Dundee Treasured Metals, Inc. (OTCPK:DPMLF) Q1 2019 Earnings Convention Name Could 10, 2019 9:00 AM ET
Janet Reid – Supervisor, IR
Richard Howes – President, CEO & Director
Hume Kyle – EVP & CFO
David Rae – EVP & COO
Convention Name Individuals
Jacob Willoughby – Beacon Securities Restricted
Good day, girls and gents, and welcome to the Dundee Treasured Metals First Quarter 2019 Analyst Convention Name. [Operator Instructions]. As a reminder, this convention name is being recorded.
I might now wish to introduce your host for right this moment’s convention, Ms. Janet Reid. Ms. Reid, it’s possible you’ll start.
Good morning, everybody. I am Janet, the Supervisor of Investor Relations, and welcome to Dundee Treasured Metals First Quarter Convention Name. With me right this moment are Rick Howes, President and CEO; and Hume Kyle, Chief Monetary Officer, who will every touch upon the quarter; in addition to David Rae, Chief Working Officer; Nikolay Hristov, SVP of Sustainable Improvement; and John Lindsay, SVP of Tasks, who’re right here right this moment to help with answering questions following our formal remarks. After shut of enterprise yesterday, we launched our first quarter consequence, and hope you had a possibility to evaluate our materials.
All forward-looking data offered throughout this name is topic to the forward-looking qualification, which is detailed in our information launch and included in full for the needs of right this moment’s name. Sure monetary measures referred to throughout this name aren’t measures acknowledged beneath IFRS and are known as non-GAAP measures. These measures don’t have any standardized meanings beneath IFRS and might not be akin to related measures introduced by different corporations. The definitions established and calculations carried out by DPM are based mostly on administration’s cheap judgment and are constantly utilized.
These measures are supposed to supply extra data and shouldn’t be thought-about in isolation or as an alternative choice to measures ready in accordance with IFRS. Please confer with the non-GAAP monetary measures part of our most up-to-date MD&A for reconciliations of those non-GAAP measures. Please word that, except in any other case acknowledged, operational and monetary data communicated throughout this name have typically been rounded and any references to 2018 pertain to the comparable interval in 2018.
On this morning’s name, Rick will touch upon our first quarter working outcomes in addition to the progress being made on our capital initiatives and exploration packages for the quarter. Hume will then present an summary of our first quarter monetary outcomes.
With that, I am going to flip the decision over to Rick.
Thanks, Janet, and hey, everybody, and thanks for becoming a member of us right this moment for our first quarter convention name. I am happy to offer you an replace on the primary quarter outcomes and progress on our key initiatives and initiatives. The underwriting efficiency for the quarter was stable from each operations. Total monetary outcomes for the primary quarter had been impacted by a number of gadgets not reflective of the corporate’s underlying working efficiency, with probably the most vital being a $5.eight million mark-to-market adjustment on share-based compensation because of the improve within the share worth. This resulted in reporting an earnings loss per share of $Zero.01 and a money stream per share of $Zero.09.
We noticed good Q1 efficiency in earnings from each Chelopech and Tsumeb in keeping with expectations. With the development at Krumovgrad now accomplished and first gold focus reported in March, we count on to achieve business manufacturing this quarter. This may end in a a lot stronger second half to the 12 months.
With many of the Krumovgrad capital spending now full, our steadiness sheet stays robust. On the finish of the quarter, we had debt of solely $29 million, money of $14.four million and an undrawn revolving credit score facility of $234 million. We count on to begin constructing money place within the second half of the 12 months. We noticed robust quarter-on-quarter transfer up within the gold worth to a mean realized worth of $13.01 from $12.28 in This autumn. Copper costs had been comparatively unchanged, with a mean realized copper worth of $2.77.
Chelopech produced 43,000 ounces of gold and eight million kilos of copper at an all-in sustaining prices of $817 an oz. The decreases in gold and copper manufacturing had been primarily – due primarily to decrease gold and copper grades, which had been as anticipated and in keeping with the mine plan. Gold grades are anticipated to be on this vary for the remaining quarters, and copper grades are anticipated to be considerably greater within the subsequent two quarters. Now we have quite a few key enchancment initiatives underway this 12 months that can improve revenues and reduce prices, together with drill and blast optimization and the transition from ANFO to emulsion explosives, our autonomous drone survey, additional mill optimization, transfer to built-in dynamic planning and execution with MineRP and the introduction of a digital sensible middle for improved choice making. We proceed with our funding in exploration in and round Chelopech to extend sources and reserves.
In mine useful resource, growth drilling totaled 14,000 meters within the quarter, concentrating on the higher ranges of Block eight and Targets 148 and 700, with the purpose to broaden the present ore extents and permit conversion of mineral sources into mineral reserves. Additional to this, the areas down-plunge of Block 147 and Goal ‘North’ had been additionally drilled in the course of the first quarter. On the regional exploration program round Chelopech, a complete of two,862 meters, diamond drilling continued from the underground positions, alongside the 1.5-kilometer lengthy Southeast Breccia Pipe Zone and from floor on the Krasta venture situated 2 kilometers northeast of the mine. Krasta now has 18 of 19 holes drilled, hitting a mineralization in a brand new zone of shallow copper gold mineralization over a strike size of 300 meters between 130 and 500 meters from floor. This might be additional examined with drilling this summer time to find out the [indiscernible] floor as a possible open pit useful resource.
At Tsumeb, advanced focus smelted in the course of the quarter of 2019 was 62,822 tonnes. It is a report first quarter efficiency the place seasonal energy grid instability in the course of the wet season sometimes affect operations. At Tsumeb, that was efficiently mitigated with quite a few measures taken. With continued enhancements in temperature stability of the furnace operations, we anticipate reaching a report 18-month lagging line between rebuilds, which might imply the annual upkeep shutdown would happen in This autumn 2019, and we’ll not see a serious upkeep shutdown once more in 2020. Money value per tonne of advanced focus smelted, internet of by-product credit, via the primary quarter of 2019 of $370 was $129 decrease than the corresponding interval of 2018, due primarily to greater volumes of advanced focus smelted and the outcomes of quite a few cost-saving initiatives.
We proceed to make progress lowering the secondary copper stock that accrued in the course of the development and commissioning of the brand new asset deliberate, copper converters. We have now diminished stock by 2/three from the height stage in 2016. This discount will proceed via 2019 and can end in a discount in stockpile curiosity and permit greater throughput capability for contemporary concentrates.
We continued to advance the smelter enlargement venture to extend the throughput of advanced focus to as a lot as 370,000 tonnes every year. The feasibility examine was accomplished within the fourth quarter of 2016 and confirmed the strong venture economics, with an estimated implementation capital value of roughly $52 million. The scope of the venture contains the rotary holding furnace, extra cooling and different upgrades to the Ausmelt furnace in addition to upgrades to the slag mill space. Work to safe the mandatory permits to help this deliberate improve in manufacturing is progressing. We are going to submit an up to date ESIA for approval this quarter. Discussions are ongoing for potential new sources of advanced focus feed to fill this expanded capability.
As of March 31, 2019, development of the Krumovgrad venture was considerably accomplished. First focus manufacturing was achieved in March, as deliberate. Mining of ore and waste continued via the primary quarter of 2019, with 71,000 tonnes of waste and 16,000 tonnes of ore blasted and excavated. Ore was bought to the ore stockpile and 600 tonnes of low-grade ore was fed to the plant in the course of the scorching commissioning course of.
Presently, the ramp-up to business manufacturing goes effectively. We’re nonetheless feeding lower-grade materials via the plant. We are actually working round the clock operations, and throughput is already reaching the design charge. We’re now reaching 60% to 70% of goal recoveries, with a number of days really hitting the goal, which is definitely sooner than we anticipated.
We’re assured that we are going to attain business manufacturing this quarter. Filling of the primary rock cell with tailings within the IMWF, the built-in mine waste facility, is accomplished and can now be monitored to verify the design consolidation charge. Demobilization of web site development crews is underway.
Spending of $152 million have been incurred to the top of March, with a further $12 million to $14 million forecast spending remaining to finish. The mixture value of the venture is now anticipated to be between $164 million and $166 million in comparison with the unique estimate of $178 million.
Exploration has recognized quite a few satellite tv for pc deposits inside a number of kilometers of Krumovgrad. We accomplished section 2 drilling program for the Surnak satellite tv for pc deposit situated four kilometers to the west of Krumovgrad open pit in This autumn. A most important mineral useful resource estimate, together with metallurgical check work is underway, and we count on to finish this work and launch the leads to Q3. Drilling on the opposite close by satellite tv for pc deposits will proceed in 2019 to look to increase the lifetime of the Krumovgrad venture.
In the course of the first quarter of 2019, geological mapping, trenching and soil sampling had been carried out to outline extra gold targets on Chiirite, Elhovo and Lada exploration licenses. On the Chatal kaya high-grade vein prospect on the Chiriite license, roughly 25 kilometers northeast of Krumovgrad, a three,000-meter drill marketing campaign will begin within the second quarter. On September 24, 2018, we introduced the outcomes of the up to date mineral useful resource estimate for the Timok gold venture in Serbia. This included complete – indicated mineral sources of 46.9 million tonnes at 1.32 grams gold or 1.96 million ounces. It contains oxides-indicated mineral useful resource of 21.eight million tonnes at 1.06 grams of gold or 742,000 ounces of gold and transitional-indicated mineral sources of 9.2 million tonnes at 1.15 grams gold or 338,000 ounces.
Internet adjustments in comparison with the 2017 mineral useful resource estimate present a 35% improve in tonnes and a 16% improve in contained ounces. The rise in indicated mineral sources in comparison with the 2017 mineral useful resource estimate is attributable to the up to date interpretations of the oxide and transitional weathering domains and higher recoveries indicated from the vertical column leach check processing oxide and transitional materials. The inclusion of oxide and transitional mineralization throughout the conceptual pit optimization examine has decrease cutoffs, which, in flip, has elevated the constrained mineral sources. Primarily based on this up to date mineral useful resource estimate, now we have initiated a scoping examine for Timok. And relying on the outcomes of the scoping examine, we count on to launch a preliminary financial evaluation on this quarter. These research will deal with the preliminary economics of the oxide and transitional materials to be constrained in separate open pit shells in addition to the potential for subsequent growth of the sulfide useful resource.
Improvement of a allowing and approvals plan incorporating the ESIA course of and approvals in addition to all extra permits and approvals was initiated within the fourth quarter of 2018. Following the optimistic outcomes from the metallurgical testwork program performed on the Timok oxide and conventional samples in the course of the first quarter of 2018, additional samples had been collected from the varied domains and submitted for metallurgical testwork in the course of the fourth quarter. Outcomes from this testwork program might be included within the scoping examine. Exploration plans for 2019 are being developed to establish extra high-quality targets to broaden the near-surface oxide sources.
On the Bigar Hill and Korkan deposit, outcomes from near-surface drilling in the course of the second and third quarters of 2018 indicated good potential for extra sources exterior the brand new useful resource mannequin. Outcomes of holes drilled to the west of Bigar Hill mineral useful resource intersected 28 meters at three grams gold from 85 meters downhole. On the northeast facet of the Bigar Hill deposit, we intersected 35 meters at 2 grams gold from 246 meters downhole in oxidized and strongly brecciated Cretaceous limestone.
On the Korkan deposit situated 25 to 50 meters northwest of the mineral useful resource, we intersected 2 intervals together with 16 meters at 1.7 grams gold in an oxidized part from 65 to 81 meters downhole adopted by 21 meters of Zero.7 grams from 93 meters to 114 meters in a transitional part. These drill outcomes might be adopted up in the summertime of 2019 drill program, which is able to embody holes for geotechnical, hydrogeological knowledge to help the pre-feasibility examine.
Our first testing of using AI for exploration concentrating on might be with the Timok knowledge set. This work is underway, with the primary targets generated anticipated to be this quarter.
On the Malartic three way partnership, a diamond drill program consisting of 5,800 meters in 9 holes, began in early March 2019. Drill targets happen alongside the Parfouru gold-bearing deformation zone on the Revillard and Malrobic prospects and close to final 12 months’s intersections of 5.5 grams over 2 meters and seven.2 grams gold over three.three meters. The targets are being examined each laterally and at roughly 300 to 400 meters from the floor. A complete of three,700 – three,774 meters in 6 holes was accomplished by the top of March. In the course of the second quarter of 2019, the drill program might be accomplished, outcomes might be interpreted and the summer time exploration program, together with validation of soil anomaly recognized final fall, might be deliberate.
With MineRP, we see nice potential with our funding as a novel new enterprise integration digital platform designed for the mining business. We, ourselves, are adopting MineRP in addition to many different digital applied sciences to remodel our enterprise.
The intent now we have with MineRP is to introduce new planning enhancement and allow the clever use of information. Key advantages anticipated from this initiative are knowledge unification to a single platform, fast parametric life-of-mine planning and sequencing, real-time monitoring of efficiency plan versus precise money to raised reply to interruptions and higher decision-making. And MineRP is making good progress at introducing this distinctive platform that marries the science of mining to the enterprise of mine – to the mining business with good curiosity and uptake. Six main worldwide corporations have signed on to this new software program platform, and the corporate is in superior discussions with 12 different corporations. We count on development in revenues and earnings to start within the second half of 2019.
The robust outcomes from Tsumeb and Chelopech, together with the ramp up of manufacturing that’s now underway at Krumovgrad, displays the distinctive progress our workforce has made to enhance the efficiency of our operations and advance our development initiatives. Tsumeb continued to enhance and contribute to the free money stream of our enterprise, with additional upside doable by growing throughput and lowering value additional, which is the main target for 2019 and past. With vital near-term development and free money stream coming from our Krumovgrad venture starting within the second half previous 12 months, we signify an actual development and worth funding alternative for buyers.
We count on to construct a money place, which is able to begin this 12 months and develop quickly over the subsequent a number of years. In dialogue with our Board, now we have adopted a disciplined allocation framework – capital allocation framework that can steadiness reinvestment within the enterprise, whereas returning capital to shareholders as soon as we’re ready to take action.
Thanks. I am going to now flip the decision over to Hume, who will evaluate the monetary outcomes and the 2019 steering. Following which, we’ll open the ground to questions.
Thanks, Rick. From an earnings perspective, DPM reported adjusted internet lack of $Zero.01 per share relative to Zero in 2018 and adjusted EBITDA of $17 million, down from $20 million, in 2018. These decreases had been pushed within the first occasion by the mark-to-market affect related to DPM’s robust efficiency, which accounted for considerably all of the shortfall relative to consensus estimates in addition to greater remedy prices, primarily associated to the unfavorable last settlements on provisionally priced focus gross sales, greater doable copper focus produced and bought because of decrease copper grades. And these had been partially offset by greater volumes from Tsumeb, greater volumes of payable gold bought from Chelopech and a stronger U.S. greenback.
From a money stream perspective, funds from operations in the course of the quarter was $16 million in comparison with $18 million in 2018. Our free money stream was $10 million in comparison with $11 million in 2018. These adjustments had been impacted by primarily the identical components that impacted adjusted EBITDA, aside from free money stream, which was additionally impacted by decrease money outlays versus sustaining capital.
Our websites’ high measures had been down each at Chelopech and Tsumeb with respect to per tonne metrics, reflecting continued stable efficiency and a stronger U.S. greenback within the case of Tsumeb greater throughput and an ongoing focus to lowering prices. Our all-in sustaining value was $817 for the quarter, up $121 million, reflecting the higher-cost gold, copper focus produced and bought because of the decrease copper grade and the mark-to-market affect related to the robust share efficiency from DPM in the course of the quarter. And these had been partially offset by greater gold grades and a stronger U.S. greenback.
With respect to capital, sustaining development capital expenditures for the quarter had been $2 million and $18 million, respectively, for an mixture spend of $20 million, down from $30 million in 2018, due primarily to the decrease spend at Krumovgrad and the timing of every site-sustaining capital expenditure plans. At March 31, our monetary place was robust, with $248 million in money sources. And with Krumovgrad manufacturing now ramping up and DPM shifting in direction of a interval of great free money stream technology, we’re presently within the technique of executing a number of amendments to the long-term credit score facility that, amongst different issues, will lengthen the power to 2022, cut back borrowing prices and cut back the combination measurement of the power from $275 million to $175 million. These amendments are anticipated to be absolutely executed in Could 2019.
From a threat perspective, we have additionally entered right into a sequence of hedges in respect of the Namibian greenback to cut back Tsumeb’s publicity to overseas foreign money actions and to lock in a charge that helps free money stream technology for the operation. At March, we would hedged roughly 80% of Tsumeb’s Namibian greenback working prices over the steadiness of the 12 months utilizing a Zero-cost possibility technique that offered for, on common, a minimal and most trade charge of ZAR 14 and ZAR 15.46. All of us hedged roughly 25% to Tsumeb’s 2020 Namibian working publicity, is in the same technique that on common offered the minimal and most trade charge of ZAR 14.47 and ZAR 16.09. This distinction to a spot charge right this moment of ZAR 14.20.
In the course of the quarter, we additionally amended our pay as you go ahead gold gross sales association, which you will recall was entered into in 2016 as a part of our derisking technique to help the development of the Krumovgrad venture. This modification primarily shifts the primary 6 months of deliveries to realign them when the venture is anticipated to be absolutely ramped up and gives an ample cushion within the occasion we expertise any unexpected delays. Because of this, deliveries are scheduled – that had been scheduled initially from Could to October will now be delivered from November ’19 to April 2020. Such that, in mixture, 46,210 ounces will now be delivered over a 15-month interval commencing in November 2019, representing roughly 14% of our anticipated gold deliveries throughout that interval, and roughly 75% of deliveries occurring in 2020. By way of our outlook for 2019, we’re on observe to attain all of the acknowledged targets and as such, our steering stays unchanged from the steering we issued in February ’19, with the one caveat being that we narrowed the vary of the Krumovgrad forecast development prices.
In closing, the Krumovgrad will – as Krumovgrad strikes in direction of full operation within the second quarter, we’re coming into a interval of considerably greater gold manufacturing and free money stream. And we count on to see continued robust efficiency in our shared worth.
As Rick stated, that is going to supply the chance to poise energy in our monetary – or to additional strengthen our monetary place as there is no doubt, having a sure amount of money in right this moment’s capital-constrained market as a very good factor. It additionally gives the chance to reinvest in our enterprise, not solely to maintain, however to develop in a disciplined and accretive method; and doubtlessly introduce a sustainable dividend that returns a portion of money to our shareholders with out compromising our monetary energy or our capacity to maintain and develop the enterprise.
With that, I am going to flip the decision again over to the operator.
[Operator Instructions]. Our first query comes from Jacob Willoughby of Beacon Securities.
Congrats on a terrific quarter, particularly contemplating the decrease copper and gold grades. My – I’ve two questions. The primary one about Tsumeb. From what I can see, it had a terrific quarter, did $three.2 million in internet earnings versus a lack of $four.7 million within the year-ago quarter. Is that one thing that you just count on to form of proceed for the remainder of the 12 months?
That is David Rae. Sure, we anticipate that the present stage of efficiency goes to proceed. Should you look again in the previous few quarters, you see principally a reset within the stage of manufacturing at Tsumeb. We do anticipate that can proceed. It is largely the manufacturing charge that influences what occurs financially at this mine.
Nice. Okay. After which, in fact, that is internet of the Namibian greenback exchanges and your hedges and the whole lot like that.
Sure. Sure. As Dave stated, the actual contributors year-over-year had been actually quantity adopted by foreign money in addition to simply decrease deductions for stockpile curiosity as a result of now we have extra secondaries. We have had higher metallic publicity expertise – or we’re really experiencing restoration versus losses that we have had within the earlier years. And we’re additionally benefiting from extra favorable asset costs.
Proper. After which my solely different query was simply on the G&A growing from $9.6 million to $13.36 million. You talked about that the MineRP is included in there, however the fee this 12 months on MineRP are literally decrease. So does that greater G&A embody the stock-based compensation?
Sure. Sure. I imply the stock-based compensation is actually the entire improve, proper. They – I believe the precise affect within the quarter was a bit over $5 million or $Zero.03 per share.
[Operator Instructions]. And I am not exhibiting any additional questions right now. I might now like to show the decision again over to Rick Howes for any additional remarks.
Sure. Thanks very a lot. We’ll simply want everyone have a terrific Mom’s Day weekend, and thanks.
Thanks. Girls and gents, thanks for taking part in right this moment’s convention. This does conclude right this moment’s program, and it’s possible you’ll all disconnect. Everybody, have a beautiful day.