Dundee Precious Metals Q2 2026 Earnings Report

Dundee Precious Metals EPS Results

• Actual EPS: C$1.35
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Dundee Precious Metals Revenue Results

• Actual Revenue: $513.67 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Dundee Precious Metals Announcement Details

• Quarter: Q2 2026
• Date: 7/30/2026
• Time: After Market Closes
• Conference Call Date: Friday, July 31, 2026
• Conference Call Time: 9:00AM ET

DPM 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.

Dundee Precious Metals Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record financial performance: Second-quarter revenue rose 94% year over year to $362 million, adjusted net earnings more than doubled to $211 million, and free cash flow reached a record $227 million, supported by higher metal prices and Vareš pre-commercial revenue.
• Positive Sentiment: Vareš ramp-up remains on track for commercial production in the third quarter and an 850,000-ton annualized processing rate by year-end; quarterly production increased 48% sequentially to approximately 35,000 GEO at a reported $563 per GEO sold.
• Positive Sentiment: Exploration is expanding DPM’s growth pipeline, with the Wedge Zone showing high-grade mineralization and the Brevene South Porphyry discovery returning a 730-meter interval grading 2.5 grams per tonne gold equivalent; resource and further drilling updates are planned.
• Positive Sentiment: DPM reported $761 million of cash, no debt, and $1.2 billion of total liquidity, while returning $58 million to shareholders in the quarter and repurchasing approximately $102 million of shares year to date; management indicated buybacks could potentially increase.
• Neutral Sentiment: Ada Tepe production ended as scheduled on July 15, shifting the focus to responsible mine closure, while Vareš’s reported low costs benefited from capitalizing $37 million of pre-commercial operating costs; those costs are expected to flow through AISC after commercial production.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the DPM Metals second quarter 2026 earnings results conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Jennifer Cameron. Please go ahead.

[Jennifer Cameron, Director of Investor Relations at DPM Metals]

Thank you, and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to the DPM Metals second 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 the purposes of today's call. Certain 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 Cameron, Director of Investor Relations at DPM Metals]

These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. 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 2025 pertain to most to the comparable period in 2025, and references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Rae.

[David Rae, President and CEO at DPM Metals]

Good morning, and thank you all for joining us. I want to start by recognizing the dedication of our teams across all operations, whose commitment to safety, operational excellence, and responsible mining continues to drive our success. We delivered exceptional results in the second quarter, generating record free cash flow and earnings while continuing to advance our growth strategy. The ongoing ramp-up of the Vareš Mine and continued advancement of our growth pipeline, including the major discovery of the Brevene South Porphyry, have further demonstrated DPM's position as a growing European-focused precious metals producer. Moving to the highlights of the second quarter, we produced approximately 103 oz of gold equivalent and remain firmly on track to achieve our 2026 production guidance for the 12th consecutive year.

[David Rae, President and CEO at DPM Metals]

We continue to deliver strong margins with an AISC of $1,214 per ounce GEO sold, compared to an average realized gold price of $4,375 per ounce. We generated a record $227 million in free cash flow, driven by strong operating performances. The ramp-up of Vareš drives production growth. We continue to return capital to shareholders, returning $58 million or 25% of free cash flow to our share buybacks and dividend payments. We ended the quarter with $761 million of cash and $1.2 billion of total liquidity. Turn to our operations and growth projects in more detail, starting with Vareš. We are making significant progress at Vareš, we are on track to achieve the ramp-up to full production by year-end. We are achieving development rates of over 400 meters per month and have done so since October last year.

[David Rae, President and CEO at DPM Metals]

We processed 117,000 tons in the quarter, a 48% increase quarter-over-quarter. The planned shutdown of the processing plant to complete tie-ins to the additional tailings filter was completed in seven days, well ahead of schedule. This allows for reduced downtime in the second half of the year when we anticipate higher production rates. Vareš produced approximately 35,000 GEO during the second quarter, with an AISC of $563 per GEO sold. Navin will have some additional color on the AISC at Vareš and our guidance expectations. We are on track to achieve the ramp-up to the 850,000 ton per year run rate by year-end. During the quarter, we started commissioning of the second water treatment plant. Construction of the paste backfill plant is well set, the second tailings filter continue to advance.

[David Rae, President and CEO at DPM Metals]

Both of these are expected to be operational before the end of the year. We initiated our surface drilling program during the second quarter, drilling at priority targets at the Piatra Craiului area, alongside advancing 3D models and conducting geophysical surveys to support target generation. Most importantly, we progressed the development of our future leadership for Vareš, including key positions for mining, processing, technical services, finance, HR, and legal, laying the foundation for our long-term success in the country. In short, Vareš is exceeding our expectations, we are excited about its contribution to our growth in the years ahead. To Chelopech. Our flagship operation delivered solid production of approximately 57,000 GEO in the second quarter, with an AISC of $1,174 of GEO sold. Is on track to achieve its guidance for the year.

[David Rae, President and CEO at DPM Metals]

We are very pleased with the progress of the Wedge Zone target. Delineation drilling continued during the second quarter, results confirmed and extended the high-grade mineralization. This mineralized zone is currently defined over approximately 170 m along strike, with 130 m in width and 300 m of vertical extent. The target remains open along strike and down dip, with strong potential for further expansion. Initial metallurgical test work indicates that the mineralization is amenable to flotation processing using the existing flow sheet at the Chelopech plant, supporting the Wedge Zone's potential to augment the existing mine plan. We are planning to complete an initial mineral resource estimate for the Wedge Zone by year-end as part of our annual mineral resource and mineral reserve update. We are also actively evaluating decline contractors and advancing technical work to support an economic study for Wedge.

[David Rae, President and CEO at DPM Metals]

We continue to anticipate commencing the decline towards Wedge from existing operations by year-end, using internal resources. In June, we announced a major new discovery of a high-grade copper-gold porphyry mineralization at the Brevene South Porphyry target. This is our fourth significant discovery since 2023, continuing our remarkable exploration track record. Initial results from drilling, including 730 m of 2.5 grams per ton gold equivalent, demonstrate the potential for scale and continuity with broad continuous intervals of high-grade copper-gold porphyry mineralization. That particular hole, which was in progress as we reported, continued for over one kilometer and was terminated in mineralization. A large phyllic alteration envelope exceeding 1,000 m by 1,500 m indicates a substantial hydrothermal system, with the BSP target remaining open in multiple directions and at depth.

[David Rae, President and CEO at DPM Metals]

Given the significance of this discovery, drilling continues with five high-capacity rigs dedicated to the target and up to 15,000 m planned through to the end of the third quarter. In parallel, we continue to progress the technical work required to support the conversion of the Brevene exploration license to a mining concession under the well-defined Bulgarian permitting process. On completion of the current phase of exploration work, which ends in September 2026, DPM plans to submit a final report in support of a Commercial Discovery Certificate. At this point, while the process to convert Brevene to a commercial discovery is underway, we will not be able to conduct drilling activities on the Brevene license. However, BSP remains open towards the southeast flank of the Chelopech mine concession, and we intend to immediately move to testing the target from within the mine concession.

[David Rae, President and CEO at DPM Metals]

Wedge and BSP are two great examples of how we have transformed our growth outlook, creating an exceptional project pipeline that sets DPM apart from other mid-tier producers. Today, we have several attractive growth opportunities, including ÄŒoka Rakita, where we are advancing permitting this year to support a construction decision. We continue to advance permitting in line with the well-defined Serbian process to support the start of construction in early 2027. The special purpose spatial plan, which was initiated in November 2025 and is a key permitting milestone, continues to progress well and is expected to be approved and adopted in the second half of 2026. Excuse me. Following that, we anticipate submission of the exploitation permit application. Most of the baseline studies required for the environmental and social impact assessment have already been completed, and it is expected to be submitted at year-end.

[David Rae, President and CEO at DPM Metals]

We are maintaining close and proactive engagement with the relative authorities and stakeholders to support the permitting process, we remain confident in the overall progress at Čoka Rakita. Project execution readiness and operational readiness are planning continue, leveraging the project's proximity to our Chelopech underground mine and our new Vareš underground mine to support training and development of key personnel and practices for future operating roles. We initiated a 20,000-meter drilling program at the Čoka Rakita license during the second quarter. A significant component of the drilling program is allocated to infilling and extending mineralization at Dumitru Potok and increasing the drill density. Upon completion of the drilling, we intend to update the mineral resource estimate for the Rakita camp. An additional drilling program is also underway at the Potaj Čuka license, targeting the same northwest geological trend of Čoka Rakita and Dumitru Potok projects.

[David Rae, President and CEO at DPM Metals]

With a significant gold-copper inferred mineral resource already defined at Dumitru Potok and the prospect open in several directions, we look forward to advancing the drilling program and continuing to define the potential of this organic growth prospect. As we reported earlier this month, production at Ada Tepe concluded as scheduled on July 15th, 2026. As the first new mine in the Balkans in over 40 years, Ada Tepe has been a testament to DPM's ability to permit, build, and operate a world-class asset and implement standards that go above and beyond what is required. I want to express my deepest gratitude to everybody who has been a part of this exceptional story.

[David Rae, President and CEO at DPM Metals]

I particularly want to acknowledge the community for welcoming us, partnering with us, and working with us to create a world-class example of how mining can be conducted responsibly with standards that go above and beyond those required and for the benefit of all stakeholders. We now have the opportunity to demonstrate responsible mine closure with 95% of the mine area expected to be returned back to the Natura 2000, the European Union's Nature Protection Network. I'm proud of what we have accomplished at Ada Tepe, and I'm confident that we are leaving a positive legacy for future generations. Before handing the call over to Navin, I'll summarize our 2026 priorities. Delivering on the ramp-up at Vareš, advancing Čoka Rakita to a construction decision, and daylighting value from our discovery of two tier 1 potential gold-copper deposits.

[David Rae, President and CEO at DPM Metals]

We will continue to execute on these priorities and with the same commitment to responsible, efficient mining, financial discipline, and value creation. I'll now turn the call over to Navin for a review of our financial results.

[Navin Dyal, CFO at DPM Metals]

Thanks, David. 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. Overall, DPM delivered record quarterly revenues, earnings, and free cash flow, benefiting from higher metal prices and the addition of Vareš to our portfolio. Looking at our earnings and cash flow, revenue of $362 million for the quarter was 94% higher than prior year, due primarily to higher realized metal prices and the inclusion of Vareš's pre-commercial production revenue of $110 million. Adjusted net earnings in the quarter of $211 million, or $0.95 per share, more than doubled compared to the prior year, due primarily to higher realized metal prices and the inclusion of Vareš, partially offset by higher income taxes and cost of sales.

[Navin Dyal, CFO at DPM Metals]

Adjusting items which were not indicative of the company's operating performance primarily included a $33 million reversal of certain provisions at Vareš and a $10 million loss on settlement of a previously recognized receivable related to the DPM tolling agreement. Cash flow provided from operating activities for the quarter of $271 million reflect an increase of $172 million compared to the prior year, due primarily to higher earnings generated in the period and the timing of deliveries and subsequent receipts of cash, partially offset by higher annual cash redemptions under the share-based compensation plans reflecting DPM's strong share price performance, the timing of payments to suppliers, and higher income taxes paid. Free cash flow of $227 million for the quarter reflects an increase of $133 million compared to the prior year, due primarily to higher adjusted net earnings generated in the quarter.

[Navin Dyal, CFO at DPM Metals]

Taking a look at our cost metrics in the first half of 2026, All-in Sustaining Costs of $1,470 per gold equivalent ounce sold, referred to herein as GEO, compared to an average realized gold price of $4,635 per ounce, reflecting the high margin, low cost nature of our operations. All-in Sustaining Cost per GEO sold was comparable to prior year. At Vareš, All-in Sustaining Cost per GEO sold was below the low end of its 2026 guidance range, due primarily to the capitalization of certain pre-commercial production operating costs. With commercial production anticipated by the end of the third quarter, All-in Sustaining Costs per GEO sold is expected to be within the guidance range at Vareš.

[Navin Dyal, CFO at DPM Metals]

On a consolidated basis, All-in Sustaining Cost at Vareš is largely offset by higher costs at Chelopech and Ada Tepe due primarily to higher labor costs, a stronger euro relative to the US dollar, and higher royalties reflecting higher metal prices, as well as the impact of mark-to-market adjustments to share-based compensation expenses. Mark-to-market adjustments to share-based compensation expenses resulted in an increase of $95 per GEO sold for the first half of 2026, compared to an increase of $122 per GEO sold in the prior year. We are on track to meet all our All-in Sustaining Cost guidance for the year, and we're closely monitoring the market dynamics outside of our control, which impact costs such as metal prices, foreign exchange rates, and oil prices and their movements compared to our guidance assumptions.

[Navin Dyal, CFO at DPM Metals]

In terms of our capital spending, sustaining capital expenditures of $3 million for the quarter were lower than prior year, due primarily to no capital expenditures at Ada Tepe, as the mine reached the end of its life in July 2026. Growth capital expenditures of $28 million were higher than the prior year, reflecting capital expenditures at Vareš, including the capitalization of certain pre-commercial production operating costs, partially offset by lower capital costs related to the Čoka Rakita project, due primarily to timing of expenditures.

[Navin Dyal, CFO at DPM Metals]

We continue to maintain a strong balance sheet and cash position with a consolidated cash balance of $761 million, no debt, and a $400 million undrawn revolving credit facility. With our significant financial returns and robust free cash flow, we are well-positioned to fund our growth opportunities and exploration prospects while continuing to deliver peer-leading capital returns, peer-leading returns to shareholders through our enhanced share buyback program.

[Navin Dyal, CFO at DPM Metals]

In the first half of 2026, we repurchased over 2.1 million shares at a total cost of $75 million under the company's normal course issuer bid, or NCIB, and paid approximately $18 million of dividends. From July 1st to July 30th, 2026, we repurchased approximately 800,000 shares at a total cost of $27 million, bringing year-to-date repurchases to approximately 3 million shares for an aggregate cost of $102 million. We continue to deploy our capital in a disciplined manner that balances our desire to reinvest in growing and optimizing our business with our commitment to return capital to our shareholders. In closing, we continue to deliver strong performance from our mining operations and continue our track record of generating significant free cash flow. We remain in a strong cash position and are focused on growth. I will now turn the call back to David for his concluding remarks.

[David Rae, President and CEO at DPM Metals]

Navin, this is an exciting time for DPM. DPM today is a premier mining business with industry-leading margins, lower risk development assets due to their scale and quality, and a disciplined capital allocation strategy. That has delivered share price outperformance for several years. We remain focused on executing our strategy to deliver above-average returns to our shareholders as a mid-tier precious metals company with a clear path forward to dry stacking. I'd now like to open the call for any questions.

[Operator]

Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. You'll hear an automated message advising your hand is raised. If you would like to remove yourself, please press star one one again. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. First question of the day will come from the line of Fahad Tariq of Jefferies. Please go ahead.

[Fahad Tariq, Analyst at Jefferies]

Hi, thanks for taking my questions. On ÄŒoka Rakita, can you talk a bit about just the level of dialogue between yourselves and the government, as you think about getting the permit in the second half of this year? Just the comfort level in starting construction in early 2027.

[David Rae, President and CEO at DPM Metals]

Thanks, Fahad. With ÄŒoka Rakita, largely our main activities are with people in the administration of the different bureaus. This would be Ministry of Mines, Ministry of Energy, Construction, Environmental, with the bulk of that being more towards the spatial planning activities at the moment, which are led by a sort of mix of disciplines. There's regular conversations going on there to understand the expectations on delivery. I would say that that is leading to our ongoing confidence in terms of delivering against expectations in terms of timing. Next things to watch for are the conclusion of spatial planning, the EIA and leading to the move to an exploitation permit, and just to reiterate the confidence of being able to get the permission to go ahead with the construction early in the new year.

[Fahad Tariq, Analyst at Jefferies]

Great. Then, just switching gears to maybe the balance sheet. The cash balance has grown substantially over the last year, and it's back to pre-Adriatic levels. Can you just talk a bit about just the use of cash? It sounds like ÄŒoka Rakita is easily well-funded. The $200 million in buybacks, there could be an opportunity to go higher. Just any high-level commentary on potential use of cash on the balance sheet going forward. Thanks.

[Navin Dyal, CFO at DPM Metals]

Sure, Fahad. I'll take that one. As you know, we have got a great track record of being prudent capital allocators. The approach that we take is focusing on our balance sheet strength, capital returns and reinvestment in the business. As you heard from David, we've got tremendous opportunities we believe within the business, over the coming years. That's definitely taken into consideration. Then when it comes to just the levels of buybacks and even the sustainable dividend that we have, discussions with our board are, there's a healthy debate at the board level in terms of capital returns and looking at our capital needs over the coming years and balancing that with healthy returns.

[Navin Dyal, CFO at DPM Metals]

Our dividend is set at a very sustainable level, as you know, again, we've had tremendous success over the years of buying back our shares and that's perhaps the avenue that we're going to continue to take to really ensure that we ensure a healthy capital return back to our shareholders.

[David Rae, President and CEO at DPM Metals]

Maybe just adding to that, if you consider our track record of exploration success, we clearly have the ability to direct some of our free cash flow generation into some pretty exciting projects. You'll continue to see an increase, even if it's a relatively small number overall, in terms of exploration. We've gone from $50 million to $60 million to currently $70 million over the course of the last three years. We've said already that, while we halt Brevene exploration, while we wait for the Commercial Discovery, we're going to go aggressively after the porphyry and additional activities around Wedge Zone, keeping in mind that there is the potential for additional opportunities around Wedge Zone, given that we have very little drilling below Chelopech. You're right about the ability to buy back more in terms of the NCIB.

[David Rae, President and CEO at DPM Metals]

At this point, we've talked about $200 million, as you sort of indicated, there is a possibility of us increasing that.

[Fahad Tariq, Analyst at Jefferies]

Great. Thank you so much.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Eric Winmill of Scotiabank. Please go ahead.

[Eric Winmill, Analyst at Scotiabank]

Great. Thank you. Good morning, David and team. Congrats on a great quarter. Thanks for taking my question. Just wondering about Wedge Zone Deep. Obviously, great to hear that you want to start the decline efforts there possibly before end of this year. Just sort of curious, I know it's still early days there, but wondering if you have any estimates in terms of CapEx or timing or how much drilling is required ultimately after you get the resource out in terms of being able to convert that into mineable areas. Thank you.

[David Rae, President and CEO at DPM Metals]

Yeah, good question. We obviously have intent to go after this with the idea being that this could influence what's going to happen in 2028. The sooner we do that, the better. Certainly intend to commence the development before the end of the year. There is work that needs to be done ahead of the transition through to the group, the company, let's say, that is going to do that development on our behalf. This is something that we've done and also considered for Čoka Rakita, and if you recall, counted into the increase in the capital cost for Čoka Rakita. The reason why we're doing this is we see an increasing requirement for capability that's been demonstrated at Chelopech and in fact at Vareš, but is becoming more in demand as we have success with Wedge Zone and as we prepare for Čoka Rakita.

[David Rae, President and CEO at DPM Metals]

Let's come back to your question about work that's planned. We do intend to, with our own teams, commence that development. That will be largely intended to set up services and allow the separation of activities between mine operation and the contract work that's going to develop. A little bit of additional context. We have three ways to get at Wedge Zone, and these things we are evaluating. We're in a period of engineering at the moment. Your other questions about capital spend and some other commentary, that's something we'll update as we get closer to the end of the year.

[Eric Winmill, Analyst at Scotiabank]

Okay, fantastic. Thank you. Maybe just on BSP porphyry, I know you're going to go through the permitting process there, converting it to Commercial Discovery Certificate. I know it's always tough to comment on regulatory timelines, but any thoughts here in terms of how long you're expecting the permitting process there?

[David Rae, President and CEO at DPM Metals]

Yeah, it's a good question, obviously, we'll keep people updated. There's two different dynamics to this. The one is that historically it's taken some time to get these through. It's well-defined in terms of what has to get done. Can be a little bit more of an issue in terms of how long. The government has actually committed itself to actually look at these timelines and do more to provide confidence and shorten. We're in a dynamic where two things are going on. The one is there's a typical timeline, at the same time, the government is intent on trying to shorten these things. As you know, there's a very big difference between timelines in, say, Serbia and timelines in Bulgaria.

[David Rae, President and CEO at DPM Metals]

We'll update on this, something like 15-18 months is not unusual to get to the point where we're going to be drilling again on Brevene. There'll be a good amount of work which we haven't commented on too much here, we've got publicly on our website a commentary about where else we are drilling. We want to complete drilling before we actually complete the activity at Brevene. Then the other thing, Eric Winmill, as you know from the visit, for those who weren't on the visit recently, the information we have published on our website that comes from that visit. We are excited about the prospect that really this translates across that Brevene boundary into Chelopech, actually towards Wedge Zone Deep and slightly below Wedge Zone Deep. We see lots of potential to do Chelopech and the concession.

[David Rae, President and CEO at DPM Metals]

The reason why that's interesting is we're not waiting for anything in terms of timeline there. This will get straight into a question of what we need to do in terms of overall permitting within an existing concession, that's much more something within our control. We see the potential actually that those two could split. You could end up with an in Chelopech concession project on the porphyry, which will then grow into what we've already identified and are currently delineating within Brevene. This is really exciting for us in addition to what we've identified and what we continue to develop at Wedge Zone.

[Eric Winmill, Analyst at Scotiabank]

Excellent. Thank you very much. Maybe just one more quick one if I can squeeze it in. On the ÄŒoka Rakita camp, clearly big resource potential there. Resource update, I guess following the drilling. Any thoughts there in terms of how you prioritize that or maybe some of the areas that you see the greatest potential for additional resource growth?

[David Rae, President and CEO at DPM Metals]

You can expect to see additional news coming on this as we close out this particular phase of activity on drilling. I would anticipate a number of news releases looking at what's happening in Serbia, particularly around Dimitrovgrad, because we haven't really updated that since the end of last year. We'll come back to what's happening at Brevene. We'll come back to what's happening elsewhere. In the Potaj ÄŒuka exploration license, the considerations about what's been happening around ÄŒoka Rakita and so on. We see a pretty active series of interactions on how this exploration is going and what our future plans are. It's really exciting to now have two, what we consider to be tier 1 opportunities within the organization that one in Bulgaria, one in Serbia. Just another comment on Serbia. We still haven't got any further, really, than 2 km out from ÄŒoka Rakita.

[David Rae, President and CEO at DPM Metals]

We still have another 4 to 5 km north, south, and a few kilometers east to west that we still have to go to. We have targets of porphyries that we've identified that could be the sources of future material at depth, Dimitrovgrad and ÄŒoka Rakita like, and that have actually ultimately resulted in the historical Timok discoveries at surface. We're still looking at that connection, following that trend. At the current, you'll see a number of different things. Serbia will be one. Chelopech will be another in terms of reporting. Wedge Zone will be a third.

[Eric Winmill, Analyst at Scotiabank]

Fantastic. Thank you very much. I really appreciate it. Congrats again. I'll hop back from the queue.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Don DeMarco of National Bank. Please go ahead.

[Don DeMarco, Analyst at National Bank]

Thank you, operator. Good morning, David and team. Congratulations on a strong quarter. First off, at Vareš, what was the magnitude of the pre-commercial cost capitalization benefit in Q2 in terms of dollars per ounce? Was this just a one-off for this quarter? Is it baked into guidance, or is it fair to say you might be tracking the lower end of the cost guidance range as it stands right now?

[Navin Dyal, CFO at DPM Metals]

Sure, Don. I'll quote the half-year amount. We capitalized $48 million in total, with respect to growth capital at Vareš, of which $37 million of that related to the pre, what I call capitalized operating costs. We actually give two ranges of guidance, effectively for Vareš. One is on a gross basis, before that capitalization. That number, I believe, was around $260-$275 per tonne of ore processed. Then we provided a net number, which essentially equates to about $120 a tonne, which is actually the year-to-date number that you see in our tables for Vareš. What I would say is that we provided enough information for participants to understand exactly what we're doing on the accounting, because the accounting can get a bit complicated.

[Navin Dyal, CFO at DPM Metals]

It should be done by the third quarter, again, as we achieve commercial production, then everything else will start flowing through to our All-in Sustaining Cost, cost per tonne, that's what you're going to start seeing come the fourth quarter.

[Don DeMarco, Analyst at National Bank]

Okay, great. You're looking at commercial production in Q3 for Vareš then? What are the actual triggers for commercial production?

[Navin Dyal, CFO at DPM Metals]

Yes. The triggers for commercial production is a continuous processing rate for 30 days. We're using a criteria of basically, 60% throughput capacity.

[Don DeMarco, Analyst at National Bank]

Okay. You expect that to come sometime this quarter then, in Q3?

[Navin Dyal, CFO at DPM Metals]

Correct.

[Don DeMarco, Analyst at National Bank]

Okay, great. Chelopech was also below the low end of the AISC guidance range. I mean, a good problem to have, right? Should we take this to imply that you expect a reversion to higher costs in the back half of the year?

[Navin Dyal, CFO at DPM Metals]

Yeah, I would say that Chelopech is pretty consistent and relative to what we provided in terms of guidance, we expect to be within the midpoint of the guidance for Chelopech. I wouldn't infer necessarily that it's materially higher cost in the second half of the year. We've kind of alluded to some of the cost pressures that we've seen, namely, FX assumptions that we had relative to the prior year. Labor costs are always a bit sticky. That's always something that we see on a year-over-year basis. Everything else, it's really just normal course. Oil is obviously, as we've outlined before, something that we're closely monitoring, and could impact cost depending on obviously the situation that's happening in the Middle East.

[Don DeMarco, Analyst at National Bank]

Okay, great. Thanks again. That's all for me. We'll keep an eye out for those exploration updates. Thank you.

[Navin Dyal, CFO at DPM Metals]

Thanks.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Jeremy Hall of Concord. You may go ahead.

[Jeremy Hall, Analyst at Concord]

Hi, David, Nav, and Jennifer. Thanks for taking my question. Just follow up on Eric's question on the ÄŒoka Rakita camp. You've mentioned that there's a resource update coming at the end of the current drilling. What's the sense you're getting? Will you be targeting an initial economic study on these porphyry opportunities shortly after the resource update, or is there still a lot of work to be done on the exploration front to get a handle on the scale before moving to economic studies?

[David Rae, President and CEO at DPM Metals]

We recognize that the initial resource estimate is just simply the starting point. Getting to something at a PEA level is definitely a priority for us, in all of the opportunities that we have. In terms of timing of that, we're going to provide more information as we progress. The first thing is there's much to come in terms of dimensions and initial resource estimate on these different assets. Potentially more to come from the possibility of other wedged zones. It's very dynamic, but we are very focused on what we need to do in terms of drilling the drill density, given the nature of the material. What does that translate to in terms of timing and making sure that we're able to prioritize that work. That's a bit sort of around what you were asking, but hopefully that gives you what you need.

[Jeremy Hall, Analyst at Concord]

No, appreciate the several opportunities ongoing and that there's a lot of work and prioritization to be done. Well, looking forward to updates there. My other question is on Vareš. Wondering if you can give us an indication on what you're seeing for grades so far this quarter, and what we might be able to expect into Q4. So far in the year with the stronger precious metal grades and throughput expected to strengthen through the back half. It looks like you're tracking pretty comfortably towards upper end of guidance, potentially above there. Any indication of what we're seeing for grades would be helpful.

[David Rae, President and CEO at DPM Metals]

I was actually at the mill this morning, things are going very well. In terms of grade, we're a little cautious. While it is that we're still establishing the updated life of mine plan, a little more cautious than we might be, let's say, typically. This integration has gone extremely well, really happy with what's happening. We're close to access, not only to the bottom of zone 1 where we started, and 90% of the production's coming from there, but the bottom of zone 2, access to the sort of top end area towards the northwest, in terms of zone 3 and zone 4, which is also at the bottom of that asset. Our development's just been exceptionally strong.

[David Rae, President and CEO at DPM Metals]

Opening that up gives us an opportunity to give more confidence in terms of production rates because you have more working phases on which to operate. Continue with grade control drilling, that will ultimately translate into more confidence on grade. I would say we're happy with the outlook that we have. Clearly, as you've sort of alluded to, we are easily on track so far in H1 to meet guidance in H4. I'd say we're being a little cautious. At this point, I'm not too sure there's a lot of need to do that. Let's say we're very confident about our ability to achieve numbers by year-end.

[Jeremy Hall, Analyst at Concord]

Understood. Okay. Well, thank you, David. Appreciate you taking my questions. I'll step back in the queue.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Frederic Bolton of BMO Capital Markets. Please go ahead.

[Frederic Bolton, Analyst at BMO Capital Markets]

Question. Morning,David and Jennifer Cameron. Thank you for taking my call. Just a question on exploration in Bosnia. In your MD&A, you talk about the technical assessment of the Draskovac sediment-hosted mineralization. Can you expand a bit more on that and tell us what's going on there? Thank you.

[David Rae, President and CEO at DPM Metals]

It was a little difficult to hear you there, let me give you the context of what it is that we are doing at the moment. We have been looking and prioritizing along the line of opportunities in the 24 km that we have between the mine and the mill. We've been doing some work in an area that was not previously identified, very close to the mine. I think that was one of the comments that was in the notes. In terms of other things, we're now busy, and we have been through the whole of the quarter with the new group that we've put together on exploration. That's focused on internal resources, and our team has been doing magnetic survey and other geophysics in order to focus our targeting. We're pretty excited about what we see and the opportunity.

[David Rae, President and CEO at DPM Metals]

We do think there's more than has been previously identified. Obviously, now that we have the team operating in the fashion that we're looking for based on what we've already got established in Bulgaria and Serbia, we're anticipating more information to come out. It's early at this stage. I don't know if that answers your question. Apologies, it was a little difficult to hear your question.

[Frederic Bolton, Analyst at BMO Capital Markets]

Yeah. No, that sort of broadly answered my question. Moving towards Rupice. What progress have you got in terms of setting up drilling for the Rupice Northwest Deposit, and particularly in the Kakanj municipality?

[David Rae, President and CEO at DPM Metals]

I see. In order to access Rupice Northwest, there are agreements that we need to complete with the Kakanj municipality. We're very happy with the relationship that we have and feel that's come a long way. There are some things that are coming up, which I think are important and very much in the mind of what's happening to Kakanj. I anticipate that about halfway through Q4, we'll be able to get into a more serious conversation. By that stage, as I already sort of indicated, but perhaps not so clearly, we'll be in position on the ground from two different points in order to explore into that area. We are anticipating to be on track with the ability to do some work in that area towards the end of Q4.

[Frederic Bolton, Analyst at BMO Capital Markets]

Great. Thank you very much for the answers. Thank you.

[Operator]

Thank you. There are no more further questions in the queue. I'd like to turn the call back over to Jennifer for closing remarks. Please go ahead.

[Jennifer Cameron, Director of Investor Relations at DPM Metals]

Great. Thanks everyone for joining us today. As you heard from David, lots of exciting news to come. We look forward to keeping you all updated through the fall on a lot of the activities that we have going on. For everyone in Ontario, I hope you all have a great long weekend, and look forward to seeing you all in the fall.

[Operator]

This concludes today's programming. Thank you so much for joining. You may now disconnect.

Participants

Analysts

• Jennifer Cameron, Director of Investor Relations at DPM Metals
• David Rae, President and CEO at DPM Metals
• Navin Dyal, CFO at DPM Metals
• Fahad Tariq, Analyst at Jefferies
• Eric Winmill, Analyst at Scotiabank
• Don DeMarco, Analyst at National Bank
• Jeremy Hall, Analyst at Concord
• Frederic Bolton, Analyst at BMO Capital Markets