Dundee Precious Metals Announces 2022 Third Quarter Results; Delivers Another Strong Quarter of Free Cash Flow
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Dundee Precious Metals Announces 2022 Third Quarter Results;
Delivers Another Strong Quarter of Free Cash Flow
Toronto, Ontario, November 10, 2022 – Dundee Precious Metals Inc. (TSX: DPM) (“DPM” or the
“Company”) today announced its operating and financial results for the third quarter of 2022.
Highlights
(Unless otherwise stated, all monetary figures in this news release are expressed in U.S. dollars, and all operational and financial information contained
in this news release are related to continuing operations.)
Metals production: Produced 63,870 ounces of gold and 6.9 million pounds of copper; on-track to
achieve 2022 production guidance of 250,000 to 290,000 ounces of gold and 32 to 37 million pounds
of copper.
Complex concentrate smelted: Throughput of 63,990 tonnes at Tsumeb, a near-record level of
quarterly production.
All-in sustaining cost: Reported cost of sales per ounce of gold sold 1 of $1,209, and an all-in
sustaining cost per ounce of gold sold 2 of $991. DPM expects to achieve its 2022 guidance for all-in
sustaining cost of $750 to $890 per ounce of gold sold.
Free cash flow: Generated $30.0 million of cash from operating activities and $43.2 million of free
cash flow2.
Adjusted net earnings: Generated a net loss attributable to common shareholders from continuing
operations of $57.7 million or $0.30 per share, as a result of an $85.0 million non-cash impairment
charge in respect of Tsumeb, and adjusted net earnings 2 of $25.3 million or $0.13 per share.
Financial position: Maintained strong financial strength with $419.6 million of cash, supplemented by
a new $150.0 million revolving credit facility that includes generally more favourable terms and provides
added financial flexibility.
Returning capital to shareholders: Returned $36.5 million year-to-date to shareholders, comprised
of a quarterly dividend and share repurchases. Declared fourth quarter dividend of $0.04 per common
share payable on January 16, 2023 to shareholders of record on December 31, 2022.
Development projects: Updated feasibility study (“FS”) for Loma Larga on-track for completion by
year-end with the results expected to be released in the first quarter of 2023; received exploration
permit and initiated drill program at the high-potential Čoka Rakita prospect located nearby the Timok
gold project.
1 Cost of sales per ounce of gold sold represents total cost of sales for Chelopech and Ada Tepe, divided by total payable gold in concentrate sold. This measure
is before treatment charges, freight and by-product credits, which are reflected in revenue, while all-in sustaining cost per ounce of gold sold is net of these items.
2 All-in sustaining cost per ounce of gold sold, free cash flow, and adjusted net earnings are non-GAAP financial measures or ratios. These measures have no
standardized meanings under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other
companies. Refer to the “Non-GAAP Financial Measures” section commencing on page 13 of this news release for more information, including reconciliations to
IFRS measures.
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“Our mining operations continue to perform well, delivering gold and copper production in line with plan
while effectively managing cost pressures. As a result, we generated over $133 million of free cash flow
year-to-date and remain on track to achieve our 2022 consolidated guidance,” said David Rae, President
and Chief Executive Officer. “Our Bulgarian operations recently achieved five million hours without a lost-
time incident, a further testament to our strong operating performance and culture of prioritizing the safety
and well-being of our employees.”
“At our Loma Larga project, the revised feasibility study is on track for completion by year-end. We continue
to receive strong support from the government and to work proactively with all stakeholders involved in the
development of the project.”
Use of non-GAAP Financial Measures
Certain financial measures referred to in this news release are not measures recognized under IFRS and
are referred to as non-GAAP financial measures or ratios. These measures have no standardized meanings
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. 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. Non-GAAP
financial measures and ratios, together with other financial measures calculated in accordance with IFRS,
are considered to be important factors that assist investors in assessing the Company’s performance.
The Company uses the following non-GAAP financial measures and ratios in this news release:
mine cash cost
cash cost per tonne of ore processed
mine cash cost of sales
cash cost per ounce of gold sold
all-in sustaining cost
all-in sustaining cost per ounce of gold sold
smelter cash cost
cash cost per tonne of complex concentrate smelted
adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”)
adjusted net earnings
adjusted basic earnings per share
cash provided from operating activities, before changes in working capital
free cash flow
average realized metal prices
For a detailed description of each of the non-GAAP financial measures and ratios used in this news release
and a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the “Non-
GAAP Financial Measures” section commencing on page 13 of this news release.
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Key Financial and Operational Highlights
$ millions, except where noted
Ended September 30,
Three Months Nine Months
2022 2021 2022 2021
Revenue 128.6 162.3 416.9 475.0
Cost of sales 99.4 87.5 283.5 263.0
Impairment charge 85.0 - 85.0 -
Earnings (loss) before income taxes (53.7) 58.9 21.1 169.1
Net earnings (loss) attributable to common shareholders
from continuing operations (57.7) 50.4 2.6 138.6
Net earnings (loss) attributable to common shareholders (1) (57.7) 50.4 2.6 158.6
Basic earnings (loss) per share from continuing operations (0.30) 0.27 0.01 0.75
Basic earnings (loss) per share(1) (0.30) 0.27 0.01 0.86
Adjusted EBITDA(2) 56.4 85.8 194.5 252.6
Adjusted net earnings(2) 25.3 52.5 95.6 150.6
Adjusted basic earnings per share (2) 0.13 0.28 0.50 0.82
Cash provided from operating activities 30.0 41.1 180.3 164.3
Free cash flow(2) 43.2 68.5 133.2 186.6
Capital expenditures incurred:
Growth(3) 7.5 4.2 21.2 9.6
Sustaining(4) 11.5 10.9 41.5 40.2
Total capital expenditures 19.0 15.1 62.7 49.8
Metals contained in concentrate produced:
Gold (ounces)
Chelopech 43,051 38,434 133,796 127,951
Ada Tepe 20,819 33,321 65,893 99,190
Total gold in concentrate produced 63,870 71,755 199,689 227,141
Copper (‘000s pounds) 6,897 8,350 23,399 25,537
Payable metals in concentrate sold:
Gold (ounces)
Chelopech 36,383 33,996 112,377 108,759
Ada Tepe 20,393 32,238 64,489 96,472
Total payable gold in concentrate sold 56,776 66,234 176,866 205,231
Copper (‘000s pounds) 6,715 7,758 20,498 24,505
Cost of sales per tonne of ore processed (5):
Chelopech 76.89 53.90 67.62 58.18
Ada Tepe 134.18 114.37 126.02 112.56
Cash cost per tonne of ore processed (2):
Chelopech 50.96 43.02 49.27 44.88
Ada Tepe 55.46 53.27 54.09 49.44
Cost of sales per ounce of gold sold (6) 1,209 835 1,067 819
All-in sustaining cost per ounce of gold sold (2) 991 701 839 621
Complex concentrate smelted (tonnes) 63,990 55,137 132,287 137,773
Cost of sales per tonne of complex concentrate smelted (7) 481 584 717 690
Cash cost per tonne of complex concentrate smelted (2) 297 393 470 492
1) These measures include discontinued operations for the first nine months of 2021.
2) Adjusted 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 are non-GAAP financial measures or ratios. Refer to the “Non-GAAP Financial Measures”
section commencing on page 13 of this news release for more information, including reconciliations to IFRS measures.
3) Growth capital expenditures are generally defined as capital expenditures that expand existing capacity, increase life of assets and/or increase future earnings.
This measure is used by management and investors to assess the extent of discretionary capital spending being undertaken by the Company each period.
4) Sustaining capital expenditures are generally defined as expenditures that support the ongoing operation of the asset or business without any associated increase
in capacity, life of assets or future earnings. This measure is used by management and investors to assess the extent of non-discretionary capital spending being
incurred by the Company each period.
5) Cost of sales per tonne of ore processed represents cost of sales for Chelopech and Ada Tepe, respectively, divided by tonnes of ore processed.
6) Cost of sales per ounce of gold sold represents total cost of sales for Chelopech and Ada Tepe, divided by total payable gold in concentrate sold.
7) Cost of sales per tonne of complex concentrate smelted represents cost of sales for Tsumeb, divided by tonnes of complex concentrate smelted.
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Operating Highlights
A table comparing production, delivery and cash cost measures for the third quarter and first nine months of 2022 against 2022 guidance
is located on page 10 of this news release.
Operational performance: In the third quarter of 2022, the Company continued to deliver strong operating
performance at Chelopech and Ada Tepe, in line with management’s expectations. Gold grades at Ada Tepe
are expected to increase further in the fourth quarter as per the mine plan, and both mines remain on track to
achieve their 2022 production guidance. At Tsumeb, the operation ramped-up to full production six days into
the quarter following the planned Ausmelt maintenance shutdown, which was completed at the end of the
second quarter, and thereafter demonstrated an impressive level of productivity. This resulted in near record-
level quarterly production. Additional maintenance activities at Tsumeb are expected to result in several days
of down time at the facility, however the operation is on track to meet the lower end of its current 2022 production
guidance.
Production: Gold contained in concentrate produced in the third quarter and first nine months of 2022 of
63,870 ounces and 199,689 ounces, respectively, was 11% and 12% lower than the corresponding periods in
2021 due primarily to mining in lower gold grade zones at Ada Tepe, partially offset by higher gold head grades
at Chelopech, in line with the mine plans for both operations. Copper production in the third quarter and first
nine months of 2022 of 6.9 million pounds and 23.4 million pounds, respectively, was 17% and 8% lower than
the corresponding periods in 2021 due primarily to lower copper grades, in line with the Chelopech mine plan.
Deliveries: Payable gold in concentrate sold in the third quarter and first nine months of 2022 of 56,776 ounces
and 176,866 ounces, respectively, was in each case 14% lower than the corresponding periods in 2021
reflecting lower gold production. Payable copper in concentrate sold in the third quarter and first nine months
of 2022 of 6.7 million pounds and 20.5 million pounds, respectively, was 13% and 16% lower than the
corresponding periods in 2021 due primarily to lower copper production.
Complex concentrate: Complex concentrate smelted during the third quarter of 2022 of 63,990 tonnes was
8,853 tonnes higher than the corresponding period in 2021, as a result of strong productivity and improved
performance. Complex concentrate smelted during the first nine months of 2022 of 132,287 tonnes was 5,486
tonnes lower than the corresponding period in 2021 due primarily to unplanned downtime during the first six
months of 2022 as a result of maintenance to the off-gas and baghouse systems, partially offset by near record-
level quarterly production in the third quarter.
Cost measures: Cost of sales in the third quarter and first nine months of 2022 of $99.4 million and $283.5
million, respectively, was $11.9 million and $20.5 million higher than the corresponding periods in 2021 due
primarily to higher local currency mine operating expenses reflecting higher prices for electricity and direct
materials in Bulgaria and higher depreciation. This was partially offset by a stronger U.S. dollar and lower local
currency operating expenses at Tsumeb reflecting lower labour costs as a result of a comprehensive cost
optimization initiative.
All-in sustaining cost per ounce of gold sold in the third quarter of 2022 of $991 was 41% higher than the
corresponding period in 2021 due primarily to higher treatment charges at Chelopech as a result of a greater
proportion of concentrate deliveries to Tsumeb with a higher toll rate, lower volumes of gold sold, and higher
prices for electricity and direct materials in Bulgaria, partially offset by a stronger U.S. dollar. All-in sustaining
cost per ounce of gold sold in the first nine months of 2022 of $839 was 35% higher than the corresponding
period in 2021 due primarily to lower volumes of gold sold, higher freight and treatment charges at Chelopech,
and higher prices for electricity and direct materials in Bulgaria, partially offset by a stronger U.S. dollar.
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Cash cost per tonne of complex concentrate smelted in the third quarter of 2022 of $297 was $96 lower than
the corresponding period in 2021 due primarily to higher volumes of complex concentrate smelted, lower labour
costs, higher by-product credits reflecting higher sulphuric acid deliveries and prices and a stronger U.S. dollar.
Cash cost per tonne of complex concentrate smelted in the first nine months of 2022 of $470 was $22 lower
than the corresponding period in 2021 due primarily to higher sulphuric acid by-product credits and lower labour
costs, partially offset by lower volumes of complex concentrate smelted and higher external services primarily
related to the cost optimization initiative.
Financial Highlights
Revenue: Revenue in the third quarter of 2022 of $128.6 million was $33.7 million lower than the corresponding
period in 2021 due primarily to lower volumes of metals sold, higher treatment charges at Chelopech as a result
of increased deliveries to Tsumeb in the quarter, lower realized gold and copper prices, and lower estimated
metal recoveries at Tsumeb, partially offset by higher volumes of complex concentrate smelted. Revenue in
the first nine months of 2022 of $416.9 million was $58.1 million lower than the corresponding period in 2021
due primarily to lower volumes of metal sold and higher freight charges at Chelopech, partially offset by higher
realized metal and sulphuric acid prices and higher estimated metal recoveries at Tsumeb.
Tsumeb impairment charge: As at September 30, 2022, the carrying value of Tsumeb exceeded its estimated
recoverable amount resulting in an impairment charge of $85.0 million being recognized in the condensed
interim consolidated statements of earnings (loss), of which $84.3 million related to property, plant, and
equipment and $0.7 million related to intangible assets. This charge was primarily attributable to lower forecast
toll revenue as a result of an expected reduction in higher arsenic bearing third party concentrate feed being
received by the smelter, commencing in 2024, concurrent with when the smelter is not expected to be
processing any Chelopech concentrate. While the processing of Chelopech concentrate at other third party
smelters is expected to generate additional overall value for the Company, it will be realized through lower
treatment charges and higher margins at Chelopech rather than higher throughput and higher margins at
Tsumeb.
Net earnings (loss): Net loss attributable to common shareholders from continuing operations in the third
quarter of 2022 was $57.7 million ($0.30 per share) compared to net earnings of $50.4 million ($0.27 per share)
in the corresponding periods in 2021. Net earnings attributable to common shareholders from continuing
operations in the first nine months of 2022 were $2.6 million ($0.01 per share) compared to $138.6 million
($0.75 per share) in the corresponding periods in 2021.
Net earnings (loss) attributable to common shareholders from continuing operations in the third quarter and
first nine months of 2022 and 2021 were impacted by the Tsumeb impairment charge and a reduction in
Tsumeb’s restructuring costs related to a comprehensive cost optimization initiative, unrealized gains or losses
on Sabina Gold and Silver Corp. (“Sabina”) special warrants and deferred income tax adjustments not related
to current period earnings, all of which are not reflective of the Company’s underlying operating performance
and are excluded from adjusted net earnings.
Adjusted net earnings: Adjusted net earnings in the third quarter of 2022 were $25.3 million ($0.13 per share)
compared to $52.5 million ($0.28 per share) in the corresponding period in 2021 due primarily to lower volumes
of metal sold, higher treatment charges at Chelopech, lower realized gold and copper prices and higher local
currency mine operating expenses, partially offset by a stronger U.S. dollar.
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Adjusted net earnings in the first nine months of 2022 were $95.6 million ($0.50 per share) compared to $150.6
million ($0.82 per share) in the corresponding period in 2021. The decrease was due primarily to lower volumes
of metal sold, higher local currency mine operating expenses, higher freight charges at Chelopech, and higher
depreciation, partially offset by a stronger U.S. dollar, higher realized metal and sulphuric acid prices, lower
income taxes and higher estimated metal recoveries at Tsumeb.
Earnings (loss) before income taxes: Loss before income taxes in the third quarter of 2022 was $53.7
million compared to earnings of $58.9 million in the corresponding period in 2021. Earnings before income
taxes in the first nine months of 2022 were $21.1 million compared to $169.1 million in the corresponding period
in 2021. These changes reflect the same factors that affected net earnings (loss) attributable to common
shareholders from continuing operations, except for income tax, which is excluded.
Adjusted EBITDA: Adjusted EBTIDA in the third quarter and first nine months of 2022 was $56.4 million
and $194.5 million, respectively, compared to $85.8 million and $252.6 million in the corresponding periods
in 2021, reflecting the same factors that affected adjusted net earnings, except for interest, income tax,
depreciation and amortization, which are excluded from adjusted EBITDA.
Cash provided from operating activities: Cash provided from operating activities in the third quarter and
first nine months of 2022 of $30.0 million and $180.3 million was $11.1 million lower and $16.0 million
higher than the corresponding periods in 2021, respectively, due primarily to the same factors impacting
earnings before income taxes, excluding the non-cash impairment charge in respect of Tsumeb, as well as
timing of deliveries and subsequent receipt of cash.
For a detailed discussion on the factors affecting cash provided from operating activities, refer to the
“Liquidity and Capital Resources” section contained in the Management’s Discussion and Analysis for the
three and nine months ended September 30, 2022 (the “MD&A”).
Free cash flow: Free cash flow in the third quarter and first nine months of 2022 of $43.2 million and $133.2
million, respectively, was $25.3 million and $53.4 million lower than the corresponding periods in 2021, due
primarily to the same factors impacting earnings before income taxes, excluding the non-cash impairment
charge in respect of Tsumeb.
Capital expenditures: Capital expenditures incurred during the third quarter and first nine months of 2022
were $19.0 million and $62.7 million, respectively, compared to $15.1 million and $49.8 million in the
corresponding periods in 2021.
Sustaining capital expenditures incurred during the third quarter and first nine months of 2022 were $11.5
million and $41.5 million, respectively, comparable to the corresponding periods in 2021 of $10.9 million
and $40.2 million. Growth capital expenditures incurred during the third quarter and first nine months of
2022 were $7.5 million and $21.2 million, respectively, compared to $4.2 million and $9.6 million in the
corresponding periods in 2021, due primarily to activities related to the development of the Loma Larga and
Timok gold projects.
Financial Strength and Flexibility
For the nine months ended September 30, 2022, cash increased by $85.2 million to $419.6 million, due
primarily to earnings generated in the period as well as a favourable change in working capital, partially
offset by cash outlays for capital expenditures, dividend payments and share repurchases.
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In July 2022, DPM entered into a new four-year revolving credit facility with a consortium of four banks. The
facility matures in July 2026 and provides more flexibility and generally more favourable terms and
conditions compared with DPM’s previous revolving credit facility. Under the new facility, DPM is permitted
to borrow up to $150 million, which can be increased up to $250 million, subject to certain conditions.
Returning capital to shareholders
In line with its disciplined capital allocation framework, DPM continues to return capital to shareholders
through a sustainable quarterly dividend and periodic share repurchases under its normal course issuer bid
(“NCIB”).
During the third quarter, DPM repurchased 872,700 common shares at an average price of $4.76
(Cdn$6.13) per share. In aggregate, the Company repurchased 2,471,500 common shares during the first
nine months of the year at an average price of $5.51 (Cdn$7.05) per share for a total value of approximately
$13.6 million (Cdn$17.4 million).
During the first nine months of the year, the Company paid $22.9 million of dividends. On November 10,
2022, the Company’s Board of Directors declared a fourth quarter dividend of $0.04 per common share
payable on January 16, 2023, to shareholders of record on December 31, 2022.
During the first nine months of 2022, the Company has returned a total of $36.5 million to shareholders,
representing approximately 27% of its free cash flow during the same period.
Development Projects Update
Loma Larga, Ecuador
The Company continues to advance the revised FS for the Loma Larga project in Ecuador. This includes
progressing several trade-off studies aimed at further improving the project based on DPM’s expertise and
experience, and the design of a metallurgical test program. The work is progressing well and is targeted for
completion by the end of 2022 and the results are expected to be released in the first quarter of 2023.
During the quarter, the Company progressed discussions in respect of an investor protection agreement
with the government of Ecuador, which is expected to be in place prior to committing any significant capital
to the project.
Drilling activities at the project remain paused, pending the outcome of the appeals process related to the
decision on the Constitutional Protection Action (the “Action”). On July 20, 2022, the written decision of the
Judicial Labour Unit of Cuenca upheld the validity of the Company’s environmental permits for exploration,
confirmed that the Ministry of Water and Ecological Transition did not violate rights relating to the protection
of water and nature in granting the permits, and reaffirmed the Company’s legal rights in the mining
concessions. The court also found that the Company will be required to include the local indigenous
populations in its consultation process prior to proceeding to the exploitation phase, which DPM had already
planned as part of its development of the project, reflecting the Company’s commitment to the highest
standards of stakeholder engagement and in line with International Finance Corporation practices.
The decision of the first instance court was appealed by all parties, including (i) by the Company and the
government parties on the requirement for indigenous consultation and whether, if required, it must precede
the remaining requirements for the environmental license, including the Citizen Participation Process, and
(ii) by the plaintiffs on the finding that the grant of permits did not violate the rights of nature and the other
alleged violations. The appeal was heard by the Provincial Court of Azuay on October 14, 2022 and a
decision is pending. The Company continues to believe that the claims by the plaintiffs are without merit,
however, drilling activities at Loma Larga remain paused pending that decision. The expected timing for
receipt of the environmental license is subject to the outcome of the appeal process.
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DPM continues to receive strong support from the government and is working proactively with all
stakeholders involved in the development of the project.
Timok gold project, Serbia
The Company continues to advance and optimize the Timok FS. While the Company has seen inflationary
pressures on capital and operating budgets consistent with general industry trends, work continues to
optimize capital expenditures and the mine plan. As a result, the FS is now expected to be released in the
first quarter of 2023.
Following completion of the FS, the Company expects to focus on exploration at the Čoka Rakita target
located south-east of the Timok deposit prior to any potential further advancement of the Timok gold project.
DPM received the exploration permit for Čoka Rakita and commenced a 30,000-metre target delineation
and infill drill program in October 2022.
Exploration
At Chelopech, a total of 23,258 metres of surface exploration diamond drilling was completed during the
quarter. The brownfield exploration program continued to focus on testing the mineralization potential of
the Sharlo Dere target within the mine concession, as well as advance the intensive Mineral Resource
delineation drilling campaign on the Sveta Petka exploration licence to support the Company’s application
for a Commercial Discovery. At the Sharlo Dere prospect, drilling was focused on testing the footprint of
the prospect based on approximately 100-metre grid spacing to support Mineral Resource re-evaluation,
and metallurgical test work is currently underway.
Exploration activities at Ada Tepe focused on the completion of scout and resource extension drilling on
the mine concession and drilling at Chiirite and Dalbokata Reka exploration licences, with a total of 6,235
metres of diamond drilling completed during the quarter . Results of the drilling activity on the mine
concession provide support for the potential addition of incremental mineable material in proximity to the
pit, and DPM intends to follow-up these results with infill RC drilling.
In Ecuador, DPM completed 2,739 metres of drilling at the Tierras Coloradas concession during the
quarter. This drill program tested the high-grade low sulphidation vein system which was previously
identified in 2020. The change in status of the Tierras Coloradas project from early to advanced stage
exploration is in progress, and all regulations and authorizations required from the different Ecuadorian
authorities are expected to be received by the end of 2023.
2022 Guidance and Three-Year Outlook
With solid operating performance from the Chelopech and Ada Tepe mines, DPM is on track to meet its
guidance for 2022 for mine operations, including expected gold production of 250,000 to 290,000 ounces
and copper production of 32 to 37 million pounds. Additional maintenance activities at Tsumeb are expected
to result in several days of down time at the facility, however the operation is on track to meet the lower end of
its current 2022 production guidance of 185,000 to 200,000 tonnes of complex concentrate smelted.
The previously issued three-year outlook contained in DPM’s MD&A for the six months ended June 30,
2022 remains unchanged, with the exception of the 2022 guidance in respect of exploration expenses. This
has been increased to be between $22 million and $25 million, up from the previous guidance range of $16
million to $19 million, due primarily to higher drilling volumes in Bulgaria at Sveta Petka related to the
commercial discovery process, and at Sharlo Dere, following positive results from early scout drilling, as