Dundee Precious Metals (TSX:DPM)
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3 Years : From Dec 2011 to Dec 2014
(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 third quarter 2012 adjusted net earnings(1) of $18.7 million ($0.15 per share) compared to $32.4 million ($0.26 per share) for the same period in 2011. Reported third quarter 2012 net earnings attributable to common shareholders were $21.9 million ($0.18 per share) compared to $40.3 million ($0.32 per share) for the same period in 2011. Adjusted net earnings in the first nine months of 2012 were $59.4 million ($0.47 per share) compared to $48.2 million ($0.39 per share) for the same period in 2011. Net earnings attributable to common shareholders in the first nine months of 2012 were $39.7 million ($0.32 per share) compared to $63.4 million ($0.51 per share) for the same period in 2011.
The quarter over quarter decrease in adjusted net earnings was driven by lower metal prices, higher operating and administrative expenses, higher exploration expenses primarily related to activities at Dunav and Avala, and the deferral of copper concentrate deliveries at Deno Gold as a result of the lead content being higher than current smelter's specifications. These unfavourable variances were partially offset by a stronger U.S. dollar. Net earnings attributable to common shareholders were also impacted by unrealized losses on copper derivative contracts of $9.0 million (2011 - unrealized gains of $40.2 million) and unrealized mark-to-market gains in respect of the Company's Sabina Gold & Silver Corp. ("Sabina") special warrants of $12.3 million (2011 - unrealized losses of $32.2 million).
The increase in adjusted net earnings in the first nine months of 2012 relative to the same period in 2011 was due primarily to higher volumes of payable gold and copper in concentrate sold, higher gold prices and a stronger U.S. dollar, partially offset by lower by-product prices, lower volumes of concentrate smelted at NCS resulting from short-term production curtailments, higher administrative expenses and higher exploration expenses, primarily related to activities at Dunav and Avala. The increase in payable gold and copper in concentrate sold reflects Chelopech's ramp-up of production associated with its mine expansion. Net earnings attributable to common shareholders were also impacted by several items, including unrealized losses on copper derivative contracts of $16.7 million (2011 - unrealized gains of $36.4 million) and unrealized losses related to the Company's Sabina special warrants of $2.9 million (2011 - $26.4 million).
"Chelopech delivered another quarter of solid operating and financial results. The physical construction of the expansion project was completed in early October and the commissioning of the underground crusher and conveyor is currently underway and progressing well and remains under budget. The installation of the lead circuit at Deno Gold was also completed in the third quarter and commissioning is currently underway," said Jonathan Goodman, President and CEO. "We are pleased with the progress being made on the capital projects and other initiatives underway at NCS and are confident that production will be restored to normal levels in the near term. Overall, we are well positioned to deliver a strong fourth quarter and, with $131 million in cash, are in solid financial shape."
Adjusted EBITDA(1) in the third quarter and first nine months of 2012 was $26.5 million and $86.8 million, respectively, compared to $46.7 million and $80.5 million in the corresponding periods in 2011 driven by the same factors affecting adjusted net earnings.
Concentrate production for the three and nine months ended September 30, 2012 was 35,924 tonnes and 103,381 tonnes, respectively, representing a 4% and 26% 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 volumes of ore processed. In the third quarter of 2011, 37,033 tonnes of oxidized ore, stockpiled on surface from past mining operations, were processed to supplement mine production and to fully utilize the mill. There was no oxidized ore processed in 2012.
Concentrate smelted at NCS in the third quarter and first nine months of 2012 of 45,787 tonnes and 113,533 tonnes, respectively, was 17% and 15% lower than the corresponding periods in 2011 due primarily to the impact of the Namibian Minister of Environment and Tourism's (the "Minister") directive issued on April 27, 2012, to reduce production to 50% of the smelter's operating capacity. On July 10, 2012, the Minister's Technical Committee, with the approval of the Minister, authorized an immediate production increase to 75% of the smelter's operating capacity. Inspections to assess whether further increases are warranted have now been completed and the Company expects that the government will advise on the timing of further increases in November 2012.
Deliveries of concentrate in the third quarter of 2012 of 33,934 tonnes were 11% lower than the corresponding period in 2011 due primarily to timing of shipments and lower concentrate production at Deno Gold as a result of lower ore processed. Payable metals in concentrate sold in the third quarter of 2012 were lower than the corresponding period in 2011 consistent with the decrease in concentrate deliveries.
Deliveries of concentrate in the first nine months of 2012 of 101,687 tonnes were 17% higher than the corresponding period in 2011 due primarily to increased concentrate production at Chelopech partially offset by the deferral of copper concentrate deliveries at Deno Gold as a result of the lead content being higher than current smelter's specifications and lower production of zinc concentrate at Deno Gold. Payable copper and gold in concentrate sold in the first nine months of 2012 were up 22% and 26%, respectively, relative to the corresponding period in 2011 due primarily to increased production at Chelopech and higher gold grades.
Consolidated cash cost of sales per ounce of gold sold, net of by-product credits, for the third quarter of 2012 was $217 compared to negative $115 for the third quarter of 2011. The quarter over quarter increase was due primarily to lower by-product prices, lower volumes of payable zinc and silver in concentrate sold and higher treatment charges. Cash cost of sales per ounce of gold sold, net of by-product credits, for the first nine months of 2012 was $92 compared to negative $22 during the same period in 2011. This increase was due primarily to lower by-product prices and higher operating expenses, partially offset by higher aggregate volumes of payable gold and copper in concentrate sold and a stronger U.S. dollar.
Cash provided from operating activities, before changes in non-cash working capital, during the third quarter and first nine months of 2012 of $35.3 million and $90.4 million, respectively, was $7.5 million lower and $8.6 million higher than the corresponding prior year periods due primarily to the same factors affecting adjusted net earnings and higher income tax payments.
Capital expenditures in the third quarter and first nine months of 2012 were $39.0 million and $98.0 million, respectively, compared to $38.6 million and $87.4 million in the corresponding periods in 2011. The year-to-date increase was due primarily to increased construction activities in connection with NCS' capital program, partially offset by reduced construction activities at Chelopech.
As at September 30, 2012, DPM maintained a solid financial position with minimal debt, representing 10% of total capitalization, a consolidated cash position of $131.1 million and an investment portfolio valued at $93.9 million.
Ms. Eira Thomas joined the board of directors of the Company on September 12, 2012. Ms. Thomas has over 20 years of experience in the mining industry and has held a number of senior positions, most recently, as Chairman and director of Stornoway Diamond Corporation, an organization she co-founded.
The Company's outlook for its 2012 operating results remains unchanged from the guidance in the MD&A issued on August 1, 2012, although we expect to achieve the higher end of the range for production and the lower end of the range for cost. Expected growth capital expenditures for the year have been reduced to reflect the deferral of certain expenditures to 2013.
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
produced: Chelopech Deno Gold Total
Gold (ounces) 110,000 - 120,000 22,000 - 25,000 132,000 - 145,000
pounds) 40.0 - 43.0 2.3 - 2.6 42.3 - 45.6
pounds) - 16.0 - 18.0 16.0 - 18.0
Silver (ounces) 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 $130 million and $140 million, down from previous guidance of $150 million to $175 million. These expenditures 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 continue to remain 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 nine months ended September 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
$ millions, except where noted
Ended September 30, Three Months Nine Months
2012 2011 2012 2011
Revenue 99.3 112.5 281.6 250.0
Gross profit 41.0 51.1 117.3 91.9
Earnings before income taxes 19.9 47.0 33.4 72.0
Net earnings attributable to common
shareholders 21.9 40.3 39.7 63.4
Basic earnings per share 0.18 0.32 0.32 0.51
Adjusted EBITDA(1) 26.5 46.7 86.8 80.5
Adjusted net earnings(1) 18.7 32.4 59.4 48.2
Adjusted basic earnings per share(1) 0.15 0.26 0.47 0.39
Cash flow from operations, before changes
in non-cash working capital 35.3 42.8 90.4 81.8
Concentrate produced (mt) 35,924 34,704 103,381 82,102
Metals in concentrate produced:
Gold (ounces) 33,844 32,221 109,807 79,713
Copper ('000s pounds) 11,865 11,140 34,287 25,866
Zinc ('000s pounds) 4,714 4,692 12,545 14,455
Silver (ounces) 185,772 152,865 522,356 492,949
NCS - concentrate smelted (mt) 45,787 55,009 113,533 132,815
Deliveries of concentrates (mt) 33,934 38,142 101,687 86,925
Payable metals in concentrate sold:
Gold (ounces) 32,134 34,125 99,033 78,592
Copper ('000s pounds) 10,495 11,410 31,123 25,514
Zinc ('000s pounds) 3,160 4,918 11,122 14,072
Silver (ounces) 156,102 198,894 367,038 478,660
Cash cost of sales per ounce of gold
sold, net of by-product credits(1)
Chelopech 99 (187) (4) (74)
Deno Gold 894 85 855 114
Consolidated 217 (115) 92 (22)
(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 nine months ended September 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, November 8, 2012, at 9:00 a.m. (E.S.T.). The call will be webcast live (audio only) at: http://www.gowebcasting.com/3835. Listen only telephone option at 416-695-6616 or North America Toll Free at 1-800-766-6630. Replay available at 905-694-9451 or North America Toll Free at 1-800-408-3053, passcode 4317707. 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 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.
Dundee Precious Metals Inc.
President and Chief Executive Officer
Dundee Precious Metals Inc.
Executive Vice President and Chief Financial Officer
Dundee Precious Metals Inc.
Senior Vice President, Investor & Regulatory Affairs and