Mr. Rick Howes reports
DUNDEE PRECIOUS METALS ANNOUNCES 2014 SECOND QUARTER RESULTS
Dundee Precious Metals Inc. (DPM) had a second quarter 2014 net loss attributable to common shareholders of $79.7-million (57 cents per share), compared with net earnings of $15.9-million (12 cents per share) for the same period in 2013. (All monetary figures are expressed in U.S. dollars unless otherwise stated.)
Net loss attributable to common shareholders in the first six months of 2014 was $69.7-million (50 cents per share), compared with net earnings of $16.6-million (13 cents per share) for the same period in 2013.
Financial and operating highlights:
- Mines -- higher metals production and lower costs achieved at Chelopech
during the quarter; Kapan production negatively affected by temporary
shutdown in June;
- Smelter -- record production and higher tolls fuelled higher EBITDA (earnings before interest, taxes, depreciation and amortization) in
the period; acid plant construction remains on track for completion by
year-end;
- Near-term growth -- Krumovgrad municipal council approved the company's
terms of reference, allowing DPM to proceed with the preparation and
submission of a detailed development plan;
- Impairment loss -- Kapan's exploration and evaluation assets related
primarily to a previously contemplated open-pit expansion were reduced
by $70-million;
- Financial results -- exited second quarter with approximately $225-million of cash resources, including $200-million from undrawn portion
of long-term revolving credit facility.
Net loss attributable to common shareholders for the second quarter of 2014 was affected by several items not reflective of the company's underlying operating performance, including impairment losses primarily taken in connection with certain exploration and evaluation assets, unrealized gains and losses attributable to hedging future copper and gold production, unrealized losses attributable to DPM's equity settled warrants, and net gains on Sabina warrants. Excluding these items, adjusted net earnings(1) during the second quarter of 2014 totalled $9.3-million (seven cents per share), compared with $3.6-million (three cents per share) for the corresponding period in 2013. This increase was due primarily to higher volumes of concentrate smelted at higher toll rates at Tsumeb and lower third party treatment charges at Chelopech, partially offset by higher depreciation following the completion of Tsumeb's project 2012 in the fourth quarter of 2013.
In the first six months of 2014, adjusted net earnings were $7-million (five cents per share), compared with $10.2-million (eight cents per share) in the corresponding period in 2013. This decrease was due primarily to lower metal prices, lower volumes of payable metals in concentrate sold and higher depreciation, partially offset by higher volumes of concentrate smelted at higher toll rates at Tsumeb, lower third party treatment charges at Chelopech and the net favourable impact of a stronger U.S. dollar.
"Our flagship asset, Chelopech, performed well in the quarter, with metals production higher than in the first quarter as a result of higher grades and recoveries. We continue to see improvements at Tsumeb, where increased production and higher toll rates contributed to significantly higher EBITDA. Despite numerous improvements made at Kapan, we experienced a setback in the second quarter as a result of a fatality sustained at the mine, which triggered a temporary shutdown of the operation and has impacted the ramp-up to full production," said Rick Howes, president and chief executive officer. "At Krumovgrad, we received a positive signal with the approval from the Krumovgrad municipal council and are now able to proceed with filing our development plans to move the project forward."
Impairment losses
At June 30, 2014, the company reduced the carrying value of Kapan's exploration and evaluation assets by $70-million, with the resulting impairment loss recognized through other expense (income). This loss reflects management's determination that capitalized exploration and evaluation costs incurred primarily to support the merits of an open-pit expansion, initially the preferred option, should be written off. The assessment work being conducted in support of a potential underground expansion is progressing well and is expected to be completed later this year.
The company also recognized a $6.8-million impairment loss during the second quarter of 2014 in respect of certain equipment that was to have been used by Chelopech for a metals processing facility.
Adjusted EBITDA
Adjusted EBITDA(1) during the second quarter and first six months of 2014 was $32.2-million and $48.9-million, respectively, compared with $20.8-million and $47.3-million in the corresponding periods in 2013, driven by the same factors affecting adjusted net earnings, except for depreciation, which is excluded from adjusted EBITDA.
The average market price for gold during the second quarter and first six months of 2014 decreased by 10 per cent and 16 per cent, respectively, compared with the corresponding periods in 2013. The average market price for copper during the second quarter and first six months of 2014 decreased by 5 per cent and 8 per cent, respectively, compared with corresponding periods in 2013. The average realized copper price, including realized hedging gains, for the second quarter and first six months of 2014 was $3.34 and $3.30 per pound, respectively, compared with $3.33 and $3.49 per pound in the corresponding periods in 2013.
Production and deliveries
Copper and zinc concentrate production in the second quarter and first six months of 2014 of 34,341 tonnes and 63,402 tonnes, respectively, was 4 per cent and 14 per cent lower than the corresponding periods in 2013. The quarter-over-quarter decrease was due primarily to lower volumes of ore mined and processed at Kapan, partially offset by higher volumes of ore processed at Chelopech. The decrease in the first six months of 2014 relative to the corresponding period in 2013 was due primarily to lower copper grades and recoveries at Chelopech and lower volumes of ore mined and processed at Kapan. The lower recoveries at Chelopech in the second quarter and first six months of 2014 were due primarily to the treatment of increased volumes of ore characterized by a higher sulphur to copper ratio than originally anticipated. This material has a higher intrinsic pyrite content, which increases the load on downstream sections once recovered in the flotation circuits. Important mechanical and operating parameters affecting the recoveries in the first six months of 2014 have now been corrected. Further optimization of the new circuits is continuing and is expected to continue over the balance of 2014.
Gold contained in pyrite concentrate produced in the second quarter and first six months of 2014 was 10,188 ounces and 14,980 ounces, respectively.
Concentrate smelted at Tsumeb during the second quarter and the first six months of 2014 of 60,322 tonnes and 109,472 tonnes, respectively, was 30 per cent and 35 per cent higher than the corresponding periods in 2013, supported by the introduction of the second oxygen plant in late January, 2014, and the completion of project 2012, which negatively affected 2013 production due to the downtime associated with commissioning activities.
Deliveries of copper and zinc concentrates during the second quarter of 2014 of 35,513 tonnes were comparable with the deliveries in the corresponding period in 2013. Deliveries of copper and zinc concentrates during the first six months of 2014 of 66,705 tonnes were 7 per cent lower than the corresponding period in 2013, due primarily to lower concentrate production at Chelopech as a result of lower copper grades and recoveries, and lower volumes of ore mined and processed at Kapan.
Relative to the second quarter of 2013, payable gold in copper and zinc concentrates sold in the second quarter of 2014 decreased by 5 per cent to 35,411 ounces, payable copper in concentrate sold increased by 7 per cent to 11.2 million pounds, payable silver in concentrate sold decreased by 9 per cent to 126,760 ounces and payable zinc in concentrate sold decreased by 36 per cent to three million pounds. The increase in payable copper in concentrate sold was due primarily to increased copper concentrate deliveries at Chelopech. The decreases in payable gold and silver in concentrate sold were due primarily to lower recoveries at Chelopech. The decrease in payable zinc in concentrate sold was due primarily to lower volumes of ore mined and processed at Kapan.
Relative to the first six months of 2013, payable gold in copper and zinc concentrates sold in the first six months of 2014 decreased by 16 per cent to 62,736 ounces, payable copper in concentrate sold decreased by 5 per cent to 20.8 million pounds, payable silver in concentrate sold decreased by 4 per cent to 236,373 ounces and payable zinc in concentrate sold decreased by 35 per cent to five million pounds. These decreases were consistent with the lower contained metals in concentrate produced in the first six months of 2014 relative to the corresponding period in 2013.
Payable gold in pyrite concentrate sold in the second quarter and first six months of 2014 was 8,115 ounces (2013 -- 843 ounces) and 10,993 ounces (2013 -- 1,830 ounces), respectively.
Cash cost of sales per ounce of gold sold
Consolidated cash cost of sales per ounce of gold sold, net of byproduct credits, during the second quarter of 2014 of $277 was 20 per cent lower than the cash cost of sales of $346 for the corresponding period in 2013, due primarily to lower treatment charges and higher volumes of payable copper in concentrate sold.
Consolidated cash cost of sales per ounce of gold sold, net of byproduct credits, during the first six months of 2014 of $402 was 30 per cent higher than the cash cost of sales of $309 for the corresponding period in 2013, due primarily to lower volumes of payable metals in concentrate sold and lower metal prices, partially offset by lower treatment charges.
All-in sustaining cost per ounce of gold
Consolidated all-in sustaining cost per ounce of gold, net of byproduct credits, in the second quarter of 2014 was $581, compared with $650 in the corresponding period in 2013. This decrease was due primarily to the same factors affecting cash cost of sales per ounce of gold sold and lower cash outlays for sustaining capital expenditures, partially offset by higher general and administrative expenses.
Consolidated all-in sustaining cost per ounce of gold, net of byproduct credits, in the first six months of 2014 was $794, compared with $617 in the corresponding period in 2013. This increase was due primarily to the same factors affecting cash cost of sales per ounce of gold sold and higher general and administrative expenses.
Cash provided from operating activities
Cash provided from operating activities in the second quarter of 2014 was $24.1-million, compared with $11.5-million in the corresponding period in 2013, due primarily to the same factors affecting adjusted EBITDA and lower income taxes paid, partially offset by higher working capital requirements. Cash provided from operating activities in the first six months of 2014 was $35.7-million, compared with $43.5-million in the corresponding period in 2013, due primarily to the same factors affecting adjusted EBITDA and higher working capital requirements, partially offset by lower income taxes paid.
Cash provided from operating activities, before changes in non-cash working capital, during the second quarter and first six months of 2014 of $32.4-million and $49.3-million, respectively, was $23.5-million and $16.1-million higher than the corresponding periods in 2013, due primarily to the same factors affecting adjusted EBITDA and lower income taxes paid.
Capital expenditures
Cash outlays for capital expenditures during the second quarter and first six months of 2014 totalled $52.1-million and $102.7-million, respectively, compared with $40.6-million and $101.8-million in the corresponding periods in 2013, due primarily to timing of payments for work related to the construction of a new acid plant at Tsumeb, partially offset by the completion of project 2012 in December, 2013.
Financial position
In June, 2014, DPM increased its revolving credit facility (RCF) by $125-million to $275-million with the existing consortium and one new bank. The expanded RCF comprises a $150-million (previously $125-million) tranche maturing in early 2017, a $45-million (previously $25-million) tranche maturing in early 2019 and a new $80-million tranche maturing in mid-2019, which has quarterly reductions of $4-million beginning in the third quarter of 2016. As at June 30, 2014, DPM maintained a consolidated cash position of $24.7-million, an investment portfolio valued at $21.9-million and $200-million of additional liquidity under its RCF. These cash resources, together with the cash flow currently being generated, support the continued development of the company's business.
2014 guidance
The company's production and cash cost guidance for 2014 is set out in the accompanying table and is unchanged from the guidance issued in April, except for ore mined/milled and metals contained in concentrate produced, which have been updated to reflect performance in the first six months of 2014.
Prior 2014
Current 2014 guidance guidance
Chelopech Kapan Tsumeb Consolidated Consolidated
Ore mined/milled 1,900 to 420 to - 2,320 to 2,375 to
(000s tonnes) 2,050 440 2,490 2,575
Concentrate smelted - - 190 to 190 to 220 190 to 220
(000s tonnes) 220
Metals contained in
concentrate
produced(1)
Gold (000s ounces) 126.0 to 23.0 to - 149 to 157 155 to 174
130.0 27.0
Copper (million 42.7 to 2.4 to - 45.1 to 49.0 45.5 to 50.0
pounds) 46.2 2.8
Zinc (million - 11.6 to - 11.6 to 15.9 11.6 to 15.9
pounds) 15.9
Silver (000s 210 to 230 430 to - 640 to 698 678 to 870
ounces) 468
Cash cost/tonne of 43 to 47 81 to 91 - 51 to 56 51 to 56
ore processed ($)(2)
Cash cost/ounce of 285 to 430 485 to - 335 to 505 335 to 505
gold sold, net of 855
byproduct credits
($)(1)(2)
All-in sustaining - - - 710 to 815 710 to 815
cost per ounce of
gold ($)(1)(2)
Cash cost/tonne of - - 280 to 280 to 350 280 to 350
concentrate smelted 350
($)(2)
Payable gold in 27 to 33 - - 27 to 33 27 to 33
pyrite concentrate
sold (000s ounces)
1. Excludes metals in pyrite concentrate and, where applicable, the treatment
charges, transportation and other selling costs related to the sale of
pyrite concentrate, reported separately.
2. Based on current exchange rates and, where applicable, a copper price of
$3.36 per pound, a silver price of $20.53 per ounce and a zinc price of
$1.03 per pound.
The Chelopech mine performed well in the second quarter of 2014, with metal production well above first quarter levels. However, gold recoveries in the copper concentrate have not yet reached the levels expected from the new flotation circuits. Further optimization of the new circuits is continuing and is expected to continue over the balance of 2014. As a result, the upper end of the guidance for 2014 gold production has been reduced to 130,000 ounces from 138,000 ounces. In the interim, additional gold is reporting to the pyrite concentrate, which partially offsets this effect. Metal production in the third quarter of 2014 is expected to be lower than metal production in the fourth quarter of 2014 as a result of mine sequencing and the associated variation in grades.
In May, 2014, an underground worker was fatally injured in the Kapan mine. Operations were immediately suspended and, over the course of a three-week period, an investigation was initiated, involving company officials, government representatives and outside experts, to ensure any recommended changes to the mine's work, and safety procedures were implemented prior to resuming operations. Production has resumed, but has not yet returned to expected levels, resulting in production guidance being reduced to reflect this lower level of production.
For 2014, the majority of the company's growth capital expenditures(1) will be focused on the construction of an acid plant at Tsumeb. Other growth capital expenditures include the pyrite recovery circuit and margin improvement projects at Chelopech, securing the remaining permits and planning for the commencement of construction related to the Krumovgrad gold project, and exploration and development work to enhance underground operations and advance a potential expansion at Kapan. In total, these expenditures are expected to range between $160-million and $175-million. Sustaining capital expenditures(1) are expected to range between $37-million and $45-million.
The 2014 guidance provided is not expected to occur evenly throughout the year, as a result of variations associated with areas being mined from quarter to quarter, the timing of concentrate deliveries and planned outages, including the annual maintenance shutdown at Tsumeb, which this year is occurring in July. Also, the rate of capital expenditures may vary from quarter to quarter based on the schedule for, and execution of, each capital project and, where applicable, the receipt of necessary permits and approvals. Further details can be found in the company's MD&A (management's discussion and analysis). under the section on 2014 guidance.
Note:
- Adjusted net earnings; adjusted basic earnings per share; adjusted EBITDA; cash from operating activities, before changes in non-cash working capital; cash cost per tonne of ore processed; cash cost per ounce of gold sold, net of byproduct credits; all-in sustaining cost per ounce of gold; cash cost per tonne of concentrate smelted; and growth and sustaining capital expenditures are not defined measures under international financial reporting standards (IFRS). Presenting these measures from period to period helps management and investors evaluate earnings and cash flow trends more readily in comparison with results from prior periods.
KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
(in millions of U.S. dollars, except where noted)
Three months Six months
ended June 30, ended June 30,
2014 2013 2014 2013
Revenue $ 98.0 $ 80.2 $ 174.4 $ 168.2
Gross profit(1) 30.4 16.4 43.2 40.6
(Loss) earnings before income taxes (82.1) 16.7 (70.0) 21.1
Net (loss) earnings attributable to
common shareholders (79.7) 15.9 (69.7) 16.6
Basic (loss) earnings per share ($) (0.57) 0.12 (0.50) 0.13
Adjusted EBITDA(2) 32.2 20.8 48.9 47.3
Adjusted net earnings(2) 9.3 3.6 7.0 10.2
Adjusted basic earnings per share
($)(2) 0.07 0.03 0.05 0.08
Cash provided from operating
activities 24.1 11.5 35.7 43.5
Cash provided from operating
activities, before changes in non-
cash working capital(2) 32.4 8.9 49.3 33.2
Copper and zinc concentrate produced
(mt) 34,341 35,925 63,402 73,327
Metals in copper and zinc concentrate
produced
Gold (ounces) 38,835 40,617 65,442 85,089
Copper (000s pounds) 11,600 11,431 20,955 24,033
Zinc (000s pounds) 2,990 5,844 6,124 9,202
Silver (ounces) 168,612 215,009 298,935 370,413
Tsumeb -- concentrate smelted (mt) 60,322 46,393 109,472 80,886
Deliveries of copper and zinc
concentrate (mt) 35,513 35,211 66,705 71,614
Payable metals in copper and zinc
concentrate sold
Gold (ounces) 35,411 37,282 62,736 74,568
Copper (000s pounds) 11,173 10,465 20,759 21,779
Zinc (000s pounds) 3,051 4,794 5,031 7,797
Silver (ounces) 126,760 139,568 236,373 246,287
Payable gold in pyrite concentrate
sold (ounces) 8,115 843 10,993 1,830
Cash cost of sales per ounce of
gold sold, net of byproduct credits
($)(2) 277 346 402 309
All-in sustaining cost per ounce of
gold ($)(2) 581 650 794 617
Cash cost/tonne of concentrate
smelted at Tsumeb ($)(2) 296 389 301 431
1. Gross profit is regarded as an additional GAAP (generally accepted accounting
principles) measure and is presented in the company's condensed interim
unaudited consolidated statements of (loss) earnings. Gross profit represents
revenue less cost of sales and is one of several measures used by management
and investors to assess the underlying operating profitability of a business.
2. Adjusted EBITDA; adjusted net earnings; adjusted basic earnings per share;
cash flow provided from operating activities, before changes in non-cash
working capital; cash cost of sales per ounce of gold sold, net of byproduct
credits; all-in sustaining cost per ounce of gold; and cash cost per tonne of
concentrate smelted are not defined measures under IFRS.
DPM's condensed interim unaudited consolidated financial statements, and MD&A for the second quarter and first six months ended June 30, 2014, are posted on the company's website and have been filed on SEDAR.
The company will be holding a call to discuss its 2014 second quarter results on July 31, 2014, at 9 a.m. ET. Participants are invited to join the live webcast (audio only) on-line. Alternatively, participants can access a listen-only telephone option at 416-340-2219 or (North America toll-free) 1-866-226-1798. A replay of the call will be available at 905-694-9451 or (North America toll-free) at 1-800-408-3053, using passcode 2783756. The audio webcast for this conference call will also be archived and available on the company's website.
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.