(All amounts have been expressed in US Dollars except where otherwise indicated)
Dundee Precious Metals Inc. (TSX:DPM)(TSX:DPM.WT.A) ("DPM" or "the Company")
announces the results of the capital cost update and mine plan optimization
which continue to support the construction and operation of its Krumovgrad gold
project (the "Project") in Bulgaria.
Highlights:
-- Upfront capital cost to build the Project estimated at $164 million
-- Generates an IRR of 26%
-- Low cash cost maintained at $389 per ounce of gold equivalent
-- Increased gold and silver production at lower throughput rate
-- Estimated average EBITDA increased to $65 million per year over life of
mine at $1,250 per ounce of gold
"As expected, the updated economics on Krumovgrad continue to confirm the
commercial and economic viability of the project," stated Rick Howes, President
and CEO. "Further optimization of the mine plan has provided for increased
metals production at reduced throughput. We continue to work hard to build
strong relationships within the community and gain their support in advancing to
the next stage of development. We continue to evaluate alternatives to
supplement internal cash flow with the optimal funding to support the project,
prior to moving forward with construction. This project, once completed, will
bring new economic opportunities to the local community, the region and Bulgaria
while creating value for our shareholders," he added.
Following completion of the updated capital estimate and optimized mine plan,
the new up-front capital cost, excluding sunk costs, is estimated at $164
million, up from the preliminary estimate of $127 million, contained in the
"Krumovgrad Gold Project Definitive Feasibility Study NI 43-101 Technical
Report" that was filed on SEDAR at www.sedar.com on January 13, 2012 (the "2012
Report"). This increase is due primarily to: an increase in the contingency
allowance of $11.0 million; better design certainty which in turn generated
increased capital cost estimates especially in the earthworks and civil
engineering areas; and vendor, contractor and labour cost escalation since the
2010 based cost estimates in the 2012 Report were established. Estimated
sustaining capital over the life of the mine is unchanged at $12.5 million.
Average annual concentrate production over the life of mine ("LOM") is
anticipated to be 4,100 tonnes, containing, on average, 85,700 ounces of gold,
and an average of 103,000 ounces of gold in the first three years, and 38,700
ounces of silver. This compares with average annual LOM concentrate production
in the 2012 Report of 11,500 tonnes containing, on average, 74,000 ounces of
gold and 35,000 ounces of silver. Assumed gold and silver prices used for
financial modelling, of $1,250 per ounce and $23.00 per ounce, respectively,
produced a cash cost per ounce of gold equivalent ("AuEq") (defined below),
estimated at $389 and an average annual EBITDA (defined below) estimated at $65
million. The cash cost per ounce of AuEq and EBITDA in the 2012 Report were
estimated at $404 and $53 million, respectively. The updated return on the
Project is estimated to be 26%, down from the original estimate of 31%,
primarily reflecting a longer construction period and a higher estimated project
capital costs, partially offset by the benefits resulting from an optimized mine
plan.
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Key Project Operating and Financial
Metrics 2014 2012
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Average annual plant throughput 775,512 tonnes 850,000 tonnes
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Average annual concentrate production 4,100 tonnes 11,500 tonnes
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Average annual gold production 85,700 oz 74,000 oz
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Average annual silver production 38,700 oz 35,000 oz
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Total cash cost/tonne ore processed $44.13 $38.11
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Total cash cost per oz AuEq (1) $389 $404
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Upfront capital cost (2) $164.1 million $127.4 million
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Sustaining capital $12.5 million $12.5 million
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Closure and rehabilitation costs $14.7 million $13.5 million
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Average annual EBITDA $64.9 million $52.6 million
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Life of Mine Life of Mine
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Total gold production 685,549 oz 663,641 oz
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Total silver production 309,915 oz 314,939 oz
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NPV at a discount rate of 7.5%, after tax
(2) $143.9 million $165.3 million
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Internal Rate of Return, after tax (IRR)
(2) 26.3% 31.0%
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Payback Period, after tax (from start of
production) 2.5 years 3.3 years
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Mine Life 8 years 9 years
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Gold Price Assumption $1,250/oz $1,250/oz
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Silver Price Assumption $23.00/oz $25.00/0z
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(1) AuEq ounces include silver ounces produced and sold converted to a AuEq
based on the ratio of the average metal prices for the commodities.
(2) Excludes sunk capital.
Summary of Mineral Reserve and Mineral Resource Estimates
The estimate of Mineral Resources completed by RSG Global in 2005 has been
reviewed by CSA Global (UK) Ltd. ("CSA") in 2012 and 2014 and modified, though
not materially or significantly. The estimation parameters and assumptions used
by RSG remain valid and modification by CSA relates only to how the block model
has been reported and presented for mine planning purposes. The underlying grade
estimations have not been modified.
The following table summarizes the Mineral Reserve and Mineral Resource
estimates for the Project as at December 31, 2013.
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MINERAL RESERVES GOLD SILVER
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Tonnes Grade Ounces Grade Ounces
M g/t M g/t M
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Proven 2.6 5.39 0.449 2.82 0.235
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Krumovgrad (Upper Zone) 1.1 3.46 0.124 1.91 0.068
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Krumovgrad (Wall) 1.5 6.83 0.325 3.50 0.166
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Probable 3.6 3.08 0.358 1.79 0.208
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Krumovgrad (Upper Zone) 3.5 3.00 0.337 1.75 0.197
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Krumovgrad (Wall) 0.1 5.54 0.020 2.93 0.011
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Proven and Probable 6.2 4.04 0.807 2.22 0.443
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Krumovgrad (Upper Zone) 4.6 3.11 0.461 1.79 0.266
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Krumovgrad (Wall) 1.6 6.74 0.345 3.46 0.177
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MINERAL RESOURCES GOLD SILVER
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Tonnes Grade Ounces Grade Ounces
M g/t M g/t M
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Measured 2.8 5.19 0.478 2.74 0.252
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Krumovgrad (Upper Zone) 1.1 3.46 0.125 1.91 0.069
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Krumovgrad (Wall) 1.7 6.32 0.353 3.27 0.183
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Indicated 4.1 2.92 0.382 1.73 0.226
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Krumovgrad (Upper Zone) 3.9 2.86 0.357 1.70 0.212
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Krumovgrad (Wall) 0.2 4.28 0.024 2.38 0.014
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Measured and Indicated 6.9 3.86 0.859 2.15 0.477
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Krumovgrad (Upper Zone) 5.0 2.99 0.482 1.75 0.281
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Krumovgrad (Wall) 1.9 6.13 0.377 3.19 0.196
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Inferred 0.3 1.30 0.013 1.06 0.011
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Krumovgrad (Upper Zone) 0.3 1.31 0.013 1.06 0.011
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Krumovgrad (Wall) 0.0 0.87 0.000 0.88 0.000
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(1) The rounding of tonnage and grade figures has resulted in some columns
showing relatively minor discrepancies in sum totals;
(2) All Mineral Resources and Mineral Reserves estimates have been
determined and reported in accordance with NI 43-101 and the
classification adopted by the CIM;
(3) Measured and Indicated Mineral Resources are inclusive of Proven and
Probable Mineral Reserves;
(4) Mineral Resources and Mineral Reserves may be subject to legal,
political, environmental and other risks and uncertainties;
(5) Mineral Resources and Mineral Reserves estimates have been reviewed and
prepared by CSA Global (UK) Ltd, a privately-owned consulting company
that provides multi-disciplinary services to the global resources
industry and is independent of the Company;
(6) Mineral Resources and Mineral Reserves estimates are based on long term
metals prices of $1,250/oz Au and $23/oz Ag and are as of December 31,
2013; and
(7) Mineral Resources and Mineral Reserves are based on a gold cut-off grade
of 0.6 g/t for the Upper Zone and Overburden and 0.8 g/t for the Wall.
Capital Cost
The upfront Project capital cost estimate of $164.1 million reflects the
remainder of engineering costs, all construction, direct and indirect, costs and
commissioning, including an accuracy allowance and contingency of $15.5 million.
The total future capital cost reflects the Project capital plus sustaining
capital through the operating period, and closure and rehabilitation costs. The
updated capital cost and the related financial analysis include only incremental
capital costs and excludes financing and sunk costs.
The table below is a summary of the estimated upfront capital costs required to
complete the Project, together with the additional capital expected to be
incurred over the life of the Project.
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CAPITAL COST ESTIMATE SUMMARY
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Item Total ($M)
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Direct costs 124.3
Indirect costs 24.3
Accuracy Allowance and Contingency (12.5%) 15.5
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Total Upfront Capital Cost 164.1
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Sustaining capital 12.5
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Closure and rehabilitation costs 14.7
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TOTAL FUTURE CAPITAL 191.3
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Operating Costs
Operating costs are based on the mining and treatment of 775,000 tpy of ore,
producing an annual average of 85,700 oz of gold and 38,700 oz of silver for the
estimated life of the mine. Costs are based on 2013 quotations for all materials
and consumables.
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SUMMARY OF ESTIMATED OPERATING COSTS
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$/t ore
Item Processed (1)
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Mining costs 12.10
Processing costs 21.81
Tailings treatment & IMWF costs (2) 2.50
General & administration 3.71
Royalty 4.01
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Total Annual Cash Costs 44.13
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(1) Average cash cost over eight (8) years; and
(2) Integrated Mine Waste Facility.
Permitting Update
On October 4, 2013, the Administrative Court in Kardzhali issued a Ruling, which
overturned the refusal of the Krumovgrad Municipal Council (the "Council") to
issue permission for the preparation of the detailed development plan ("DDP")
and returned the matter to the Council to decide on the Company's request within
one month. This Ruling was appealed by the Council before the three-member panel
of the Court, and on December 18, 2013, the appeal was dismissed by the Court.
The Council's final appeal to the five member panel was heard on January 13,
2014, and, on February 10, 2014, the Court again ruled in favour of the Company.
As a result, the case was dismissed by the Court and may not be appealed
further. On March 7, 2014, the Council again considered the Company's
application and a majority of the Council voted not to approve the Terms of
Reference and the preparation of the DDP. The Council's decision has been
formally presented to the Governor of the Kardzhali District for ratification,
as required by Bulgarian law. The Governor has refused to ratify the Council's
decision and returned the matter to the Council for further consideration. The
Company is in dialogue with the Council and its leadership regarding calling a
further meeting to again consider the DDP terms of reference. Independent of the
Governor's action, in order to preserve its legal rights, the Company has filed
an appeal of the Council's decision with the Administrative Court in Kardzhali.
The Company maintains active dialogue with the government and other stakeholders
to build relationships and work towards securing the remaining permits
throughout 2013 and 2014. The Company remains confident that the Council will
eventually issue a favourable decision on the DDP terms of reference, which in
turn is expected to facilitate obtaining the remaining local permits and
approvals allowing the Project to move forward to construction.
Should the Council continue to delay progress, DPM will defer its scheduled
ramp-up and take steps to limit spending to only those activities necessary to
secure the remaining local permits. Provided the existing delays are resolved,
commissioning of the Project and the hand-over to operations are currently
expected to occur during the fourth quarter of 2016 or early in the first
quarter of 2017.
Technical Information
The Mineral Resource and Mineral Reserve estimates and other scientific and
technical information contained in this news release was prepared by CSA Global
(UK) Ltd. ("CSA"), in accordance with Canadian regulatory requirements set out
in National Instrument 43-101 Standards of Disclosure for Mineral Projects, and
has been reviewed and approved by, as relates to Mineral Resources, Galen White,
BSc (Hons) FAusIMM FGS, Director and Principal Consultant of CSA, and Julian
Bennett, BSc ARSM FIMMM CEng, as relates to Mineral Reserves. Both Galen White
and Julian Bennett are independent Qualified Persons ("QP"), as defined under NI
43-101. The NI 43-101 technical report (the "Technical Report") entitled "NI
43-101 Technical Report, Ada Tepe Deposit, Krumovgrad Project, Bulgaria" dated
March 21, 2014, in respect of the study for the construction and operation of
its Krumovgrad gold project disclosed herein, is being filed today on SEDAR at
www.sedar.com. Simon Meik, Vice President, Processing, Jean Francois Laurin,
Project Director, Krumovgrad, and Edgar Urbaez, Corporate Director, Technical
Services, all of DPM, who are QPs and not independent of the Company, have also
reviewed and approved the contents of this release.
The Mineral Resource and Mineral Reserve estimates contained herein may be
subject to legal, political, environmental or other risks that could materially
affect the potential development of such Mineral Resources. See the Technical
Report for more information with respect to the key assumptions, parameters,
methods and risks of determination associated with the foregoing Mineral
Resource estimates.
Cautionary note to U.S. Investors concerning estimates of Mineral Resources.
These estimates have been prepared in accordance with the requirements of
Canadian securities laws, which differ from the requirements of U.S. securities
laws. The terms "mineral resource", "measured mineral resource", "indicated
mineral resource" and "inferred mineral resource" are defined in NI 43-101 and
recognized by Canadian securities laws but are not defined terms under the U.S.
Securities and Exchange Commission ("SEC") Guide 7 ("SEC Guide 7") or recognized
under U.S. securities laws. U.S. investors are cautioned not to assume that any
part or all of mineral deposits in these categories will ever be upgraded to
mineral reserves. "Inferred mineral resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to their economic
and legal feasibility. It cannot be assumed that all or any part of an "inferred
mineral resource" will ever by upgraded to a higher category. Under Canadian
securities laws, estimates of "inferred mineral resources" may not form the
basis of feasibility or pre-feasibility studies. U.S. investors are cautioned
not to assume that all or any part of an inferred mineral resource exists or is
economically or legally mineable. Accordingly, these mineral resource estimates
and related information may not be comparable to similar information made public
by U.S. companies subject to the reporting and disclosure requirements under the
U.S. federal securities laws and the rules and regulations thereunder, including
SEC Guide 7.
FORWARD LOOKING STATEMENTS
This news 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 and silver, the
estimation of mineral reserves and resources, the realization of 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, 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.
NON-IFRS FINANCIAL MEASURES
This news release refers to estimated EBITDA (defined as earnings before
interest, taxes, depreciation and amortization), cash cost per tonne of ore
processed and cash cost per ounce of AuEq because management and 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.
In addition, management utilizes these metrics as an important management tool
to monitor cost performance of the Company's operations. These measurements have
no standardized meaning under International Financial Reporting Standards
("IFRS") and may not be comparable to similar measures presented by other
companies. These measurements are intended to provide additional information and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
DPM 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Dundee Precious Metals Inc.
Rick Howes
President & Chief Executive Officer
(416) 365-2836
rhowes@dundeeprecious.com
Dundee Precious Metals Inc.
Lori Beak
Senior Vice President, Investor & Regulatory
Affairs and Corporate Secretary
(416) 365-5165
lbeak@dundeeprecious.com
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