Dundee Precious Metals Announces 2024 Second Quarter Results; Record Free Cash Flow Generation Driven by Strong All-in Sustaining Cost Performance

2024-08-01

TSX - Toronto Stock Exchange · Gold · Copper · Silver · Arsenic · Sulfur · Zinc · Lead · Antimony · Canada

TORONTO, Aug. 01, 2024 (GLOBE NEWSWIRE) -- Dundee Precious Metals Inc. (TSX: DPM) ("DPM" or the "Company") announced its operating and financial results for the second quarter and six months ended June 30, 2024.

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.)

Record free cash flow: Generated $82.4 million of free cash flow 1 from continuing operations and $125.8 million of cash provided from operating activities from continuing operations. Record adjusted net earnings: Reported adjusted net earnings 2 from continuing operations of $70.9 million ($0.39 per share 1 ) and net earnings from continuing operations of $70.9 million ($0.39 per share). Continued capital discipline: Returned $32.5 million, or 23% of free cash flow, to shareholders during the first half of 2024 through dividends paid and shares repurchased. On track to meet 2024 guidance: With strong production of 67,644 ounces of gold and 7.9 million pounds of copper in the second quarter, and 130,371 ounces of gold and 14.6 million pounds of copper in the first half of 2024, DPM is well-positioned to achieve its annual production guidance. Generating robust margins: Reported all-in sustaining cost per ounce of gold sold 1 of $710, and cost of sales per ounce of gold sold 2 of $1,073. All-in sustaining cost per ounce of gold sold for 2024 is expected to be well within the annual guidance range. Substantial liquidity position: Ended the quarter with a strong balance sheet, including a total of $707.5 million of cash from continuing and discontinued operations, a $150.0 million undrawn revolving credit facility, and no debt. Advancing growth pipeline: Initiated the Čoka Rakita project pre-feasibility study ("PFS"), following positive results of the preliminary economic assessment ("PEA") announced in May 2024. Exploration activities to pursue additional targets on the Čoka Rakita licence and three additional licences are continuing. Tsumeb smelter sale update: In July 2024, all required Chinese regulatory approvals were received, with approval under the Namibia Competition Act still required. Following the smelter’s tolling agent electing to end its tolling agreement with Tsumeb, DPM is currently in discussions with Sinomine Resource Group Co Ltd (“Sinomine”) regarding amendments to the share purchase agreement (“SPA”), including an expected reduction of the cash consideration from $49.0 million to $20.0 million. The parties are also in discussions on a proposed arrangement whereby DPM would agree to step into the role of tolling agent for Tsumeb for a period ending four months following closing of the sale, which is expected in the third quarter of 2024.

1 All-in sustaining cost per ounce of gold sold, free cash flow, adjusted net earnings and adjusted basic earnings per share are non-GAAP financial measures or ratios. These measures have no standardized meanings under IFRS Accounting Standards (“IFRS”) and may not be comparable to similar measures presented by other companies. Refer to the “Non-GAAP Financial Measures” section commencing on page 17 of this news release for more information, including reconciliations to IFRS measures. 2 Cost of sales per ounce of gold sold represents total cost of sales for Chelopech and Ada Tepe, divided by total payable gold in concentrate sold, while all-in sustaining cost per ounce of gold sold includes treatment and freight charges, net of by-product credits, all of which are reflected in revenue.

CEO Commentary

“We generated record free cash flow of $82 million in the second quarter, reflecting our strong operating results, excellent all-in sustaining cost performance and the benefit of higher metal prices improving our already robust margins,” said David Rae, President and Chief Executive Officer.

“We continue to advance Čoka Rakita, our high-grade, low-cost growth project in Serbia. The PFS is on track for completion in Q1 2025, and permitting preparation activities are underway to support commencement of construction in mid-2026. We are also continuing our infill and scout drilling programs, where results have continued to demonstrate the robust nature of the deposit and significant exploration potential of Čoka Rakita and the surrounding licences.

“DPM is in a unique position in the industry, with a strong base of high-margin production driving significant free cash flow generation, and the balance sheet strength to internally fund our growth pipeline and exploration prospects while continuing to return capital to shareholders.”

Use of non-GAAP Financial Measures

Certain financial measures referred to in this news release are not measures recognized under IFRS and are referred to as non-GAAP financial measures or ratios. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management’s reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Non-GAAP financial measures and ratios, together with other financial measures calculated in accordance with IFRS, are considered to be important factors that assist investors in assessing the Company’s performance.

The Company uses the following non-GAAP financial measures and ratios in this news release:

mine cash cost cash cost per tonne of ore processed mine cash cost of sales cash cost per ounce of gold sold all-in sustaining cost all-in sustaining cost per ounce of gold sold smelter cash cost cash cost per tonne of complex concentrate smelted adjusted earnings (loss) before interest, taxes, depreciation and amortization (“adjusted EBITDA”) adjusted net earnings (loss) adjusted basic earnings (loss) 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 18 of this news release.

Key Operating and Financial Highlights

| $ millions, except where noted | | Three Months | | Six Months | | | | | | | | | | | 2024 | | 2023 | Change | | 2024 | | 2023 | Change | | | | | Operating Highlights | | | | | | | | | | | | | | Ore Processed | t | 755,543 | | 740,936 | 2 | % | | 1,456,741 | | 1,478,573 | (1 | %) | | Metals contained in concentrate produced: | | | | | | | | | | | | | | Gold | | | | | | | | | | | | | | Chelopech | oz | 43,734 | | 44,463 | (2 | %) | | 81,229 | | 79,721 | 2 | % | | Ada Tepe | oz | 23,910 | | 31,843 | (25 | %) | | 49,142 | | 65,166 | (25 | %) | | Total gold in concentrate produced | oz | 67,644 | | 76,306 | (11 | %) | | 130,371 | | 144,887 | (10 | %) | | Copper | Klbs | 7,880 | | 7,913 | 0 | % | | 14,572 | | 15,090 | (3 | %) | | Payable metals in concentrate sold: | | | | | | | | | | | | | | Gold | | | | | | | | | | | | | | Chelopech | oz | 37,849 | | 33,853 | 12 | % | | 67,417 | | 64,926 | 4 | % | | Ada Tepe | oz | 22,974 | | 31,212 | (26 | %) | | 48,618 | | 63,638 | (24 | %) | | Total payable gold in concentrate sold | oz | 60,823 | | 65,065 | (7 | %) | | 116,035 | | 128,564 | (10 | %) | | Copper | Klbs | 6,469 | | 6,585 | (2 | %) | | 11,926 | | 12,943 | (8 | %) | | Cost of sales per tonne of ore processed (1) : | | | | | | | | | | | | | | Chelopech | $/t | 68 | | 62 | 10 | % | | 68 | | 63 | 8 | % | | Ada Tepe | $/t | 139 | | 138 | 1 | % | | 143 | | 138 | 4 | % | | Cash cost per tonne of ore processed (2) : | | | | | | | | | | | | | | Chelopech | $/t | 56 | | 50 | 12 | % | | 55 | | 51 | 8 | % | | Ada Tepe | $/t | 71 | | 66 | 8 | % | | 68 | | 66 | 3 | % | | Cost of sales per ounce of gold sold (3) | $/oz | 1,073 | | 929 | 16 | % | | 1,099 | | 951 | 16 | % | | All-in sustaining cost per ounce of gold sold (2) | $/oz | 710 | | 733 | (3 | %) | | 793 | | 802 | (1 | %) | | Financial Highlights | | | | | | | | | | | | | | Revenue | | 156.8 | | 132.5 | 18 | % | | 280.6 | | 258.9 | 8 | % | | Cost of sales | | 65.2 | | 60.4 | 8 | % | | 127.5 | | 122.3 | 4 | % | | Earnings (loss) before income taxes (4) | | 71.8 | | 69.2 | 4 | % | | 124.4 | | 118.2 | 5 | % | | From continuing operations | | 80.2 | | 57.1 | 40 | % | | 126.5 | | 103.1 | 23 | % | | From discontinued operations | | (8.4 | ) | 12.1 | (170 | %) | | (2.1 | ) | 15.1 | (114 | %) | | Net earnings (loss) (4) | | 62.5 | | 61.7 | 1 | % | | 108.2 | | 108.3 | 0 | % | | From continuing operations | | 70.9 | | 49.6 | 43 | % | | 110.3 | | 93.2 | 18 | % | | From discontinued operations | | (8.4 | ) | 12.1 | (170 | %) | | (2.1 | ) | 15.1 | (114 | %) | | Basic earnings (loss) per share (4) | $/sh | 0.34 | | 0.32 | 6 | % | | 0.60 | | 0.57 | 5 | % | | From continuing operations | $/sh | 0.39 | | 0.26 | 50 | % | | 0.61 | | 0.49 | 24 | % | | From discontinued operations | $/sh | (0.05 | ) | 0.06 | (183 | %) | | (0.01 | ) | 0.08 | (113 | %) | | Adjusted EBITDA (2),(4) | | 89.1 | | 86.7 | 3 | % | | 155.0 | | 155.1 | 0 | % | | From continuing operations | | 93.1 | | 73.0 | 28 | % | | 147.6 | | 136.7 | 8 | % | | From discontinued operations | | (4.0 | ) | 13.7 | (129 | %) | | 7.4 | | 18.4 | (60 | %) | | Adjusted net earnings (loss) (2),(4) | | 64.2 | | 62.2 | 3 | % | | 105.6 | | 108.3 | (3 | %) | | From continuing operations | | 70.9 | | 50.1 | 42 | % | | 103.4 | | 93.2 | 11 | % | | From discontinued operations | | (6.7 | ) | 12.1 | (156 | %) | | 2.2 | | 15.1 | (85 | %) | | Adjusted net earnings (loss) per share (2),(4) | $/sh | 0.35 | | 0.33 | 6 | % | | 0.58 | | 0.57 | 2 | % | | From continuing operations | $/sh | 0.39 | | 0.27 | 44 | % | | 0.57 | | 0.49 | 16 | % | | From discontinued operations | $/sh | (0.04 | ) | 0.06 | (167 | %) | | 0.01 | | 0.08 | (88 | %) | | Cash provided from (used in) operating activities (4) | | 116.6 | | 59.2 | 97 | % | | 170.1 | | 130.1 | 31 | % | | From continuing operations | | 125.8 | | 54.6 | 131 | % | | 161.6 | | 120.3 | 34 | % | | From discontinued operations | | (9.2 | ) | 4.6 | (301 | %) | | 8.5 | | 9.8 | (13 | %) | | Free cash flow (2),(4) | | 73.9 | | 70.4 | 5 | % | | 142.1 | | 135.5 | 5 | % | | From continuing operations | | 82.4 | | 66.4 | 24 | % | | 142.5 | | 132.5 | 8 | % | | From discontinued operations | | (8.5 | ) | 4.0 | (310 | %) | | (0.4 | ) | 3.0 | (114 | %) | | Capital expenditures incurred (5) : | | | | | | | | | | | | | | Sustaining (6) | | 7.9 | | 6.1 | 29 | % | | 13.6 | | 13.4 | 1 | % | | Growth and other (7) | | 3.6 | | 6.9 | (48 | %) | | 11.9 | | 13.3 | (10 | %) | | Total capital expenditures | | 11.5 | | 13.0 | (11 | %) | | 25.5 | | 26.7 | (4 | %) |

1) Cost of sales per tonne of ore processed represents cost of sales for Chelopech and Ada Tepe, respectively, divided by tonnes of ore processed. 2) Cash cost per ounce of gold sold, cash cost per tonne of ore processed, all-in sustaining cost per ounce of gold sold, 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 18 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) These measures include discontinued operations. 5) Capital expenditures incurred were reported on an accrual basis and do not represent the cash outlays for the capital expenditures. 6) 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. 7) Growth capital expenditures are generally defined as capital expenditures that expand existing capacity, increase life of assets and/or increase future earnings. This measure is used by management and investors to assess the extent of discretionary capital spending being undertaken by the Company each period.

Performance Highlights

A table comparing production, sales and cash cost measures by asset for the second quarter and six months ended June 30, 2024 against 2024 guidance is located on page 13 of this news release.

In the second quarter of 2024, the Company’s mining operations continued to deliver strong results. Gold production at Chelopech and Ada Tepe was in line with expectations, with higher copper grades expected at Chelopech over the balance of the year. Both mines remain on track to achieve their 2024 production and cost guidance.

Highlights include the following:

Chelopech, Bulgaria: Gold contained in concentrate produced in the second quarter and first half of 2024 of 43,734 ounces and 81,229 ounces, respectively, was comparable to the corresponding periods in 2023 due primarily to lower gold grades, largely offset by higher gold recoveries. Copper production in the second quarter and first half of 2024 of 7.9 million pounds and 14.6 million pounds, respectively, were comparable to the corresponding periods in 2023, due primarily to lower copper grades, largely offset by higher copper recoveries.

All-in sustaining cost per ounce of gold sold in the second quarter of 2024 was $531 compared to $776 in the corresponding period in 2023 due primarily to higher by-product credits reflecting higher realized copper prices, lower treatment charges, higher volumes of gold sold and lower prices for power, partially offset by higher labour costs, higher freight charges and the timing of maintenance activities, as well as lower cash outlays for sustaining capital expenditures.

All-in sustaining cost per ounce of gold sold in the first half of 2024 was $670 compared to $851 in the corresponding period in 2023 due primarily to lower treatment charges as a result of DPM having secured more favourable commercial terms for the year under the current tight market for copper concentrates, higher volumes of gold sold and lower prices for power, partially offset by higher labour costs and higher freight charges as a result of the disruptions in key sea routes due to the Middle East conflicts, as well as lower cash outlays for sustaining capital expenditures.

Ada Tepe, Bulgaria: Gold contained in concentrate produced in the second quarter and first half of 2024 of 23,910 ounces and 49,142 ounces, respectively, was in each case 25% lower than the corresponding periods in 2023 due primarily to mining lower-grade zones, in line with the mine plan.

All-in sustaining cost per ounce of gold sold in the second quarter and first half of 2024 of $699 and $638, respectively, was 32% and 26% higher than the corresponding periods in 2023 due primarily to lower volumes of gold sold.

Consolidated Operating Highlights

Production: Gold contained in concentrate produced in the second quarter and first half of 2024 of 67,644 ounces and 130,371 ounces, respectively, was 11% and 10% lower than the corresponding periods in 2023 due primarily to mining in lower grade zones at Ada Tepe and Chelopech, partially offset by higher gold recoveries at Chelopech, in line with the mine plans for both operations.

Copper production in the second quarter and first half of 2024 of 7.9 million pounds and 14.6 million pounds, respectively, were comparable to the corresponding periods in 2023, due primarily to lower copper grades, largely offset by higher copper recoveries.

Deliveries: Payable gold in concentrate sold in the second quarter and first half of 2024 of 60,823 ounces and 116,035 ounces, respectively, was 7% and 10% lower than the corresponding periods in 2023 primarily reflecting lower gold production, partially offset by the timing of deliveries.

Payable copper in concentrate sold in the second quarter of 2024 of 6.5 million pounds was comparable to the corresponding period in 2023, consistent with copper production. Payable copper in the first half of 2024 of 11.9 million pounds was 8% lower than the corresponding period in 2023, due primarily to the timing of deliveries and lower copper production in the first quarter of 2024.

Cost measures: Cost of sales in the second quarter and first half of 2024 of $65.2 million and $127.5 million, respectively, increased compared to $60.4 million and $122.3 million in the corresponding periods in 2023 due primarily to higher depreciation expenses, higher labour costs and the timing of maintenance activities, partially offset by lower prices for power.

All-in sustaining cost per ounce of gold sold in the second quarter of 2024 of $710 was 3% lower than the corresponding period in 2023 due primarily to higher by-product credits as a result of higher realized copper prices, lower treatment charges at Chelopech and lower cash outlays for sustaining capital expenditures, partially offset by lower volumes of gold sold, higher share-based compensation expenses reflecting DPM’s strong share price performance, higher labour costs, higher freight charges and the timing of maintenance activities.

All-in sustaining cost per ounce of gold sold in the first half of 2024 of $793 was comparable to the corresponding period in 2023 due primarily to lower treatment charges at Chelopech, lower cash outlays for sustaining capital expenditures and lower prices for power, largely offset by lower volumes of gold sold, higher freight charges, higher labour costs and the timing of maintenance activities.

Capital expenditures: Capital expenditures incurred in the second quarter and first half of 2024 were $11.5 million and $25.5 million, respectively, compared to the corresponding periods in 2023 of $13.0 million and $26.7 million.

Sustaining capital expenditures incurred in the second quarter and first half of 2024 were $7.9 million and $13.6 million, respectively, compared to the corresponding periods in 2023 of $6.1 million and $13.4 million, due primarily to the timing of expenditures.

Growth and other capital expenditures incurred during the second quarter and first half of 2024, primarily related to the Loma Larga gold project, were $3.6 million and $11.9 million, respectively, compared to $6.9 million and $13.3 million in the corresponding periods in 2023, due primarily to lower expenditures related to the Loma Larga gold project as expected. Growth and other capital expenditures in the first half of 2024 also included a $4.0 million expenditure for the electric mobile equipment received in the first quarter of 2024 related to the Company’s ESG initiatives.

Consolidated Financial Highlights

Financial results in the second quarter of 2024 reported record free cash flow generation, reflecting higher realized metal prices combined with the Company’s strong all-in sustaining cost performance, partially offset by lower volumes of metals sold and higher planned exploration and evaluation expenses.

Revenue: Revenue in the second quarter of 2024 of $156.8 million was 18% higher than the corresponding period in 2023, due primarily to higher realized prices of metals sold, partially offset by lower volumes of gold sold at Ada Tepe. Revenue in the first half of 2024 of $280.6 million was 8% higher than the corresponding period in 2023, due primarily to higher realized prices of metals sold and lower treatment charges at Chelopech, partially offset by lower volumes of gold sold at Ada Tepe.

Net earnings : Net earnings from continuing operations in the second quarter and first half of 2024 of $70.9 million ($0.39 per share) and $110.3 million ($0.61 per share), respectively, increased compared to $49.6 million ($0.26 per share) and $93.2 million ($0.49 per share) in the corresponding periods in 2023 due primarily to higher revenue and higher interest income, partially offset by higher planned exploration and evaluation expenses and higher income taxes.