Mr. Rick Howes reports
DUNDEE PRECIOUS METALS ANNOUNCES 2015 FOURTH QUARTER AND ANNUAL RESULTS AND 2016 GUIDANCE
Dundee Precious Metals Inc. had fourth-quarter net loss attributable to common shareholders of $48.5-million (34 cents per share) compared with net earnings attributable to common shareholders of $21.5-million (15 cents per share) for the same period in 2014. The net loss attributable to common shareholders for 2015 was $47.0-million (33 cents per share) compared with $58.9-million (42 per share) for the same period in 2014.
All monetary figures are expressed in U.S. dollars unless otherwise stated.
Net (loss) earnings attributable to common shareholders for the fourth quarter and 12 months of 2015 and 2014 were impacted by several items not reflective of the company's underlying operating performance, including impairment losses of $42.7-million and $70.0-million in respect of Kapan recognized in the fourth quarter of 2015 and second quarter of 2014, respectively; unrealized gains and losses attributable to hedging future copper and gold production, and foreign-denominated operating costs; net gains and losses attributable to DPM's equity-settled warrants; and net gains and losses on Sabina warrants. Excluding these items, adjusted net loss (1) during the fourth quarter of 2015 was $3.9-million (three cents per share) compared with adjusted net earnings of $16.3-million (12 cents per share) for the corresponding period in 2014. This adjusted net loss was due primarily to lower volumes of payable metals in concentrate sold, lower metal prices, higher local currency operating expenses, higher deductions for estimated metals exposure at Tsumeb and higher depreciation. These unfavourable variances were partially offset by the favourable impact of a stronger U.S. dollar and higher third party toll rates at Tsumeb.
For 2015, adjusted net earnings were $300,000 (nil per share) compared with $13.8-million (10 cents per share) in 2014. This decrease was due primarily to lower metal prices, higher local currency operating expenses, higher deductions for stockpile interest and estimated metals exposure at Tsumeb, and a higher proportion of third party concentrate smelted at Tsumeb, resulting in a lower overall toll rate and higher depreciation. These unfavourable variances were partially offset by the favourable impact of a stronger U.S. dollar, lower general and administrative expenses, and higher third party toll rates at Tsumeb.
"All operations performed as expected in the quarter, and met 2015 production and cash cost guidance; however, weaker metal prices, higher deductions for estimated metals exposure and stockpile interest at Tsumeb, and an impairment charge at Kapan negatively impacted the company's financial results," said Rick Howes, president and chief executive officer. "Looking forward to 2016, the focus will remain on further optimizing operational performance, reducing costs at each of our operations and securing the remaining permits for the Krumovgrad gold project."
Adjusted earnings before interest, taxes, depreciation and amortization
Adjusted EBITDA (1) during the fourth quarter and 12 months of 2015 was $21.8-million and $88.1-million, respectively, compared with $40.4-million and $97.9-million in the corresponding periods in 2014, driven primarily by the same factors affecting adjusted net (loss) earnings (1), except for depreciation.
The average market price for gold during both the fourth quarter and 12 months of 2015 decreased by 8 per cent compared with the corresponding periods in 2014. The average market price for copper during the fourth quarter and 12 months of 2015 decreased by 26 per cent and 20 per cent, respectively, compared with the corresponding periods in 2014. The average realized gold price, including realized hedging gains and losses, for the fourth quarter and 12 months of 2015 was $1,111 per ounce and $1,162 per ounce, respectively, compared with $1,199 per ounce and $1,248 per ounce in the corresponding periods in 2014. The average realized copper price, including realized hedging gains, for the fourth quarter and 12 months of 2015 was $3.12 per pound and $3.18 per pound, respectively, compared with $3.18 per pound and $3.26 per pound in the corresponding periods in 2014.
Production
Production of copper and zinc concentrates in the fourth quarter of 2015 of 36,424 tonnes was 18 per cent lower than the corresponding period in 2014 due primarily to lower copper grades in ore treated at Chelopech and lower volumes of ore processed. Production of copper and zinc concentrates for 2015 of 128,041 tonnes was 8 per cent lower than the corresponding period in 2014 due primarily to lower copper grades in ore treated at Chelopech, partially offset by higher copper grades at Kapan.
Relative to the fourth quarter of 2014, gold contained in copper and zinc concentrates produced in the fourth quarter of 2015 decreased by 27 per cent to 35,835 ounces, copper production decreased by 19 per cent to 12.0 million pounds, silver production decreased by 7 per cent to 184,167 ounces, and zinc production decreased by 9 per cent to 2.7 million pounds. The decreases in gold and copper production were due primarily to lower gold and copper grades and recoveries at Chelopech, and lower volumes of ore processed at Chelopech and Kapan. The decrease in silver production was due primarily to lower volumes of ore processed at Chelopech and Kapan, and lower silver recoveries at Chelopech, partially offset by higher silver grades at Chelopech and Kapan. The decrease in zinc production at Kapan was due primarily to lower volumes of ore processed and lower recoveries, partially offset by higher zinc grades.
Relative to 2014, gold contained in copper and zinc concentrates produced in 2015 decreased by 4 per cent to 139,801 ounces, copper production decreased by 9 per cent to 42.4 million pounds, and silver production increased by 6 per cent to 703,277 ounces. Zinc production in 2015 of 11.9 million pounds was comparable with 2014. The decreases in gold and copper production were due primarily to lower recoveries and grades at Chelopech, partially offset by higher grades and recoveries at Kapan. The increase in silver production was due primarily to higher grades at Chelopech and Kapan, partially offset by lower recoveries at Chelopech.
Over all, gold, copper, zinc and silver production levels in 2015 were in line with the guidance provided on Feb. 12, 2015.
Gold contained in pyrite concentrate produced in the fourth quarter and 12 months of 2015 was 13,656 ounces (2014: 12,391 ounces) and 54,774 ounces (2014: 36,466 ounces), respectively, consistent with increased production of pyrite concentrate.
Complex concentrate smelted at Tsumeb in the fourth quarter of 2015 of 55,833 tonnes was 4 per cent higher than the corresponding period in 2014. Complex concentrate smelted in 2015 of 196,107 tonnes was comparable with 2014. Production for 2015 was within the guidance provided on Feb. 12, 2015, albeit at the lower end of the range.
Deliveries
Deliveries of copper and zinc concentrates during the fourth quarter and 12 months of 2015 of 34,795 tonnes and 129,542 tonnes, respectively, were 11 per cent and 5 per cent lower than the corresponding periods in 2014 due primarily to the decrease in concentrate produced and the timing of shipments.
Relative to the fourth quarter of 2014, payable gold in copper and zinc concentrates sold in the fourth quarter of 2015 decreased by 26 per cent to 32,105 ounces, payable copper in concentrate sold decreased by 15 per cent to 10.6 million pounds, payable silver in concentrate sold decreased by 8 per cent to 176,728 ounces, and payable zinc in concentrate sold increased by 52 per cent to 3.1 million pounds. The decreases in payable gold, copper and silver in copper and zinc concentrates sold were consistent with the decreases in gold, copper and silver contained in concentrate produced. The increase in payable zinc in concentrate sold was due primarily to the timing of deliveries and higher grades at Kapan.
Relative to 2014, payable gold in copper and zinc concentrates sold in 2015 decreased by 3 per cent to 130,599 ounces, payable copper in concentrate sold decreased by 6 per cent to 40.3 million pounds, payable silver in concentrate sold increased by 4 per cent to 549,424 ounces. Payable zinc in concentrate sold in 2015 of 10.3 million pounds was comparable with the corresponding period in 2014. The decreases in payable gold and copper in copper and zinc concentrates sold were consistent with the decreases in gold and copper contained in copper and zinc concentrates produced. The increase in payable silver in concentrate sold was consistent with the increase in silver contained in concentrate produced.
Payable gold in pyrite concentrate sold in the fourth quarter and 12 months of 2015 was 9,779 ounces (2014: 11,801 ounces) and 38,156 ounces (2014: 26,514 ounces), respectively. The increase in 2015 was consistent with increased production of pyrite concentrate and above the guidance provided on Feb. 12, 2015.
Cash cost per ounce of gold sold
Consolidated cash cost per ounce of gold sold, net of byproduct credits (1), during the fourth quarter of 2015 was $485 compared with $259 during the corresponding period in 2014 due primarily to lower volumes of payable metals in copper and zinc concentrates sold, lower prices for byproducts, and higher local currency operating expenses, which have been partially offset by the favourable impact of a stronger U.S. dollar relative to the euro and the Armenian dram.
Consolidated cash cost per ounce of gold sold, net of byproduct credits, during 2015 of $377 was comparable with 2014 due primarily to higher local currency operating expenses and lower prices for byproducts, partially offset by the favourable impact of a stronger U.S. dollar relative to the euro and the Armenian dram.
All-in sustaining cost per ounce of gold
Consolidated all-in sustaining cost per ounce of gold (1) in the fourth quarter of 2015 was $758 compared with $419 in the corresponding period in 2014 due primarily to the same factors affecting cash cost per ounce of gold sold and higher cash outlays for sustaining capital expenditures.
Consolidated all-in sustaining cost per ounce of gold in 2015 was $620 compared with $690 in 2014. This decrease was due primarily to the same factors affecting cash cost per ounce of gold sold, as well as lower cash outlays for sustaining capital expenditures, and lower general and administrative expenses.
Cash production cost per tonne of complex concentrate smelted
Cash production cost per tonne of complex concentrate smelted (1) during the fourth quarter of 2015 of $347 was comparable with 2014. The favourable impact of a weaker South African rand relative to the U.S. dollar has offset the increases in local currency operating expenses.
Cash production cost per tonne of complex concentrate smelted in 2015 of $377 was 7 per cent higher than 2014 due primarily to increased maintenance activities and electricity rates, partially offset by the favourable impact of a weaker South African rand relative to the U.S. dollar.
Cash provided from operating activities
Cash provided from operating activities in the fourth quarter of 2015 of $33.0-million was $14.7-million lower than the corresponding period in 2014. This decrease was due primarily to lower volumes of payable metals in concentrate sold, lower metal prices and higher local currency operating expenses, partially offset by the favourable impact of a stronger U.S. dollar and higher volumes of complex concentrate smelted and toll rates at Tsumeb.
Cash provided from operating activities in 2015 of $87.7-million was $10.4-million lower than 2014. This decrease was due primarily to lower metal prices, higher local currency operating expenses, a higher proportion of third party concentrate smelted at Tsumeb resulting in a lower overall toll rate and reduced cash inflow from changes in non-cash working capital, partially offset by the favourable impact of a stronger U.S. dollar and higher third party toll rates at Tsumeb.
Cash provided from operating activities, before changes in non-cash working capital (1), during the fourth quarter and 12 months of 2015 of $22.1-million and $80.5-million, respectively, compared with $39.0-million and $85.6-million in the corresponding periods in 2014.
Capital expenditures
Capital expenditures during the fourth quarter and 12 months of 2015 totalled $20.8-million and $87.4-million, respectively, compared with $25.9-million and $184.2-million in the corresponding periods in 2014. These decreases were due primarily to a lower rate of spending for the acid plant and copper converters at Tsumeb, and the completion of the pyrite recovery project and other growth projects at Chelopech in 2014.
Financial position
As at Dec. 31, 2015, DPM maintained a consolidated cash position of $26.6-million, an investment portfolio valued at $13.9-million and $160-million of undrawn lines under its committed long-term revolving credit facility. These cash resources, together with the cash flow currently being generated, support the company's continuing operating and capital requirements.
2016 guidance
The company's production and cash cost guidance for 2016 is set out in the attached table.
2016 PRODUCTION AND CASH COST GUIDANCE
Chelopech Kapan Tsumeb Consolidated
Ore mined/milled
(000s tonnes) 2,030 - 2,250 375 - 435 - 2,405 - 2,685
Complex
concentrate
smelted (000s
tonnes) - - 215 - 250 215 - 250
Metals contained
in copper and
zinc
concentrates
produced (1)(2)
Gold (000s
ounces) 95 - 108 24 - 31 - 119 - 139
Copper
(million
pounds) 33.2 - 37.8 2.1 - 2.7 - 35.3 - 40.5
Zinc (million
pounds) - 9.0 - 14.0 - 9.0 - 14.0
Silver (000s
ounces) 204 - 234 384 - 474 - 588 - 708
Payable gold in
pyrite
concentrate
sold (000s
ounces) 26 - 40 - - 26 - 40
Cash cost per
tonne of ore
processed
($)(3)(4) 32 - 36 80 - 90 - 40 - 45
Cash cost per
ounce of gold
sold, net of
byproduct
credits
($)(1)(3)(4) 560 - 760 735 - 1,175 - 600 - 835
All-in
sustaining cost
per ounce of
gold
($)(1)(3)(4) - - - 940 - 1,070
Cash cost per
tonne of
complex
concentrate
smelted, net of
byproduct
credits
($)(3)(4) - - 305 - 400 305 - 400
Cash cost per
ounce of gold
sold in pyrite
concentrate
($)(4) 790 - 890 - - 790 - 890
(1) Excludes metals in pyrite concentrate, and, where applicable, the
treatment charges, transportation and other selling costs related to the
sale of pyrite concentrate, which is reported separately.
(2) Metals contained in concentrate produced are prior to deductions
associated with smelter terms.
(3) Based on foreign exchange rates and metal prices that approximate
current rates and prices. The assumed copper price reflects the impact of
64 per cent of 2016 copper production being hedged at $2.32 per pound.
(4) 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 complex concentrate smelted, net of byproduct credits,
and cash cost per ounce of gold sold in pyrite concentrate have no
standardized meaning under generally accepted accounting principles.
Refer to the non-GAAP financial measures section of the management's
discussion and analysis for the three and 12 months ended Dec. 31, 2015
(MD&A) for further discussion of these items, including reconciliations
to international financial reporting standards measures.
For 2016, the majority of the company's growth capital expenditures (1) are focused on the completion of the new copper converters at Tsumeb and securing the remaining permits required to support the construction of the Krumovgrad gold project. In aggregate, these expenditures are expected to be between $27-million and $31-million. Sustaining capital expenditures (1) are expected to range between $35-million and $47-million.
The 2016 guidance provided above is not expected to occur evenly throughout the year. The estimated metals contained in concentrate produced and volumes of complex concentrate smelted are expected to vary from quarter to quarter depending on the areas being mined, the timing of concentrate deliveries and planned outages. Production in the second half of 2016 is expected to be higher than the first half based on the existing mine plans at Chelopech and Kapan, and the commissioning of the new copper converters and annual maintenance shutdown at Tsumeb expected to occur in the first and second quarter of 2016, respectively. Chelopech 2016 ore production is expected to increase by up to 10 per cent over 2015, while copper and gold grades are expected to be 14 per cent and 13 per cent lower than 2015, respectively, consistent with the current mine plan. Tsumeb 2016 throughput is expected to increase by approximately 10 per cent to 28 per cent over 2015 as a result of reduced construction activity with the completion of the acid plant and new copper converters, and the associated increase in capacity. 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, and, where applicable, the receipt of necessary permits and approvals. Further details can be found in the company's MD&A under the section 2016 guidance.
(1) Adjusted net (loss) earnings, adjusted basic (loss) earnings per share, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), cash provided from operating activities, before changes in non-cash working capital, cash cost per ounce of gold sold, net of byproduct credits, all-in sustaining cost per ounce of gold, cash production cost per tonne of complex concentrate smelted, and growth and sustaining capital expenditures have no standardized meaning under international financial reporting standards. Presenting these measures from period to period helps management and investors evaluate earnings and cash flow trends more readily in comparison with results from prior periods. Refer to the non-GAAP financial measures section of the MD&A for further discussion of these items, including reconciliations to IFRS measures.
KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
($ millions, except where noted)
Three months 12 months
ended Dec. 31, ended Dec. 31,
2015 2014 2015 2014
Revenue $64.5 $89.3 $260.1 $324.0
Gross (loss) profit (1) (7.0) 21.9 (2.2) 61.8
(Loss) earnings before income taxes (45.9) 24.5 (40.9) (55.4)
Net (loss) earnings attributable to
common shareholders (48.5) 21.5 (47.0) (58.9)
Basic (loss) earnings per share ($) (0.34) 0.15 (0.33) (0.42)
Adjusted EBITDA (2) 21.8 40.4 88.1 97.9
Adjusted net (loss) earnings (2) (3.9) 16.3 0.3 13.8
Adjusted basic (loss) earnings per
share ($)(2) (0.03) 0.12 0.00 0.10
Cash provided from operating
activities 33.0 47.7 87.7 98.1
Cash provided from operating
activities, before changes in non-
cash working capital (2) 22.1 39.0 80.5 85.6
Copper and zinc concentrates
produced (mt) 36,424 44,508 128,041 139,378
Metals contained in copper and zinc
concentrates produced
Gold (ounces) 35,835 49,123 139,801 145,306
Copper (000s pounds) 12,052 14,877 42,413 46,456
Zinc (000s pounds) 2,671 2,938 11,887 12,048
Silver (ounces) 184,167 198,308 703,277 663,435
Gold contained in pyrite concentrate
produced (ounces) 13,656 12,391 54,774 36,466
Tsumeb -- complex concentrate smelted
(mt) 55,833 53,782 196,107 198,346
Deliveries of copper and zinc
concentrates (mt) 34,795 39,184 129,542 136,540
Payable metals in copper and zinc
concentrates sold
Gold (ounces) 32,105 43,409 130,599 134,220
Copper (000s pounds) 10,620 12,487 40,272 42,749
Zinc (000s pounds) 3,070 2,019 10,267 10,120
Silver (ounces) 176,728 192,239 549,424 528,336
Payable gold in pyrite concentrate
sold (ounces) 9,779 11,801 38,156 26,514
Cash cost per ounce of gold sold,
net of byproduct credits ($)(2) 485 259 377 373
All-in sustaining cost per ounce of
gold ($)(2) 758 419 620 690
Cash production cost per tonne of
complex concentrate smelted at
Tsumeb ($)(2) 347 350 377 351
(1) Gross (loss) profit is regarded as an additional GAAP measure and is
presented in the company's audited consolidated statements of loss. Gross
(loss) 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 (loss) earnings, adjusted basic (loss)
earnings per share, cash flow provided from operating activities before
changes in non-cash working capital, cash cost per ounce of gold sold, net
of byproduct credits, all-in sustaining cost per ounce of gold and cash
production cost per tonne of complex concentrate smelted are not defined
measures under IFRS. Refer to the MD&A for reconciliations to IFRS measures.
DPM's audited consolidated financial statements and MD&A for the fourth quarter and 12 months ended Dec. 31, 2015, are posted on the company's website and have been filed on SEDAR.
The company will be holding a call and a webcast to discuss its 2015 fourth-quarter and annual results on Wednesday, Feb. 10, 2016, at 9 a.m. EST. Participants are invited to join the live webcast (listen/view only). Alternatively, participants can access a listen-only telephone option at 416-340-2218 or North America toll-free at 1-866-225-0198. A replay of the call will be available at 905-694-9451 or North America toll-free at 1-800-408-3053, passcode 9479457. The audio webcast for this conference call will also be archived and available on the company's website.
We seek Safe Harbor.
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