Good day. Thank you for standing by. Welcome to the Dundee Precious Metals fourth quarter 2022 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'll need to press star 11 on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Cameron, Director of Investor Relations. Please go ahead.
Thank you. Good morning. I'm Jennifer Cameron, Director of Investor Relations. I'd like to welcome you to the Dundee Precious Metals fourth quarter conference call. With us today are members of our senior management team, including David Rae, President and CEO, 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, are referred to as non-GAAP measures or ratios. These measures have no standardized meaning under IFRS, 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 are related to continuing operations and have generally been rounded. References to 2021 pertain to the comparable periods in 2021, 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. Thank you all for joining us today. I'd like to start by welcoming Navin Dyal, our Chief Financial Officer and newest member of DPM's senior management team, to his first quarterly call since joining us in November of last year. Overall, the leadership team at DPM is very proud of what our global team has achieved this past year, delivering strong results at our mining operations and advancing the company's future prospects, all while maintaining the high standards for safety and sustainability performance that are core to our culture. Today, Navin and I will provide a brief update on our Q4 results and full year results for 2022 and discuss why we believe DPM continues to be well-positioned to deliver value to all our stakeholders now and over the long term.
I also will outline why we are excited about what lies ahead for DPM in 2023 and beyond, given our future pipeline, our success in exploration, our proven ability to optimize our assets, all DPM strengths that were underscored by our two recent announcements, namely the updated life of mine plan at Ada Tepe and the new high-grade discovery at Čoka Rakita in Serbia. Looking back at the past year, I'm pleased to report that in 2022 we continued our record of strong, consistent performance at our operations. We produced approximately 273,000 ounces of gold and over 30 million pounds of copper. Despite industry-wide cost pressures, our all-in sustaining costs were within our guidance at $885 per ounce. We generated $166 million in free cash flow.
We ended this year with a strong financial position with over $430 million in cash and strong liquidity, including a $150 million undrawn revolving credit facility and no debts. We continued our impressive safety record with our Bulgarian operations, achieving over 6 million hours without a lost time incident. We remained leaders in sustainability performance, scoring in the 91st percentile among metals and mining companies in the 2022 S&P Global Corporate Sustainability Assessment. We were included in The Sustainability Yearbook, which recognizes the top 15% of companies for the second consecutive year. We completed a life of mine plan update for Ada Tepe, adding additional high margin ounces to our production profile. We announced the high-grade discovery at Čoka Rakita, which has significant additional exploration potential.
Last month announced that our board has approved a new share buyback program to purchase up to $100 million of our outstanding shares. Looking at our operations in more detail and starting with Chelopech, our largest mine continued its track record of strong performance in 2022, producing 179,000 ounces of gold and 30.8 million pounds of copper, within its annual guidance for gold and slightly below the low end of guidance for copper. In 2022, brownfield exploration at Chelopech focused on an intensive drilling campaign that supports the application for a commercial discovery. The application is now near completion, and we expect to submit it to the Bulgarian authorities in the first quarter.
In 2023, we plan to drill approximately 50,000 meters to test conceptual targets on the Brevene exploration license, which immediately surrounds Chelopech, as well as within the Chelopech mine concession, which includes follow-up on the Sharlo Dere prospect and testing for deeper extensions of the Chelopech deposit. With increased in-mine and brownfield exploration drilling, we believe there is strong potential to continue our track record of extending mine life at Chelopech, which currently extends to 2030. Turning now to Ada Tepe, the mine had another strong year in 2022 with a production of approximately 94,000 ounces of gold, which was at the higher end of our guidance. All-in sustaining costs of $765 per ounce of gold sold was below the low end of its guidance range.
Ada Tepe delivered its highest quarterly production of 2022 in Q4, producing over 28,000 ounces of gold. After completing the pushback in third quarter, gold grade increase was planned, and the mine is well-positioned for high grades continuing in 2023. Ada Tepe has consistently outperformed our expectations since commissioning in 2019, and we are confident that Ada Tepe will continue to deliver strong results, supported by the updated life of mine plan we announced in January. Highlights of the updated life of mine plan, which is the result of our accelerated grade control drilling program and the strategic mine planning study, includes a 22% increase to life of mine recovered for an additional 66,000 ounces of gold compared to the previous life of mine plan. There was also a 13% increase in gold grade and a 1% increase in recovery.
The new life of mine plan has also improved DPM's three-year outlook for production that Navin will outline shortly. Overall, the new mine plan for Ada Tepe is another example that highlights the strength of our technical and operations team in Bulgaria and their ability to maximize the long-term value of our assets. At Tsumeb, performance in the fourth quarter was impacted by a 17-day shutdown to repair a water leak in the off-gas system, as well as instability in the power grid as a result of abnormally heavy rains in December. Complex concentrates melted for the year of 174,000 tons was below 2022 guidance. We look ahead to 2023, we have a maintenance strategy in place to address the water leaks which we encountered last year, and we are forecasting a consistent throughput rate over the next three years.
We are also expecting cost per ton to decline, reflecting our efforts this past year to optimize efficiencies and reduce costs, an initiative that continues. Turning to our development projects, I will start with our activities in Serbia. Last month, we were pleased to announce a new high-grade discovery at the Čoka Rakita prospect, located three kilometers southeast of the Timok project. To reiterate a few highlights from that announcement, drilling at Čoka Rakita defined a large high-grade footprint that remains open in multiple directions, and which we believe provides additional upside potential. Significantly, preliminary metallurgical test results indicate that the mineralized material is amenable for conventional flotation, produces a clean gold concentrate, achieving total combined gold recoveries of greater than 93%, including flotation and tails leaching.
Test work to potentially improve gold recovery using a combined gravity and flotation circuit alone is planned for 2023. Given the potential impact of Čoka Rakita on Timok, we will be focusing on further exploration at Čoka Rakita in 2023, we are therefore pausing further work on the Timok feasibility study. Exploration this year will include approximately 40,000 meters of info and extensional drilling, we are targeting an initial mineral resource estimate by the end of 2023. We're excited about this new development, I look forward to updating you within the next set of with the next set of drill results expected in the second quarter. Turning to Loma Larga in Ecuador.
Drilling activities as well as the citizen participation process for the environmental impact assessment remain paused pending the outcome of the appeals process related to the decision on the constitutional protective action following the hearing held in mid-October. The decision on the appeal is expected to provide clarity on the consultation process and whether an Indigenous consultation could be completed in parallel as we originally planned or would need to be completed prior to resuming the citizen participation process. The expected timing for receipt of the environmental license is subject to the outcome of the appeal process. As we announced last night, we are extending the optimization phase of the updated feasibility study, which we now expect to complete in the second half of the year.
This will allow us time to evaluate additional optimization opportunities and to leverage our significant operating experience with similar deposits, such as Chelopech, and potentially to incorporate the results of the drilling program once we're able to restart those activities. Prior to the acquisition of Loma Larga, we determined that the capital estimate made by the previous owners in the 2020 feasibility study was low relative to our assessment. We've also incorporated certain scope changes as part of our feasibility study work to enhance project execution and meet DPM's operating standards. We've seen inflationary pressures consistent with general industry trends, which are impacting capital and operating costs and potentially the calculation of mineral reserve and resources. By extending the timeline for the feasibility study, we have the opportunity to pursue optimization opportunities to offset these impacts, including by leveraging the strength of our operations team.
We continue to see Loma Larga as a high-quality project with the potential to generate strong economic returns following the result of this ongoing optimization work. In parallel, we continue to progress discussions with the government of Ecuador regarding an investment protection agreement, which we're targeting for completion by the end of the first quarter. In line with our disciplined approach to project development, we do not anticipate making any significant capital commitments to the project prior to the completion of the investment protection agreement and receipt of the environmental license. At Tierras Coloradas concession in Ecuador, located in Loja province, we completed approximately 2,700 meters of drilling in the last quarter. This program tested the high-grade, low sulfidation vein system, which was previously identified in 2020.
The change in status of the Tierras Coloradas project from early to advanced stage exploration is in progress, and all regulations and authorizations required from the different Ecuadorian authorities are expected to be received by early 2024. In closing, this past year, our people have demonstrated the strength that helped DPM stand out in the gold industry and which represent a compelling value opportunity for investors. These highlights include a strong, consistent production from our operations and an all-in sustaining cost that ranks among the lowest in the gold industry. There's also a robust free cash flow profile, financial strength and flexibility, a record of disciplined capital allocation returning capital to shareholders, attractive development projects, a proven exploration success both in extending mine life at our operations and discovering new greenfield opportunities, an industry-leading ESG performance, and an impressive track record in securing our social license to operate.
Finally, a strong technical team with a history of adding real value through innovation. Now I'll turn the call over to Navin for a review of our financial results and outlook, following which we'll open the call to your questions.
Thanks, David. Good morning, everyone. I'm very pleased to have joined DPM as CFO during an exciting time for the company. Since joining, I've been impressed by the quality of the people, the strength of the balance sheet, as well as the tremendous opportunities for growth. Looking forward, with robust free cash flow, significant cash on hand, and no debt, we are well positioned to invest in our future and to continue returning a portion of our free cash flow to shareholders. Now let me turn to the financial highlights of our fourth quarter and year-end results, after which I'll discuss our 2023 guidance and improved three-year outlook. As Dave mentioned, we delivered robust gold production in line with guidance.
All-in sustaining cost per ounce of gold sold, which is within the guidance range, reflects varying factors throughout the year, including inflationary cost pressures and lower volumes of metal sold as expected, partially offset by a stronger U.S. dollar. Notwithstanding, we generated adjusted net earnings of $33 million in the fourth quarter, compared to $51 million in the fourth quarter of last year. The quarter-over-quarter decrease is largely related to lower volumes of metal sold. As well, adjusted net earnings of $129 million compared to $202 million in 2021 were impacted by lower volumes of metal sold, partially offset by a stronger U.S. dollar. Net earnings attributable to common shareholders in the fourth quarter of 2022 were $33 million or $0.18 per share, compared to $52 million or $0.27 per share in the same period in 2021.
Net earnings in 2022 were $36 million or $0.19 per share, compared to $191 million or $1.02 per share in 2021. These decreases were due primarily to an impairment charge of $85 million in respect of Tsumeb, which we recorded in the third quarter, as well as lower volumes of metal sold, partially offset by a stronger U.S. dollar. In terms of our cash flow metrics, fourth quarter and full-year cash flow from operations before changes in working capital were $52 million and $227 million respectively, while free cash flow, which also considers outlays of sustaining capital, was $33 million and $166 million respectively. These results were both lower than the corresponding periods in 2021, largely due to lower volumes of metal sold.
Turning to our key cost measures, as expected, costs are up over 2021 levels, reflecting the local inflationary environment, and in the case of all-in sustaining costs, lower by-product credits from lower copper production and sales and higher sustaining capital, which was partially offset by a stronger dollar. Taking a closer look, our consolidated all-in sustaining cost in the fourth quarter of 2022 were $1,008 per ounce, up 33% relative to the prior year period. All-in sustaining costs for the full year 2022 of $885 per ounce were 35% higher than 2021 due to the factors I mentioned earlier as well as higher freight charges.
At Tsumeb, cash costs for the fourth quarter and 12 months of 2022 of $443 and $463 per ton respectively, was comparable to the corresponding periods in 2021, due primarily to the higher by-product credits from sulfuric acid sales and lower labor costs related to a cost optimization initiative we undertook in 2022, partially offset by lower volumes of complex concentrates smelted and higher local currency operating costs. Turning to capital expenditures. Sustaining capital expenditures incurred during the fourth quarter and 12 months were $16.7 million and $58.2 million respectively, which is comparable to the corresponding periods in the prior year of $12.3 million and $52.5 million.
Growth capital expenditures incurred during the fourth quarter and 12 months of 2022 were $11.1 million and $32.4 million respectively, compared to $7.4 million and $17.1 million in the corresponding periods in 2021, due primarily to activities related to the development of the Loma Larga and Timok gold projects. Let's turn to our outlook and guidance. Our updated three-year outlook reflects higher production in 2023 and 2024, as well as an improved outlook for all-in sustaining costs relative to the update we provided in the third quarter of 2022.
Highlights of the updated outlook include average annual gold production of approximately 270,000 ounces of gold and 32 million pounds of copper over the next three years, and an attractive all-in sustaining cost profile that continues to rank us as one of the lowest cost gold producers of our size. All in sustaining costs are expected to range between $700 and $860 per ounce in 2023, and between $720 and $880 per ounce for 2024 and 2025, which is lower than previously expected. This reflects the benefits of higher expected volumes of gold sold as a result of the updated life of mine plan at Ada Tepe and higher by-product credits due to a higher copper price assumption, partially offset by a weaker U.S. dollar.
At Tsumeb, we are focused on achieving a consistent rate of throughput along with lower costs. We expect to resolve the water leaks we encountered in 2022 by April of this year. We are forecasting complex concentrate smelted to be between 200,000 and 230,000 tons over the next three years. The consistent throughput rate is also expected to benefit cash costs per ton of complex concentrate smelted, which is planned to trend lower over the next three years. This also reflects additional estimated cost savings as we continue to advance a cost option, reduction program that we initiated last year.
In terms of our consolidated sustaining capital, we expect spending to trend lower over a three-year period, due primarily to the completion of the upgraded tailings management facility at Chelopech and the gradual reduction in activities at Ada Tepe as the mine approaches its end of life in 2026. Our detailed guidance for 2023 is outlined on slide 17 of the webcast. A few items to note with regard to our expected growth capital and exploration spending for 2023. In 2023, we are forecasting approximately $10 million-$14 million of growth capital for Loma Larga. This is largely related to the estimated run rate for G&A, as well as permitting social and environmental related costs. As we achieve certain milestones for the project, we will increase our guidance for Loma Larga capital, reflecting funding to resume drilling and to further advance permitting.
As we disclosed in January, we are pausing work on the Timok feasibility study to focus on further exploration at Čoka Rakita. As a result, growth capital for the project has significantly reduced relative to last year, ranging between $1 million and $2 million. Our increased exploration spending in 2023 reflects increased activities in Serbia following the high-grade discovery at Čoka Rakita we announced last month, and an advanced brownfield drill program at Chelopech related to Sveta Petka and Sharlo Dere. As a result, our exploration spending this year is expected to be between $25 million and $30 million. DPM continues to take a balanced approach to capital allocation, which focuses on balance sheet strengths, capital returns to shareholders, and reinvestment in our business to sustain the long-term future of this organization. In 2022, we increased our return of capital to shareholders.
In addition to our sustainable quarterly dividend, which offers an attractive yield of 2.7%, we purchased approximately 2.5 million shares under our NCIB. In aggregate, we returned a combined total of $44 million, or 27% of our 2022 free cash flow to shareholders. To offer another way of looking at it, this translates to approximately $182 per ounce of gold sold in 2022. In 2023, we are further enhancing our share repurchase program with board approval to renew the NCIB, subject to acceptance by the TSX for the purchase of up to $100 million of our shares outstanding. This represents approximately 10% of our public float at today's share price.
With a cash position of $433 million as of December 31st, no debt, an undrawn $150 million revolving credit facility, and continued strong free cash flow generation, we are well positioned to fund future growth opportunities that generate additional value for stakeholders while continuing to return capital to our stakeholders. With that, I will turn the call back to the operator for Q&A.
As a reminder, to ask a question, please press star one one on your telephone. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Wayne Lam with RBC Capital Markets.
Yeah, thanks. Morning, guys. Just wondering at Tsumeb, guidance over the three years is relatively flat. Just wondering how does that factor in the planned maintenance shutdowns, which operate on an 18-month cycle? When's the next scheduled shutdown given the maintenance periods undertaken in 2022?
Yeah. Good morning, Wayne. The next shutdown is planned towards the end of the year, in Q3, there's some possibility that may move out. Having said that, you'll recall that Navin said that we have some potential to replace some of the items in the water cooling system, in Q2. If you look back at our production over previous years, we've achieved 230,000 tons, treatment on two occasions, once with a shutdown, once without. If you look then at the guidance of 200,000-230,000 tons, we can achieve that with or without a shutdown.
Okay, perfect. Thanks. You just said Chelopech. Can you just comment on the copper grades, and what you're seeing there, in terms of the modest cut versus the prior outlook?
Some part of that is just practicality. If you go back to the previous technical report, you'll find that we were saying we were gonna produce a lower grade copper concentrate. Part of producing a lower grade concentrate is increased concentrate tons. We're just waiting for the installations of some upgrades to our systems. Moderating the copper grade going into the plant is one of the options that we have, and that's what happened in Q4.
Okay, great. Thank you. Maybe just lastly, just at Loma Larga, what kind of timing are you or are you guys looking at if the Indigenous consultation can't be completed in parallel? Just wondering if there might be a scenario in which Timok is able to be accelerated and potentially prioritized in the pipeline ahead of Loma Larga?
It's obviously, I would say the best thing at this point is to wait to see what happens in terms of the response on a few items, but particularly the constitutional protective action. At the point that we get that result, we'll be able to give better guidance. At this point, we'd say we would anticipate that would be six months of difference between being able to run in parallel and having to run in series with the Indigenous consultation and the planned consultation for non-indigenous groups. In terms of the scenario on prioritization, I think at this point, what we'd like to do, our activity is primarily focused not on Timok, but on Čoka Rakita. Could we accelerate that one?
I think the answer is no for Timok, but we're doing what we can to understand our options to prioritize Čoka Rakita.
Okay. That's all for me. Thank you.
Our next question comes from the line of Don DeMarco with National Bank Financial.
Thank you, operator. Good morning, David and team. Congratulations on the three-year outlook, better than expected cost. Regarding the cost, can you provide some color on how the consolidated AISC remains stable from 2024 to 2025 despite production easing and copper remaining flat?
Sure. Hi, Don. It's Navin here. Yeah.
Navin.
Yeah. We can provide a bit of that. One of the things that's happening, you would've seen this in the fourth quarter, with our own sustained costs, is that we are still working through a large inventory balance that comes through, and that actually ends up in our own sustained cost. We would expect that that inventory, that's really not a cash. It's really inventory that's been built up, and we have cash allocated on that on the balance sheet. It's coming through in 2024. We won't be expecting to see that inventory movement that is, you know, really kind of just buried in our cost, appear in 2025.
Got it. Okay. That's helpful. Second question regarding the upside NCIB, it's welcomed, and this should provide some share price support, but did the board also consider redeploying the proceeds from Sabina into another developer? Like, with Dundee's strong balance sheet, you guys are in a good position to mitigate developer risk, not unlike what B2's done with the acquisition of Sabina.
I think we, you know, we keep an eye on opportunities in the market and look for opportunistic ways in which to, let's say, take a balanced approach to capital allocation. So definitely we look for opportunities like that, but at the same time, we've recognized that we've got the Sabina cash in our outlook, which we had not planned at that stage. Also, you know, we have a situation where Loma Larga is potentially moving back in time. Given that, we thought it was appropriate to give ourselves some more tools. I think just to make sure that we're not confusing things here, the NCIB is not reliant on Sabina.
Right.
I don't know if that's, that makes sense, Don, or if, you, there's other questions?
Yeah. Yeah. No. That makes sense. I mean, it's, you've got a strong war chest of cash and you're looking at different options to deploy it. Buying back shares is certainly a good option. I'm just wondering, you know, you know, it sounds like you're also considering alternative developers to Loma Larga, but just maintaining a prudent approach on that.
That's right.
Thank you. That's all for me.
As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from Raj Ray with BMO. Raj, your line is now open.
Thank you, operator. Good morning, Dave and team. My first question is on your cost. I mean, look, it's great to see $800 on AISC, and the entire industry is close to $1,200. If I look at the electricity subsidy that you got in 2022, just wanted to see how much of that is baked into your 2023 and 2024. Is that a number that you can provide?
Yeah. Hi, Raj. It's Navin again. Yeah.
Navin.
Hi. Yeah, in 2023, we've, the Bulgarian government has continued that subsidy. For 2023, that subsidy equates to BGN 200 per megawatt hour. That translates to about $110 per megawatt hour. We've assumed for purposes of our long, you know, our outlook, as we're looking into 2024 and 2025, that will continue as well, either in the form of the subsidy or in the form of reduced energy costs, as we see the world returning normal.
Okay, that's great, Navin. If you look at your cost structure and your three-year outlook, what's the biggest external risk you see to maintaining that cost? I mean, you would have obviously built in some of the inflation, is there any anything that, in your opinion, that might move the cost on the higher side?
Yeah, you know, again, we benefit from that, from that energy subsidy, which is a huge benefits to us. I mean, we have been seeing inflationary pressures when it comes to cement, you know, steel. You know, why this part of the decision we made is, you know, to further look at local markets to further optimize that because we're seeing these inflationary pressures. I would say in terms of risks, you know, probably with respect to some of those materials that are used in construction, you know, as we look to expand and build and grow our business.
Within the operations, I mean, I think, you know, we've got a pretty good handle on costs, and we're doing other things that potentially could mitigate the effects of these rising costs, or inflationary pressures. At the same time, local inflationary pressures are being offset by a stronger dollar, which has helped us tremendously to the tune of about $100 per ounce, this past year.
Okay, that's great. My next question is probably for Dave. Dave, on Ada Tepe, if you look at the three-year outlook, what's the stripping ratio over these three years that we should be modeling?
We can come back to you on that, Raj.
Okay. Okay, no worries.
We're gonna be doing a data technical report on that.
Okay. Okay, thank you. On Chelopech, I understand the reserves and resource statement is gonna be out by the end of Q1 . Can you give us any sense of what we should be expecting in terms of how much of the drilling was infill versus, like, expansion and whether you're just looking to replenish reserves this year, or should we expect some incremental growth as well?
I can't give you any sort of view on what's happened at the end of the month, of course, the end of March. What I can say is that two-thirds of our drilling underground is extensional, and that's typically what we do year in, year out, so we do around 44,000 meters in total. Of course, we've got some additional drilling from surface, and a lot of that is into the areas such as Charlotte area, which are within the concession. Still more to do, as you've seen from our exploration plans for this year. For the last point, for the last two years, we've been able to hit our depletion and add resources and reserves to Chelopech, and that's our ongoing goal.
Okay. Okay. Thanks, Dave. One, last question on Čoka Rakita. How's the newsflow looking over the next few months?
So we.
What can we expect?
There's gonna be additional news flow coming out in Q2. We have seven drills on there at the moment, and we're actively. You can imagine. We're doing what we can to get additional insights as quickly as possible. All seven of those rigs are on Čoka Rakita. We're right smack bang in the middle of winter, which doesn't always make it easy when you have a meter and a half of snowfall on the site as we did the other day. I'm happy to say our teams are doing an exceptional job of making sure that we get that information to us. It does take a little more time for us to get the results back because we are doing additional analytical work on anything where we see visible gold.
It's just if you're trying to work out what conventionally you might see in terms of timing, that's why it takes us a little longer on this to make sure that we've got clarity on the analyses of the core.
Okay. That's great. Thanks a lot. That's it from me.
That concludes today's question- and- answer session. I'd like to turn the call back for closing remarks.
Thank you everyone for joining us. If anyone has any further questions, please feel free to reach out. Otherwise, we look forward to speaking with you over the coming weeks. Thanks, and take care.
This concludes today's conference call. Thank you for participating. You may now disconnect.