Good day. Thank you for standing by. Welcome to the Dundee Precious Metals first quarter 2023 earnings results conference call. At this time, all participants are in 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 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. Please go ahead.
Thank you good morning. I'm Jennifer Cameron, Director, Investor Relations, and I'd like to welcome you to our first quarter conference call. Joining us today are members of our senior management team, including David Rae, President and CEO, and 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 that we will be referring to 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, unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2022 pertain to the comparable period in 2022, and references to averages are based on midpoints of our outlook for guidance. I'll now turn the call over to David Rae.
Thanks, Jennifer. Good morning. Thank you all for joining us. As you've seen from our news release circulated last night, our first quarter was an excellent start to the year as we delivered strong production and financial results. This morning, I'll briefly review the highlights from our first quarter results and discuss why we believe DPM continues to be well-positioned to deliver value to all our stakeholders now and over the long term. Highlights from our first quarter include solid production of approximately 69,000 ounces of gold and 7.2 million pounds of copper, all-in sustaining costs of $872 per ounce of gold sold, which continues to rank us amongst the lowest gold producers of our size. Strong free cash flow generation of $65 million, and exceptional exploration results at Čoka Rakita in Serbia, as well as Tierras Coloradas in Ecuador.
With production at each of our operations expected to increase for the balance of the year, we're in a strong position to deliver our 2023 guidance. We exited the quarter in a very strong financial position with a cash balance of $473 million, which does not include proceeds of approximately $56.5 million related to our divestment of B2Gold shares following its acquisition of Sabina. We continue to deploy our capital in a disciplined manner. In addition to investing in our future growth and exploration prospects, we returned approximately 24% of our free cash flow to shareholders through our sustainable quarterly dividend and enhanced share buyback program, which Navin will touch on shortly.
Looking at our operations in more detail, Chelopech continued its track record of strong performance in the first quarter, producing approximately 35,000 ounces of gold and 7.2 million pounds of copper. Gold production was in line with our expectations, while copper production was slightly lower than planned due to lower copper recoveries. We expect grades and recoveries to be higher for the balance of the year in line with the plan, and Chelopech is on track to achieve its guidance for 2023. We continue to focus on extending Chelopech's mine life through our in-mine and brownfields exploration programs. In March, we announced our year-end Mineral Reserve and Mineral Resource update, along with the life of mine plan update that extended Chelopech's mine life to 2031.
In the first quarter, we continued to advance our brownfield exploration program with seven rigs focused on the drilling campaign at Sredokraska, as well as testing conceptual targets on the Brevene exploration license and testing deeper extension at the Chelopech deposit. With increase in mine and brownfield exploration drilling, we believe there is strong potential to continue our track record of extending mine life at Chelopech. Turning now to Ada Tepe, the mine delivered a near record level of production in the first quarter, producing approximately 33,000 ounces of gold, all-in sustaining costs of $486 per ounce of gold sold were below the low end of its guidance range. We are confident that Ada Tepe will continue to deliver strong results, supported by the updated life of mine plan we announced in January.
We're also continuing our exploration efforts around Adashev. During the first quarter, our activities were focused on target delineation for the Sirnak and Kopel prospect within the mine concession and the Karatepe prospect located within maturity exploration license. At Tsumeb, complex concentrates melted during the quarter was approximately 50,000 tons, which was below our expectations of a result of unplanned maintenance in the off-gas system. Cash costs were $392 per ton, which reflect our efforts during the year to optimize and increase efficiencies, primarily around the reduction of costs. That initiative will continue. We're planning to undertake additional maintenance in the off-gas system concurrently with the Ausmelt furnace maintenance during the third quarter, which is expected to result in improved quarterly performance. Tsumeb remains on track for its 2023 guidance.
Turning to our development projects, I'll start with our activities in Serbia. In January, we announced a new high-grade discovery at the Čoka Rakita prospect, located 3 kilometers southeast of the Timok project, where drilling has defined a large high-grade footprint with significant upside potential. In mid-April, we shared additional assay results, which extended the deposit to the east and confirmed and extended the high-grade zone. Proper gold mineralization has also been identified at depth. We're following up on these results with a 40,000-meter infill and extensional drilling program in this year to support a maiden mineral resource estimate for Čoka Rakita, which we are targeting by the end of the year. We're also planning to drill approximately 10,000 meters at the Anka exploration license, which is located 5 kilometers south of Čoka Rakita, and potential drilling on new targets which share a similar geological environment.
Čoka Rakita has several positive attributes that we look for in projects, including a very high-grade core, good initial metallurgical results, strong infrastructure, and a great fit with our skill sets, resulting in significant potential within our organic growth portfolio. We're excited about this new development in a region where we have built strong relationships and where we've had a local and regional presence for many years. Turning to Loma Larga in Ecuador, drilling activities as well as the citizens' participation process for the environmental impact assessment remain paused, pending the outcome of the appeals process related to the decision on a Constitutional Protective Action following a 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 citizens' participation process. The expected timing for receipt of the environmental license is subject to the outcome of the appeal process. We are currently leveraging our significant operating expertise at Chelopech to explore additional optimized opportunities for the project. These are being included in an updated feasibility study, which is targeted for the second half of 2023. As we advance the project, our approach will benefit from our firm commitment to the highest standards for engagement with local communities and environmental stewardship, in addition to our operating Expertise to unlock the significant potential of the project.
We continue to progress discussions with the government of Ecuador regarding an investor protection agreement. This agreement is substantially complete and is progressing through the approvals of the various ministries. In February, we were pleased to share results from a 2,700-meter drilling program at our Tierras Coloradas concession, which is located 200 kilometers south of Loma Larga in Ecuador's Loja Province. The results confirm the presence of two high-grade, fifth-grade, vein systems that remain open in multiple directions. Given these positive results, we are planning an expanded 10,000-meter drilling program, which is expected to commence in the second half of the year. In closing, our first quarter results demonstrate the strengths that cause DPM to stand out in the gold industry. These highlights include strong, consistent production from our operations and an all-in sustaining cost that ranks amongst the lowest in the gold industry.
A robust free cash flow profile supporting our financial strength and flexibility. A record of disciplined capital allocation and returning capital to shareholders. Attractive development projects. Proven exploration success both in extending mine life at our operations and discovering new brownfields opportunities. Strong ESG performance and a track record of securing its social license to operate. Of course, a strong leadership and technical team with a history of adding real value through innovation. I'll now turn the call over to Navin for a review of our financial results and outlook, following which we will open the call to questions.
Thanks, David. This morning, I will discuss our financial highlights for the quarter and provide an overview of our balance sheet and capital allocation program, highlighting how the company continues to be very well positioned to reinvest in our business while also returning a significant percentage of our free cash flow to shareholders. As David mentioned, the company delivered strong performance at Chelopech and near record level production at Ada Tepe.
Looking at our key cost measures, first quarter all-in sustaining cost of $872 per ounce of gold sold is 27% higher than the prior year, due primarily to mark-to-market adjustments to share-based compensation expenses as a result of our strong share price performance, which impacted all-in sustaining costs by approximately $100 per ounce of gold sold and which was not reflected in our 2023 guidance, as well as higher treatment and freight charges, lower by-product credits as a result of lower volumes and prices of copper sold, higher labor costs, and higher prices for direct materials, all of which were partially offset by higher volumes of gold sold and a stronger U.S. dollar. Our all-in sustaining cost for the year is expected to be in line with our guidance.
At Tsumeb, cash cost per ton of $392 was 18% lower than the corresponding period of 2022. Due primarily to a stronger dollar and lower labor costs as a result of a cost optimization initiative we undertook last year. Looking at capital expenditures. Sustaining capital expenditures of $7.7 million were 12% lower than the corresponding period in 2022 and were in line with expectations. Growth capital expenditures were $6.5 million compared to $6.1 million in the prior year, due primarily to activities related to the Loma Larga Gold Project. Turning to our financial highlights.
Revenue of $155.8 million was comparable to the prior year, as higher volumes of gold sold at Ada Tepe were mostly offset by lower revenue at Chelopech as a result of lower volumes of metal sold, higher treatment and freight charges, and lower realized copper prices. Net earnings were $46.6 million or $0.25 per share, compared to $26.8 million or $0.14 per share in the prior year, due primarily to higher volumes of metal sold and a stronger U.S. dollar, partially offset by higher share-based compensation expenses as a result of our strong share price performance during the quarter. Higher local currency, mine operating costs and royalties, and higher exploration expenses as planned. Net earnings in the prior year also included restructuring costs related to the cost optimization initiative at Tsumeb.
First quarter adjusted net earnings of $46.1 million increased compared to $37 million in the prior year, due primarily to the same factors impacting net earnings, except for the Tsumeb restructuring costs, which were excluded from adjusted net earnings in the prior year. In terms of our cash flow metrics, first quarter cash pro-flow provided by from operations before changes in working capital was $75 million, and free cash flow, which also reflects outlays for sustaining capital, was $65 million. These results were both higher than the prior year, largely due to the same factors impacting earnings before income tax. Looking forward, our three-year outlook, as shown on slide 16, highlights our strong gold production profile and attractive all-in sustaining costs, and positions us well to generate significant free cash flow.
It also highlights the benefits of additional low-cost production from Ada Tepe as a result of the optimized life of mine plan we shared in January, which are reflected in our three-year outlook for gold production and all-in sustaining costs. The updated life of mine plan for Chelopech, which we announced at the end of March, was consistent with our three-year outlook, and it therefore remains unchanged from what we issued in February. We remain on track to achieve our guidance for 2023 as outlined on slide 17. Turning to slide 18. We continue to deploy our capital in a disciplined manner that balances our desire to reinvest in growing and optimizing our business with our commitment to returning capital to our shareholders.
In addition to investing in our future growth and exploration prospects, we have continued to pay a quarterly dividend since 2020, which offers an attractive 2.1% yield based on the current DPM share price. In 2022, we repurchased approximately 2.5 million shares under our NCIB program. In February of this year, we announced that our board had approved a new share buyback program to repurchase up to 16.5 million of the company shares, or up to $100 million over a 12-month period. As a result, we returned approximately $15.9 million, or 24% of free cash flow in the first quarter, consisting of the repurchase of approximately 1.3 million shares under our NCIB for a total value of approximately $8.3 million and $7.6 million in dividends paid.
Combined, this translates to approximately $250 per ounce of gold sold for the quarter. In April, we returned another $8.3 million through share repurchases, resulting in an aggregate 2.4 million shares repurchased at a total cost of $16.6 million year-to-date 2023. As a result of B2Gold's acquisition of Sabina, we exchanged all of our ownership interests in Sabina for B2Gold common shares on April 19th of this year. Subsequently, we have disposed of these holdings for total cash proceeds of approximately $56.5 million. In closing, we delivered another solid quarter of operating performance and continued to generate strong free cash flow of $65 million. During the quarter, we increased our cash balance to $473 million, which excludes the proceeds of our Sabina B2Gold divestment.
Our robust cash balance, together with no debt, an undrawn $150 million revolving credit facility, and continued strong free cash flow generation, positions us well to fund future growth opportunities that generate additional value for stakeholders while continuing to return capital to our shareholders. With that, I will turn the call back to the operator for Q&A.
Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please 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 of RBC. Your line is now open.
Oh, hey, thanks, guys. Morning. Just wondering if Tsumeb. It looks like issues with the off-gas system had led to a few unplanned maintenance incidents over the past year. You guys have done a pretty good job in optimizing the cost structure there. Can you provide a bit more detail on why there seems to be some instability there, and some of the optimization initiatives that you've undertaken?
Yeah, thanks, Wayne. Maybe a quick bit of history. This installation was actually done in 2013, and what we have is an outlook for replacement of some of the units. In that time, what we've done is we've increased the material going through, and we've also changed some of the nature of the materials being treated. As a consequence of that, we've ended up with certain components of this one short system on the Ausmelt, which takes the gases into the dust collection system. We've ended up with certain elements of that having problems with the water cooling system integrity at times which were unexpected. Unfortunately, when that happens when you're in operation, there are significant things that you need to manage in terms of safety and risk to make sure that you can do a repair promptly and effectively.
We've made a decision that the ongoing activity and the way we do this is something that has much to be improved. What we're gonna do is actually replace the units and then do the repair work offline. We're actually in the process of changing to that new approach, and we believe that's gonna give us greater continuity of that system and at the same time, you know, meet with our goals of making sure that, you know, we have safety appropriately managed for our organization. In terms of what you can expect, I would expect that to translate into greater availability, and greater availability has a knock-on consequence in terms of cost. Therefore, current cost performance can be expected to improve, and production performance can be expected to improve.
Okay, great. Thank you. Maybe just at Loma Larga, maybe two questions. I guess the first is, you know, it's been about 6 months since this hearing and over a year from when drilling was first paused. Just wondering what's kind of driving the delays or the drawn-out process there? Number two, for the investor protection agreement, can you help us understand the negotiations around that? It just seems like there's a number of mines in Mexico now being advanced, and so would've thought that, it would be pretty cookie cutter.
Okay. Yeah. Thanks for that question. In terms of the delay in, on the response on the Constitutional Protective Action, we know that there is a backlog of court cases which need to be reported on and decisions taken and communicated. That's what we're understanding is the issue. We remain confident that there's nothing fundamental that's affecting that decision and anticipate a positive response soon. Perhaps what I can do is I can ask my colleague, Kelly Stark-Anderson to talk about the IPC.
The IPA, as we've indicated, the terms were substantially agreed with the government a number of months ago. In the current political situation in Ecuador, there has been quite a bit of turnover in various ministries that we work with. We've got strong support at the ministerial level, but some of the bureaucratic processes, we've needed to engage with various individuals at various levels to ensure they're well familiar with the terms and conditions of the IPA and to continue to move it forward. We're having weekly, if not more frequently, frequent meetings with individuals through the bureaucratic levels as well as at the ministerial levels to continue to move it forward. In the political situation as it stands now, you know, that's where our focus is, and we need to ensure we keep pushing that through. It is, of course, part of the political environment there that's creating issues.
Okay, great. Thank you. Maybe last one for me, just on the Sabina stake sale. Obviously nice to monetize that. How are you thinking about the return from that sale, and would you consider a special dividend? Then more broadly speaking, how should we think about the growing cash balance in terms of potential to upsize the capital returns program?
Okay. Hi, Wayne. It's Navin. I'll just answer a couple things here. As we outlined back in February, when we issued our year-end results, the transaction between Sabina and B2Gold had already been announced. That was just prior to us announcing our enhanced NCIB program. We'd already taken into consideration, you know, while it wasn't a factor in terms of us upsizing the NCIB, it was, you know, we were aware of the transaction taking place, and we were also aware that going forward, we were probably not a holder of B2Gold shares, you know, just given our focus. As with respect to a special dividend, that's something that, you know, we have constant conversations with our board about our capital allocation program.
As you know, we take a very, very disciplined approach to that, and we, you know, try to balance that with, you know, the needs of the business, our potential growth prospects, going forward, exploration opportunities as well as a number of other factors. With respect to a special dividend, at this time, there's not been a consideration for that. In terms of upsizing the NCIB, as you've seen, we've only done, you know, about $60 million worth of the current NCIB. We have the ability to go up to $100 million. You know, we expect to perhaps continue with that over the next for the foreseeable future. Again, it's not a discussion we're having at this moment to consider upsizing that NCIB program. Does t hat answer your question?
Okay, great. Thank you very much. That's all for me. Thanks for taking my questions.
All right, thank you. Again, as a reminder, to ask a question, you will need to press star one one on your telephone. One moment while we compile the Q&A roster. Our next question comes from the line of Eric Winmill of Scotiabank. Your line is now open.
Great. Good morning, everyone. Thanks for taking my question, and nice to see the free cash flow generation in Q1. Maybe just on Čoka Rakita, obviously getting some really good results there. You know, initial resource later this year. Can you help me understand what would be sort of the threshold you wanna see there in terms of development? Or how quickly do you think you could get that into the mine plan there?
Yeah. I think, you know, what we're seeing right now based on the initial drill results is, you know, we're starting to increase our confidence that this has the potential to be, you know, a standalone deposit. I think, you know, it's tough to say what the threshold is in terms of actual ounces, but we're seeing, you know, some very good grades which give us increasing confidence in accelerating the project. In terms of timing, as mentioned, we're targeting the initial resource by the end of the year. However, what we're doing between now and then is we're actually completing a number of other steps, which are scoping level steps to be able to accelerate the project after we put out the resource so that we'll be able to come out with a PEA fairly quickly thereafter.
We're also doing GeoTech drilling and additional met test work as well as an initial design of an exploration decline, which could start as early as next year as well. We're working very hard to accelerate the project. I mean, I think right now it's a little bit early to come up with an exact timeline. However, 2028 would be something that, you know, is a date that we're working for in terms of working towards in terms of production. As I said, early days to sort of formalize that at the moment.
Okay. Great. Super helpful. Thank you. Maybe just another quick one from me. Obviously, you talked about disciplined M&A evaluation, which makes a lot of sense. How should we think about that in terms of, you know, criteria or jurisdictions that might guide your search for suitable candidates?
Sure. I mean, you know, I think You know, at the moment, we're very comfortable with our organic portfolio, as we've just talked about, you know, with respect to Čoka Rakita and Loma Larga. Having said that, you know, we do evaluate other projects with respect to M&A. We do have a good expertise in our existing region, but, you know, we'll be opportunistic if it, you know, if other opportunities present themselves in other jurisdictions as well, depending on the asset quality.
Okay. Great. Much appreciated. Yeah, thank you. I'll hop back in the queue.
Thank you. One moment for our next question. All right, our next question comes from Don DeMarco of National Bank Financial. Your line is open.
Thank you, operator, and good morning, team. My question just has to do with how to kind of view the priorities in Ecuador versus Čoka Rakita. Of course, Loma Larga has the schedule, the development schedule has been subject to some delays, and you've got this promising new exploration target, but then Čoka Rakita's emerging. How do you view each of those? Does one sort of take precedent over the other in terms of funding dollars going forward or precedents going forward? Thank you.
Yeah. Thanks, Don. It's a question that we get asked a lot, of course. As excited as we are about Čoka Rakita, we also recognize that we're progressing something that's at a lot earlier stage than Loma Larga. Loma Larga at the moment continues to get the necessary support for us to be ready to deliver that project in the timelines that we've previously communicated. We continue with working on the updated feasibility study set to come out in the second half of the year. We continue to progress our activities to release the current project drilling and GeoTech and other drilling that we want to do and this type of thing. That's pretty much at a stage where we're looking to complete the EIA, move to an exploitation permit, and actually construct the project.
Clearly that remains the, in the sort of position one within our portfolio to deliver. Tierras Coloradas is very early days, and we're very happy to have found something that's exciting, in proximity, but still 200 kilometers south of Loma Larga and in a separate province, which does change the dynamics a little bit in terms of, you know, the potential to move that project should we have any ongoing things that we're dealing with Loma Larga. With Čoka Rakita, there's no constraint on resourcing to either Loma Larga or Čoka Rakita, and we have teams looking at how we can advance Čoka Rakita as fast as possible. Maybe an additional comment to what Michael said to Eric's question about timeline.
When we talk about the decline, it's necessary to put in a decline in order to complete the work to be accepted at a Serbian feasibility level. We're not doing that as much to advance the project. It's just a necessary part of the process. Given our interest and the way that project is developing, we're obviously interested in doing that sooner rather than later. Loma Larga remains a priority for us. It's the one that's at the front of the queue. Čoka Rakita, at this point, is firmly establishing itself at the second point. Keep in mind, Timok is associated with that. Tierras Coloradas is a new entity and really comes together with the other work that we're doing in and around Chelopech and Ada Tepe.
Okay. Okay, well, thanks for that. I guess as a second question then, looking at your cash balance higher quarter-over-quarter, and then we've got the proceeds from the sale of the B2 shares, can you just talk about some of your capital allocation priorities? Is it another good position to be in? But with Loma Larga spend potentially some time into the future, this cash balance could go above $600 million-$700 million before you start deploying cash in a significant way. Is that what you see too?
Yeah, Don DeMarco, that's definitely, you know, the possibility of that happening. You know, as David Rae said, you know, we're definitely focused on advancing Loma Larga. As we progress through the course of the year and we have more clarity around the timing of those processes, you know, perhaps we come back and take another look at our cash balance, you know, especially considering where gold prices have moved to. Certainly the plan for now, is to stick to the current plan, you know, continue to look at our enhanced NI 43-101 program while making sure that we have enough cash in the business to effectively run our operations.
Maybe, Don.
Okay.
Additional to what Navin was saying, the burn rate in Q1 for Loma Larga is also a function of the amount of work that we're doing on the development of the updated feasibility study. Obviously, as we come out of that, our burn rate will decrease. Just to comment that while we remain committed to Loma Larga, don't anticipate that Q1 is gonna be the ongoing burn rate.
Okay, fair enough. Okay. Well, thank you, Navin. Thank you, David. That's all for me.
All right. Thank you. I would now like to turn it back to Jennifer Cameron for closing remarks.
Thank you everyone for joining us today. We look forward to keeping you updated. If you have any other additional follow-up questions, please feel free to reach out. If not, we'll talk to you next time.
All right. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.