Dundee Precious Metals Inc.
TSX : DPM
TSX : DPM.WT
TSX : DPM.WT.A

Dundee Precious Metals Inc.

February 17, 2010 20:19 ET

Dundee Precious Metals Reports Fourth Quarter 2009 And Year-End Results

TORONTO, ONTARIO--(Marketwire - Feb. 17, 2010) -

(All monetary figures are expressed in Canadian Dollars unless otherwise stated)

Dundee Precious Metals Inc. ("DPM" or the "Company") (TSX:DPM)(TSX:DPM.WT)(TSX:DPM.WT.A) today announced its unaudited results for the fourth quarter ended December 31, 2009. DPM reported fourth quarter net earnings of $3.7 million (basic and diluted net earnings per share of $0.04). This compares with a fourth quarter 2008 net loss of $80.0 million (basic and diluted net loss per share of $1.03).

For the year 2009, the Company had net earnings of $5.0 million (basic and diluted net earnings per share of $0.05). This compares with a net loss of $79.2 million (basic and diluted net loss per share of $1.20) for the year 2008.

"A combination of strong metal prices and improved operating performance and efficiencies at Chelopech and Deno Gold contributed to solid earnings for 2009," stated Jonathan Goodman, President and CEO, "which, when adjusted for a $6.4 million non-cash, tax-related valuation allowance, was $11.4 million. Construction of the mine/mill expansion at Chelopech is underway and on schedule for completion in the second half of 2011. In addition, underground exploration at the mine has identified two new ore zones and 1.43 million tonnes of Measured and Indicated Resource, more than offsetting the amount of ore mined during 2009."

The following table summarizes the Company's financial and operating results for the periods indicated:



----------------------------------------------------------------------------
$ millions, except per
share amounts Three Months Twelve Months
Ended December 31,
------------------------ -----------------------
2009 2008 2009 2008
----------------------------------------------------------------------------
Net Revenue $ 44.5 $ 15.9 $ 154.5 $ 105.0
Cost of Sales 31.2 35.1 109.3 109.6
----------------------------------------------------------------------------
Gross Profit (Loss) from
Mining Operations 13.3 (19.2) 45.2 (4.6)
----------------------------------------------------------------------------
Investment and Other
Income (Expense) 0.1 (54.6) (3.4) (25.8)
Exploration Expense (1.4) (5.4) (5.5) (26.8)
Administrative and Other
Expenses (4.8) (4.3) (17.4) (19.9)
Net Earnings (Loss) 3.7 (80.0) 5.0 (79.2)

Basic Net Earnings
(Loss) per Share $ 0.04 $ (1.03) $ 0.05 $ (1.20)
Diluted Net Earnings
(Loss) per Share $ 0.04 $ (1.03) $ 0.05 $ (1.20)

Net Cash Provided by
(Used in) Operating
Activities 20.3 (10.9) 17.0 (7.0)
Capital Expenditures (13.1) (15.5) (39.0) (82.2)
Proceeds on Sale (Purchase)
of Short-term Investments (8.5) (52.7) 5.6 (52.7)
Proceeds on Sale of
Exploration Property - - 7.0 -
Other Investing
Activities - (5.8) (4.3) 55.1
Financing Activities (1.7) 75.6 (5.3) 89.0
----------------------------------------------------------------------------
Net Increase (Decrease)
in Cash $ (3.0) $ (9.3) $ (19.0)$ 2.2
----------------------------------------------------------------------------

Concentrate Produced
(mt)
Chelopech 15,634 14,931 71,657 54,669
Deno Gold 3,999 2,409 10,144 11,606
Cash Cost per tonne Ore
Processed (US$/t)(1)
Chelopech (excluding
royalties) $ 65.26 $ 50.92 $ 55.23 $ 57.87
Deno Gold $ 72.01 $ 108.03 $ 72.27 $ 109.40
----------------------------------------------------------------------------



Fourth Quarter 2009 and Year-End - Financial Highlights



- Net earnings in the fourth quarter of 2009 were $3.7 million compared to
a net loss of $80.0 million in the corresponding prior year period. The
increase in net earnings, period over period, was primarily due to
higher gross profit from mining operations, lower property impairment
provisions and reduced exploration expense. Included in the fourth
quarter of 2008 results was a $47.0 million write-down in the carrying
value of the Back River project to its estimated fair value. The
increase in gross profit from mining operations, period over period, was
due primarily to a 38% increase in gold prices, a 71% increase in copper
prices, a 12% increase in deliveries of concentrates and lower
production costs at Deno Gold.

- Net earnings in the twelve months of 2009 were $5.0 million compared to
a net loss of $79.2 million in the corresponding prior year period. Net
earnings in the twelve months of 2009 were negatively impacted by $6.4
million of valuation allowances taken in the period due to uncertainty
around the potential use of the future income tax assets against future
Canadian taxable income. The increase in net earnings, period over
period, was due primarily to higher gross profit from mining operations,
lower property impairment provisions and reduced exploration and
administrative expenses partially offset by lower investment and other
income. The year 2008 results included a $47.0 million write-down in the
carrying value of the Back River project to its estimated fair value and
a $27.2 million gain on the sale of the Company's holdings in Eldorado
Gold Corporation. The increase in gross profit from mining operations
was due primarily to a 28% increase in deliveries of concentrates, a 12%
increase in gold prices and lower production costs at Chelopech and Deno
Gold. These positive variances were partially offset by a 26% decrease
in copper prices, period over period.

- Chelopech recorded a gross profit from mining operations of $10.3
million in the fourth quarter of 2009 compared to a gross loss from
mining operations of $11.4 million in the fourth quarter of 2008.
Chelopech operations reported net revenue of $31.7 million on
concentrate deliveries of 17,791 tonnes. Chelopech cash cost per tonne
of ore processed(1), excluding royalties, in the fourth quarter of 2009
of US$65.26 was 28% higher than the corresponding prior year period due
to the unfavourable impact of a 12% appreciation of the average Euro to
U.S. foreign exchange rate, period over period, cost of living pay
increases and performance related bonuses. Cash cost per tonne of ore
processed(1), including royalties, in the fourth quarter of 2009 of
US$71.61 was 31% higher than the fourth quarter of 2008 cash cost per
tonne of ore processed(1), including royalties, of US$54.52.

- Chelopech recorded a gross profit from mining operations of $46.9
million in the twelve months of 2009 compared to a gross profit from
mining operations of $16.7 million in the corresponding prior year
period. Chelopech operations reported net revenue of $134.1 million on
concentrate deliveries of 75,542 tonnes. Chelopech cash cost per tonne
of ore processed(1), excluding royalties, in the twelve months of 2009
of US$55.23 was 5% lower than the corresponding prior year period. Cash
cost per tonne of ore processed(1), including royalties, in the twelve
months of 2009 of US$61.00 was slightly lower than the corresponding
prior year period cash cost per tonne of ore processed(1), including
royalties, of US$61.38.

- In response to the very positive regulatory and operational advances
made by Deno Gold in the period leading up to and the five month period
during which it was on temporary care and maintenance, DPM restarted the
mining and milling operations in April 2009. Deno Gold recorded a gross
profit from mining operations of $3.0 million in the fourth quarter of
2009 compared to a gross loss from mining operations of $7.8 million in
the corresponding prior year period. Deno Gold recorded a gross loss
from mining operations of $1.7 million in the twelve months of 2009
compared to a gross loss from mining operations of $21.3 million in the
corresponding prior year period. Continued operating improvements at
Deno Gold during the year 2009, including reductions in headcount and
external contractors, tighter inventory and cost controls, and a
devaluation of the Armenian dram to U.S. dollar exchange rate
contributed to a 34% reduction, year over year, in cash cost per tonne
of ore processed(1), to US$72.27. Deliveries of concentrates in the
fourth quarter of 2009 of 5,218 tonnes were 15% higher than the
corresponding prior year period. Deliveries of concentrates in the
year 2009 of 10,633 tonnes were slightly lower than the corresponding
prior year period.

- Net cash provided by operating activities was $20.3 million in the
fourth quarter of 2009 compared to cash used in operating activities of
$10.9 million in the corresponding prior year period. The increase in
cash provided by operating activities was primarily due to higher gross
profit from mining operations.

- As at December 31, 2009, DPM had cash, cash equivalents and short-term
investments of $79.4 million compared to $104.0 million at December 31,
2008.



Significant Items and Year 2010 Outlook

Chelopech - Mine and Mill Expansion Project



- Chelopech is presently expanding its mine and mill operations to
approximately double its annual concentrate production capacity to
150,000 tonnes (the "Project"). The Project comprises: (i) the expansion
of mine production capacity to 2.0 million tonnes of ore per year,
including the installation of an underground crushing and conveying
system, (ii) the installation of a new semi-autogenous grinding mill and
(iii) the modernization and upgrade of the existing concentrator. It is
expected that the Project will be completed in the second half of 2011.
An updated life of mine plan, reflecting the expanded 2.0 million tonnes
of ore per year mine rate, has been approved by the Ministries of
Economy and Energy ("MoEE") and of Environment and Water ("MoEW"). The
Company is in discussions with a number of financial institutions
regarding debt financing for the Project.


Chelopech - Exploration Results



- During the fourth quarter of 2009, a diamond drilling program focused on
an unexplored silica zone and down dip extension of a narrow copper/gold
stockwork system underneath the drift connecting the western and central
sections of the Chelopech mine intersected a 15 to 20 metre (true width)
wide normal stockwork system similar in mineralogy (energite-tennantite-
pyrite) and orientation (strike NNW dipping steeply NE) to Blocks 151
and 103. Visual gold was observed in one of the four holes drilled. The
magnitude of this ore zone, called Block 145, is yet to be defined. To
date the zone is open in all directions. Drilling is scheduled to
recommence in March 2010. In addition, nine underground drill holes in
the area north of Block 149 intersected massive sulphides. This new ore
zone is open in all directions with widths of 5 to 10 metres, a 50 metre
strike length and a 150 metre down-dip extension. Assay results show
copper grades ranging from 0.02% to 1.7% and gold grades ranging from
2.05g/t to 68.8g/t. Diamond drilling will continue on a 25 by 25 metre
grid to determine its true dimensions.

- Underground exploration efforts at the Chelopech mine during the year
2009 contributed 1.43 million tonnes of Measured and Indicated Resources
grading 0.97%Cu and 3.53g/tAu to its mineral resource inventory, using a
4 g/t AuEq cut-off. This volume of material is not yet reflected in the
Company's current statement of Mineral Resources as set out in its
Management's Discussion and Analysis for the financial year ended
December 31, 2009.


Metals Processing Facility ("MPF") Project



- In September 2009 and January 2010, respectively, the MoEW issued the
Integrated Pollution Prevention and Control ("IPPC") and the Seveso
(working with hazardous substances) permits for the MPF that is proposed
to be constructed at the site of the Chelopech mine. The IPPC and Seveso
permits are prerequisites for the issuance of the MPF construction
permit. In November 2009, however, the Bulgarian Supreme Administrative
Court (the "Court") revoked the Environmental Impact Assessment ("EIA")
resolution issued by the MoEE in July 2008 and returned the EIA
administrative file to the MoEW for another review. This decision does
not impact on the Chelopech mine/mill expansion project. The Company
considers the Court's reasons for its decision to be unsubstantiated and
without merit and has appealed this decision. A hearing before a five-
member panel is scheduled for March 11, 2010. On January 28, 2010,
Chelopech received an appeal claim against the IPPC permit from a group
of non-governmental organizations. The first hearing under the IPPC
appeal is scheduled for May 19, 2010. No appeal of the Seveso permit was
filed within the statutory time limit. Pending the receipt of all
necessary permits to commence construction of the MPF and satisfactory
resolution of all appeals related to such permits and the EIA, the
Company will limit ts activities with respect to the advancement of the
MPF Project.


Krumovgrad



- In September 2009, the Bulgarian MoEW issued a Commercial Discovery
Certificate (the "Certificate") for DPM's Krumovgrad gold deposit. The
Certificate is the final requirement for conversion of the property to a
mining concession, the application for which has been filed with the
Bulgarian government.


Acquisition of Tsumeb Smelter Assets and Related Business



- On January 14, 2010, DPM entered into a binding letter of intent (the
"LOI") with Weatherly International plc ("WTI") for the purchase of
WTI's Tsumeb smelter assets and related business. The acquisition
includes all land, plant and other assets used by or in connection with
or which benefit or pertain to WTI's smelter business (the "Namibian
Transaction"). The consideration to be provided to WTI by DPM upon
completion of the Namibian Transaction will be: (i) US$33 million
consisting of US$18 million in cash and the issuance of approximately
4,446,420 fully paid common shares of DPM and (ii) the assumption by DPM
of all third party obligations of Namibia Custom Smelters (Pty) Limited
("NCS"), a subsidiary of WTI.

- Subject to contract and completion of the Namibian Transaction, DPM has
agreed, in principle, with Louis Dreyfus Commodities Metals Suisse SA
("LDC"), the smelter tolling agent, to settle approximately US$11.4
million of metals exposure and debt, through the payment of US$2 million
in cash and US$9.4 million in common shares of DPM, based on a deemed
price of Cdn$3.50 per share. LDC will continue to have exclusive rights
to source the balance of the concentrate for the Tsumeb smelter through
to and including 2020, other than the Chelopech long-term supply
contract. The LOI is conditional upon a number of conditions being
satisfied by February 28, 2010 or such other date as the parties may
agree.



Sale of Serbian Assets



- On January 25, 2010, DPM entered into a letter of intent with PJV
Resources Inc. ("PJV"), a private company, and Rodeo Capital Corp.
("Rodeo"), a capital pool corporation listed on the TSX Venture Exchange
("TSXV"), for the sale of its Timok gold project through the sale of
DPM's Serbian subsidiary, Dundee Plemeniti Metali d.o.o. ("Metali"). As
consideration for the sale, DPM will receive a number of units ("Vendor
Units") in the capital of PJV, such that, upon the completion of the
Business Combination (as defined below) component of the Timok
Transaction (as defined below), DPM will hold 60% of the issued and
outstanding capital of the issuer resulting from the Business
Combination (the "Resulting Issuer"), on a non-diluted basis. The
initial financing of PJV will generate gross proceeds of a minimum of
$25 million ("Minimum Financing") with respect to which PJV has entered
into an engagement letter with Dundee Securities Corporation. Each
Vendor Unit will be comprised of one PJV common share and one half of a
warrant. Each whole warrant will be exercisable for one common share for
a period of not less than two years and at an exercise price not greater
than $0.40 per warrant. In addition, upon completion of a feasibility
study (as defined in National Instrument 43-101) on all or part of the
Timok project, DPM shall be issued 25 million common shares in the
capital of the Resulting Issuer, and an additional 25 million common
shares of the Resulting Issuer upon a positive decision being made by
the Resulting Issuer to bring all or any part of the Timok project into
production (a total of 50 million common shares if the Resulting Issuer
proceeds directly to a mining decision without a feasibility study).

- The PJV acquisition of Metali will be a component of a wider transaction
(the "Timok Transaction") whereby, as a subsequent step to the
acquisition, a three-cornered amalgamation ("Business Combination") will
be effected pursuant to which PJV (as financing and acquisition
corporation) will amalgamate with a wholly-owned subsidiary of Rodeo,
and all the securities of PJV (including those issued to DPM as part of
the sale of its Timok project), will be exchanged for securities of
Rodeo. The Timok Transaction will constitute a Qualifying Transaction
(as defined in the policies of the TSXV) for Rodeo.

- The Timok Transaction is subject to various conditions, including among
other things, approval of the Serbian government, entering into
definitive agreements, all applicable regulatory approvals and
completion of the Minimum Financing. The letter of intent will terminate
at the earlier of: (i) April 30, 2010 or (ii) the date of execution of a
definitive agreement in respect of the Timok Transaction.


2010 Outlook



- For the year 2010, the Company currently plans to invest approximately
US$90.0 million at Chelopech of which US$67.0 million is related to the
mine and mill expansion. Concentrate production at Chelopech is expected
to range between 75,000 tonnes and 80,000 tonnes in the year 2010.

- The Company also plans to invest approximately US$14.0 million at Deno
Gold in the year 2010 for sustaining capital and to increase the mill
throughput to 600,000 tonnes per year. Completion of the mill expansion
is expected in the third quarter of 2010.



A complete set of DPM's Consolidated Financial Statements, Notes to the Consolidated Financial Statements and Management's Discussion and Analysis for the twelve months ended December 31, 2009 will be posted on the Company's website at www.dundeeprecious.com and will be filed on Sedar at www.sedar.com.

Conference Call

DPM will be holding an analyst call on Thursday, February 18, 2010 at 8.30 a.m. (EST).

The call will be webcast live (audio only) at: http://events.digitalmedia.telus.com/dundee/021810/index.php.

The audio webcast for this conference call will be archived and available on the Company's website at www.dundeeprecious.com.

Overview

DPM is a Canadian-based, international mining company engaged in the acquisition, exploration, development and mining of precious metal properties. Its common shares and share purchase warrants (symbols: DPM; DPM.WT; DPM.WT.A) are traded on the Toronto Stock Exchange ("TSX"). DPM's business objectives are to identify, acquire, finance, develop and operate low-cost, long-life mining properties.

The Company's operating interests include its 100% ownership of Chelopech Mining EAD ("Chelopech"), a gold, copper, silver concentrates producer, owner of the Chelopech mine located approximately 70 kilometres east of Sofia, Bulgaria, and a 95% interest in Vatrin Investment Limited ("Vatrin"), a private entity which holds 100% of Deno Gold Mining Company CJSC ("Deno Gold"), its principal asset being the Kapan mine, a gold, copper, zinc, silver concentrates producer located about 320 kilometres south east of the capital city of Yerevan in Southern Armenia. DPM's interests also include a 100% interest in the Krumovgrad development stage gold property located in south eastern Bulgaria, near the town of Krumovgrad, and numerous exploration properties in one of the larger gold-copper-silver mining regions in Serbia.

Summarized Financial Results

Net revenue

Net revenue from the sale of concentrates of $44.5 million in the fourth quarter of 2009 was $28.6 million higher than the corresponding prior year period net revenue of $15.9 million due to a 38% increase in gold prices, a 71% increase in copper prices, net favourable mark-to-market adjustments and final settlements and a 12% increase in deliveries of concentrates.

Deliveries of concentrates produced at Chelopech of 17,791 tonnes in the fourth quarter of 2009 were 11% higher than fourth quarter of 2008 deliveries of 15,964 tonnes. Deliveries of concentrates produced at Deno Gold of 5,218 tonnes in the fourth quarter of 2009 were 15% higher than fourth quarter of 2008 deliveries of concentrates of 4,528 tonnes. Net favourable mark-to-market adjustments and final settlements of $0.4 million, related to the open positions of provisionally priced concentrate sales, were recorded in the fourth quarter of 2009 compared to net unfavourable mark-to-market adjustments and final settlements of $11.3 million in the fourth quarter of 2008. In the fourth quarter of 2009, DPM recorded net losses on its copper derivatives of $0.7 million.

Net revenue from the sale of concentrates of $154.5 million in the twelve months of 2009 was $49.5 million or 47% higher than the corresponding prior year period due primarily to a 28% increase in deliveries of concentrates, net favourable mark-to-market adjustments and final settlements, the favourable impact of a weaker Canadian to U.S. dollar exchange rate and a 12% increase in gold prices partially offset by a 26% decrease in copper prices and net losses related to the copper derivatives. The weakening of the Canadian dollar relative to the U.S. dollar, period over period, increased revenue by $13.2 million in 2009.

Deliveries of concentrates produced at Chelopech of 75,542 tonnes in the twelve months of 2009 were 33% higher than the corresponding prior year period deliveries of 56,760 tonnes due to increased production in 2009 and a drawdown of concentrate inventories. Deliveries of concentrates produced at Deno Gold of 10,633 tonnes in the twelve months of 2009 were slightly lower than the corresponding prior year period deliveries of concentrates of 10,777 tonnes. Deno Gold was on care and maintenance in the first quarter of 2009. Net favourable mark-to-market adjustments and final settlements of $7.9 million, related to the open positions of provisionally priced concentrate sales, were recorded in the year 2009 compared to net unfavourable mark-to-market adjustments and final settlements of $12.8 million recorded in the corresponding prior year period. Offsetting the net favourable mark-to-market adjustments and final settlements recorded in the year 2009 were net realized losses related to the copper derivatives of $5.1 million and net unrealized losses of $0.08 million. The copper derivative contracts were entered into to mitigate substantially all of the copper price exposure and associated earnings volatility the Company is exposed to as a result of the time lag between the receipt of provisional sales revenue from concentrate deliveries and its specified final pricing period.

The average London Bullion gold price(2) in the fourth quarter of 2009 of US$1,102 per ounce was 38% higher than the fourth quarter of 2008 average price of US$796 per ounce. The average London Metal Exchange ("LME") cash copper price(2) in the fourth quarter of 2009 of US$3.02 per pound was 71% higher than the fourth quarter of 2008 average price of US$1.77 per pound. The average LME cash zinc price(2) in the fourth quarter of 2009 of US$1.00 per pound was 85% higher than the fourth quarter of 2008 average price of US$0.54 per pound.

The average London Bullion gold price(2) in the twelve months of 2009 of US$973 per ounce was 12% higher than the corresponding prior year period average price of US$872 per ounce. The average LME cash copper price(2) in the twelve months of 2009 of US$2.34 per pound was 26% lower than the corresponding prior year period average price of US$3.16 per pound. The average LME cash zinc price(2) in the twelve months of 2009 of US$0.75 per pound was 12% lower than the corresponding prior year period average price of US$0.85 per pound.

Cost of sales

Cost of sales of $31.2 million in the fourth quarter of 2009 was $3.9 million or 11% lower than the corresponding prior year period due primarily to lower production costs at Deno Gold partially offset by higher deliveries of concentrates produced at Chelopech and Deno Gold. Deliveries of concentrates produced at Chelopech and Deno Gold totalled 23,009 tonnes in the fourth quarter of 2009 compared to 20,492 tonnes in the corresponding prior year period.

Cost of sales of $109.3 million in the twelve months of 2009 was comparable to the corresponding prior year period due primarily to higher deliveries of concentrates produced at Chelopech and the unfavourable impact of a weaker Canadian to U.S. dollar exchange rate offset by lower production costs at Chelopech and Deno Gold. Deliveries of concentrates produced at Chelopech and Deno Gold totalled 86,175 tonnes in the twelve months of 2009 compared to 67,537 tonnes in the corresponding prior year period. A weaker Canadian dollar to U.S. dollar exchange rate in the twelve months of 2009, compared to the corresponding prior year period, increased cost of sales by $7.8 million in 2009.

Cash cost per tonne of ore processed(1), excluding royalties, at Chelopech in the fourth quarter of 2009 of US$65.26 was 28% higher than the corresponding prior year period cash cost per tonne of ore processed(1), excluding royalties, of US$50.92 due primarily to the unfavourable impact of a 12% appreciation of the average Euro to U.S. foreign exchange rate, period over period, cost of living pay increases and performance related bonuses. Cash cost per tonne of ore processed(1), including royalties, in the fourth quarter of 2009 of US$71.61 was 31% higher than fourth quarter of 2008 cash cost per tonne of ore processed(1), including royalties, of US$54.52.

Cash cost per tonne of ore processed(1), excluding royalties, at Chelopech in the twelve months of 2009 of US$55.23 was 5% lower than the corresponding prior year period cash cost per tonne of ore processed(1), excluding royalties, of US$57.87 due to the favourable impact of a 5% devaluation of the average Euro to U.S. foreign exchange rate, year over year, higher volume of material processed and reduced spending on services partially offset by higher volumes of backfill placed in stopes in the first half of 2009 and higher prices for and usage of materials and supplies. Cash cost per tonne of ore processed(1), including royalties, in the twelve months of 2009 of US$61.00 was slightly lower than the corresponding prior year period cash cost per tonne of ore processed(1), including royalties, of US$61.38.

Cash cost per tonne of ore processed(1) at Deno Gold in the fourth quarter and twelve months of 2009 of US$72.01 and US$72.27 were, respectively, 33% and 34% lower than the corresponding prior year periods due primarily to the favourable impact of a weaker Armenian dram relative to the U.S. dollar, improved operating performance, tighter inventory and cost controls and reductions in headcount and external contractors.

Gross profit (loss)

Chelopech recorded a gross profit from mining operations of $10.3 million in the fourth quarter of 2009 compared to a gross loss from mining operations of $11.4 million in the fourth quarter of 2008. The increase in gross profit from mining operations, period over period, of $21.7 million was due to a 38% increase in gold prices, a 71% increase in copper prices and an 11% increase in deliveries of concentrates. Net favourable mark-to-market adjustments and final settlements of $0.4 million, related to the open positions of provisionally priced concentrate sales, were recorded in the fourth quarter of 2009 compared to net unfavourable mark-to-market adjustments and final settlements of $8.2 million in the fourth quarter of 2008. Net losses of $0.6 million related to the copper derivatives were recorded in the fourth quarter of 2009.

Chelopech recorded a gross profit from mining operations of $46.9 million in the twelve months of 2009 compared to a gross profit from mining operations of $16.7 million in the corresponding prior year period. The increase in gross profit from mining operations, period over period, of $30.2 million was primarily due to a 33% increase in deliveries of concentrates, higher gold and copper contained in concentrate produced due to higher metal grades and recovery rates, a 12% increase in gold prices and lower production costs partially offset by a 26% decrease in copper prices. Net favourable mark-to-market adjustments and final settlements of $7.3 million, related to the open positions of provisionally priced concentrate sales, were recorded in the twelve months of 2009 compared to net unfavourable mark-to-market adjustments and final settlements of $8.5 million in the twelve months of 2008. Offsetting the net favourable mark-to-market adjustments and final settlements recorded in the year 2009 were net losses related to the copper derivatives of $5.1 million.

Deno Gold recorded a gross profit from mining operations of $3.0 million in the fourth quarter of 2009 compared to a gross loss from mining operations of $7.8 million in the corresponding prior year period. The operations were on care and maintenance in November and December 2008. The increase in gross profit from mining operations was due primarily to a 15% increase in deliveries of concentrates, a 33% decrease in production costs and improved metal prices. Net favourable mark-to-market adjustments and final settlements of $0.04 million, related to the open positions of provisionally priced concentrate sales, were recorded in the fourth quarter of 2009 compared to net unfavourable mark-to-market adjustments and final settlements of $3.1 million in the fourth quarter of 2008.

Deno Gold recorded a gross loss from mining operations of $1.7 million in the twelve months of 2009 compared to a gross loss from mining operations of $21.3 million in the twelve months of 2008. The operations were on care and maintenance in the first quarter of 2009. Improved metal prices in the second half of 2009, relative to the corresponding prior year period, and a 34% decrease in production costs, year over year, also contributed to the lower operating loss. Net favourable mark-to-market adjustments and final settlements of $0.6 million, related to the open positions of provisionally priced concentrate sales, were recorded in the twelve months of 2009 compared to net unfavourable adjustments and final settlements of $4.3 million in the corresponding prior year period.

Investment and other income (expense)

Investment and other income totalled $0.1 million in the fourth quarter of 2009 compared to investment and other expense of $54.6 million in the corresponding prior year period.

Investment and other expense totalled $3.4 million in the twelve months of 2009 compared to investment and other expense of $25.8 million in the corresponding prior year period.

The year 2008 results included a $47.0 million write-down in the carrying value of the Back River project to its estimated fair value and a $27.2 million gain on the sale of the Company's holdings in Eldorado Gold Corporation.

Administrative and other expenses

Administrative and other expenses were $4.8 million and $17.4 million in the fourth quarter and twelve months of 2009 compared to $4.3 million and $19.9 million in the corresponding prior year periods, respectively. The decrease in administrative and other expenses in the year 2009, relative to the corresponding prior year period, was primarily due to lower employment costs and associated expenses and lower spending on outside services as a result of the cost savings initiatives introduced in the first quarter of 2009 partially offset by provisions for royalties and other taxes.

Exploration expense

Exploration expense was $1.4 million and $5.5 million in the fourth quarter and twelve months of 2009 compared to $5.4 million and $26.8 million in the corresponding prior year periods, respectively. The decrease in exploration expense in the fourth quarter and twelve months of 2009, relative to the corresponding prior year periods, was due to a decrease in the level of exploration activities in Serbia.

Foreign exchange

Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the period end exchange rates, whereas non-monetary assets and liabilities and related expenses denominated in foreign currencies are translated at the exchange rate in effect at the transaction date. Income and expense items are translated at the exchange rate in effect on the date of the transaction. Exchange gains and losses resulting from the translation of these amounts are included in the consolidated statement of earnings. In the fourth quarter of 2009, DPM recorded foreign exchange gains of $1.2 million compared with foreign exchange losses of $2.3 million in the corresponding prior year period. In the year 2009, DPM recorded foreign exchange losses of $3.3 million compared with foreign exchange losses of $3.9 million in the corresponding prior year period.

Income tax expense

DPM's effective tax rate of 46% for the twelve months of 2009 was higher than the Canadian statutory rate of 33.0% due primarily to an increase in the valuation allowance on investments and property, the unrecognized tax benefit relating to foreign and Canadian losses and the decrease in future tax rates which resulted in a decrease in the deferred tax assets partially offset by the benefit of profits earned in jurisdictions having a lower tax rate, primarily Bulgaria, and the reversal of the flow-through shares liability of $6.0 million, which was recognized as a recovery following the sale of the Back River project.

Valuation allowances of $6.4 million were recorded in the twelve months ended December 31, 2009 due to the uncertainty around the potential use of the future income tax assets against future Canadian taxable income. The future income tax assets are still available for tax purposes against future Canadian taxable income.

Operating cash flow (shortfall)

The following table summarizes the Company's cash flow (shortfall) from operating activities for the periods indicated:



---------------------------------------------------- -----------------------
$ thousands
Ended December 31, Three Months Twelve Months
----------------------- ----------------------
2009 2008 2009 2008
--------------------------------------- ------------ ---------- ------------
Net earnings (loss) $ 3,730 $ (80,042) $ 5,047 $ (79,195)
Non-cash charges (credits)
to earnings:
Amortization of property,
plant and equipment 6,054 4,968 20,229 16,424
Property impairment
provisions 316 48,705 4,836 48,780
Net gains on sale of
investments - (64) (160) (28,069)
Write-downs of investments
to market value - 6,009 1,130 7,532
Other 1,945 (1,208) (338) (590)
--------------------------------------- ------------ ---------- ------------
Total non-cash charges to
earnings 8,315 58,410 25,697 44,077
Decrease (increase) in non-
cash working capital 8,220 10,718 (13,739) 28,086
--------------------------------------- ------------ ---------- ------------
Net cash provided by (used
in) operating activities $ 20,265 $ (10,914) $ 17,005 $ (7,032)
--------------------------------------- ------------ ---------- ------------
--------------------------------------- ------------ ---------- ------------


Cash provided by operating activities in the fourth quarter of 2009 was $20.3 million compared with cash used in operating activities of $10.9 million in the fourth quarter of 2008. The increase in cash provided by operating activities in the fourth quarter of 2009, relative to the corresponding prior year period, was due primarily to higher gross profit from mining operations and lower exploration expense.

Cash provided by operating activities in the twelve months of 2009 was $17.0 million compared with cash used by operating activities of $7.0 million in the twelve months of 2008. The increase in cash provided by operating activities in the twelve months of 2009, relative to the corresponding prior year period, was due primarily to higher gross profit from mining operations and reductions in administrative and exploration expenses partially offset by an increase in working capital requirements. The non-cash working capital requirements of $13.7 million in the twelve months of 2009 was primarily due to a decrease in accounts payable and a decrease in deferred revenue.

The following table summarizes the Company's investing activities for the periods indicated:



--------------------------------------------------- ------------------------
$ thousands
Ended December 31, Three Months Twelve Months
---------------------- ----------------------
2009 2008 2009 2008
--------------------------------------- ----------- ------------ -----------
Proceeds on sale of
exploration property $ - $ - $ 7,000 $ -
Proceeds on sale of
investments at fair value - 1,631 2,612 61,869
Purchases of investments at
fair value - (3,872) (2,152) (3,872)
Proceeds on sale (purchase)
of short-term investments (8,455) (52,662) 5,581 (52,662)
Loan advances - (3,654) (4,887) (3,654)
Capital expenditures (13,123) (15,479) (39,057) (82,160)
Other 4 18 171 732
--------------------------------------- ----------- ------------ -----------
Net cash used in investing
activities $ (21,574) $ (74,018) $ (30,732) $ (79,747)
--------------------------------------- ----------- ------------ -----------
--------------------------------------- ----------- ------------ -----------


Capital expenditures at Chelopech in the fourth quarter of 2009 of $10.1 million were 30% higher than the corresponding prior year period due to the ramp-up of the mine and mill expansion project in the period. Capital expenditures at Chelopech in the twelve months of 2009 of $30.7 million were 25% lower than the corresponding prior year period due a reduction in non-critical expenditures including those related to the mine and mill expansion and the MPF projects in the first nine months of 2009. Capital expenditures at Deno Gold in the fourth quarter and twelve months of 2009 of $2.0 million and $6.9 million were, respectively, 71% and 74% lower than the corresponding prior year periods due primarily to the suspension of exploration activities in the fourth quarter of 2008.

In the second quarter of 2009, DPM completed the sale of the Back River exploration project to Sabina. Total proceeds from the transaction were $35.0 million, including $7.0 million in cash, resulting in a gain on sale of exploration property of $0.8 million and associated future income tax recovery of $6.0 million.

In August 2009, DPM purchased 40.5 million ordinary shares of WTI for US$2.0 million ($2.2 million), which by agreement, was advanced by WTI to its subsidiary, NCS, to cover the costs of certain capital improvements being made to its Tsumeb copper smelter and for working capital purposes.

In 2009, DPM advanced $4.9 million (US$4.0 million) to NCS, a subsidiary of WTI, as per the agreement DPM signed with NCS in December 2008 to advance up to US$7.0 million of loans to NCS. The total commitment of US$7.0 million had been advanced as at June 30, 2009.

Financing Activities

The following table summarizes the Company's financing activities for the periods indicated:



------------------------------------------------- --------------------------
$ thousands
Ended December 31, Three Months Twelve Months
----------------------- ------------------------
2009 2008 2009 2008
------------------------------------ ------------ ------------- ------------
Net proceeds of equity
financing $ - $ 77,175 $ - $ 77,175
Redemption of deferred
share units (29) - (29) (58)
Repayment of leases (373) - (1,219) -
Proceeds of debt
financing - - - 15,821
Repayment of debt (1,320) (1,543) (4,049) (3,972)
------------------------------------ ------------ ------------- ------------
Net cash provided by
(used in) financing
activities $ (1,722) $ 75,632 $ (5,297) $ 88,966
------------------------------------ ------------ ------------- ------------
------------------------------------ ------------ ------------- ------------


Average Metal Prices

The following table, summarizing the average metal prices for the London Bullion Market Association ("LBM") gold, LME copper Grade A, LME special high grade ("SHG") zinc and LBM silver prices, is used to illustrate the Company's average metal price exposures based on its key reference prices for the periods indicated.



---------------------------------------------------- -----------------------
US$ Average
Ended December 31, Three Months Twelve Months
---------------------- ----------------------
2009 2008 2009 2008
---------------------------------------- ----------- ----------- -----------
London Bullion gold ($/oz) $ 1,102 $ 796 $ 973 $ 872
LME settlement copper ($/lb) 3.02 1.77 2.34 3.16
LME settlement SHG zinc
($/lb) 1.00 0.54 0.75 0.85
LBM spot silver ($/oz) $ 17.58 $ 10.20 $ 14.65 $ 15.02
---------------------------------------- ----------- ----------- -----------


Non-GAAP Financial Measures

We have referred to cash cost per tonne of ore processed because we understand that certain investors use this information to assess the Company's performance and also determine the Company's ability to generate cash flow for investing activities. This measurement captures all of the important components of the Company's production and related costs. In addition, management utilizes this metric as an important management tool to monitor cost performance of the Company's operations. This measurement has no standardized meaning under Canadian GAAP and is therefore unlikely to be comparable to similar measures presented by other companies. This measurement is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP.

The following table provides, for the periods indicated, a reconciliation of the Company's cash cost measure and Canadian GAAP cost of sales:



---------------------------------------------------- ----------- -----------
$ thousands, unless otherwise indicated
For the year ended December 31, 2009 Chelopech Deno Gold Total
---------------------------------------------------- ----------- -----------
Ore processed (mt) 980,928 218,235

Cost of sales (Cdn$) $ 85,780 $ 23,482 $ 109,262
Cost of sales (US$) $ 74,499 $ 21,072 $ 95,571
Add (deduct):
Amortization (12,401) (3,170)
Reclamation costs and other (1,841) (752)
Care and maintenance costs - (3,074)
Change in concentrate inventory (419) 1,696
---------------------------------------------------- ----------- -----------
Total cash cost of production (US$) $ 59,838 $ 15,772
---------------------------------------------------- ----------- -----------
---------------------------------------------------- ----------- -----------

Cash cost per tonne of ore processed
(US$), including royalties $ 61.00 $ 72.27
Cash cost per tonne of ore processed
(US$), excluding royalties $ 55.23 $ 72.27
---------------------------------------------------- ----------- -----------



$ thousands, unless otherwise indicated
For the year ended December 31, 2008 Chelopech Deno Gold Total
---------------------------------------------------- ----------- -----------
Ore processed (mt) 900,563 269,033

Cost of sales (Cdn$) $ 71,426 $ 38,194 $ 109,620
Cost of sales (US$) $ 67,423 $ 36,319 $ 103,742
Add/(Deduct):
Amortization and other (9,811) (2,560)
Reclamation costs and other (2,155) (1,108)
Care and maintenance costs - (1,732)
Change in concentrate inventory (178) (1,485)
---------------------------------------------------- ----------- -----------
Total cash cost of production (US$) $ 55,279 $ 29,434
---------------------------------------------------- ----------- -----------
---------------------------------------------------- ----------- -----------

Cash cost per tonne of ore processed
(US$), including royalties $ 61.38 $ 109.40
Cash cost per tonne of ore processed
(US$), excluding royalties $ 57.87 $ 109.40
---------------------------------------------------- ----------- -----------


(1) A reconciliation of the Company's cash cost per tonne ore processed to cost of sales under Canadian GAAP for the years 2009 and 2008 is shown in the table entitled "Non-GAAP Financial Measures."

(2) Refer to the Average Metal Prices section for the average metal prices used to illustrate the Company's average metal price exposure based on its key reference prices.

To view the Financial Statements, please click the following link: http://media3.marketwire.com/docs/dpm0217financials.pdf.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" that involve a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements with respect to the future price of gold, copper, zinc and silver the estimation of mineral reserves and resources, the realization of mineral estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims, limitations on insurance coverage and timing and possible outcome of pending litigation. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made, and they involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any other future results, performance or achievements expressed or implied by the forward-looking statements.
Such factors include, among others: the actual results of current exploration activities; actual results of current reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of gold, copper, zinc and silver; possible variations in ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, fluctuations in metal prices, as well as those risk factors discussed or referred to in Management's Discussion and Analysis under the heading "Risks and Uncertainties" and other documents filed from time to time with the securities regulatory authorities in all provinces and territories of Canada and available at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Unless required by securities laws, the Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements.

Contact Information

  • Dundee Precious Metals Inc.
    Jonathan Goodman
    President and Chief Executive Officer
    (416) 365-2408
    jgoodman@dundeeprecious.com
    or
    Dundee Precious Metals Inc.
    Stephanie Anderson
    Executive Vice President and Chief Financial Officer
    (416) 365-2852
    sanderson@dundeeprecious.com
    or
    Dundee Precious Metals Inc.
    Lori Beak
    Vice President, Investor Relations and Corporate Secretary
    (416) 365-5165
    lbeak@dundeeprecious.com