Good day, and thank you for standing by. Welcome to the Dundee Precious Metals fourth quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star zero. I would like to hand the conference over to 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 Dundee Precious Metals fourth quarter conference call. With me today are David Rae, President and CEO, Hume Kyle, Chief Financial Officer, and Michael Dorfman, Executive Vice President, Corporate Development.
After the close of business yesterday, we released our fourth quarter and annual results for 2020, as well as our three-year outlook and 2022 guidance. I hope you have had a chance to review our material. 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 meanings 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, and we've outlined the nearest GAAP measures to those referenced in this presentation on slide 3 of the webcast.
Please refer to the non-GAAP financial measure section of our most recent MD&A and reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2020 pertain to the comparable periods in 2020, and references to averages are based on midpoint of our outlook or guidance. I'll now turn the call over to David Rae.
Thanks, Jennifer. Good morning, and thank you all for joining us. This morning, I'll briefly review the highlights of our full year results and our operational performance before handing the call over to Hume to discuss our financial results. As we reported yesterday, 2021 was an excellent year for DPM across a number of areas.
We produced approximately 310,000 ounces of gold, delivering record production for the third consecutive year. We continued to manage our costs, resulting in an industry-leading all-in sustaining cost of $657 per gold ounce. We generated record financial results in 2021, including $252 million of free cash flow and $202 million of adjusted net earnings. We ended the year in a very strong financial position.
During the year, we strengthened our asset portfolio, increasing mineral reserves and extending mine life at Chelopech, and added the high-quality Loma Larga project to our development portfolio. We continued to advance our exploration activities at Ada Tepe, Chelopech, and Timok.
In addition to our strong operating performance and advancement of our growth pipeline, we also returned a total of $33 million to shareholders through our quarterly dividend and share repurchase program during the year. Yesterday, we also announced that we increased our quarterly dividend by 33% from $0.03 to $0.04 per share, given our strong outlook for the business and commitment to disciplined capital allocation.
Finally, we continued to deliver on our ESG priorities, which is demonstrated by the positive ratings that DPM received from rating agencies, including an A rating by MSCI and a score in the 91st percentile among metals and mining companies in the 2021 S&P Global Corporate Sustainability Assessment.
Turning now to the highlights of our operations, I'll start with Chelopech. Chelopech continued its track record of consistent performance, producing approximately 177,000 gold ounces and 35 million pounds of copper at an all-in sustaining cost of $722 per ounce.
In Q4, Chelopech produced 49,000 ounces of gold and 9 million pounds of copper, which was above our expectations for the quarter as a result of higher gold grades and recoveries. We continue to focus on extending the mine life through our in-mine and brownfields exploration programs.
In November, we received approval for a one-year extension to the Sveta Petka exploration license, which surrounds the Chelopech mine. This allows us to move forward with the commercial discovery phase work. Permitting is nearing completion, and we plan to undertake a 35,000-meter drilling program this year.
In 2021, we also continued testing conceptual targets within the Brevene exploration license, as well as scout drilling at several near-mine prospects, including Vozdol, Petrovden, and Sharlo Dere.
With a mine life that extends to 2029, an updated mineral resource base, an increased in-mine and brownfield exploration drilling, we believe in the strong potential to continue our track record of mine life extension at Chelopech. Ada Tepe has continued to deliver impressive performance, producing approximately 133,000 gold ounces in 2021 at an all-in sustaining cost of $583 per ounce.
In Q4, Ada Tepe achieved a new record for quarterly production with approximately 34,000 gold ounces, which is slightly above plan due to higher grades. As we look to the year ahead, we are assessing the results of the accelerated grade control program at Ada Tepe.
This drilling was completed in January 2022, and initial information for the 2022 mining areas was reflected in our production guidance for 2022. We are in the process of incorporating the results from this drilling program into an optimized mine plan, which is expected to be completed in the third quarter of 2022.
We are continuing our exploration efforts around Ada Tepe with 20,000 meters of drilling planned in 2022, which will be focused on near mine target delineation and drilling within the mine concession and surrounding Krumovitsa exploration license, as well as scout and target delineation on regional licenses, including Chiirite, where several new vein targets were identified in 2021.
Turning to Tsumeb, the smelter processed approximately 190,000 tons of complex concentrate in 2021. This was slightly below our revised guidance for the year as a result of the planned maintenance shutdown during the first quarter, as well as unplanned maintenance downtime during the second half of the year related to water leaks in the Ausmelt off-gas system. Despite lower than expected throughput, cash cost performance of $479 per ton was in line with guidance.
Our strong 2021 results demonstrate our ability to deliver significant free cash flow and our commitment to allocating our capital in a disciplined manner. Looking forward, we've updated our three-year outlook, and that reflects a strong production and attractive all-in sustaining cost profile.
Hume will provide further details in a moment, but I want to highlight that while our outlook for all-in sustaining costs reflect higher costs associated with ocean freight and higher prices for electricity and direct materials in Bulgaria, we have a strong track record of leveraging innovative technologies that optimize performance and mitigate these cost pressures.
For example, at Chelopech and Ada Tepe, we've successfully implemented advanced process control technology, resulting in greater process efficiencies and improved recoveries. Another highlight is how we've utilized blast movement technology at Ada Tepe to reduce dilution and ore loss, and in turn, increase gold production.
Leveraging DPM's strong culture of innovation to optimize performance, we can look to reduce costs and improve safety, and I expect that to continue to be a priority as we move forward. In terms of future growth, we continue to advance our portfolio of growth projects. Since acquiring the Loma Larga project in the third quarter of 2021, we've focused on integration activities, stakeholder engagement, and a review of the technical studies and permitting schedule for the project.
We're targeting to complete a revised feasibility study in 2022 and have commenced a 15,800-meter drill program in support of the technical study in the first quarter. We're also progressing discussions with the government of Ecuador on the Investment Protection Agreement, which we plan to complete prior to making any significant capital commitments on the project.
Based on our revised permitting schedule, we expect to receive the major environmental permits towards the end of 2022, which we expect to be followed by finalization of an exploitation agreement with the government and receipt of construction permits. Turning to the Timok project in Serbia, we continue to progress the feasibility study based on the oxide and transitional portions of the deposit, which is on track for completion in Q2 of 2022.
As we advance the feasibility study, we have several initiatives underway that are directed at reducing the initial capital estimate to optimize overall economics. Last night, we announced that as part of the board of directors' ongoing succession and refreshment process, our Chair, Jonathan Goodman, will not be standing for re-election at the upcoming annual meeting of shareholders.
Peter Gillin, currently Deputy Chair, will assume the Chair position subject to his re-election at the annual meeting. On behalf of the board and the entire team at DPM, I'd like to take a moment to acknowledge Jonathan Goodman for the pivotal contributions he has made since 2003 in his capacity as founder, shareholder, CEO, and now Chair at DPM.
Starting with the acquisition of our Bulgarian assets and the transformation into world-class operations, Jonathan Goodman has been an integral part of our growth into the leading environmentally and socially responsible mid-tier producer we are today. His strong leadership and guidance over the years established a strong foundation for our company's values, which have been critical to our success and will continue to serve us going forward.
To wrap up, 2021 was another very strong year for DPM. Our strong gold production profile and significant free cash flow generation positions us well to continue delivering value for all of our stakeholders. We've also demonstrated a strong track record of deploying our capital in a disciplined manner.
In addition to enhancing our portfolio with the high-quality Loma Larga project, we've continued to pay a quarterly dividend since 2020. In aggregate between our dividends and share repurchases, we returned approximately $33 million or 13% of our free cash flow back to shareholders in 2021, sorry.
As mentioned, we are further increasing our quarterly dividend by 33%, reflecting our positive outlook for the business. We firmly believe that DPM's strong fundamentals continue to represent a compelling value opportunity for our investors. I'll now turn the call over to Hume for a review of our financial results and outlook, following which we will open the call to questions.
Thanks, David. As David mentioned, we had record annual gold production in 2021, and together with a favorable commodity price environment and solid all-in sustaining cost performance, we delivered record annual earnings and cash flow. In the fourth quarter, adjusted net earnings were $51 million, or $0.27 per share, up 16% year-over-year.
For the year, adjusted net earnings were $202 million, or $1.09 per share, compared with $1.04 per share in 2020, representing a 4% increase. These increases were primarily attributable to higher realized metal prices, higher volumes of metal sold, partially offset by higher operating and royalty expenses, lower annual throughput at Tsumeb, and a weaker U.S. dollar. Net earnings attributable to common shareholders for 2021 were $210 million.
This included a $20 million gain from the sale of MineRP, as well as a mark-to-market after-tax loss in respect of our Sabina special warrants and shares, none of which are reflective of our underlying performance. In terms of our cash flow metrics, cash flow from operations before changes in working capital was $80 million for the fourth quarter, up $30 million from Q4 2020, and $309 million for the year, up $60 million year-over-year.
Free cash flow was also higher in the fourth quarter, with cash flow generation of $66 million, up 67% compared to 2020. For the year, free cash flow generated was $252 million, up 19% from 2020, representing one of the stronger cash flow yields in the sector.
These year-over-year increases in cash flow reflect the same factors that impacted our earnings, as well as the favorable impact from the fulfillment of the pre-existing prepaid-for gold sales arrangement, partially offset by higher cash outlays for sustaining capital expenditures.
Turning to our consolidated cost measures, we continue to focus on margin improvement and cost performance at all of the operations. For the quarter, our all-in sustaining cost was $757, up 16% relative to 2020, due primarily to higher operating expenses and higher treatment charges, partially offset by higher volumes of gold sold.
For the year, we reported an all-in sustaining cost of $657 per ounce, which was in the middle of our guidance and comparable to 2020, reflecting solid operating performance at both Chelopech and at Ada Tepe, as well as higher by-product credits attributable to higher realized prices from copper, partially offset by higher operating expenses, royalties, and sustaining capital expenditures.
At Tsumeb, Q4 costs per ton were $445, up $39 compared to 2020, due primarily to higher operating expenses as a result of higher maintenance costs, partially offset by higher sulfuric acid by-product credits reflecting the higher prices that we received.
For the year, cash cost per ton was $479 for 2021, which was lower, at the lower end of the guidance range and up $102 compared to 2020, reflecting lower volumes smelted and the fixed cost nature of the Tsumeb facility, combined with a stronger ZAR relative to the US dollar.
From a capital expenditure standpoint, our sustaining capital expenditures incurred during the fourth quarter were $12 million, which was comparable to the corresponding period in 2020. For the year, our sustaining capital expenditures were $53 million, up $40 million from $41 million in 2020, reflecting the Q1 planned maintenance at Tsumeb and accelerated grade control drilling at Ada Tepe.
Growth capital expenditures incurred during the quarter were $7 million, up $3 million from the corresponding period in 2020, and for the year, growth CapEx was $17 million compared to $8 million in 2020.
These year-over-year increases were due primarily to the work related to the development of our Timok and Loma Larga gold projects. Turning to our updated three-year outlook and more detailed 2022 guidance.
For 2022, we are expecting increased production relative to the previous outlook as a result of higher expected recoveries at Chelopech, partially offset by lower expected gold production at Ada Tepe, reflecting the results of its accelerated grade control drilling program.
Over the next three years, we currently expect annual production to average approximately 270,000 ounces of gold per year and 35 million pounds of copper, in line with our prior outlook.
From a cost standpoint, we continue to forecast an attractive cost profile with an all-in sustaining cost per ounce of gold expected to be between $750 and $890 in 2022. Over the next three years, we expect an average annual all-in sustaining cost in the range of $675-$805, with year-over-year variations reflecting expected gold grades and volumes of gold concentrate delivered to third-party smelters.
These ranges are up roughly 5% from our prior outlook, reflecting recent cost increases in respective ocean freight, electricity, and direct materials, and higher sustaining capital expenditures, partially offset by higher copper by-product pricing.
At the smelter, annual throughput is expected to be between 210,000 and 240,000 tons in 2022 and 2023, and between 220,000 and 250,000 tons in 2024. This reflects a targeted 18-month furnace maintenance schedule, with the next shutdown expected during the second quarter of 2022.
Cash cost per ton of complex concentrate smelted is expected to be between $380 and $460 per ton in 2022, and then will drop to between $340 and $450 per ton during 2023 and 2024, reflecting the impact of increased throughput as well as estimated cost savings from a comprehensive initiative directed at optimizing the cost structure of the smelter.
Sustaining capital expenditures are expected to be between $57 million and $67 million in 2022, and thereafter decline to between $46 million and $54 million in 2023. This is up from our previous outlook due primarily to Chelopech's upgrade of its tailings management facility, some of which is carryover from 2021,
Mobile equipment purchases, underground capital development, and some capitalized deferred stripping costs at Ada Tepe that were previously treated as an operating expense. In 2024, sustained capital expenditures are expected to decrease further to a range of $42 million-$49 million. For 2022, we also plan to reinvest additional capital to grow the business.
In particular, growth capital expenditures are expected to be between $31 million and $49 million, comprised primarily of $21 million-$31 million related to the technical and permitting work associated with the Loma Larga gold project, and $8 million-$12 million related to the feasibility study for the Timok gold project.
Exploration is expected to be between $16 million and $19 million and will be focused primarily on a 60,000-meter brownfield drilling program on mine concessions and exploration licenses, primarily at or around the Chelopech and Ada Tepe mines in Bulgaria and the Timok gold project in Serbia.
In closing, 2021 was another solid year of operating performance, with record free cash flow generation of $252 million, of which $35 million was invested towards improving the margin and extending the life of our existing assets and to developing our Loma Larga and Timok gold projects, and $33 million was returned to shareholders in the form of dividends and share buybacks. As a result, our cash position increased by $185 million to $334 million at December 31.
With no debt, we are well positioned to develop our existing assets and to invest in new growth opportunities in a disciplined manner while continuing to return capital to our shareholders, a base portion of which will continue to be in the form of a sustainable quarterly dividend, which for Q1 has been increased by 33% to $0.04, reflecting the continued free cash flow generation of the business and our positive outlook. With that, I will turn the call back to the operator.
As a reminder to ask a question, you will need to press star one on your telephone, and to withdraw your question, just press the pound key. Once again, that's star one for questions, star one. One moment for questions. Our first question on the line of Trevor Turnbull from Scotiabank. You may begin.
Hi. Thank you. I just had a question about some of the refined guidance you gave at Ada Tepe after doing some of the delineation drilling. I couldn't remember if this was the first year that you've done this delineation drilling.
If it isn't the first year, can you just kind of remind us of how that's worked out in the past? I guess I'm just trying to kind of benchmark the changes you saw in the guidance for Ada Tepe this year, maybe compared to previous years, and if there's any read-through for the remaining life of mine.
Thanks, Trevor. I don't have the precise numbers to hand, but this is not the first year that we've done this. From the original resource model that we had, we looked at what would be the best spacing in order to give us the most representative grade control model. In the course of doing that, for the first year of production, what we recognized was that there was a reduction in tonnage relative to the resource model, and there was an increase in grade.
The two effectively offset with about a 3% positive number of ounces. Overall, it didn't make a material effect in the sense of the ounces, but it was slightly positive in terms of what we could expect to see at the facility.
Just closing that commentary, what you also see is that from the grade control model through the plant, we're also seeing a slight bias to the positive in terms of gold ounces as well. To your specific question, not the first time that we've done this .
When we did 2022, and that's all that we've taken into account at this point, we had the same thing where we saw a tonnage reduction and a grade increase, and it was offset slightly the other way. It was slightly lower in terms of the number of ounces, but not material. As a consequence of that's why we adjusted the guidance for 2022. What we've done, we've finished off in January this year, that 217 km program, which started last year.
We are busy at the moment taking that information into hand with the idea being that what we will do is we'll revise our outlook for the remainder of the life of mine at some point in Q3 this year.
Okay. Thank you. Thank you, David.
Sorry.
Um-
You did say, can you read it through? No, I wouldn't do that at this point. What we're finding is that it was slightly positive actually for the first two years. It was slightly below for 2022. I wouldn't read anything to it at this point.
Yeah. No, just kinda normal variance, both ways.
Yeah.
The other question I had is about the smelter, and I apologize. Hume may have touched on it, and I may have missed it. I just wondered if Hume did mention or if you can tell us a bit about the amount of Chelopech concentrates going to the smelter. Is it gonna be a bit like last year where you're continuing to use potentially third-party for your concentrates? Or is that starting to flow back in greater proportion to Tsumeb?
Yeah, I would say that we're continuing to divert material to China where we can. We will probably send a little bit more material to Tsumeb in 2022 than we did in 2021. You know, very comparable.
Okay. I appreciate it. That's all I had, guys. Thank you.
Thanks, Trevor.
Once again, that's star one for questions, star one. I'm not showing any further questions in the. Oh, never mind. I do have a question from Wayne Lam from RBC. You may begin.
Hey. Morning, guys. Just have a question at Chelopech. You guys had mentioned seeing a bit of improvement on the recoveries to offset. Just wondering if you might be able to provide a little bit more detail on that front.
Sure. Hi, Wayne. Historically, if you look what we've done is we've optimized the overall recovery over time. I think if you look at the MD&A, you'll notice that for last year it was around 76%. If you go back a number of years, you'll find that was down in the 60% number.
What we've been doing is we've been maximizing the amount of pyrite concentrate at commercial terms as a previous activity. In 2022, we also started to bring in some additional things that we've been working on.
We've done some activities, which are focused on sort of initial reaction to the information that we're getting in the plant to work with the supervisors in terms of giving them the tools required to be able to take decisions more precisely first time, as opposed to, you know, more of a learning curve. Those things were these two different elements to that.
One is more of a management process, but the other piece is this advanced control technology that we were talking about, that we've been working with Metso Outotec on implementing across our operations, by the way. For last year, it had impact specifically at Chelopech and at Ada Tepe. What's now happening is we've got that which is giving us a slight reduction in variability, which ultimately means the recovery overall goes up.
For 2022, we're also working on another thing now, which is looking at the grade recovery relationship and the appropriate point for that relative to what implications that has for the life of mine for Chelopech.
There's quite a big additional activity that's going on at the moment that we anticipate has the potential to take that recovery to around 80% in total between pyrite and copper concentrate. A few different things over time, things that happened in 2021 and what you can expect to see this year.
Okay. Perfect. Thank you. Just a quick question at Ada Tepe. Should we expect to see any major change in the strip ratio over the three-year outlook?
Yes. Actually, this year relative to previous years, the strip ratio has increased as we get into pushback too. That's the main thing that affects the ounces projection for this year. Just at a very high level, the main part of that work will be in the first three quarters, and Q4 is gonna revert more to what we were seeing in 2021, just in terms of that additional work.
Yes, that strip ratio for this year has gone from 2-4. And we'll revise the strip ratios as we complete some of the work that's now going on with the grade control modeling. We've previously projected what that is in the technical report. It's feel free to look at that or give us a call if you'd like to get more clarification on that. We'll be revising that as we get into Q3 this year.
Okay, great. That's all I had. Thank you, guys.
Our next question will come from the line of Don DeMarco from National Bank. You may begin.
Oh, hi. Thank you, operator. Good morning, gentlemen. My question has to do with the exploration program at Ada Tepe. I see that for 2022, you've got, I think it's 20,000 meters budgeted. Chelopech is 35.
I'm just thinking, looking at the mine life at Ada Tepe, does the program reflect a priority to try to extend the mine life? And if you can talk about maybe the most promising, what the most promising targets might be in terms of resource accretion and extending the mine life. Thank you.
Hi, Don. Yeah. Chelopech, keep in mind that's only really talking about Sredok. Sredok is around 35,000 meters, right? That's gonna be new. This is an area we've been looking to drill and unfortunately had things delayed with some of the election processes in Bulgaria. That's the most, the biggest focus.
The number that you quoted in total for Chelopech, keep in mind that that's only part of the activity there. We also do an additional 45,000 meters from underground, of which two-thirds of that is extensional. You know, Chelopech, you know, in that sort of 50,000-60,000 meters, 35,000 meters is gonna be focused on Sredok, but you know, as I mentioned, another 44,000 meters on top of that.
In terms of Krumovgrad, these are the targets that, you know, we want to do work on with the idea being that we're looking at what opportunities we have to bring in these and other resources into Ada Tepe as we get towards the mine life. There's actually a bit of a spread of sort of activity. You know, we've got Chiirite, Dalboka Reka, Elovo, and other areas immediately around Krumovgrad.
We've got this new exploration license called Krumovitsa, which is immediately around the asset that we're now, you know, actively doing more work on. I suspect that you're gonna see some development in our focus on these targets through the year, so this is gonna be something that'll be an ongoing conversation. Do I feel that it's appropriate for where we are?
I feel it's appropriate given the targets that we have and the work that we feel we should be doing. We obviously do recognize there's some urgency to replacing the current resource and reserve at Ada Tepe. Don't know if that answers the question.
Yeah, that's great. Thank you for that. That's all for now.
Thanks, Don.
Once again, that's star one for questions, star one. I'm not showing any further questions in the queue. I'd like to turn the call back over to Jennifer Cameron for any closing remarks.
Thank you all for joining us today. If there are no further questions, please feel free to reach out, and we look forward to keeping you updated on the next call.
This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.