Dundee Precious Metals Announces 2014 First Quarter Results

TORONTO, ONTARIO--(Marketwired - May 6, 2014) - Dundee Precious Metals Inc. (TSX:DPM)(TSX:DPM.WT.A) -

(All monetary figures are expressed in U.S. dollars unless otherwise stated)

Financial and Operating Highlights:

• Mines - Lower overall metals production and higher costs during the quarter due to lower grades and recoveries in the areas mined at Chelopech. 2014 guidance to be achieved through higher balance of year production.
  
  
• Smelter - 42% production increase and higher tolls fuelled significantly higher EBITDA. Acid plant construction remains on track for completion by year end.
  
  
• Near term growth - Updated favourable project economics for Krumovgrad released in February 2014. Constructive dialogue with government and local officials is continuing to resolve outstanding community support issues. Kapan underground expansion conceptual study to be completed mid-year.
  
  
• Financial results - Adjusted net loss of $2.3 million due to lower metal prices and mine production offset by improved results from Tsumeb. Exited first quarter with approximately $139 million of cash resources, including undrawn portion of long-term revolving credit facility.
  
  

Dundee Precious Metals Inc. ("DPM" or the "Company") today reported first quarter 2014 net earnings attributable to common shareholders of $10.0 million ($0.07 per share) compared to $0.7 million ($0.01 per share) for the same period in 2013.

Net earnings attributable to common shareholders for the first quarter of 2014 were impacted by several items not reflective of the Company's underlying operating performance, including unrealized losses attributable to DPM's equity settled warrants, unrealized gains attributable to hedging future copper production, and unrealized gains on Sabina warrants. Excluding these items, adjusted net loss⁽¹⁾ during the first quarter of 2014 was $2.3 million ($0.02 per share) compared to adjusted net earnings of $6.6 million ($0.05 per share) for the corresponding period in 2013. This decrease was due primarily to lower metal prices, lower volumes of payable metals in concentrate sold and higher depreciation following the completion of Tsumeb's Project 2012 in the fourth quarter of 2013, partially offset by the favourable impact of a stronger U.S. dollar relative to the ZAR and higher volumes of concentrate smelted and toll rates at Tsumeb.

"We continue to focus on optimizing the performance of our existing operations. While Chelopech's metals production was lower than expected as a result of the areas mined during the quarter, it is not reflective of the balance of year production we expect to see. We have already recovered one third of the gold shortfall in April with improved grades and recoveries. Kapan is also making progress with rebuilding its development inventory and delivered metals production in line with our guidance," said Rick Howes, President and CEO. "Tsumeb continues to make improvements to its operating performance as it ramps up to full capacity, with first quarter concentrate volumes up 42% over last year. Overall, we remain on track to achieve our 2014 guidance and focused on further optimizing operational performance, reducing costs, and preparing for the commencement of construction on our Krumovgrad Gold Project."

Adjusted EBITDA

Adjusted EBITDA⁽¹⁾ during the first quarter of 2014 was $16.7 million compared to $26.5 million in the corresponding period in 2013, driven by lower metal prices and lower volumes of payable metals in concentrate sold, partially offset by a stronger U.S. dollar and higher volumes of concentrate smelted and toll rates at Tsumeb.

All metals prices were down during the first quarter of 2014 relative to the corresponding period in 2013. The average market price for gold during the first quarter of 2014 decreased by 21% to $1,293 per ounce compared to $1,631 per ounce in the corresponding period in 2013. The average market price for copper during the first quarter of 2014 decreased by 11% to $3.19 per pound compared to $3.60 per pound in the corresponding period in 2013. The average realized copper price, including hedging gains, was $3.25 per pound (2013 - $3.64 per pound) in the first quarter of 2014.

Production and Deliveries

Copper and zinc concentrate production in the first quarter of 2014 of 29,061 tonnes was 22% lower than the corresponding period in 2013 due primarily to lower copper grades and recoveries at Chelopech and a mill relining it completed in the period. The lower grades and recoveries at Chelopech were due primarily to changes in the mine plan that resulted in the treatment of increased volumes of ore characterized by a higher sulphur to copper ratio than planned. Quarterly production over the balance of 2014 is expected to be higher with annual production within guidance.

The commissioning of the pyrite recovery circuit was completed in the first quarter of 2014. Gold contained in pyrite concentrate produced in the first quarter of 2014 was 4,792 ounces (2013 - 300 ounces).

Concentrate smelted at Tsumeb during the first quarter of 2014 of 49,150 tonnes was 42% higher than the corresponding period in 2013 supported by the introduction of the second oxygen plant in late January 2014 and first quarter 2013 production being affected by Project 2012 tie-ins and the associated downtime.

Deliveries of copper and zinc concentrates during the first quarter of 2014 of 31,192 tonnes was 14% lower than the corresponding period in 2013 due primarily to decreased copper concentrate production at Chelopech as a result of lower grades and recoveries.

Relative to the first quarter of 2013, payable gold in copper and zinc concentrates sold in the first quarter of 2014 decreased by 27% to 27,325 ounces, payable copper in concentrate sold decreased by 15% to 9.6 million pounds, payable silver in concentrate sold increased by 3% to 109,613 ounces and payable zinc in concentrate sold decreased by 34% to 2.0 million pounds. These decreases were consistent with the lower contained metals in concentrate produced in the period. Payable gold in pyrite concentrate sold totalled 2,878 ounces in the first quarter of 2014 (2013 - 987 ounces).

Cash cost of sales per ounce of gold sold

Consolidated cash cost of sales per ounce of gold sold, net of by-product credits⁽¹⁾, during the first quarter of 2014 was $563 compared to $273 for the corresponding period in 2013. This increase was due primarily to lower volumes of payable metals in concentrate sold as a result of lower grades and recoveries at Chelopech, and lower metal prices.

All-in sustaining cost per ounce of gold

Consolidated all-in sustaining cost per ounce of gold⁽¹⁾ during the first quarter of 2014 was $1,048 compared to $545 in the corresponding period in 2013. This increase was due primarily to lower volumes of payable metals in concentrate sold, lower metal prices and higher sustaining capital expenditures at Kapan.

Cash provided from operating activities

Cash provided from operating activities during the first quarter of 2014 of $11.6 million was $20.4 million lower than the corresponding period in 2013 due primarily to lower metal prices, lower volumes of payable metals in concentrate sold and an increase in working capital requirements, partially offset by higher volumes of concentrate smelted and toll rates at Tsumeb. Cash provided from operating activities, before changes in non-cash working capital⁽¹⁾, during the first quarter of 2014 was $16.9 million down $7.4 million from the corresponding prior year period due primarily to the same factors affecting adjusted EBITDA.

Capital expenditures

Cash outlays for capital expenditures during the first quarter of 2014 totalled $50.6 million compared to $61.2 million in the corresponding period in 2013 due primarily to timing of payments for work related to the construction of a new acid plant at Tsumeb.

Financial position

As at March 31, 2014, DPM maintained a solid financial position with minimal debt, representing 13% of total capitalization, a consolidated cash position of $38.7 million, an investment portfolio valued at $19.4 million and $100.0 million of additional liquidity under the Company's $150 million long-term committed revolving credit facility. These cash resources, together with the cash flow currently being generated, are expected to be sufficient to fund all non-discretionary capital projects through to completion. The Company's discretionary growth projects, which include the Krumovgrad Gold Project, a Kapan underground mine expansion and a holding furnace at Tsumeb, are expected to be staged over time based on their expected returns, market conditions, and DPM having sufficient capital resources in place to support any one or more of these projects. The Company is in the process of increasing its existing revolving credit facility with terms extending out five years. This facility is expected to be in place in the second quarter and will be used to support DPM's discretionary growth capital requirements as well as for general corporate purposes.

2014 Guidance

The Company's production and cash cost guidance for 2014 is set out in the following table and is unchanged from the guidance issued in February 2014:

2014 Production & Cash Cost Guidance
		Chelopech	Kapan	Tsumeb	Consolidated
Ore mined/milled ('000 tonnes)		1,900 - 2,050	475 - 525	-	2,375 - 2,575
Concentrate smelted ('000 tonnes)		-	-	190 - 220	190 - 220
Metals contained in concentrate produced(1)
	Gold ('000 ounces)	126.0 - 138.0	29.0 - 36.0	-	155 - 174
	Copper (million pounds)	42.7 - 46.2	2.8 - 3.8	-	45.5 - 50.0
	Zinc (million pounds)	-	11.6 - 15.9	-	11.6 - 15.9
	Silver ('000 ounces)	210 - 230	468 - 640	-	678 - 870
Cash cost/tonne of ore processed ($)(2)		43 - 47	81 - 91	-	51 - 56
Cash cost/ounce of gold sold, net of by-product credits ($)(1),(2)		285 - 430	485 - 855	-	335 - 505
All-in-sustaining cost per ounce of gold ($)(1),(2)		-	-	-	710 - 815
Cash cost/tonne of concentrate smelted ($)(2)		-	-	280 - 350	280 - 350
Payable gold in pyrite concentrate sold ('000 ounces)		27 - 33	-	-	27 - 33

(1) Excludes metals in pyrite concentrate and, where applicable, the treatment charges, transportation and other selling costs related to the sale of pyrite concentrate, which is reported separately.

(2) Based on current exchange rates and, where applicable, a copper price of $3.28 per pound, a silver price of $20.00 per ounce and a zinc price of $0.90 per pound.

For 2014, the majority of the Company's growth capital expenditures⁽¹⁾ will be focused on the construction of an acid plant at Tsumeb. Other growth capital expenditures include the pyrite recovery circuit and margin improvement projects at Chelopech, securing the remaining permits and planning for the commencement of construction related to the Krumovgrad Gold Project, and exploration and development work to enhance underground operations and advance a potential expansion at Kapan. In aggregate, these expenditures are expected to range between $160 million and $175 million. Sustaining capital expenditures(1) are expected to range between $37 million and $45 million.

The 2014 guidance provided is not expected to occur evenly throughout the year as a result of variations associated with areas being mined from quarter to quarter, the timing of concentrate deliveries, planned outages, including the annual maintenance shutdown at Tsumeb, which is currently scheduled for the third quarter of 2014. Kapan has been successfully increasing the capital development rates required to resume normal production levels. Production rates are expected to range between 40,000 and 45,000 tonnes per month in the second quarter of 2014 and reach full production in the third quarter of 2014. The production guidance for Tsumeb assumed it would be capable of ramping up to full capacity in the first quarter of 2014, which occurred with the commissioning of the second oxygen plant in late January 2014. Despite lower metals in copper concentrate produced in the first quarter of 2014 related to the areas mined at Chelopech, quarterly production over the balance of the year is expected to be higher with annual production and costs within guidance. Also, the rate of capital expenditures may vary from quarter to quarter based on the schedule for, and execution of, each capital project and, where applicable, the receipt of necessary permits and approvals. In the case of the acid plant, 2014 capital expenditures could be lower than planned as a result of the recent report received from Outotec, which indicates that heavy rain during the first quarter and labour related shortages have resulted in some schedule delays. Further details can be found in the Company's MD&A under the section "2014 Guidance".

⁽¹⁾ Adjusted net (loss) earnings, adjusted basic (loss) earnings per share, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), cash from operating activities, before changes in non-cash working capital, cash cost per tonne of ore processed, cash cost per ounce of gold sold, net of by-product credits, all-in sustaining cost per ounce of gold, cash cost per tonne of concentrate smelted, and growth and sustaining capital expenditures are not defined measures under International Financial Reporting Standards ("IFRS"). Presenting these measures from period to period helps management and investors evaluate earnings and cash flow trends more readily in comparison with results from prior periods. Refer to the "Non-GAAP Financial Measures" section of the management's discussion and analysis for the three months ended March 31, 2014 (the "MD&A") for further discussion of these items, including reconciliations to net earnings attributable to common shareholders and earnings before income taxes.

Key Financial and Operational Highlights

$ millions, except where noted		Three Months
Ended March 31,		2014		2013
Revenue		76.4		88.0
Gross profit (1)		12.8		24.3
Earnings before income taxes		12.1		4.4
Net earnings attributable to common shareholders		10.0		0.7
Basic earnings per share ($)		0.07		0.01
Adjusted EBITDA (2)		16.7		26.5
Adjusted net (loss) earnings (2)		(2.3	)	6.6
Adjusted basic (loss) earnings per share ($) (2)		(0.02	)	0.05
Cash provided from operating activities		11.6		32.0
Cash provided from operating activities, before changes in non-cash working capital (2)		16.9		24.3
Copper and zinc concentrate produced (mt)		29,061		37,402
Metals in copper and zinc concentrate produced:
	Gold (ounces)	26,607		44,472
	Copper ('000s pounds)	9,355		12,602
	Zinc ('000s pounds)	3,134		3,358
	Silver (ounces)	130,323		155,404
Tsumeb - concentrate smelted (mt)		49,150		34,493
Deliveries of copper and zinc concentrate (mt)		31,192		36,403
Payable metals in copper and zinc concentrate sold:
	Gold (ounces)	27,325		37,286
	Copper ('000s pounds)	9,586		11,314
	Zinc ('000s pounds)	1,980		3,003
	Silver (ounces)	109,613		106,719
Deliveries of pyrite concentrate (mt)		16,468		7,738
Payable gold in pyrite concentrate sold (ounces)		2,878		987
Cash cost of sales per ounce of gold sold, net of by-product credits ($) (2)		563		273
All-in sustaining cost per ounce of gold ($) (2)		1,048		545
Cash cost/tonne of concentrate smelted at Tsumeb($) (2)		307		486

(1) Gross profit is regarded as an additional GAAP measure and is presented in the Company's condensed interim unaudited consolidated statements of earnings (loss). Gross profit represents revenue less cost of sales and is one of several measures used by management and investors to assess the underlying operating profitability of a business.

(2) Adjusted EBITDA; adjusted net (loss) earnings; adjusted basic (loss) earnings per share; cash flow provided from operating activities, before changes in non-cash working capital; cash cost of sales per ounce of gold sold, net of by-product credits; all-in sustaining cost per ounce of gold; and cash cost per tonne of concentrate smelted, are not defined measures under IFRS. Refer to the MD&A for reconciliations to IFRS measures.

DPM's condensed interim unaudited consolidated financial statements, and MD&A for the first quarter ended March 31, 2014, are posted on the Company's website at www.dundeeprecious.com and have been filed on SEDAR at www.sedar.com.

The Company will be holding a call to discuss its 2014 first quarter results on May 7, 2014, at 9:00 a.m. (E.S.T.). Participants are invited to join the live webcast (audio only) at: http://www.gowebcasting.com/5387. Alternatively participants can access a listen only telephone option at 416-340-2219 or North America Toll Free at 1-866-226-1798. A replay of the call will be available at 905-694-9451 or North America Toll Free at 1-800-408-3053, passcode 1408597. The audio webcast for this conference call will also be archived and available on the Company's website at www.dundeeprecious.com.

Dundee Precious Metals Inc. is a Canadian based, international gold mining company engaged in the acquisition, exploration, development, mining and processing of precious metals. The Company's principal operating assets include the Chelopech operation, which produces a copper concentrate containing gold and silver, located east of Sofia, Bulgaria; the Kapan operation, which produces a copper concentrate and a zinc concentrate, both containing gold and silver, located in southern Armenia; and the Tsumeb smelter, a concentrate processing facility located in Namibia. DPM also holds interests in a number of developing gold properties located in Bulgaria, Serbia, and northern Canada, including interests held through its 53.1% owned subsidiary, Avala Resources Ltd., its 45.5% interest in Dunav Resources Ltd. and its 12.1% interest in Sabina Gold & Silver Corp.

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 such mineral estimates, the timing and amount of estimated future production and output, 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, reclamation expenses, the potential or anticipated outcome of title disputes or claims 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 that 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, uncertainties inherent with conducting business in foreign jurisdictions where corruption, civil unrest, political instability and uncertainties with the rule of law may impact the Company's activities; fluctuations in metal prices; unanticipated title disputes; claims or litigation; limitation on insurance coverage; as well as those risk factors discussed or referred to in the Company's MD&A under the heading "Risks and Uncertainties" and under the heading "Cautionary Note Regarding Forward-Looking Statements" which include further details on material assumptions used to develop such forward-looking statements and material risk factors that could cause actual results to differ materially from forward-looking statements, and other documents (including without limitation the Company's 2013 AIF) filed from time to time with the securities regulatory authorities in all provinces and territories of Canada and available on SEDAR at www.sedar.com. 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.