Good day, and thank you for standing by. Welcome to the Dundee Precious Metals First Quarter 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jennifer Cameron. Please go ahead.
Thank you, and good morning. I'm Jennifer Cameron, Director, Investor Relations, and I'd like to welcome you to our first quarter conference call.
Joining us today are members of our senior management team, including David Rae, President and CEO, and Navin Dyal, 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.
The definitions established 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 reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call is related to continuing operations and has generally been rounded. References to 2024 pertain to the comparable periods in 2024, and references to averages are based on midpoints of our outlook or guidance.
I'll now turn the call over to David Rae.
Good morning, and thank you all for joining us. Before we begin today's discussion, I want to take a moment to acknowledge the recent passing of Peter Gillin, who served as the Chair of our Board since 2022 and as a Director for the past 16 years. His steady leadership and oversight helped guide our transformation into the responsible growing precious metals producers that we are today, and he will be missed by us all.
I'd also like to welcome Juanita Montalvo to a new role as Chair. Juanita has served on the Board since 2017, and with more than 25 years of international experience in mining, she has a strong track record in the development of large-scale projects, operational and strategic decision-making, and brings extensive governance expertise.
She assumes the role at an exciting time for the company as we advance our organic pipeline and continue to be well-positioned to deliver value to all of our stakeholders now and over the long term.
Turning now to our quarterly results. As you would have seen from our news release circulated last night, our first quarter was a solid start to the year, a result of our low-cost structure and the benefit of high metal prices, improving our already robust margins. Highlights from our quarter include solid production of approximately 50,000 ounces of gold and 5.9 million pounds of copper, generating strong margins and all-in sustaining cost of $1,244 per ounce of gold sold, and continued financial strength as we ended the quarter with a consolidated cash balance of $763 million.
We continue to consistently deliver free cash flow, generating approximately $79 million during the quarter, and further strengthened our financial capacity to fund growth.
At the same time, our investors are benefiting from our low-cost, high-margin gold production as we harvest free cash flow by returning excess capital to shareholders, demonstrated by the repurchase of a record 7.5 million shares during the quarter. We also continue to advance our organic growth pipeline and generate strong results from our exploration activities in Serbia, which I'll touch on in a moment.
Looking at our operations in more detail, Chelopech's performance was in line with the mine plan, producing approximately 37,000 ounces of gold and 5.9 million pounds of copper with an all-in sustaining cost of $673 per ounce of gold sold. Cash costs of $53 per tonne of ore processed were on target for the quarter, reflecting Chelopech's track record of solid, efficient operations, and the mine is on track to meet its 2025 guidance targets for the year.
We continue to prioritize in-mine and brownfield exploration work to further extend mine life at Chelopech, targeting an increase to over 10 years. During the quarter, in-mine extensional drilling activities were focused on discovering new mineralized zones as well as infill drilling at Charlotte Dee, where modeling for a new resource estimate is ongoing.
Ada Tepe produced approximately 12,500 ounces of gold with an all-in sustaining cost of $1,340 per ounce of gold sold. As we guided at the beginning of the year, Ada Tepe's production is expected to nearly double in the second half of the year compared to the first half due to self-sequencing of the IMWF.
With higher production expected in the second half of the year, Ada Tepe is on track to achieve its guidance for the year. We continue to focus on developing quality assets, and our growth priority is advancing Coka Rakita to production, which is targeted for 2028. The feasibility study is advancing as planned and is expected to be completed by year-end.
Activities planned for 2025 in support of starting up construction in mid-2026, include completing the geotechnical and hydrogeological drilling, progressing the design to the basic engineering level, advancing the project execution readiness and commencing operational readiness activities leveraging Coka Rakita's regional proximity to Chelopech to train and develop key personnel for operating roles.
In parallel, permitting activities continues to advance. We submitted the final report on mineral reserves and resources known as the elaborative reserves to the relevant authorities in the first quarter and continue to engage with relevant stakeholders regarding the spatial plan. What makes Coka Rakita particularly exciting is the significant exploration potential within the footprint of the project, where we've made several additional discoveries, including the Dumitru Potok and Frasen prospects, which are located only 1 kilometer north of Coka Rakita.
Our 55-kilometer drilling program focused on testing high-priority targets of our Coka Rakita project is advancing well, with 14 drill rigs currently in operation.
At Dumitru Potok, with impressive drilling results we shared at the end of February, they confirm the presence of a large high-grade copper, gold, silver skarn system with mineralization concentrated along both the eastern and western sides of an intrusion. Based on drilling to date, mineralization has been detected over a 1-kilometer strike length up to 300 meters vertically and up to 500 meters away from the intrusion.
The drill program continues to expand the Dumitru Potok discovery, and we have yet to define its limits as it remains open in multiple directions and at depth. We are also advancing drilling at Coka Rakita North and Valja Saka prospects and look forward to providing further updates on our progress.
At the Loma Larga Gold project in Ecuador, the updated feasibility study is on track for completion in the second quarter of 2025. This will update the project economics to reflect the current gold price, capital, and operating cost environment as well as demonstrate the value and optionality in our growth portfolio.
The Ministry of Energy and Mines has continued to advance the prior informed indigenous consultation towards completion, which is the last requirement before we apply for the environmental license. Towards the end of April, we received notice that the term of the Cristalco concession, the main concession of the Loma Larga Gold project, has been extended by 25 years.
Loma Larga remains an attractive growth option in our portfolio with mineral reserves of 1.9 million ounces of gold and 80 million pounds of copper, which are a clear fit with our technical and operating expertise. Overall, we continue to deliver strong results, and with both mines on track to achieve our guidance, we are well-positioned to continue our strong operating track record, while also focusing on achieving key milestones for our next phase of growth.
I'll now turn the call over to Navin for a review of the financial results.
Thanks, Dave. I'll be touching briefly on the financial highlights for the quarter and concluding with some commentary on our balance sheet and return of capital program.
Overall, results during the quarter reflect our solid gold production and a favorable commodities price environment. All of my remarks will focus on results from continuing operations unless otherwise noted.
Looking at our earnings and cash flow. Revenue of $144 million in the quarter was higher than the prior year due primarily to higher realized metal prices, partially offset by lower volumes of gold sold. Adjusted net earnings in the quarter of $55 million or $0.32 per share increased compared to the prior year due primarily to higher revenue as well as lower valuation expense as a result of the capitalization of costs beginning this year related to the Coka Rakita project, partially offset by higher mark-to-market adjustments to share-based compensation expenses resulting from a 46% increase in the company's share price during the quarter. Adjusted net earnings exclude a one-time levy to the 2025 Bulgarian state budget for an after-tax amount of $22 million.
Cash flow provided from operating activities and free cash flow of $55 million and $79 million, respectively, reflect an increase of $19 million in each case compared to the prior year due to higher adjusted net earnings generated.
Taking a closer look at our cost metrics, all-in sustaining cost of $12.44 per ounce of gold sold was 41% higher than the prior year due primarily to lower volumes of gold sold and higher mark-to-market adjustments for share-based compensation expenses.
Given the 46% increase in our share price during the quarter, mark-to-market adjustments to share-based compensation increased our all-in sustaining costs by $214 per ounce compared to an increase of only $38 per ounce in the prior year.
We are on track to meet all our all-in sustaining cost guidance for the year, and we are closely monitoring the market dynamics outside of our control, which impact costs, such as metal prices and foreign exchange rates compared to our budget assumptions.
Looking at the aspects of our costs that are more within our control, on a cash cost per tonne basis, performance at Chelopech and Ada Tepe were in line with our expectations for the quarter. In terms of our capital spending, sustaining capital expenditures of $8 million were higher than the prior year due primarily to higher deferred stripping costs as a result of higher stripping ratios at Ada Tepe, as anticipated in the mine plan for this year.
Growth capital expenditures of $12 million were higher than the prior year due primarily to costs related to the Coka Rakita project being capitalized for the beginning of 2025 as a result of the project advancement to the feasibility study stage. We continue to maintain a strong balance sheet and cash position with a consolidated cash balance of $763 million, no debt, and a $150 million undrawn revolving credit facility.
With our significant financial strength and robust free cash flow, we are well-positioned to fund our growth opportunities and exploration prospects, while continuing to deliver peer-leading returns to shareholders through our enhanced share buyback program. Starting in the fourth quarter of last year, we ramped up our share buyback significantly. We repurchased a record number of shares during the first quarter, buying back 7.5 million shares at a total cost of $83 million.
Combined with our $0.04 per share quarterly dividend, we returned an aggregate of 114% of our free cash flow to shareholders in the first quarter. Towards the end of March, we renewed our normal course issuer bid, enabling us to repurchase up to $15 million of common shares, approximately 10% of our public float, in line with our plan to return up to $200 million to shareholders in 2025.
We continue to deploy our capital in a disciplined manner that balances our desire to reinvest in growing and optimizing our business with our commitment to returning capital to our shareholders. We will continue to take a balanced approach to capital allocation that focuses on balance sheet strength, capital return to shareholders, and reinvestment in the business to sustain growth over the long term.
In closing, we continue to deliver strong performance from our mining operations and strive to maintain our track record of generating significant free cash flow.
I'll now turn the call back to Dave for concluding remarks.
Thanks, Navin. This is another exciting year for DPM as we advance our organic growth pipeline and continue to build value and momentum. Our portfolio is generating solid, consistent results, and we are very well positioned as one of the lowest-cost producers. We are harvesting free cash flow and delivering peer-leading returns to shareholders through our enhanced share buyback program.
We're progressing the Coka Rakita feasibility study for an accelerated construction decision. We have substantial financial strength to fund growth opportunities and fund exploration following our success in 2024, and we're focused on executing our strategy to deliver above-average returns for shareholders as a mid-tier precious metals company.
DPM is a clear path forward, and we're very excited about our future.
I'd now like to open up the call for any questions.
[Operator Instructions] Our first question comes from Don DeMarco from National Bank.
Congratulations on another strong free cash flow quarter. First question is, what is the broader conceptual plan for development in Serbia?
I mean, we've got Coka Rakita on a well-defined path. But given what you know about Dumitru Potok and Frasen, if these prove out, would these potentially be processed in a separate facility, that is, you might have a pair of mines and plants on these licenses?
Yes. Thanks, Don. The base thinking is that the Coka Rakita processing facility, which is part of our current feasibility study in progress, is to have a dedicated facility for the Coka Rakita deposit.
Dumitru Potok would have a separate facility. That's the base assumption. Now, having said that, there's a lot of overlap between these 2 assets.
So it could well be site by site, but they're essentially going to be different flow sheets and different facilities. So there will be some synergies, but the idea is to keep these 2 separate.
So then focusing on Coka Rakita. Production is targeted for 2028. And at this stage, what do you think are the risks to achieving this time line? You mentioned permitting. Is there any permitting risk? Or what are the other risks that could put pressure on this time line?
We've obviously detailed pretty clearly down to a granular level exactly what we have to do and are comfortable with what's happened to achieve our timelines, which puts us in a position that we complete permitting and get a construction decision by mid-2026, which would lead to first production in mid-2028.
So we continue to watch this very carefully. But as I say, at this point, we're still comfortable that, that time line is entirely achievable.
And then finally, we have the Loma Larga FS that's pending in Q2. Would you be looking at the economics in this FS to determine a go-forward reevaluate the project at this point? And if so, if it's favorable, what would the next steps be?
So, just to be clear, what we've done is recognize that we had a gap between the feasibility study that we came in with from INB and what we subsequently published 1 year later, which was just a replication of that information.
We felt the need, despite having updated the reserves and resources, to provide something that took into account the differences that have happened on both capital and operating costs, and also the metal price environment.
But what we have not done is we've not gone back and reassessed the cutoff grade and what that means in terms of the reserves and resources. So what will happen is that the piece of work that's being completed in this quarter will just have capital OpEx metal price adjustments.
What will be necessary after that is then to look at with the information from drilling, geotech, hydrogeology condemnation, we'll then take that and we'll reassess that all of the assumptions for earthworks, civils, and other considerations are, in fact, correct. We're assuming they are highly likely they are, but we need to confirm that.
And then what we'll do is we'll recalculate the cutoff grade, redo the reserves and resources, and then update the feasibility study, which I would anticipate to be largely the same as it is now in terms of facilities and infrastructure, and operation.
But there are 2 different activities there. The first one will really give more of an update, absent changing the reserves and resources of where we stand today with the current capital operating costs and metal price environment.
So with that, when would you expect to have all the information you need in order to make a go-forward decision on this project?
That's a great question. So obviously, what we're doing at the moment is we're watching the advancement of all of the things that are required to get us to a stage where we can advance the project.
The steps that we're looking to complete are the constitutional court items, of which the fourth element is in progress at the moment. And we would be looking forward to that being completed in the relatively near future, presumably after the new government is in place, which is only towards the end of May.
So there's a piece of work there. Once that is completed, we then make the application for the environmental permits, the EIA. We've already done all the work on that. So it's not something that's a lengthy process as we see it at the moment.
Then what would happen is we would then go back and we would initiate the drilling. There's probably at least 6 months of drilling, and then you have to do the update to the feasibility study.
So you're looking at something that's probably 9 to 12 months out from the point at which we clear that. So this is going to be something that's timing after Coka Rakita in terms of a construction decision is what I would say right now. But this next quarter to 6 months is going to be really important in terms of the time line for that.
[Operator Instructions] Our next question comes from Jeremy Hoy of Canaccord Genuity.
Just one quick one from me today. You guys advanced Coka Rakita pretty rapidly from discovery through to initial resource in a PEA.
You're also aggressively drilling these new prospects, Dumitru Potok and Frasen. Do you have a high-level time line in mind for when we might see a resource and the later technical studies for these prospects?
It's a little early for that, Jeremy. But what I would say is that we're looking to do what we can so that by the end of the year, there's an ability to take an estimate on what Dumitru Potok and Frasen are likely to be in terms of their overall scale.
So, somewhat similar to what we did in January of 2023 with Coka Rakita.
So if you consider that Coka Rakita is 250 to 450 meters underground, if you have a look at Dumitru Potok here, we're talking about something that's 900 meters to 1.1 kilometers, 1.2 kilometers underground, let's say. So it actually takes longer to get there and do the work that you can then use to make these estimates. And then, of course, you have to look at the nature of the material and what that means in terms of the drill spacing.
So all of these things come into an ability for us to actually make that estimate on timing. So at this point, we're excited to be finding what we are. We're looking to do something which, by the end of the year, should give us some sense of scale, and then that will allow us to start thinking about timelines.
At this time, I am showing no further questions. Thank you for your participation in today's conference. There is one more. [Operator Instructions]
Our next question comes from Bereket Berhe from Beacon Securities.
Congratulations again for another strong free cash flow quarter. My question relates to your TC/RCs, and I do not know how much you can comment on this, but I was trying to figure out if you're benefiting from the low TC/RC environment at the moment.
But looking at your numbers, at least relative to last year and the last few quarters, I do not see an appreciable difference. Am I reading this wrong? Or is there a better TC/RC environment for you guys at the moment?
Yes. What we did at the beginning, essentially late at the end of last year, we had essentially taken the benefit of the historically low TCs and RCs, and we have essentially locked in a number of our contracts related to that over the course of this year.
What we're seeing right now is a TC market for clean concentrate that continues to decline. And as you know, our concentrate at Chelopech is a bit more complex. But I think what you can infer from this is that we are benefiting from the historical or recent historic loads of TCs. What I would also comment as well is that what we're also seeing is freight costs significantly lower than we have seen in the recent past.
And we've been able to take advantage of that as well, locking in our sea freight costs for the balance of the year. So you should see overall on balance year-over-year TCs that are perhaps the same, and then lower freight costs for the balance of the year.
At this time, I'm now showing no further questions. This concludes our call. Thank you for your participation in today's conference. You may now disconnect.
