Good day and thank you for standing by. Welcome to Dundee Precious Metals 4th quarter 2023 earnings results conference call. At this time, all participants are in a 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference to Jennifer Cameron.
Thank you and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to Dundee Precious Metals' fourth quarter and year-end 2023 conference call. With me today are David Rae, President and CEO; Navin Dyal, Chief Financial Officer; as well as members of our Senior Manager team who will be available to take your questions. 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 the call are related to continuing operations and have generally been rounded. References to 2022 pertain to the comparable periods in that year, 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. Overall, the leadership team at DPM is very proud of what our global team achieved in 2023, which was an exceptional year for the company. We delivered strong operating results and a robust free cash flow generation, significantly increased our return of capital to shareholders, and further strengthened our balance sheet, providing an exceptional platform for our future growth, which we significantly transformed during the year. Today, Navin and I will provide a brief update on our Q4 and year-end results and discuss why we believe that DPM continues to be well-positioned to deliver value to all of our stakeholders now and over the long term. I will also outline why we are excited about what lies ahead for DPM in 2024.
Looking back at the past year, I'm pleased to report that in 2023 we continued our strong track record, consistent performance at our operations. We produced approximately 296,000 oz of gold and 31 million lb of copper, and despite industry-wide cost pressures and lower copper prices, our all-in sustaining cost was $849 per ounce, which was within our guidance. We generated $228 million in free cash flow and significantly increased our return of capital to shareholders, returning $96 million or 42% of our free cash flow through share buybacks and dividends. We ended the year in a strong financial position with $595 million in cash and strong liquidity, including an undrawn $150 million revolving credit facility and no debt.
Importantly, we continued to deliver on our ESG priorities and scored in the 91st percentile among metals and mining companies in the S&P Global Corporate Sustainability Assessment for the third consecutive year. During the year, we also significantly transformed our growth pipeline, which the Čoka Rakita project in Serbia and the acquisition of Osino Resources, which is targeted to close in the second half of the year, subject to certain approvals. Looking at our operations in more detail and starting with Chelopech, our largest mine continued its track record of strong performance in 2023, producing approximately 162,000 oz of gold and $31 million of copper within our guidance for the year. In November, we announced an updated mineral reserve and resource estimate, along with an updated life-of-mine plan with improved grades and recoveries, continuing our consistent track record of extending Chelopech's mine life.
Today, Chelopech has a life-of-mine that extends to 2032 based on mineral reserves, has a strong mineral resource base, and significant opportunities to continue our track record of mine life extensions, including Chelopech North, which used to be known as Sveta Petka, where we received our commercial discovery certificate in Q4. In 2023, we continued our in-mine exploration program as well as aggressive brownfield exploration. We continued drilling at Sharlo Dere West and Sharlo Dere prospects, which demonstrated additional resource potential, and these are within the concession and close to existing infrastructure. Turning now to Ada Tepe, the mine achieved a new gold production record in 2023 at 134,200 oz. All-in sustaining costs were particularly impressive at $500 per ounce of gold sold and were below the low end of guidance for the year.
In the fourth quarter, we continued the target delineation campaign and scout drilling at the new Krumovgrad exploration license. Scout drilling of several epithermal sediment-hosted targets was advanced during the quarter and is planned to continue in the first quarter of 2024. In 2024, we plan to spend a total of $3 million-$4 million for brownfield exploration activities and approximately $2 million in greenfield exploration at Ada Tepe. Last night, we announced that in 2023 we decided to undertake a strategic review of our Tsumeb asset, including a potential sale of the smelter. To provide some context around that announcement, we acquired Tsumeb in 2010 as a secure processing outlet for the complex concentrate produced by Chelopech.
With developments in the global smelting market, we've been able to place Chelopech concentrate at several other third-party facilities, providing secure and reliable processing at favorable terms without the need to own and operate the smelter. Therefore, we do not expect to process any Chelopech concentrate at Tsumeb commencing in 2024, and the smelter, therefore, is no longer seen as a strategic asset within our portfolio. In 2023, Tsumeb processed approximately 188,000 tons of complex concentrate, which was below 2023 guidance. This was a result of unplanned downtime in the off-gas furnace system in the first three quarters of the year, and we extended our shutdown in order to complete repairs to that off-gas system.
However, in the fourth quarter, we got the benefit of that work with Tsumeb processing approximately 68,000 tons of complex concentrate, which was a near-record level of performance, a very large improvement over the prior three quarters due to the repair of those off-gas systems. Over the course of 2023, we significantly transformed our growth prospects. In December, we announced that we had entered into an agreement to acquire Osino Resources and the advanced-stage Twin Hills project in Namibia, which has the potential to add near-term growth to our portfolio.
The transaction is subject to Osino shareholder approval and Namibian competition approval. Also, in December, we announced the initial mineral resource estimate for Čoka Rakita, which marked a significant milestone for DPM's future growth and confirmed Čoka Rakita's potential as a high-quality gold project. Since we announced the initial discovery in January of 2023, Čoka Rakita has rapidly grown into a 1.8 million oz deposit at 5.6 g a ton, a remarkable achievement over such a short period of time. We're continuing to accelerate the project through our development pipeline, including advancing a preliminary economic assessment, excuse me, which we expect to complete in the second quarter of 2024.
We'll be targeting a throughput rate of 850,000 tons per annum. The project is located approximately 35 km from the city of Bor in Serbia, is proximal to existing roads and power lines, and is approximately 320 km northwest of DPM's Chelopech mine in Bulgaria, which will allow easy access to existing technical support capabilities. Čoka Rakita is a strong fit with our underground mining and processing expertise, with metallurgical test work demonstrating gold recoveries of approximately 90% by gravity concentration and conventional flotation. We're excited by Čoka Rakita's potential in a region where we've had a presence for many years and where we've developed strong relationships with local stakeholders. We're also planning to continue aggressive exploration at Čoka Rakita and the surrounding licences to generate new discoveries.
Scout drilling near Čoka Rakita continued in the fourth quarter, intercepting favorable geological indicators in the north and northwest flank of the system where additional marble-hosted skarn mineralization was encountered. In the fourth quarter of 2023, we were granted two new exploration licenses covering the area hosting the Timok Gold Project. We are currently preparing an aggressive exploration program and plan to start testing skarn targets on the new Potaj Čuka exploration license located to the north of Čoka Rakita, as well as the new Pešter Jug exploration license, which is to the west of Čoka Rakita. This program is expected to commence in early 2024, pending approval of work programs and permitting procedures, with approximately 25,000 m of drilling planned for the first year of exploration on these targets. 2024, we're planning to spend a total of around $20 million for exploration activities in Serbia.
Turning to Loma Larga in Ecuador, we continue to progress activities related to permitting and stakeholder relationships. In October, a new president was elected, and we are working with the newly formed government to fulfill the requirements of the August 2023 ruling, which found that free prior and informed consultation of certain local indigenous populations must be carried out by the state. That ruling also required environmental consultation with communities in the project's area of influence and additional reports on the impact on water resources and the nearby national recreation area, and these will be delivered by the ministry to the court to advance the project to the exploitation phase. In line with this ruling, the government commenced the environmental consultation process in January, and DPM will continue to support the government of Ecuador and proactively engage with stakeholders to fulfill the conditions established by the court.
As previously reported, DPM will continue with the optimization phase of the feasibility study beyond the previously stated timeline ending in 2023. This is in order to evaluate additional opportunities and potentially incorporate the results of drilling once these activities are able to recommence. We will continue to take a disciplined approach with respect to future investments in the Loma Larga project, which will be based on the receipts of key milestones, the overall operating environment in Ecuador, and our other capital allocation priorities. Excuse me. At the Tierras Coloradas concession, which is located 200 km south of Loma Larga in Ecuador's Loja province, we continue the 10,000 m drilling program, which commenced in August. This program is designed to follow up the positive results we reported at the end of February, which confirmed the presence of two high-grade vein systems that remain open in multiple directions.
In closing, we're entering 2024 in the unique position. We have strong and consistent production from our operations and an all-in sustaining cost that ranks among the lowest in the gold industry. We have significant free cash flow generation, a record of disciplined capital allocation and returning capital to shareholders. We have attractive development projects, proven exploration success, and the financial strength to internally fund our growth pipeline and exploration prospects, as well as continuing to return capital to shareholders through our quarterly dividend. We've got continuing ESG performance and an impressive track record of securing our social license and a very strong technical team with a history of adding real value through innovation. I'll now turn the call over to Navin for review of the financial results and outlook, following which we'll open the call to questions.
Thanks, Dave. I'll be touching briefly on the financial highlights from the quarter and year. I'll also provide an overview of our 2024 guidance sorry, 2024 guidance and updated three-year outlook, and I will conclude with some commentary on our balance sheet and return of capital program. A few considerations include the announced agreement to acquire Osino Resources Corp and its advanced-stage Twin Hills gold development project, which offers near-term production growth to supplement the decrease in production at Ada Tepe as the mine comes to the end of its life, and a significant exploration package in Namibia. The company's decision to undertake a strategic review of its Tsumeb operation, including a potential sale, given that the smelter is no longer seen as strategic to DPM's asset portfolio.
As a result of this decision, the assets and liabilities of Tsumeb have been presented as held for sale in the company's balance sheet as of December 31st, 2023, and the operating results and cash flows of Tsumeb have been presented as discontinued operations in the consolidated statements of earnings and loss and cash flows for both of the years ended December 31st, 2023, and 2022. My remarks will focus on highlights from continuing operations only. Looking at our financial highlights from the quarter and year, we achieved consolidated production and costs in line with our guidance and delivered strong financial results. We generated $139 million of revenue in the fourth quarter, a 23% increase compared to the prior year due primarily to higher volumes and realized prices of gold sold.
For the year, revenue was $520 million, 20% higher than 2022 due primarily to higher volumes and realized prices of gold sold and lower treatment and freight charges at Chelopech, partially offset by lower volumes and realized prices of copper sold. Adjusted net earnings were $50 million for the quarter, a $28 million increase compared to the prior year due primarily to higher revenues from gold sales. This was partially offset by higher planned exploration and evaluation expenses. In 2023, adjusted net earnings were $180 million, $61 million higher than the prior year due primarily to higher revenues from gold sales, lower treatment and freight charges at Chelopech, and higher interest income. This was partially offset by higher planned exploration and evaluation expenses, where we increased spending following positive results from our exploration programs in Serbia and Bulgaria.
Cash flows from operations of $71 million for the fourth quarter and $262 million for the year were higher than the prior year due primarily to higher adjusted EBITDA. During the fourth quarter, free cash flow was $49 million, $19 million higher than the prior year due primarily to the same factors impacting cash flow from operations and lower cash outlays for sustaining capital. For 2023, we generated $228 million of free cash flow, a 51% increase compared to 2022. In terms of cost metrics, we achieved our all-in sustaining cost guidance for the year. In the fourth quarter, all-in sustaining cost was $876 per ounce of gold sold, 13% lower relative to 2022, with higher volumes of gold sold, lower cash outlays for sustaining capital, higher byproduct credits, and lower prices for power, partially offset by a stronger euro relative to the U.S. dollar.
In terms of our capital spend, we were in line with our guidance for both sustaining capital and growth capital expenditures. Looking at the fourth quarter, sustaining capital expenditures were $8 million, 38% lower than the prior year of $13 million due primarily to the planned upgrade of the tailings management facility at Chelopech, which occurred throughout 2022 and was completed in the second quarter of 2023. Growth capital expenditures of $10 million for the quarter primarily related to the Loma Larga gold project, which were comparable to the prior year. Last night, we provided an updated three-year outlook, which has been outlined in detail on slide 16 of the webcast. We are forecasting strong gold production, averaging approximately 240,000 oz annually over the next three years. Our three-year outlook forecasts a reduction in 2026 as Ada Tepe reaches the end of its mine life.
Copper production over the next three years is expected to average approximately 33 million lb per year, with higher production expected in 2025 in line with the Chelopech updated life-of-mine plan. We are forecasting slightly higher all-in sustaining cost per ounce of gold sold for 2024 relative to our previous three-year outlook. This is partially due to a change in our copper price assumption, which we lowered to $3.75 per pound or $4 per pound in our previous outlook. Our revised outlook also reflects lower volumes of copper sold in 2024 and higher local currency operating expenses. Our sustaining capital is trending lower over the next three years, largely reflecting the fact that Ada Tepe is nearing the end of its mine life. Our 2024 guidance and three-year outlook does not yet reflect the acquisition of Osino Resources.
We continue to build our financial strength, ending the quarter with $595 million of cash on the balance sheet. During the year, we bought back 9.7 million shares through our NCIB program and paid $30 million of dividends, returning a total of 42% of our free cash flow to shareholders. We also intend to renew the NCIB, providing us with the flexibility to pursue additional share repurchases, depending on our financial position, the outlook for our business, and ongoing capital requirements as we advance our growth pipeline, as well as our share price and overall market conditions. We are currently reviewing our capital allocation strategy with a view to balancing between the capital required to fund our growth and returning capital to shareholders through dividend distribution and future share buybacks.
Today, with our strong cash position, no debt, and a $150 million undrawn credit facility, we are in a unique position among growing gold producers. We have the ability to fund our development pipeline internally while continuing to pay a quarterly dividend. With that, I will now turn the call back to the operator for Q&A.
Thank you. As a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. One moment for our first question, please. That is star one one if you have a question. Our first question is from Wayne Lam with RBC. Please go ahead.
Oh, hey. Morning, guys. Just curious at Twin Hills, can you kind of walk us through what we might be able to expect with the results of the optimization study? And then, is the majority of the work being done to normalize the CapEx and costs versus the Osino study? Or are there additional upside scenarios kind of being evaluated here in terms of higher grade or additional material outside of the main bulge and central deposits?
Yeah. Hi, Wayne. Good morning. Sorry, my voice is breaking up a little bit. Excuse me. There's not really much to update at this point on Twin Hills. Obviously, we are cognizant of opportunities in terms of grade, mine plans, and sequence capital, but all of these are for future communication. I think at this point, we're still in a position where we're waiting for the shareholder meeting. And while we have some contact, we're not really in a position to talk about updating anything to market.
Yeah. Understood. Looking forward to the closing of that transaction. Maybe moving to Tsumeb, can you give us a bit of insight around the strategic review and what the timing could look like there? And then just on the Chelopech ore, you guys have done a lot of work to divert the concentrate to third parties over the past year. Can you give us kind of an idea of what those agreements might look like in terms of tenor for the placement of ore? And what kind of gives you the confidence that you can kind of do without Tsumeb now?
Okay. A few different things. In terms of the process, we've been at this for a little while. We've looked broadly at the type of groups that might be interested in the smelter. There are a broad range of different groups, including those directly focused on smelters, perhaps those who are concentrate traders, perhaps those who might be interested in some of the historical work around the site, which has left copper inventories and old tailings and things like that. That process has been fairly broad-ranged. We've obviously got to the point where we feel there is something that we have confidence in that we can conclude. In terms of the timing, not appropriate, really, to give you anything on that at the moment, but just to say that that was a deliberate step that we took to place this in an asset held for sale.
I think just watch this space. In terms of confidence on our placement of concentrate, all the way back to 2013, 2014, we've been placing concentrates in different smelters globally. To this point, we have more than five different facilities where we can place that concentrate. That gives us the confidence that we have the ability to do that without requiring the fallback of our own smelter. In terms of the tenor, the bottom line there is that it makes sense for us, if you compare relative to the smelter, we would consider a percentage of gross metal value payable. The bottom line is that these smelters are all quite different in terms of the treatment terms that they give us between payable, TCs, and this type of thing. I can't really give you a number that is a direct comparable, safe to say that it makes a difference.
If you look back at the updated life of mine plan, not the last one, but the one prior to that with Chelopech, you can see the difference that it made in terms of the outlook for Chelopech. So it's material. And that has sort of led us to the point where last year, we only had one quarter of production from Chelopech going to the smelter, and this year, planned nothing. So Navin, did you want to add anything?
Sure. Yeah. I'll highlight it, Navin. The tenor for the contractor, typically three years. And they continue thereafter with a one-year cancellation notice in place.
Okay. Great. Thanks. And then maybe just last one. Just curious at Tierras Coloradas, you guys had some really interesting exploration results early last year, but it seems to have gone quiet since then. Have the issues at Loma Larga impacted your willingness to spend more aggressively on drilling there? Or is that just the function of focus being diverted a bit now, given the emphasis at Čoka Rakita, and now Twin Hills?
So I think the drilling was the prior year. And what happened from that drilling, we decided to do some additional work. Initially, the scope of that was less than what we ultimately wanted to do. So we were talking 2,000 m, I think, to 3,000 m. And we ended up with 10,000 m that we targeted. Took a little while to get that in place, but that's got nothing to do with what's going on at Loma Larga. You just have practicalities to go through in terms of making sure that everything is okay with permitting, making sure that the local communities are on site. And then you've got to go and get contracts in place. And it's in a different jurisdiction. It's some different groups. And you've got to hire people in order to make it work. So it was just a straight practicality.
Now, this is in Loja Province. So it is different from Azuay. And there's nothing preventing us from drilling. So what we did at the end of last year is we had some of our key people that have been the drivers at Čoka Rakita, out to this area to have a look at what are we targeting and are there other opportunities that we didn't consider when we came to that initial 10,000 m. So the bottom line is that the work is actually progressing at the rate that we can in an area, which is actually quite difficult to access. It's also not a flat terrain.
You have to be very careful in terms of thinking through what you have to do. We've included some of the thinking that's generated success at Čoka Rakita in what we're looking at this year. But largely, it's been down to just the pace at which we can deliver that work. There were some very interesting numbers early on. We're continuing to drill. We have about 6,000 m of the 10,000 m done. And we would anticipate completing that within the second quarter of th is year.
Okay. Perfect. Thanks for taking my questions.
Thank you. One moment for our next question, please. And it comes from the line of Don DeMarco with National Bank Financial.
Thank you, operator. And good morning, Dundee team. First question for David and Navin. So with Tsumeb now classified as an asset held for sale, I see that in the reporting last night, it said net assets of $45 million. Do you think that this magnitude is indicative of price that the asset could garner in the event of M&A?
Hi, Don. It's Navin. Yeah. At this point, we're not going to comment on potential price that we might receive for this. This is something that, obviously, would be coming at a later time point.
Okay. Fair enough. Well, thanks for the information last night anyway. Looking to Ada Tepe, Q4 grade, 7.5 g per tonne. Now, Ada Tepe has really been running hot on grades for a while now. We saw from the technical report, mine plan had a grade of 6.28 g per tonne in 2023, which is above the reserve of 5.19. The mine plan has it coming down to 5.52. But given that it's been running above mine plan, would we expect—are you just getting good reconciliation here? Or do you expect the grades to maybe soften a little more than expected in 2024?
Yeah. Congratulations, Don, on a level of detail here that I don't think is necessarily the norm. Actually, we had something specific that we decided to do in Q4 that had nothing to do with the overall plans or any changes. So don't assume that's the norm. Don't assume that's the reconciliation. There were some practicalities in Q4. And it was largely around what was happening with water. And we made a decision. We were slightly altering our mine plan for purposes of Q4. And we're back to where we used to be. So what will happen is that the outlook now is as per what we had in the forecast for this year.
But we had something that was driving the grade in Q4. And it wasn't to achieve a record production. If you look more closely, you'll see that what we did is we balanced the tonnage with the grade for the quarter. So we've not robbed anything. But there was a specific need for us to do something in Q4. Congratulations on smoothing that.
Okay. Well, that's great. And great to hear that the outlook, the mine plan for 2024, is intact. And congratulations on converting that higher grade to free cash flow in the quarter. And then final question. Okay. So balance sheet, $600 million in cash, $150 million on your facility. Can you just remind us when we're going to get CapEx updates for the potential development of Čoka Rakita and Twin Hills subject to closing of the deal and so on?
Yeah, Don. It's Mike here. With respect to Twin Hills, what we indicated is we would be updating the market following closing on that. And with respect to Čoka Rakita, we've undertaken a PEA, which is on target for release in Q2. So you'll be getting a CapEx update for Čoka Rakita then.
Okay. Thanks, guys. Good luck with the rest of the year.
Thank you.
Thank you. One moment for our next question, please. And it's from the line of Eric Winmill with Scotiabank. Please proceed.
Great. Good morning, everyone. Thanks for taking my question. A number of my questions have already been answered. But maybe just following up on Ada Tepe. I mean, I know you said the asset was sort of nearing the end of its life, 2026. It does look like maybe it's been a stronger profile. Any comments here specifically in terms of the mine planning and what you're seeing in 2026?
The forecast for the three years that we've just provided the update is representative of what we expect, I think, as we said before. But we anticipate there may be a couple of months of difference in the outlook for Ada Tepe as we get closer to the sort of residual amounts in 2026. But we're not anticipating it being more than a couple of months. So we do anticipate closure in 2026. And as I said, sort of the outlook for the next three years, that's up to date.
Yeah. Fantastic. Thank you. And maybe just one more from me in terms of the other jurisdictions. I know you touched on Ecuador a little bit. Any other comments here in terms of Serbia or maybe Namibia, some of what's happening there in country and how that might shape your capital allocation in the coming years?
Yeah. So in Serbia, we continue to develop that project at a pace, very, very good support from local and federal authorities. So very happy with what's going on there. And great support from the local community. So not really seeing any changes there or expecting anything. We're just driving as hard as we can to get that project permitted so that we're looking for construction data early in 2026. If you have a look at what's happening in Namibia, I presume what you're talking about there is the change after President Geingob passed away.
That's correct. And I know they've talked a little bit about strategic priorities. And yeah, I was wondering if it might have any impact.
Well, I think the interesting thing about it is it really demonstrates just how good a jurisdiction Namibia is. Within, I think, 16 hours of the announcement of the President's passing, there'd been a formation of the government and a new leader appointed with a Vice President. And there was no noise or concerns or expressions of frustrations. So the population just accepted this. It was a logical transition of government, well-managed. It was the first time anybody's passed away in that position in Namibia. So it's sort of an interesting test of the transition. And obviously, I think it did extremely well. In terms of the current leadership, well-known, well-respected, very much in line with previous thinking. And the current Vice President is the person that was previously nominated as the head of SWAPO, who would then expect to become the next President. So again, a level of continuity.
So we like Namibia for a reason. It's demonstrated good governance, consistency, and openness in terms of many of its activities. I don't know if that covers the question, Eric.
Yeah. Perfect. I appreciate the added color. That's really helpful. So great to see the cash balance continue to grow. And yeah, I look forward to the updates. I'll hop back in the queue. Have a great day.
Thank you.
Thank you. And with that, we conclude our Q&A session for today. I will turn it back to Jennifer Cameron for final comments.
Well, thank you, everyone, for joining us. We look forward to talking to you next quarter. Should you have any additional questions, any member of our team is happy to help you out. So feel free to give us a call. Thanks.
And thank you all for joining our call today. You may now disconnect.