. At the Kupel prospect, additional drilling is ongoing to delineate the extension of a conceptually modelled vein structure.
Permitting at the Kara Tepe prospect, which is located on the Chiriite exploration licence, is ongoing and drilling is planned to start in November 2024, focused on skarn/carbonate replacement gold targets.
2024 Guidance and Three-year Outlook
With solid operating performance from the Chelopech and Ada Tepe mines in the first nine months of 2024, DPM is on track to meet its 2024 guidance for both mining operations, including expected gold production of 245,000 to 285,000 ounces, copper production of 29 to 34 million pounds, and an all-in sustaining cost of $790 to $930 per ounce of gold sold.
Selected Production, Delivery and Cost Performance versus Guidance
Q3 2024
YTD September 2024
2024Consolidated Guidance
Chelopech
Ada Tepe
Consolidated
Chelopech
Ada Tepe
Consolidated
Ore processed
