TSE:DPM Dundee Precious Metals Q3 2024 Earnings Report C$47.19 +3.33 (+7.59%) As of 09:53 AM Eastern ProfileEarnings HistoryForecast Dundee Precious Metals EPS ResultsActual EPSC$0.35Consensus EPS C$0.40Beat/MissMissed by -C$0.05One Year Ago EPSN/ADundee Precious Metals Revenue ResultsActual RevenueN/AExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ADundee Precious Metals Announcement DetailsQuarterQ3 2024Date11/5/2024TimeAfter Market ClosesConference Call DateWednesday, November 6, 2024Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress ReleaseInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Dundee Precious Metals Q3 2024 Earnings Call TranscriptProvided by QuartrNovember 6, 2024 ShareLink copied to clipboard.Key Takeaways Dundee Precious Metals produced approximately 60,000 ounces of gold and 7 million pounds of copper in Q3, generating a robust $71 million in free cash flow and ending the quarter with $658 million in cash and zero debt. At Chelopech, the company delivered 44,000 ounces of gold and 7 million pounds of copper at an all‐in sustaining cost of $638 per ounce, remaining on track to meet full‐year production and cost guidance. Adatepe experienced temporary setbacks from lower head grades, recoveries, and fleet availability, resulting in Q3 production of 16,000 ounces of gold at an AISC of $1,171 per ounce, though management reports these issues have been resolved. The Choka Riquita pre‐feasibility study is now 80% complete, with infill drilling confirming high‐grade continuity and two new discoveries at Dimitropotok and Frazen highlighting significant exploration upside. The sale of the Tsumeb smelter for $15.9 million closed in Q3, accompanied by a $94.8 million working capital outflow under a fixed‐price tolling agreement that is expected to reverse by year‐end. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallDundee Precious Metals Q3 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants Operator00:00:00Welcome to the Dundee Precious Metals Third Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Jennifer Cameron. Please go ahead. Operator00:00:37Thank you, and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to our Third Quarter Conference Call. Joining us today are members of our Senior Management Team, including David Rae, President and CEO, and Navin Dyal, Chief Financial Officer. Before we begin, I'd like to remind you that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning 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. Jennifer CameronDirector of Investor Relations at Dundee Precious Metals00:01:28These 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. Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2023 pertain to the comparable periods in 2023, and references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Rae. David RaePresident and CEO at Dundee Precious Metals00:02:07Good morning, and thank you all for joining us. This morning, Navin and I will briefly review our Third Quarter results and discuss why we believe DPM continues to be well-positioned to deliver value now and over the long term. Highlights from our Third Quarter include progress at our ÄŒoka Rakita project as we completed the infill drilling for the PFS and announced two new high-grade discoveries. Solid production of approximately 60,000 ounces of gold and seven million pounds of copper. Very strong margins, which increased 53% quarter over quarter, reflecting an all-in sustaining cost of $1,005 per ounce and an average gold price of $2,548 per ounce. Also, we had robust free cash flow with generation of $71 million and continued financial strength as we ended the quarter with a consolidated cash balance of $658 million and no debt. David RaePresident and CEO at Dundee Precious Metals00:03:03I'm pleased to say that we are on track to achieve our 2024 guidance target, which will mark the 10th consecutive year we have achieved or outperformed our gold production and all-in sustaining cost guidance, a testament to the strength of our operating team and the quality of our mines. Taking a look at our operations in more detail, Chelopech continued its consistent track record in the third quarter, producing 44,000 ounces of gold and 7 million pounds of copper at an impressive all-in sustaining cost of $638 per ounce of gold sold. Over the balance of the year, we expect improved copper grades at Chelopech, and the operation is on track to achieve its production guidance for the year. With all-in sustaining cost of $659 per ounce year to date, Chelopech is also expected to be well within its cost guidance for the year. David RaePresident and CEO at Dundee Precious Metals00:03:57At Ada Tepe, some temporary challenges impacted performance during the quarter, including lower-than-expected head grades, recoveries, and fleet availability. This resulted in Third Quarter production of approximately 16,000 ounces of gold and an all-in sustaining cost of $1,171 per ounce of gold sold. The issues that impacted fleet availability have been resolved with performance tracking to plan, and we expect higher production in the Fourth Quarter, and Ada Tepe remains on track to achieve its guidance for the year. Turning to our development projects, we continue to progress the pre-feasibility study for our high-quality ÄŒoka Rakita project, which is on track for completion in the First Quarter of 2025. At the end of the Third Quarter, the PFS design and engineering was approximately 80% complete. David RaePresident and CEO at Dundee Precious Metals00:04:50During the quarter, we completed the PFS infill drilling program, the results of which continue to confirm the continuity of the high-grade mineralization, and an updated mineral resource estimate is underway. The geotechnical and hydrogeological drilling program, which will support the PFS design and cost estimates, is nearing completion. We're also advancing project permitting activities in support of this timeline with good support and engagement from key regional and national authorities. This includes preparations for the EIA, which we expect to submit in the first quarter of 2026. What makes ÄŒoka Rakita particularly exciting is that it's an attractive project on a standalone basis, offering very robust economic returns, production growth, and strong margins. And also, there's a significant exploration potential across our four licenses, as demonstrated by our recent scout drilling results. David RaePresident and CEO at Dundee Precious Metals00:05:51In September, we announced two new discoveries at the Dumitru Potok and Frasen Prospect, which are both located only a kilometer north of ÄŒoka Rakita. It is still early days for these discoveries, with additional work to do in order to understand the footprint, continuity, and overall site potential, as well as the metallurgy. However, the exploration upside remains evident from our ongoing drilling success as new high-grade copper-gold mineralization keeps expanding its footprint at Dumitru Potok and Frasen. It also demonstrates that our targeting model is working and that there is significant potential for additional mineralization along strike to ÄŒoka Rakita, Dumitru Potok, and Frasen. Overall, we're very excited by ÄŒoka Rakita's potential in a region where we've had a presence for many years that has a long history of exploration and mining development and where we've developed strong relationships with local stakeholders. David RaePresident and CEO at Dundee Precious Metals00:06:48Turning to the Loma Larga project, we continue to progress activities related to permitting and stakeholder relations. The baseline ecosystem and water studies were completed during the third quarter and submitted to the court by the Ministry of Environment. At the end of October, the environmental consultation process with local communities overall voting favorably for the development of the project. We would expect the environmental license to be issued once the free, prior, and informed consultation process is completed. We continue to take a disciplined approach with respect to future investments in activities in Ecuador, which will be based on the project achieving key milestones, the overall operating environment in the country, and, of course, other capital allocation priorities. Overall, we continue to deliver strong financial results, and with both mines on track to achieve our 2024 guidance targets, we're well-positioned to continue our strong operating track record. David RaePresident and CEO at Dundee Precious Metals00:07:49I'll now turn the call over to Navin for a review of our financial results. Navin DyalCFO at Dundee Precious Metals00:07:53Thanks, Dave. I'll be touching briefly on the financial highlights for the quarter and conclude with some commentary on our balance sheet and return of capital program. All of my remarks will focus on results from continuing operations unless otherwise noted. Looking at our financial highlights, third quarter highlights include revenue of $147 million, adjusted net earnings of $46 million or $0.26 per share, cash flow provided from operating activities of $52 million, and free cash flow of $71 million. Overall results during the quarter reflect our strong operating performance, the low-cost nature of our operations, and a favorable commodity price environment. Looking at our earnings and cash flow in more detail, revenue of $147 million in the quarter was 21% higher than 2023 due to higher realized metal prices and lower treatment charges at Chelopech, partially offset by lower volumes of gold sold at Ada Tepe. Navin DyalCFO at Dundee Precious Metals00:08:52Adjusted net earnings in the quarter of $46 million or $0.26 per share increased compared to the prior year due to higher revenue and interest income, partially offset by higher planned exploration and evaluation expenses, higher share-based compensation expenses reflecting DPM's strong share price performance, and higher income taxes. Cash flow provided from operating activities of $52 million for the quarter was lower than the prior year due to the timing of collection from sales, partially offset by higher earnings generated in the quarter. Free cash flow, which is calculated before changes in working capital, was $71 million for the quarter, an increase of $25 million compared to 2023 due to higher earnings generated in the quarter. Navin DyalCFO at Dundee Precious Metals00:09:38Taking a look at our cost metrics for the quarter, all-in sustaining cost of $1,005 per ounce was 10% higher than the prior year due primarily to lower volumes of gold sold and higher share-based compensation expenses, partially offset by lower treatment charges at Chelopech and higher byproduct credits as a result of higher realized copper prices. In terms of our capital spending, sustaining capital expenditures were $11 million for the quarter and were comparable to 2023, while gross capital expenditures of $3 million for the quarter were lower compared to 2023 due primarily to lower expenditures related to the Loma Larga project, as expected. On August 30th, 2024, we closed the sale of the Tsumeb Smelter for net cash consideration of $15.9 million. Navin DyalCFO at Dundee Precious Metals00:10:24During the quarter, the company agreed to step into IXM's position and entered into a tolling agreement with Sinomine for a period ending four months following closing of the sale, where the company will purchase new metal-bearing materials and sell the blister copper produced by Tsumeb until the end of the agreement. Sinomine is contractually obligated to pay the company for all DPM-owned inventories at the end of the agreement, which terminates effective December 31st, 2024. As a result, as of September 30th, the company had a total net cash outflow of $94.8 million related to this tolling agreement. We continue to maintain a strong balance sheet and cash position with a consolidated cash balance of $658 million, no debt, and a $150 million undrawn revolving credit facility. Navin DyalCFO at Dundee Precious Metals00:11:16Given the strength of our balance sheet and our outlook for continued strong free cash flow generation, we are in a unique position with the financial flexibility to fund growth opportunities while continuing to return a portion of our free cash flow to our shareholders in line with our commitment to capital discipline. During the first nine months of 2024, the company repurchased 3.4 million shares at a total cost of $28.3 million under the share buyback program and paid $21.7 million of dividends, representing an aggregate return of 23% of our free cash flow to shareholders. I'll now turn the call back to Dave for his concluding remarks. David RaePresident and CEO at Dundee Precious Metals00:11:57Thanks, Navin. In closing, we're in a unique position in the industry considering our strong operating track record, the low-cost nature of our operating mines generating significant free cash flow, our attractive organic projects, and the financial strength and flexibility to internally fund growth while continuing to return capital to shareholders. I'd now like to open the call for any questions. Operator00:12:25Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Raj Ray of BMO. Your line is now open. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:12:55Thank you, Operator, and good morning, Dave and team. A couple of questions. First up on the working capital changes at Tsumeb. Do you anticipate any more working capital build-up over the next four months, or this is kind of a one-off and it reverses at the end of four months? And second is a broader question on capital allocation. I mean, I understand that the company is looking at growth opportunities both within the portfolio as well as potentially outside, but gold price is significantly higher this year compared to last year. Yet, if I look at the share buybacks for this year, it's probably around $27 million versus $53 million last year as of Q3. And then if I look at the payout ratios, now, there's two things. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:13:45One is if you look at the average payout ratio for the last four years for the gold industry, it's been around 65%. Dundee is at the low end of that, around 23%. Now, obviously, the free cash flow is much larger for Dundee given your cost structure. But secondly, do you anticipate keeping the same capital returns? I mean, the one risk you—there's two questions that we get from investors. One, does the company believe that it's fairly valued at this point? And second is, is there imminent M&A potential that the company sees in the market? I'll leave it at that. Navin DyalCFO at Dundee Precious Metals00:14:28Hi, Raj. It's Navin. Yes, I'll answer the first question and touch upon the capital allocation question in a second, and then I'll probably turn it back to Dave. So in terms of the working capital build-up, yes, what we will see over the course of the four months is puts and takes in terms of build-up of purchases that we've made as well as the timing of blister returns as well. So within the quarter, you'll see increases in inventory, but decreasing by the end, decreases as a result of blister returns. So by the end of the year, though, again, we fully anticipate that this agreement, and as contractually obligated, this agreement terminates at the end of December. Navin DyalCFO at Dundee Precious Metals00:15:06So we would expect that all that working capital will come back once this agreement is terminated and Sinomine purchases that inventory. Maybe turning to your second question on capital allocation. Navin DyalCFO at Dundee Precious Metals00:15:18So in terms of conversations that we might otherwise have around increasing share buybacks, that type of conversation, we have that regularly as a management team and then obviously with the board. We've always taken, as you know, a very balanced approach to capital allocation that focuses on the balance sheet strength and capital returns to shareholders and also reinvestment in the business, considering we have a significant organic growth pipeline up and coming that would return a lot of value to shareholders. We're one of the few producers of our size that actually pay a dividend, and as you know, we supplement that with the NCIB. And as you pointed out, we definitely consider our cash balance to be a strategic advantage. Navin DyalCFO at Dundee Precious Metals00:15:59We have this financial strength to fund our growth opportunities, but also have the ability to continue to pay a dividend and also to pursue accretive M&A opportunities. And perhaps with that, maybe I'll turn it back to Dave on perhaps discussing more about considerations around growth. David RaePresident and CEO at Dundee Precious Metals00:16:17Yeah. So Raj, I mean, we obviously maintain a set of targets that we review on a regular basis and consider for M&A opportunities. We also, just to make sure that we have the right context, we have two different organic growth projects in our portfolio, one of which ÄŒoka Rakita is very exciting and imminent, and the other of which continues to progress slowly and quietly in the background, which producing 200,000 ounces a year at its low all-in sustaining costs is exciting as well. David RaePresident and CEO at Dundee Precious Metals00:16:48There's the potential for use of funds, either returning capital, and we have a healthy conversation on what we do in terms of dividends and buybacks, opportunities to invest where we have some accretive results from M&A, and then also looking at what's happening in terms of the future investments and the outlook sort of year by year for both ÄŒoka Rakita and also for our secondary project at Loma Larga. I think more than that, I don't know if that answered your question, if you have anything else that you'd like to clarify, but that I think is a reasonable indication of our position. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:17:27Okay, that's great. Thanks, Dave. That's it from me. David RaePresident and CEO at Dundee Precious Metals00:17:31Thanks, Raj. Operator00:17:32Thank you. One moment for our next question. Our next question comes from Don DeMarco of National Bank Financial. Your line is now open. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:17:43Thank you, Operator. And Navin, I'd just like to continue to follow up on the response to your question to Rob. You mentioned that you expect working capital to come back after the agreement is terminated. So with the agreement terminating at the end of December, should we expect the repayments to be reflected on the Q4 financials or in Q1? Navin DyalCFO at Dundee Precious Metals00:18:05Yeah, hi, Don. Yeah. So the agreement terminates on December 31st, and the mechanics of the way that works with respect to the buyback of that inventory is that that buyback occurs on December 31st. However, given the fact that it's also, we're in the holiday season and it's scheduled to occur right on New Year's Day and New Year's Eve, this could slip into the first week of January in terms of the payment. Also, just to note as well, what they're buying essentially is both the raw materials that are on-site and on-ship, as well as the contractual metal in circuit, which is obviously in the circuit, and we'll have a final adjustment of what that figure is only post-December 31st. But I would expect the majority of the value of that working capital would be recovered by the end of the year. David RaePresident and CEO at Dundee Precious Metals00:19:04Okay. Fair enough. And just in general, are the outlays that you incurred over the last few months consistent with what you expected, or are they a little bit higher or lower? Navin DyalCFO at Dundee Precious Metals00:19:14Sorry, I didn't get the first part of your question, Don. The delays or? Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:19:17Yeah. Are the outlays or the cash outlays that you incurred to purchase the concentrate, is it in line with your expectations, or is it a bit higher or lower? Navin DyalCFO at Dundee Precious Metals00:19:26Yeah, it certainly is a little bit higher. It does fluctuate with metal prices. So certainly, there will be, with higher metal prices, copper prices, the value of that metal is definitely going to be higher. But in terms of the expected timing of those purchases, they're in line. I think the other piece of this is really the performance of the smelter and how quickly they can return the blister. And that's where it's subject to, obviously, operating performance and any downtime that may be associated with the smelter that would potentially extend the timing of the delivery of the blister at any point. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:20:08Okay. Thanks for that. Now, just over to David. Chelopech has posted a couple of quarters of AISC in the $500-$600 range. Is this the new norm? We're looking ahead to 2025 and guidance. How should we kind of frame our expectations on costs looking ahead? So, Don, of course, we will be updating our guidance when we come up with our Q4 numbers. What do you see coming through, though? Primarily two things. So the one is the copper price influence on the treatment costs. But the other one is also the change in concentrates and where they're going. So that's had a very material impact for two reasons. One is the direct charge, the TC. But the other piece, which is perhaps not as evident, is it also allows us to target a higher recovery with a greater mass pull. David RaePresident and CEO at Dundee Precious Metals00:20:56So we've increased the tons, decreased the grade, which increases the overall recovery. So there's those two things, the copper impact, plus also the change in the way we're operating the facility, which is with the recovery way outweighing the increased cost associated with additional tonnage of concentrate. Okay. So clearly, those are the drivers that are supporting these low costs. But would you say that Q2 and Q3 then might be the new norm in terms of the costs that we're seeing there? So Q3 includes a number of different things which are important for the start of the annual cycle, which recognizes pay increases, for instance. So that would be a more representative number than would be Q2. And things like inflationary pressures and such, we've started to see unwinding of some of that previous pressure. David RaePresident and CEO at Dundee Precious Metals00:21:51So we've seen benefits from things like reagents, steel costs, and things like that. We've started to see that come down. So I would say if you want to look at it, Q2 is a good start, but we will update you on that early in the new year. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:22:02Okay. Thank you. And then final question. So we're continuing to hear progress at Loma Larga. It'd be nice to get an impression of your overall strategy for this asset. I mean, you made this investment at a lower gold price. No doubt it's increased in value. Two things then. When would we expect an update on the economics, including development CapEx? And second, are you sort of squarely focused on developing this asset, or would it even potentially be a divestment candidate for a profit? So I'm going to start with that in reverse. David RaePresident and CEO at Dundee Precious Metals00:22:38We're not wedded to any particular asset. So the decision in terms of the strategy on any asset is something that we consider at any given time. So we have Tierras Coloradas, and we have Loma Larga in equity. I think we've been very pleasantly surprised by the progress that's been made recently, despite many of the things happening in-country. And that's led us to the point where we've had the two technical reports required by the Constitutional Court submitted just at the end of the quarter, actually in October. And then, of course, we just had a consultation to some communities looking at that particular information that's coming out of those two studies. All of these things are good progress, and we're now just waiting to see the prior informed consultation being completed. So let's just have a look at the project and the rest of your question, though. David RaePresident and CEO at Dundee Precious Metals00:23:28We still have to do some additional work here, which will update the economics of this project. So the first thing that would happen with clearance to progress the project is we're going to commence some drilling, and that will be focused on geotech, hydrogeology, and some minor amounts of resource clarification, particularly at depth below the deposit. So that work is expected to happen, and we'll then feed into going through our current status with our internal technical view of how we've developed this project, and that's going to lead to an updated feasibility study. So that's going to take us some. But don't expect that to be overnight. Just the idea of looking at what the individual costs are for supply, earthworks, and other contracting and things like that, this takes a little bit of time. Would that be a 2025 item? David RaePresident and CEO at Dundee Precious Metals00:24:16It depends on when we got the clearance to move forward, to be quite honest. But you're not talking about something that's going to be done, let's say, in six months. It's going to take a little bit longer than that once we get to move on. And at the moment, we can't do drilling on the asset. That's primarily the main thing that we need to do. But just to come back, Don, to, you've seen the movement of ÄŒoka Rakita as we've identified the opportunity. They're really excited about what we see. That's really gone into prime position and is our main focus of the organization. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:24:45Okay. Thank you, David. That's all from me. Thank you. Operator00:24:51Thank you. As a reminder to ask a question, you will need to press star 11 on your telephone. Our next question comes from Jeremy Hoy of Canaccord Genuity. Your line is now open. Jeremy HoyResearch Analyst at Canaccord Genuity Group Inc.00:25:12Hi, everyone. Thanks for taking my question. Really appreciate that color on Loma Larga. It answered a lot of the questions I did have. But I did want to ask on Chelopech. There was a mention of the China VAT tax applicability potentially changing. I was wondering if you could provide a little bit more color on that. And there was also a mention of potential alternative buyers, but my understanding was there are limited buyers for this concentrate. And so just kind of want to understand exactly how you're thinking about that. Navin DyalCFO at Dundee Precious Metals00:25:49Sure, Jeremy. It's Navin here. So just a bit of background. So we have been sending about 70%-75% of our concentrate to China. This is both the copper-gold concentrate and the pyrite. And again, we produce two types of concentrate there. The pyrite concentrate that we send from Chelopech have always attracted VAT at 13% and an additional duty of 1%. Our copper-gold concentrate that we would send there would not attract that VAT or that duty because it was a high-grade metal threshold that was required in China to be considered a precious metal or gold concentrate that was not subject to this. Navin DyalCFO at Dundee Precious Metals00:26:31What China's tax authority is proposing, and these are only proposed changes at this point, is to apply VAT and duty on gold concentrate that otherwise has a high component of iron and sulfur, which they would consider a pyrite concentrate and hence would be captured or attract VAT and duty. That's the background of this. At this point, this is really fairly new. What we saw in September, and this is being reported in October, was that the imports of this concentrate purchased by the buyers in China of the smelters has been significantly down. What I'll also point out in terms of the impact to us is that our contracts clearly state that any additional taxes that are incurred are at the buyer's expense. Navin DyalCFO at Dundee Precious Metals00:27:26However, we do recognize that ultimately this will have, if this were to be enacted, that this would definitely have an impact on future deliveries of concentrate to China, considering the additional costs that would be required. Now, in our case, look, we've been producing this concentrate for over 20 years now. We are very familiar with the market, the broader market, and we do have alternatives to that. But as you point out, though, given the nature of our concentrate, those additional areas or potential areas that we could deliver our concentrate might incur additional costs. But at this point, it's really too early for us to really comment on that. Hopefully, that helps. Jeremy HoyResearch Analyst at Canaccord Genuity Group Inc.00:28:07That's very helpful. Thank you, Navin. I appreciate it. Operator00:28:11Thank you. Our next question comes from Eric Winmill of Bank of Nova Scotia. Your line is now open. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:28:19Great. Thank you very much. Hi, David and team. I appreciate you taking my question. Just on the inventory payment, Tsumeb, just trying to understand here, I know you said there's no major financial gain or loss associated with that, but just wondering if we should be modeling margins, obviously, on these inventory sales. Also, do you anticipate any counterparty risk on this? And I guess, is there any potential here that this agreement could get extended beyond the December '31 deadline? Thanks. Navin DyalCFO at Dundee Precious Metals00:28:51All right. Thanks, Eric, so I'll just address a few of those here, so in terms of the margin, it's a back-to-back contract, essentially, so we purchased the materials essentially from the previous tolling agent, which is IXM, and then we deliver the blister back to them as well, so because of that back-to-back nature, there's no price risk because essentially they're hedging on both sides of that transaction, and essentially, we don't collect essentially any type of commission on that as well, so that's what I would suggest with that. In terms of counterparty risk, IXM has been a purchaser of this material. They want the blister, and hence I don't think that there's an issue here, and then when it comes to margin or additional costs, we are charging an interest on this to Sinomine for the working capital. This interest is north of 7.5%. Navin DyalCFO at Dundee Precious Metals00:29:48And given where interest rates have been falling, the cash would have been essentially sitting in our account at less than that. So we are making a small amount on this on interest income, but it's enough to cover our internal costs, which we're managing all of these transactions internally. So hopefully that helps. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:30:08Just last part in terms of extending this beyond December 31? Navin DyalCFO at Dundee Precious Metals00:30:12Yeah, of course. Yeah. As I mentioned before, the contract ends on December 31st, and thus far, we've enjoyed a really good relationship with both Sinomine and IXM, and everything has been working in accordance with our agreement. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:30:32Okay. Thank you. I really appreciate that. Just quickly on ÄŒoka Rakita, so obviously new resource estimate is underway there. Do you anticipate releasing that, I guess, in advance of the PFS? David RaePresident and CEO at Dundee Precious Metals00:30:48So what will happen is that the primary activity here in the work done was to convert inferred to indicated. So that's the main thing that you're going to see. Yeah. Hopefully, that answers your question. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:31:04Okay. Perfect. I appreciate that. Just one more for me. There was a mention in the disclosures here about the Brevene license at Chelopech. Just wondering, I guess, what's planned there and what do you see for that particular part of the deposit or of the land package? David RaePresident and CEO at Dundee Precious Metals00:31:25Yeah, sure. So Eric, I think there's two different things that we typically talk about here. The one has been Sveta Petka historically, and that's what we're now referring to as Chelopech North. So that's advanced from where we now are with Brevene silver exploration license to a geological discovery, which is where we are now with Brevene. And we've subsequently advanced beyond that to a commercial discovery. And by the end of next year, we're anticipating having a new concession for that. So Brevene is part of that same thing. So we've now got the geological discovery. What we're now doing is we're justifying with the authorities the plan for this next phase of work, which would be a one-year period of drilling, which would then be used to justify a commercial discovery. David RaePresident and CEO at Dundee Precious Metals00:32:06Now, the impact of this is it opens up the real estate on which we can do work to discover additional potential feed to Chelopech. So that's the primary impact of all of this work is just to open that up. At the same time, as you know, we continue to drill in areas within the concession. And from underground, we continue to do some, let's say, 70% extensional and 30% infill for around 40,000 meters per year. So all of those things are looking to a view of extending the life of mine at Chelopech. And obviously, the more real estate we've got in that area and our prospects, the more we're able to look to really extend that life at Chelopech. So that's our primary goal. So just, Eric, the one thing I'm not too sure is quite clear. Of course, we'll be releasing the PFS. David RaePresident and CEO at Dundee Precious Metals00:32:57We've said that's going to be in the first quarter of next year, and that will include consideration of what additional benefit we've got from the drilling that we've done, where we've taken it down to 30 by 30 meter spacing with 15 by 15 in the high-grade area. So just making sure that I've got that point across in terms of ÄŒoka Rakita. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:33:18Okay. Fantastic. I really appreciate the added color. Actually, maybe just one more, if you don't mind, but Ada Tepe. So obviously expecting stronger production there. I know you kind of touched on that, but maybe anything specific you can point to in terms of what's changed there or reasons why production is down and why you see it ticking up here in Q4? David RaePresident and CEO at Dundee Precious Metals00:33:42Yeah. So we had a combination of an underperformance in an area in terms of grade, combined with some issues with our flexibility related to truck availability. So both of those are resolved in terms of Q4. So we're not anticipating any impact carried through from early Q3, actually, into Q4. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:34:04Okay. Fantastic. Thank you very much. I really appreciate the extra color. I'll hop back in the queue. Cheers. Operator00:34:10Thank you. David RaePresident and CEO at Dundee Precious Metals00:34:11Thanks, Eric. Operator00:34:14Our next question comes from Ingrid Rico of Stifel. Your line is now open. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:34:22Great. Thank you. Good morning, David and team. I just wanted to follow up on a question previously asked. I think Don asked about the Chelopech cost. So understanding the benefits from the lower TCRCs and freight charges, but I did notice that the unit cost per ton did increase quarter over quarter. Just if we can get a bit of color on what are the drivers there. Is it just purely labor wages coming up to inflation, or is there any other sort of inflationary pressures on consumables that are coming through? Navin DyalCFO at Dundee Precious Metals00:35:00Hi, Ingrid. Yes, sure. I'll answer that. So yeah, the main factors there was labor, wages, and also a little bit of share-based compensation expenses because we saw an increase in our mark-to-market for the quarter on the unit cost at Chelopech. And the labor, as Dave pointed out, is that we typically have wage increases in the middle of the year. In fact, they're backdated to July in Bulgaria. So that's going to be a bit of a factor here in terms of the increase that you're seeing there. But also, I think what also should be mentioned is that we did have slightly lower tons in the quarter relative to the prior year. It's about 6% down. Hence why, on a per-unit basis, we're seeing a little bit of an increase there. Navin DyalCFO at Dundee Precious Metals00:35:45But when it comes to other consumables, we're actually seeing, relative to our budget, either flat to slightly improving costs in some of those areas, particularly with respect to things like steel and grinding media. We just renewed a contract there recently in which we saw some savings from the prior contract as well. So when it comes to other major consumables, we're not seeing any inflationary pressures happening there. So hopefully that answers your question. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:36:15Yeah, that's great, Navin. Just in terms of the labor increase and the labor wage increase, just remind me, the contract, it's set every year, or are you now locked in on the wages for a longer-term period? Navin DyalCFO at Dundee Precious Metals00:36:35Yeah. It's every two years that we have these negotiations. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:36:39Perfect. Excellent, and if I can, just also a follow-up on the concentrate being sent to China. As I understand, these are already contracts for 2025 to 2027. What is your ability in those contracts to maybe divert some of those sales to other regions and whether that's possible under the contract? Navin DyalCFO at Dundee Precious Metals00:37:07Sure. Yeah. I mean, clearly, if we—so a couple of things to mention here. One is any of the VAT increases or duties that would be applied are at the buyer's account. So we would be happy to continue to deliver into China if so long as the customer is willing to take it. Now, the issue for perhaps then for the customer in this case or the smelters is that if they take this concentrate and if this proposal by the Chinese tax authorities were to remain in place, they would be operating likely at a loss for much of this contract. Hence why we've seen such a decline in imports. They have been very vocal. The smelters themselves have been very vocal against these proposals. Navin DyalCFO at Dundee Precious Metals00:37:50So if they are operating at a loss, they certainly would be looking to potentially exit these contracts and not take the material in one instance, in which case we would be looking for alternatives for this concentrate. But ourselves, we would be happy to continue to deliver again. This VAT and this duty does not essentially get passed on to us. If we continue to deliver into China, it would have to be absorbed. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:38:22Understood. That's great color. And just to finish up on sort of the concentrate sales, maybe just if you can share how you're seeing those commercial terms in the global market. Have we sort of peaked on those sort of good terms, or how do you look at those into 2025? Navin DyalCFO at Dundee Precious Metals00:38:42Yeah. We have seen a significant improvement in our TCs over the course of the year. And I think I've mentioned this before. It's about $100 a ton in terms of benefit there that we've seen in the global market. We don't think it's hit necessarily bottom just yet. We continue to see improvements there. But certainly, it's at record lows in terms of these charges. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:39:10Great. Thank you for that. That's it for me. Operator00:39:16Thank you. This concludes the question-and-answer session. I would now like to turn it back to Jennifer Cameron for closing remarks. Jennifer CameronDirector of Investor Relations at Dundee Precious Metals00:39:24Well, thank you all for joining us. We look forward to keeping you updated over the course of the next few months, and we'll catch up on the next quarter. Please feel free to reach out with any additional questions. David RaePresident and CEO at Dundee Precious Metals00:39:35Thank you. Operator00:39:37Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.Read moreParticipantsExecutivesNavin DyalCFOJennifer CameronDirector of Investor RelationsDavid RaePresident and CEOAnalystsDon DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank FinancialJeremy HoyResearch Analyst at Canaccord Genuity Group Inc.Ingrid RicoMD and Precious Metals Analyst at Stifel CanadaEric WinmillVP and Equity Analyst at Bank of Nova ScotiaPowered by Earnings DocumentsSlide DeckPress ReleaseInterim report Dundee Precious Metals Earnings Headlines2 Canadian Gold Stocks to Buy if the Metal Keeps ClimbingMarch 26, 2026 | msn.comThis Cash-Gushing Dividend Stock Could Beat the TSXDecember 26, 2025 | ca.finance.yahoo.comA U.S. Resource Gap Is a National Issue - and OpportunityAmerica still does not domestically produce one mineral tied to batteries, energy storage, and national defense - and that supply gap may be turning into an opportunity. One domestic supplier appears to have identified that gap early and moved to capitalize on it before the broader market took notice.May 6 at 1:00 AM | i2i Marketing Group, LLC (Ad)Dundee Precious Metals declares CAD 0.04 dividendNovember 15, 2025 | msn.comEcuador mining project faces opposition over water concernsSeptember 19, 2025 | msn.comDPM Metals completes name changeSeptember 12, 2025 | msn.comSee More Dundee Precious Metals Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Dundee Precious Metals? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Dundee Precious Metals and other key companies, straight to your email. Email Address About Dundee Precious MetalsDPM Metals engages in the acquisition, exploration, development, mining, and processing of precious metals, primarily focusing on gold, copper, and silver deposits. The company produces approximately 200,000 ounces of gold annually and is among the lowest-cost gold producers globally. DPM Metals maintains a strong financial position with $763 million in net cash as of March 2025 and has returned over $260 million to shareholders since 2020.View Dundee Precious Metals ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Latest Articles Just How Big a Problem Could Amazon’s Cash Burn Rate Be?BlackBerry Rewrites Its Own Operating SystemGrab Holdings Faces Hurdles, But Upside Potential Is Hard to IgnorePalantir Drops After a Blowout Q1—What Investors Should KnowShopify’s Valuation Crisis Creates Opportunity in 2026onsemi Stock Dips After Earnings: Why the Dip Is BuyableTSLA: 3 Reasons the Stock Could Hit $400 in May Upcoming Earnings Coinbase Global (5/7/2026)Airbnb (5/7/2026)Datadog (5/7/2026)Ferrovial (5/7/2026)Gilead Sciences (5/7/2026)Microchip Technology (5/7/2026)MercadoLibre (5/7/2026)Monster Beverage (5/7/2026)Canadian Natural Resources (5/7/2026)W.W. 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PresentationSkip to Participants Operator00:00:00Welcome to the Dundee Precious Metals Third Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Jennifer Cameron. Please go ahead. Operator00:00:37Thank you, and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to our Third Quarter Conference Call. Joining us today are members of our Senior Management Team, including David Rae, President and CEO, and Navin Dyal, Chief Financial Officer. Before we begin, I'd like to remind you that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning 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. Jennifer CameronDirector of Investor Relations at Dundee Precious Metals00:01:28These 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. Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2023 pertain to the comparable periods in 2023, and references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Rae. David RaePresident and CEO at Dundee Precious Metals00:02:07Good morning, and thank you all for joining us. This morning, Navin and I will briefly review our Third Quarter results and discuss why we believe DPM continues to be well-positioned to deliver value now and over the long term. Highlights from our Third Quarter include progress at our Čoka Rakita project as we completed the infill drilling for the PFS and announced two new high-grade discoveries. Solid production of approximately 60,000 ounces of gold and seven million pounds of copper. Very strong margins, which increased 53% quarter over quarter, reflecting an all-in sustaining cost of $1,005 per ounce and an average gold price of $2,548 per ounce. Also, we had robust free cash flow with generation of $71 million and continued financial strength as we ended the quarter with a consolidated cash balance of $658 million and no debt. David RaePresident and CEO at Dundee Precious Metals00:03:03I'm pleased to say that we are on track to achieve our 2024 guidance target, which will mark the 10th consecutive year we have achieved or outperformed our gold production and all-in sustaining cost guidance, a testament to the strength of our operating team and the quality of our mines. Taking a look at our operations in more detail, Chelopech continued its consistent track record in the third quarter, producing 44,000 ounces of gold and 7 million pounds of copper at an impressive all-in sustaining cost of $638 per ounce of gold sold. Over the balance of the year, we expect improved copper grades at Chelopech, and the operation is on track to achieve its production guidance for the year. With all-in sustaining cost of $659 per ounce year to date, Chelopech is also expected to be well within its cost guidance for the year. David RaePresident and CEO at Dundee Precious Metals00:03:57At Ada Tepe, some temporary challenges impacted performance during the quarter, including lower-than-expected head grades, recoveries, and fleet availability. This resulted in Third Quarter production of approximately 16,000 ounces of gold and an all-in sustaining cost of $1,171 per ounce of gold sold. The issues that impacted fleet availability have been resolved with performance tracking to plan, and we expect higher production in the Fourth Quarter, and Ada Tepe remains on track to achieve its guidance for the year. Turning to our development projects, we continue to progress the pre-feasibility study for our high-quality Čoka Rakita project, which is on track for completion in the First Quarter of 2025. At the end of the Third Quarter, the PFS design and engineering was approximately 80% complete. David RaePresident and CEO at Dundee Precious Metals00:04:50During the quarter, we completed the PFS infill drilling program, the results of which continue to confirm the continuity of the high-grade mineralization, and an updated mineral resource estimate is underway. The geotechnical and hydrogeological drilling program, which will support the PFS design and cost estimates, is nearing completion. We're also advancing project permitting activities in support of this timeline with good support and engagement from key regional and national authorities. This includes preparations for the EIA, which we expect to submit in the first quarter of 2026. What makes Čoka Rakita particularly exciting is that it's an attractive project on a standalone basis, offering very robust economic returns, production growth, and strong margins. And also, there's a significant exploration potential across our four licenses, as demonstrated by our recent scout drilling results. David RaePresident and CEO at Dundee Precious Metals00:05:51In September, we announced two new discoveries at the Dumitru Potok and Frasen Prospect, which are both located only a kilometer north of Čoka Rakita. It is still early days for these discoveries, with additional work to do in order to understand the footprint, continuity, and overall site potential, as well as the metallurgy. However, the exploration upside remains evident from our ongoing drilling success as new high-grade copper-gold mineralization keeps expanding its footprint at Dumitru Potok and Frasen. It also demonstrates that our targeting model is working and that there is significant potential for additional mineralization along strike to Čoka Rakita, Dumitru Potok, and Frasen. Overall, we're very excited by Čoka Rakita's potential in a region where we've had a presence for many years that has a long history of exploration and mining development and where we've developed strong relationships with local stakeholders. David RaePresident and CEO at Dundee Precious Metals00:06:48Turning to the Loma Larga project, we continue to progress activities related to permitting and stakeholder relations. The baseline ecosystem and water studies were completed during the third quarter and submitted to the court by the Ministry of Environment. At the end of October, the environmental consultation process with local communities overall voting favorably for the development of the project. We would expect the environmental license to be issued once the free, prior, and informed consultation process is completed. We continue to take a disciplined approach with respect to future investments in activities in Ecuador, which will be based on the project achieving key milestones, the overall operating environment in the country, and, of course, other capital allocation priorities. Overall, we continue to deliver strong financial results, and with both mines on track to achieve our 2024 guidance targets, we're well-positioned to continue our strong operating track record. David RaePresident and CEO at Dundee Precious Metals00:07:49I'll now turn the call over to Navin for a review of our financial results. Navin DyalCFO at Dundee Precious Metals00:07:53Thanks, Dave. I'll be touching briefly on the financial highlights for the quarter and conclude with some commentary on our balance sheet and return of capital program. All of my remarks will focus on results from continuing operations unless otherwise noted. Looking at our financial highlights, third quarter highlights include revenue of $147 million, adjusted net earnings of $46 million or $0.26 per share, cash flow provided from operating activities of $52 million, and free cash flow of $71 million. Overall results during the quarter reflect our strong operating performance, the low-cost nature of our operations, and a favorable commodity price environment. Looking at our earnings and cash flow in more detail, revenue of $147 million in the quarter was 21% higher than 2023 due to higher realized metal prices and lower treatment charges at Chelopech, partially offset by lower volumes of gold sold at Ada Tepe. Navin DyalCFO at Dundee Precious Metals00:08:52Adjusted net earnings in the quarter of $46 million or $0.26 per share increased compared to the prior year due to higher revenue and interest income, partially offset by higher planned exploration and evaluation expenses, higher share-based compensation expenses reflecting DPM's strong share price performance, and higher income taxes. Cash flow provided from operating activities of $52 million for the quarter was lower than the prior year due to the timing of collection from sales, partially offset by higher earnings generated in the quarter. Free cash flow, which is calculated before changes in working capital, was $71 million for the quarter, an increase of $25 million compared to 2023 due to higher earnings generated in the quarter. Navin DyalCFO at Dundee Precious Metals00:09:38Taking a look at our cost metrics for the quarter, all-in sustaining cost of $1,005 per ounce was 10% higher than the prior year due primarily to lower volumes of gold sold and higher share-based compensation expenses, partially offset by lower treatment charges at Chelopech and higher byproduct credits as a result of higher realized copper prices. In terms of our capital spending, sustaining capital expenditures were $11 million for the quarter and were comparable to 2023, while gross capital expenditures of $3 million for the quarter were lower compared to 2023 due primarily to lower expenditures related to the Loma Larga project, as expected. On August 30th, 2024, we closed the sale of the Tsumeb Smelter for net cash consideration of $15.9 million. Navin DyalCFO at Dundee Precious Metals00:10:24During the quarter, the company agreed to step into IXM's position and entered into a tolling agreement with Sinomine for a period ending four months following closing of the sale, where the company will purchase new metal-bearing materials and sell the blister copper produced by Tsumeb until the end of the agreement. Sinomine is contractually obligated to pay the company for all DPM-owned inventories at the end of the agreement, which terminates effective December 31st, 2024. As a result, as of September 30th, the company had a total net cash outflow of $94.8 million related to this tolling agreement. We continue to maintain a strong balance sheet and cash position with a consolidated cash balance of $658 million, no debt, and a $150 million undrawn revolving credit facility. Navin DyalCFO at Dundee Precious Metals00:11:16Given the strength of our balance sheet and our outlook for continued strong free cash flow generation, we are in a unique position with the financial flexibility to fund growth opportunities while continuing to return a portion of our free cash flow to our shareholders in line with our commitment to capital discipline. During the first nine months of 2024, the company repurchased 3.4 million shares at a total cost of $28.3 million under the share buyback program and paid $21.7 million of dividends, representing an aggregate return of 23% of our free cash flow to shareholders. I'll now turn the call back to Dave for his concluding remarks. David RaePresident and CEO at Dundee Precious Metals00:11:57Thanks, Navin. In closing, we're in a unique position in the industry considering our strong operating track record, the low-cost nature of our operating mines generating significant free cash flow, our attractive organic projects, and the financial strength and flexibility to internally fund growth while continuing to return capital to shareholders. I'd now like to open the call for any questions. Operator00:12:25Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Raj Ray of BMO. Your line is now open. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:12:55Thank you, Operator, and good morning, Dave and team. A couple of questions. First up on the working capital changes at Tsumeb. Do you anticipate any more working capital build-up over the next four months, or this is kind of a one-off and it reverses at the end of four months? And second is a broader question on capital allocation. I mean, I understand that the company is looking at growth opportunities both within the portfolio as well as potentially outside, but gold price is significantly higher this year compared to last year. Yet, if I look at the share buybacks for this year, it's probably around $27 million versus $53 million last year as of Q3. And then if I look at the payout ratios, now, there's two things. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:13:45One is if you look at the average payout ratio for the last four years for the gold industry, it's been around 65%. Dundee is at the low end of that, around 23%. Now, obviously, the free cash flow is much larger for Dundee given your cost structure. But secondly, do you anticipate keeping the same capital returns? I mean, the one risk you—there's two questions that we get from investors. One, does the company believe that it's fairly valued at this point? And second is, is there imminent M&A potential that the company sees in the market? I'll leave it at that. Navin DyalCFO at Dundee Precious Metals00:14:28Hi, Raj. It's Navin. Yes, I'll answer the first question and touch upon the capital allocation question in a second, and then I'll probably turn it back to Dave. So in terms of the working capital build-up, yes, what we will see over the course of the four months is puts and takes in terms of build-up of purchases that we've made as well as the timing of blister returns as well. So within the quarter, you'll see increases in inventory, but decreasing by the end, decreases as a result of blister returns. So by the end of the year, though, again, we fully anticipate that this agreement, and as contractually obligated, this agreement terminates at the end of December. Navin DyalCFO at Dundee Precious Metals00:15:06So we would expect that all that working capital will come back once this agreement is terminated and Sinomine purchases that inventory. Maybe turning to your second question on capital allocation. Navin DyalCFO at Dundee Precious Metals00:15:18So in terms of conversations that we might otherwise have around increasing share buybacks, that type of conversation, we have that regularly as a management team and then obviously with the board. We've always taken, as you know, a very balanced approach to capital allocation that focuses on the balance sheet strength and capital returns to shareholders and also reinvestment in the business, considering we have a significant organic growth pipeline up and coming that would return a lot of value to shareholders. We're one of the few producers of our size that actually pay a dividend, and as you know, we supplement that with the NCIB. And as you pointed out, we definitely consider our cash balance to be a strategic advantage. Navin DyalCFO at Dundee Precious Metals00:15:59We have this financial strength to fund our growth opportunities, but also have the ability to continue to pay a dividend and also to pursue accretive M&A opportunities. And perhaps with that, maybe I'll turn it back to Dave on perhaps discussing more about considerations around growth. David RaePresident and CEO at Dundee Precious Metals00:16:17Yeah. So Raj, I mean, we obviously maintain a set of targets that we review on a regular basis and consider for M&A opportunities. We also, just to make sure that we have the right context, we have two different organic growth projects in our portfolio, one of which Čoka Rakita is very exciting and imminent, and the other of which continues to progress slowly and quietly in the background, which producing 200,000 ounces a year at its low all-in sustaining costs is exciting as well. David RaePresident and CEO at Dundee Precious Metals00:16:48There's the potential for use of funds, either returning capital, and we have a healthy conversation on what we do in terms of dividends and buybacks, opportunities to invest where we have some accretive results from M&A, and then also looking at what's happening in terms of the future investments and the outlook sort of year by year for both Čoka Rakita and also for our secondary project at Loma Larga. I think more than that, I don't know if that answered your question, if you have anything else that you'd like to clarify, but that I think is a reasonable indication of our position. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:17:27Okay, that's great. Thanks, Dave. That's it from me. David RaePresident and CEO at Dundee Precious Metals00:17:31Thanks, Raj. Operator00:17:32Thank you. One moment for our next question. Our next question comes from Don DeMarco of National Bank Financial. Your line is now open. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:17:43Thank you, Operator. And Navin, I'd just like to continue to follow up on the response to your question to Rob. You mentioned that you expect working capital to come back after the agreement is terminated. So with the agreement terminating at the end of December, should we expect the repayments to be reflected on the Q4 financials or in Q1? Navin DyalCFO at Dundee Precious Metals00:18:05Yeah, hi, Don. Yeah. So the agreement terminates on December 31st, and the mechanics of the way that works with respect to the buyback of that inventory is that that buyback occurs on December 31st. However, given the fact that it's also, we're in the holiday season and it's scheduled to occur right on New Year's Day and New Year's Eve, this could slip into the first week of January in terms of the payment. Also, just to note as well, what they're buying essentially is both the raw materials that are on-site and on-ship, as well as the contractual metal in circuit, which is obviously in the circuit, and we'll have a final adjustment of what that figure is only post-December 31st. But I would expect the majority of the value of that working capital would be recovered by the end of the year. David RaePresident and CEO at Dundee Precious Metals00:19:04Okay. Fair enough. And just in general, are the outlays that you incurred over the last few months consistent with what you expected, or are they a little bit higher or lower? Navin DyalCFO at Dundee Precious Metals00:19:14Sorry, I didn't get the first part of your question, Don. The delays or? Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:19:17Yeah. Are the outlays or the cash outlays that you incurred to purchase the concentrate, is it in line with your expectations, or is it a bit higher or lower? Navin DyalCFO at Dundee Precious Metals00:19:26Yeah, it certainly is a little bit higher. It does fluctuate with metal prices. So certainly, there will be, with higher metal prices, copper prices, the value of that metal is definitely going to be higher. But in terms of the expected timing of those purchases, they're in line. I think the other piece of this is really the performance of the smelter and how quickly they can return the blister. And that's where it's subject to, obviously, operating performance and any downtime that may be associated with the smelter that would potentially extend the timing of the delivery of the blister at any point. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:20:08Okay. Thanks for that. Now, just over to David. Chelopech has posted a couple of quarters of AISC in the $500-$600 range. Is this the new norm? We're looking ahead to 2025 and guidance. How should we kind of frame our expectations on costs looking ahead? So, Don, of course, we will be updating our guidance when we come up with our Q4 numbers. What do you see coming through, though? Primarily two things. So the one is the copper price influence on the treatment costs. But the other one is also the change in concentrates and where they're going. So that's had a very material impact for two reasons. One is the direct charge, the TC. But the other piece, which is perhaps not as evident, is it also allows us to target a higher recovery with a greater mass pull. David RaePresident and CEO at Dundee Precious Metals00:20:56So we've increased the tons, decreased the grade, which increases the overall recovery. So there's those two things, the copper impact, plus also the change in the way we're operating the facility, which is with the recovery way outweighing the increased cost associated with additional tonnage of concentrate. Okay. So clearly, those are the drivers that are supporting these low costs. But would you say that Q2 and Q3 then might be the new norm in terms of the costs that we're seeing there? So Q3 includes a number of different things which are important for the start of the annual cycle, which recognizes pay increases, for instance. So that would be a more representative number than would be Q2. And things like inflationary pressures and such, we've started to see unwinding of some of that previous pressure. David RaePresident and CEO at Dundee Precious Metals00:21:51So we've seen benefits from things like reagents, steel costs, and things like that. We've started to see that come down. So I would say if you want to look at it, Q2 is a good start, but we will update you on that early in the new year. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:22:02Okay. Thank you. And then final question. So we're continuing to hear progress at Loma Larga. It'd be nice to get an impression of your overall strategy for this asset. I mean, you made this investment at a lower gold price. No doubt it's increased in value. Two things then. When would we expect an update on the economics, including development CapEx? And second, are you sort of squarely focused on developing this asset, or would it even potentially be a divestment candidate for a profit? So I'm going to start with that in reverse. David RaePresident and CEO at Dundee Precious Metals00:22:38We're not wedded to any particular asset. So the decision in terms of the strategy on any asset is something that we consider at any given time. So we have Tierras Coloradas, and we have Loma Larga in equity. I think we've been very pleasantly surprised by the progress that's been made recently, despite many of the things happening in-country. And that's led us to the point where we've had the two technical reports required by the Constitutional Court submitted just at the end of the quarter, actually in October. And then, of course, we just had a consultation to some communities looking at that particular information that's coming out of those two studies. All of these things are good progress, and we're now just waiting to see the prior informed consultation being completed. So let's just have a look at the project and the rest of your question, though. David RaePresident and CEO at Dundee Precious Metals00:23:28We still have to do some additional work here, which will update the economics of this project. So the first thing that would happen with clearance to progress the project is we're going to commence some drilling, and that will be focused on geotech, hydrogeology, and some minor amounts of resource clarification, particularly at depth below the deposit. So that work is expected to happen, and we'll then feed into going through our current status with our internal technical view of how we've developed this project, and that's going to lead to an updated feasibility study. So that's going to take us some. But don't expect that to be overnight. Just the idea of looking at what the individual costs are for supply, earthworks, and other contracting and things like that, this takes a little bit of time. Would that be a 2025 item? David RaePresident and CEO at Dundee Precious Metals00:24:16It depends on when we got the clearance to move forward, to be quite honest. But you're not talking about something that's going to be done, let's say, in six months. It's going to take a little bit longer than that once we get to move on. And at the moment, we can't do drilling on the asset. That's primarily the main thing that we need to do. But just to come back, Don, to, you've seen the movement of Čoka Rakita as we've identified the opportunity. They're really excited about what we see. That's really gone into prime position and is our main focus of the organization. Don DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank Financial00:24:45Okay. Thank you, David. That's all from me. Thank you. Operator00:24:51Thank you. As a reminder to ask a question, you will need to press star 11 on your telephone. Our next question comes from Jeremy Hoy of Canaccord Genuity. Your line is now open. Jeremy HoyResearch Analyst at Canaccord Genuity Group Inc.00:25:12Hi, everyone. Thanks for taking my question. Really appreciate that color on Loma Larga. It answered a lot of the questions I did have. But I did want to ask on Chelopech. There was a mention of the China VAT tax applicability potentially changing. I was wondering if you could provide a little bit more color on that. And there was also a mention of potential alternative buyers, but my understanding was there are limited buyers for this concentrate. And so just kind of want to understand exactly how you're thinking about that. Navin DyalCFO at Dundee Precious Metals00:25:49Sure, Jeremy. It's Navin here. So just a bit of background. So we have been sending about 70%-75% of our concentrate to China. This is both the copper-gold concentrate and the pyrite. And again, we produce two types of concentrate there. The pyrite concentrate that we send from Chelopech have always attracted VAT at 13% and an additional duty of 1%. Our copper-gold concentrate that we would send there would not attract that VAT or that duty because it was a high-grade metal threshold that was required in China to be considered a precious metal or gold concentrate that was not subject to this. Navin DyalCFO at Dundee Precious Metals00:26:31What China's tax authority is proposing, and these are only proposed changes at this point, is to apply VAT and duty on gold concentrate that otherwise has a high component of iron and sulfur, which they would consider a pyrite concentrate and hence would be captured or attract VAT and duty. That's the background of this. At this point, this is really fairly new. What we saw in September, and this is being reported in October, was that the imports of this concentrate purchased by the buyers in China of the smelters has been significantly down. What I'll also point out in terms of the impact to us is that our contracts clearly state that any additional taxes that are incurred are at the buyer's expense. Navin DyalCFO at Dundee Precious Metals00:27:26However, we do recognize that ultimately this will have, if this were to be enacted, that this would definitely have an impact on future deliveries of concentrate to China, considering the additional costs that would be required. Now, in our case, look, we've been producing this concentrate for over 20 years now. We are very familiar with the market, the broader market, and we do have alternatives to that. But as you point out, though, given the nature of our concentrate, those additional areas or potential areas that we could deliver our concentrate might incur additional costs. But at this point, it's really too early for us to really comment on that. Hopefully, that helps. Jeremy HoyResearch Analyst at Canaccord Genuity Group Inc.00:28:07That's very helpful. Thank you, Navin. I appreciate it. Operator00:28:11Thank you. Our next question comes from Eric Winmill of Bank of Nova Scotia. Your line is now open. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:28:19Great. Thank you very much. Hi, David and team. I appreciate you taking my question. Just on the inventory payment, Tsumeb, just trying to understand here, I know you said there's no major financial gain or loss associated with that, but just wondering if we should be modeling margins, obviously, on these inventory sales. Also, do you anticipate any counterparty risk on this? And I guess, is there any potential here that this agreement could get extended beyond the December '31 deadline? Thanks. Navin DyalCFO at Dundee Precious Metals00:28:51All right. Thanks, Eric, so I'll just address a few of those here, so in terms of the margin, it's a back-to-back contract, essentially, so we purchased the materials essentially from the previous tolling agent, which is IXM, and then we deliver the blister back to them as well, so because of that back-to-back nature, there's no price risk because essentially they're hedging on both sides of that transaction, and essentially, we don't collect essentially any type of commission on that as well, so that's what I would suggest with that. In terms of counterparty risk, IXM has been a purchaser of this material. They want the blister, and hence I don't think that there's an issue here, and then when it comes to margin or additional costs, we are charging an interest on this to Sinomine for the working capital. This interest is north of 7.5%. Navin DyalCFO at Dundee Precious Metals00:29:48And given where interest rates have been falling, the cash would have been essentially sitting in our account at less than that. So we are making a small amount on this on interest income, but it's enough to cover our internal costs, which we're managing all of these transactions internally. So hopefully that helps. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:30:08Just last part in terms of extending this beyond December 31? Navin DyalCFO at Dundee Precious Metals00:30:12Yeah, of course. Yeah. As I mentioned before, the contract ends on December 31st, and thus far, we've enjoyed a really good relationship with both Sinomine and IXM, and everything has been working in accordance with our agreement. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:30:32Okay. Thank you. I really appreciate that. Just quickly on Čoka Rakita, so obviously new resource estimate is underway there. Do you anticipate releasing that, I guess, in advance of the PFS? David RaePresident and CEO at Dundee Precious Metals00:30:48So what will happen is that the primary activity here in the work done was to convert inferred to indicated. So that's the main thing that you're going to see. Yeah. Hopefully, that answers your question. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:31:04Okay. Perfect. I appreciate that. Just one more for me. There was a mention in the disclosures here about the Brevene license at Chelopech. Just wondering, I guess, what's planned there and what do you see for that particular part of the deposit or of the land package? David RaePresident and CEO at Dundee Precious Metals00:31:25Yeah, sure. So Eric, I think there's two different things that we typically talk about here. The one has been Sveta Petka historically, and that's what we're now referring to as Chelopech North. So that's advanced from where we now are with Brevene silver exploration license to a geological discovery, which is where we are now with Brevene. And we've subsequently advanced beyond that to a commercial discovery. And by the end of next year, we're anticipating having a new concession for that. So Brevene is part of that same thing. So we've now got the geological discovery. What we're now doing is we're justifying with the authorities the plan for this next phase of work, which would be a one-year period of drilling, which would then be used to justify a commercial discovery. David RaePresident and CEO at Dundee Precious Metals00:32:06Now, the impact of this is it opens up the real estate on which we can do work to discover additional potential feed to Chelopech. So that's the primary impact of all of this work is just to open that up. At the same time, as you know, we continue to drill in areas within the concession. And from underground, we continue to do some, let's say, 70% extensional and 30% infill for around 40,000 meters per year. So all of those things are looking to a view of extending the life of mine at Chelopech. And obviously, the more real estate we've got in that area and our prospects, the more we're able to look to really extend that life at Chelopech. So that's our primary goal. So just, Eric, the one thing I'm not too sure is quite clear. Of course, we'll be releasing the PFS. David RaePresident and CEO at Dundee Precious Metals00:32:57We've said that's going to be in the first quarter of next year, and that will include consideration of what additional benefit we've got from the drilling that we've done, where we've taken it down to 30 by 30 meter spacing with 15 by 15 in the high-grade area. So just making sure that I've got that point across in terms of Čoka Rakita. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:33:18Okay. Fantastic. I really appreciate the added color. Actually, maybe just one more, if you don't mind, but Ada Tepe. So obviously expecting stronger production there. I know you kind of touched on that, but maybe anything specific you can point to in terms of what's changed there or reasons why production is down and why you see it ticking up here in Q4? David RaePresident and CEO at Dundee Precious Metals00:33:42Yeah. So we had a combination of an underperformance in an area in terms of grade, combined with some issues with our flexibility related to truck availability. So both of those are resolved in terms of Q4. So we're not anticipating any impact carried through from early Q3, actually, into Q4. Eric WinmillVP and Equity Analyst at Bank of Nova Scotia00:34:04Okay. Fantastic. Thank you very much. I really appreciate the extra color. I'll hop back in the queue. Cheers. Operator00:34:10Thank you. David RaePresident and CEO at Dundee Precious Metals00:34:11Thanks, Eric. Operator00:34:14Our next question comes from Ingrid Rico of Stifel. Your line is now open. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:34:22Great. Thank you. Good morning, David and team. I just wanted to follow up on a question previously asked. I think Don asked about the Chelopech cost. So understanding the benefits from the lower TCRCs and freight charges, but I did notice that the unit cost per ton did increase quarter over quarter. Just if we can get a bit of color on what are the drivers there. Is it just purely labor wages coming up to inflation, or is there any other sort of inflationary pressures on consumables that are coming through? Navin DyalCFO at Dundee Precious Metals00:35:00Hi, Ingrid. Yes, sure. I'll answer that. So yeah, the main factors there was labor, wages, and also a little bit of share-based compensation expenses because we saw an increase in our mark-to-market for the quarter on the unit cost at Chelopech. And the labor, as Dave pointed out, is that we typically have wage increases in the middle of the year. In fact, they're backdated to July in Bulgaria. So that's going to be a bit of a factor here in terms of the increase that you're seeing there. But also, I think what also should be mentioned is that we did have slightly lower tons in the quarter relative to the prior year. It's about 6% down. Hence why, on a per-unit basis, we're seeing a little bit of an increase there. Navin DyalCFO at Dundee Precious Metals00:35:45But when it comes to other consumables, we're actually seeing, relative to our budget, either flat to slightly improving costs in some of those areas, particularly with respect to things like steel and grinding media. We just renewed a contract there recently in which we saw some savings from the prior contract as well. So when it comes to other major consumables, we're not seeing any inflationary pressures happening there. So hopefully that answers your question. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:36:15Yeah, that's great, Navin. Just in terms of the labor increase and the labor wage increase, just remind me, the contract, it's set every year, or are you now locked in on the wages for a longer-term period? Navin DyalCFO at Dundee Precious Metals00:36:35Yeah. It's every two years that we have these negotiations. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:36:39Perfect. Excellent, and if I can, just also a follow-up on the concentrate being sent to China. As I understand, these are already contracts for 2025 to 2027. What is your ability in those contracts to maybe divert some of those sales to other regions and whether that's possible under the contract? Navin DyalCFO at Dundee Precious Metals00:37:07Sure. Yeah. I mean, clearly, if we—so a couple of things to mention here. One is any of the VAT increases or duties that would be applied are at the buyer's account. So we would be happy to continue to deliver into China if so long as the customer is willing to take it. Now, the issue for perhaps then for the customer in this case or the smelters is that if they take this concentrate and if this proposal by the Chinese tax authorities were to remain in place, they would be operating likely at a loss for much of this contract. Hence why we've seen such a decline in imports. They have been very vocal. The smelters themselves have been very vocal against these proposals. Navin DyalCFO at Dundee Precious Metals00:37:50So if they are operating at a loss, they certainly would be looking to potentially exit these contracts and not take the material in one instance, in which case we would be looking for alternatives for this concentrate. But ourselves, we would be happy to continue to deliver again. This VAT and this duty does not essentially get passed on to us. If we continue to deliver into China, it would have to be absorbed. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:38:22Understood. That's great color. And just to finish up on sort of the concentrate sales, maybe just if you can share how you're seeing those commercial terms in the global market. Have we sort of peaked on those sort of good terms, or how do you look at those into 2025? Navin DyalCFO at Dundee Precious Metals00:38:42Yeah. We have seen a significant improvement in our TCs over the course of the year. And I think I've mentioned this before. It's about $100 a ton in terms of benefit there that we've seen in the global market. We don't think it's hit necessarily bottom just yet. We continue to see improvements there. But certainly, it's at record lows in terms of these charges. Ingrid RicoMD and Precious Metals Analyst at Stifel Canada00:39:10Great. Thank you for that. That's it for me. Operator00:39:16Thank you. This concludes the question-and-answer session. I would now like to turn it back to Jennifer Cameron for closing remarks. Jennifer CameronDirector of Investor Relations at Dundee Precious Metals00:39:24Well, thank you all for joining us. We look forward to keeping you updated over the course of the next few months, and we'll catch up on the next quarter. Please feel free to reach out with any additional questions. David RaePresident and CEO at Dundee Precious Metals00:39:35Thank you. Operator00:39:37Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.Read moreParticipantsExecutivesNavin DyalCFOJennifer CameronDirector of Investor RelationsDavid RaePresident and CEOAnalystsDon DeMarcoDirector, Equity Research Analyst - Metals & Mining at National Bank FinancialJeremy HoyResearch Analyst at Canaccord Genuity Group Inc.Ingrid RicoMD and Precious Metals Analyst at Stifel CanadaEric WinmillVP and Equity Analyst at Bank of Nova ScotiaPowered by
