- Continued solid operating performance at Chelopech - Weaker metal prices partially offset by hedging and strong US dollar - Accelerated maintenance and operational enhancements at NCS helped mitigate Q2 impact of Namibian Government's directives and supported July approval to begin increasing production - Existing expansion, upgrade, development and exploration projects generally on track - Solid financial position with $140 million in cash to support current capital requirements
TORONTO, ONTARIO--(Marketwire - Aug. 1, 2012) -
(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:
|Metals contained in concentrate produced:||Chelopech||Deno Gold||Total|
|110,000 - 120,000||22,000 - 25,000||132,000 - 145,000|
|40.0 - 43.0||2.3 - 2.6||42.3 - 45.6|
|-||16.0 - 18.0||16.0 - 18.0|
|190,000 - 205,000||450,000 - 510,000||640,000 - 715,000|
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|
|Three Months||Six Months|
$ millions, except where noted
Ended June 30,
|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:|
|Copper ('000s pounds)||10,188||8,944||22,422||14,726|
|Zinc ('000s pounds)||3,388||5,002||7,831||9,763|
|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:|
|Copper ('000s pounds)||10,215||7,379||20,628||14,104|
|Zinc ('000s pounds)||4,117||4,123||7,962||9,154|
|Cash cost of sales per ounce of gold sold, net of by-product credits (1)|
|(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.