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spk08: Good day, and thank you for standing by. Welcome to the Dundee Precision Medals second quarter 2024 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message Advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Jennifer Cameron, please go ahead.
spk01: Thank you, and good morning. I'm Jennifer Cameron, Director, Investor Relations, and I'd like to welcome you to the Dendy Precious Metals second quarter conference call. Joining us today are members of our senior management team, including David Ray, President and CEO, and Navin Dayal, Chief Financial Officer. Before we begin, I'd like to remind you that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS, and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These definitions and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliation of these measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have been generally rounded. References to 2023 pertain to the comparable periods in 2023, and references to averages are based on midpoints of our outlook for guidance. I'll now turn the call over to David Ray.
spk05: Thanks, Jennifer. Good morning and thank you all for joining us. I'm pleased to provide you with an overview of our second quarter results and to provide some insights into our achievements during this period. This morning, David and I will briefly review our results and discuss why we believe DPM continues to be well positioned to deliver value now and over the long term. As you would have seen from our news release circulated last night, we've delivered a very strong quarter. which included record financial results and excellent cost performance. Highlights from our second quarter include production of approximately 68,000 ounces of gold and 8 million pounds of copper, an all-in sustaining cost of $710 an ounce, in line with our guidance for the year, record free cash flow generation of 82 million, and continued financial strength as we ended the quarter with a consolidated cash balance of $707 million and no debt. I'm pleased to say that we're on track to achieve our 2024 guidance targets, which will mark the 10th consecutive year we have achieved or outperformed our gold production and oil and sustaining cost guidance, a testament to the strength of our operating team and the quality of our minds. During the quarter, we also advanced our growth pipeline, completing the PEA for Choca Raquita, and initiated the pre-feasibility study. which is on track for completion in the first quarter of 2025. Taking a look at our operations in more detail, Chalapetch continued its consistent track record in the second quarter, producing 44,000 ounces of gold and 8 million pounds of copper at an impressive oil and sustaining cost of $531 per gold ounce sold. Of the balance of the year, we expect improved copper grades at Chalapetch, and the operation is on track to achieve its production guidance for the year. With all-in sustaining costs of $670 per ounce in the first half, Chalapetch is also expected to be well within its cost guidance for the year. We continue to focus on extending Chalapetch's mine life through our successful in-mine exploration program and an aggressive brownfield exploration program. With increased in-mine and brownfield exploration drilling, we believe there's strong potential to continue our track record of extending mine life at Chalapetch, which currently extends to 2032. We commenced in the quarter drilling at Charlotte Derry, ended evaluating extensions and confirming several high-grade intercepts from previous work. We also continue to advance the activities to support moving to the commercial discovery phase for Brevenet, and this includes a one-year extension of the exploration rights, which we expect to receive in the fourth quarter. Adatepe produced approximately 24,000 ounces of gold in the second quarter, in line with our expectations. All in sustaining cost was $699 per ounce of gold sold, which is below the low end of Adatepe's guidance range for the year. Adatepe has consistently outperformed our expectations since commissioning in 2019, and we are confident that Adatepe will continue to deliver strong results. We're also continuing our exploration efforts around Adatepe with activities focused on delineation of Krumavica. Drilling, which commenced at the end of March, is ongoing and permitting for the next phase of drill sites is in progress. Turning to our development projects and starting with our high-quality Chocowikita project, We completed and showed the results of the PEA in the second quarter, which outlined a high-margin, low-cost underground mine, robust economics with first production targeted for 2028. Based on the positive results, we initiated a PFS, which is advancing well and is on track for completion in the first quarter of 2025. We're also advancing project permitting activities in support of this timeline with good support and engagement from key regional and national authorities. This includes preparation for the EIA, which we expect to submit in the first quarter of 2026. What makes Chocomikita particularly exciting is that it's not only an attractive project on a standalone basis with an IRR of 33% at a $1,700 gold price, But it also has significant exploration potential across our four licenses. We are continuing our Scout drilling program, which is focused on aggressively pursuing additional targets and following up on the positive results we published earlier in the year. Overall, we're very excited by Chocoriquita's potential in a region where we've had a presence for many years and where we've developed strong relationships with local stakeholders. Turning to the Loma Laga project, we continue to progress activities related to permitting and stakeholder relations. The informational phase of the environmental consultation process was successfully completed in April, and we are working with the Ministry of Energy and Mines to outline an interim procedure for the free prior and informed consultation process. The baseline ecosystem and water studies are also currently in progress. We continue to take a disciplined approach with respect to future investments in activities in Ecuador, which will be based on the project achieving key milestones, the overall operating environment in the country, and our other capital allocation priorities. In our release last night, we provided an update on the SUMET sale. As we progress towards closing, all Chinese regulatory approvals have now been received. with the Namibian Competition Act being the only remaining approval required. Due to DPM's sale of the smelter, the smelter's tolling agent has elected to end the existing agreement it had with Sumer, and DPM will therefore be required to purchase all unprocessed concentrates and secondary materials owed by Sumer, which amounts to approximately $80 million net of the cash settlement of the outstanding metal recoverable. As a result of this development, we're in discussions with Sinemine regarding amendments to the agreement, including an expected reduction in the cash consideration for the smelter from $49 million to $20 million. We're also discussing an arrangement whereby DPM would step into the position of a tolling agent on a temporary basis, commencing when the current agreement with IXM ends and terminating four months following closing. We view this as a necessary step to facilitate the transaction, one that we are comfortable in making given DPM's experience and knowledge of smelter counterparties. The sale of the smelter is consistent with our strategic objective of focusing on our gold mining assets and simplifying our portfolio going forward, and we continue to target closing the transaction in the third quarter. Overall, we delivered record financial results for the second quarter and first half of the year, And with both minds on track to achieve our 2024 guidance, we are well positioned to continue our strong operating track record. I'll now turn the call over to Navin for a review of our financial results.
spk07: Thanks, Dave. I'll be touching briefly on the financial highlights for the quarter, provide an update on how we are tracking in terms of our guidance for the year, and conclude with some commentary on our balance sheet and return of capital programs. All of my remarks will focus on results from continuing operations, and unless otherwise noted, will not include results from discontinued operations. Looking at our financial results, second quarter highlights include revenue of $157 million, record adjusted net earnings of $71 million or 39 cents per share, cash flow from operating activities of $126 million, and record free cash flow of $82 million. Overall, results during the quarter reflect our strong operating performance the low-cost nature of our operations, and a favorable commodity price environment. Looking at our earnings and cash flow in more detail, revenue of $157 million in the second quarter was 18% higher than 2023, due primarily to higher realized prices of metals sold, partially offset by lower volumes of gold sold at Atatepe as planned. Adjusted net earnings in the second quarter of $71 million, or $0.39 per share, increased compared to the prior year, due primarily to higher revenue, higher interest income partially offset by higher planned exploration and evaluation expenses from choker rakita and higher income tax cash flow from operating activities of 126 million per the quarter was higher than the prior year due primarily to higher earnings generated in the quarter as well as the timing of deliveries and the collection of outstanding receivables free cash flows in the quarter was 82 million an increase of 16 million compared to 2023 due primarily to higher earnings generated at the quarter and lower cash outlays for sustaining capital expenditures. Taking a look at our cost metrics for the quarter, all with sustaining costs of $710 per ounce of gold sold, but slightly lower than the prior year, due primarily to higher by-product credits, lower treatment charges, and lower cash outlays for sustaining capital, partially offset by lower gold sold and higher costs related to share-based compensation, labor, and freight. In terms of our capital spending, sustaining capital expenditures were $8 million for the quarter, compared to $6 million in 2023, due primarily to the timing of expenditures. Growth capital expenditures of $4 million for the quarter were lower compared to 2023, due primarily to lower expenditures related to the Loma Larga Gold Project, as expected. As Dave mentioned, with strong results in the first half of the year, we are on track to achieve our annual guidance metrics for the year. We continue to maintain a strong balance sheet and cash position, with a consolidated cash balance of $707 million, which includes the cash held at SUMED, no debt, and a $150 million undrawn revolving credit facility. Given the strength of our balance sheet and our outlook for continued strong free cash flow generation, we are in a unique position with the financial flexibility to fund growth opportunities while continuing to return a portion of our free cash flow to our shareholders in line with our commitment to capital discipline. During the first half of 2024, the company repurchased 2.3 million shares at a total cost of $18.4 million under the share buyback program and paid $14.5 million of dividends, representing an aggregate return of 23% of our free cash flow to shareholders. With that, I will turn the call back to Dave for his concluding remarks.
spk05: Thanks, Nevin. In closing, we believe that our strong Q2 results demonstrate that DPM is in a unique position in the industry, considering our strong operating track record, our all-in sustaining costs, which are among the lowest in the gold industry, our significant free cash flow generation, attractive organic projects, and the financial strength and flexibility to internally fund our growth pipeline while continuing to return capital to shareholders. And with that, I'd like now to open the call to any questions.
spk08: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Wayne Lamb with RBC. Your line is open.
spk06: Yeah, thanks, guys. Morning, everyone. I guess, just at Zoom, I just want to understand a little bit on sale and the reduction in the purchase price. Is the $29 million cash reduction mostly driven by SinoMine having to go out and find a new tolling agent? Just curious why such a large concession of the overall price had to be made. And then, in the event that they cannot find someone to assume that role. Is there a scenario where DKM would have to take that on for an extended period, or could there be a further amendment to the currently proposed terms?
spk05: Yeah. Hi, Wayne. So, first of all, there were two different elements to the change in valuation. The trigger was the position with a tolling agent, and of course, at that point, we reviewed the current situation in terms of the market. So those were the sort of two elements. Coming to your second point about finding someone, we don't think it's an issue with the ability to find someone in the market in order to perform that function. But this does create opportunity for signer mining in terms of how they might do that. Do we see that we might extend? Do we see further amendments? At this point, no. pretty clear that that's four months.
spk06: Okay, great. Thanks. And then do you foresee any credit risk on the $80 million that you guys are effectively lending? Just wondering if this could be perhaps interpreted as lending $80 million to help close a $20 million sale, which seems like quite a bit of risk.
spk07: Hi, Wade. It's Ron Avin. No, we're actually not lending the funds. We're buying the concentrate ourselves. It's essentially a working capital facility. It's no different than what IXM had been providing to us over the many years. We're just stepping into IXM's position as essentially the financier for this inventory. Under IXM's purview as being the tolling agent, they own the material. As we step into it as DPM, we will own the material.
spk06: Okay, understood. Thanks for calling. And maybe just lastly at Adetape, with the $5 to $70 million exploration spend guide this year, you guys have written pretty upfront about the mine life being depleted at mid-26. As you look out to next year, is the plan to continue to spend on drilling there to try to extend out a few more quarters beyond that? Or just wondering if there becomes a point where you don't feel the return there justifies the capital outlay.
spk05: I think the semblance to that is that we've identified a very exciting prospect which has demonstrated some incredible value for the company. As long as we feel that there are opportunities in exploration in and around that area, we will continue.
spk06: Okay, good to hear there's still some prospectivity. Okay, yeah, that's all for me. Thanks for taking my questions.
spk08: Thank you. Our next question comes from Eric Windmill with Scotia Bay. Your line is now open.
spk04: Great. Good morning, David and team. Thanks for taking my question. And really nice to see the cash build here in Q2. Maybe just continuing on the questions about SUMEB. If you're acting as tolling agent, do you see a situation where maybe you end up sending more Chalapachaur to SUMEB for processing in the future?
spk05: Definitely no.
spk04: Okay, that's helpful. Thank you. And so obviously, you know, TCRCs coming down this quarter, you sort of see that as a sustainable level going forward or any thoughts here on TCRCs throughout the balance of this year?
spk07: Yeah, I can answer that. Yeah, so we have seen definitely a decrease in the TCRCs. It's been beneficial for Chalifax certainly and not so much for the smelter. James Forrest, Norcal PTACS, On you know it appears as if based on what we're seeing that we might be coming off the bottom, but it probably still will take some time for that to. James Forrest, Norcal PTACS, come back to normal levels at least for the smelter but we are enjoying it in terms of reduced PCs and also better payable terms actually mostly for chela patch.
spk04: James Forrest, Norcal PTACS, Okay that's helpful Thank you very much. Uh, just turning to terrace Colorado's, um, and I've had some pretty good results there. I know you drilled almost 12,000 meters in Q2. I assume we'll see those results soon and now applying for advanced expiration permits. What does that, uh, involve here? I mean, and should we, uh, you know, read through positively here that you like what you're seeing and that's why you want to move to the advanced expiration.
spk05: So we do like what we're seeing at TRS-Coloradus. You're correct in saying that we've completed an amount of work, and we're currently waiting to see the outcome from that. But our view on TRS-Coloradus is more than just the area that we've looked at. There remains opportunity there beyond what we currently targeted, which was the veins. There's also what we suspect is a porphyry there, plus some high-sulfurization epithermal potential. So what we're also doing at the same time is we're looking at other targeting opportunities and doing some surface work, the legwork basically, to prepare for future targeting. In terms of the exploration permitting, that's not preventing us from drilling. That's just something that we are going through at the moment with the intent of changing to a different phase of the exploration process.
spk04: Okay, great. Thank you very much. And maybe if you can indulge me one more question, just on sustaining capex, it looks like maybe you're running a little bit low relative to the full year guidance. So should we expect that the sustaining capex is going to pick up in the back half of the year?
spk07: Yeah, Eric, that's probably a good assumption, picking up in the back half. It's typically back end weighted or sustaining capital spend. So yeah.
spk04: Okay, fantastic. Well, thanks a lot. I appreciate the added color and, uh, Yeah, congrats again on the next free cash flow bill. Cheers.
spk08: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. Again, that is star 11 to ask a question. Our next question comes from Frederick Bolton with BMO Capital Markets. Your line is now open.
spk03: Hi, good morning. Thank you for taking my call. So I just have a couple of questions. So given the strong free cash flow and low costs at Trello Perch, are there any thoughts on increasing shareholder returns?
spk07: Sure, I'll take that. Hi, Frederick. We typically revisit this topic quite regularly as the management team and the board. We're focused on taking a balanced approach to capital allocation, which focuses on our balance sheet strength, capital return to shareholders, and reinvestment. Just a reminder, we're one of the very few producers of our size that pay a dividend. We continue to use our NCIB as a tool for the capital allocation program. And we also view our cash balance as a strategic advantage. We want to make sure that we maintain the financial strength of funder growth pipeline, as well as continuing to pay a sustainable dividend, as well as pursue other opportunities.
spk03: Okay, thank you. And so, I noticed that you'd be deferring the initial results that Charlotte did in their telepatch. How should we interpret this? Is this a case of the geology being more complicated than expected, or can you give us a bit more comment on that, please?
spk05: Really just a question of prioritization and looking at whether we drill from surface or underground. So we've moved to having more drills accessed from underground. So you've got to get into position to make that happen. You've got to get the bigger drill rigs to make that happen and so on. So if anything, we're still excited about what's happening at Charlotte Dairy. We want to do that work. We're just reconfiguring the way we're going to approach it. So we'll have two drills from underground, two drills from surface. Just the timing at which that's starting is not going to allow us to bring that into the next update of the reserves and resources.
spk03: Okay, great. Thank you. Sorry, I just have one last question just to follow up on the previous caller. With regards to the TCRC charges for the rest of the year, I know you mentioned that you're happy with these levels. Can you just give us a little bit of guidance how we should look at it for the rest of the year? Could we continue to model at these levels?
spk07: Yeah, Frederick, it's a bit challenging because TCs and RCs are one component of the way we kind of sell our concentrate. The other component, obviously, is the factor, the payable metal factor that gets applied. You know, what we are seeing, I guess, in terms of guidance, what we're seeing relative to our budget for the year, we're seeing about a $4 million to $5 million benefit on the whole, taking into account higher payable terms and perhaps, you know, flat to lower TCRCs. that are hitting the bottom line, essentially. But it's hard to give a specific guidance on what the TC rates would be for the balance of the year. It's actually a combination of TC and better payable terms.
spk03: Thank you, Anson. Thank you. That's it to me.
spk08: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Jennifer
spk01: Cameron for closing remarks thank you all for joining us today if you have any further questions please feel free to reach out and for those of you in Ontario please enjoy the long weekend thank you this concludes today's conference call thank you for participating you may now disconnect Thank you. Bye. Thank you.
spk08: Good day, and thank you for standing by. Welcome to the Dundee Precision Metals second quarter 2024 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message Advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Jennifer Cameron, please go ahead.
spk01: Thank you, and good morning. I'm Jennifer Cameron, Director, Investor Relations, and I'd like to welcome you to the Dendy Precious Metals second quarter conference call. Joining us today are members of our senior management team, including David Ray, President and CEO, and Navin Dayal, Chief Financial Officer. Before we begin, I'd like to remind you that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS, and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These definitions and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliation of these measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have been generally rounded. References to 2023 pertain to the comparable periods in 2023, and references to averages are based on midpoints of our outlook for guidance. I'll now turn the call over to David Ray.
spk05: Thanks, Jennifer. Good morning and thank you all for joining us. I'm pleased to provide you with an overview of our second quarter results and to provide some insight into our achievements during this period. This morning, Navin and I will briefly review our results and discuss why we believe DPM continues to be well positioned to deliver value now and over the long term. As you would have seen from our news release circulated last night, we've delivered a very strong quarter. which included record financial results and excellent cost performance. Highlights from our second quarter include production of approximately 68,000 ounces of gold and 8 million pounds of copper, an all-in sustaining cost of $710 an ounce, in line with our guidance for the year, record free cash flow generation of 82 million, and continued financial strength as we ended the quarter with a consolidated cash balance of $707 million and no debt. I'm pleased to say that we're on track to achieve our 2024 guidance targets, which will mark the 10th consecutive year we have achieved or outperformed our gold production and all-in sustaining cost guidance, a testament to the strength of our operating team and the quality of our minds. During the quarter, we also advanced our growth pipeline, completing the PEA for Choca Raquita, and initiated the pre-feasibility study. which is on track for completion in the first quarter of 2025. Taking a look at our operations in more detail, Chalapetch continued its consistent track record in the second quarter, producing 44,000 ounces of gold and 8 million pounds of copper at an impressive oil and sustaining cost of $531 per gold ounce sold. Of the balance of the year, we expect improved copper grades at Chalapetch, and the operation is on track to achieve its production guidance for the year. With all in sustaining costs of $670 per ounce in the first half, Chalapetch is also expected to be well within its cost guidance for the year. We continue to focus on extending Chalapetch's mine life through our successful in-mine exploration program and an aggressive brownfield exploration program. With increased in-mine and brownfield exploration drilling, we believe there's strong potential to continue our track record of extending mine life at Chalapetch, which currently extends to 2032. We commenced in the quarter drilling at Charlotte Deary, ended evaluating extensions and confirming several high-grade intercepts from previous work. We also continue to advance the activities to support moving to the commercial discovery phase for Brevenet, and this includes a one-year extension of the exploration rights, which we expect to receive in the fourth quarter. Adatepe produced approximately 24,000 ounces of gold in the second quarter, in line with our expectations, all in sustaining costs of $699 per ounce of gold sold, which is below the low end of Adatepe's guidance range for the year. Atatepe has consistently outperformed our expectations since commissioning in 2019, and we are confident that Atatepe will continue to deliver strong results. We're also continuing our exploration efforts around Atatepe with activities focused on delineation of Krumavica. Drilling, which commenced at the end of March, is ongoing and permitting for the next phase of drill sites is in progress. Turning to our development projects and starting with our high-quality Chocowikita project, We completed and showed the results of the PEA in the second quarter, which outlined a high margin, low cost underground mine, robust economics with first production targeted for 2028. Based on the positive results, we initiated a PFS, which is advancing well and is on track for completion in the first quarter of 2025. We're also advancing project permitting activities in support of this timeline with good support and engagement from key regional and national authorities. This includes preparation for the EIA, which we expect to submit in the
spk08: Good day, and thank you for standing by. Welcome to the Dundee Precision Medals second quarter 2024 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message Advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Jennifer Cameron, please go ahead.
spk01: Thank you, and good morning. I'm Jennifer Cameron, Director, Investor Relations, and I'd like to welcome you to the Dendy Precious Metals second quarter conference call. Joining us today are members of our senior management team, including David Ray, President and CEO, and Navin Dayal, Chief Financial Officer. Before we begin, I'd like to remind you that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS, and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These definitions and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliation of these measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have been generally rounded. References to 2023 pertain to the comparable periods in 2023, and references to averages are based on midpoints of our outlook for guidance. I'll now turn the call over to David Ray.
spk05: Thanks, Jennifer. Good morning and thank you all for joining us. I'm pleased to provide you with an overview of our second quarter results and to provide some insights into our achievements during this period. This morning, Navin and I will briefly review our results and discuss why we believe DPM continues to be well positioned to deliver value now and over the long term. As you would have seen from our news release circulated last night, we've delivered a very strong quarter. which included record financial results and excellent cost performance. Highlights from our second quarter include production of approximately 68,000 ounces of gold
Disclaimer