TORONTO, Feb. 16, 2023 (GLOBE NEWSWIRE) -- Dundee Precious Metals Inc. (TSX: DPM) ("DPM" or the "Company") today announced its operating and financial results for the fourth quarter and twelve months ended December 31, 2022.
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.)
- Metals production: Produced 273,109 ounces of gold, in line with 2022 guidance and 30.8 million pounds of copper, slightly below 2022 guidance.
- Complex concentrate smelted: Throughput of 174,122 tonnes at Tsumeb, slightly below 2022 guidance.
- All-in sustaining cost: Reported cost of sales per ounce of gold sold1 of $975, and an all-in sustaining cost per ounce of gold sold2 of $885, within the range of guidance for 2022.
- Free cash flow: Generated $232.1 million of cash from operating activities and $166.4 million of free cash flow2.
- Adjusted net earnings: Reported net earnings attributable to common shareholders from continuing operations of $35.9 million ($0.19 per share) and adjusted net earnings2 of $129.0 million ($0.68 per share).
- Financial position: Ended the year with a strong balance sheet, including $433.2 million of cash, a $150.0 million undrawn revolving credit facility, and no debt.
- Returning capital to shareholders: Returned $44.1 million, or 27% of 2022 free cash flow, to shareholders through dividends and share repurchases. Declared fourth quarter dividend of $0.04 per common share payable on April 17, 2023 to shareholders of record on March 31, 2023.
- Enhanced Normal Course Issuer Bid ("NCIB"): DPM's Board of Directors has approved the renewal of its NCIB, pending Toronto Stock Exchange ("TSX") approval, for the purchase of up to $100 million of the Company's outstanding common shares, subject to certain internal parameters.
- Strong sustainability performance: Scored in the 91st percentile among metals and mining companies in the 2022 S&P Global Corporate Sustainability Assessment and was included in The Sustainability Yearbook for the second consecutive year.
- Ada Tepe life of mine ("LOM") plan: Updated mineral reserve and mineral resource estimate and optimized LOM plan for Ada Tepe with higher annual production, improved average grade and higher gold recoveries.
- Improved 2023 guidance and three-year outlook: Gold production expected to average 270,000 ounces over the next three years, with higher forecasted production in 2023 and 2024; improved all-in sustaining cost profile; declining sustaining capital expenditures; and consistent smelter performance.
- Development projects: DPM has taken the decision to extend the timeline for the optimization phase of the updated feasibility study ("FS") for Loma Larga in Ecuador, which is now expected to be completed in the second half of 2023.
- Exploration: High-grade discovery at the Coka Rakita exploration prospect in Serbia where DPM is expecting additional results from drilling in the second quarter and targeting an initial Mineral Resource estimate in the fourth quarter of 2023. Continued exploration work at Tierras Coloradas in Ecuador and advanced brownfield exploration at Chelopech and Ada Tepe.
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1 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. This measure is before treatment charges, freight and by-product credits, all of which are reflected in revenue, while all-in sustaining cost per ounce of gold sold is net of these items.
2 All-in sustaining cost per ounce of gold sold, free cash flow, and adjusted net earnings are non-GAAP financial measures or ratios. These measures have no standardized meanings under International Financial Reporting 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 17 of this news release for more information, including reconciliations to IFRS measures.
CEO Commentary
"In 2022, we delivered strong operating results, achieving our gold production guidance while managing industry cost pressures. We generated $166 million of free cash flow in 2022, of which we returned 27% to shareholders through share repurchases and our sustainable quarterly dividend. We also continued to invest in our future, as we progressed the feasibility study update at Loma Larga and announced a high-grade discovery at Coka Rakita in Serbia," said David Rae, President and Chief Executive Officer.
"Our strong three-year outlook for gold production and attractive all-in sustaining costs, reflecting the improved life of mine plan for Ada Tepe, combined with our financial strength and significant free cash flow generation position us well to continue generating value for all of our stakeholders.
"Our focus in 2023 will be on continuing to deliver strong operating performance, achieving key milestones at Loma Larga, and advancing our portfolio of prospective exploration targets."
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
- smelter cash cost
- cash cost per tonne of complex concentrate smelted
- adjusted earnings before interest, taxes, depreciation and amortization ("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 17 of this news release.
Key Operating and Financial Highlights
| $ millions, except where noted | Three Months | Twelve Months | ||||||||
| Ended December 31, | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||
| Operating Highlights | ||||||||||
| Metals contained in concentrate produced: | ||||||||||
| Gold | ||||||||||
| Chelopech | oz | 45,339 | 49,050 | (8 | %) | 179,135 | 177,001 | 1 | % | |
| Ada Tepe | oz | 28,081 | 33,774 | (17 | %) | 93,974 | 132,964 | (29 | %) | |
| Total gold in concentrate produced | oz | 73,420 | 82,824 | (11 | %) | 273,109 | 309,965 | (12 | %) | |
| Copper | Klbs | 7,436 | 9,151 | (19 | %) | 30,835 | 34,688 | (11 | %) | |
| Payable metals in concentrate sold: | ||||||||||
| Gold | ||||||||||
| Chelopech | oz | 39,203 | 40,538 | (3 | %) | 151,580 | 149,297 | 2 | % | |
| Ada Tepe | oz | 26,628 | 33,282 | (20 | %) | 91,117 | 129,754 | (30 | %) | |
| Total payable gold in concentrate sold | oz | 65,831 | 73,820 | (11 | %) | 242,697 | 279,051 | (13 | %) | |
| Copper | Klbs | 6,726 | 8,175 | (18 | %) | 27,224 | 32,680 | (17 | %) | |
| Cost of sales per tonne of ore processed(1): | ||||||||||
| Chelopech | $/t | 71 | 60 | 18 | % | 63 | 59 | 7 | % | |
| Ada Tepe | $/t | 125 | 123 | 2 | % | 120 | 115 | 5 | % | |
| Cash cost per tonne of ore processed(2): | ||||||||||
| Chelopech | $/t | 51 | 54 | (6 | %) | 50 | 47 | 6 | % | |
| Ada Tepe | $/t | 58 | 60 | (3 | %) | 55 | 52 | 6 | % | |
| Cost of sales per ounce of gold sold(3) | $/oz | 990 | 819 | 21 | % | 975 | 819 | 19 | % | |
| All-in sustaining cost per ounce of gold sold(2) | $/oz | 1,008 | 757 | 33 | % | 885 | 657 | 35 | % | |
| Complex concentrate smelted | t | 41,835 | 51,932 | (19 | %) | 174,122 | 189,705 | (8 | %) | |
| Cost of sales per tonne of complex concentrate smelted(4) | $/t | 621 | 646 | (4 | %) | 694 | 678 | 2 | % | |
| Cash cost per tonne of complex concentrate smelted(2) | $/t | 443 | 447 | (1 | %) | 463 | 480 | (3 | %) | |
| Financial Highlights | ||||||||||
| Revenue | 152.9 | 166.4 | (8 | %) | 569.8 | 641.4 | (11 | %) | ||
| Cost of sales | 91.1 | 94.1 | (3 | %) | 357.4 | 357.1 | - | % | ||
| Impairment charge | - | - | - | % | 85.0 | - | 100 | % | ||
| Earnings before income taxes | 37.6 | 60.3 | (38 | %) | 58.7 | 229.4 | (74 | %) | ||
| Net earnings attributable to common shareholders from continuing operations | 33.3 | 52.1 | (36 | %) | 35.9 | 190.7 | (81 | %) | ||
| Per share | 0.18 | 0.27 | (33 | %) | 0.19 | 1.02 | (81 | %) | ||
| Net earnings attributable to common shareholders(5) | 33.3 | 51.5 | (35 | %) | 35.9 | 210.1 | (83 | %) | ||
| Per share(5) | 0.18 | 0.27 | (33 | %) | 0.19 | 1.12 | (83 | %) | ||
| Adjusted EBITDA(2) | 58.3 | 84.3 | (31 | %) | 252.9 | 336.9 | (25 | %) | ||
| Adjusted net earnings(2) | 33.3 | 51.4 | (35 | %) | 129.0 | 202.0 | (36 | %) | ||
| Per share(2) | 0.18 | 0.27 | (33 | %) | 0.68 | 1.09 | (38 | %) | ||
| Cash provided from operating activities | 49.3 | 88.9 | (45 | %) | 232.1 | 253.5 | (8 | %) | ||
| Free cash flow(2) | 33.3 | 65.8 | (49 | %) | 166.4 | 252.4 | (34 | %) | ||
| Capital expenditures incurred: | ||||||||||
| Growth(6) | 11.2 | 7.4 | 50 | % | 32.4 | 17.1 | 90 | % | ||
| Sustaining(7) | 16.7 | 12.3 | 35 | % | 58.2 | 52.5 | 11 | % | ||
| Total capital expenditures | 27.9 | 19.7 | 41 | % | 90.6 | 69.6 | 30 | % | ||
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 tonne of ore processed, all-in sustaining cost per ounce of gold sold, cash cost per tonne of complex concentrate smelted, 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 17 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) Cost of sales per tonne of complex concentrate smelted represents cost of sales for Tsumeb, divided by tonnes of complex concentrate smelted.
5) These measures include discontinued operations for the twelve months of 2021.
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.
7) 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.
Performance Highlights
A table comparing production, delivery and cash cost measures by asset for the fourth quarter and twelve months of 2022 against 2022 guidance is located on page 14 of this news release.
The Company's mining operations continued to deliver strong operating results and despite inflationary cost pressures, the Company achieved an all-in sustaining cost per ounce of gold sold within the guidance range for the year.
Chelopech, Bulgaria: Chelopech continued its track record of strong performance, producing 45,339 ounces of gold and 7.4 million pounds of copper in the fourth quarter. In 2022, Chelopech produced 179,135 ounces of gold, achieving its annual guidance for gold, and 30.8 million pounds of copper which was 3% below the low end of the guidance range.
All-in sustaining cost per ounce of gold sold in the fourth quarter of 2022 was $1,253. For 2022, all-in sustaining cost per ounce of gold sold was $957, 6% above the high end of the guidance range for the year, reflecting lower by-product credits as a result of lower volumes of copper sold, higher freight charges, the local inflationary environment and higher cash outlays for sustaining capital, partially offset by a stronger U.S. dollar.
Ada Tepe, Bulgaria: Ada Tepe delivered its highest quarterly production in the fourth quarter of 2022, producing 28,081 ounces of gold. Following the completion of a pushback in the third quarter, gold grades increased as planned and the operation is well positioned for higher grades in 2023, as per the mine plan. Annual production of 93,974 ounces of gold was at the higher end of its guidance range for the year. In January 2023, the Company released an updated Mineral Reserve and Mineral Resource estimate and LOM plan for Ada Tepe, which reflects a 22% increase in recovered gold ounces, a 13% increase in average gold grade and a 1% increase in recovery, compared to the previous LOM plan.3 The additional estimated production from Ada Tepe has been reflected in the Company's improved three-year outlook.
All-in sustaining cost per ounce of gold sold in the fourth quarter of 2022 was $648. For 2022, all-in sustaining cost per ounce of gold sold in 2022 was $765, which was 13% below the low end of its guidance range for the year, reflecting a stronger U.S. dollar and higher than expected volume of gold sold.
Tsumeb, Namibia: Performance during the fourth quarter of 2022 at the Tsumeb smelter was impacted by a 17-day shutdown to repair a water leak in the off-gas system as well as instability in the power grid as a result of abnormally heavy rainfall in December. As a result, complex concentrate smelted for the year of 174,122 tonnes was 6% below the low end of its 2022 guidance range.
Cash cost per tonne of complex concentrate smelted in the fourth quarter was $443. In 2022, cash cost per tonne of complex concentrate smelted of $463 was towards the higher end of the updated guidance range, due primarily to the fixed cost nature of the facility and the impact of lower volumes of complex concentrate smelted, partially offset by a stronger U.S. dollar.
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3 For more information regarding the Mineral Reserve and Mineral Resource estimate and updated LOM plan for Ada Tepe, refer to the news release dated January 12, 2023, available on our website at www.dundeeprecious.com and SEDAR at www.sedar.com.
Consolidated Operating Highlights
Production: Gold contained in concentrate produced in the fourth quarter and twelve months of 2022 of 73,420 ounces and 273,109 ounces, respectively, was 11% and 12% lower than the corresponding periods in 2021 due primarily to mining in lower grade zones at Ada Tepe, partially offset by higher gold recoveries at Chelopech, in line with the mine plans for both operations.
Copper production in the fourth quarter and twelve months of 2022 of 7.4 million pounds and 30.8 million pounds, respectively, was 19% and 11% lower than the corresponding periods in 2021 due primarily to lower copper grades.
Deliveries: Payable gold in concentrate sold in the fourth quarter and twelve months of 2022 of 65,831 ounces and 242,697 ounces, respectively, was 11% and 13% lower than the corresponding periods in 2021 primarily reflecting lower gold production. Payable copper in concentrate sold in the fourth quarter and twelve months of 2022 of 6.7 million pounds and 27.2 million pounds, respectively, was 18% and 17% lower than the corresponding periods in 2021 due primarily to lower copper production.
Complex concentrate: Complex concentrate smelted during the fourth quarter of 2022 of 41,835 tonnes was 19% lower than the corresponding period in 2021 due primarily to the 17-day shutdown and instability in the power grid, as described above. Complex concentrate smelted during 2022 of 174,122 tonnes was 8% lower than 2021 due primarily to unplanned downtime as a result of maintenance to the off-gas and baghouse systems during the year, partially mitigated by near record-level quarterly production in the third quarter of 2022.
Cost measures: Cost of sales in the fourth quarter of 2022 of $91.1 million was 3% lower than the corresponding period in 2021 due primarily to a stronger U.S. dollar, partially offset by higher local currency mine operating expenses in Bulgaria. Cost of sales in 2022 of $357.4 million was comparable to 2021 due primarily to a stronger U.S. dollar largely offset by higher local currency mine operating expenses in Bulgaria and higher depreciation.
All-in sustaining cost per ounce of gold sold in the fourth quarter of 2022 of $1,008 was 33% higher than the corresponding period in 2021 due primarily to higher local currency operating expenses reflecting the local inflationary environment, lower by-product credits as a result of lower volumes of copper sold, and lower volumes of gold sold, partially offset by a stronger U.S. dollar. All-in sustaining cost per ounce of gold sold in 2022 of $885 was 35% higher than 2021 due primarily to lower volumes of gold sold, lower by-product credits, higher freight charges and higher local currency operating expenses, partially offset by a stronger U.S. dollar.
Cash cost per tonne of complex concentrate smelted in the fourth quarter and twelve months of 2022 of $443 and $463, respectively, was comparable to the corresponding periods in 2021 due primarily to higher sulphuric acid by-product credits and lower labour costs related to the cost optimization initiative undertaken in 2022, partially offset by lower volumes of complex concentrate smelted and higher inflationary local currency operating expenses.
Consolidated Financial Highlights
Revenue: Revenue during the fourth quarter and twelve months of 2022 of $152.9 million and $569.8 million, respectively, was 8% and 11% lower than the corresponding periods in 2021 due primarily to lower volumes of gold and copper sold.
Net earnings: Net earnings attributable to common shareholders from continuing operations in the fourth quarter of 2022 were $33.3 million ($0.18 per share) compared to $52.1 million ($0.27 per share) in the corresponding period in 2021, due primarily to lower volumes of metal sold.
Net earnings attributable to common shareholders from continuing operations in 2022 were $35.9 million ($0.19 per share) compared to $190.7 million ($1.02 per share) in 2021, due primarily to an impairment charge of $85.0 million in respect of Tsumeb, as well as lower volumes of metal sold, partially offset by a stronger U.S. dollar.
Adjusted net earnings: Adjusted net earnings in the fourth quarter and twelve months of 2022 were $33.3 million ($0.18 per share) and $129.0 million ($0.68 per share), respectively, compared to $51.4 million ($0.27 per share) and $202.0 million ($1.09 per share) in the corresponding periods in 2021 due primarily to the same factors affecting net earnings attributable to common shareholders from continuing operations, with the exception of the adjusting items primarily related to the Tsumeb impairment charge.
Earnings before income taxes: Earning before income taxes in the fourth quarter and twelve months of 2022 was $37.6 million and $58.7 million, respectively, compared to $60.3 million and $229.4 million in the corresponding periods in 2021. These changes reflect the same factors that affected net earnings attributable to common shareholders from continuing operations, except for income tax, which is excluded.
Adjusted EBITDA: Adjusted EBTIDA in the fourth quarter and twelve months of 2022 was $58.3 million and $252.9 million, respectively, compared to $84.3 million and $336.9 million in the corresponding periods in 2021, reflecting the same factors that affected adjusted net earnings, except for interest, income tax, depreciation and amortization, which are excluded from adjusted EBITDA.
Cash provided from operating activities: Cash provided from operating activities in the fourth quarter and twelve months of 2022 of $49.3 million and $232.1 million, respectively, was 45% and 8% lower than the corresponding periods in 2021, due primarily to the same factors impacting earnings before income taxes, excluding a non-cash impairment charge in respect of Tsumeb, as well as timing of deliveries and subsequent receipt of cash.
For a detailed discussion on the factors affecting cash provided from operating activities, refer to the "Liquidity and Capital Resources" section contained in the Management's Discussion and Analysis for the three and twelve months ended December 31, 2022 (the "MD&A").
Free cash flow: Free cash flow in the fourth quarter and twelve months of 2022 of $33.3 million and $166.4 million, respectively, was 49% and 34% lower than the corresponding periods in 2021, due primarily to the same factors impacting earnings before income taxes, excluding the non-cash impairment charge in respect of Tsumeb.
Capital expenditures: Capital expenditures incurred during the fourth quarter and twelve months of 2022 were $27.9 million and $90.6 million, respectively, compared to $19.7 million and $69.6 million in the corresponding periods in 2021.
Sustaining capital expenditures incurred during the fourth quarter and twelve months of 2022 of $16.7 million and $58.2 million, respectively, were comparable to the corresponding periods in 2021 of $12.3 million and $52.5 million.
Growth capital incurred during the fourth quarter and twelve months of 2022 were $11.2 million and $32.4 million, respectively, compared to $7.4 million and $17.1 million in the corresponding periods in 2021, due primarily to activities related to the development of the Loma Larga and Timok gold projects
Balance Sheet Strength and Financial Flexibility
The Company continues to maintain a strong financial position, with a growing cash position, no debt and a $150 million revolving credit facility which remains undrawn.
For the twelve months ended December 31, 2022, cash increased by $98.8 million to $433.2 million, due primarily to earnings generated in the period as well as a favourable period over period change in working capital primarily related to timing of deliveries and subsequent receipt of cash, partially offset by cash outlays for capital expenditures, dividend payments and share repurchases.
In July 2022, DPM entered into a new four-year revolving credit facility with a consortium of four banks. The facility matures in July 2026 and provides more flexibility and generally more favourable terms and conditions compared with DPM's previous revolving credit facility. Under the new facility, DPM is permitted to borrow up to $150 million, which can be increased up to $250 million, subject to certain conditions.
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 its normal course issuer bid ("NCIB").
During 2022, the Company returned a total of $44.1 million to shareholders, representing approximately 27% of its free cash flow generated in the year. This included the repurchase of 2,471,500 shares at an average price of $5.51 (Cdn$7.14) per share for a total value of approximately $13.6 million (Cdn$17.6 million), and $30.5 million of dividends distributed during the year.
Quarterly Dividend
On February 16, 2023, the Company's Board of Directors declared a dividend of $0.04 per common share payable on April 17, 2023, to shareholders of record on March 31, 2023.
Enhanced NCIB
The Board has approved the renewal of the NCIB ("New Bid"), subject to approval by the TSX. If accepted, the New Bid will be made in accordance with the applicable rules and policies of the TSX and applicable Canadian securities laws. Pursuant to the New Bid, it is expected that the Company will be able to purchase up to 16,500,000 common shares, representing approximately 10% of the public float as of February 16, 2023, over a period of twelve months commencing after the TSX approval. The New Bid will also allow the Company to implement an Issuer Repurchase Agreement and automatic share repurchase plan with its designated broker in order to facilitate the purchase of its shares.
Assuming the full number of shares are repurchased under this New Bid, and at the Company's current share price, this represents an authorized return of capital of up to $100 million. The actual timing and number of common shares that may be purchased pursuant to 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.
Development Projects Update
Loma Larga, Ecuador
Drilling activities, as well as the Citizens Participation Process for the Environmental Impact Assessment, remain paused pending the outcome of the appeals process related to the decision on the constitutional protective action following the hearing held in mid-October 2022. The decision on the appeal is expected to provide clarity on the consultation process and whether an indigenous consultation could be completed in parallel, as originally planned by the Company, or would need to be completed prior to resuming the Citizens Participation Process. The expected timing for receipt of the environmental licence is subject to the outcome of the appeal process.
Given the delays in timing for recommencing drilling activities and further advancing the environmental permitting process, DPM has taken the decision to extend the timeline for the optimization phase of the updated FS for Loma Larga, which is now expected to be completed in the second half of 2023. This will allow DPM time to evaluate additional optimization opportunities that have been identified to leverage the Company's significant operating expertise with similar deposits, in particular Chelopech in Bulgaria, which shares similar geology, mining method and processing flow sheet to the Loma Larga project; and to potentially incorporate the results of the drilling program supporting the updated FS optimization once DPM is able to recommence those activities.
Prior to the acquisition, DPM had determined that the initial capital estimate for the project, prepared by the previous owner in April 2020, was low. Since then, the Company has incorporated certain scope changes to the project as part of the updated FS work, to enhance project execution and meet DPM's operating standards. DPM has also seen inflationary pressures consistent with general industry trends. Combined, these factors are expected to result in a significant increase to the estimated capital and operating costs for the project. This may impact economics and other parameters, including Mineral Resource and Mineral Reserve estimates, which are being assessed as the additional work required for the updated FS progresses. DPM views Loma Larga as a high-quality project with the potential to generate compelling economic returns following this optimization work.
The Company has progressed discussions with the government of Ecuador in respect of an investor protection agreement, which is targeted to be complete by the end of the first quarter of 2023. In-line with its disciplined approach to project development, DPM does not anticipate making any significant capital commitments to the project prior to the completion of the investor protection agreement and receipt of the environmental licence.
The Company maintains a constructive relationship with government institutions and other stakeholders involved with the development of the project. After the announcement of the local election results, the DPM team welcomed the newly elected leaders and plans to engage with them in a proactive manner to build support for the project.
Timok gold project, Serbia
As announced in January 20234, given the potential of the new high-grade discovery at the Coka Rakita prospect, the Company will now focus on further exploration at Coka Rakita in 2023 and as a result, will pause further work on the Timok FS.
Exploration
At Chelopech, the brownfield exploration program was focused on an intensive drilling campaign to support a Commercial Discovery for the Sveta Petka exploration licence, which is now close to completion and is scheduled for submission to the Bulgarian authorities during the first quarter of 2023.
At Ada Tepe, exploration activities were focused on a resource extension drill program and other satellites on the mine concession, as well as target delineation campaigns on the Chiirite and Dalbokata Reka exploration licences. Approximately 9,400 metres were drilled over 47 holes during the year. Results of the drilling activity on the mine concession provided support for the potential addition of incremental mineable material in proximity to the pit, and DPM is assessing if follow-up drilling is required in this area.
In Serbia, drilling at the Coka Rakita prospect resumed in the fourth quarter of 2022 following receipt of a new exploration licence and outlined potential for a high-grade deposit that remains open in multiple directions. Results to date are very encouraging, and DPM will focus on further exploration at Coka Rakita, including infill and extension drilling. DPM intends to release additional results from drilling in the second quarter and is targeting an initial Mineral Resource estimate in the fourth quarter of 2023.
In Ecuador, DPM completed approximately 2,700 metres of drilling at the Tierras Coloradas licence during the fourth quarter of 2022. This drill program tested the high-grade low sulphidation vein system which was previously identified in 2020. The change in status of the Tierras Coloradas project from early to advanced stage exploration is in progress, and all regulations and authorizations required from the different Ecuadorian authorities are expected to be received by early 2024.
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4 For more information regarding the new high-grade discovery at Coka Rakita, please refer to the news release dated January 16, 2023, available on our website at www.dundeeprecious.com and SEDAR at www.sedar.com.
Detailed 2023 Guidance
The following sections of this news release, under the headings "Detailed 2023 Guidance" and "Three-Year Outlook (2023 to 2025)", represent forward-looking information and readers are cautioned that actual results may vary materially from the Company's expectations. Refer to the "Cautionary Note Regarding Forward Looking Statements" located on page 16 of this news release and the "Risks and Uncertainties" section of the MD&A issued February 16, 2023 and available on the Company's website (www.dundeeprecious.com) and filed on SEDAR (www.sedar.com).
The Company issued its detailed guidance for 2023, which is set out in the following table:
| $ millions, unless otherwise indicated | Chelopech | Ada Tepe | Tsumeb | Corporate and Other | Consolidated Guidance | |
| Ore processed | Kt | 2,090 - 2,200 | 730 - 810 | - | - | 2,820 - 3,010 |
| Cash cost per tonne of ore processed(1) | $/t | 53 - 58 | 73 - 79 | - | - | - |
| Metals contained in concentrate produced(2),(3) | ||||||
| Gold | Koz | 150 - 170 | 120 - 145 | - | - | 270 - 315 |
| Copper | Mlbs | 30 - 35 | - | - | - | 30 - 35 |
| Payable metals in concentrate sold(3) | ||||||
| Gold | Koz | 130 - 150 | 115 - 140 | - | - | 245 - 290 |
| Copper | Mlbs | 26 - 31 | - | - | - | 26 - 31 |
| All-in sustaining cost per ounce of gold sold(1),(4) | $/oz | 700 - 880 | 530 - 630 | - | - | 700 - 860 |
| Complex concentrate smelted | Kt | - | - | 200 - 230 | - | 200 - 230 |
| Cash cost per tonne of complex concentrate smelted(1) | $/t | - | - | 340 - 410 | - | 340 - 410 |
| Corporate general and administrative expenses(5) | - | - | - | 25 - 28 | 25 - 28 | |
| Exploration expenses(1) | - | - | - | - | 25 - 30 | |
| Sustaining capital expenditures(1) | 20 - 24 | 10 - 13 | 14 - 17 | 2 - 3 | 46 - 57 | |
| Growth and other capital expenditures(1),(6) | 2 - 3 | 0 - 1 | 2 - 3 | 18 - 24 | 22 - 31 | |
1) Based on a Euro/US$ exchange rate of 1.10, a US$/ZAR exchange rate of 17.00, a copper price of $4.00 per pound and a sulphuric acid price of $95 per tonne, where applicable.
2) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
3) Gold produced includes gold in pyrite concentrate produced of 45,000 to 51,000 ounces and payable gold sold includes payable gold in pyrite concentrate sold of 30,000 to 37,000 ounces.
4) Allocated general and administrative expenses are reflected in consolidated all-in sustaining cost per ounce of gold sold; however are not reflected in the all-in sustaining cost per ounce of gold sold for Chelopech and Ada Tepe, which is a change from the presentation in the Company's historical MD&A given that the nature of such expenses is more reflective of the Company's consolidated all-in sustaining cost and not pertaining to the individual operations of the Company.
5) Excludes share-based compensation expense of approximately $3 million, before mark-to-market adjustments from movements in the Company's share price, given the volatile nature of this expense. This is a change from the historical approach to the Company's detail guidance on corporate general and administrative expenses.
6) Growth and other capital expenditures in Corporate and Other include the estimated running cost for the Loma Larga gold project of $10 million to $14 million and for the Timok gold project of $1 million to $2 million (as detailed below), as well as a capitalized lease related to electric mobile equipment of $7 million to $8 million as part of the Company's ESG initiatives.
Certain key cost measures in the Company's detailed guidance for 2023 are sensitive to market assumptions, including copper price and foreign exchange rates. The following table demonstrates the effect of a 10% change in these market assumptions on all-in sustaining cost and smelter cash cost provided in the 2023 guidance.
| 2023 assumptions | Hypothetical change | All-in sustaining cost ($/oz) | Smelter cash cost ($/t) | |
| Copper | $4.00/lb | +/- 10% | +/- $44/oz | N/A |
| Euro/US$ | 1.10 | +/- 10% | +/- $92/oz | N/A |
| US$/ZAR | 17.00 | +/- 10% | N/A | - $24/t /+ $40/t (1) |
1) As at December 31, 2022, approximately 86% of projected Namibian dollar operating expenses for 2023 have been hedged with option contracts providing a weighted average floor rate of 15.69 and a weighted average ceiling rate of 17.69.
Three-Year Outlook (2023 to 2025)
The Company provided its updated three-year outlook, as outlined in the table below. Highlights of the Company's updated three-year outlook include:
- Maintains strong gold production levels: Over the next three years, gold production is expected to average approximately 270,000 ounces per year, based on current mine plans, with higher forecasted production in 2023 and 2024 compared to the previous outlook.
- Stable copper production: Copper production over the next three years is expected to average approximately 32 million pounds per year, based on current mine plans.
- Improved all-in sustaining cost: All-in sustaining cost per ounce of gold sold is expected to range between $700 and $860 in 2023 and between $720 and $880 for 2024 and 2025, which is lower than previously expected. This reflects the benefits of higher expected volumes of gold sold as a result of the updated LOM plan at Ada Tepe and higher by-product credits reflecting higher copper prices, partially offset by a weaker U.S. dollar.
- Consistent smelter performance: The Company is forecasting complex concentrate smelted to be between 200,000 and 230,000 tonnes in each of the next three years, reflecting its expectation for a consistent rate of throughput following a plan to resolve water leak issues by April 2023. Cash cost per tonne of complex concentrate smelted is expected to trend lower in the next three years, reflecting the benefit of a consistent throughput level, as well as estimated cost savings associated with the ongoing cost optimization initiative which commenced in 2022.
- Sustaining capital expenditures trending lower: Sustaining capital expenditures are expected to trend lower over the next three years, due primarily to the completion of the upgraded tailings management facility at Chelopech and the gradual reduction in activities at Ada Tepe as the mine approaches its end of life in 2026.
The Company's three-year outlook is set out in the following table:
| $ millions, unless otherwise indicated | 2022 Results | 2023 Guidance | 2024 Outlook | 2025 Outlook | |
| Gold contained in concentrate produced(1),(2) | |||||
| Chelopech | Koz | 179 | 150 - 170 | 160 - 180 | 160 - 185 |
| Ada Tepe | Koz | 94 | 120 - 145 | 85 - 105 | 70 - 85 |
| Total | Koz | 273 | 270 - 315 | 245 - 285 | 230 - 270 |
| Copper contained in concentrate produced(1) | |||||
| Chelopech | Mlbs | 31 | 30 - 35 | 29 - 34 | 29 - 34 |
| All-in sustaining cost per ounce of gold sold(3) | $/oz | 885 | 700 - 860 | 720 - 880 | 720 - 880 |
| Complex concentrate smelted | Kt | 174 | 200 - 230 | 200 - 230 | 200 - 230 |
| Cash cost per tonne of complex concentrate smelted(3) | $/t | 463 | 340 - 410 | 310 - 360 | 300 - 350 |
| Sustaining capital expenditures(3) | |||||
| Chelopech | 23 | 20 - 24 | 14 - 18 | 12 - 15 | |
| Ada Tepe | 10 | 10 - 13 | 10 - 12 | 8 - 10 | |
| Tsumeb | 19 | 14 - 17 | 10 - 13 | 14 - 17 | |
| Corporate digital initiatives(4) | 6 | 2 - 3 | 2 - 3 | 2 - 3 | |
| Consolidated | 58 | 46 - 57 | 36 - 46 | 36 - 45 |
1) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
2) Gold produced includes gold in pyrite concentrate produced of 45,000 to 51,000 ounces for 2023, and 48,000 to 54,000 ounces in each of 2024 and 2025.
3) Based on, where applicable, a Euro/US$ exchange rate of 1.10, a US$/ZAR exchange rate of 17.00, and a copper price of $4.00 per pound for all years, as well as a sulphuric acid price of $95 per tonne in 2023, $94 per tonne in 2024 and $86 per tonne in 2025.
4) While corporate sustaining capital expenditures are primarily related to digital initiatives for all years, 2022 results also included the capitalized lease and leasehold improvements related to the new head office lease.
The estimated metals contained in concentrate produced, payable metals in concentrate sold and volumes of complex concentrate smelted detailed in the Company's 2023 detailed guidance and three-year outlook are not expected to occur evenly throughout the year and are forecasted to vary from quarter to quarter depending on mine sequencing, the timing of concentrate deliveries and planned outages, including furnace maintenance shutdowns at Tsumeb. The rate of capital expenditures is also expected to vary from quarter to quarter based on the schedule for, and execution of, each capital project.
Additional detail on the Company's three-year outlook is set out below:
Chelopech: Gold and copper contained in concentrate produced are expected to be consistent with the production schedules and expected grades outlined in the most recently issued technical report.5 Gold contained in concentrate produced remains unchanged from the previous outlook for 2023 and 2024, with the outlook for 2025 relatively consistent with 2024 production levels. The outlook for copper contained in concentrate produced in 2023 and 2024 has been revised from the previous outlook of between 32 and 39 million pounds for 2023 and between 30 and 35 million pounds for 2024.
Cash cost per tonne of ore processed is expected to be higher in 2023 as compared to 2022, primarily reflecting a stronger Euro relative to the U.S. dollar and the local inflationary environment.
Sustaining capital expenditures in 2023 are expected to be in line with 2022 results, reflecting additional costs related to the upgrade of Chelopech's tailings management facility which is expected to be completed in 2023. Sustaining capital expenditures are expected to trend lower in 2024 and decline even further in 2025. Growth capital expenditures related to resource development drilling and margin improvement projects are expected to be between $2 million and $3 million in 2023, relatively consistent year over year.
Ada Tepe: Gold contained in concentrate produced in 2023 and 2024 is expected to be higher than the previously issued outlook range of 115,000 to 140,000 ounces in 2023, and 69,000 to 83,000 ounces in 2024, reflecting the updated LOM plan announced in January 2023 which included an increase of approximately 66,000 ounces of total gold recovered to concentrate over the LOM.
Cash cost per tonne of ore processed is expected to be higher in 2023 as compared to 2022, primarily reflecting lower volumes of ore processed, higher royalty payments due to higher contained ounces mined, a stronger Euro relative to the U.S. dollar and the local inflationary environment.
Sustaining capital expenditures are expected to be higher than the previous outlook range of between $9 million and $10 million in each of 2023 and 2024, as a result of increased costs related to Ada Tepe's integrated waste management facility, before reducing to a range of $8 million to $10 million in 2025.
Tsumeb: The Company is forecasting complex concentrate smelted to be between 200,000 and 230,000 tonnes in each of 2023, 2024 and 2025, reflecting its expectation for a consistent rate of throughput following a plan to resolve water leak issues in the off-gas system by April 2023. Over 90% of concentrate feed is currently contracted through to the end of 2023, with the remaining feed in 2023 and additional feed thereafter expected to be contracted in the normal course.
Sustaining capital expenditures are expected to be between $14 million and $17 million for each of 2023 and 2025, and between $10 million and $13 million in 2024, reflecting the timing of scheduled maintenance shutdowns based on an expected 18-month operating cycle for the Ausmelt furnace.
_______________
5 Refer to the technical report "NI 43-101 Mineral Resource and Mineral Reserve Update, Chelopech Mine- Chelopech, Bulgaria," dated March 31, 2022, available on our website at www.dundeeprecious.com and SEDAR at www.sedar.com.
Loma Larga gold project: Growth capital expenditures for 2023 associated with the Loma Larga gold project are expected to be between $10 million and $14 million, which mainly include general and administrative expenses, and costs related to certain permitting, social and environmental related activities.
Upon achieving certain milestones for the project, the Company will increase its guidance for growth capital expenditures, reflecting additional funding to resume drilling activities and further advance permitting. The amount and timing of the spend in respect of this additional funding is dependent on the timing of achieving the respective milestones in the year.
Timok gold project: As previously announced, the Company is pausing further work on the Timok FS to focus on further exploration at Coka Rakita. As a result, growth capital expenditures are expected to be significantly reduced in 2023 to a range of $1 million to $2 million.
Exploration expenses: In 2023, the Company is increasing its level of spending on exploration, reflecting higher expected drilling activities following the discovery of a high-grade deposit at Coka Rakita in Serbia, and an advanced brownfield drill program at Chelopech focusing on the Sveta Petka Commercial Discovery application process as well as additional drilling at Sharlo Dere. Therefore, expenditures related to exploration in 2023 are expected to be between $25 million and $30 million.
Selected Production, Delivery and Cost Performance versus Guidance
| Q4 2022 | 2022 | 2022 Consolidated Guidance | ||||||||
| Chelopech | Ada Tepe | Tsumeb | Consolidated | Chelopech | Ada Tepe | Tsumeb | Consolidated | |||
| Ore processed | Kt | 553 | 206 | - | 759 | 2,139 | 853 | - | 2.992 | 2,900 - 3,100 |
| Metals contained in concentrate produced | ||||||||||
| Gold | Koz | 45 | 28 | - | 73 | 179 | 94 | - | 273 | 250 - 290 |
| Copper | Mlbs | 7 | - | - | 7 | 31 | - | - | 31 | 32 - 37 |
| Payable metals in concentrate sold | ||||||||||
| Gold | Koz | 39 | 27 | - | 66 | 152 | 91 | - | 243 | 220 - 255 |
| Copper | Mlbs | 7 | - | - | 7 | 27 | - | - | 27 | 28 - 32 |
| All-in sustaining cost per ounce of gold sold(1) | $/oz | 1,253 | 648 | - | 1,008 | 957 | 765 | - | 885 | 750 - 890 |
| Complex concentrate smelted(2) | Kt | - | - | 42 | 42 | - | - | 174 | 174 | 185 - 200 |
| Cash cost per tonne of complex concentrate smelted | $/t | - | - | 443 | 443 | - | - | 463 | 463 | 420 - 480 |
1) All-in sustaining cost per ounce of gold sold guidance for Chelopech and Ada Tepe was expected to be $740 to $900 and $770 to $880, respectively.
2) Previous 2022 guidance was 210,000 to 240,000 tonnes.
Fourth Quarter 2022 Results Conference Call and Webcast
At 9 AM EST on Friday, February 17, 2023, DPM will host a conference call and audio webcast to discuss the results, followed by a question-and-answer session. To participate via conference call, register in advance at the link provided below to receive the dial-in information as well as a unique PIN code to access the call.
The call registration and webcast details are as follows:
| Conference call date and time | Friday, February 17, 2023 9AM EST |
| Call registration | https://register.vevent.com/register/BI992f7f1b998d4467a27b65f1461c86d7 |
| Webcast link | https://edge.media-server.com/mmc/p/32yqxtvb |
| Replay | Archive will be available on www.dundeeprecious.com |
This news release and DPM's audited consolidated financial statements and MD&A for the three and twelve months December 31, 2022 are posted on the Company's website at www.dundeeprecious.com and have been filed on SEDAR at www.sedar.com.
Qualified Person
The technical and scientific information in this news release has been prepared in accordance with Canadian regulatory requirements set out in National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") of the Canadian Securities Administrators and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves, and has been reviewed and approved by Ross Overall, B.Sc. (Applied Geology), Corporate Mineral Resource Manager of DPM, who is a Qualified Person as defined under NI 43-101, and who is not independent of the Company.
About Dundee Precious Metals
Dundee Precious Metals Inc. is a Canadian-based international gold mining company with operations and projects located in Bulgaria, Namibia, Ecuador and Serbia. The Company's purpose is to unlock resources and generate value to thrive and grow together. This overall purpose is supported by a foundation of core values, which guides how the Company conducts its business and informs a set of complementary strategic pillars and objectives related to ESG, innovation, optimizing our existing portfolio, and growth. The Company's resources are allocated in-line with its strategy to ensure that DPM delivers value for all of its stakeholders. DPM's shares are traded on the Toronto Stock Exchange (symbol: DPM).
For further information, please contact:
| David Rae President and Chief Executive Officer Tel: (416) 365-5092 drae@dundeeprecious.com | Navin Dyal Chief Financial Officer Tel: (437) 427-8579 navin.dyal@dundeeprecious.com | Jennifer Cameron Director, Investor Relations Tel: (416) 219-6177 jcameron@dundeeprecious.com | ||
Cautionary Note Regarding Forward Looking Statements
This news release contains "forward looking statements" or "forward looking information" (collectively, "Forward Looking Statements") that involve a number of risks and uncertainties. Forward Looking Statements are statements that are not historical facts and are generally, but not always, identified by the use of forward looking terminology such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "guidance", "outlook", "intends", "anticipates", "believes", or variations of such words and phrases or that state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms or similar expressions. The Forward Looking Statements in this news release relate to, among other things: expected cash flows; the price of gold, copper, silver and sulphuric acid; toll rates, metals exposure and stockpile interest deductions at Tsumeb; estimated capital costs, all-in sustaining costs, operating costs and other financial metrics, including those set out in the outlook and guidance provided by the Company; currency fluctuations; the processing of Chelopech concentrate; results of economic studies, including the Loma Larga feasibility study; expected milestones; timing and success of exploration activities, including at the Coka Rakita target; the timing of the completion and results of an updated feasibility study for the Loma Larga project; the timing and possible outcome of pending litigation or legal proceedings, including the timing of the legal proceedings related to the Action and resumption of drilling activities at Loma Larga; development of the Loma Larga gold project, including expected production, successful negotiations of an investment protection agreement and exploitation agreement and granting of environmental and construction permits in a timely manner; success of permitting activities; permitting timelines; success of investments, including potential acquisitions; measures the Company is undertaking in response to the COVID-19 outbreak, including its impacts on the Company's global supply chains, the level of and duration of reductions or curtailments in operating levels at any of the Company's operations or in its exploration and development activities; government regulation of mining and smelting operations; the timing and amount of dividends; the timing and number of common shares of the Company that may be purchased pursuant to the NCIB; and the timing and expected benefit of the recently announced acquisition by B2Gold of Sabina.
Forward Looking Statements are based on certain key assumptions and the opinions and estimates of management and Qualified Person (in the case of technical and scientific information), 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. In addition to factors already discussed in this news release, such factors include, among others: fluctuations in metal and sulphuric acid prices, toll rates and foreign exchange rates; risks arising from the current inflationary environment and the impact on operating costs and other financial metrics, including the risk that the power subsidy in Bulgaria may be discontinued; continuation or escalation of the conflict in Ukraine, including the continued exemption from the Council of Europe's sanctions in favour of Bulgaria with respect to the import of Russian oil and economic sanctions against Russia and Russian persons which may impact supply chains; risks relating to the Company's business generally and the impact of global pandemics, including COVID-19, resulting in changes to the Company's supply chain, product shortages, delivery and shipping issues, closure and/or failure of plant, equipment or processes to operate as anticipated, employees and contractors becoming infected, low vaccination rates, lost work hours and labour force shortages; regulatory changes, including changes impacting the complex concentrate market; inability of Tsumeb to secure complex copper concentrate on terms that are economic; possible variations in ore grade and recovery rates; inherent uncertainties in respect of conclusions of economic evaluations, economic studies and mine plans, including the Loma Larga feasibility study; uncertainties with respect to timing of the updated Loma Larga feasibility study; changes in project parameters, including schedule and budget, as plans continue to be refined; uncertainties with respect to realizing the anticipated benefits from the acquisition of INV Metals Inc. and the development of the Loma Larga gold project; uncertainties with respect to actual results of current exploration activities; uncertainties and risks inherent to developing and commissioning new mines into production, which may be subject to unforeseen delays; uncertainties inherent with conducting business in foreign jurisdictions where corruption, civil unrest, political instability and uncertainties with the rule of law may impact the Company's activities; limitations on insurance coverage; 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; actual results of current and planned reclamation activities; opposition by social and non-governmental organizations to mining projects and smelting operations; unanticipated title disputes; claims or litigation; failure to achieve certain cost savings or the potential benefits of any upgrades and/or expansion, including the potential rotary holding furnace installation at the Tsumeb smelter; increased costs and physical risks, including extreme weather events and resource shortages, related to climate change; cyber-attacks and other cybersecurity risks; there being no assurance that the Company will purchase additional common shares of the Company under the NCIB; risks related to the timing, completion and expected benefit of the acquisition by B2Gold of Sabina; risks related to the implementation, cost and realization of benefits from digital initiatives; uncertainties with respect to realizing the targeted MineRP earn-outs as well as those risk factors discussed or referred to in the Company's annual MD&A and annual information form for the year ended December 31, 2021, the MD&A, and other documents filed from time to time with the securities regulatory authorities in all provinces and territories of Canada and available on SEDAR at www.sedar.com.
The reader has been cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. 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. The Company's Forward Looking Statements reflect current expectations regarding future events and speak only as of the date hereof. Other than as it may be required by law, 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.
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 used by management and investors to assist with assessing the Company's performance, including its ability to generate sufficient cash flow to meet its return objectives and support its investing activities and debt service obligations. In addition, the Human Capital and Compensation Committee of the Board of Directors uses certain of these measures, together with other measures, to set incentive compensation goals and assess performance. 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.
Non-GAAP Cash Cost and All-in Sustaining Cost Measures
Mine cash cost; smelter cash cost; mine cash cost of sales; and all-in sustaining cost are non-GAAP financial measures. Cash cost per tonne of ore processed; cash cost per ounce of gold sold; all-in sustaining cost per ounce of gold sold; and cash cost per tonne of complex concentrate smelted are non-GAAP ratios. These measures capture the important components of the Company's production and related costs. Management and investors utilize these metrics as an important tool to monitor cost performance at the Company's operations. In addition, the Human Capital and Compensation Committee of the Board of Directors uses certain of these measures, together with other measures, to set incentive compensation goals and assess performance.
The following tables provide a reconciliation of the Company's cash cost per tonne of ore processed and cash cost per tonne of complex concentrate smelted to its cost of sales:
| $ thousands, unless otherwise indicated For the three months ended December 31, 2022 | Chelopech | Ada Tepe | Tsumeb | Total | ||||
| Ore processed | t | 553,088 | 206,153 | - | ||||
| Complex concentrate smelted | t | - | - | 41,835 | ||||
| Cost of sales | 39,438 | 25,703 | 25,968 | 91,109 | ||||
| Add/(deduct): | ||||||||
| Depreciation and amortization | (7,456 | ) | (13,948 | ) | (800 | ) | ||
| Change in concentrate inventory | (3,985 | ) | 193 | - | ||||
| Sulphuric acid revenue(1) | - | - | (6,625 | ) | ||||
| Mine cash cost / Smelter cash cost(2) | 27,997 | 11,948 | 18,543 | |||||
| Cost of sales per tonne of ore processed(3) | $/t | 71 | 125 | - | ||||
| Cash cost per tonne of ore processed(3) | $/t | 51 | 58 | - | ||||
| Cost of sales per tonne of complex concentrate smelted(4) | $/t | - | - | 621 | ||||
| Cash cost per tonne of complex concentrate smelted(4) | $/t | - | - | 443 | ||||
| $ thousands, unless otherwise indicated For the three months ended December 31, 2021 | Chelopech | Ada Tepe | Tsumeb | Total | ||||
| Ore processed | t | 561,986 | 219,325 | - | ||||
| Complex concentrate smelted | t | - | - | 51,932 | ||||
| Cost of sales | 33,474 | 27,004 | 33,564 | 94,042 | ||||
| Add/(deduct): | ||||||||
| Depreciation and amortization | (5,766 | ) | (13,604 | ) | (3,736 | ) | ||
| Change in concentrate inventory | 2,289 | (253 | ) | - | ||||
| Other non-cash expenses | 155 | 72 | - | |||||
| Sulphuric acid revenue(1) | - | - | (6,614 | ) | ||||
| Mine cash cost / Smelter cash cost(2) | 30,152 | 13,219 | 23,214 | |||||
| Cost of sales per tonne of ore processed(3) | $/t | 60 | 123 | - | ||||
| Cash cost per tonne of ore processed(3) | $/t | 54 | 60 | - | ||||
| Cost of sales per tonne of complex concentrate smelted(4) | $/t | - | - | 646 | ||||
| Cash cost per tonne of complex concentrate smelted(4) | $/t | - | - | 447 | ||||
1) Represents a by-product credit for Tsumeb.
2) Cash costs are reported in U.S. dollars, although the majority of costs incurred are denominated in non-U.S. dollars, and consist of all production related expenses including mining, processing, services, royalties and general and administrative.
3) Represents cost of sales and mine cash cost, respectively, divided by tonnes of ore processed.
4) Represents cost of sales and smelter cash cost, respectively, divided by tonnes of complex concentrate smelted.
| $ thousands, unless otherwise indicated For the twelve months ended December 31, 2022 | Chelopech | Ada Tepe | Tsumeb | Total | ||||
| Ore processed | t | 2,138,792 | 852,990 | - | ||||
| Complex concentrate smelted | t | - | - | 174,122 | ||||
| Cost of sales | 133,929 | 102,739 | 120,779 | 357,447 | ||||
| Add/(deduct): | ||||||||
| Depreciation and amortization | (26,132 | ) | (55,984 | ) | (17,023 | ) | ||
| Change in concentrate inventory | (1,671 | ) | 181 | - | ||||
| Sulphuric acid revenue(1) | - | - | (23,052 | ) | ||||
| Mine cash cost / Smelter cash cost(2) | 106,126 | 46,936 | 80,704 | |||||
| Cost of sales per tonne of ore processed(3) | 63 | 120 | - | |||||
| Cash cost per tonne of ore processed(3) | $/t | 50 | 55 | - | ||||
| Cost of sales per tonne of complex concentrate smelted(4) | $/t | - | - | 694 | ||||
| Cash cost per tonne of complex concentrate smelted(4) | $/t | - | - | 463 | ||||
| $ thousands, unless otherwise indicated For the twelve months ended December 31, 2021 | Chelopech | Ada Tepe | Tsumeb | Total | ||||
| Ore processed | t | 2,199,155 | 865,587 | - | ||||
| Complex concentrate smelted | t | - | - | 189,705 | ||||
| Cost of sales | 128,726 | 99,748 | 128,662 | 357,136 | ||||
| Add/(deduct): | ||||||||
| Depreciation and amortization | (22,063 | ) | (54,405 | ) | (18,202 | ) | ||
| Other non-cash expenses(5) | 155 | 72 | (652 | ) | ||||
| Change in concentrate inventory | (3,196 | ) | (247 | ) | - | |||
| Sulphuric acid revenue(1) | - | - | (18,840 | ) | ||||
| Mine cash cost / Smelter cash cost(2) | 103,622 | 45,168 | 90,968 | |||||
| Cost of sales per tonne of ore processed(3) | $/t | 59 | 115 | - | ||||
| Cash cost per tonne of ore processed(3) | $/t | 47 | 52 | - | ||||
| Cost of sales per tonne of complex concentrate smelted(4) | $/t | - | - | 678 | ||||
| Cash cost per tonne of complex concentrate smelted(4) | $/t | - | - | 480 | ||||
1) Represents a by-product credit for Tsumeb.
2) Cash costs are reported in U.S. dollars, although the majority of costs incurred are denominated in non-U.S. dollars, and consist of all production related expenses including mining, processing, services, royalties and general and administrative.
3) Represents cost of sales and mine cash cost, respectively, divided by tonnes of ore processed.
4) Represents cost of sales and smelter cash cost, respectively, divided by tonnes of complex concentrate smelted.
5) Relates to inventory write-down to net realizable value, reflecting market price movement, included in cost of sales in the audited consolidated statements of earnings (loss).
The following table provides, for the periods indicated, a reconciliation of the Company's cash cost per ounce of gold sold and all-in sustaining cost per ounce of gold sold to its cost of sales:
| $ thousands, unless otherwise indicated For the three months ended December 31, 2022 | Chelopech | Ada Tepe | Total | ||||
| Cost of sales | 39,438 | 25,703 | 65,141 | ||||
| Add/(deduct): | |||||||
| Depreciation and amortization | (7,456 | ) | (13,948 | ) | (21,404 | ) | |
| Treatment charges, transportation and other related selling costs(1) | 26,529 | 864 | 27,393 | ||||
| By-product credits(2) | (24,717 | ) | (260 | ) | (24,977 | ) | |
| Mine cash cost of sales | 33,794 | 12,359 | 46,153 | ||||
| Rehabilitation related accretion and depreciation expenses(3) | 264 | 295 | 559 | ||||
| General and administrative expenses(4) | 4,943 | 2,469 | 7,412 | ||||
| Cash outlays for sustaining capital(5) | 9,879 | 1,840 | 11,719 | ||||
| Cash outlays for leases(5) | 251 | 280 | 531 | ||||
| All-in sustaining cost | 49,131 | 17,243 | 66,374 | ||||
| Payable gold in concentrate sold(6) | oz | 39,203 | 26,628 | 65,831 | |||
| Cost of sales per ounce of gold sold(7) | $/oz | 1,006 | 965 | 990 | |||
| Cash cost per ounce of gold sold(7) | $/oz | 862 | 464 | 701 | |||
| All-in sustaining cost per ounce of gold sold(7) | $/oz | 1,253 | 648 | 1,008 | |||
| $ thousands, unless otherwise indicated For the three months ended December 31, 2021 | Chelopech | Ada Tepe | Total | ||||
| Cost of sales | 33,474 | 27,004 | 60,478 | ||||
| Add/(deduct): | |||||||
| Depreciation and amortization | (5,766 | ) | (13,604 | ) | (19,370 | ) | |
| Other non-cash expenses | 155 | 72 | 227 | ||||
| Treatment charges, transportation and other related selling costs(1) | 29,571 | 964 | 30,535 | ||||
| By-product credits(2) | (31,703 | ) | (285 | ) | (31,988 | ) | |
| Mine cash cost of sales | 25,731 | 14,151 | 39,882 | ||||
| Rehabilitation related accretion expenses(3) | 70 | 32 | 102 | ||||
| General and administrative expenses(4) | 3,568 | 2,361 | 5,929 | ||||
| Cash outlays for sustaining capital(5) | 4,158 | 5,235 | 9,393 | ||||
| Cash outlays for leases(5) | 237 | 347 | 584 | ||||
| All-in sustaining cost | 33,764 | 22,126 | 55,890 | ||||
| Payable gold in concentrate sold(6) | oz | 40,538 | 33,282 | 73,820 | |||
| Cost of sales per ounce of gold sold(7) | $/oz | 826 | 811 | 819 | |||
| Cash cost per ounce of gold sold(7) | $/oz | 635 | 425 | 540 | |||
| All-in sustaining cost per ounce of gold sold(7) | $/oz | 833 | 665 | 757 | |||
1) Represents revenue deductions for treatment charges, refining charges, penalties, freight and final settlements to adjust for any differences relative to the provisional invoice.
2) Represents copper and silver revenue.
3) Included in cost of sales and finance costs in the audited consolidated statements of earnings (loss).
4) Represents an allocated portion of DPM's general and administrative expenses, including share-based compensation expense, based on Chelopech's and Ada Tepe's proportion of total revenue.
5) Included in cash used in investing activities and financing activities, respectively, in the audited consolidated statements of cash flows.
6) Includes payable gold in pyrite concentrate sold in the fourth quarter of 2022 of 10,408 ounces (2021 - 11,331 ounces).
7) Represents cost of sales, mine cash cost of sales and all-in sustaining cost, respectively, divided by payable gold in concentrate sold.
| $ thousands, unless otherwise indicated For the twelve months ended December 31, 2022 | Chelopech | Ada Tepe | Total | ||||
| Cost of sales | 133,929 | 102,739 | 236,668 | ||||
| Add/(deduct): | |||||||
| Depreciation and amortization | (26,132 | ) | (55,984 | ) | (82,116 | ) | |
| Treatment charges, transportation and other related selling costs(1) | 111,016 | 2,943 | 113,959 | ||||
| By-product credits(2) | (110,959 | ) | (793 | ) | (111,752 | ) | |
| Mine cash cost of sales | 107,854 | 48,905 | 156,759 | ||||
| Rehabilitation related accretion and depreciation expenses(3) | 1,020 | 1,353 | 2,373 | ||||
| General and administrative expenses(4) | 14,888 | 8,052 | 22,940 | ||||
| Cash outlays for sustaining capital(5) | 20,285 | 10,193 | 30,478 | ||||
| Cash outlays for leases(5) | 959 | 1,185 | 2,144 | ||||
| All-in sustaining cost | 145,006 | 69,988 | 214,694 | ||||
| Payable gold in concentrate sold(6) | oz | 151,580 | 91,117 | 242,697 | |||
| Cost of sales per ounce of gold sold(7) | $/oz | 884 | 1,128 | 975 | |||
| Cash cost per ounce of gold sold(7) | $/oz | 712 | 537 | 646 | |||
| All-in sustaining cost per ounce of gold sold(7) | $/oz | 957 | 765 | 885 | |||
| $ thousands, unless otherwise indicated For the twelve months ended December 31, 2021 | Chelopech | Ada Tepe | Total | ||||
| Cost of sales | 128,726 | 99,748 | 228,474 | ||||
| Add/(deduct): | |||||||
| Depreciation and amortization | (22,063 | ) | (54,405 | ) | (76,468 | ) | |
| Other non-cash expenses | 155 | 72 | 227 | ||||
| Treatment charges, transportation and other related selling costs(1) | 102,901 | 4,310 | 107,211 | ||||
| By-product credits(2) | (128,636 | ) | (1,038 | ) | (129,674 | ) | |
| Mine cash cost of sales | 81,083 | 48,687 | 129,770 | ||||
| Rehabilitation related accretion expenses(3) | 256 | 125 | 381 | ||||
| General and administrative expenses(4) | 10,019 | 7,847 | 17,866 | ||||
| Cash outlays for sustaining capital(5) | 15,511 | 17,469 | 32,980 | ||||
| Cash outlays for leases(5) | 936 | 1,466 | 2,402 | ||||
| All-in sustaining cost | 107,805 | 75,594 | 183,399 | ||||
| Payable gold in concentrate sold(6) | oz | 149,297 | 129,754 | 279,051 | |||
| Cost of sales per ounce of gold sold(7) | $/oz | 862 | 769 | 819 | |||
| Cash cost per ounce of gold sold(7) | $/oz | 543 | 375 | 465 | |||
| All-in sustaining cost per ounce of gold sold(7) | $/oz | 722 | 583 | 657 | |||
1) Represents revenue deductions for treatment charges, refining charges, penalties, freight and final settlements to adjust for any differences relative to the provisional invoice.
2) Represents copper and silver revenue.
3) Included in cost of sales and finance costs in the audited consolidated statements of earnings (loss).
4) Represents an allocated portion of DPM's general and administrative expenses, including share-based compensation expense, based on Chelopech's and Ada Tepe's proportion of total revenue.
5) Included in cash used in investing activities and financing activities, respectively, in the audited consolidated statements of cash flows.
6) Includes payable gold in pyrite concentrate sold in 2022 of 40,828 ounces (2021 - 37,747 ounces).
7) Represents cost of sales, mine cash cost of sales and all-in sustaining cost, respectively, divided by payable gold in concentrate sold.
Adjusted net earnings and adjusted basic earnings per share
Adjusted net earnings is a non-GAAP financial measure and adjusted basic earnings per share is a non-GAAP ratio used by management and investors to measure the underlying operating performance of the Company. Presenting these measures from period to period helps management and investors evaluate earnings trends more readily in comparison with results from prior periods.
Adjusted net earnings are defined as net earnings attributable to common shareholders, adjusted to exclude specific items that are significant, but not reflective of the underlying operations of the Company, including:
- impairment charges or reversals thereof
- unrealized and realized gains or losses related to investments carried at fair value;
- significant tax adjustments not related to current period earnings; and
- non-recurring or unusual income or expenses that are either not related to the Company's operating segments or unlikely to occur on a regular basis.
The following table provides a reconciliation of adjusted net earnings to net earnings attributable to common shareholders from continuing operations:
| $ thousands | Three Months | Twelve Months | |||||||
| Ended December 31, | 2022 | 2021 | 2022 | 2021 | |||||
| Net earnings attributable to common shareholders from continuing operations | 33,320 | 52,108 | 35,923 | 190,750 | |||||
| Add/(deduct): | |||||||||
| Impairment charge | - | - | 85,000 | - | |||||
| Net (gains) loss on Sabina special warrants, net of income taxes of $nil | - | (659 | ) | 2,369 | 6,312 | ||||
| Tsumeb restructuring costs | - | - | 5,735 | - | |||||
| Deferred income tax expense not related to current period earnings(1) | - | - | - | 5,019 | |||||
| Adjusted net earnings | 33,320 | 51,449 | 129,027 | 202,081 | |||||
| Basic earnings per share | 0.18 | 0.27 | 0.19 | 1.02 | |||||
| Adjusted basic earnings per share | 0.18 | 0.27 | 0.68 | 1.09 | |||||
1) Represents changes in unrecognized tax benefits included in net earnings related to unrealized gains (losses) on publicly traded securities, which, together with the related deferred income tax expense (recovery), were recognized in other comprehensive income (loss).
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure used by management and investors to measure the underlying operating performance of the Company's operating segments. Presenting these measures from period to period helps management and investors evaluate earnings trends more readily in comparison with results from prior periods. In addition, the Human Capital and Compensation Committee of the Board of Directors uses adjusted EBITDA, together with other measures, to set incentive compensation goals and assess performance.
Adjusted EBITDA excludes the following from earnings before income taxes:
- depreciation and amortization;
- interest income;
- finance cost;
- impairment charges or reversals thereof;
- unrealized and realized gains or losses related to investments carried at fair value; and
- non-recurring or unusual income or expenses that are either not related to the Company's operating segments or unlikely to occur on a regular basis.
The following table provides a reconciliation of adjusted EBITDA to earnings before income taxes:
| $ thousands | Three Months | Twelve Months | |||||||
| Ended December 31, | 2022 | 2021 | 2022 | 2021 | |||||
| Earnings before income taxes | 37,632 | 60,274 | 58,742 | 229,418 | |||||
| Add/(deduct): | |||||||||
| Impairment charge | - | - | 85,000 | - | |||||
| Depreciation and amortization | 22,740 | 23,533 | 101,252 | 96,207 | |||||
| Tsumeb restructuring costs | - | - | 5,735 | - | |||||
| Finance costs | 1,555 | 1,380 | 6,325 | 5,549 | |||||
| Interest income | (3,673 | ) | (254 | ) | (6,554 | ) | (632 | ) | |
| Net (gains) losses on Sabina special warrants | - | (659 | ) | 2,369 | 6,312 | ||||
| Adjusted EBITDA | 58,254 | 84,274 | 252,869 | 336,854 | |||||
Cash provided from operating activities, before changes in working capital
Cash provided from operating activities, before changes in working capital, is a non-GAAP financial measure defined as cash provided from operating activities excluding changes in working capital as set out in the Company's consolidated statements of cash flows. This measure is used by the Company and investors to measure the cash flow generated by the Company's operating segments prior to any changes in working capital, which at times can distort performance.
Free cash flow
Free cash flow is a non-GAAP financial measure defined as cash provided from operating activities, before changes in working capital which includes changes in share-based compensation liabilities, less cash outlays for sustaining capital, mandatory principal repayments and interest payments related to debt and leases. This measure is used by the Company and investors to measure the cash flow available to fund growth capital expenditures, dividends and share repurchases.
The following table provides a reconciliation of cash provided from operating activities, before changes in working capital and free cash flow to cash provided from operating activities:
| $ thousands | Three Months | Twelve Months | |||||||
| Ended December 31, | 2022 | 2021 | 2022 | 2021 | |||||
| Cash provided from operating activities | 49,289 | 88,940 | 232,052 | 253,580 | |||||
| Add: | |||||||||
| Changes in working capital | 3,064 | (8,877 | ) | (4,857 | ) | 55,469 | |||
| Cash provided from operating activities, before changes in working capital | 52,353 | 80,063 | 227,195 | 309,049 | |||||
| Cash outlays for sustaining capital(1) | (17,160 | ) | (12,724 | ) | (53,823 | ) | (49,758 | ) | |
| Principal repayments related to leases | (1,207 | ) | (1,165 | ) | (4,620 | ) | (4,455 | ) | |
| Interest payments(1) | (723 | ) | (367 | ) | (2,315 | ) | (2,443 | ) | |
| Free cash flow | 33,263 | 65,807 | 166,437 | 252,393 | |||||
1) Included in cash used in investing and financing activities, respectively in the audited consolidated statements of cash flows.
Average realized metal prices
Average realized gold and copper prices are non-GAAP ratios used by management and investors to highlight the price actually realized by the Company relative to the average market price, which can differ due to the timing of sales, hedging and other factors.
Average realized gold and copper prices represent the average per unit price recognized in the Company's consolidated statements of earnings (loss) prior to any deductions for treatment charges, refining charges, penalties, freight and final settlements to adjust for any differences relative to the provisional invoice.
The following table provides a reconciliation of the Company's average realized gold and copper prices to its revenue:
| $ thousands, unless otherwise indicated | Three Months | Twelve Months | ||||||||
| Ended December 31, | 2022 | 2021 | 2022 | 2021 | ||||||
| Total revenue | 152,863 | 166,433 | 569,795 | 641,443 | ||||||
| Add/(deduct): | ||||||||||
| Tsumeb revenue | (39,895 | ) | (33,574 | ) | (136,305 | ) | (119,350 | ) | ||
| Treatment charges and other deductions(1) | 27,393 | 30,535 | 113,959 | 107,211 | ||||||
| Silver revenue | (446 | ) | (1,127 | ) | (3,319 | ) | (4,831 | ) | ||
| Revenue from gold and copper | 139,915 | 162,267 | 544,130 | 624,473 | ||||||
| Revenue from gold | 115,341 | 131,407 | 435,657 | 499,630 | ||||||
| Payable gold in concentrate sold | oz | 65,831 | 73,820 | 242,697 | 279,051 | |||||
| Average realized gold price per ounce | $/oz | 1,752 | 1,780 | 1,795 | 1,790 | |||||
| Revenue from copper | 24,574 | 30,860 | 108,473 | 124,843 | ||||||
| Payable copper in concentrate sold | Klbs | 6,726 | 8,175 | 27,224 | 32,680 | |||||
| Average realized copper price per pound | $/lb | 3.65 | 3.77 | 3.98 | 3.82 | |||||
1) Represents revenue deductions for treatment charges, refining charges, penalties, freight and final settlements to adjust for any differences relative to the provisional invoice.
