Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dundee Precious Metals Inc (DPMLF, Financial) reported strong production with approximately 60,000 ounces of gold and 7 million pounds of copper in the third quarter.
- The company achieved very strong margins, with a 53% increase quarter over quarter, reflecting an all-in sustaining cost of $1,005 per ounce and an average gold price of $2,548 per ounce.
- Dundee Precious Metals Inc (DPMLF) generated robust free cash flow of $71 million and maintained a strong financial position with a consolidated cash balance of $658 million and no debt.
- The company is on track to achieve its 2024 guidance targets, marking the 10th consecutive year of meeting or outperforming its gold production and cost guidance.
- Progress continues on the Äoka Rakita project, with the pre-feasibility study on track for completion in the first quarter of 2025, and two new high-grade discoveries announced.
Negative Points
- Temporary challenges impacted performance during the quarter, including lower than expected head grades, recoveries, and fleet availability, resulting in lower production at certain operations.
- The all-in sustaining cost of $1,005 per ounce was 10% higher than the prior year, primarily due to lower volumes of gold sold and higher share-based compensation expenses.
- The company experienced a net cash outflow of $94.8 million related to a tolling agreement, which could impact short-term liquidity.
- There are potential risks associated with changes in China's VAT tax applicability on certain concentrates, which could affect future deliveries and costs.
- The Loma Larga project continues to face permitting and stakeholder relation challenges, with progress being slower than anticipated.
Q & A Highlights
Q: Do you anticipate any more working capital build-up over the next four months, or is this a one-off that reverses at the end of four months? Also, regarding capital allocation, why are share buybacks lower this year despite higher gold prices?
A: (Navin Dyal, CFO) We expect working capital to fluctuate due to purchases and timing of returns, but it should normalize by year-end. Regarding capital allocation, we regularly discuss share buybacks and maintain a balanced approach, focusing on balance sheet strength, shareholder returns, and reinvestment in growth opportunities. (David Rae, CEO) We consider M&A opportunities and have exciting organic growth projects like Äoka Rakita and Loma Larga, which influence our capital allocation decisions.
Q: With the agreement terminating at the end of December, should we expect the repayments to be reflected in Q4 financials or in Q1?
A: (Navin Dyal, CFO) The agreement terminates on December 31st, and while the buyback occurs then, the payment might slip into early January due to the holiday season. However, we expect the majority of the working capital value to be recovered by year-end.
Q: Are the cash outlays for purchasing concentrate in line with expectations, or are they higher or lower?
A: (Navin Dyal, CFO) The outlays are slightly higher due to fluctuating metal prices, but the timing of purchases is as expected. The performance of the smelter can affect delivery timing, but overall, the costs are in line with expectations.
Q: Chelopech has posted low all-in sustaining costs recently. Is this the new norm, and how should we frame expectations for 2025?
A: (David Rae, CEO) The low costs are due to higher copper prices and changes in concentrate processing, which improve recovery rates. While Q3 is more representative of ongoing costs, we will update guidance with our Q4 results.
Q: What is the strategy for Loma Larga, and when can we expect an update on its economics? Is it a potential divestment candidate?
A: (David Rae, CEO) We are not committed to any specific asset and consider strategic options regularly. Progress at Loma Larga has been positive, and we await further consultation results. We plan to update the project's economics after additional drilling and feasibility studies, which will take time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
