DUNDEE PRECIOUS METALS ANNOUNCES 2021 THIRD QUARTER RESULTS; DELIVERS ANOTHER QUARTER OF STRONG FREE CASH FLOW (All monetary figures are expressed in U.S. dollars
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DUNDEE PRECIOUS METALS ANNOUNCES 2021 THIRD QUARTER RESULTS;
DELIVERS ANOTHER QUARTER OF STRONG FREE CASH FLOW
(All monetary figures are expressed in U.S. dollars unless otherwise stated)
Toronto, Ontario, November 11, 202 1 – Dundee Precious Metals Inc. (TSX: DPM) (“DPM” or the
“Company”) today announced its operating and financial results for the third quarter of 2021. All operational
and financial information contained in this news release are related to continuing operations, unless
otherwise stated.
THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS:
• Metals production tracking well to meet 2021 guidance – Produced 71,755 ounces of gold and 8.3
million pounds of copper. On track to meet 2021 metals production guidance;
• Continued focus on cost performance at all operations – Achieved an all-in sustaining cost per ounce
of gold(1) of $701 and a cash cost per tonne of complex concentrate smelted(1) of $393. Year-to-date all-
in sustaining cost per ounce of gold of $621 was below the low end of the guidance;
• Strong free cash flow – Continued to generate significant free cash flow during the quarter, achieving
$41.0 million in cash flow from operating activities and $68.5 million of free cash flow(1);
• Solid quarterly earnings – Generated net earnings attributable to common shareholders from continuing
operations of $50.4 million and adjusted net earnings(1) of $52.5 million or $0.28 per share;
• Growing financial strength – Ended the quarter with $269.5 million in cash and short term investments,
an undrawn $150 million long-term revolving credit facility (“RCF”), as well as an investment portfolio of
$48.5 million and no debt;
• Returning cash to shareholders – Declared third quarter dividend of $0.03 per common share payable
on January 15, 2022 to shareholders of record on December 31, 2021 and repurchased 1,571,500
common shares under the Normal Course Issuer Bid (“NCIB”); and
• Acquisition of a high-quality development project – Completed acquisition of INV Metals Inc. (“INV”)
during the quarter, adding Loma Larga, a gold development project with robust economics located in
Ecuador.
“With continued strong gold and copper production and impressive all -in sustaining cost performance, we
generated over $186 million dollars of free cash flow year -to-date,” said David Rae, President and Chief
Executive Officer. “Based on our strong operating performance and our outlook for the balance of the year, our
mining operations are on track to achieve their 2021 guidance.”
“During the quarter, we completed the acquisition of the Loma Larga gold project, adding a high -quality,
advanced stage gold asset to our development pipeline with the potential to generate meaningful production
growth and significant value for our stakeholders. We are encouraged by the progress being made since
closing and the government support we are receiving in Ecuador.”
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KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
$ millions, except where noted
Ended September 30,
Three Months Nine Months
2021 2020 2021 2020
Revenue 162.3 156.0 475.0 457.8
Cost of sales 87.5 79.9 263.0 249.7
Earnings before income taxes 58.9 60.9 169.1 165.3
Net earnings attributable to common shareholders from
continuing operations
50.4 55.2 138.6 148.9
Net earnings attributable to common shareholders (1) 50.4 53.6 158.6 145.7
Basic earnings per share from continuing operations 0.27 0.31 0.75 0.83
Basic earnings per share(1) 0.27 0.30 0.86 0.81
Adjusted EBITDA(2) 85.8 86.3 252.6 244.5
Adjusted net earnings(2) 52.5 51.6 150.6 144.3
Adjusted basic earnings per share(2) 0.28 0.28 0.82 0.80
Cash provided from operating activities 41.0 41.8 164.3 126.4
Free cash flow(2) 68.5 61.8 186.6 172.1
Metals contained in concentrate produced:
Gold (ounces)
Chelopech 38,434 49,823 127,951 141,542
Ada Tepe 33,321 30,021 99,190 92,630
Total gold in concentrate produced 71,755 79,844 227,141 234,172
Copper (‘000s pounds) 8,350 9,224 25,537 27,983
Payable metals in concentrate sold:
Gold (ounces)
Chelopech 33,996 37,877 108,759 113,365
Ada Tepe 32,238 31,297 96,472 94,901
Total payable gold in concentrate sold 66,234 69,174 205,231 208,266
Copper (‘000s pounds) 7,758 7,560 24,505 25,623
Cash cost per tonne of ore processed(2):
Chelopech 43.02 38.01 44.88 37.32
Ada Tepe 53.27 34.00 49.44 39.40
All-in sustaining cost per ounce of gold(2) 701 640 621 655
Complex concentrate smelted at Tsumeb (tonnes) 55,137 55,880 137,773 179,406
Cash cost per tonne of complex concentrate smelted, net
of by-product credits(2)
393 407 492 369
1) These measures include discontinued operations.
2) Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA’); adjusted net earnings; adjusted basic earnings per share; free cash
flow; cash cost per tonne of ore processed; all-in sustaining cost per ounce of gold; and cash cost per tonne of complex concentrate smelted, net of by-
product credits are not defined me asures under International Financial Reporting Standards (“IFRS”). Refer to the “Non -GAAP Financial Measures”
section of the Management’s Discussion and Analysis for the three and nine months ended September 30, 2021 (the “MD&A”) for more details, including
reconciliations to IFRS measures.
Third Quarter Operating Highlights
In the third quarter of 2021, the Company achieved strong operating performance at Chelopech and Ada Tepe.
Production at Chelopech was lower than the third quarter of 2020, as a result of mining lower grade zones. At
Ada Tepe, gold production was better than the third quarter of 2020 as a result of higher gold grades. The
Tsumeb smelter delivered performance that was in line with the third quarter of 2020, but below expectations
as a result of a water leak in the off gas system. With solid performance in the first nine months of the year, the
Company remains on track to meet its 2021 guidance for metals production.
Net Earnings and Adjusted Net Earnings
Net earnings attributable to common shareholders from continuing operations in the third quarter and first nine
months of 2021 were $50.4 million ($0.27 per share) and $138.6 million ($0.75 per share), respectively,
compared to $55.2 million ($0.31 per share) and $148.9 million ($0.83 per share) in the corresponding periods
in 2020.
Net earnings attributable to common shareholders from continuing operations in the third quarter and first nine
months of 2021 and 2020 were impacted by unrealized losses on Sabina Gold and Silver Corp. (“Sabina”)
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special warrants and deferred income tax adjustments not related to current period earnings, both of which are
not reflective of the Company’s underlying operating performance and are excluded from adjusted net earnings.
Adjusted net earnings in the third quarter of 2021 were $52.5 million ($0.28 per share) compared to $51.6
million ($0.28 per share) in the corresponding period in 20 20 due primarily to lower treatment charges at
Chelopech and higher realized copper prices, partially offset by lower volumes of metal sold and higher
operating expenses.
Adjusted net earnings in the first nine months of 2021 were $ 150.6 million ($0.82 per share) compared to
$144.3 million ($0.80 per share) in the corresponding period in 2020 due primarily to higher realized metal
prices, lower share-based compensation and lower treatment charges at Chelopech , partially offset by a
planned maintenance shutdown at Tsumeb in the first quarter of 2021, lower volumes of metal sold and higher
operating expenses.
Adjusted EBITDA
Adjusted EBITDA in the third quarter and first nine months of 2021 was $85.8 million and $252.6 million,
respectively, compared to $86.3 million and $244.5 million in the corresponding periods in 2020 reflecting
the same factors that affected adjusted net earnings, except for interest, income tax, depreciation and
amortization, which are excluded from adjusted EBITDA.
Production, Delivery and Cost Measures
Gold contained in concentrate produced in the third quarter and first nine months of 2021 decreased by
10% to 71,755 ounces and by 3% to 227,141 ounces, respectively, relative to the corresponding periods in
2020, due primarily to mining lower grade zones at Chelopech in the third quarter of 2021, partially offset
by higher gold grades at Ada Tepe.
Copper production in the third quarter and first nine months of 2021 decreased by 9% to 8.3 million pounds
and by 9% to 25.5 million pounds, respectively, relative to the corresponding periods in 2020, due primarily
to mining lower grade zones in the third quarter of 2021, partially offset by higher copper recoveries.
Payable gold in concentrate sold in the third quarter of 2021 of 66,234 ounces was 4% lower than the
corresponding period in 2020 due primarily to mining lower grade zones at Chelopech and lower gold
recoveries at Ada Tepe, partially offset by higher gold grades at Ada Tepe. Payable copper in concentrate
sold in the third quarter of 2021 of 7.8 million pounds was 3% higher than the corresponding period in 2020
due primarily to the timing of deliveries.
Payable gold in concentrate sold in the first nine months of 2021 of 205,231 ounces was comparable to the
corresponding period in 2020. Payable copper in concentrate sold in the first nine months of 2021 of 24.5
million pounds was 4% lower than the corresponding period in 2020 due primarily to lower metal production,
partially offset by the timing of deliveries.
Complex concentrate smelted at Tsumeb during the third quarter of 2021 of 55,137 tonnes was comparable
to the corresponding period in 2020. Complex concentrate smelted at Tsumeb during the first nine months
of 2021 of 137,773 tonnes was 23% lower than the corresponding period in 2020 due primarily to the
planned Ausmelt furnace maintenance shutdown, which was completed during the first quarter of 2021.
Cost of sales in the third quarter of 2021 of $ 87.5 million was $ 7.6 million higher than the corresponding
period in 2020 due primarily to higher local currency operating expenses in Bulgaria reflecting higher prices
for electricity and direct materials. Cost of sales in the first nine months of 2021 of $263.0 million was $13.3
million higher than the corresponding period in 2020 due primarily to higher local currency operating
expenses in Bulgaria and higher royalties at Ada Tepe reflecting a higher profit -based royalty rate, and a
weaker U.S. dollar, partially offset by lower local currency operating expenses at Tsumeb due primarily to
lower volumes of complex concentrate smelted and lower depreciation.
All-in sustaining cost per ounce of gold in the third quarter of 2021 of $ 701 was 10% higher than the
corresponding period in 2020 due primarily to higher local currency operating expenses in Bulgaria, higher
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cash outlays for sustaining capital expenditures and lower volumes of gold sold, partially offset by higher
by-product credits reflecting higher realized copper prices and lower treatment charges at Chelopech as a
result of a higher proportion of gold-copper concentrate deliveries to third party smelters.
All-in sustaining cost per ounce of gold in the first nine months of 2021 of $ 621 was 5% lower than the
corresponding period in 2 020 due primarily to higher by -product credits reflecting higher realized copper
prices, partially offset by higher local currency operating expenses in Bulgaria and a stronger Euro relative
to the U.S. dollar.
Cash cost per tonne of complex concentrate s melted in the third quarter of 2021 of $ 393 was $14 lower
than the corresponding period in 2020 due primarily to lower local currency operating expenses and higher
acid by-product credits, partially offset by a stronger ZAR relative to the U.S. dollar.
Cash cost per tonne of complex concentrate smelted in the first nine months of 2021 of $ 492 was $123
higher than the corresponding period in 2020 reflecting the fixed cost nature of the facility and the impact
of lower volumes of complex concentrate smelted resulting from the maintenance shutdown during the first
quarter of 2021, combined with a stronger ZAR relative to the U.S. dollar , partially offset by lower local
currency operating expenses.
A table comparing production, delivery and cash cost measures for the third quarter and first nine months
of 2021 against 2021 guidance can be found on page 9 of this news release.
Cash Provided from Operating Activities
Cash provided from operating activities in the third quarter of 2021 of $ 41.0 million was comparable to the
corresponding period in 2020 and consistent with earnings before taxes, due primarily to an unfavourable
period over period change in working capital mainly related to a decrease in accounts payable and accrued
liabilities, and higher income taxes paid , offset by the prepaid forward gold sales agreement at Ada Tepe
being fully satisfied with the final delivery in December 2020.
Cash provided from operating activities in the first nine months of 2021 of $164. 3 million was $37.9 million
higher than the corresponding period in 2020 and higher than the $3.8 million increase in earnings before
income taxes, due primarily to the prepaid forward gold sales agreement at Ada Tepe being fully satisfied
with the final delivery in December 2020, and a favourable period over period change in working capital,
partially offset by higher income taxes paid.
During the third quarter and first nine months of 2020, Ada Tepe delivered 6,992 ounces and 27,094 ounces
of gold, respectively, pursuant to the prepaid forward gold sales arrangement which resulted in $9.6 million
and $37.1 million of deferred revenue being recognize d in revenue during the third quarter and first nine
months of 2020, respectively, with no corresponding impact on cash as these deliveries were in partial
satisfaction of the $50.0 million of upfront proceeds received in 2016. In December 2020, the Compan y
completed its final delivery of gold under this arrangement.
For a detailed discussion on the factors affecting cash provided from operating activities, refer to the
“Liquidity and Capital Resources” section contained in the MD&A.
Free Cash Flow
Free cash flow in the third quarter of 2021 was $68.5 million compared to $61.8 million in the corresponding
period in 2020 due primarily to the fulfillment of the prepaid forward gold sales agreement at Ada Tepe in
December 2020, partially offset by higher income taxes paid.
Free cash flow in the first nine months of 2021 was $186.6 million compared to $ 172.1 million in the
corresponding period in 2020 due primarily to higher realized gold and copper prices including the fulfillment
of the prepaid forward gold sales agreement at Ada Tepe in December 2020, partially offset by lower
volumes of complex concentrat e smelted as a result of the maintenance shutdown at Tsumeb in 2021 ,
higher cash outlays for sustaining capital expenditures and higher income taxes paid.
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Capital expenditures
Capital expenditures incurred during the third quarter and first nine months of 2021 were $15.0 million and
$49.9 million, respectively, compared to $ 12.4 million and $ 33.6 million in the corresponding periods in
2020.
Sustaining capital expenditures incurred during the third quarter and first nine months of 2021 were $10.9
million and $40.2 million, respectively, compared to $11.4 million and $28.5 million in the corresponding
periods in 2020. The increase for the first nine months of 2021 was due primarily to the planned
maintenance shutdown at Tsumeb in the first quarter of 2021 and accelerated grade control drilling at Ada
Tepe initiated in September 2020 . Growth capital expenditures incurred during the third quarter and first
nine months of 2021 were $ 4.2 million and $ 9.6 million, respectively, compared to $ 1.0 million and $ 5.1
million in the corresponding periods in 2020, due primarily to the costs related to the Timok and Loma Larga
gold projects.
Loma Larga gold project, Ecuador
In the third quarter of 2021, DPM completed the acquisition of the high-quality, advanced stage Loma Larga
gold project in Ecuador. Based on the feasibility study (“FS”) completed in 2020 by INV, Loma Larga has the
potential to produce an annual average of approximately 200,000 gold ounces in its first five years of
operation. Life of mine production is estimated to be approximately 170,000 gold ounces per year at an
attractive all-in sustaining cost of approximately $630 per ounce of gold, which continues to support DPM’s
peer-leading cost profile.
Following closing of the acquisition, the Company has been focused on integration activities, stakeholder
engagement and a review of the technical studies and permitting schedule. DPM is targeting completion of
a revised FS in 2022, and has commenced scoping for the FS optimization work as well as the design of a
metallurgical test program , the results of which will be incorporated into the revised FS. The Company is
also progressing discussions in respect of an investor protection agreement with the government of Ecuador.
Based on the revised permitting schedule and the initial positive re sponse from stakeholders, DPM is
targeting receipt of major environmental permits towards the end of 2022, followed by finalization of the
exploitation agreement and construction permits.
For more information , including key assumptions, risks and paramet ers relating to the FS, refer to the
technical report “NI 43 -101 Feasibility Study Technical Report, Loma Larga Project, Azuay Province,
Ecuador” dated April 8, 2020, available on INV’s profile at www.sedar.com.
Timok gold project, Serbia
On February 23, 2021, DPM released the positive results of a pre -feasibility study (“PFS”) on the Timok
gold project and initiated a FS . The project is currently expected to produce approximately 547,000 gold
ounces over an eight-year mine life, with an average annual gold production of 80,000 ounces for the first
six years, at an all-in sustaining cost of $693 per ounce of gold (life of mine average). Initial capital is
currently estimated to be $211 million, with several initia tives underway directed at reducing the initial
capital estimate and optimizing overall economics to be evaluated as part of the FS. The PFS focused on
the oxide and transitional portion of the project’s Mineral Resource, with additional upside potential f rom
the sulphides to be considered in parallel with the FS following further metallurgical test work. The results
of the FS are planned to be released in the second quarter of 2022.
For additional details, including key assumptions, risks and parameters relating to the PFS refer to the news
release entitled “Dundee Precious Metals Announces Positive Pre-Feasibility Study and Encouraging New
Exploration Results for the Timok Gold Project in Serbia” dated February 23, 2021 and the Technical Report
entitled “NI 43 -101 Technical Report, Timok Project, Pre -Feasibility Study, Zagubica, Serbi a” effective
March 30, 2021, which have been posted on the Company’s website at www.dundeeprecious.com and
have been filed on SEDAR at www.sedar.com.
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Exploration
At Chelopech, significant effort during the quarter was dedicated towards testing conceptual targets within
the Brevene exploration licence as well as the completion of scout drilling at the Vozdol, Petrovden and
Sharlo Dere near-mine prospects. As anticipated, the Company’s application for a one -year extension to
the Sveta Petka exploration licence was approved in November 2021, allowing DPM to commence work
related to the commercial discovery phase. A 5,000 metre drilling campaign at Sveta Petka is anticipated
to begin in the first quarter of 2022.
During the third quarter of 20 21, the geological activities at Ada Tepe were focused on an extensive
targeting delineation campaign that encompassed the Surnak, Skalak, Synap and Kuklitsa prospects of the
Khan Krum mining concession area, as well as Lada, Chiirite and a newly granted Krumovitsa exploration
licence. This included systematic geological mapping, rock sampling and trenching, as well as ground
electrical, radiometric and seismic surveys.
Following completion of advanced exploration activities at Timok, the final geological report and request of
retention rights were submitted to the Serbian authorities and a three -year retention period has been
granted. A ground magnetics survey is currently underway and drilling commenced at the Umka licence to
test the potential for gold-rich skarn/manto mineralization similar to Coka Rakita.
In Ecuador, a review of the mineral potential and the legal, administrative and social obligations is underway
in order to develop a strategy for the development of the exploration concessio ns held by DPM. An
exploration program consisting of geophysical surveys (ground or airborne), prospecting, mapping and
sampling will be completed in the coming months to determine precise drilling targets and subsequent
activity.
Financial Position and Liquidity
As at September 30, 2021, the Company had cash and short term investment s of $ 269.5 million,
investments valued at $48.5 million primarily related to its 8.9% interest in Sabina, as well as $150.0 million
of available capital under its RCF, and no debt.
Capital Allocation – INV Acquisition, Share Repurchases and Declaration of Dividend
As part of its strategy, the Company adheres to a disciplined capital allocation framework that is based on
three fundamental considerations – balance sheet strength, reinvestment in the business, and the return of
capital to shareholders.
INV acquisition
On July 26, 2021, the Company acquired all of the issued and outstanding shares it did not already own of
INV, subsequently renamed DPM Ecuador Holdings Inc. , which owns INV Minerales Ecuador S.A., the
principal assets of which are comprised of the Loma Larga gold project and certain other exploratio n
licences. This transaction was accounted for as an asset acquisition and the total consideration for the
acquisition consisted of: i) 0.0910 of a DPM common share for each INV common share acquired for a total
of 10,664,501 DPM common shares at a market price of $5.72 (Cdn$7.19) per share with an aggregate
value of $61.0 million; ii) 1,119,728 DPM stock options with a fair market value of $2.4 million in exchange
for 12,304,700 outstanding INV stock options which vested immediately as at the date of acqui sition; and
iii) transaction costs of $2.5 million. The total consideration was allocated primarily to the exploration and
evaluation assets related to the Loma Larga gold project. This acquisition leverages DPM’s proven
strengths in developing world -class assets and applying industry -leading ESG solutions to unlock the
significant potential of the Loma Larga gold project.
Share repurchases under the NCIB
Effective March 2, 2021, DPM renewed its NCIB to repurchase certain of its common shares through the
facility of the TSX. The number of shares that can be purchased during the period of the NCIB will not
exceed 9,000,000 common shares, being approximately 5% of the outstanding shares as of February 23,
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2021. The actual timing and number of shares that may be purchased pursuant to the NCIB will be subject
to DPM’s ongoing capital requirements and management’s view that, from time to time, DPM’s shares may
trade at prices well below the underlying value of the Company and during these periods the repurchase of
shares represents an excellent opportunity to enhance shareholder value.
During the third quarter of 2021 , the Company purchased 1,571,500 shares, of which 1,465,100 shares
were cancelled as at September 30, 2021 with the remaining shares cancelled in October 2021. The total
cost for these purchases was $9.5 million at an average price of $6.04 (Cdn$7.65) per share.
Declaration of dividend
On February 11, 2021, May 5, 2021 and July 29, 2021, the Company declared a quarterly dividend of $0.03
(2020 – $0.02) per common share to shareholders of record on March 31, 2021, June 30, 2021 and
September 30, 2021, respectively, resulting in total divi dend distributions of $16. 7 million (2020 – $10.9
million).
On November 11, 2021, the Company declared a dividend of $0.03 per common share payable on January
17, 2022 to shareholders of record on December 31, 2021.
The Company’s dividend has been set a t a level that is considered to be sustainable based on the
Company’s free cash flow outlook and is expected to allow the Company to build additional balance sheet
strength to support the estimated capital funding associated with Loma Larga, Timok and othe r growth
opportunities, which represent a key element of DPM’s strategy. The declaration, amount and timing of any
future dividend are at the sole discretion of the Board of Directors and will be assessed based on the
Company’s capital allocation framework, having regard for the Company’s financial position, overall market
conditions, and its outlook for sustainable free cash flow, capital requirements, and other factors considered
relevant by the Board of Directors.
2021 Guidance
Following strong performance in the first nine months of the year, DPM is on track to meet its original
guidance with respect to metals production and all-in sustaining cost per ounce of gold in 2021, including
gold production of 271,000 to 317,000 ounces and copper production of 34 to 39 million pounds, and all-in
sustaining cost per ounce of gold of $625 to $695.
Tsumeb’s guidance in respect of complex concentrate smelted of 200,000 to 220,000 tonnes has now been
adjusted to a range of 195,000 to 200,000 tonnes to reflect unplanned maintenance downtime as a result
of a water leak in the off gas system during the third quarter of 2021.
Cash cost per tonne of ore processed guidance for Chelopech and Ada Tepe has been updated to $46 to
$48 and $52 to $55, respectively, up from the original guidance of $42 to $45 and $46 to $50 , reflecting
recent price increases for electricity in Bulgaria.
Sustaining capital expenditures for 2021 are now expected to range between $ 52 million and $66 million,
down from the range of $56 million to $72 million in the original 2021 guidance, due to the timing of Tsumeb
capital expenditures and certain projects related to corporate digital initiatives.
Growth capital expenditures for 2021 are now expected to range between $17 million and $24 million, which
have been lowered from the range of $21 million to $28 million in the previous 2021 guidance, due to the
timing of spend related to Tsumeb and the Timok gold project.
For additional information regarding the Company’s detailed guidance for 2021, please refer to the “Three-
Year Outlook” section of the MD&A.
COVID-19
To date, with the proactive measures taken by each of the Company’s operations, the COVID-19 pandemic
has had minimal impact on DPM’s production. DPM is closely monitoring the COVID -19 situation and has
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put measures in place to safeguard the health of its workforce and support the continuity of its operations.
Given the highly uncertain and evolving nature of this situation, the Company is not able to reliably estimate
the likelihood, timing, duration, severity and scope of this pandem ic and the potential impact it could have
on the Company’s future operating and financial results. As a result, the 2021 guidance is predicated on
the COVID-19 pandemic continuing to be effectively managed with minimal impact on DPM’s operations.
For additional details on COVID-19, including the related risks faced by the Company, refer to the “Overview
– Operational and Financial Highlights” and “Risk and Uncertainties” sections contained in th e MD&A.
(1) Adjusted net earnings, adjusted basic earnings per share, adjusted EBITDA, average realized gold and copper prices, all-in
sustaining cost per ounce of gold, cash cost per tonne of complex concentrate smelted, net of by-product credits, free cash flow, and
growth and sustaining capital expenditures are Non-GAAP measures and have no standardized meaning under IFRS. Presenting
these measures from period to period helps management and investors evaluate earnings and cash flow trends more readily in
comparison with results from prior periods. Refer to the “Non-GAAP Financial Measures” section of the MD&A for further discussion
of these items, including reconciliations to IFRS measures.