Good afternoon, ladies and gentlemen, and welcome to the Dundee Precious Metals First Quarter Results Conference Call. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. As a reminder, this call may be recorded. Thank you.
I would now like to turn the conference over to your host Ms. Jennifer Cameron. Ma'am, please go ahead.
Thank you, and good morning. I'm Jennifer Cameron, Director, Investor Relations for Dundee Precious Metals, and I'd like to welcome you to our first quarter conference call. With me today are David Ray, our incoming President and CEO and Hume Kyle, Chief Financial Officer. After the close of business yesterday, we released our first quarter results and hope you've had an opportunity to review the mute 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 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. 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 DBM 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 and A for reconciliations of these non GAAP measures.
Please note that unless otherwise stated, operational and financial information communicated during this call has generally been rounded and any references to 2019 prefer pertain for the comparable period in 2019. I'll now turn the call over to David Ray.
Good morning and thank you all for joining us.
It's a pleasure to be here today
as the incoming CEO of Dundee Precious Metals and provide you with an overview of our first quarter results. And some insights into our achievements over this period. I'd first like to acknowledge Rick's many contributions to the company over the past 11 years, as he leaves DPM and the strongest position it's ever been in. Rick will be joining us at our virtual AGM later today. And I hope you'll join us all at DPM and wishing him the best in these future endeavors.
In terms of COVID-nineteen, it goes without saying that this has been a very challenging few months around the world as a result of the pandemic. We continue to manage the situation by prioritizing the health and safety of our workforce and local communities and to focus on maintaining the continuity of our operations. Thus far, our operations are continuing to operate in line with our guidance for the year, and we've not experienced any disruptions to our inbound and outbound supplies. The pandemic counts, however, have an effect on the local communities where we operate, and we're making a number of efforts to provide financial support and assistance. With a particular focus on the most vulnerable groups within to benefit the local communities where we operate.
This financial support has been focused on local hospitals, to support their activities and to assist them in preparing additional medical facilities to isolate and treat COVID-nineteen patients. We've also provided necessary medical supplies and protected equipment. We continue to take proactive measures to closely monitor the situation and given our and operating strength, we are well positioned to manage these challenges. As you have seen from our news release circulated last night, we delivered an exceptional first quarter, achieving multiple records for operating and financial performance. This was accomplished despite the recent challenges with the COVID-nineteen pandemic.
And that's a tribute to our strong local operating teams, the relationships we've built with our stakeholders which resulted in production 73,000 ounces of gold, £9,400,000 of copper and near record smelter performance. We also had better than expected cost performance resulted in an all in cost for the quarter of $5.93 per ounce. And we had strong financial results, including record adjusted EBITDA, record adjusted earnings per share and a record $49,000,000 free cash flow for the quarter. Turning to our operating performance out of Tete, and the highlights from our operations starting with out of Tete last year. The full ramp up of our newest mine will achieve with only 3 months, within only 3 months, a remarkable accomplishment in our industry.
Atatepi continues to deliver impressive performance and then only its 2nd full quarter of operation, the mine produced 30 to 30 ounces of gold. This was, I must admit, above our expectations for the quarter as a result of strong throughput and grades. With cash costs of $40 per tonne of ore processed. Cost performance was also significantly better than anticipated and Huma is going to go into some of the reasons behind that shortly. The mine and mill continue to perform at expected levels and to meet or exceed our expectations.
With a strong start to the year at EPI continues to be on track to meet his 2020 guidance with gold production expected to increase significantly over 2019 levels. As our newest mine contributes in its 1st full year of production and the associated cash flow generation to our portfolio. We're also continuing with our exploration efforts around Adatepe, and we had 52100 meters of drilling planned at Surnek. And other satellite prospects during the course of the year, with the goal of establishing a new mineral resource to extend operations at Atatepec. At Chelopech continue there was a continuation of the excellent track record of consistent performance producing approximately 43,000 ounces of gold £9,400,000 of copper.
Gold production was in line with our expectations, while copper production was slightly below. That was a consequence of slightly lower than expected copper grades and recoveries. Cash costs of $36 per tonne of ore processed were in line with expectations. Overall Chelopech is on track to meet its 2020 guidance and continues to perform well. At the end of report with an updated mineral reserve and mineral resource estimate for Chelopech.
We added 1,000,000 tons of mineral reserves, largely as a result of new stub designs and redesign of existing stubs. This partially offset production depletion of 2,200,000 tons for a net reduction of 1,200,000 tons in total. With a proven and probable gold reserve of 1,600,000 ounces and so 1,000,000 of copper. That supports an 8 year mine life and with an additional 1,300,000 ounces of gold, £296,000,000 of copper in MNI, there is a strong potential to continue extending mine life at Dalopech as we have achieved over the last 11 years of our production there. In terms of exploration, we continue to focus on extending the mine life through our in mine and brown exploration programs.
In our first quarter, a total of approximately 13,000 meters of resource developed diamond drilling completed with the end of expanding the current ore body extents and to explore for new mineralization along models trends. In terms of brownfield activities, diamond drilling from surface continued around Chelopech through the first quarter of 2020 at the wet south target and at the Cresta prospect with a total of 4000 meters of drilling completed in 11 holes. Moving to C Met, sooner the 2nd highest quarterly production on record, which was a significant increase from the previous quarter as the operation wrapped up. Following an extended maintenance shutdown completed during the fourth quarter of 2019. This is particularly satisfying us historically the first quarter has been the most challenging due to power instability, during the rainy season.
This shows the outcome of efforts by the team to mitigate these realities. The cash cost per ton of complex concentrates noted during the first quarter was $3.57. This was below expectations and Hume again will discuss this shortly. As we previously announced in early April, we temporarily reduced operations at Syneb in April by shutting down ancillary plants in response to a government directive targeted at limiting staff levels in response to COVID-nineteen. The smelter has now returned to full operations and despite a 30 day reduction, Tsumeb remains on track to deliver its 2020 guidance.
Overall, as you can see from our exceptional first quarter results, 2020 is on track to be another milestone year for DPM. As we are now in Serbia is advancing well as a potential growth opportunity. Following encouraging results from the optimization work completed last year, to incorporate the sulfide portion of the resource, we've recently initiated a pre feasibility study, which is expected to be completed by the end of 2020. We also continue to evaluate additional opportunities to support growth and that have the potential to generate strong returns and enhance the value of the company. In closing, DPM has never been in a stronger position.
And with our strong first quarter results, demonstrated that significant free cash flow generation is underway and that we are committed to deploying this capital in a disciplined manner. Earlier this year, we were very pleased to announce an inaugural dividend of $0.02 per share, a quarterly level we believe to be sustainable based on our free cash flow outlook. And yesterday, we announced the 2nd quarter dividend payable on July 15. This is a signal of our commitment to delivering superior returns shareholders and the disciplined approach to capital allocation, as well as confidence that we will continue to deliver strong results in the coming years. Before I wrap up, I'd like to acknowledge all of our dedicated employees across the company for their outstanding efforts to proactively respond to the challenges of the COVID-nineteen pandemic.
While also maintaining the continuity of our operations. With continued volatility in global markets, we expect the strong fundamentals for gold to continue. DPM is now extremely well positioned relative to our peers to benefit in this environment of higher gold prices and can also better withstand any fluctuations that may occur. We firmly believe that DPM's strong fundamentals continue to represent a compelling value opportunity for investors. And with that, I'll now turn the call over to Hume for a review of our financial results and comment on our 3 year outlook and 2020 guidance, following which we will open the call to questions.
Thanks, Dave. Good morning, everybody. As Dave said, the global challenges being posed by COVID-nineteen, despite those challenges, we had an exceptional Q1 with strong production and cost performance contributing to a number of quarterly records. Including net earnings, adjusted EPS, adjusted EBITDA, and free cash flow. Relative 2019, 2020 financial results benefited from higher volumes of gold and copper sold, which primarily reflect the startup of Atatepe and an additional delivery by Chelopech, higher gold prices, lower TCs, a stronger U.
S. Dollar and lower share based compensation costs related to period over period share price performance. As a result, we reported some impressive improvements in financial performance compared to 2019, with adjusted net earnings of $46,000,000 or $0.26 per share, representing a 27% increase compared to 2019 and EBITDA of $78,000,000, up $61,000,000 or 4 50% compared to 2019. From a cash flow perspective, Q1 cash flow from operating activities was $9,000,000 compared to $14,000,000 in 20 19, primarily reflecting an increase due principally to the timing of sales receipts from our customers. Funds from operations on the other hand, which are more reflective cash generated during the quarter as it is not impacted by swings in working capital was $57,000,000 compared to $16,000,000 in the prior period.
During the quarter, we also generated free cash flow of 49,000,000, a significant increase over 10,000,000 generated in the same period last year, reflecting out of Tepi's contribution to the cash flow generating capability of our portfolio and our overall strong operating performance. This was partially offset by the delivery of 13,000 which resulted in approximately $18,000,000 or $13.65 per ounce of deferred revenue being recognized in earnings with no corresponding contribution to cash flow. Turning to our consolidated cash cost measures, our all in sustaining costs per ounce for Q1 was $5.93. This was down $2.26 from 2019 due primarily to low cost gold production from Atatepe and higher copper byproduct volumes. At Tsumeb, our Q1 cash cost was $5.37, down $13 from 2019 due primarily to higher volumes, a weaker czar, which was partially offset by lower asset prices.
From a capital expenditure standpoint, sustaining capital expenditures for the first quarter were $7,000,000, up $5,000,000 from 2019 and reflecting investments that are being made to and the life of Chelopech's tailings management facility, as well as the startup of Atatepe. While growth capital expenditures for the first quarter were $3,000,000, down $15,000,000 from 2019 due to the completion of the Atatepe mine in June 2019. As David said, we continue to maintain a strong financial position. As at March 31, we had $189,000,000 of cash resources, $175,000,000 under our revolving credit facility, a cash position of $14,000,000, and a portfolio of investments that provide additional upside comprised primarily of a 10% interest in Sabina, a 19% interest in I and V, and a 78% interest in MineRP. As part of our ongoing assessment of the potential impacts of COVID-nineteen on our business, we evaluated the adequacy of confirm that we're satisfied that we are well positioned to deal with any of its potential impacts.
From a risk management perspective, We also continue to monitor our underlying financial exposures. And as reported in previous periods, we've entered into a series of hedges in the form of 0 cost collars, to reduce Tsumeb's operating costs exposure to foreign currency movements. Tsumeb's projected operating costs have been hedged with a weighted average floor and ceiling exchange rate of 14.61and16.14. And for 20 21, 55 percent of its operating costs have been hedged with a weighted average floor and ceiling exchange rate of 15.67 1831. Looking forward, we continue to focus on increasing the profitability and the net asset value of our business by optimizing our existing assets.
Based on year to date performance and our outlook over the balance of the year, DPM is on track to meet previously issued guidance for each of its operations, including expected gold production of $257,000 to 299,000 ounces of gold and £35,000,000 to £40,000,000 of copper, an all in sustaining cost of $700 to $7.80 per ounce and a cash cost per ton of complex concentrate smelted of $3.78 to $4.50. Over the balance of 20.20, just under 21,000 ounces of gold will be used to fully settle the company's prepaid forward gold sale which was undertaken to provide partial funding for the construction of Aretepe mine. If foreign exchange rates and copper prices remain unchanged from current spot levels over the balance of the year, 2020 cash costs are expected to be closer to the low end of our guidance. Our longer term outlook that we issued in February and which covers 2020 to 2022 remains unchanged and the details of which can be found in significant free cash flow generation underway, we remain committed to maintaining a disciplined approach to capital allocation and are in a great position to grow our cash position to to support prudently investing in high return growth opportunities and to return a portion of the free cash flow generation to our shareholders by way of a dividend the second of which was announced yesterday.
With this context, we firmly believe notwithstanding the strong share price appreciation we've seen in recent years DPM continues to represent an attractive investment opportunity for gold investors. And with that, I'll turn the call back over to the operator. Thank
you. Your first question comes from the line of Mark Michael JV. From RBC. Your line is open.
Perfect. Thanks and good morning. Again, congrats, David, on, I guess, your 1st formal day in the seat or effectively the 1st day in the seat? And congrats to Rick. I'm assuming he's listening in.
And again, excellent quarter from you guys. So can you guys or to start off, can you just give some more color around this working capital build and when you would expect to recover it. Just a little more clarity on that.
June, did you want to take that?
Yes, sure. No problem. Yes, I mean, I would say that the working capital is just completely normal course. It has nothing to do with any credit issues. It has nothing to do with COVID-nineteen, it's really just the timing of when we deliver and then the corresponding timing of when we get paid.
And that's it. And it's, if you look at it quarter over quarter, as we look at it quarter over the balance of the year, the vast majority of it is going to get reversed in the 2nd quarter. And I would say that like on a go forward basis, there'll be a small portion that might stay, simply because we're in an environment where we've got higher gold prices, so on balance Our outstanding receivables at any given point in time will be a little bit higher reflecting that. But the vast majority of the 48 $1,000,000 change in working capital for you that was, is was receivable. And as I say, the vast majority of it will reverse in Q2.
Okay, perfect. Yes, just always get to clarify and understand if there is any structural build of higher inventories or again preparing for COVID or any risks around COVID or delays with the shipments or whatever. So again, good to clarify that. And then can you give some more clarity on the cost performance at Atatepe? I mean, the $40 ton is quite a bit below what you guys were guiding.
So kind of what drove that delta? And should we expect some of that to reverse in the back half of the year?
Go ahead, Jim, and I'll add in if there's other comments, to give you the picture.
Yes. I'm happy to do that. No, at attempt, they definitely performed better than, even we had expected. I think it's due to production, it's due to grade, it's due to the strong U. S.
Dollar that we saw, as well as timing So we don't expect that we'd be at the same level that we were in Q1 throughout the entire year. Just because timing of maintenance activities and other activities that take place at the mine throughout the year, So I wouldn't sort of forecast that this is a level that we would likely come out at the end of the year. And that's why we haven't changed our guidance. But that said, I think at this stage, there's good reason to believe that we are going to perform at the lower end or certainly below the midpoint of our guidance, particularly if foreign exchange rates remain at present levels. Dave, you want to add anything?
Sure. I mean, to give you an idea, we've had we had no mill maintenance activities in Q1. We've had no maintenance activities in both online Q2. So just a couple of days of downtime for relining activity. So part of the performance was also related to the tonnage.
So we had a little excess in terms of what we did in AttoTech's plan. And then of course, there was a similar sort of value would be great. So those two things affected the overall performance when it came to production. But in terms of cost, you of course get some benefit with your variable cost versus 5th cost. There were a couple of other minussing.
So as a consequence of the COVID situation, the power costs in country was slightly reduced. So that was about $1 per ton. And then we also had some contracting, which we put in place, which we were slightly better than anticipated. So there are some reasons why as Houston stays, we're sort of middle trending down in terms of what we'd guided on for the year, but an exceptional performance in Q1, we'll do everything that we can to make sure we keep the costs as low as possible, but that's a little that's than we would anticipate for the rest of the year. So as Jim said, we're maintaining our guidance at this point.
Okay, perfect. That's helpful. And then I guess kind of obviously early days for you in the CEO role, but you've had a bit of time to prepare. So Kind of how are you thinking about the strategic approach for DPM? And do you think there will be any changes relative to what we've previously seen?
So at a high level, if you look historically, we've worked on making sure that we have high continuity of operations and exceptional people, well trained to do what they do. And that the idea being during the build of at Atepay, but we are able to generate the cash flow that supports our ambitions to have a healthy pipeline that supports a mid tier operation going forward. And what's happened is that as a consequence of our share price being lower than we believed was where it should have been, we've been a little bit more cautious in terms of our activities in populating that pipeline. So now where we have the share price improving, not yet the point which we believe recognizes the value of the organization. Now there's an opportunity for some discipline in terms of the population of that pipeline.
So we have activities through from early stage exploration to projects through to potentially, operations as we look to have that pipeline supporting our future mid tier performance. So the primary change is going to be around what do we do now to refocus on this pipeline? So we did start a process in February. We are continuing to look at where it is that we believe we can create unique differences And that will be the focus of targeting both for ongoing operations and any future additions to our pipeline. Don't know if that helps, Mark?
No, that was helpful. And then I guess just on Tmall, can you obviously, you're now pushing ahead on the PFS. And you'd mentioned some positive impact that you saw from some of the optimization work. So can you give a little more detail around what's going on there?
Michael, would you take that?
Sure. Hi, Mark. As you'll recall from the PA that was released last year, that was focused on, entirely the oxide entrance transitional components of the ore body. So it was really just half of the resource that really focused was the focus of the PA. We then took a look at the broader resource and try to incorporate sulfide component, which was the other half of the 2,000,000 ounce resource.
And that was, that supported the optimization study that was completed late last year. That supported our decision to go ahead, to the prefeasibility stage based on those encouraging results. And that will be complete, by the end of the year.
Perfect. That's it for me. Thanks guys and great quarter. Thanks.
Speakers, I am not showing any other questions at this time. You may continue.
Jennifer, you
on mute?
Yes, I'm here. So that's all
the questions we have for today. So thank you everyone for joining us and we look forward to catching up with you ahead of the next quarter.
Thank you so much, speakers. This concludes today's conference call. Thank you all for joining. You may now disconnect.