In a Jan. 12 research note, CIBC analyst Cosmos Chiu reported that Dundee Precious Metals Inc. (DPM:TSX) posted a solid Q4/19 and its production for 2019 fell well within the guidance range. "Overall, the results confirm that the company is set up for a strong 2020 as Chelopech's high-margin production is complemented by Ada Tepe's first full year of operation."
Chiu reviewed Dundee's Q4/19 and 2019 numbers, which were in line with CIBC's estimates, and performance of each asset.
During the quarter, Dundee produced 69,500 ounces (69.5 Koz) of gold and 10 million pounds (10 Mlb) of copper, which took the year's total for each to 231 Koz and 37 Mlb, respectively. These quantities fell in the higher end of full-year 2019 guidance, which was 200–247 Koz for gold and 33–39 Mlb for copper.
As for Dundee's Chelopech operation in Bulgaria, it "continued its solid year," Chiu noted. Total production was 173 Koz of gold, versus guidance of 155–187 Koz. Copper production fell within the top end of guidance. During Q4/19, gold production was 43 Koz compared to CIBC's estimate of 42 Koz, and production was 10 Mlb, the same as CIBC's estimate. Dundee attributed Chelopech's production levels, Chiu relayed, to having mined in higher-grade gold areas of the deposit and having recovered more gold in the pyrite concentrate.
This year, Dundee will continue to drill at Chelopech "as it looks to extend the current eight-year reserve life at its flagship operation," noted Chiu.
Regarding Ada Tepe, also in Bulgaria, "it has progressed well since Dundee announced that the mine had completed its ramp-up on Sept. 27, 2019," Chiu indicated. Total production there in 2019 was 57 Koz of gold, in the high end of revised (lowered) guidance of 45–60 Koz. Q4/19 production came in at 26.5 Koz, under CIBC's forecast of 27.3 Koz. "The positive impact of higher-grade material was offset by milling downtime as the SAG mill was relined within the quarter," explained Chiu.
Gold sales of 38.9 Koz from Ada Tepe exceeded production due to there being extra gold concentrate in inventory from Q3/19. This was expected and should benefit Dundee's Q4/19 financials.
With respect to Dundee's Tsumeb operation in Namibia, it smelted 48,600 tons (48.6 Kt) of concentrate in Q4/19, more than CIBC's projection of 45.5 Kt. Dundee revised full-year guidance downward to 210–230 Kt due to scheduled maintenance of the smelter, and full-year production met that guidance. The company curtailed operations at Tsumeb from Sept. 3 through Oct. 25, during which annual maintenance was carried out. "No significant maintenance shutdown is now expected until 2021," Chiu pointed out.
CIBC has an Outperformer rating and a CA$7 per share price target on Dundee, whose current share price is about CA$5.94.
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Disclosures from CIBC, Dundee Precious Metals Inc., Earnings Update, January 12, 2020
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Important Disclosure Footnotes for Dundee Precious MEtals INc. (DPM.TO)
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