Q3 2024 Dundee Precious Metals Inc Earnings Call

November 6, 2024

Operator 1: Speakers' presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, 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 our first speaker today, Jennifer Cameron. Please go ahead.

Operator: Speakers' presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, 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 our first speaker today, Jennifer Cameron. Please go ahead.

<unk> answer session to ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand as rates 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.

Speaker Change: Our first speaker today, Jennifer Cameron. Please go ahead.

Speaker Change: Thank you and good morning, I'm, Jennifer Cameron director of Investor Relations and I'd like to welcome. We welcome you to our third quarter conference call. Joining us today are members of our senior management team, including David Ray President and CEO and <unk> Chief Financial Officer.

Jennifer Cameron: Thank you, and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to our Q3 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 purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS and are referred to as non-GAAP measures or ratios. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied.

Speaker Change: Before we begin I would 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 purposes of todays call.

Certain financial measures referred to during this call are not measures recognize under IRS and are referred to as non-GAAP measures and ratios. These measures have no standardized meaning under <unk> 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 our.

Speaker Change: Our consistently applied.

Speaker Change: 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 IRS. 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.

Jennifer Cameron: 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 2023 pertain to the comparable periods in 2023, and references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Rae.

Speaker Change: Communicated during this call are related to continuing operations and have generally been rounded references to 2023 pertained to the comparable periods in 2023 and references to averages are based on midpoint of our outlook or guidance I will now turn the call over to David Ray.

Speaker Change: Yes.

David Ray: Good morning, and thank you all for joining US. This morning, I will briefly review our third quarter results and discuss why we believe DPM continues to be well positioned to deliver value now and over the long term.

David Rae: Good morning, and thank you all for joining us. This morning, Navin and I will briefly review our Q3 results and discuss why we believe DPM continues to be well-positioned to deliver value now and over the long term. Highlights from our Q3 include progress at our Choquehuayta project as we completed the infill drilling to the PFS and announced two new high-grade discoveries. Solid production of approximately 60,000 ounces of gold and 7 million pounds of copper. Very strong margins, which increased 53% quarter-over-quarter, reflecting an all-in sustaining cost of $1,005 per ounce and an average gold price of $2,548 per ounce.

David Ray: Highlights from our third quarter include.

David Ray: So that chunk of Rachida project as we complete the infill drilling to the PFS and announced two new high grade discoveries.

David Ray: Solid production of approximately 60000 ounces of gold and 7 million pounds of copper.

David Ray: Very strong margins, which increased 53% quarter over quarter, reflecting an all in sustaining cost of $1005 per ounce and an average gold price of 2500 $48 per ounce.

David Ray: Also we have a robust free cash flow generation of $71 million.

David Rae: Also, we had robust free cash flow with generation of $71 million and continued financial strength as we ended the quarter with a consolidated cash balance of $658 million and no debt. I'm pleased to say that we are on track to achieve our 2024 guidance target, which will mark the 10th consecutive year we have achieved or outperformed our gold production, and all-in sustaining cost guidance, a testament to the strength of our operating team and the quality of our mines. Taking a look at our operations in more detail, Chelopech continued its consistent track record in Q3, producing 44,000 ounces of gold and 7 million pounds of copper at an impressive all-in sustaining cost of $638 per ounce of gold sold.

David Ray: And continued financial strength as we ended the quarter with a consolidated cash balance of $658 million.

David Ray: And no debt.

David Ray: Places I'm pleased to say that we are on track to achieve our 2024 guidance targets, which will mark the 10th consecutive year, we've achieved or outperformed our gold production and OLED sustaining cost guidance, a testament to the strength of our operating team and the quality of our mines.

Taking a look at our operations in more detail <unk> continued its consistent track record in the third quarter, producing 44000 ounces of gold and 7 million pounds of copper at an impressive all in sustaining cost of $638 per ounce of gold sold.

David Ray: Over the balance of the year, we expect improved copper grades at cello pitch and the operation is on track to achieve its production guidance for the year.

David Rae: Over the balance of the year, we expect improved copper grades at Chelopech, and the operation is on track to achieve its production guidance for the year. With all-in sustaining costs of $659 per ounce year to date, Chelopech is also expected to be well within its cost guidance for the year. At Ada Tepe, some temporary challenges impacted performance during the quarter, including lower than expected head grades, recoveries, and fleet availability. This resulted in Q3 production of approximately 16,000 ounces of gold and an all-in sustaining cost of $1,171 per ounce of gold sold. The issues that impacted fleet availability have been resolved, with performance tracking to plan, and we expect higher production in Q4, and Ada Tepe remains on track to achieve its guidance for the year.

David Ray: With all in sustaining costs of $659 per ounce year to date <unk> is also expected to be well within its cost guidance for the year.

David Ray: That added some temporary challenges impacted performance during the quarter, including lower than expected head grades recoveries and fleet availability.

David Ray: This resulted in third quarter production of approximately 16000 ounces of gold at an all in sustaining cost of 1100 $71 per ounce of gold sold.

David Ray: The issues that impacted fleet's availability have been resolved with performance tracking to plan and we expect higher production in the fourth quarter and added set there remains on track to achieve its guidance for the year.

Turning to our development projects, we continue to progress the pre feasibility study for a high quality Choker Ricky-tick project, which is on track for completion in the first quarter of 2025 at the end of the third quarter. The PFS design and engineering was approximately 80% complete.

David Rae: Turning to our development projects, we continue to progress the pre-feasibility study for our high-quality Loma Larga project, which is on track for completion in Q1 2025. At the end of Q3, the PFS design and engineering was approximately 80% complete. During the quarter, we completed the PFS infill drilling program, the results of which continue to confirm the continuity of the high-grade mineralization, and an updated mineral resource estimate is underway. The geotechnical and hydrogeological drilling program, which will support the PFS design and cost estimates, is nearing completion. We're also advancing project permitting activities in support of this timeline, with good support and engagement from key regional and national authorities. This includes preparations for the EIA, which we expect to submit in Q1 2026.

David Ray: During the quarter, we completed the PFS infill drilling program the results of which continue to confirm the continuity of the high grade mineralization and an updated mineral resource estimate is underway.

David Ray: The geotechnical and hydro geological drilling program, which will support the PFS design and cost estimates is nearing completion.

David Ray: We're also advancing project permitting activities in support of this timeline with.

David Ray: With good support and engagement from key regional and National authorities and this includes preparations for the EIA, which we expect to submit in the first quarter of 2026.

David Ray: What makes choker with Keith is particularly exciting is that it's an attractive project on a standalone basis operating offering very robust economic returns and production growth and strong margins.

David Rae: What makes Čoka Rakita particularly exciting is that it's an attractive project on a standalone basis, offering very robust economic returns, production growth, and strong margins. Also, there's a significant exploration potential across our 4 licenses, as demonstrated by our recent scout drilling results. In September, we announced 2 new discoveries at the Dumitru Potok and Frasen Prospect, which are both located only a kilometer north of Čoka Rakita. It is still early days for these discoveries, with additional work to do in order to understand the footprint, continuity, and overall site's potential, as well as the metallurgy. However, the exploration upside remains evident from our ongoing drilling success. A new high-grade copper-gold mineralization keeps expanding its footprint at Dumitru Potok and Frasen. It also demonstrates that our targeting model is working and that there is significant potential for additional mineralization along strike to Čoka Rakita, Dumitru Potok, and Frasen.

David Ray: Also there is a significant exploration potential across all four licenses as demonstrated by our recent scout drilling results.

In September we announced two new discoveries of the Dmitry <unk>.

Fraser the prospect, which are both located only a kilometer north of choker Akita.

David Ray: It is still early days for these discoveries with additional work to do in order to understand the footprint continuity and overall size potential as well as the metallurgy. However, the exploration upside remains evident from our ongoing drilling success of new high grade copper gold mineralization keeps expanding its footprint to mutual.

David Ray: Tracy.

Speaker Change: It also demonstrates that our targeting model is working and that there is.

Speaker Change: Significant potential for additional mineralization, along strike to choke of Akita and mutual plus a comprising.

Speaker Change: Overall, we are very excited by choker, which has potential in a region, where we've had a presence for many years.

David Rae: Overall, we're very excited by Čoka Rakita's potential in a region where we've had a presence for many years, that has a long history of exploration and mining development and where we have developed strong relationships with local stakeholders. Turning to the Loma Larga project, we continue to progress activities related to permitting and stakeholder relations. The baseline, ecosystem and water studies were complete during Q3 and submitted to the court by the Ministry of Environment. At the end of October, the environmental consultation process with local communities overall voting favorably for the development of the project. We would expect the environmental license to be issued once the free, prior, and informed consultation process is completed.

Speaker Change: That has a long history of exploration and mining development, where we have developed strong relationships with local stakeholders.

Speaker Change: Turning to the loan Melaka project, we continue to progress activities related to permitting and stakeholder relations.

Speaker Change: The baseline ecosystem and water studies will complete during the third quarter and submitted to the court by the Ministry of environment.

Speaker Change: At the end of October the environmental consultation process with local communities overall voting favorably for the development of the project.

Speaker Change: We would expect the environmental license to be issued once the free prior and informed consultation process is completed.

Speaker Change: We continue to take a disciplined approach with respect to future investments and activities in Ecuador, which will be based on the project achieving key milestones. The overall operating environment in the country and of course other capital allocation priorities.

David Rae: We continue to take a disciplined approach with respect to future investments in activities in Ecuador, which will be based on the project achieving key milestones, the overall operating environment in the country, and of course, other capital allocation priorities. Overall, we continue to deliver strong financial results, and with both mines on track to achieve our 2024 guidance targets, we're well positioned to continue our strong operating track record. I'll now turn the call over to Navin for a review of our financial results.

Speaker Change: Overall, we continued to deliver strong financial results and with both mines are on track to achieve our 2024 guidance targets. We are well positioned to continue our strong operating track record.

Speaker Change: I'll now turn the call over to <unk> for a review of our financial results.

Speaker Change: Thanks, Dave I'll be touching briefly on the financial highlights for the quarter and conclude with some commentary on our balance sheet and return of capital program.

Navin Dyal: Thanks, Dave. I'll be touching briefly on the financial highlights for the quarter and conclude with some commentary on our balance sheet and return of capital program. All of my remarks will focus on results from continuing operations unless otherwise noted. Looking at our financial highlights, Q3 highlights include revenue of $147 million, adjusted net earnings of $46 million, or 26 cents per share, cash flow provided from operating activities of $52 million, and free cash flow of $71 million. Overall results during the quarter reflect our strong operating performance, the low-cost nature of our operations, and a favorable commodity price environment.

All of my remarks will focus on results from continuing operations unless otherwise noted.

Speaker Change: Looking at our financial highlights third quarter highlights include revenue of $147 million adjusted.

Speaker Change: Adjusted net earnings of $46 million or 26 per share.

Speaker Change: Cash flow provided from operating activities of $52 million and free cash flow of 71 million.

Speaker Change: Overall results during the quarter reflect our strong operating performance the low cost nature of our operation.

Speaker Change: Favorable commodity price environment.

Speaker Change: Looking at our earnings and cash flow in more detail revenue of $147 million in the quarter was 21% higher than 2023, due to higher realized metal prices and lower treatment charges at <unk>.

Navin Dyal: Looking at our earnings and cash flow in more detail, revenue of $147 million in the quarter was 21% higher than 2023 due to higher realized metal prices and lower treatment charges at Chelopech, partially offset by lower volumes of gold sold at Ada Tepe. Adjusted net earnings in the quarter of $46 million or $0.26 per share increased compared to the prior year due to higher revenue and interest income, partially offset by higher plant exploration and evaluation expenses, higher share-based compensation expenses reflecting DPM's strong share price performance, and higher income tax. Cash flow provided from operating activities of $52 million for the quarter was lower than the prior year due to the timing of collection from sales, partially offset by higher earnings generated in the quarter.

Speaker Change: Partially offset by lower volumes of gold sold at a tepid.

Speaker Change: Adjusted net earnings in the quarter of $46 million or 26 per share increase compared to the prior year due to higher revenue and interest income, partially offset by higher planned exploration and evaluation expenses higher share based compensation expenses, reflecting dpm's strong share price performance and higher income taxes.

Speaker Change: Yes.

Speaker Change: Cash flow provided from operating activities of $52 million for the quarter was lower than the prior year due to the timing of collection from sales, partially offset by higher earnings generated in the quarter.

Speaker Change: Free cash flow, which is calculated before changes in working capital was $71 million for the quarter, an increase of $25 million compared to 2023 due to higher earnings generated in the quarter.

Navin Dyal: Free cash flow, which is calculated before changes in working capital, was $71 million for the quarter, an increase of $25 million compared to 2023 due to higher earnings generated in the quarter. Taking a look at our cost metrics for the quarter, all-in sustaining costs of $1,005 per ounce was 10% higher than the prior year, due primarily to lower volumes of gold sold and higher share-based compensation expenses, partially offset by lower treatment charges at Chelopech and higher byproduct credits as a result of higher realized copper prices. In terms of our capital spending, sustaining capital expenditures were $11 million for the quarter and were comparable to 2023. While growth capital expenditures of $3 million for the quarter were lower compared to 2023, due primarily to lower expenditures related to the Loma Larga project as expected.

Speaker Change: Taking a look at our cost metrics for the quarter all in sustaining cost of $1 five per ounce was 10% higher than the prior year due primarily to lower volumes of gold sold and higher share based compensation expense.

Speaker Change: Partially offset by lower treatment charges at <unk> and higher byproduct credits as a result of higher realized copper prices.

In terms of our capital spending sustaining capital expenditures were $11 million for the quarter and were comparable to 2023.

Speaker Change: Our growth capital expenditures of $3 million for the quarter were lower compared to 2023, due primarily to lower expenditures related to the <unk> project as expected.

Speaker Change: On August 30 of 2024, we closed sale of the <unk> smelter for net cash consideration of $15 9 million during.

Navin Dyal: On 30 August 2024, we closed the sale of the Tsumeb smelter for net cash consideration of $15.9 million. During the quarter, the company agreed to step into IXM's position and entered into a tolling agreement with Sinomine for a period ending four months following closing of the sale, where the company will purchase new metal-bearing material, and sell the copper blister produced by Tsumeb until the end of the agreement. Sinomine is contractually obligated to pay the company for all DPM-owned inventories at the end of the agreement, which terminates effective 31 December 2024. As a result, as of 30 September, the company had a total net cash outflow of $94.8 million related to this tolling agreement.

Speaker Change: During the quarter the company agreed to step into physician and entered into a tolling agreement with <unk> for a period ending four months following closing of the sale, where the company will purchase new metal bearing material and sell the copper blister produced by <unk> until the end of the agreement.

Speaker Change: <unk> is contractually obligated to pay the company for all DPM own inventories at the end of the agreement, which terminated effective December 31 2024.

Speaker Change: As a result as of September 30, the company had a total net cash outflow of $94 8 million related to the tolling agreement.

We can see continued to maintain a strong balance sheet and cash position with a consolidated cash balance of 658 million no debt and a $150 million undrawn revolving credit facility.

Navin Dyal: We continue to maintain a strong balance sheet and cash position with a consolidated cash balance of $658 million, no debt, and a $150 million undrawn revolving credit facility. Given the strength of our balance sheet and our outlook for continued strong free cash flow generation, we are in a unique position with the financial flexibility to fund growth opportunities while continuing to return a portion of our free cash flow to our shareholders in line with our commitment to capital discipline. During the first nine months of 2024, the company repurchased 3.4 million shares at a total cost of $28.3 million under the share buyback program and paid $21.7 million of dividends, representing an aggregate return of 23% of our free cash flow to shareholders.

Speaker Change: Given the strength of our balance sheet and our outlook for continued strong free cash flow generation. We are in a unique position with the financial flexibility to fund growth opportunities, while continuing to return a portion of our free cash flow to our shareholders in line with our commitment to capital discipline.

Speaker Change: During the first nine months of 2024, the company repurchased three 4 million shares at a total cost of $28 $3 million under the share buyback program and paid $21 7 million of dividends.

Speaker Change: Presenting an aggregate return of 23% of our free cash flow to shareholders.

David Ray: I'll now turn the call back to Dave for his concluding remarks.

Navin Dyal: I'll now turn the call back to Dave for his concluding remarks.

David Ray: Thanks, Kevin.

David Ray: In closing we are in a unique position in the industry, considering our strong operating track record the low cost nature of our operating mines generating significant free cash flow.

David Rae: Thanks, Navin. In closing, we're in a unique position in the industry considering our strong operating track record, the low-cost nature of our operating mines generating significant free cash flow, our attractive organic projects, and the financial strength and flexibility to internally fund growth while continuing to return capital to shareholders. I'd now like to open the call for any questions.

David Ray: Our attractive organic projects and the financial strength and flexibility to internally fund growth, while continuing to return capital to shareholders.

Speaker Change: I'd now like to open the call for any questions.

Speaker Change: Thank you.

Operator 2: 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, then 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 Raj Ray of BMO. Your line is now open.

Operator: 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, then 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 Raj Ray of BMO. Your line is now open.

Speaker Change: 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 on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from Raj Ray of BMO. Your line is now open.

Speaker Change: Thank you operator, and good morning, Dave and team.

Raj Ray: Thank you, operator, and good morning, David and team. Couple of questions. First up on the working capital changes at Tsumeb. Do you anticipate any more working capital buildup over the next four months, or this is kind of a one-off and it reverses at the end of four months? Second is a broader question on capital allocation. I mean, I understand that the company is looking at growth opportunities both within the portfolio as well as potentially outside, but gold prices are significantly higher this year compared to last year. Yet, if I look at the share buybacks for this year, it's hovering around $27 million versus $53 million last year as of Q3. If I look at the payout ratios. Now, there's two things.

Speaker Change: Couple of question first up on the <unk>.

Speaker Change: Working capital changes Thats ma'am.

Speaker Change: Do you anticipate any more working capital buildup.

Speaker Change: The next four months or this is kind of a one off on <unk> versus a band of four months.

Speaker Change: And secondly, a broader question on capital allocation.

I understand that the company is looking in growth opportunities, both within the portfolio as well as potentially outside.

Speaker Change: But gold prices.

Speaker Change: It's going to be higher this year compared to last year, you had to if I look at the share buybacks for this year, it's probably going on $27 million versus $53 million last year as of Q3, and then if I look at the payout ratios now there's two things. One is if you look at the average payout ratio for the last four years with a balloon.

Raj Ray: One is, if you look at the average payout ratio for the last four years for the gold industry, it's been around 65%. Dundee is at the low end of that, around 23. Now this one, obviously, the free cash flow is much larger for Dundee, given your cost structure. Secondly, like, do you anticipate keeping the same capital returns? There's two questions that we get from investors. One, does the company believe that it's fairly valued at this point? Second is there imminent M&A potential that the company sees in the market? I'll leave it at that.

Speaker Change: Industry, it's been around 65%.

Speaker Change: Dundee is at the low end of that 23.

Speaker Change: One obviously the free cash flow is much larger from for Dundee given your cost structure, but secondly.

Speaker Change: I do.

Speaker Change: Anticipate keeping the same capital returns I mean, the one risk you. There's two questions that we get from vessels. One does the company believe that it's fairly valued at this point and second is is there imminent M&A and potential of the company sees in the market.

Speaker Change: I'll leave it at that.

Speaker Change: Hi, Roger and haven't yet so I'll answer the first question and touch upon the capital allocation question in the second and then I'll, probably turn it back to Dave. So in terms of the working capital build up yes, we do what we will see over the course of the four months is puts and takes in terms of buildup of.

Navin Dyal: Hi, Raj. It's Navin. Yes, I'll answer the first question and touch upon the capital allocation question in a second, and then I'll probably turn it back to David. In terms of the working capital buildup, yes, we do. What we will see over the course of the four months is puts and takes in terms of buildup of you know, purchases that we've made, as well as the timing of blister returns as well. Within the quarter, you'll see increases in inventory, but decreases by the end of you know, as a result of blister returns. By the end of the year, though, again, we fully anticipate that this agreement, as contractually obligated, terminates at the end of December.

Speaker Change: Purchases that we've made as well as the timing uplift their returns as well so within the quarter Youll see increases inventory, but decreasing by the end of it decreases are the result of Blitz of returns.

Speaker Change: So by the end of the year, though again, we fully anticipate that this agreement.

Speaker Change: Contractually obligated disagree with terminates at the end of December.

Speaker Change: So we would expect that all of that working capital come back. Once this agreement is terminated and final mine purchases that inventory.

Navin Dyal: We would expect that all that working capital to come back once this agreement is terminated and Sinomine purchases that inventory. Maybe turning to your second question on capital allocation. In terms of conversations that we might otherwise have around increasing share buybacks, that type of conversation, we have that regularly as a management team and then obviously with the board. We've always taken, as you know, a very balanced approach to capital allocation that focuses on the balance sheet strength, capital returns to shareholders, and reinvestment in the business, considering we have a significant organic growth pipeline up and coming that would return a lot of value to shareholders.

Speaker Change: Maybe turning to your second question on capital allocation. So in terms of conversations that we might otherwise have around increasing share buybacks that type of conversation, we have that regularly as a management team and obviously with the board.

Speaker Change: <unk> always taken as you know is a very balanced approach to capital allocation that focuses on the balance sheet strengthening.

Speaker Change: Returns to shareholders and also reinvestment in the business et cetera, we have at.

Speaker Change: Significant organic growth pipeline.

Speaker Change: <unk> debt return a lot of value to shareholders.

Speaker Change: We're one of the few producers of all of our size that actually pay a dividend.

Navin Dyal: We're one of the few producers of our size that actually pay a dividend, and we also, as you know, supplement that with the NCIB. As you pointed out, we definitely consider our cash balance to be a strategic advantage. You know, we have the financial strength to fund our growth opportunities, but also have the ability to continue to pay a dividend, and also to, you know, pursue accretive M&A opportunities. Perhaps with that, maybe I'll turn it back to Dave on perhaps discussing more about considerations around growth.

Speaker Change: We supplement that with the CIB.

Speaker Change: And as you pointed out we definitely consider our cash balance to be a strategic advantage.

Speaker Change: We have this ramp.

Speaker Change: Strength to fund our growth opportunities, but also have the ability to continue to pay a dividend and also to.

David Ray: Pursue accretive M&A opportunities, perhaps with that maybe I'll turn it back to Dave on perhaps discussing more about considerations around growth.

David Ray: Yes, so regimen, we obviously maintain.

David Rae: Yeah. Raj, I mean, we obviously maintain a set of targets that we review on a regular basis and consider for M&A opportunities. We also, just to make sure that we have the right context, we have two different organic growth projects in our portfolio. One of which, Čoka Rakita, is very exciting and imminent, and the other of which continues to progress slowly and quietly in the background, which, you know, producing 200,000 ounces a year at its low all-in sustaining costs, is exciting as well. There's the potential for use of funds either returning capital, and we have a healthy conversation on what we do in terms of dividends and buybacks. Opportunities to invest where we have some accretive results from M&A.

David Ray: A set of targets that we review on a regular basis and consider for M&A opportunities.

David Ray: We also just to.

David Ray: Make sure that we have the right context, we have two different organic growth projects in our portfolio, one of which chaga Ricky there is very exciting and imminent and neither of which continues to progress slowly and quietly in the background, which producing 200000 ounces a year at its low all in sustaining costs.

<unk> as well so there's the potential for use of funds either returning capital and we have a healthy conversation on what we do in terms of dividends and buybacks.

David Ray: Opportunities to invest where we have some accretive.

<unk> from M&A.

David Ray: And then also looking at what's happening in terms of the picture investments of the outlet.

David Rae: Also looking at what's happening in terms of the future investments and the outlook sort of year by year for both Čoka Rakita and also for our secondary project at Loma Larga. I think more than that, I don't know if that answered your question, if you have anything else that you'd like to clarify, but that I think is a reasonable indication of our position.

David Ray: Year by year for both charter with Quito and also.

David Ray: For secondary projects at Loma login.

More than that I don't know if that answered. Your question. If you have anything else that you'd like to clarify that I think is a reasonable indication of our position.

Speaker Change: Okay, that's great. Thanks.

Speaker Change: That's it for me.

Raj Ray: Okay, that's great. Thanks, Dave. That's it from me.

Speaker Change: Thanks Rich.

Speaker Change: Thank you.

David Rae: Thanks, Raj.

Speaker Change: One moment for your next question.

Operator 2: Thank you. One moment for our next question. Our next question comes from Don DeMarco of National Bank Financial. Your line is now open.

Operator: Thank you. One moment for our next question. Our next question comes from Don DeMarco of National Bank Financial. Your line is now open.

Speaker Change: Your next question comes from Don Demarco of National Bank Financial Your line is now open.

Speaker Change: Thank you operator.

Now I'd just like to continue.

Don DeMarco: Thank you, operator. Navin, I'd just like to continue follow up on the response to your question to Raj. You mentioned that you expect working capital to come back after the agreement is terminated. With the agreement terminating at the end of December, should we expect the repayments to be reflected on the Q4 financials or in Q1?

Speaker Change: Follow up on the response to your question Rob You mentioned that you expect working capital come back after the agreement is terminated.

Speaker Change: Agreement terminating at the end of December should we expect the repayments could be reflected on the Q4 financials are in Q1.

Speaker Change: Yes.

Speaker Change: Yes, so the agreement terminates on December 31, and the mechanics of the way that works with respect to the buyback of that.

Navin Dyal: Yeah. Hi, Don. So the agreement terminates on 31 December, and the mechanics of the way that works with respect to the buyback of that inventory is that that buyback occurs on 31 December. However, given the fact that it's also we're in the holiday season and it's scheduled to occur right on New Year's Day, it will be New Year's Eve, this could slip into the first week of the

Speaker Change: Inventory is that that buyback occurs on December 31, However, given the fact that it's also where in the holiday season and is scheduled to occur right on an year to date, we rajeev.

Speaker Change: Could slip into the first week.

Speaker Change: In terms of the payment okay.

Don DeMarco: Yeah.

Navin Dyal: of January in terms of the payment.

Speaker Change: Just the just to note as well what they are buying essentially as both the raw materials.

Don DeMarco: Okay.

Navin Dyal: Also, just to note as well, you know, what they're buying essentially is both the raw materials that is on site and on ship, as well as the contractual metal in circuit, which is obviously in the circuit. We'll have a final adjustment of what that figure is only post 31 December 2024. I would expect the majority of the value of that working capital would be recovered by the end of the year.

That is on site and on ship as well as the contractual Netherlands circuit, which is obviously in the circuit and we'll have a final adjustment of what that figure is only post December 31.

Speaker Change: But I would I would expect the majority of the value of that working capital would be recovered by the end of the year.

Okay fair enough and just in general.

Don DeMarco: Okay. Fair enough. Just in general, are the outlays that you incurred over the last few months consistent with what you expected, or are they a little bit higher or lower?

Speaker Change: That you incurred over the last few months consistent with what you expected or are they a little bit higher or lower.

Speaker Change: Sorry, I didn't get the first part of your question on the delays are the outlays of cash outlays that you incurred to purchase the concentrate is it in line with your expectations or is it a bit higher or lower.

Navin Dyal: Sorry, I did get the first part of your question, Don. The delays or-

Don DeMarco: Yeah. Are the outlays or the cash outlays that you incurred to purchase the concentrate, is it in line with your expectations or is it a bit higher or lower?

Speaker Change: Yes, it certainly is a little bit higher with it it.

Navin Dyal: Yeah, it certainly is a little bit higher. It does fluctuate with metal prices. Certainly there will be, with higher metal prices, you know, copper prices, the value of that metal is definitely going to be higher. In terms of the expected timing of those purchases, they're in line. I think what the other piece of this is really the performance of the smelter and how quickly they can return the blister. That's where it's subject to obviously, you know, operating performance and any downtime that may be associated with the smelter, that would potentially extend the timing of the delivery of the blister, at any point.

Speaker Change: It is.

Speaker Change: It does fluctuate with metal prices, so certainly there will be.

Speaker Change: With higher metal prices copper.

Speaker Change: Copper prices the value of that metal is definitely going to be higher but in terms of the expected timing of those purchases they're in line.

Speaker Change: I think the other piece of this is really the performance culture.

Speaker Change: Jan.

Speaker Change: Our quite unique return.

Did not.

Speaker Change: It's subject to obviously.

Speaker Change: Operating performance.

Speaker Change: That may be associated with the smelter.

Wood.

Speaker Change: Really extend the timing of the delivery of the questar at any point.

Speaker Change: Okay. Thanks for that now.

Don DeMarco: Okay. Thanks for that. Now, just over to David. Chelopech has posted a couple of quarters of AISC in the $500 to $600 range. Is this the new norm? We're looking ahead to 2025 and guidance. How should we kind of frame our expectations on cost looking ahead?

Speaker Change: Over to David <unk> has posted a couple of quarters of ASIC in the five to $600 range is this the new norm. We're looking ahead to 2025 and guidance.

Speaker Change: How should we kind of frame our expectations on cost looking at.

Speaker Change: So don't of course, we will be updating our guidance when we come up with our Q4 numbers.

David Rae: Don, of course, we will be updating our guidance, you know, when we come up with our Q4 numbers. What do you see coming through though? Primarily two things. The one is the copper price influence on the operating costs. The other one is also the change in, you know, concentrates and where they're going. That's had a very material impact for two reasons. One is the direct charge for TC. The other piece, which is perhaps not as evident, is it also allows us to target a higher recovery with a greater mass pull. We've increased the tons, decreased the grade, which increases the overall recovery.

Speaker Change: What do you see coming through the primarily two things. So one is the copper price influence.

Speaker Change: The remaining cost will be in the one is also the change in the concentrates and where they're going so that had a very material impact for two reasons. One is the direct charge the Tc, but the other piece, which is perhaps not as evident as it also allows us to target a higher recovery with greater mass.

Speaker Change: So we've increased the tons decrease the grade which increases the overall recovery. So there's those two things the copper and the client plus also.

David Rae: There's those two things, the copper impact, plus also the change in the way we're operating the facility, which is with the recovery way outweighing the increased cost associated with additional tonnage of concentrate.

Speaker Change: Change in the way, we're operating the facility, which is with the recovery way outweigh the increased cost associated with additional tonnage of concentrate.

Okay. So clearly those are the drivers that are supporting these more cost.

Don DeMarco: Okay. Clearly, those are the drivers that are supporting these low costs. Would you say that Q2 and Q3 then might be the new norm in terms of the cost that we're seeing there?

Speaker Change: But would you say that Q2 and Q3, then might be the new norm in terms of the cost that we're seeing there.

Speaker Change: So Q3 includes a number of different things, which are important for the start of the annual cycle, which recognize these pay increases for instance.

David Rae: Q3 includes a number of different things which are important for the start of the annual cycle, which recognizes pay increases, for instance.

Speaker Change: So that.

Speaker Change: With a more representative number then would be Q2, yeah, okay interesting.

Don DeMarco: Okay.

David Rae: That would be a more representative number than would be Q2.

Speaker Change: Things like inflationary pressures in stocks and such we've started to see unwinding of some of that previous pressure.

Don DeMarco: Okay.

David Rae: With things like inflationary pressures and such, we're starting to see unwinding of some of that previous pressure.

Got it.

Like reagents steel costs and things like that but we are starting to see that come down. So I would say look at it Q2 is a good start but we will update you on that early in the new year.

Don DeMarco: Okay.

David Rae: We've seen benefits like reagents, steel costs, and things like that. We're starting to see that come down. I would say.

Don DeMarco: Okay.

David Rae: Take a look at it. Q2 is a good start, but we will update you on that, early in the new year.

Speaker Change: Okay. Thank you and then final question. So we're continuing to hear progress at normal AGA.

Don DeMarco: Okay. Thank you. Final question. We're continuing to hear progress at Loma Larga. You know, it'd be nice to get an impression of your overall strategy for this asset. I mean, you made this investment at a lower gold price. No doubt it's increased in value. Two things then. When would we expect an update on the economics, including development CapEx? And second, are you sort of squarely focused on developing this asset, or would it even potentially be a divestment candidate for a profit?

Speaker Change: It would be nice to get an impression of your overall strategy Curtis asset.

Speaker Change: They disinvest net a lower gold price no doubt, it's increasing value.

Speaker Change: Two things.

Speaker Change: When would we expect an update on the economics, including development Capex and second.

Speaker Change: Are you sort of squarely focused on developing this asset or what do you do you can potentially be a divestment candidate for a profit.

Speaker Change: So let me start with that and reverse we're not wedded to any particular asset. So the decision in terms of the strategy on any asset is something that we consider as anything given time, so we up tiers, Colorado. Some we have on the market.

David Rae: I'm gonna start with that in reverse. We're not wedded to any particular asset, so the decision in terms of the strategy on any asset is something that we consider at any given time. You know, we have Tierras Coloradas, and we have Loma Larga in Ecuador. I think we've been very pleasantly surprised by the progress that's been made recently, despite many of the things happening in country. That's led us to the point where we've had the two technical reports required by the Constitutional Court submitted just at the end of the quarter, actually in October. Then, of course, we just had a consultation to some communities looking at that particular information that's coming out of those two studies.

Speaker Change: I think we've been very pleasantly surprised by the progress Thats been made recently, despite many of the things happening in country and Thats led us to the point, where we've had the two technical reports required by the constitutional court supplemented.

Speaker Change: At the end of the quarter.

Speaker Change: <unk> in October and then of course, we just have a consultation.

Some communities looking at that particular information thats coming out of those two studies.

Speaker Change: All of these things are good progress and we're now just waiting to see the private and foreign consultation of being completed.

David Rae: All of these things are good progress, and we're now just waiting to see the prior informed consultation being completed. Let's just have a look at project in the rest of your question, though. We still have to do some additional work here, which will update the economics of this project. First thing that would happen with clearance to progress the project is we're gonna commence some drilling, and that will be focused on geotech, hydrogeology, and some minor amounts of resource clarification, particularly at depth below the deposit. You know, that work is expected to happen and will then feed into going through our current status with our internal technical view of how we've developed this project, and that's gonna lead to an updated feasibility study. That's gonna take us some-

Speaker Change: So, let's just have a look at projects and the rest of your question, though we still have to do some additional work, which will update the economics of these projects.

Speaker Change: The thing that would happen with clearance to progress the project as we're going to commence some drilling and that will be focused on geotag pilot geology, and some minor amounts of resource clarification.

Speaker Change: Particularly at depth below the deposit.

Speaker Change: So that work is expected to happen and will then feed into going through current stages with our internal technical review of how we would develop this project and thats going to lead to an updated feasibility study.

Speaker Change: So thats going to Samsung, but don't expect that to be out of the mines.

Don DeMarco: Okay.

David Rae: Don't expect that to be overnight. You know, just the idea of looking at what the individual costs are, the supply, earthworks, and other contracting and things like that, this takes a little bit of time.

Speaker Change: The idea of looking at what the individual cost of supply with some of the contracting and things like that.

Speaker Change: Okay.

Speaker Change: Would that be a 2025 items.

Don DeMarco: Okay. Would that be a 2025 item?

Speaker Change: It depends on when we got the clearance to move forward to be quite honestly not talking about something that's going to be done by the same six months kind of take a little bit longer than that once we go okay.

David Rae: It depends on when we got the clearance to move forward, to be quite honest. We're not talking about something that's gonna be done, let's say, in six months. It's gonna take a little bit longer than that. Once we get-

Speaker Change: To move on it at the moment, we cant do drilling on the ASP, but primarily the main thing that we need to do.

Don DeMarco: Okay.

Navin Dyal: To move on. At the moment, we can't do drilling on the asset. That's primarily the main thing that we need to do. Just to come back, Don, to, you know, you've seen the movements of Čoka Rakita as we've identified the opportunity there. We're really excited about what we see. That's really gone into prime position and is our main focus of the organization.

Speaker Change: But just to come back down to you've seen the movements of yoga with Peter as we've identified the opportunity, though it really excited about what we see that's really gone into prime position and as our main focus of the organization.

Speaker Change: Okay. Thank you David that's all from me.

Don DeMarco: Okay. Thank you, David. That's all for me.

Speaker Change: Thank you.

David Ray: Thank you.

Navin Dyal: Thank you.

David Rae: Thank you.

As a reminder to ask a question you will need to press star one one on your telephone.

Operator 2: Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from Jeremy Hoy of Canaccord Genuity. Your line is now open.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from Jeremy Hoy of Canaccord Genuity. Your line is now open.

Speaker Change: Our next question comes from.

Speaker Change: Jeremy Hawaii of Canaccord Genuity. Your line is now open.

Jeremy Hawaii: Hi, everyone. Thanks for taking my question really appreciate that color on multiple large.

Jeremy Hoy: Hi, everyone. Thanks for taking my question. Really appreciate that color on Loma Larga. That answered a lot of the questions I did have. I did wanna ask on Chelopech. There was a mention of the China VAT tax applicability potentially changing. I was wondering if you could provide a little bit more color on that. There was also a mention of potential alternative buyers. But my understanding was there are limited buyers for this concentrate. You know, just kinda wanna understand exactly how you're thinking about that.

Jeremy Hawaii: You answered a lot of the questions I could have but I did want to ask on cello patch. There was there was I mentioned of the China VAT tax applicability potentially changing.

Jeremy Hawaii: I was wondering if you could provide a little bit more color on that and there was also a mention of potential of potential alternative buyers, but my understanding was there are limited buyers for this cause and trades and so just kind of wanted to understand exactly how you're thinking about that.

Jeremy Hawaii: Sure Jeremy here.

Navin Dyal: Sure, Jeremy. Navin here. Just a bit of background. You know, we have been sending about 70 to 75% of our concentrate to China. This is both the copper gold concentrate and the pyrite. And again, we produce two types of concentrate there. The pyrite concentrate that we send from Chelopech have always attracted VAT at 13% and an additional duty of 1%. Our copper gold concentrate that we would send there would not attract that VAT or that duty because it was a high grade. It met a threshold that was required in China to be considered a precious metal or gold concentrate that was not subject to this.

Jeremy Hawaii: Just a bit of background so.

Speaker Change: We have been spending about 70% to 75% of our concentrate to China. This is both the copper gold concentrate in the pyrite and again reproduce two types of concentrate there.

Speaker Change: The pyrite concentrate that we send from cello patch has always attracted.

Speaker Change: At 13% and additional duty of 1%.

Speaker Change: Our copper gold concentrate that we send there would not attract that.

Speaker Change: T.

Speaker Change: Or that duty because it was the high grade it met the threshold that was required in China to be considered a precious metal gold concentrate that was not subject to this so we're trying to trying to tax authority is proposing on and these are only proposed changes at this point is to apply the.

Navin Dyal: What China's tax authority is proposing, and these are only proposed changes at this point, is to apply VAT and duty on gold concentrate that otherwise has a high component of iron and sulfur, which they would consider a pyrite concentrate and hence would be, you know, captured or attract VAT and duty. That's the background of this. You know, at this point, this is really fairly new. What we saw in September, and this has been reported in October, was that the imports of this concentrate, purchased by the buyers in China, the smelters, has been significantly down.

Speaker Change: And duty on.

Speaker Change: Gold concentrate that otherwise has a high component of iron and sulfur, which would they would consider a pyrite concentrate enhance would be captured or attractive and duty. So so that's the background of this so at this point. This is really this is really fairly new.

Speaker Change: What we saw in September.

Being a hybrid being reported in October was that.

Speaker Change: The importance of this concentrate.

Speaker Change: By the buyers in China of the smelters has been significantly down.

Speaker Change: What I'll also point out in terms of the impact to us is that our.

Navin Dyal: What I'll also point out in terms of the impact to us is that our contracts clearly state that any additional taxes that are incurred are at the buyer's expense. However, we do recognize that ultimately, this will have, if this were to be enacted, that this would definitely have an impact on future deliveries of concentrate to China considering the additional cost that would be required. Now in our case, look, we've been producing this concentrate for over 20 years now. We are very familiar with the market, the broader market, and we do have alternatives to that. But as you point out, though, given the nature of our concentrate, you know, that those additional areas or potential areas that we could deliver concentrate might incur additional costs.

Speaker Change: Our contracts clearly state that any additional taxes that are incurred or at the buyer of expense.

Speaker Change: However, we do recognize that ultimately this will have.

Speaker Change: Were to be enacted that this would definitely have an impact on additional future deliveries of concentrate to China, considering the additional costs that would be required now.

Speaker Change: Now in our case, what we've been producing this concentrate for about for over 20 years now we are very familiar with the market the broader market and we do have alternatives to that but as you point out, though given the nature of our concentrate.

Speaker Change: Those additional areas of potential areas that we could deliver a concentrate might incur additional cost but at this point, it's really too early for us to really comment on that hopefully that helps.

Navin Dyal: At this point, it's really too early for us to really comment on that. Hopefully, that helps.

David Ray: That's very helpful. Thank you David I appreciate it.

Jeremy Hoy: That's very helpful. Thank you, Navin. I appreciate it.

David Ray: Thank you.

Speaker Change: Our next question comes from Eric <unk> of Bank of Nova Scotia. Your line is now open.

Operator 2: Thank you. Our next question comes from Eric Winmill of Bank of Nova Scotia. Your line is now open.

Operator: Thank you. Our next question comes from Eric Winmill of Bank of Nova Scotia. Your line is now open.

Speaker Change: Great. Thank you very much hi, David and team I. Appreciate you taking my question.

Eric Winmill: Great. Thank you very much. Hi, David and team. I appreciate you taking my question. Just on the inventory payments at Tsumeb, just trying to understand here. I know you said there's no major financial gain or loss associated with that, but just wondering, you know, if we should be modeling, you know, margins obviously on these inventory sales. Also, do you anticipate any, you know, counterparty risk on this? And I guess, is there any potential here that this agreement could get extended beyond the December 31 deadline? Thanks.

Just on the inventory payment just trying to.

Speaker Change: Stan here I know you said Theres no major financial gain or loss associated with that but just wondering if we should be modeling.

Speaker Change: Our margins obviously on these inventory sales also do you anticipate any counterparty risk on this end.

Speaker Change: I guess is there any potential here that this agreement could get extended beyond the December 31 deadline.

Speaker Change: Alright, Thanks, Eric So I'll just address a few of those here. So in terms of the margin. It's a back to back contract essentially so we purchased materials essentially from.

Navin Dyal: All right. Thanks, Eric. I'll just address a few of those here. In terms of the margin, it's a back-to-back contract essentially. We purchased the materials essentially from our previous tolling agent, which is IXM, and then we deliver the blister back to them as well. Because of that back-to-back nature, there's no price risk because essentially they're hedging on both sides of that transaction. Essentially, we don't collect, you know, essentially any type of commission on that as well. That's what I would suggest with that. In terms of counterparty risk, IXM has been a purchaser of this material. They want the blister and hence I don't think that there's an issue here.

Speaker Change: The previous tolling agent, which is item and then we deliver the Pulitzer back to them as well so.

Speaker Change: Because of that back to back nature.

Speaker Change: There is no price risk because essentially they are hedging on both sides of that transaction.

Speaker Change: And essentially we don't collect essentially any type of.

Speaker Change: Commission on that as well so so that's what I would.

Speaker Change: So just with that in terms of counterparty risk.

Speaker Change: It has been a purchaser of this material.

They want the blister and hence I don't think that there is an issue here and then when it comes to margin.

Navin Dyal: When it comes to margin, you know, or additional cost, you know, we are charging an interest on this to Sinomine for the working capital. This interest is north of 7.5%. Given where interest rates have been falling, you know, this cash would have been essentially sitting in our account at less than that. We are making a small amount on this on interest income. It's enough to cover our internal costs, which we're managing all of these transactions internally. Hopefully that helps.

Speaker Change: Additional costs.

Speaker Change: Yes.

Speaker Change: We are charging in interest on this two dynamite offer the working capital on this interest cost. This interest is north of seven 5%.

Speaker Change: And given where interest rates have been falling.

Speaker Change: The cash would have been essentially sitting in our accounts at less than that so we are making a small amount on this.

Speaker Change: Non interest income.

But it's enough to cover our internal cost, which we're managing all of these transactions internally so hopefully that helps.

Speaker Change: And just last part in terms of extending this beyond December 31.

Eric Winmill: Just last part in terms of extending this beyond 31 December.

Speaker Change: Of course, yes, as I mentioned before the contract ends on December 31.

Navin Dyal: Oh, yeah, of course. Yeah, as I mentioned before, the contract ends on 31 December. Thus far, we've enjoyed a really good relationship with both Sinomine and IXM, and everything's been working in accordance with our agreement.

Speaker Change: And thus.

Speaker Change: Thus far we've.

Speaker Change: Enjoyed a really good relationship with both <unk>.

Speaker Change: <unk> and <unk>.

Speaker Change: <unk> and everything has been working in accordance with our agreement.

Speaker Change: Okay. Thank you I really appreciate that just quickly on choke rachida, So obviously new resource.

Eric Winmill: Okay. Thank you. I really appreciate that. Just quickly on Čoka Rakita. Obviously, new resource estimate is underway there. Do you anticipate releasing that, I guess, in advance of the PFS?

Speaker Change: Estimate is underway there to anticipate releasing that I guess in advance of the PFS.

Speaker Change: Yes.

Speaker Change: So what will happen is that primary activity here and the work done.

David Rae: What will happen is that primary activity here and the work done was to convert inferred to indicated. That's the main thing that you're gonna see. Yeah, hopefully that answers your question.

To convert inferred to indicated so that's that's the main thing that you're going to see.

Speaker Change: Yes, hopefully that answers your question.

Speaker Change: Okay perfect I appreciate that.

Eric Winmill: Okay, perfect. I appreciate that. Just one more for me. There was a mention in the disclosures here about the Brevene license, Chelopech. Just wondering, I guess, what's planned there, you know, and what do you see for that particular part of the deposit or of the land package?

Speaker Change: Just one more for me there was a mention in the disclosures here about the <unk> license.

Speaker Change: Hello patch just wondering I guess.

Speaker Change: Whats plan there.

Speaker Change: And what do you see for that particular part.

Speaker Change: Of the deposit or other land package.

Speaker Change: Yes sure.

I think there's two different things that we typically talk about the other one that's been set in Petcare historically and Thats why we now referring to as shelf edge nodes. So that's advanced from where we know always breathing silver an exploration license to a geological discovery, which is where we are now within and we've subsequently advanced beyond that to a commercial discovery and by the end of next.

David Rae: Yeah, sure. Eric, I think there's two different things that we typically talk about here. The one has been Sveta Petka historically, and that's what we're now referring to as Chelopech North. That's advanced from where we now are with Brevene. Sort of an exploration license to a geological discovery, which is where we are now with Brevene, and we've subsequently advanced beyond that to a commercial discovery. By the end of next year, we're anticipating having a new concession for that. Brevene is part of that same thing. We've now got the geological discovery. What we're now doing is we're justifying with the authorities the plan for this next phase of work, which would be a one-year period of drilling, which would then be used to justify a commercial discovery.

Speaker Change: We're anticipating having a new concession for them so preventing as part of that same thing. So we've now got the geological discovery. What we're now doing is we just defined with the authority. The plan for this next phase of work, which.

Speaker Change: We'll be at a one year period drilling which would then.

Speaker Change: We used to justify a commercial discovery is now the impact of this is it opens up the real estate of which we can do.

David Rae: Now, the impact of this is it opens up the real estate on which we can do work to discover additional potential feed to Chelopech. That's the primary impact of all of this work is just to open that up. At the same time, as you know, we continue to drill in areas within the concession, and from underground, we continue to do some, let's say 70% extensional and 30% infill for around 40,000 meters per year. All of those things are looking to a view of extending the life of mine at Chelopech. And obviously, the more real estate we've got in that area and how prospective it is, the more we're able to look to really extend that life of Chelopech. That's our primary goal.

Speaker Change: To discover additional potential Z to telecom. So that's the primary impact of all of this work is to open about it at the same time as you know we continue to drill in areas within the concession.

Speaker Change: From underground we continue to do some let's say, 70% extensional and 30% in solar for around 40000 meters per year. So all of those things are looking to our view of extending the life of mine life of mine at <unk> and obviously the more real estate, we've got in that area and our prospective and the more we're able to.

Speaker Change: Look to really extend that life and <unk>, that's our primary goal.

Speaker Change: Yes.

Speaker Change: So just I'm, Eric the one thing I must tissue was quite clear of course, we'll be releasing the PFS. We've said that's going to be in the first quarter of next year and that will include consideration of what additional benefit we've got from the drilling that we've done.

David Rae: Just, Eric, the one thing I'm not too sure was quite clear. Of course, you know, we'll be releasing the PFS. We've said that's gonna be in Q1 next year, and that will include consideration of what additional benefit we've got from the drilling that we've done, where we've taken it down to 30-by-30 meter spacing with 15 by 15 in the high-grade areas. Just making sure that, you know, I've got that point across in terms of Čoka Rakita.

Speaker Change: We've taken it down from $35 30 meter spacing with $55 15 in the high grade areas.

Speaker Change: Just making sure that got that point across and temperature.

Speaker Change: Okay Fantastic I really appreciate the added color.

Eric Winmill: Okay, fantastic. I really appreciate the added color. Actually, maybe just one more, if you don't mind. Ada Tepe, so obviously expecting stronger production there. I know you kinda touched on that, maybe anything specific you can point to in terms of, you know, what's changed there or, you know, reasons why production is down and why you see it ticking up here in Q4?

Speaker Change: Actually maybe just one more if you don't mind, but a tough base. So obviously expecting stronger production. There I know you kind of touched on that but maybe anything specific you can point to in terms of.

Speaker Change: Whats changed there or.

Speaker Change: Reasons, why production is down and why you see it ticking up here in Q4.

Speaker Change: Yes, So we had a combination of underperformance in an area in terms of grade combined with some issues with all flexibility related to truck availability.

David Rae: Yeah. We had a combination of an underperformance in an area in terms of grade, combined with some issues with our flexibility related to truck availability. Both of those are resolved in terms of Q4. We're not anticipating any impact carried through from early Q3 actually into Q4.

Speaker Change: So both of those are resolved.

Speaker Change: As of Q4, so we're not anticipating any impact carried through from early Q3.

Into Q4.

Speaker Change: Okay fantastic. Thank you very much I really appreciate the extra color I'll hop back in the queue.

Eric Winmill: Okay, fantastic. Thank you very much. I really appreciate the extra color. I'll hop back in the queue. Cheers.

Speaker Change: Thank you thanks.

Eric: Thanks, Eric.

Operator 2: Thank you.

Operator: Thank you.

Eric: Yes.

David Rae: Thanks, Eric.

Speaker Change: Our next question comes from Ingrid Rico and stifle your line is now open.

Operator 2: Our next question comes from Ingrid Rico of Stifel. Your line is now open.

Operator: Our next question comes from Ingrid Rico of Stifel. Your line is now open.

Speaker Change: Great. Thank you good morning, David and team.

Ingrid Rico: Great. Thank you. Good morning, David and team. I just wanted to follow up on a question previously asked. I think Don asked about the Chelopech cost. Understanding the benefits from the lower TCRCs and the freight charges. I did notice that the unit cost per ton did increase quarter-over-quarter. Just if we can get a bit of color on what are the drivers there. Is it just purely labor wages coming up to inflation? Or is there any other sort of inflationary pressures on consumables that are coming through?

Speaker Change: Just wanted to follow up on our next question previously asked I think Dan asked about the telecom cost so understanding the benefits from the lower Tc Rcs and freight charges.

Speaker Change: But I did notice that the unit cost per tonne.

Speaker Change: Increased quarter over quarter.

Speaker Change: Just if we can get a bit of color on what are the drivers. There is it just purely labor wages coming up to inflation or is there any other startup.

Speaker Change: Inflationary pressures on consumables that are coming through.

Speaker Change: Yes, sure I'll answer that so.

Navin Dyal: Hi, Ingrid. Yes sure, I'll answer that. Yeah, the main factors there was labor, wages, and also a little bit of share-based compensation expenses because we saw an increase in our mark-to-market for the quarter on the unit cost at Chelopech. We so and the labor, as Dave pointed out, is that we typically have wage increases in the middle of the year. In fact, they're backdated to July in Bulgaria. That's gonna be a bit of a factor here in terms of the increase that you're seeing there. Also, I think, what also should be mentioned is that we did have slightly lower tons in the quarter relative to the prior year. It's about 6% down.

Speaker Change: So yes, the mainly the main factors there was labor wages and also a little bit of share based compensation expenses, because we saw an increase in our mark to market for the quarter.

Speaker Change: The unit cost at <unk>.

Speaker Change: So in the labor.

Speaker Change: They pointed out is that we typically have wage increases in the middle of the year and factor back data to July in Bulgaria. So so.

So that's going to be a bit of a factor here in terms of the increase that youre seeing there, but also I think what also should be mentioned is that we did have slightly lower tons.

Speaker Change: In the quarter relative to the prior year, it's about 6% down.

Speaker Change: Hence why.

Speaker Change: On a per unit basis, we're seeing.

Navin Dyal: Hence why, you know, on a per unit basis, we're seeing, you know, a little bit of an increase there. When it comes to other consumables, we're actually seeing relative to our budget, either flat to slightly improving costs in some of those areas, particularly with respect to things like steel and grinding media. We just, you know, renewed a contract there recently in which we saw some savings from the prior contract as well. When it comes to other major consumables, we're not seeing any inflationary pressures happening there. Hopefully that answers your question.

A little bit of an increase there.

When it comes to other consumables, we're actually seeing relative to our budget.

Speaker Change: Either flat to slightly improving.

Speaker Change: Costs and some of those areas, particularly with respect to things like steel and grinding media we just.

Renewed a contract there recently and which we thought the savings from the prior contract contract as well so when it comes to other major consumables, we're not seeing any inflationary pressures that are happening there.

Speaker Change: Hopefully that answers your question.

Speaker Change: Yes, that's great.

Ingrid Rico: Yeah, that's great, Navin. Just in terms of the labor increase and the labor wage increase, just remind me, the contract it's set every year, or are you now locked in on the wage, on the wages for a longer term period?

Speaker Change: Just in terms of the labor increase in the labor wage increase.

Just remind me the contract.

Speaker Change: Every year or are you now locked in on the wage.

Speaker Change: On the wages for a longer period.

Speaker Change: It's every two years that we have these negotiations.

Navin Dyal: Yeah. It's every two years that we have these negotiations.

Speaker Change: Okay excellent.

Speaker Change: And if I can.

Ingrid Rico: Perfect. Excellent. If I can just also a follow-up on the concentrate being sent to China. As I understand, these are already contracts for 2025 and to 2027. What is your ability in those contracts to maybe divert some of those sales to other regions and whether that's possible under the contract?

Speaker Change: Just also a follow up on the.

Speaker Change: Concentrate being sent to China.

Speaker Change: As I understand is there already contracts for 2025 and 2027.

Speaker Change: What is your ability in those contracts to maybe divert some of those.

Speaker Change: Dose.

Speaker Change: Sales to other regions and whether thats possible under the contract.

Speaker Change: Sure Yes.

Speaker Change: Clearly if we so a couple of things to mention here one is the.

Navin Dyal: Sure. Yeah, I mean, you know, clearly. A couple of things to mention here. One is, any of the VAT increases or duties that would be applied are at the buyer's account. We would be happy to continue to deliver into China if, you know, so long as the customer is willing to take it. Now, the issue for, perhaps then for the customer in this case, or the smelters, is that if they take this concentrate and if this proposal by the Chinese tax authorities were to remain in place, they would be operating likely at a loss for much of this contract, hence why we've seen such a decline in imports. They have been very vocal. The smelters themselves have been very vocal against these proposals.

Speaker Change: Any of you have got increases our duties that would be applied or occupiers account. So we.

Speaker Change: We would be happy to continue to deliver into China. If so long as the customer is willing to take it now the issue for perhaps them for the customer in this case are the smelter is is that if they take the concentrate.

Speaker Change: Proposal <unk>.

Speaker Change: The Chinese authorities were to remain in place they would be operating likely on a at a loss for much of this contract. Hence why we've seen such a decline in imports.

Speaker Change: They have been very vocal in the smelters itself has been very vocal against these proposals.

Speaker Change: So if they were operating at a loss the certainly would be looking to potentially exit these contracts and not take the material one.

Navin Dyal: If they are operating at a loss, they certainly would be looking to potentially exit these contracts and not take the material in one instance. In which case, we would be looking for alternatives and, you know, for this concentrate. Ourselves, we would be happy to continue to deliver. Again, we're not the VAT and this duty does not, you know, essentially get passed on to us. If we continue to deliver into China, it would have to be absorbed.

Speaker Change: In which case, we would be looking for alternatives and for.

Speaker Change: This concentrated.

Speaker Change: But ourselves we would be happy to continue to deliver again, we're not.

And this.

Speaker Change: Duty does not.

Speaker Change: Essentially get passed on to us.

Speaker Change: If we continue to deliver into China, it would have to be absorbed.

Speaker Change: I understand that that's great color.

Ingrid Rico: Understood. That's great color. Just to finish up on sort of the concentrate sales, maybe just if you can share how you're seeing those commercial terms in the global market. Have we sort of peaked on those sort of good terms, or how do you look at those into 2025?

Speaker Change: And just to finish up on sort of the concentrate sales maybe just if you can share how youre seeing those commercial terms in the global market. How can you sort of peaked on those sort of good terms there how do you look at those into 2025.

Speaker Change: Yes, we have seen a significant improvement in our Tcs for the course of the year and I think I've mentioned this before.

Navin Dyal: Yeah, we have seen a significant improvement in our TCs over the course of the year. I think I've mentioned this before. It's you know, it's about $100 a ton in terms of benefit there that we've seen in the global market. We don't think it's hit necessarily bottom just yet. We continue to see improvements there. Certainly it's at record lows in terms of these charges.

Speaker Change: It's about $100 a ton in terms of benefit there.

Speaker Change: We've seen in the global market.

Speaker Change: We don't think it necessarily bottom just yet we continue to see improvements there.

Speaker Change: But certainly it's at record lows in terms of.

Speaker Change: In terms of these these charges.

Okay. Thank you for that that's it for me.

Ingrid Rico: Great. Thank you for that. That's it for me.

Speaker Change: Thank you.

Speaker Change: This concludes the question and answer session I would now like to turn it back to Jennifer Cameron for closing remarks.

Operator 2: Thank you. This concludes the question and answer session. I would now like to turn it back to Jennifer Cameron for closing remarks.

Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Jennifer Cameron for closing remarks.

Jennifer Cameron: Well. Thank you all for joining US we look forward to keeping you updated over the course of the next few months.

Jennifer Cameron: Well, thank you all for joining us. We look forward to keeping you updated over the course of the next few months, and we'll catch up on the next quarter. Please feel free to reach out with any additional questions. Thank you.

Speaker Change: I'll catch up on the next corner, please feel free to reach out with any additional question.

Speaker Change: Thank you.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Operator 2: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Q3 2024 Dundee Precious Metals Inc Earnings Call

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