Dundee Precious Metals Inc.
TSX : DPM

Dundee Precious Metals Inc.

November 04, 2005 20:31 ET

Dundee Precious Metals: Third Quarter 2005

TORONTO, ONTARIO--(CCNMatthews - Nov. 4, 2005) -

CHELOPECH REDEVELOPMENT AND PRODUCTION TARGETS BEING MET

KRUMOVGRAD PERMITTING PROCESS CONTINUES

CASH POSITION STRENGTHENED IN PREPARATION FOR CONSTRUCTION

(All amounts have been expressed in Canadian dollars except where indicated.)

Dundee Precious Metals Inc. (TSX:DPM) ("Dundee Precious", "DPM" or "the Company") continues to meet its targets at its Bulgarian and Canadian projects towards sustained production by 2007. A summary of its solid financial position, operational, development, exploration and investment activities during the third quarter 2005 is presented as follows:

HIGHLIGHTS

- Financial position remains strong; working capital of $90.4 million plus investment portfolio with market value of $136.6 million equate to $4.23 per share.

- Production and redevelopment targets at Chelopech being met. Ore production reached annualized rate of over 884,000 tonnes as of September 30, 2005 and mine operating at profitable level for second consecutive quarter, primarily due to higher commodity prices and improved metal recoveries and grades.

- Environmental Impact Assessment ("EIA") for the Chelopech process conversion was completed in November and filed with the Bulgarian Ministry of the Environment and Waters ("MoEW"). The Definitive Feasibility Study ("DFS") for this project is expected by year end as final test work now successfully completed.

- In September, the Company submitted formal response to the Bulgarian MeOW addressing all issues raised during public consultation hearings held in August in Krumovgrad. Response from the Ministry to the EIA expected in November. To maintain current schedule, engineering and procurement phase of the project commenced in October.

- DPM on schedule to earn a 60% interest in the Back River Project. Summer site exploration program at Goose and George Lakes successfully completed. DPM initiating detailed geological review to evaluate potential of additional mineralized zones within the Back River Project.

"I am happy to report that we continue to achieve important milestones as our two main projects move forward to reach an annualized production rate of 280,000 ounces of low cost gold in 2007", said Jonathan Goodman, President and CEO of DPM. "Meanwhile, we continue an aggressive business development and exploration program with a strategy to meet our next target: to increase our gold production beyond 500,000 ounces per year in the next three years" he added.

MINING DEVELOPMENT ACTIVITIES

CHELOPECH

Pressure Oxidation ("POX") Plant

In November, an EIA for the Chelopech processing conversion was completed and filed with the MoEW.

The Company has completed the additional test work required to confirm gold and copper recoveries from representative ore samples. The DFS to evaluate on site metal production using POX/autoclave technology at Chelopech is being finalized for presentation to the Board of Directors by the end of this year.

Redevelopment

Underground development continues to be ahead of plan for the year. The conversion of mining methods to long hole open stoping commenced at the end of the second quarter and has accounted for the subsequent increase in ore production.

The Company acquired specialized equipment earlier this year to advance the decline through difficult ground conditions and it is expected that the decline will be completed prior to the start up of the pressure oxidation plant.

Operations

The Company continues to operate the Chelopech Mine during this period of transition. The mine operated profitably for a second consecutive quarter, primarily due to higher metal prices and improved metal recoveries.

Production

Ore mined and processed over the three month period ended September 30, 2005 averaged 75,800 tonnes per month compared to an average of 53,100 tonnes per month mined in the prior year comparable period.

In the third quarter, ore grades and recoveries improved over both prior quarter and comparable quarter last year. Due to excessive rainfall in the latter half of the second quarter and the beginning of the third quarter, access to the higher grade areas had been restricted.

Ore mined at the end of September 2005 is ahead of expectation and it is anticipated that the mine will meet or exceed the current year target.

Sales

Third quarter sales were lower than expected, due to a shipment delay. Sale transactions totaling 9,518 tonnes of concentrate were completed in the quarter and 20,574 tonnes of concentrate were in inventory at September 30, 2005. It is expected that the shortfall in concentrate sales will be eliminated in the fourth quarter when the annual commitments are fulfilled. In October, sales totaling 9,071 tonnes of concentrate were completed.

KRUMOVGRAD

The process of obtaining the necessary government and regional approvals continues in order to acquire the land required for construction of the mining facilities and to construct and operate a mine at the Krumovgrad Gold Project ("Project").

As part of the EIA approval process, public hearings were held in the community of Krumovgrad in August at which the local officials expressed both their support of and concerns about the Project. Subsequent to the meeting, the Municipal Council passed a resolution opposing the Project on the basis that there were insufficient guarantees to ensure the planned protection of the environment. The Municipal Council forwarded a petition to the MoEW expressing its concern over the issue of guarantees. Several non-governmental organizations have also voiced opposition to the Project whereas others have been generally supportive. Technical experts commissioned by the Municipality and the opposition group generally endorsed the EIA.

The EIA, coupled with DPM's responses to issues raised during the public consultation process, have been submitted to the MoEW following the hearings and is currently undergoing a final review by the MoEW. The EIA fully meets, and in certain aspects exceeds, the Bulgarian environmental standards as well as the existing environmental guidelines and the proposed new directives of the European Union. DPM expects a response from the MoEW later in November. As soon as the EIA is approved, DPM intends to meet with the Municipal Council to address their specific concerns about the environmental guarantees.

The Company believes the Project has been designed in a manner that will address the concerns of the local community. In addition, DPM believes that the region hosts favourable geology and that mining could be a catalyst for future environmentally sound development that would provide local employment and complement the agricultural economy that forms the basis of the primary industry in this region today.

Mobilization for the detailed engineering and procurement phase has begun with the hiring of a project manager and finalization of the Engineering, Procurement and Construction Management contract. Exploration and resource definition work is continuing at satellite locations near the Project to establish additional resources to process at the Krumovgrad facilities. Discussions have also begun with the European Bank for Reconstruction and Development with respect to arranging financing for this US$75 million Project.

EXPLORATION

BACK RIVER PROJECT

The Company is nearing completion of the exploration program for 2005, having completed over 15,800 metres of diamond drilling to date. The objectives for the year are to better define the resources at the Goose Lake and George Lake gold deposits through an in-fill drilling program; to recompile and audit the entire Back River database; to refine and improve the understanding of the key ore controls; and to implement the Company's quality assurance protocols. In addition, the Company has initiated a detailed geological review to evaluate the potential of additional mineralized zones within the Back River Project.

The camp is being closed as the summer exploration season has ended. Supplies have been brought in and stored for the winter program which is expected to begin next April. In the meantime, compilation of the results from the current program are continuing and planning for the next phase has begun.

OTHER EXPLORATION PROPERTIES

The Company plans to continue the exploration of properties in the Balkans and other regions for gold resources and is evaluating other mining properties for possible acquisition. Grassroots exploration is continuing within the Central Rhodope and Western Bulgaria regions and the Company has applied for new exploration concessions.

FINANCIAL RESULTS

The Company reported net income of $19.0 million or $0.35 per share and $13.7 million or $0.25 per share (fully diluted) for the three and nine months ended September 30, 2005 compared with a net loss of $2.7 million or $0.05 per share and net income of $6.6 million or $0.13 per share for the three and eight months ended September 30, 2004, respectively. The net income for the current periods were significantly impacted by a gain on the sales of portfolio investments.

Operations Summary

As the Company develops its mine operations, earnings have strengthened with margins of $1.5 million and $2.7 million, for the three and nine months ending September 30, 2005, respectively. Higher commodity prices and improved gold recoveries favourably impacted results.



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Operations Three Three Nine Eight
Summary Months Months Months Months(1)
Cdn$ millions Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
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Revenue from mining
operations
Gold/copper concentrate $ 7.7 $ 4.6 $ 30.1 $ 14.7
Cost of sales 6.2 4.9 27.4 13.7
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Gross profit (loss) $ 1.5 $ (0.3) $ 2.7 $ 1.0

Net investment revenue $ 25.9 0.8 27.1 40.6
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Net revenue $ 27.4 $ 0.5 $ 29.8 $ 41.6

Expenses 4.3 4.0 12.4 38.3
Income taxes 4.1 (0.8) 3.7 (3.3)
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Net income (loss) $ 19.0 $ (2.7) $ 13.7 $ 6.6

Net income (loss) per
share
Fully diluted $ 0.35 $ (0.05) $ 0.25 $ 0.13
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Total assets $ 330.7 $ 292.9 $ 330.7 $ 292.9
Total long-term
liabilities $ 29.4 $ 11.0 $ 29.4 $ 11.0
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(1) The Company began consolidating the results from the mining operations on April 1, 2004, the effective date of conversion from an investment company to a mining company. Also, the Company changed its year end from January 31 to December 31 thus there are comparative figures only for eight months last year.

Net Revenue

Net revenue of $27.4 million and $29.8 million for the three and nine months ended September 30, 2005, respectively, resulted from the following:

(1) the financial results of the Chelopech Mine for the three and nine month period ending September 30, 2005 which had an operating gain of $1.5 million and $2.7 million on the sale of 9,518 and 39,219 dry metric tonnes of gold/copper concentrate, respectively, and

(2) investment income for the three and nine month period ended September 30, 2005 of $25.9 million and $27.1 million net of investment write-downs of $6.1 million and $7.8 million, respectively.



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Cash Flow Three Three Nine Eight
Summary Months Months Months Months(1)
Cdn$ millions Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
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Cash provided from
(used in)
Operating activities $ (5.3) $ (5.2) $ (8.2) $ (21.6)
Property, plant
and equipment (12.9) (8.1) (52.2) (15.5)
Investment and other
transactions 51.4 0.3 47.7 54.1
Financing activities 0.5 (3.2) 7.4 59.4
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Total increase (decrease)
in cash $ 33.7 $ (16.2) $ (5.3) $ 76.4
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(1) The Company began consolidating the results from the mining operations on April 1, 2004, the effective date of conversion from an investment company to a mining company. Also, the Company changed its year end from January 31 to December 31 thus there are comparative figures only for eight months last year.

Operating Activities

For the three and nine months ended September 30, 2005, the Company had operating cash requirements of $5.3 million and $8.2 million, respectively.

Net income (loss), adjusted for non-cash items, provided $2.1 million and $0.6 million in cash in the three and nine month periods, respectively; whereas, changes in non-cash working capital absorbed $7.4 million and $8.8 million in cash, respectively, primarily due to an increased level of concentrate and ore inventory at period end. Non-cash working capital will continue to fluctuate with the timing of concentrate sales and accounts payable at period end related to the level of development activities.



Capital Expenditures (Property Plant and Equipment)
As at September 30, 2005, the Company has capitalized the following
costs:

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Property, Plant and Equipment Acquisition Project Total
Cdn$ millions Cost Cost Cost
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Project:
Back River (Nunavut, Canada) $ 9.1 $ 9.8 $ 18.9
Chelopech (Bulgaria) 20.3 47.5 67.8
Krumovgrad (Bulgaria) 30.0 16.9 46.9
Corporate 0.0 1.0 1.0
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Total $ 59.4 $ 75.2 $ 134.6
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At Chelopech, $6.8 million (US$5.7 million) and $20.5 million (US$16.8 million) was spent during the three and nine months ended September 30, 2005, respectively, and $47.5 million (US$38.0 million) has been spent from the date of acquisition as follows:



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Chelopech Project Costs Current Year to Date Total Cost
US$ millions Quarter Cost from Date
Cost of Acquisition
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Project:
Establishing reserves $ 1.0 $ 1.3 $ 3.4
Decline 0.5 1.4 5.6
Mine development 1.6 5.7 17.1
Mill development 0.3 0.9 1.7
Definitive
Feasibility Study 1.6 6.3 7.2
Other 0.7 1.2 3.0
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Total $ 5.7 $ 16.8 $ 38.0
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At Krumovgrad, $1.6 million (US$1.3 million) and $5.3 million (US$4.3 million) was spent during the three and nine months ended September 30, 2005, respectively, and $16.9 million (US$13.1 million) has been spent from the date of acquisition as follows:



Krumovgrad Project Costs
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Current Year to Date Total Cost
Quarter Cost from Date
US$ millions Cost of Acquisition
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Project:
Reserve definition drilling $ 0.0 $ 0.4 $ 4.5
Definitive feasibility study 0.4 1.7 3.6
Project development 0.7 0.7 0.7
Other 0.2 1.5 4.3
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Total $ 1.3 $ 4.3 $ 13.1
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INVESTMENTS

During the three and nine month period ended September 30, 2005, the Company realized $31.9 million and $34.4 million in pre-tax gains on sales of marketable securities, which provided cash proceeds of $60.2 million and $66.2 million, respectively.

As at September 30, 2005, the portfolio had a market value of approximately $136.6 million. The three largest positions at market, were: Tahera Diamond Corporation $37.7 million; Miramar Mining Corporation $34.4 million, and Cambior Inc. $20.7 million. In the aggregate, these three investments represent 68% of the total market value of the portfolio.

FINANCING ACTIVITIES

During the third quarter, the issuance of common shares on the exercise of stock options provided a total of $0.5 million. During the second quarter, the Company completed a US$10.0 million financing with the European Bank for Reconstruction and Development. The loan bears interest at LIBOR plus 1.9% and is repayable in eight semi-annual installments commencing in June 2007.

FORWARD LOOKING STATEMENTS

This news release may contain certain information that constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating metal prices and other factors described above and in the Company's most recent annual information form under the heading "Risks Factors" which has been filed electronically by means of the Canadian Securities Administrators' website located at www.sedar.com. The Company disclaims any obligation to update or revise any forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

Dundee Precious is a Canadian based, international mining company engaged in the acquisition, exploration, development and mining of precious metals. It currently owns the Chelopech Mine, a producing gold/copper mine and the Krumovgrad Gold Project, a development project, both located in Bulgaria, and is engaged in mineral exploration activities in the region. In addition, Dundee Precious has the option to earn a 60% interest in the Back River gold project in Nunavut, Canada. The Company also holds a significant and strategic portfolio of investments in the precious metals and mineral related sector.

A complete set of DPM's consolidated financial statements and Management's Discussion and Analysis are posted on our website at www.dundeeprecious.com. An analyst conference call will be webcast live at phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=69218&eventID=1149234 on Monday, November 7, 2005 at 8:30 a.m. EST (Due to the length of the URL it may be necessary to copy and paste it into your web browser).

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