• Revenue: $157 million, 18% higher than 2023.

• Adjusted Net Earnings: $71 million or $0.39 per share.

• Cash Flow from Operating Activities: $126 million.

• Free Cash Flow: Record $82 million.

• All-in Sustaining Cost: $710 per ounce of gold sold.

• Gold Production: Approximately 68,000 ounces.

• Copper Production: 8 million pounds.

• Consolidated Cash Balance: $707 million.

• Sustaining Capital Expenditures: $8 million for the quarter.

• Share Buyback Program: 2.3 million shares repurchased at $18.4 million.

• Dividends Paid: $14.5 million.

• Warning! GuruFocus has detected 5 Warning Sign with DPMLF.

Release Date: August 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dundee Precious Metals Inc (DPMLF) reported record financial results for the second quarter, including a free cash flow generation of $82 million.

• The company achieved an all-in sustaining cost of $710 per ounce of gold, which is in line with their guidance for the year.

• Chelopech mine continued its consistent performance with an impressive all-in sustaining cost of $531 per gold ounce sold.

• Ada Tepe mine produced approximately 24,000 ounces of gold at an all-in sustaining cost below the low end of its guidance range.

• The company maintains a strong balance sheet with a consolidated cash balance of $707 million and no debt, providing financial flexibility for growth opportunities.

Negative Points

• The sale of the Tsumeb smelter faced a reduction in cash consideration from $49 million to $20 million due to changes in the tolling agent agreement.

• Dundee Precious Metals Inc (DPMLF) will need to purchase all unprocessed concentrates and secondary materials owed by Tsumeb, amounting to approximately $80 million.

• Higher planned exploration and evaluation expenses from Coka Rakita and higher income tax partially offset the increased net earnings.

• The company is facing challenges in the permitting process for the Loma Larga project, which could impact future investments.

• Sustaining capital expenditures were higher than the previous year, indicating increased costs in maintaining operations.

Q & A Highlights

Q: Can you explain the reduction in the purchase price for the Tsumeb sale and the potential for DPM to act as a tolling agent? A: David Rae, President and CEO, explained that the reduction in purchase price was due to the tolling agent's decision to end the agreement, prompting a market valuation review. DPM does not foresee further amendments and is comfortable with the temporary tolling agent role for four months post-closing.

Q: Is there any credit risk associated with the $80 million purchase of unprocessed concentrates at Tsumeb? A: Navin Dyal, CFO, clarified that DPM is not lending funds but purchasing the concentrate, similar to previous arrangements. This is essentially a working capital facility, with DPM stepping into the tolling agent's role.

Q: Will exploration spending at Ada Tepe continue despite the mine life ending in mid-2026? A: David Rae confirmed that exploration will continue as long as there are promising opportunities, given the potential value demonstrated by previous exploration efforts.

Q: With the decrease in TC/RCs, do you expect this trend to continue, and how does it affect Chelopech? A: Navin Dyal noted that while TC/RCs have decreased, benefiting Chelopech, they might be at the bottom and could take time to normalize. The reduction has resulted in better payable terms for Chelopech.

Q: Given the strong free cash flow and low costs at Chelopech, are there plans to increase shareholder returns? A: Navin Dyal stated that the company regularly reviews capital allocation, balancing shareholder returns with maintaining financial strength and funding growth opportunities. They continue to use dividends and share buybacks as part of their strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.