Unlocking Resources.
Generating Value.
Annual Report 2020
Dundee Precious Metals At a Glance
Dundee Precious Metals Inc. is a Canadian-based international gold mining company with operations and projects
located in Bulgaria, Namibia and Serbia. Our purpose is to unlock resources and generate value to thrive and grow
together. This purpose is supported by a foundation of core values, which guide how we conduct our business and
inform a set of complementary strategic pillars and objectives related to ESG, innovation, optimizing our existing
portfolio, and growth. DPM’s resources are allocated in-line with its strategy to ensure that DPM delivers value for
all of its stakeholders.
Production and Financial Highlights
GOLD AND COPPER IN
CONCENTRATE PRODUCED
ALL-IN SUSTAINING COST
($/oz.)1
ADJUSTED EBITDA
(US$M)1
Gold (000s ounces)
Copper (Mlbs)
8
9
2
1
3
2
1
0
2
7
3
7
3
6
3
5
2
7
$
0
6
6
$
4
5
6
$
9
1
3
$
0
4
1
$
0
0
1
$
2018
2019
2020
2018 2019
2020
2018
2019
2020
CASH FLOW FROM
OPERATIONS
(US$M)
7
9
1
$
8
9
$
6
9
$
FREE CASH FLOW
(US$M)1
1
1
2
$
0
7
$
4
5
$
2018 2019 2020
2018 2019 2020
1All-in sustaining cost, adjusted EBITDA and free cash
flow are not defined measures under IFRS. Refer to
the “Non-GAAP Financial Measures” as disclosed
on pages 58 to 64 of the Management’s Discussion
& Analysis contained in this report.
Global
Portfolio
of Assets
5
(cid:144)
Corporate
Head Office
Toronto, Canada
6
1
7
2
4
3
Forecast/guidance information is subject to a number of risks. Refer to the Company’s 2021 guidance and three-year
outlook as disclosed on pages 17 to 21 of the Management’s Discussion & Analysis contained in this report.
TMX:DPM
1
2
3
4
5
6
7
CHELOPECH
Location
Chelopech, Bulgaria
Operation
Underground mine
Ownership
100%
2021 Guidance
156 – 176 koz Au
34 – 39 Mlbs Cu
ADA TEPE
Location
Southern Bulgaria
Operation
Open-pit mine
Ownership
100%
2021 Guidance
115 – 141 koz Au
TSUMEB
Location
Tsumeb, Namibia
Operation
Specialty smelter
Ownership
92%
2021 Guidance
220 – 250k tonnes of
concentrate smelted
TIMOK
Location
Serbia
Ownership
100%
Stage
Feasibility study
Production
80 koz Au per annum
(first 6 years)
STRATEGIC INVESTMENT PORTFOLIO
SABINA GOLD & SILVER
Location
Nunavut, Canada
Ownership
9%
INV METALS
Location
Southern Ecuador
Ownership
23.5%
VELOCITY MINERALS
Location
Southern Bulgaria
Ownership
8.5%
DUNDEE PRECIOUS METALS 2020 ANNUAL REPORT
1
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STRONG GOLD
PRODUCTION PROFILE
STABLE COPPER
PRODUCTION
Gold contained in concentrate
produced (‘000s ounces)
Copper contained in concentrate
produced (Mlbs)
7
1
3
–
1
7
2
8
9
2
0
1
3
–
5
6
2
0
8
2
–
0
4
2
9
3
–
4
3
9
3
–
2
3
9
3
–
2
3
6
3
2020
2021
Guidance
2022
Outlook
2023
Outlook
2020
2021
Guidance
2022
Outlook
2023
Outlook
IMPROVING SMELTER
PERFORMANCE
Complex concentrate smelted
(‘000 tonnes)
ATTRACTIVE ALL-IN
SUSTAINING COST 2
All-in sustaining cost ($/oz Au)
0
5
2
–
0
2
2
0
5
2
–
0
2
2
5
6
2
–
0
3
2
2
3
2
0
1
8
$
–
0
3
7
$
0
1
7
$
–
0
3
6
$
5
9
6
$
–
5
2
6
$
4
5
6
$
2020
2021
Guidance
2022
Outlook
2023
Outlook
2020
2021
Guidance
2022
Outlook
2023
Outlook
Solid Three-Year
Outlook
Highlights strong production
profile, attractive all-in
sustaining cost and DPM’s
potential to generate
significant free cash flow.
Forecast/guidance information is subject to
a number of risks. Refer to the Company’s
2021 guidance and three-year outlook
as disclosed on pages 17 to 21 of the
Management’s Discussion and Analysis
contained in this report.
2 All-in sustaining cost is not a defined
measure under IFRS. Refer to the
“Non-GAAP Financial Measures” as
disclosed on pages 58 to 64 of the
Management’s Discussion & Analysis
contained in this report.
2
DUNDEE PRECIOUS METALS 2020 ANNUAL REPORT
TMX:DPM
Defining Our Corporate Purpose
In 2020, we engaged the entire organization, from our mine site staff to our Board of Directors, in a comprehensive,
collaborative process to further define DPM’s corporate purpose. As a result of this process, we established an
updated purpose statement: unlocking resources and generating value to thrive and grow together. This purpose is
supported by a strong foundation of six core values that guide how we conduct our business and how we behave as
an organization.
PURPOSE
Unlocking resources and
generating value to thrive and grow together
STRATEGIC OBJECTIVES
Total long-term
shareholder returns
in the top quartile
in the industry
Sustainable
mid-tier producer
Generate net
positive impact
from our operations
All-in sustaining cost
in the bottom half
of the industry
Leader in mining
innovation and
operating excellence
STRATEGIC PILLARS
ESG
Innovation
Optimize Portfolio
Growth
Secure Social Licence
Transform Assets
Unlock Value
Leverage Unique Skills
VALUES
We put safety &
well-being of
people first
We are stewards of
the environment
We are transparent
and accountable
We respect each other
and embrace inclusion
We innovate
with courage
We partner with
our communities
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DUNDEE PRECIOUS METALS 2020 ANNUAL REPORT
3
2020 Message to Shareholders
2020 Message to Shareholders
Unlocking Resources.
Generating Value.
2020 Message to Shareholders
It goes without saying that 2020 was a very
challenging year around the world as a result
of the COVID-19 pandemic. Despite these
challenges, the strength of our people and
relationships with our stakeholders, as well as
the quality of our asset portfolio, enabled us to
deliver an exceptional year.
DEFINING OUR CORPORATE PURPOSE
During the year, we engaged the entire
organization, from our mine site employees
to our Board of Directors, in a comprehensive,
collaborative process to further define DPM’s
corporate purpose. As a result of this process,
we established an updated purpose statement:
unlocking resources and generating value
to thrive and grow together. This purpose
is supported by a strong foundation of six
core values that guide how we conduct
our business and how we behave as
an organization.
Informed by our purpose and core values, we
also refreshed DPM’s strategic objectives this
year, which are focused around four strategic
pillars: ESG, innovation, optimizing
our existing portfolio, and growth.
We believe these strategic themes drove
our achievements in 2020 and laid a strong
foundation for the future.
REVIEW OF 2020 PERFORMANCE
It would normally be my pleasure to begin
a review of our annual performance by
highlighting our strong health and safety
record, but that is sadly not the case for
2020. Tragically, as previously reported,
there was a fatality at our smelter operation
in Namibia, which overshadows what was
otherwise an exceptional year. The safety
and well-being of our people is our highest
priority, and we are focused on applying what
we have learned from this incident across the
organization to ensure every employee arrives
home safely each day.
Our values, which help form the basis of the
respect we have earned from our stakeholders,
were exemplified in 2020 by the efforts
of our teams to support local communities
that were significantly impacted by the
COVID-19 pandemic.
We launched a number of initiatives designed
to assist and respond to the needs of our local
communities in Bulgaria, Namibia and Serbia.
Collectively, we contributed approximately
US$1 million, which was primarily focused
on assisting hospitals by providing additional
medical facilities, supplies, transportation and
medical equipment. We will continue to prioritize
the health and safety of our workforce
and local communities as we manage the
challenges of the ongoing pandemic.
We also made progress on a number of social
and environmental initiatives during the year,
augmented our existing sustainability reporting
framework, and released our inaugural
climate change report in December 2020.
In 2020, we continued to deliver strong
operating performance, producing a record
298,289 gold ounces and 36 million pounds
of copper, at an all-in sustaining cost of $654
per gold ounce. Combined with strong gold
prices, this translated into record financial
results, including significant free cash flow
generation of $211 million and adjusted net
earnings of $193 million.
During the year, we also made significant
steps towards building for our future. Our
exploration programs yielded strong results,
including the addition of 2 years of mine life
at Chelopech, and encouraging results at
our Timok gold project in Serbia. We also
completed a pre-feasibility study for the Timok
gold project and made a strategic investment
in Velocity Minerals Ltd. (“Velocity”), a
gold exploration company operating in
southeastern Bulgaria.
In the fourth quarter, we increased our
quarterly dividend by 50% to US$0.03 per
share, less than a year after initiating our
inaugural dividend. This increase reflects our
ongoing strong operational performance,
significant free cash flow generation and
growing cash balance. It further demonstrates
our confidence in our operations as well as
our commitment to delivering superior returns
to our shareholders through disciplined
capital allocation.
4
DUNDEE PRECIOUS METALS 2020 ANNUAL REPORT
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2020 Message to Shareholders
We were pleased to
see that our significant
achievements in 2020
were recognized by
the market, with our
share price increasing
by approximately 64%
in 2020.
DAVID RAE
President and CEO
Industry-Leading ESG
Being a leader in the areas of Environmental,
Social and Governance (“ESG”) has always
been a key focus area for DPM. After many
years on the periphery of investing, ESG has
become an integral component to mainstream
investing. This has resulted in a proliferation of
ESG data and tools and a push for companies,
from investors, governments and other
stakeholders, to disclose how these areas of
their business are managed, their specific ESG
risks and opportunities and, more generally,
how they contribute to society at large. These
important trends within our industry and the
private sector in general were factored into
the update we undertook this year to our
purpose, strategic objectives and core values.
Starting with our purpose and our values,
ESG is integrated at all levels of the
organization, from our Board of Directors
to our workforce.
Our purpose, “Unlocking resources and
generating value to thrive and grow together”,
highlights the need for an inclusive approach
to managing our business, and places
emphasis on our ability to allocate financial
and non-financial resources to ensure that
we deliver value to all DPM stakeholders.
As we witness the evolution and growth of
ESG-centric investing, we feel well-prepared
and comfortable with DPM’s position as a
leader in the mining sector. This leadership
position is demonstrated by positive ratings
the company has achieved from a growing
number of ESG rating agencies. As of
December 2020, DPM received a rating of
“A” from MCSI ESG Research LLC, a well-
respected independent ESG rating agency.
We continue to focus on generating value
for all of our stakeholders through our
strong ESG performance. During 2020,
we made progress on a number of social
and environmental initiatives, and we
augmented our existing sustainability
reporting framework by publishing “Risks
and Opportunities related to Climate Change,”
our inaugural climate change report. The
report, which follows the recommendations of
the Task Force for Climate-related Financial
Disclosure, also outlines our efforts to achieve
reductions in energy, water use, emissions
and our consumption of raw materials. We
look forward to sharing our most recent ESG
performance later in the year when we publish
our 2020 Sustainability Report.
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DUNDEE PRECIOUS METALS 2020 ANNUAL REPORT
5
MineRP was acquired in 2017 as part of
our ongoing strategy to drive innovation at
DPM, and to leverage a technology with
the potential to transform the mining industry.
Having substantially advanced our initiatives
and supported MineRP in developing its
software to position for its next phase of
growth, the time was right to divest this
interest as we continue to focus on our core
mining assets. The transaction is expected to
close in the first half of 2021.
Given our strong financial position and
expected free cash flow generation in
the coming years, we are committed to
maintaining a disciplined approach to capital
allocation that balances our desire to reinvest
in growing and optimizing the business with
our commitment to provide a cash return to
our shareholders through a sustainable
quarterly dividend.
3 Refer to the technical report for the Ada Tepe gold mine,
dated November 20, 2020 and available on our website
at www.dundeeprecious.com
4 As at December 31, 2020. On January 28, 2021, DPM
increased its ownership in INV to 23.5%.
5DPM’s 70% equity interest is on a fully diluted basis. For
more information regarding the transaction, please refer
to the news release dated December 22, 2020, available
on our website at www.dundeeprecious.com
Ada Tepe: Driving growth in production
and cash flow
Tsumeb: Focused on operational stability,
efficiencies and cost reduction
In 2020, the Tsumeb smelter processed
approximately 231,890 tonnes of complex
concentrate at a cash cost of $377 per tonne,
net of by-products. Tsumeb achieved its annual
guidance for 2020, despite the operation
being impacted by a 30-day reduction in
throughput related to COVID-19 during the
second quarter, which is a testament to the
strength of our operating team.
GROWING FINANCIAL STRENGTH
In 2020, we generated $211million of free
cash flow and significantly strengthened our
balance sheet. We ended the year with
$150 million of cash, no debt, and over
$100 million of investments comprised
primarily of our 9.4% interest in Sabina
Gold and Silver Corp. (“Sabina”), 19.4%
interest in INV Metals Inc. (“INV”) and 9.9%
interest in Velocity.4
During the year, we also delivered on the
remaining ounces under our prepaid gold
sales arrangement, which will positively
impact our free cash flow generation in 2021.
In December, DPM and other shareholders of
MineRP Holdings Inc. (“MineRP”) reached an
agreement to sell MineRP. DPM is expected
to receive approximately US$40 million in
cash on closing for its 70% interest, with the
potential for additional payments in the form
of an earn-out.5
Since ramping up to full production last
year, our operating team at Ada Tepe has
continued to deliver impressive results ahead
of our expectations, a rare accomplishment
in the mining industry so soon after declaring
commercial production.
In its first full year of operation, Ada Tepe
produced 118,727 gold ounces and
exceeded its guidance for the year,
demonstrating its potential to drive strong
operating results within our portfolio.
In October, we released an updated mineral
reserve and resource for Ada Tepe, which
incorporated over 91,000 metres of
close-spaced grade control drilling and
detailed reconciliation studies completed since
the start-up of operations. The result was a
Mineral Reserve estimate of approximately
660,000 gold ounces at an increased
grade of 4.8 grams per tonne, as well as an
optimized life of mine plan for Ada Tepe.3
The optimized mine plan reflects a higher
grade and recovered gold ounce profile
relative to the original mine plan, supports
our three-year outlook for the operation, and
highlights Ada Tepe’s potential to drive strong
operating results within our portfolio.
Chelopech: High-quality, low-cost
flagship asset
Chelopech continued its track record of
strong, consistent performance, producing
179,562 ounces of gold and 36 million
pounds of copper. Cost performance
continued to be steady and in line with our
expectations, with cash costs of $38 per tonne
of ore processed for the year, which was at the
low end of guidance for 2020.
We also continued our strong track record
of extending mine life at Chelopech, adding
3.9 million tonnes (“Mt”) to Mineral Reserves,
which more than offset production depletion of
2.2 Mt, for a net addition of 1.7 Mt, 241,000
gold ounces and 41 million pounds of copper
to the mine plan.
Chelopech has a robust eight-year mine life
that now extends to 2029 and a growing
Mineral Resource base. Combined with our
ongoing in-mine and brownfield exploration
drilling, there is strong potential to continue to
extend the mine life at Chelopech.
6
2020 Message to ShareholdersDUNDEE PRECIOUS METALS 2020 ANNUAL REPORT FOCUSED ON DISCIPLINED GROWTH
Timok
Our Timok gold project in Serbia continues
to advance as a potential future growth
opportunity for DPM. In February 2021,
we released the positive results of the
pre-feasibility study (“PFS”), which focused on
the development of the oxide and transitional
portions of the project, and announced that
the project is advancing to a feasibility study
(“FS”). The highlights of the PFS include:
• An after-tax NPV5% of $135 million and
internal rate of return of 21% (based on a
$1,500 per ounce gold price assumption);
• 547,000 ounces of recovered gold
over an 8-year mine life, with annual
gold production estimated to average
approximately 80,000 ounces in years 1
to 6, and approximately 70,000 ounces
per year over the life of mine;
• A life of mine average all-in sustaining cost
of $693 per ounce6; and
• An initial capital cost estimate of
$211 million.
DPM has identified a number of opportunities
to reduce the capital estimate and optimize
overall economics, which will be evaluated
as part of the FS, as well as the potential to
incorporate additional oxide, transitional and
sulphide portions of the Mineral Resource.
We discovered Timok in 2008, and while the
team has worked to advance the project, we
have developed strong relationships within
the local communities and government. With
additional optimization opportunities to
enhance the project, and very encouraging
exploration results, we believe Timok
represents an attractive opportunity that has
the potential to provide organic growth in a
region where we have had a presence for
many years.
Exploration
In 2020, exploration continued at Chelopech
and Ada Tepe, with the objective of increasing
mine life at each site. During the year, we
revised our exploration strategy and integrated
near-mine exploration activity with our
operations, which generated encouraging
results that we will be following up in 2021.
In our detailed 2021 guidance, we included
$13 to $15 million for exploration, which
will be directed toward a 60,000 metre
brownfield drilling program on mine
concessions and exploration licenses at and
around the Chelopech and Ada Tepe mines in
Bulgaria, and a further 12,000 metres which is
planned at the Timok gold project in Serbia.
Strategic Investment Portfolio
In addition to our organic growth opportunities,
we see additional upside with our strategic
equity investment portfolio.
In November, we were pleased to be investing
further in gold exploration in southeastern
Bulgaria through our C$7 million equity
financing which resulted in a 9.9% equity
interest in Velocity. Given our strong presence
and capabilities in the region, we believe we
are uniquely positioned to support Velocity as a
strategic shareholder.
In January 2021, we increased our ownership
interest in INV Metals Inc. to 23.5%. INV is
the owner of Loma Larga, a permitting stage
project in southern Ecuador. The Loma Larga
project has strong similarities to Chelopech,
and we believe that our unique technical,
permitting and operating experience, as well
as our shared commitment to the environment
and communities where we operate, will be
valuable to the INV team as it advances
the project.
We also own approximately 9% of Sabina,
an emerging gold company developing
Back River, an advanced high-grade asset
in Nunavut, Canada, and continue to be a
supportive shareholder as it advances this
world-class project.
In addition, we continue to advance our growth
strategy by evaluating additional opportunities
that have the potential to generate strong
returns and enhance the value of the company.
SUMMARY AND OUTLOOK
Looking forward, we expect another strong
year in 2021, with our detailed guidance
reflecting higher production and improved
costs relative to our previous three-year
outlook. We expect consolidated production
to be between 271,000 to 317,000 ounces of
gold and 34 to 39 million pounds of copper,
with an all-in sustaining cost of $625 to $695
per gold ounce.
2020 Message to Shareholders
Overall, we were pleased to see that our
significant achievements in 2020 were
recognized by the market, with our share price
increasing by approximately 64% in 2020,
outperforming both the GDXJ and the
GDX indices.7
We were also proud to be included in the
TSX30 for 2020 in recognition of our strong
three-year share price performance. Our
performance reflects many years of hard work
focused on successfully delivering capital
projects, driving innovation at our operations
and establishing ourselves as a trusted partner
in the communities where we operate.
I’d like to close by acknowledging all of our
dedicated employees across the company
for their outstanding efforts to proactively
respond to the challenges of the COVID-19
pandemic, and to thank our shareholders for
their continued support.
Overall, DPM has never been in a better
position to continue delivering value for
our shareholders and other stakeholders,
and I’m very excited about the future. Our
strong production profile and free cash flow
generation, combined with our unique skills in
innovation and building strong partnerships,
position us well to continue delivering value for
our shareholders.
David Rae
President and Chief Executive Officer
6 All-in sustaining cost per ounce of gold is not a defined
measure under IFRS. Refer to the “Non-GAAP Financial
Measures” as disclosed on pages 58 to 64 of the
Management’s Discussion & Analysis contained in
this report.
7Source: Thomson Eikon. Calculated between
December 31, 2019 and December 31, 2020.
DUNDEE PRECIOUS METALS 2020 ANNUAL REPORT
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TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview
Review of Financial and Operational Consolidated Results
2020 Actual Results Comparison to 2020 Guidance
Three-Year Outlook
Review of Operating Results by Segment
Review of Corporate and Other Segment Results from Continuing Operations
Review of Discontinued Operations
Liquidity and Capital Resources
Financial Instruments
Exploration
Development and Other Major Projects
Off Balance Sheet Arrangements
Selected Quarterly and Annual Information
Critical Accounting Estimates
Non-GAAP Financial Measures
Risks and Uncertainties
Disclosure Controls & Procedures and Internal Control Over Financial Reporting
Cautionary Note Regarding Forward Looking Statements
Cautionary Note to United States Investors Concerning Differences in reporting
of Mineral Resource Estimates
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Consolidated Statements of Earnings (Loss)
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders’ Equity
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Corporate Information
Note 2.1: Basis of Preparation
Note 2.2: Significant Accounting Policies
Note 3: Assets and Liabilities Held for Sale and Discontinued Operations
Note 4: Impairment Charge
Note 5: Accounts Receivable
Note 6:
Inventories
Note 7: Financial Instruments
Note 8: Mine Properties
Note 9: Property, Plant and Equipment
Note 10: Intangible Assets
Note 11: Accounts Payable and Accrued Liabilities
Note 12: Debt
Note 13: Deferred Revenue
Note 14: Rehabilitation Provisions
Note 15: Other Long-Term Liabilities
Note 16: Leases
1
2
9
16
17
22
31
31
32
37
39
48
49
50
51
58
64
80
80
83
84
85
91
92
93
94
95
96
96
96
96
113
114
115
116
116
121
122
123
123
124
125
125
126
126
Note 17: Share-Based Compensation Plans
Note 18: Expenses by Nature
Note 19: Finance Cost
Note 20: Other (Income) Expense
Note 21: Income Taxes
Note 22: Earnings (Loss) per Share
Note 23: Related Party Transactions
Note 24: Supplementary Cash Flow Information
Note 25: Supplementary Shareholders’ Equity Information
Note 26: Commitments and Contingencies
Note 27: Financial Risk Management
Note 28: Operating Segment Information
CORPORATE INFORMATION
127
130
131
131
131
133
133
134
134
136
136
141
146
MANAGEMENT’S DISCUSSION AND ANALYSIS
of Consolidated Financial Condition and Results of Operations
for the Three and Twelve Months Ended December 31, 2020
(All monetary figures are expressed in U.S. dollars unless otherwise stated)
The following is Management’s Discussion and Analysis (“MD&A”) of the consolidated financial condition
and results of operations of Dundee Precious Metals Inc. (“DPM” and, together with its consolidated
subsidiaries, collectively referred to as the “Company”) for the three and twelve months ended December
31, 2020. This MD&A should be read in conjunction with DPM’s audited consolidated financial statements
for the year ended December 31, 2020 prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting Standards Board. Additional Company
information, including the Company’s most recent annual information form (“AIF”) and other continuous
disclosure documents, can be accessed through the System for Electronic Document Analysis and
Retrieval (“SEDAR”) website at www.sedar.com and the Company’s website at www.dundeeprecious.com.
To the extent applicable, updated information contained in this MD&A supersedes older information
contained in previously filed continuous disclosure documents. Capitalized terms used in this MD&A that
have not been defined have the same meanings attributed to them in DPM’s audited consolidated financial
statements for the year ended December 31, 2020. Information contained on the Company’s website is not
incorporated by reference herein and does not form part of this MD&A. This MD&A contains forward looking
statements that are based on certain estimates and assumptions and involve risks and uncertainties. Actual
results may vary materially from management’s expectations. See the “Cautionary Note Regarding Forward
Looking Statements” and “Risks and Uncertainties” sections later in this MD&A for further information.
The technical and scientific information in this MD&A, with respect to the Company’s material mineral
projects, has been prepared in accordance with Canadian regulatory requirements set out in National
Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) of the Canadian Securities
Administrators and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for
Mineral Resources and Mineral Reserves, and has been reviewed and approved by Ross Overall, B.Sc.
(Applied Geology), Corporate Mineral Resource Manager of DPM, who is a Qualified Person as defined
under NI 43-101 (“QP”), and who is not independent of the Company.
This MD&A has been prepared as at February 11, 2021.
1 I DUNDEE PRECIOUS METALS INC.
OVERVIEW
Our Business
DPM is a Canadian based, international gold mining company engaged in the acquisition of mineral
properties, exploration, development, mining and processing of precious metals. Its common shares
(symbol: DPM) are traded on the Toronto Stock Exchange (“TSX”).
The Company’s purpose is to unlock resources and generate value to thrive and grow together. As
illustrated in the graphic below, this overall purpose is supported by a foundation of core values, which
guide how the Company conducts its business and informs a set of complementary strategic pillars and
objectives relating to ESG, innovation, optimizing our existing portfolio, and growth. The Company’s
resources are allocated in-line with its strategy to ensure that DPM delivers value for all of its stakeholders.
FOURTH QUARTER 2020 I 2
Continuing operations:
As at December 31, 2020, DPM’s principal subsidiaries include:
(cid:2)
(cid:2)
(cid:2)
100% of Dundee Precious Metals Chelopech EAD (“Chelopech”), which owns and operates a gold,
copper and silver mine located east of Sofia, Bulgaria;
100% of Dundee Precious Metals Krumovgrad EAD (“Ada Tepe”), which owns and operates a gold
mine located in south eastern Bulgaria, near the town of Krumovgrad; and
92% of Dundee Precious Metals Tsumeb (Proprietary) Limited (“Tsumeb”), which owns and
operates a custom smelter located in Tsumeb, Namibia.
As at December 31, 2020, DPM holds interests, directly or indirectly, in a number of exploration properties
located in Serbia, Canada, Bulgaria and Ecuador including:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
100% of Avala Resources Ltd. (“Avala”), which is focused on the exploration and development of
the Timok gold project in Serbia;
9.4% of Sabina Gold & Silver Corp. (“Sabina”), which is focused on the development of the Back
River project in southwestern Nunavut, Canada;
19.4% of INV Metals Inc. (“INV”), which is focused on the exploration and development of the Loma
Larga gold property located in Ecuador; and
a 51% interest in the Malartic gold project located in the Archean Abitibi greenstone belt near Val-
d’Or, Canada, with the remaining 49% held by Pershimex Resources Corporation (“Pershimex”).
Discontinued operations:
DPM also owns:
(cid:2) 73.7% (70% on a fully diluted basis) of MineRP Holdings (Proprietary) Limited, an independent
mining software vendor with operations in Canada, South Africa, Australia and Chile, through
MineRP Holdings Inc. (“MineRP”). In December 2020, DPM and other MineRP shareholders entered
into a definitive agreement for the sale of their respective interests.
3 I DUNDEE PRECIOUS METALS INC.
Overview – Operational and Financial Highlights from Continuing Operations
Revenue
($mm)
Cost of Sales
($mm)
Cash Provided from Operating
Activities and Free Cash Flow(1)
154
148
135
156
152
95
87
83
80
81
1,835 1,816
1,649
1,547
1,477
51
50
73
60
71
62
42
39
12
11
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Cash from Operating Activities ($mm)
Free Cash Flow ($mm)
Realized Gold Price ($/oz)(1)
Complex Concentrate Smelted
('000s tonnes)
Gold Production and Payable
Gold Sold
('000s ounces)
Copper Production and
Payable Copper Sold
(mm pounds)
65
48
59
56
52
80
81
80
70
73
68
71
69
11
10
64
63
10
9
9
10
8
8
8
8
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Production
Payable Sold
Production
Payable Sold
Smelter Cash Cost(1)
($/tonne)
All-in Sustaining Cost(1) and
Cash Cost, Net of by-product
Credits(1) ($/oz)
Net Cash(Debt) and Net
Debt/Capitalization(2)(3)
150
465
407
406
357
345
679
593
729
640
651
(2)
(2)
477
511
530
441
425
101
(16)
75
(13)
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
11
13
(23)
All-in Sustaining Cost
Cash cost, net of by-product credits
FOURTH QUARTER 2020 I 4
Net Earnings (Loss) Attributable to Common Shareholders
($mm)
10.7
27.7
106.6
16.2
(90.4)
9.1
7.2
3.4
1.1
(0.5)
(0.9)
(5.3)
(21.7)
47.0
3.2
50.2
Q4 2019
net loss(3)
Q4 2019
adjustments
Metal prices
Q4 2019
adjusted
net
earnings(1)
Metal
recoveries,
stockpile
interest
Treatment
charges at
Chelopech
Depreciation
Volumes
of complex
concentrate
smelted
Other
Stronger
U.S.
dollar(4)
Income taxes
Toll rates,
customer mix,
acid prices
Volumes
of metals
sold
Q4 2020
adjusted net
earnings(1)
Q4 2020
adjustments
Q4 2020 net
earnings(3)
Net Earnings (Loss) Attributable to Common Shareholders
($mm)
76.8
10.2
8.7
6.9
6.6
4.5
(8.1)
(12.3)
(20.2)
193.4
5.7
199.1
83.8
(66.6)
103.1
36.5
2019
net loss(3)
2019
adjustments
2019
adjusted net
earnings(1)
Volumes
of metals
sold
Metal prices Operating
expenses
Volumes
of complex
concentrate
smelted
Stronger
U.S.
dollar(4)
Treatment
charges at
Chelopech
Metal
recoveries,
stockpile
interest, other
Toll rates,
customer mix,
acid prices
Income taxes Depreciation
2020
adjusted net
earnings(1)
2020
adjustments
2020
net
earnings(3)
1) These measures are Non-GAAP measures. Refer to the “Non-GAAP Financial Measures” section contained in this MD&A for more information, including
reconciliations to IFRS measures.
2) Net cash represents cash at the end of the period less total debt.
3) Net earnings (loss) attributable to common shareholders from continuing operations.
4) Includes net realized gains and losses on foreign exchange option contracts.
Response to Coronavirus (“COVID-19”)
In March 2020, the World Health Organization classified COVID-19 as a worldwide pandemic and
governments across the globe undertook extensive measures to combat the spread of this virus. To date,
as a result of the proactive actions being taken within the regions in which we operate and by personnel at
each of our sites, the Company has not experienced any material disruptions to its operations as a result
of COVID-19. The Company’s Chelopech and Ada Tepe mines in Bulgaria continue to operate at full
capacity and have not experienced any disruptions to their operations.
As previously reported, the Tsumeb smelter in Namibia curtailed its operations by shutting down ancillary
plants for 30 days in April 2020 in response to a government directive to the natural resources sector aimed
at limiting staffing levels. Full operations resumed in May with ongoing management of the number of
employees and contractors working at site and continued observance of the COVID-19 controls that have
been established across all sites.
5 I DUNDEE PRECIOUS METALS INC.
The Company continues to closely assess and monitor the COVID-19 situation, particularly as governments
in various jurisdictions maintain and/or implement new measures to manage a resurgence in the number
of cases and the impact on their medical systems and economies. The Company is continuing with a
number of measures to mitigate the associated risks, including procedures and contingency plans that were
established at each operating location, which are directed at safeguarding employees, managing potential
supply chain disruptions, including maintaining nearly double the normal levels of in-country complex
concentrate feed for the Tsumeb smelter, and maintaining production at each of its operations. These
precautionary steps include, but are not limited to, the use of personal protective equipment, workplace and
social distancing practices, remote and rotational working options, health hygiene protocols, elimination of
non-essential business travel and site access and widespread education of the Company’s workforce.
Management of the situation is being overseen by an experienced cross-functional team that includes
members of senior management and leaders at each of the Company’s operations. DPM also continues to
engage with local communities and authorities in Bulgaria, Namibia and Serbia as they respond to the
challenges of the pandemic. To date, the Company has contributed approximately $1.0 million to support
numerous initiatives to benefit local communities. This financial support has focused on local hospitals to
provide additional medical facilities, supplies, transportation and protective equipment.
The Company has experienced a small number of positive cases within its workforce. These positive cases
are being effectively managed with testing, contact tracing and isolation measures and, to date, the vast
majority of employees have recovered with the remaining employees isolating offsite in accordance with
the Company’s procedures. Given the relatively low number of COVID-19 cases and the management
protocols in effect, the impact on the Company’s operations has been minimal.
Certain vaccines have received regulatory approval in the countries in which the Company operates, and
the respective governments have initiated vaccination of medical personnel and vulnerable individuals,
notably the elderly. However, vaccine distribution is a significant logistical undertaking and the timing and
speed of vaccination in each jurisdiction is uncertain at this time and will depend on several factors including
supply of the vaccines.
In late 2020, multiple COVID-19 variants emerged and have been identified as circulating globally, including
in regions in which the Company operates. These variants spread more easily and quickly than the original
virus, which may contribute to a higher number of cases before widespread vaccination can be achieved.
At present, there do not appear to be any imminent COVID-19 related circumstances that are expected to
disrupt the Company’s operations, however, given the highly uncertain and evolving nature of this situation,
the Company is not able to reliably estimate the likelihood, timing, duration, severity and scope of this
pandemic and the potential impact it could have on the Company’s operating and financial results. There
is no assurance that the outbreak will not have a material adverse impact on the future results of the
Company. For additional details on the risks faced by the Company as it relates to COVID-19, refer to the
“Risk and Uncertainties” section contained in this MD&A.
Summary of Significant Operational and Financial Highlights From Continuing Operations
Financial results from continuing operations in 2020 reflected the impact of a stronger realized gold price
and achievement of strong production at Chelopech and Ada Tepe.
Consolidated
(cid:2) Record gold production of 298,289 ounces, up 29% relative to 2019, and at the upper end of 2020
(cid:2)
guidance.
Sold 270,834 ounces of payable gold and 33.4 million pounds of payable copper, and smelted
231,890 tonnes of complex concentrate, generating revenue of $609.6 million. Payable gold in
concentrate sold exceeded 2020 guidance, while payable copper in concentrate sold and complex
concentrate smelted were both in line with 2020 guidance.
(cid:2) Cost of sales of $330.9 million was $36.4 million higher than 2019 due primarily to additional
deliveries and higher depreciation from Ada Tepe. All-in sustaining cost(1) of $654 was below the
original 2020 guidance, while cash cost per tonne of complex concentrate smelted of $377 was at
the lower end of 2020 guidance.
FOURTH QUARTER 2020 I 6
(cid:2) Record cash flow from operating activities of $197.0 million (2019 – $96.9 million) and free cash
flow(1) of $211.4 million, up $141.8 million relative to 2019.
(cid:2) Record net earnings attributable to common shareholders of $199.1 million (2019 – net loss
attributable to common shareholders of $66.6 million, reflecting an impairment charge of $107.0
million related to Tsumeb). Adjusted net earnings(1) were $193.4 million compared to $36.5 million
in 2019.
In December 2020, DPM announced a 50% increase to its quarterly dividend to $0.03 per share
from $0.02 per share reflecting strong ongoing performance and significant free cash flow
generation. Dividend declared in 2020 aggregated to $0.09 per share.
Ended 2020 with $149.5 million in cash, an investment portfolio of $106.6 million and no debt.
(cid:2)
(cid:2)
Chelopech
(cid:2)
(cid:2)
Achieved gold production of 179,562 ounces, up 4% relative to 2019 as a result of higher gold
grades, and at the upper end of 2020 guidance. Copper production of 35.6 million pounds was down
4% relative to 2019, reflecting lower copper grades and recoveries, and was in line with 2020
guidance.
Sold 150,764 ounces of payable gold and 33.4 million pounds of payable copper, generating
revenue of $264.9 million. Payable gold in concentrate sold was at the upper end of 2020 guidance,
while copper sold was in line with 2020 guidance.
(cid:2) Cost of sales of $113.5 million was comparable to 2019. Cash cost per ounce of gold sold, net of
by-product credits(1), of $587 was also comparable to 2019.
(cid:2) Reported earnings before income taxes of $146.8 million (2019 - $79.5 million) and adjusted
EBITDA(1) of $177.2 million (2019 - $110.9 million).
Ada Tepe
(cid:2)
(cid:2)
Achieved gold production of 118,727 ounces, up 108% relative to 2019 due primarily to a full year
of production following the achievement of commercial production in June 2019 and ramp-up to full
design capacity in the third quarter of 2019. Ada Tepe exceeded its 2020 production guidance due
primarily to higher gold grades.
Sold 120,070 ounces of payable gold, up 145% relative to 2019 and above its 2020 guidance,
generating revenue of $197.6 million.
(cid:2) Cost of sales of $92.4 million was $50.9 million higher than 2019 due primarily to a full year of
production in 2020. Cash cost per ounce of gold sold, net of by-product credits, of $341 was $84
lower than 2019 due primarily to a lower cost per tonne of ore processed and higher gold grades in
concentrate sold.
(cid:2) Reported earnings before income taxes of $100.2 million (2019 - $25.3 million) and adjusted
EBITDA of $156.2 million (2019 - $49.3 million).
Tsumeb
(cid:2)
Achieved throughput of 231,890 tonnes, up 8% relative to 2019 and in line with 2020 guidance,
generating revenue of $147.1 million.
(cid:2) Cost of sales of $124.9 million was $15.8 million lower than 2019 due primarily to a weaker ZAR
relative to the U.S. dollar. Cash cost per tonne of complex concentrate smelted(1) of $377 was 10%
lower than 2019 due primarily to a weaker ZAR and higher throughput.
(cid:2) Reported earnings before income taxes of $18.8 million compared to a loss before income taxes of
$114.1 million in 2019 as a result of a non-cash impairment charge of $107.0 million taken in 2019.
(cid:2) Reported higher adjusted EBITDA of $36.7 million (2019 - $23.2 million) reflecting primarily
increased throughput and the favourable impact of a weaker ZAR.
Timok gold project
(cid:2) Advanced the prefeasibility study (“PFS”) for the Timok gold project in the fourth quarter of 2020
and expect to release the results in the first quarter of 2021.
Exploration
(cid:2)
At the West Shaft prospect, located approximately one kilometre south-west of the Chelopech mine, an
intensive diamond drilling exploration program began in the second half of 2020. The target represents
an extension of the Chelopech hydrothermal system, trending generally east-west. Delineation and
extension of the main controlling structures at depth and laterally are ongoing. Additionally, a second
feeder structure has been inferred to the south and will be tested in early 2021.
7 I DUNDEE PRECIOUS METALS INC.
(cid:2) Deep directional drilling is continuing at the Wedge prospect, with a focus on testing more conceptual
targets. Additional resource delineation commenced in early 2021 and aims to support the Company’s
plans to secure the rights to the Sveta Petka exploration license, by means of converting the license
into a commercial discovery.
(cid:2) A significant extensional and infill drilling program began in the fourth quarter of 2020 at the Surnak and
Synap prospects, which are located approximately 3 kilometres south-west of the Ada Tepe mine. As
part of sustained efforts to support an extension of the Ada Tepe mine life, exploration will continue to
focus on the delineation and optimization of near mine prospects during 2021.
(cid:2) A shallow oxide gold mineralization was identified in 2020 at the Chocolate prospect, 300 metres south
east of the Timok gold project’s Bigar Hill deposit. Infill and target delineation drilling programs are
ongoing and are planned to be completed in the first quarter of 2021. Furthermore, scout drilling
commenced at the Coka Rakita prospect, designed to test the potential for epithermal and porphyry
related gold mineralization. The drilling program aims to delineate additional Mineral Resources to
further support the Timok Gold Project.
Other
(cid:2) Approximately 80% of projected Namibian dollar operating expenses for 2021 have been hedged
with option contracts providing a weighted average floor price of 15.77 and a weighted average
ceiling price of 18.58.
(cid:2) As at December 31, 2020, approximately 18% of projected payable copper to be sold in 2021 has
been hedged at an average price of $3.53 per pound. Additional hedges were entered into in early
2021 resulting in 69% of 2021 payable copper being hedged at an average price of $3.61 per pound.
(cid:2) During the fourth quarter of 2020, the Company acquired a 9.9% equity interest in Velocity Minerals
Ltd. (“Velocity”) for a total cost of $5.1 million.
(cid:2) DPM has published its first report on the impact of climate change on the Company’s business. The
report follows the recommendations of the Task Force for Climate-related Financial Disclosure,
highlights DPM’s efforts to achieve reductions in energy, water use, emissions and consumption of
raw materials, and outlines the major identified risks and opportunities related to climate change.
The report can be found at the Company’s web page at www.dundeeprecious.com.
Discontinued operations:
(cid:2) On December 22, 2020, the Company entered into a definitive agreement with Epiroc Canada
Holding Inc, a subsidiary of Epiroc Rock Drills AB (“Epiroc”) for the sale of its interest in MineRP
(the “MineRP Disposition”). The MineRP Disposition is subject to South African competition review
approval and is expected to close in the first half of 2021. Under the MineRP Disposition, the
estimated consideration for DPM’s fully diluted 70% equity interest in MineRP and the repayment of
DPM shareholder loans consists of (i) approximately $40 million in cash, subject to a working capital
adjustment following closing and (ii) potential additional proceeds in the form of an earn-out of up to
$28.7 million, which are payable on the achievement of certain revenue targets by MineRP in 2021
and 2022.
(cid:2) As a result of the MineRP Disposition, the assets and liabilities of MineRP have been presented as
held for sale in the consolidated statement of financial position as at December 31, 2020 and the
operating results and cash flows of MineRP have been presented as discontinued operations in the
consolidated statements of earnings and cash flows for the years ended December 31, 2020 and
2019. As a consequence, certain comparative figures in the consolidated statements of earnings
(loss) and cash flows have been reclassified to conform with current year presentation.
1) Refer to the “Non-GAAP Financial Measures” section contained in this MD&A for reconciliations to IFRS measures.
FOURTH QUARTER 2020 I 8
REVIEW OF FINANCIAL AND OPERATIONAL CONSOLIDATED RESULTS
Twelve months
2020
2019
Three Months
2020
The following tables summarize the Company’s selected financial and operational results:
$ thousands, unless otherwise indicated
Ended December 31,
Financial Results
Revenue(1)
Cost of sales(1)
Depreciation and amortization(1)
General and administrative expenses(1)
Exploration and evaluation expenses
Finance cost(1)
Impairment charges
Other (income) expense(1)
Earnings (loss) before income taxes(1)
Income tax expense
Net earnings (loss) attributable to common
shareholders from continuing operations
Net earnings (loss) attributable to common
135,436
95,223
30,910
9,551
4,782
2,689
107,000
232
(85,624)
4,782
151,751
81,117
23,984
9,378
6,339
1,481
-
(1,479)
52,588
2,422
609,558
330,857
100,211
30,604
19,072
7,022
-
(491)
217,923
18,891
(90,396)
199,074
50,176
2019
404,392
294,533
80,952
28,191
14,356
10,164
107,000
915
(53,582)
12,956
(66,621)
shareholders
Basic earnings (loss) per share from continuing
50,265
(92,684)
196,002
(70,902)
operations
Basic earnings (loss) per share
Adjusted EBITDA(1),(2)
Adjusted net earnings(1),(2)
Adjusted basic earnings per share(1),(2)
Cash provided from operating activities(1)
Free cash flow(1),(2)
Capital expenditures incurred(1):
Growth(2)
Sustaining(2)
Total capital expenditures
Operational Highlights
Metals contained in concentrate produced:
Gold (ounces)
Copper (‘000s pounds)
Payable metals in concentrate sold:
Gold (ounces)(7)
Copper (‘000s pounds)
Cash cost per ounce of gold sold, net of by-product
credits(2),(3)
All-in sustaining cost per ounce of gold(2),(4)
Complex concentrate smelted at Tsumeb (mt)
Cash cost per tonne of complex concentrate
smelted at Tsumeb(2),(5)
As at,
Financial Position and Available Liquidity
Cash
Investments at fair value
Total assets
Long-term debt
Equity
Number of common shares outstanding (‘000s)
Share price (Cdn$ per share)
Available liquidity(6)
9 I DUNDEE PRECIOUS METALS INC.
0.28
0.28
74,842
47,052
0.26
70,536
39,297
3,389
12,323
15,712
64,117
7,659
62,568
7,766
425
651
52,484
(0.51)
(0.52)
54,476
16,153
0.09
50,749
11,678
1,465
18,613
20,078
1.10
1.08
319,322
193,434
1.07
196,965
211,427
(0.38)
(0.40)
140,392
36,508
0.20
96,878
69,601
8,505
40,792
49,297
36,454
37,272
73,726
69,491
10,031
298,289
35,642
230,592
37,250
79,109
11,060
270,834
33,389
198,240
34,131
477
679
48,614
478
654
231,890
546
725
215,289
406
465
377
421
December
31, 2020
December
31, 2019
149,532
106,595
974,860
-
805,284
181,400
9.15
299,532
23,440
59,362
784,710
10,000
592,894
180,537
5.58
188,440
1) Information relates to continuing operations.
2) Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”); adjusted net earnings; adjusted basic earnings per share; free cash flow;
growth and sustaining capital expenditures; cash cost per ounce of gold sold, net of by-product credits; all-in sustaining cost per ounce of gold; and cash cost
per tonne of complex concentrate smelted at Tsumeb are not defined measures under IFRS. Refer to the “Non-GAAP Financial Measures” section of this MD&A
for more information, including reconciliations to IFRS measures.
3) Cash cost per ounce of gold sold, net of by-product credits, represents Chelopech and Ada Tepe cost of sales less depreciation, amortization and other non-
cash expenses plus treatment charges, penalties, transportation and other selling costs less by-product copper and silver revenues, divided by the payable gold
in concentrate sold.
4) All-in sustaining cost per ounce of gold represents Chelopech and Ada Tepe cost of sales less depreciation, amortization and other non-cash expenses plus
treatment charges, penalties, transportation and other selling costs, cash outlays for sustaining capital expenditures and leases, rehabilitation related accretion
expenses and an allocated portion of the Company’s general and administrative expenses and corporate social responsibility expenses, less by-product revenues
in respect of copper and silver, divided by the payable gold in concentrate sold.
5) Cash cost per tonne of complex concentrate smelted at Tsumeb represents cost of sales less depreciation and amortization and net of revenue related to the
sale of acid, divided by the volumes of complex concentrate smelted.
6) Available liquidity is defined as undrawn capacity under DPM’s revolving credit facility (the “RCF”) plus cash at the end of each reporting period.
7) Payable gold in concentrate sold in 2019 excludes 424 ounces, which were sold prior to Ada Tepe achieving commercial production in June 2019, and, as a
result, net revenue and associated cost of sales from these sales were recorded in mine properties in 2019.
Commodity prices and foreign exchange rates
Commodity prices are one of the principal determinants of the Company’s results of operations and financial
condition. In addition, as an entity reporting in U.S. dollars with operations in several countries, fluctuations
in foreign exchange rates between the U.S. dollar and the Bulgarian lev, which is pegged to the Euro, the
Namibian dollar, which is pegged to the South African rand (“ZAR”) on a 1:1 basis, and the Canadian dollar
(“Cdn$”) can also impact the Company’s results of operations and financial condition.
The following table summarizes the average trading price for gold, copper and silver based on the London
Bullion Market Association (“LBMA”) for gold and silver and the London Metal Exchange (“LME”) for copper
(Grade A) for the three and twelve months ended December 31, 2020 and 2019 and highlights the overall
year over year change in commodity prices.
Metal Market Prices (Average)
Ended December 31,
Three Months
2020
2019 Change
LBMA gold ($/ounce)
LME settlement copper ($/pound)
LBMA spot silver ($/ounce)
1,874
3.25
24.39
1,481
2.67
17.31
27%
22%
41%
Twelve months
2020
1,770
2.80
20.51
2019 Change
1,392
2.72
16.20
27%
3%
27%
The average realized gold price for the fourth quarter and twelve months of 2020 of $1,816 per ounce and
$1,709 per ounce, respectively, was 23% and 21% higher than the corresponding periods in 2019. The
average realized copper price for the fourth quarter of 2020 of $3.26 per pound was 21% higher than the
corresponding period in 2019. The average realized copper price in 2020 of $2.74 per pound was
comparable to 2019. Average realized gold and copper prices are not defined measures under IFRS. For
more information, including reconciliations to IFRS, refer to the “Non-GAAP Financial Measures” section
contained in this MD&A. Realized gold prices in 2020 were lower than the average gold market prices due
to a portion of the gold sold being at a fixed price under the prepaid forward gold sales arrangement, which
was fully settled at December 31, 2020.
The following table sets out the average foreign exchange rates for the principal currencies impacting the
Company and highlights the overall year-over-year strength (weakness) of the U.S. dollar relative to these
currencies.
Average Foreign Exchange Rates
Ended December 31,
US$/Cdn$
Euro/US$
US$/ZAR
Three Months
2020
1.3029
1.1927
15.6114
1.3200
1.1073
14.6855
2019 Change
(1%)
(8%)
2020
1.3412
1.1409
6% 16.4508
2019 Change
1%
(2%)
14%
1.3268
1.1196
14.4316
Twelve months
As at December 31, 2020, approximately 80% of projected Namibian dollar operating expenses for 2021
have been hedged with option contracts providing a weighted average floor price of 15.77 and a weighted
average ceiling price of 18.58.
FOURTH QUARTER 2020 I 10
Metals production
Gold contained in concentrate produced in the fourth quarter of 2020 decreased by 8% to 64,117 ounces,
relative to the corresponding period in 2019 due primarily to lower gold production at Chelopech as a result
of lower gold grades and recoveries. Copper production in the fourth quarter of 2020 decreased by 24% to
7.6 million pounds, relative to the corresponding period in 2019, due primarily to lower copper grades, in
line with the mine plan, and lower recoveries.
Gold contained in concentrate produced in 2020 increased by 29% to 298,289 ounces, relative to the
corresponding period in 2019, due primarily to additional production from Ada Tepe following the
achievement of commercial production in June 2019 and ramp-up to full design capacity in the third quarter
of 2019 and higher gold grades at Chelopech. Copper production in 2020 decreased by 4% to 35.6 million
pounds, relative to the corresponding period in 2019, due primarily to lower copper recoveries.
Metals sold
Payable gold in concentrate sold in the fourth quarter of 2020 decreased by 21% to 62,568 ounces, relative
to the corresponding period in 2019, due primarily to the timing of concentrate deliveries from Ada Tepe
and Chelopech in the fourth quarter of 2019. Payable copper in concentrate sold in the fourth quarter of
2020 of 7.8 million pounds was 30% lower than the corresponding period in 2019 due primarily to the timing
of gold-copper concentrate deliveries.
Payable gold in concentrate sold in 2020 increased by 37% to 270,834 ounces, relative to 2019, due
primarily to additional production and deliveries from Ada Tepe. Payable copper in concentrate sold in 2020
of 33.4 million pounds was comparable to 2019.
Complex concentrate smelted
Complex concentrate smelted during the fourth quarter of 2020 of 52,484 tonnes was 8% higher than the
corresponding period in 2019 due primarily to a 30-day maintenance shutdown that took place in the fourth
quarter of 2019 compared to a 4-day interruption due to a fatality in the fourth quarter of 2020, partially
offset by operational challenges with the offgas system and reduced converter campaign life in the period.
Complex concentrate smelted in 2020 of 231,890 tonnes was 8% higher than 2019 due primarily to a 30-
day maintenance shutdown in 2019 and steadier operations in 2020. As a result of COVID-19, throughput
in 2020 was impacted by a 30-day curtailment in April in response to a government directive aimed at
limiting staffing levels.
Revenue from continuing operations
Revenue in the fourth quarter of 2020 of $151.8 million was $16.4 million higher than the corresponding
period in 2019 due primarily to higher realized gold and copper prices, and higher estimated metal
recoveries and volumes of complex concentrate smelted at Tsumeb, partially offset by lower volumes of
payable gold and copper in concentrate sold as a result of the timing of deliveries in 2019.
Revenue in 2020 of $609.6 million was $205.2 million higher than the corresponding period in 2019 due
primarily to the 37% increase in volumes of payable gold in concentrate sold following the start of
commercial production at Ada Tepe in June 2019, higher realized gold prices and higher volumes of
complex concentrate smelted at Tsumeb.
Cost of sales from continuing operations
Cost of sales in the fourth quarter of 2020 of $81.1 million was $14.1 million lower than the corresponding
period in 2019 due primarily to lower deliveries of concentrate and lower depreciation at Tsumeb as a result
of an impairment charge taken in the fourth quarter of 2019.
Cost of sales in 2020 of $330.9 million was $36.4 million higher than 2019 due primarily to increased
deliveries of concentrate from Ada Tepe following the start of commercial production in June 2019. This
11 I DUNDEE PRECIOUS METALS INC.
was partially offset by the impact of a stronger U.S. dollar relative to the ZAR and lower depreciation at
Tsumeb.
All-in sustaining cost per ounce of gold
All-in sustaining cost per ounce of gold in the fourth quarter of 2020 of $651 was 4% lower than the
corresponding period in 2019 due primarily to lower treatment charges for Chelopech, partially offset by
lower by-product credits and a higher cost per ounce of gold as a result of lower gold grades.
All-in sustaining cost per ounce of gold in 2020 of $654 was 10% lower than 2019 due primarily to low cost
production from Ada Tepe, partially offset by higher general and administrative expenses as a result of
higher share-based compensation reflecting strong share price performance, and higher cash outflows for
sustaining capital expenditures, reflecting a full year of operation as well as the work related to grade control
drilling at Ada Tepe.
Cash cost per tonne of complex concentrate smelted, net of by-product credits
Cash cost per tonne of complex concentrate smelted in the fourth quarter and twelve months of 2020 of
$406 and $377, respectively, was 13% and 10% lower than the corresponding periods in 2019 due primarily
to higher volumes of complex concentrate smelted, the impact of a weaker ZAR relative to the U.S. dollar
and higher acid deliveries, partially offset by lower acid prices.
General and administrative expenses from continuing operations
General and administrative expenses in the fourth quarter of 2020 of $9.4 million was comparable to the
corresponding period in 2019.
General and administrative expenses in 2020 of $30.6 million was $2.4 million higher than 2019 due
primarily to higher share-based compensation related to increases in DPM’s share price, partially offset by
lower operating costs, due in part to the impact of COVID-19.
Exploration and evaluation expenses
Exploration and evaluation expenses in the fourth quarter and twelve months of 2020 were $6.3 million and
$19.1 million, respectively, compared to $4.8 million and $14.4 million in the corresponding periods in 2019
due primarily to the evaluation work related to the Timok gold project.
For a more detailed discussion on the Company’s exploration activities, refer to the “Exploration” section
contained in this MD&A. For a more detailed discussion on the Timok gold project, refer to the “Development
and Other Major Projects” section contained in this MD&A.
Finance costs from continuing operations
Finance costs are comprised of interest and other deemed financing costs in respect of the Company’s
debt, prepaid forward gold sales arrangement, lease obligations and rehabilitation provisions.
Finance costs were $1.5 million and $7.0 million in the fourth quarter and twelve months of 2020,
respectively, compared to $2.7 million and $10.2 million in the corresponding periods in 2019. The year-
over-year decrease was due primarily to the repayment of all drawdowns under the Company’s RCF and a
reduction in commitment fees following the cancellation of tranches A and C of the RCF in 2019.
Tsumeb 2019 impairment charge
As at December 31, 2019, the Company assessed the recoverable amount of Tsumeb, triggered by the
timing of the anticipated expansion project being delayed and the ability to optimize the mix of feed being
processed by the smelter. As at December 31, 2019, the carrying value of Tsumeb exceeded its estimated
recoverable amount resulting in an impairment charge of $107.0 million. This charge was primarily
FOURTH QUARTER 2020 I 12
attributable to the opportunity to process additional volumes of third party complex concentrate at Tsumeb
by capitalizing on, from time to time, market demand to process Chelopech concentrate, which has more
available outlets than other complex third party concentrate processed by Tsumeb. While this has the
potential to generate additional overall value for the Company, this would be realized through lower
treatment charges and higher margins at Chelopech rather than higher throughput and higher margins at
Tsumeb.
Other (income) expense from continuing operations
Other (income) expense is primarily comprised of unrealized gains or losses on Sabina special warrants,
foreign exchange translation gains or losses and research costs associated with assessing alternate
arsenic stabilization and disposal methods at Tsumeb.
The following table summarizes the items making up other (income) expense:
$ thousands
Ended December 31,
Net gains on Sabina special warrants(1)
Net foreign exchange losses(2)
Interest income
Other (income) expense, net(3)
Total other (income) expense
Three Months
Twelve months
2020
(3,124)
2,442
(87)
(710)
(1,479)
2019
(451)
1,049
(48)
(318)
232
2020
(5,640)
4,376
(194)
967
(491)
2019
(3,871)
4,988
(271)
69
915
1) Refer to the “Financial Instruments” section contained in this MD&A for more details.
2) Primarily related to the revaluation of foreign denominated monetary assets and liabilities.
3)
Includes $0.1 million (2019 - $0.6 million) and $1.6 million (2019 - $2.1 million) in the fourth quarter and twelve months of 2020, respectively, in respect of
testwork being done to treat arsenic using an arsenic vitrification pilot plant.
Income tax expense from continuing operations
The effective tax rate of the Company can vary significantly from one period to the next based on a number
of factors. For the three and twelve months ended December 31, 2020 and 2019, the Company’s effective
tax rate was impacted primarily by the Company’s overall earnings, mix of foreign earnings or losses, which
are subject to lower tax rates in certain jurisdictions, and unrecognized tax benefits relating to corporate
operating, exploration and evaluation costs.
$ thousands, unless otherwise indicated
Ended December 31,
Earnings (loss) before income taxes from continuing
Three Months
Twelve months
2020
2019
2020
2019
operations
52,588
(85,624)
217,923
(53,582)
Combined Canadian federal and provincial statutory
income tax rates
Expected income tax expense (recovery)
Lower rates on foreign (earnings) losses
Unrecognized tax benefit relating to losses
Non-deductible portion of capital (gains) losses
Non-deductible share-based compensation expense
Other, net
Income tax expense from continuing operations
Effective income tax rates
26.5%
13,936
(8,831)
(1,255)
(1,921)
66
427
2,422
4.6%
26.5%
(22,690)
25,182
3,684
(892)
70
(572)
4,782
(5.6%)
26.5%
57,750
(39,256)
2,906
(3,663)
246
908
18,891
8.7%
26.5%
(14,199)
15,022
11,677
89
280
87
12,956
(24.2%)
In December 2020, the Namibian Ministry of Finance announced that tax incentives under the Export
Processing Zones (“EPZ”) Act would no longer be granted, effective December 31, 2020, and that
companies with EPZ status, such as Tsumeb, would continue to benefit from these incentives up to
December 31, 2025. The EPZ regime is expected to be replaced by a new Special Economic Zone (“SEZ”),
the details of which are expected to be released in the first half of 2021.
13 I DUNDEE PRECIOUS METALS INC.
Net earnings (loss) attributable to common shareholders from continuing operations and adjusted net
earnings
Net earnings attributable to common shareholders from continuing operations in the fourth quarter and
twelve months of 2020 were $50.2 million ($0.28 per share) and $199.1 million ($1.10 per share),
respectively, compared to a net loss attributable to common shareholders from continuing operations of
$90.4 million ($0.51 per share) and $66.6 million ($0.38 per share) in the corresponding periods in 2019,
which was impacted by a $107.0 million impairment charge at Tsumeb taken in the fourth quarter of 2019.
Adjusted net earnings in the fourth quarter of 2020 were $47.0 million ($0.26 per share) compared to $16.2
million ($0.09 per share). This increase was due primarily to higher realized gold and copper prices, higher
estimated metal recoveries and volumes of complex concentrate smelted at Tsumeb, and lower treatment
charges for Chelopech, partially offset by the timing of concentrate deliveries at Ada Tepe and Chelopech
in the fourth quarter of 2019.
Adjusted net earnings in 2020 were $193.4 million ($1.07 per share) compared to $36.5 million ($0.20 per
share) in 2020. This increase was due primarily to higher volumes of gold sold as a result of a full year of
production at Ada Tepe, higher realized gold prices, higher volumes of complex concentrate smelted at
Tsumeb and the impact of a stronger U.S. dollar relative to the ZAR.
Adjusted net earnings in the fourth quarter and twelve months of 2020 excluded after-tax gains of $3.2
million (2019 – net after-tax losses of $106.6 million) and $5.7 million (2019 – net after-tax losses of $103.1
million), respectively, related to unrealized gains on Sabina special warrants and the impairment charge in
respect of Tsumeb taken in the fourth quarter of 2019, which are not reflective of the Company’s underlying
operating performance. For more details on these adjustments, refer to the “Non-GAAP Financial
Measures” section contained in this MD&A.
The following table summarizes adjusted net earnings (loss) by segment from continuing operations:
$ thousands
Ended December 31,
Chelopech
Ada Tepe
Tsumeb
Corporate & Other
Total adjusted net earnings
Three Months
2020
38,288
17,482
6,414
(15,132)
47,052
2019
21,015
21,870
(9,646)
(17,086)
16,153
Twelve months
2020
132,829
90,799
18,843
(49,037)
193,434
2019
71,569
22,167
(7,111)
(50,117)
36,508
Adjusted EBITDA from continuing operations
Adjusted EBITDA in the fourth quarter and twelve months of 2020 was $74.8 million and $319.3 million,
respectively, compared to $54.5 million and $140.4 million in the corresponding periods in 2019, reflecting
the same factors that affected adjusted net earnings, except for depreciation, interest and income taxes,
which are excluded from adjusted EBITDA.
The following table summarizes adjusted EBITDA by segment:
$ thousands
Ended December 31,
Chelopech
Ada Tepe
Tsumeb
Corporate & Other
Total adjusted EBITDA
Three Months
2020
50,057
32,304
9,847
(17,366)
74,842
2019
30,815
41,502
(2,164)
(15,677)
54,476
Twelve months
2020
177,223
156,205
36,682
(50,788)
319,322
2019
110,927
49,301
23,181
(43,017)
140,392
The “Corporate & Other” segment in the adjusted net earnings and EBITDA tables above includes corporate
general and administrative expenses, corporate social responsibility expenses, exploration and evaluation
FOURTH QUARTER 2020 I 14
expenses, and other income and expense items that do not pertain directly to an operating segment. For a
more detailed discussion of Chelopech, Ada Tepe, Tsumeb and Corporate & Other results, refer to the
“Review of Operating Results by Segment” section contained in this MD&A.
Cash provided from operating activities from continuing operations
Cash provided from operating activities in the fourth quarter of 2020 of $70.5 million was $19.8 million
higher than the corresponding period in 2019 due primarily to higher realized gold and copper prices, which
was partially offset by lower volumes of payable metals in concentrate sold as a result of the timing of
concentrate deliveries in the fourth quarter of 2019.
Cash provided from operating activities in 2020 was $197.0 million compared to $96.9 million in 2019 and
does not fully reflect the significant increase in earnings in 2020 as a result of an increase in non-cash
working capital of $51.6 million due primarily to longer settlement terms on Ada Tepe sales, increased
deliveries and higher gold prices.
In addition, during the fourth quarter and twelve months of 2020, Ada Tepe delivered 6,993 ounces and
34,087 ounces of gold, respectively, pursuant to a prepaid forward gold sales arrangement resulting in $9.6
million and $46.7 million of deferred revenue being recognized in revenue during the fourth quarter and
twelve months of 2020, respectively, with no corresponding impact on cash as these deliveries were in
partial satisfaction of the $50.0 million of upfront proceeds received in 2016. In December 2020, the
Company completed its final delivery of gold under this arrangement.
For a detailed discussion on the factors affecting cash provided from operating activities, refer to the
“Liquidity and Capital Resources” section contained in this MD&A.
Free cash flow from continuing operations
Free cash flow in the fourth quarter of 2020 was $39.3 million compared to $11.7 million in the
corresponding period in 2019. This increase was due primarily to higher realized gold and copper prices,
the impact of a stronger U.S. dollar relative to the ZAR and lower cash outlays for sustaining capital
expenditures, partially offset by lower volumes of payable metals in concentrate sold as a result of the
timing of deliveries in the fourth quarter of 2019.
Free cash flow in 2020 was $211.4 million compared to $69.6 million in 2019. This significant increase was
due primarily to higher realized gold prices, additional deliveries from Ada Tepe reflecting a full year of
production, the impact of a stronger U.S. dollar relative to the ZAR and lower cash outlays for sustaining
capital expenditures, partially offset by the impact of the prepaid forward gold sales arrangement, the final
delivery for which was completed in December 2020.
Capital expenditures from continuing operations
Capital expenditures incurred during the fourth quarter and twelve months of 2020 were $15.7 million and
$49.3 million, respectively, compared to $20.1 million and $73.7 million in the corresponding periods in
2019.
Growth capital expenditures incurred during the fourth quarter and twelve months of 2020 were $3.4 million
and $8.5 million, respectively, compared to $1.5 million and $36.5 million in the corresponding periods in
2019. The year-over-year decrease was related principally to the construction of the Ada Tepe gold mine,
which was completed in 2019.
Sustaining capital expenditures incurred during the fourth quarter and twelve months of 2020 were $12.3
million and $40.8 million, respectively, compared to $18.6 million and $37.2 million in the corresponding
periods in 2019. The quarter-over-quarter decrease was due primarily to spending related to the 30-day
maintenance shutdown at Tsumeb in the fourth quarter of 2019. The year-over-year increase was due
primarily to a full year of operation at Ada Tepe as well as the acceleration of the grade control drilling
program, partially offset by reduced spending at Tsumeb with no extended maintenance shutdown in 2020.
15 I DUNDEE PRECIOUS METALS INC.
2020 ACTUAL RESULTS COMPARISON TO 2020 GUIDANCE
The following table provides a comparison of the Company’s results to its 2020 original guidance and its
updated guidance.
$ millions, unless otherwise indicated
Ore processed (‘000s tonnes)
Cash cost per tonne of ore processed(1),(2)
Chelopech
Ada Tepe
Metals contained in concentrate produced(3),(4)
Gold (‘000s ounces)
Copper (million pounds)
Payable metals in concentrate sold(3)
Gold (‘000s ounces)
Copper (million pounds)
All-in sustaining cost per ounce of gold(1),(2)
Complex concentrate smelted (‘000s tonnes)
Cash cost per tonne of complex concentrate
smelted(1)
Original
Consolidated
Guidance(7)
2,855 - 3,092
Updated
Consolidated
Guidance(8)
2,855 - 3,092
2020
Consolidated
Results
3,092
38 - 40
50 - 60
257 - 299
35 - 40
229 - 267
33 - 38
700 - 780
230 – 265
38 - 40
44 - 50
257 - 299
35 - 40
229 - 267
33 - 38
650 - 720
230 - 265
38
40
298
36
271
33
654
232
377
22
11
8
41
8
370 - 450
18 - 22
13 - 15
7 - 10
43 - 54
5 - 10
370 – 450
18 - 22
13 - 15
2 - 8
43 - 54
5 - 10
Corporate general and administrative expenses(5)
Exploration expenses
Evaluation expenses(6)
Sustaining capital expenditures(1)
Growth capital expenditures(1)
1) Cash cost per tonne of ore processed, all-in sustaining cost per ounce of gold and cash cost per tonne of complex concentrate smelted, net of by-product credits,
and sustaining and growth capital expenditures have no standardized meaning under IFRS. Refer to the “Non-GAAP Financial Measures” section of this MD&A
for more information.
2) Includes the treatment charges, transportation and other selling costs related to the sale of pyrite concentrate, and payable gold in pyrite concentrate sold.
3) Includes gold in pyrite concentrate produced of 55,502 ounces compared to guidance of 47,000 to 53,000 ounces and payable gold in pyrite concentrate sold of
36,111 ounces compared to guidance of 29,000 ounces to 33,000 ounces.
4) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
5) Excludes mark-to-market related adjustments on share based compensation of $9.1 million.
6) The guidance for evaluation expenses was increased on July 30, 2020 from a range of $2.0 million to $8.0 million to a range of $7.0 million to $10.0 million to
reflect the advancement of the PFS and related drilling for the Timok gold project.
7) As disclosed in the MD&A issued on February 13, 2020.
8) As disclosed in the MD&A issued on November 12, 2020.
DPM achieved the upper end of its 2020 production and delivery guidance as a result of continued strong
operating performance, with Chelopech at the high end and Ada Tepe exceeding guidance. Cash cost per
tonne of ore processed at Ada Tepe of $40 was below its original guidance of $50 to $60 due primarily to
initiating an accelerated grade control drilling program resulting in the capitalization of these costs, which
resulted in a decrease in operating expenses, and lower consumption and costs for certain direct materials.
Complex concentrate smelted at Tsumeb was in line with guidance, despite the curtailment of operations
during the month of April in response to a government directive to the natural resources sector aimed at
limiting staffing levels. Cash cost per tonne of concentrate smelted in 2020 was at the lower end of 2020
guidance due primarily to a weaker ZAR relative to the U.S. dollar and lower operating expenses.
All-in sustaining cost per ounce of gold in 2020 of $654 was below the original guidance of $700 to $780
due primarily to lower treatment charges for Chelopech resulting from a greater proportion of concentrate
deliveries to third party smelters in the fourth quarter and higher deliveries in line with strong gold production
at Chelopech and Ada Tepe as a result of higher than anticipated gold grades.
FOURTH QUARTER 2020 I 16
THREE-YEAR OUTLOOK
DPM continues to focus on increasing the profitability of its business by optimizing existing operating assets,
which are expected to maintain higher levels of gold production and declining all-in sustaining costs as
highlighted in the 2021 to 2023 outlook and supplemental detailed 2021 guidance below.
2021 to 2023 Outlook
The outlook is based on historical performance and experience at DPM’s operations and is consistent with
the production schedules outlined in the technical report for Chelopech entitled “NI 43-101 Technical Report
- Mineral Resource and Reserve Update, Chelopech Mine, Chelopech, Bulgaria” dated March 30, 2020
(the “Chelopech Technical Report”), and the technical report for Ada Tepe entitled “NI 43-101 Technical
Report – Mineral Reserve and Mineral Resource Update for the Ada Tepe Mine, Krumovgrad, Bulgaria”
dated November 23, 2020 (the “Ada Tepe Technical Report”). For 2022 and 2023, all production and cost
estimates do not yet incorporate any cost savings, operating performance improvements in respect of mine
and smelter throughput and potential improvements to mine grades and recoveries. The Chelopech
Technical Report and the Ada Tepe Technical Report have been filed on SEDAR (www.sedar.com) and
are available on the Company’s website (www.dundeeprecious.com).
Highlights of three-year outlook include:
(cid:2) Continued solid gold production: Over the next three years, gold production is expected to average
approximately 280,000 ounces per year. Gold production in 2021 is expected to range between
271,000 ounces and 317,000 ounces, which is higher than the previously provided 2021 outlook of
250,000 ounces to 295,000 ounces. Based on current mine plans, gold production is expected to range
between 240,000 ounces and 280,000 ounces in 2022 and between 265,000 ounces and 310,000
ounces in 2023. The positive change in production profile in 2021 and 2022 relative to the previously
provided outlook is consistent with the updated mine plan as per the Chelopech Technical Report and
the Ada Tepe Technical Report.
(cid:2) Stable copper production: Copper production between 2021 and 2023 is expected to be
approximately 35 million pounds per year, which is in line with 2020 production.
(cid:2) Attractive all-in sustaining cost: 2021 all-in sustaining cost guidance has decreased to a range of
$625 to $695 per ounce from the previously provided outlook of $670 to $750 due primarily to lower
treatment charges and higher by-product prices, partially offset by higher sustaining capital
expenditures. For 2022, all-in sustaining cost is expected to range between $730 to $810, which is
higher than the previously provided outlook of $670 and $750 as a result of variations in gold grades,
consistent with the current mine plan. All-in sustaining cost in 2023 is expected to decrease to between
$630 and $710 due to higher gold production and lower sustaining capital expenditures.
(cid:2) Stable smelter performance: Annual estimates for complex concentrate smelted vary due to the
timing of scheduled furnace maintenance shutdowns, with the next shutdown occurring in the first
quarter of 2021. Based on an expected 18-month operating cycle, complex concentrate smelted is
expected to remain unchanged in 2022 and to increase in 2023. Cash cost per tonne of concentrate
smelted is expected to increase in 2021 and 2022 as a result of planned furnace maintenance
shutdowns and forecast weaker acid prices. In 2023, cash cost per tonne of concentrate smelted is
expected to decrease as a result of increased throughput.
(cid:2) Sustaining capital expenditures trending lower: Sustaining capital expenditures for 2021 are
expected to range between $56 million and $72 million, up from $40 million in 2020 as a result of
initiating an accelerated life of mine grade control drilling program at Ada Tepe, which was originally
planned to occur over several years and was previously classified as an operating cost, as well as
investments to upgrade Chelopech’s tailings management facility following completion of the work to
extend its life in 2019 and 2020, and the furnace maintenance shutdown at Tsumeb. Following 2021,
sustaining capital expenditures are expected to trend lower, with 2022 sustaining capital expenditures
expected to range between $38 million and $50 million, with a further reduction to a range of $33 million
to $44 million expected in 2023.
17 I DUNDEE PRECIOUS METALS INC.
The Company’s three-year outlook is set out in the following table:
$ millions,
unless otherwise indicated
Gold contained in concentrate produced (‘000s
2020
Results
2021
Guidance
2022
Outlook
2023
Outlook
ounces)(1),(2)
Chelopech
Ada Tepe
Total
Copper contained in concentrate produced
(million pounds)
Chelopech
All-in sustaining cost per ounce of gold(3),(4)
Complex concentrate smelted (‘000s tonnes)
Cash cost per tonne of complex concentrate
smelted(3),(4)
Sustaining capital expenditures ($millions)(3),(4)
Chelopech
Ada Tepe
Tsumeb
Corporate digital initiatives
Consolidated
179
119
298
36
654
232
377
17
13
8
3
41
156 – 176
115 – 141
271 – 317
145 – 165
95 – 115
240 – 280
150 – 170
115 – 140
265 – 310
34 – 39
625 – 695
220 – 250
450 – 520
32 – 39
730 – 810
220 – 250
450 – 520
32 – 39
630 – 710
230 – 265
420 – 490
20 – 25
16 – 21
16 – 20
4 – 6
56 – 72
14 – 18
6 – 8
16 – 20
2 – 4
38 – 50
9 – 12
6 – 8
16 – 20
2 – 4
33 – 44
1) Gold produced includes gold in pyrite concentrate produced of 50,000 to 56,000 ounces for 2021, and 46,000 to 52,000 ounces in each of 2022 and 2023.
2) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
3) All costs and capital expenditures are based on, where applicable, a Euro/US$ exchange rate of 1.18, a US$/ZAR exchange rate of 16.00, a copper price of
$3.32 per pound in 2021 and $3.00 per pound in each of 2022 and 2023, and an average acid price of $45 per tonne, and have not been adjusted for inflation.
4) All-in sustaining cost per ounce of gold, cash cost per tonne of complex concentrate smelted and sustaining capital expenditures are Non-GAAP measures and
have no standardized meaning under IFRS. Refer to the “Non-GAAP Financial Measures” section of this MD&A for more information.
The Company’s detailed guidance for 2021 is set out in the following table:
$ millions,
unless otherwise indicated
Ore processed (‘000s tonnes)
Cash cost per tonne of ore processed(3),(4)
Metals contained in concentrate produced(1),(2)
Gold (‘000s ounces)
Copper (million pounds)
Payable metals in concentrate sold(1)
Gold (‘000s ounces)
Copper (million pounds)
All-in sustaining cost per ounce of gold(3),(4)
Complex concentrate smelted (‘000s tonnes)
Cash cost per tonne of complex concentrate
smelted(3),(4)
Corporate general and administrative
expenses(3),(5)
Exploration expenses(3)
Evaluation expenses
Sustaining capital expenditures(3),(4),(6)
Growth capital expenditures(3),(4),(7)
Chelopech
2,090 - 2,200
42 - 45
Ada Tepe
835 - 925
46 - 50
156 - 176
34 - 39
115 - 141
-
Tsumeb
-
-
-
-
130 - 147
31 - 36
685 - 755
-
113 - 138
-
560 - 630
-
-
-
-
220 - 250
Consolidated
Guidance
2,925 – 3,125
-
271 - 317
34 - 39
243 - 285
31 - 36
625 - 695
220 - 250
-
-
450 - 520
450 - 520
-
-
-
20 - 25
2 - 4
-
-
-
16 - 21
-
-
-
-
16 - 20
3 - 4
19 - 23
13 - 15
2 - 3
56 - 72
16 - 21
1) Gold produced includes gold in pyrite concentrate produced of 50,000 to 56,000 ounces and payable gold sold includes payable gold in pyrite concentrate sold
of 31,000 to 35,000 ounces.
2) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
3) Based on a Euro/US$ exchange rate of 1.18, a US$/ZAR exchange rate of 16.00, a copper price of $3.32 per pound and an average acid price of $45 per tonne,
where applicable.
4) Cash cost per tonne of ore processed, all-in sustaining cost per ounce of gold, cash cost per tonne of complex concentrate smelted at Tsumeb and sustaining
and growth capital expenditures are Non-GAAP measures and have no standardized meaning under IFRS. Refer to the “Non-GAAP Financial Measures” section
of this MD&A for more information.
5) Excludes mark-to-market adjustments on share-based compensation.
6) Consolidated sustaining capital expenditures include approximately $5 million related to corporate digital initiatives.
7) Consolidated growth capital expenditures include the estimated costs related to the potential feasibility study (“FS”) for the Timok gold project.
FOURTH QUARTER 2020 I 18
The foregoing three-year outlook and supplemental detailed 2021 guidance are not expected to occur
evenly throughout the year. The estimated metals contained in concentrate produced, payable metals in
concentrate sold and volumes of complex concentrate smelted are expected to vary from quarter to quarter
depending on the areas being mined, the timing of concentrate deliveries and planned outages, including
the Tsumeb furnace maintenance shutdown scheduled to occur in the first quarter of 2021. The rate of
capital expenditures is also expected to vary from quarter to quarter based on the schedule for, and
execution of, each capital project.
Additional detail on the Company’s three-year outlook is set out below:
Chelopech
Gold contained in concentrate produced in 2021 is expected to range between 156,000 ounces and
176,000 ounces, which has improved relative to the previous 2021 outlook of 145,000 ounces to 165,000
ounces as a result of higher recoveries. Gold contained in concentrate produced in 2022 is expected to be
between 145,000 ounces and 165,000 ounces and between 150,000 ounces and 170,000 ounces in 2023.
Copper contained in concentrate produced in 2021 is expected to be between 34 million pounds and 39
million pounds, which is comparable to 2020, and is expected to be between 32 million pounds and 39
million pounds in each of 2022 and 2023.
Sustaining capital expenditures in 2021 are expected to be between $20 million and $25 million, including
approximately $5 million for the work associated with the next phase of work to upgrade Chelopech’s
tailings management facility. Growth capital expenditures related to resource development drilling and
margin improvement projects are expected to be between $2 million and $4 million in 2021. Sustaining
capital expenditures are expected to trend lower starting in 2022, ranging between $14 million and $18
million, including approximately $3 million to complete the upgrade of the tailings management facility. In
2023, sustaining capital expenditures are expected to decline to between $9 million and $12 million.
Ada Tepe
Gold contained in concentrate produced in 2021 is expected to be between 115,000 ounces and 141,000
ounces, which is 8% higher than 2020 based on the mid-point of 2021 guidance and an improvement from
the previous 2021 outlook of 105,000 ounces to 130,000 ounces. This increase is due primarily to higher
gold grades and is consistent with the updated life of mine plan. Gold contained in concentrate produced
in 2022 is expected to be between 95,000 ounces and 115,000 ounces and between 115,000 ounces and
140,000 ounces in 2023.
Sustaining capital expenditures in 2021 are expected to be between $16 million and $21 million, reflecting
an acceleration of the grade control drilling program in order to provide representative and high quality
samples for better grade control and mine planning over the life of mine. Sustaining capital expenditures
are expected to decline to between $6 million and $8 million in 2022 and remain at this level in 2023.
Tsumeb
Complex concentrate smelted in 2021 is expected to range between 220,000 tonnes and 250,000 tonnes,
consistent with the previously provided outlook, reflecting the previously announced furnace maintenance
shutdown, which is scheduled to occur in the first quarter of 2021. Based on an expected 18-month
operating cycle, complex concentrate smelted in 2022 is expected to range between 220,000 tonnes and
250,000 tonnes, a decrease relative to the previously provided outlook of 240,000 tonnes to 265,000
tonnes, reflecting a slight shift in the timing of the furnace maintenance shutdown. In 2023, complex
concentrate smelted is expected to range between 230,000 tonnes and 265,000 tonnes as a result of no
furnace maintenance shutdown expected in that year. Concentrate feed is currently contracted through to
June 2023 with additional feed thereafter expected to be contracted in the normal course.
Cash cost per tonne of complex concentrate smelted is expected to increase to between $450 and $520 in
2021, as a result of the planned furnace maintenance shutdown and a weaker acid market and is expected
19 I DUNDEE PRECIOUS METALS INC.
to remain at this level in 2022. In 2023, cash cost per tonne of concentrate smelted is expected to decrease
to between $420 and $490 as a result of increased throughput.
Sustaining capital expenditures in 2021 are expected to be between $16 million and $20 million, which is
higher than 2020 as a result of the maintenance shutdown. Sustaining capital is expected to be between
$16 million and $20 million in each of 2022 and 2023, reflecting the estimated capital cost to increase
hazardous waste disposal capacity.
All-in sustaining cost
2021 all-in sustaining cost guidance has decreased to a range of $625 to $695 per ounce of gold from the
previously provided outlook of $670 to $750 due primarily to lower treatment charges and higher by-product
credits, partially offset by higher sustaining capital expenditures. Approximately 40% of Chelopech gold-
copper concentrate in 2021 is expected to be delivered to third party smelters resulting in an expected
reduction in treatment charges.
All-in sustaining cost is expected to be between $730 and $810 in 2022 and between $630 and $710 in
2023. The year-over-year variations in all-in sustaining cost reflect expected gold grades in concentrate
produced and the volumes of gold-copper concentrate delivered to third party smelters.
Timok gold project
The estimated costs associated with moving forward with a potential FS, subject to the results of the PFS,
are expected to be between $11 million and $13 million in 2021. These have been included in growth capital
expenditures in the above detailed 2021 guidance table.
Exploration and evaluation expenditures
Expenditures related to exploration in 2021 are expected to be between $13.0 million and $15.0 million and
will be directed toward a 60,000 metre brownfield drilling program on mine concessions and exploration
licenses at or around the Chelopech and Ada Tepe mines in Bulgaria and a further 12,000 metres of drilling,
which is planned at the Timok gold project in Serbia.
At Chelopech, exploration efforts will concentrate on near mine exploration drilling related to the Sveta
Petka commercial discovery process, which includes West Shaft and Wedge targets, and on drilling more
conceptual targets on the Brevene exploration license, including Bridge and Vozdol.
At Ada Tepe, a significant portion of the exploration budget is dedicated to near mine target delineation
drilling on the mining concession area, including Surnak, Synap and Kuklitsa, while additional drilling is
expected to commence later in the year on other exploration licenses in the Krumovgrad district.
Drilling at Timok will continue with shallow oxide resource delineation at the Chocolate target, proximal to
Bigar Hill, as well with target delineation drilling on Coka Rakita and other under explored sulphide targets.
Later during the year, the drilling will concentrate on target delineation surface work and scout drilling on
other Serbia regional licenses.
Evaluation expenditures in 2021 are expected to be between $2 million and $3 million and are primarily
related to the estimated costs to complete the PFS, which is expected to be released in the first quarter of
2021.
COVID-19
To date, with the proactive measures taken by each of the Company’s operations, the COVID-19 pandemic
has had minimal impact on DPM’s production. DPM is closely monitoring the COVID-19 situation and has
put measures in place to safeguard the health of its workforce and support the continuity of its operations.
Given the highly uncertain and evolving nature of this situation, the Company is not able to reliably estimate
the likelihood, timing, duration, severity and scope of this pandemic and the potential impact it could have
FOURTH QUARTER 2020 I 20
on the Company’s future operating and financial results. As a result, the three-year outlook provided is
predicated on the COVID-19 pandemic continuing to be effectively managed with minimal impact on DPM’s
operations. For additional details on COVID-19, including the related risks faced by the Company, refer to
the “Overview – Operational and Financial Highlights” and “Risk and Uncertainties” sections contained in
this MD&A.
21 I DUNDEE PRECIOUS METALS INC.
REVIEW OF OPERATING RESULTS BY SEGMENT
Chelopech – Selected Operational and Financial Highlights
$ thousands, unless otherwise indicated
Ended December 31,
Operational Highlights
Ore mined (mt)
Ore processed (mt)
Gold recoveries:
538,457
541,066
2020
Three Months
Twelve months
2019
2020
2019
535,720
547,834
2,182,844 2,211,067
2,201,220 2,203,242
Gold-copper concentrate (%)
Pyrite concentrate (%)
Head grade / recoveries:
Gold (g/mt) / combined recoveries (%)
Copper (%) / %
Silver (g/mt) / %
Gold-copper concentrate produced (mt)
Pyrite concentrate produced (mt)
Metals contained in concentrate produced:
Gold in gold-copper concentrate (ounces)
Gold in pyrite concentrate (ounces)
Total gold production
Copper (pounds)
Silver (ounces)
Cash cost per tonne of ore processed(1),(2),(9)
Cash cost per ounce of gold in gold-copper
concentrate produced(1),(2),(3)
Cash cost per pound of copper in gold-copper
concentrate produced(1),(2),(3)
Gold-copper concentrate delivered (mt)
Pyrite concentrate delivered (mt)
Payable metals in concentrate sold:
Gold in gold-copper concentrate (ounces)(5)
Gold in pyrite concentrate (ounces)(5)
Total payable gold in concentrate sold
Copper (pounds)(5)
Silver (ounces)(5)
Cash cost per ounce of gold sold, net of by-
product credits (2),(4),(6)
All-in sustaining cost per ounce of gold(2),(4),(6)
Cost per tonne of gold-copper concentrate sold(7)
Financial Highlights
Revenue(8)
Cost of sales(10)
Earnings before income taxes
Adjusted EBITDA(2)
Net earnings/Adjusted net earnings(2)
Capital expenditures incurred:
Growth(2)
Sustaining(2)
Total capital expenditures
47.8
17.5
47.4
22.6
50.1
22.4
50.5
22.5
3.50 / 72.5 3.35 / 73.0
3.35 / 65.3 3.48 / 70.0
0.85 / 75.7 1.02 / 81.6 0.93 / 78.6 0.93 / 82.1
7.46 / 30.6 7.74 / 35.0 6.56 / 35.4 6.29 / 35.4
22,800
51,438
28,730
64,282
105,765
262,283
105,741
252,582
27,852
10,168
38,020
29,101
13,862
42,963
7,659,384 10,031,111
47,673
39.88
39,732
41.78
124,060
55,502
179,562
119,928
53,471
173,399
35,642,083 37,250,240
157,851
36.30
164,235
38.42
526
449
451
402
0.91
24,652
75,102
0.79
35,473
64,152
0.71
106,026
267,897
0.78
106,895
256,937
28,065
9,334
37,399
30,843
9,325
40,168
7,765,680 11,060,418
50,357
38,680
114,653
36,111
150,764
112,660
36,545
149,205
33,388,783 34,130,933
138,305
149,831
456
704
1,253
74,380
30,898
42,110
50,057
38,288
1,075
5,202
6,277
602
859
963
56,890
34,152
22,963
30,815
21,015
913
5,805
6,718
587
762
1,070
264,855
113,481
146,758
177,223
132,829
4,147
16,911
21,058
585
767
1,051
193,989
112,367
79,462
110,927
71,569
3,879
16,124
20,003
1) Cash costs are reported in U.S. dollars, although the majority of costs incurred are denominated in non-U.S. dollars, and consist of all production related
expenses including mining, processing, services, royalties and general and administrative.
2) Refer to the “Non-GAAP Financial Measures” section of this MD&A for more information, including reconciliations of these Non-GAAP measures.
3) Gold and copper are accounted for as co-products. Total cash costs are net of by-product silver sales revenue.
4) Includes payable gold in pyrite concentrate sold, and the treatment charges, transportation and other selling costs related to the sale of pyrite concentrate of
$6.8 million (2019 – $6.4 million) and $24.7 million (2019 – $25.5 million) in the fourth quarter and twelve months of 2020, respectively.
FOURTH QUARTER 2020 I 22
5) Represents payable metals in gold-copper and pyrite concentrate sold based on provisional invoices.
6) Cash cost per ounce of gold sold, net of by-product credits, represents cost of sales, less depreciation, amortization and other non-cash expenses, plus treatment
charges, penalties, transportation and other selling costs, less by-product copper and silver revenues, divided by the payable gold in gold-copper and pyrite
concentrate sold.
7) Represents cost of sales divided by the volumes of gold-copper concentrate delivered.
8) Revenue includes the value of payable metals sold, deductions for treatment charges, penalties, transportation and other selling costs, and final settlements to
reflect any physical and cost adjustments on provisionally priced sales. Net unfavourable settlements of $2.5 million (2019 – $4.7 million) and favourable
settlements of $2.2 million (2019 – unfavourable settlements of $7.5 million) were recognized in the fourth quarter and twelve months of 2020, respectively.
Deductions during the fourth quarter and twelve months of 2020 were $20.2 million (2019 – $28.3 million) and $99.6 million (2019 – $100.7 million), respectively.
9) Cash cost per tonne of ore processed represents production expenses, including mining, processing, services, royalties and general and administrative
expenses, divided by tonnes of ore processed.
10) Cost of sales includes depreciation of $7.8 million (2019 – $7.7 million) and $29.8 million (2019 – $30.7 million) in the fourth quarter and twelve months of 2020,
respectively.
Review of Chelopech Results
Concentrate and metals production
Gold-copper concentrate produced during the fourth quarter of 2020 of 22,800 tonnes was 21% lower than
the corresponding period in 2019 due primarily to lower copper grades and recoveries. Gold-copper
concentrate produced during 2020 of 105,765 tonnes was comparable to 2019.
Pyrite concentrate produced during the fourth quarter of 2020 of 51,438 tonnes was 20% lower than the
corresponding period in 2019 due primarily to lower gold grades and recoveries. Pyrite concentrate
produced during 2020 of 262,283 tonnes was 4% higher than 2019 due primarily to higher gold grades.
Gold contained in gold-copper and pyrite concentrate produced in the fourth quarter and twelve months of
2020 was 38,020 ounces and 179,562 ounces, respectively, compared to 42,963 ounces and 173,399
ounces in the corresponding periods in 2019.
Gold contained in gold-copper concentrate produced in the fourth quarter of 2020 decreased by 4% to
27,852 ounces and gold contained in pyrite concentrate produced decreased by 27% to 10,168 ounces, in
each case relative to the corresponding period in 2019, due primarily to lower gold grades and recoveries.
Gold contained in gold-copper concentrate produced in 2020 increased by 3% to 124,060 ounces and gold
contained in pyrite concentrate produced increased by 4% to 55,502 ounces, in each case relative to 2019,
due primarily to higher gold grades.
Copper production in the fourth quarter of 2020 of 7.6 million pounds was 24% lower than the corresponding
period in 2019 due primarily to lower copper grades, in line with the mine plan, and lower recoveries. Copper
production in 2020 of 35.6 million pounds was 4% lower than 2019 due primarily to lower copper recoveries.
Silver production in the fourth quarter of 2020 of 39,732 ounces was 17% lower than the corresponding
period in 2019 due primarily to lower silver grades and recoveries. Silver production in 2020 of 164,235
ounces was 4% higher than 2019 due primarily to higher silver grades.
Concentrate deliveries and metals sold
Deliveries of gold-copper concentrate during the fourth quarter of 2020 of 24,652 tonnes were 31% lower
than the corresponding period in 2019 due primarily to the timing of deliveries. Deliveries of gold-copper
concentrate in the fourth quarter of 2020 were in line production, whereas, in the fourth quarter of 2019,
there was an inventory drawdown of 6,743 tonnes. Deliveries of gold-copper concentrate during 2020 of
106,026 tonnes were comparable to 2019.
Deliveries of pyrite concentrate during the fourth quarter of 2020 of 75,102 tonnes were 17% higher than
the corresponding period in 2019 due primarily to the timing of deliveries. Deliveries of pyrite concentrate
during 2020 of 267,897 tonnes were 4% higher than 2019, consistent with increased production.
In the fourth quarter of 2020, payable gold in gold-copper concentrate sold decreased by 9% to 28,065
ounces, payable copper decreased by 30% to 7.8 million pounds and payable silver decreased by 23% to
38,680 ounces, in each case, relative to the corresponding period in 2019. The decrease in gold sold was
due primarily to the timing of 2019 gold-copper concentrate deliveries, partially offset by higher gold grades
in gold-copper concentrate sold. The decrease in copper sold was consistent with the decrease in gold-
23 I DUNDEE PRECIOUS METALS INC.
copper concentrate deliveries due to the timing of deliveries in the fourth quarter of 2019. Payable gold in
pyrite concentrate sold in the fourth quarter of 2020 of 9,334 ounces was comparable to the corresponding
period in 2019.
In 2020, payable gold in gold-copper concentrate sold increased by 2% to 114,653 ounces, payable copper
decreased by 2% to 33.4 million pounds and payable silver increased by 8% to 149,831 ounces, in each
case, relative to 2019. The increase in gold sold was due primarily to higher gold grades in gold-copper
concentrate sold. Payable gold in pyrite concentrate sold in 2020 of 36,111 ounces was comparable to
2019.
Inventory
Gold-copper concentrate inventory totaled 5,283 tonnes as at December 31, 2020, down from 5,544 tonnes
as at December 31, 2019 due primarily to the timing of gold-copper concentrate deliveries.
Cash cost measures
Cash cost per tonne of ore processed in the fourth quarter of 2020 of $41.78 was 5% higher than the
corresponding period in 2019 due the impact of a stronger Euro relative to the U.S. dollar, higher royalties
as a result of higher gold prices and higher labour costs as a result of annual pay increases, partially offset
by lower electricity and diesel rates and lower input costs for certain consumables.
Cash cost per tonne of ore processed in 2020 of $38.42 was 6% higher than the corresponding period in
2019 due primarily to higher royalties as a result of higher gold prices and quantities of contained metal in
ore mined, the impact of a stronger Euro relative to the U.S. dollar, increased maintenance costs and higher
labour costs as a result of annual pay increases, partially offset by lower electricity and diesel rates.
Cash cost per ounce of gold sold, net of by-product credits, during the fourth quarter of 2020 of $456 was
$146 lower than the corresponding period in 2019 due primarily to lower treatment charges as a result of a
greater proportion of gold-copper concentrate deliveries to third party smelters with lower treatment charge
than Tsumeb, partially offset by lower by-product credits. Cash cost per ounce of gold sold, net of by-
product credits, during 2020 of $587 was comparable to 2019.
All-in sustaining cost in the fourth quarter and twelve months of 2020 was $704 and $762, respectively,
compared to $859 and $767 in the corresponding periods in 2019. The decrease in the fourth quarter of
2020 relative to the corresponding period in 2019 was due primarily to lower treatment charges, partially
offset by lower by-product credits.
Net earnings / Adjusted net earnings
Net earnings and adjusted net earnings in the fourth quarter of 2020 of $38.3 million were $17.3 million
higher than the corresponding period in 2019 due primarily to higher realized gold and copper prices and
lower treatment charges, partially offset by lower volumes of metals sold as a result of the timing of gold-
copper concentrate deliveries in 2019 and the impact of a stronger Euro relative to the U.S. dollar. Gold-
copper concentrate deliveries in the fourth quarter of 2020 were in line with production, whereas, in the
fourth quarter of 2019, there was an inventory drawdown of 6,743 tonnes.
Net earnings and adjusted net earnings in 2020 of $132.8 million were $61.3 million higher than 2019 due
primarily to higher realized gold prices, lower treatment charges and higher volumes of payable gold in
concentrate sold as a result of higher gold grades, partially offset by the impact of a stronger Euro relative
to the U.S. dollar and lower volumes of payable copper in concentrate sold.
FOURTH QUARTER 2020 I 24
The following table summarizes the key drivers affecting the change in adjusted net earnings:
$ millions
Ended December 31,
Adjusted net earnings - 2019
Higher realized metal prices
Lower treatment charges and freight(2)
Higher (lower) metals sold
Lower (higher) cost per tonne concentrate sold(1)
Stronger Euro
Income taxes & other
Adjusted net earnings - 2020
Three
Twelve
Months Months
71.5
59.8
6.6
2.8
2.3
(1.7)
(8.5)
132.8
21.0
20.5
9.1
(6.3)
(0.6)
(1.7)
(3.7)
38.3
1) Excludes impact of depreciation and foreign exchange.
2) The fourth quarter decrease in treatment charges was due primarily to a lower proportion of gold-copper concentrate deliveries to Tsumeb compared to the
corresponding period in 2019.
Capital expenditures
Capital expenditures during the fourth quarter and twelve months of 2020 were $6.3 million and $21.1
million, respectively, compared to $6.7 million and $20.0 million in the corresponding periods in 2019, in
line with 2020 guidance, and elevated relative to Chelopech’s normal rate of spending as a result of the
costs incurred to upgrade and further extend the life of its tailing management facility.
25 I DUNDEE PRECIOUS METALS INC.
Ada Tepe – Selected Operational and Financial Highlights
$ thousands, unless otherwise indicated
Ended December 31,
Operational Highlights
Ore mined (mt)
Ore processed (mt)
Head grade / recoveries in gold concentrate(1)
256,928
213,428
Three Months
2020
2019
Twelve months
2020
2019
182,558
217,489
1,029,309
890,738
430,384
470,545
Gold (g/mt) / %
Silver (g/mt) / %
Gold concentrate produced (mt)
Metals contained in concentrate produced:
Gold (ounces)
Silver (ounces)
Cash cost per tonne of ore processed(2),(3),(10)
Cash cost per ounce of gold in concentrate
produced(2),(3),(4)
Gold concentrate delivered (mt)(9)
Payable metals in concentrate sold:
Gold (ounces)(5),(9)
Silver (ounces)(5),(9)
Cash cost per ounce of gold sold, net of by-
product credits(3),(6)
All-in sustaining cost per ounce of gold(3),(6)
Cost per tonne of gold concentrate sold(11)
Financial Highlights
Revenue(7)
Cost of sales(8)
Earnings before income taxes
Adjusted EBITDA(3)
Net earnings/Adjusted net earnings(3)
Capital expenditures incurred:
Growth(3)
Sustaining(3)
Total capital expenditures
4.54 / 83.7 4.44 / 84.6 4.92 / 84.3 4.56 / 83.3
2.32 / 52.5 2.53 / 56.8 2.48 / 56.9 2.62 / 57.2
2,700
1,410
5,926
1,515
26,097
8,366
42.17
337
1,505
25,169
6,862
378
573
1,462
42,552
22,006
19,000
32,304
17,482
2,126
2,482
4,608
26,528
10,110
49.04
395
1,804
38,941
13,855
349
493
1,607
54,924
28,993
24,304
41,502
21,870
553
2,212
2,765
118,727
40,422
40.07
294
6,138
120,070
36,225
341
518
1,506
197,573
92,450
100,237
156,205
90,799
2,373
13,150
15,523
57,193
22,519
49.29
399
2,397
49,459
17,854
425
596
1,732
69,710
41,515
25,334
49,301
22,167
32,438
3,978
36,416
1) Recoveries are after the flotation circuit but before filtration.
2) Cash costs are reported in U.S. dollars, although the majority of costs incurred are denominated in non-U.S. dollars, and consist of all production related
expenses including mining, processing, services, royalties and general and administrative.
3) Refer to the “Non-GAAP Financial Measures” section of this MD&A for more information, including reconciliations of these Non-GAAP measures.
4) Total cash costs are net of by-product silver sales.
5) Represents payable metals in gold concentrate sold based on provisional invoices.
6) Cash cost per ounce of gold sold, net of by-product credits, represents cost of sales, less depreciation, amortization and other non-cash expenses, plus treatment
charges, penalties, transportation and other selling costs, less by-product silver revenues, divided by the payable gold in concentrate sold.
7) Revenue includes the value of payable metals sold, deductions for treatment charges, penalties, transportation and other selling costs, and final settlements to
reflect any physical and cost adjustments on provisionally priced sales.
8) Cost of sales includes depreciation of $13.1 million (2019 – $16.3 million) and $54.3 million (2019 – $21.9 million) in the fourth quarter and twelve months of
2020, respectively.
9) Gold concentrate deliveries and payable gold in concentrate sold in 2019 included 41 tonnes and 424 ounces, respectively, which were sold prior to achieving
commercial production in June 2019, and as a result, net revenue and associated cost of sales from these concentrate sales were recorded in mine properties
in 2019.
10) Cash cost per tonne of ore processed represents production expenses, including mining, processing, services, royalties and general and administrative
expenses, divided by tonnes of ore processed.
11) Represents cost of sales divided by the volumes of gold concentrate delivered.
Review of Ada Tepe Results
Gold production
Gold contained in concentrate produced in the fourth quarter of 2020 of 26,097 ounces was comparable to
the corresponding period in 2019. Gold contained in concentrate produced in 2020 was 118,727 ounces
up from 57,193 ounces in 2019 as a result of Ada Tepe achieving commercial production in June 2019 and
ramp-up to full design capacity in the third quarter of 2019.
FOURTH QUARTER 2020 I 26
Gold sold
Payable gold in concentrate sold in the fourth quarter of 2020 decreased by 35% to 25,169 ounces relative
to the corresponding period in 2019 due primarily to the timing of 2019 concentrate deliveries and higher
grades in the fourth quarter of 2019. In the fourth quarter of 2020, payable gold in concentrate sold was
consistent with production, whereas, in the fourth quarter of 2019, payable gold in concentrate sold was
significantly higher than gold production due to the timing of finalization of concentrate sales agreements
following the start of commercial production in June 2019.
Payable gold in concentrate sold in 2020 was 120,070 ounces compared to 49,459 ounces in 2019,
reflecting a full year of production in 2020.
Inventory
Gold concentrate inventory totaled 91 tonnes as at December 31, 2020, down from 303 tonnes as at
December 31, 2019.
Cash cost measures
Cash cost per tonne of ore processed in the fourth quarter of 2020 of $42.17 was 14% lower than the
corresponding period in 2019 due primarily to higher volumes of ore mined and lower rates for electricity
and certain consumables, partially offset by higher royalties, higher employments costs as a result of annual
pay increases and the impact of a stronger Euro relative to the U.S. dollar.
Cash cost per tonne of ore processed in 2020 of $40.07 was 19% lower than 2019 due primarily to higher
volumes of ore mined and processed, partially offset by higher royalties, higher employment costs as a
result of annual salary increase, increased maintenance activities and the impact of a stronger Euro relative
to the U.S. dollar.
Cash cost per ounce of gold sold, net of by-product credits, in the fourth quarter of 2020 of $378 was $29
higher than the corresponding period in 2019 due primarily to a higher cost per ounce of gold sold as a
result of lower gold grades in concentrate sold. Cash cost per ounce of gold sold, net of by-product credits,
in 2020 of $341 was $84 lower than 2019 due primarily to a lower cost per ounce of gold sold as a result of
higher gold grades.
All-in sustaining cost in the fourth quarter of 2020 of $573 was $80 higher than the corresponding period in
2019 due primarily to the impact of lower gold grades in concentrate sold in the period. All-in sustaining
cost in 2020 of $518 was $78 lower than 2019 due primarily to a lower cost per ounce of gold sold as a
result of higher gold grades, partially offset by higher cash outlays for sustaining capital expenditures and
higher allocated general and administrative expenses.
Net earnings / Adjusted net earnings
Net earnings and adjusted net earnings in the fourth quarter of 2020 were $17.5 million compared to $21.9
million in the corresponding period in 2019 due primarily to lower volumes of payable gold in concentrate
sold as a result of the timing of deliveries in 2019 and lower gold grades in concentrate sold, partially offset
by higher realized gold prices.
Net earnings and adjusted net earnings in 2020 were $90.8 million compared to $22.2 million in 2019 due
primarily to additional concentrate deliveries reflecting a full year of production, higher realized gold prices
and a lower cost per tonne.
27 I DUNDEE PRECIOUS METALS INC.
The following table summarizes the key drivers affecting the change in adjusted net earnings:
$ millions
Ended December 31,
Adjusted net earnings - 2019
Higher (lower) gold sold
Higher realized gold prices
(Higher) lower cost per tonne concentrate sold(1)
Income taxes & other
Lower (higher) depreciation related to volumes sold
Adjusted net earnings - 2020
1) Excludes impact of depreciation and foreign exchange.
Capital expenditures
Three
Twelve
Months Months
22.2
81.0
17.0
10.7
(7.7)
(32.4)
90.8
21.9
(15.4)
7.2
(0.7)
1.2
3.3
17.5
Capital expenditures during the fourth quarter of 2020 of $4.6 million were $1.8 million higher than the
corresponding period in 2019 due primarily to spending on margin improvement projects. Capital
expenditures in 2020 of $15.5 million were $20.9 million lower than 2019 due primarily to the completion of
construction in the second quarter of 2019, partially offset by increased spending on sustaining capital
expenditures reflecting a full year of production and costs related to a life of mine grade control drilling
program initiated in 2020. Capital expenditures in 2020 exceeded guidance due primarily to the acceleration
of the grade control drilling program.
Prepaid forward gold sales arrangement
In September 2016, the Company entered into a prepaid forward gold sales arrangement with several of
DPM’s existing lenders whereby the Company would deliver 45,982 ounces of gold on specified dates over
a 21-month period commencing in May 2019 in exchange for an upfront cash prepayment of $50.0 million.
In March 2019, the Company amended its prepaid forward gold sales arrangement whereby gold deliveries
for the first six months originally scheduled to commence in May 2019 were delivered during the period
from October 2019 to March 2020 in addition to the existing quantities due during this period. As a result,
total quantities of gold to be delivered increased by 228 ounces to 46,210 ounces. Deliveries of this gold
were in the form of unallocated gold credits sourced from any of the Company’s own mines and occurred
over a 15-month period from October 2019 to December 2020 in satisfaction of the upfront cash
prepayment of $50.0 million that was received in September 2016.
The cash prepayment of $50.0 million was recorded as deferred revenue in the consolidated statements of
financial position, and subsequently recognized, together with a deemed financing cost, as revenue when
deliveries were made under the prepaid forward gold sales arrangement.
During the fourth quarter and twelve months of 2020, 6,993 ounces and 34,087 ounces of gold, respectively,
were delivered pursuant to the prepaid forward gold sales arrangement and as a result, $9.6 million and
$46.7 million was transferred from deferred revenue to revenue during the fourth quarter and twelve months
of 2020, respectively. In December 2020, the Company completed its final delivery of gold under this
arrangement.
FOURTH QUARTER 2020 I 28
Tsumeb – Selected Operational and Financial Highlights
$ thousands, unless otherwise indicated
Ended December 31,
Operational Highlights
Complex concentrate smelted (mt):
Three Months
Twelve months
2020
2019
2020
2019
Chelopech
Third parties
Total complex concentrate smelted
Cash cost per tonne of complex concentrate
smelted(1),(2)
Acid production (mt)
Acid deliveries (mt)
Financial Highlights
Toll revenue(3)
Acid revenue
Total revenue
Cost of sales(4)
Impairment charge
Earnings (loss) before income taxes
Adjusted earnings (loss) before interest, taxes,
depreciation and amortization (2)
Net earnings (loss)
Adjusted net earnings (loss)(2)
Capital expenditures incurred:
Growth(2)
Sustaining(2)
Total capital expenditures
19,469
33,015
52,484
406
53,803
52,776
30,716
4,102
34,818
28,213
-
6,414
9,847
6,414
6,414
187
4,578
4,765
15,799
32,815
48,614
465
52,539
23,363
20,940
2,683
23,623
32,078
107,000
(116,646)
(2,164)
(116,646)
(9,646)
85,883
146,007
231,890
377
249,235
259,798
125,201
21,929
147,130
124,926
-
18,843
79,233
136,056
215,289
421
223,009
199,205
118,467
22,226
140,693
140,651
107,000
(114,111)
36,682
18,843
18,843
23,181
(114,111)
(7,111)
-
10,478
10,478
1,985
7,546
9,531
136
16,006
16,142
1) Cash cost per tonne of complex concentrate smelted represents cost of sales less depreciation and amortization and net of revenue related to the sale of acid,
divided by the volumes of complex concentrate smelted.
2) Refer to the “Non-GAAP Financial Measures” section of this MD&A for more information, including reconciliations of these Non-GAAP measures.
3) Includes deductions for stockpile interest and favourable or unfavourable estimated metal recoveries.
4) Cost of sales includes depreciation of $2.8 million (2019 – $6.7 million) and $15.1 million (2019 – $27.3 million) in the fourth quarter and twelve months of 2020,
respectively.
Review of Tsumeb Results
Health and Safety
Despite continually improving safety statistics and a constant focus on health and safety, DPM suffered a
fatality as a result of an incident on November 19, 2020 at the Tsumeb smelter which occurred while an
employee was conducting maintenance activities in the waste processing plant. Despite the Company’s
best efforts to respond to the situation, the employee tragically succumbed to his injuries. A full
investigation, led by an external expert, has been conducted to identify the root cause and the contributing
factors for the incident. Recommendations from the investigation have been and are continuing to be
implemented.
Production & acid deliveries
Complex concentrate smelted during the fourth quarter of 2020 of 52,484 tonnes was 8% higher than the
corresponding period in 2019 due primarily to a 30-day maintenance shutdown that took place in the fourth
quarter of 2019 compared to a 4-day interruption due to a fatality in the fourth quarter of 2020, partially
offset by operational challenges with the offgas system and reduced converter campaign life in the period.
Complex concentrate smelted in 2020 of 231,890 tonnes was 8% higher than 2019 due primarily to the 30-
day maintenance shutdown taken in 2019 and a steadier state of operations in 2020, partially offset by a
30-day COVID-19 related curtailment in April 2020 in response to a government directive aimed at limiting
staffing levels.
29 I DUNDEE PRECIOUS METALS INC.
Acid production in the fourth quarter and twelve months of 2020 of 53,803 tonnes and 249,235 tonnes,
respectively, was 2% and 12% higher than the corresponding periods in 2019 as a result of increased
concentrate throughput. Acid production in the fourth quarter of 2020 was also impacted by lower sulfur in
concentrate smelted.
Acid deliveries in the fourth quarter and twelve months of 2020 of 52,776 tonnes and 259,798 tonnes,
respectively, were 126% and 30% higher than the corresponding periods in 2019 due primarily to the 30-
day maintenance shutdown and a temporary disruption of acid deliveries to accommodate customer
requirements, in each case during the fourth quarter of 2019.
Cash cost per tonne of complex concentrate smelted, net of by-product credits
Cash cost per tonne of complex concentrate smelted in the fourth quarter and twelve months of 2020 of
$406 and $377, respectively, was 13% and 10% lower than the corresponding periods in 2019 due primarily
to higher volumes of complex concentrate smelted, the impact of a weaker ZAR relative to the U.S. dollar
and higher acid deliveries, partially offset by lower acid prices.
Net earnings (loss) / Adjusted net earnings (loss)
Net earnings in the fourth quarter and twelve months of 2020 of $6.4 million and $18.8 million compared to
a net loss of $116.6 million and $114.1 million in the corresponding periods in 2019, which included a fourth
quarter impairment charge of $107.0 million.
Adjusted net earnings, which exclude the 2019 impairment charge, in the fourth quarter and twelve months
of 2020 were $6.4 million and $18.8 million, respectively, compared to an adjusted net loss of $9.6 million
and $7.1 million in the corresponding periods in 2019. The improvement in adjusted net earnings period
over period was also due to lower depreciation as a result of the impairment charge, higher volumes of
complex concentrate smelted, a weaker ZAR relative to the U.S. dollar, higher acid deliveries and higher
estimated metal recoveries, partially offset by lower acid prices and lower toll rates.
The following table summarizes the key drivers affecting the change in adjusted net earnings (loss):
$ millions
Ended December 31,
Adjusted net loss – 2019
Lower depreciation
Higher volumes of complex concentrate smelted
Weaker ZAR(1)
Other
Lower deductions for stockpile interest
Higher estimated metal recoveries
Customer mix & lower acid prices
Lower (higher) operating expenses(2)
Lower toll rates
Adjusted net earnings – 2020
Three
Twelve
Months Months
(7.1)
12.2
8.7
8.6
3.9
2.8
0.6
(2.7)
(2.8)
(5.4)
18.8
(9.6)
3.9
3.4
1.2
1.0
1.3
9.4
(1.0)
1.1
(4.3)
6.4
1) Includes realized losses on foreign exchange option contracts of $0.1 million and $3.5 million in the fourth quarter and twelve months of 2020, respectively,
compared to realized gains on foreign exchange option contracts of $nil and $0.7 million in the corresponding periods in 2019.
2) Excludes impact of depreciation and foreign exchange.
Capital expenditures
Capital expenditures during the fourth quarter and twelve months of 2020 of $4.8 million and $9.5 million,
respectively, were $5.7 million and $6.6 million lower than the corresponding periods in 2019, which were
impacted by the maintenance shutdown in the fourth quarter of 2019. 2020 capital expenditures were below
guidance due to delays in starting certain projects as a result of COVID-19 and the impact of a weaker
ZAR.
FOURTH QUARTER 2020 I 30
REVIEW OF CORPORATE & OTHER SEGMENT RESULTS FROM CONTINUING OPERATIONS
The Corporate & Other segment results include corporate general and administrative expenses, corporate
social responsibility expenses, exploration and evaluation expenses, and other income and expense items
that do not pertain directly to an operating segment.
The following table summarizes the Company’s selected Corporate & Other segment results:
$ thousands
Ended December 31,
Financial Highlights
General and administrative expenses
Exploration and evaluation expenses(1)
Loss before income taxes
Adjusted loss before interest, taxes, depreciation
and amortization
Net loss attributable to common shareholders from
continuing operations
Adjusted net loss from continuing operations(2)
Three Months
Twelve months
2020
2019
2020
2019
9,378
4,491
(14,937)
9,551
3,548
(16,245)
30,604
13,262
(47,915)
28,191
10,734
(44,267)
(17,366)
(15,677)
(50,788)
(43,017)
(12,008)
(15,132)
(16,635)
(17,086)
(43,397)
(49,037)
(46,246)
(50,117)
1) Includes evaluation expenses related to the Timok gold project of $4.0 million (2019 - $1.7 million) and $8.1 million (2019 – $3.2 million) in the fourth quarter and
twelve months of 2020, respectively.
2) Excludes net gains on Sabina special warrants.
General and administrative expenses
General and administrative expenses in the fourth quarter of 2020 of $9.4 million was comparable to the
corresponding period in 2019. General and administrative expenses in 2020 of $30.6 million was $2.4
million higher than 2019 due primarily to higher share-based compensation related to increases in DPM’s
share price, partially offset by lower operating costs, due in part to the impact of COVID-19.
Exploration and evaluation expenses
Exploration and evaluation expenses in the fourth quarter and twelve months of 2020 were $4.5 million and
$13.3 million, respectively, up from $3.5 million and $10.7 million in the corresponding periods in 2019 due
primarily to the evaluation work related to the Timok gold project.
For a more detailed discussion on the Company’s exploration activities, refer to the “Exploration” section
contained in this MD&A. For a more detailed discussion on the Timok gold project, refer to the “Development
and Other Major Projects” section contained in this MD&A.
REVIEW OF DISCONTINUED OPERATIONS
MineRP Disposition
On December 22, 2020, the Company entered into a definitive agreement with Epiroc for the sale of its
interest in MineRP. The MineRP Disposition is subject to South African competition review approval and is
expected to close in the first half of 2021. Under the MineRP Disposition, the estimated consideration for
DPM’s fully diluted 70% equity interest in MineRP and the repayment of DPM shareholder loans consists
of (i) approximately $40 million in cash on closing from the buyer subject to a working capital adjustment
following closing and (ii) potential additional proceeds from an earn-out of up to $28.7 million, which are
payable on the achievement of certain revenue targets by MineRP in 2021 and 2022.
Financial highlights
Revenue in the fourth quarter and twelve months of 2020 of $2.6 million and $11.5 million, respectively,
was $1.6 million and $3.2 million lower than the corresponding periods in 2019 due primarily to COVID-19
related delays that impacted starting up new projects and converting a growing pipeline of new business.
31 I DUNDEE PRECIOUS METALS INC.
Net loss from discontinued operations attributable to common shareholders in 2020 was $3.1 million
compared to a loss of $4.3 million in 2019.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2020, the Company had cash of $149.5 million, investments valued at $106.6 million
primarily related to its 9.4% interest in Sabina, 19.4% interest in INV and 9.9% interest in Velocity, and
$150.0 million of undrawn capacity under its RCF.
The Company’s liquidity is impacted by several factors which include, but are not limited to, gold, copper
and acid market prices, production levels, capital expenditures, operating cash costs, interest rates and
foreign exchange rates. These factors are monitored by the Company on a regular basis.
As at December 31, 2020, the Company’s cash resources and available lines of credit under its RCF
continue to provide sufficient liquidity and cash resources to meet its current operating and capital
expenditure requirements, all contractual commitments, as well as a number of margin improvement and
growth opportunities. The Company may, from time to time, raise additional capital to ensure it maintains
its financial strength and has sufficient liquidity to support its discretionary growth capital projects and the
overall needs of the business.
As part of the Company’s assessment of the potential implications associated with the COVID-19 pandemic,
the Company assessed its financial resources as at December 31, 2020 and concluded that it has sufficient
available cash resources to manage the potential impacts that could reasonably be expected to arise.
Capital allocation and declaration of dividend
As part of its strategy, the Company adheres to a disciplined capital allocation framework that is based on
three fundamental considerations – balance sheet strength, reinvestment in the business, and the return of
capital to shareholders. Maintaining a strong balance sheet includes ensuring adequate liquidity, managing
within prudent financial metrics, and building a strong cash position to support accretive growth.
Reinvestment in the business includes investing in its operating assets to sustain and optimize
performance; investing in resource development to extend the life of its mines and to identify new gold
resources; further advancing existing resources towards production; as well as investing in new projects to
grow beyond its existing asset base. Returning capital to shareholders includes dividends, and under
certain circumstances, opportunistic share repurchases. These alternatives are not mutually exclusive and
are assessed in a balanced manner with a view to maximizing total shareholder returns over the long-term.
With Ade Tepe contributing its first full year of production since its successful commissioning and ramp-up
in 2019, 2020 marked the beginning of a period of significant free cash flow generation, which will be used
to further strengthen DPM’s balance sheet, reinvest in the business, and return cash to shareholders by
way of dividends.
On February 13, 2020, May 6, 2020, July 30, 2020 and November 12, 2020, the Company declared a
quarterly dividend of $0.02 per common share payable to shareholders of record on March 31, 2020, June
30, 2020, September 30, 2020 and December 31, 2020. On December 8, 2020, the Company announced
a 50% increase to its quarterly dividend, which commenced with its fourth quarter dividend previously
announced on November 12, 2020, resulting in aggregate dividends of $0.09 per common share being
declared in 2020 and $16.3 million being deducted from retained earnings in the consolidated statements
of changes in shareholders’ equity for the year ended December 31, 2020. The Company paid $10.9 million
of these dividends, which was included in cash used in financing activities in the consolidated statements
of cash flows for the year ended December 31, 2020 and recognized a dividend payable of $5.4 million in
accounts payable and accrued liabilities in the consolidated statements of financial position as at December
31, 2020.
On February 11, 2021, the Company declared a quarterly dividend of $0.03 per common share payable on
April 15, 2021 to shareholders of record on March 31, 2021.
FOURTH QUARTER 2020 I 32
The Company’s dividend has been set at a level that is considered to be sustainable based on the
Company’s free cash flow outlook and is expected to allow the Company to build additional balance sheet
strength to support further growth, a key element of DPM’s strategy. The declaration, amount and timing of
any future dividend are at the sole discretion of the Board of Directors and will be assessed based on the
Company’s capital allocation framework, having regard for the Company’s financial position, overall market
conditions, and its outlook for sustainable free cash flow, capital requirements, and other factors considered
relevant by the Board of Directors.
Cash flow from Continuing Operations
The following table summarizes the Company’s cash flow activities of continuing operations:
$ thousands
Ended December 31,
Cash provided from operating activities, before
changes in non-cash working capital
Changes in non-cash working capital
Cash provided from operating activities
Cash used in investing activities
Cash used in financing activities
Increase in cash
Cash at beginning of period
Cash at end of period
Three Months
Twelve months
2020
2019
2020
2019
50,124
20,412
70,536
(16,828)
(5,049)
48,659
100,873
149,532
33,120
17,629
50,749
(28,088)
(16,678)
5,983
15,300
21,283
248,605
(51,640)
196,965
(42,551)
(26,165)
128,249
21,283
149,532
112,613
(15,735)
96,878
(69,550)
(23,004)
4,324
16,959
21,283
The primary factors impacting period-over-period cash flow movements are summarized below.
Operating Activities of Continuing Operations
Cash provided from operating activities in the fourth quarter of 2020 of $70.5 million was $19.8 million
higher than the corresponding period in 2019 due primarily to higher realized gold and copper prices,
partially offset by lower volumes of payable metals in concentrate sold as a result of the timing of
concentrate deliveries.
Cash provided from operating activities in 2020 was $197.0 million compared to $96.9 million in 2019 and
does not fully reflect the significant increase in earnings in 2020 as a result of an increase in non-cash
working capital of $51.6 million due primarily to longer settlement terms on Ada Tepe sales, increased
deliveries and higher gold prices.
In addition, during the fourth quarter and twelve months of 2020, Ada Tepe delivered 6,993 ounces and
34,087 ounces of gold, respectively, pursuant to the prepaid forward gold sales arrangement resulting in
$9.6 million and $46.7 million of deferred revenue being recognized in revenue during the fourth quarter
and twelve months of 2020, respectively, with no corresponding impact on cash as these deliveries were
in partial satisfaction of the $50.0 million of upfront proceeds received in 2016. In December 2020, the
Company completed its final delivery of gold under this arrangement.
Cash provided from operating activities, before changes in non-cash working capital, during the fourth
quarter and twelve months of 2020 was $50.1 million and $248.6 million, respectively, compared to $33.1
million and $112.6 million in the corresponding periods in 2019. These increases are consistent with the
underlying improvement in the Company’s financial performance during the period as well as the same
factors affecting cash flow from operating activities, with the exception of changes in non-cash working
capital.
Investing Activities of Continuing Operations
Cash used in investing activities in the fourth quarter and twelve months of 2020 was $16.8 million and
$42.6 million, respectively, compared to $28.1 million and $69.6 million in the corresponding periods in
2019.
33 I DUNDEE PRECIOUS METALS INC.
The following table provides a summary of the Company’s cash outlays for capital expenditures of
continuing operations:
$ thousands
Ended December 31,
Chelopech
Tsumeb
Ada Tepe
Other
Total cash capital expenditures
Three Months
Twelve months
2020
5,270
3,475
2,905
61
11,711
2019
5,309
12,217
1,878
568
19,972
2020
15,955
6,943
11,661
2,997
37,556
2019
16,181
18,224
32,466
2,016
68,887
Cash outlays for capital expenditures in the fourth quarter and twelve months of 2020 of $11.7 million and
$37.6 million, respectively, were $8.3 million and $31.3 million lower than the corresponding periods in
2019. The year-over-year decrease was due primarily to completion of construction at Ada Tepe in the
second quarter of 2019 and the maintenance shutdown at Tsumeb in the fourth quarter of 2019.
During the fourth quarter of 2020, DPM acquired a 9.9% equity interest in Velocity for a total cost of $5.1
million.
Financing Activities of Continuing Operations
Cash used in financing activities in the fourth quarter and twelve months of 2020 was $5.1 million and $26.2
million, respectively, compared to $16.7 million and $23.0 million in the corresponding periods in 2019.
The primary factors impacting the movement in financing activities are summarized below:
(cid:2) Net repayments under the RCF in the fourth quarter and twelve months of 2020 were $nil and
$10.0 million, respectively, compared to $17.0 million and $19.0 million in the corresponding
periods in 2019; and
(cid:2) Dividends paid in the fourth quarter and twelve months of 2020 were $3.6 million and $10.9
million, respectively, compared to $nil in the corresponding periods in 2019.
Financial Position
$ thousands
As at
Cash
Accounts receivable, inventories and other current assets
Assets held for sale
Investments at fair value
Non-current assets, excluding investments at fair value
Total assets
Current liabilities
Liabilities held for sale
Non-current liabilities
Equity attributable to common shareholders
Non-controlling interests
December December
31, 2019
23,440
81,586
-
59,362
620,322
784,710
109,583
-
82,233
586,616
6,278
31, 2020
149,532
138,787
30,713
106,595
549,233
974,860
79,073
6,003
84,500
798,669
6,615
Increase/
(Decrease)
126,092
57,201
30,713
47,233
(71,089)
190,150
(30,510)
6,003
2,267
212,053
337
Cash increased by $126.1 million to $149.5 million during 2020 due primarily to strong operating
performance in 2020 combined with higher gold prices. Accounts receivable, inventories and other current
assets increased by $57.2 million to $138.8 million due primarily to an increase in accounts receivable as
a result of longer settlement terms on Ada Tepe sales, increased deliveries and higher gold prices. Non-
current assets, excluding investments at fair value, decreased by $71.1 million to $549.2 million due
primarily to depreciation and depletion and reclassification of MineRP non-current assets to assets held for
sale, partially offset by capital expenditures.
FOURTH QUARTER 2020 I 34
Current liabilities decreased by $30.5 million to $79.1 million during 2020 due primarily to the decrease in
deferred revenue related to the settlement of the prepaid forward gold sales arrangement, with the final
delivery made in December 2020. Non-current liabilities increased by $2.3 million to $84.5 million due
primarily to an increase in share-based compensation as a result of the increase in DPM’s share price in
2020 and an increase in rehabilitation provisions, partially offset by repayments under the RCF. Equity
attributable to common shareholders increased by $212.1 million to $798.7 million reflecting 2020 net
earnings generated, partially offset by declared dividends.
Contractual Obligations, Commitments and Contingencies
The Company had the following minimum contractual obligations and commitments as at December 31,
2020:
$ thousands
Lease obligations
Capital commitments
Purchase commitments
Other obligations
Total contractual obligations and commitments
up to 1 year 1 – 5 years over 5 years
871
-
1,176
58
2,105
5,350
4,923
13,655
648
24,576
14,000
-
16,924
510
31,434
Total
20,221
4,923
31,755
1,216
58,115
As at December 31, 2020, Tsumeb had approximately $76.9 million (December 31, 2019 – $62.9 million)
of recoverable third party in-process secondary materials, which it is obligated to process and return,
generally in the form of blister, to IXM S.A. (“IXM”) pursuant to a tolling agreement (the “Tolling Agreement”).
In December 2019, the Company and IXM agreed to amend the existing Tolling Agreement to provide for
lower stockpile interest on excess secondary materials, the establishment of the December 31, 2019 excess
secondary balances as the new targeted levels above which secondary materials would be required to be
purchased by the Company, an extension of the date by which the Company must eliminate excess
secondary materials to March 31, 2021, and an extension of the Tolling Agreement by one year to
December 31, 2023. During 2020, the Company purchased $2.5 million of secondary materials, of which
$1.0 million was included in inventories and $1.5 million in other long-term assets in the consolidated
statements of financial condition. As at December 31, 2020, the value of excess secondary materials was
approximately $45.4 million, which was approximately $29.2 million above the targeted levels under the
Tolling Agreement. As at December 31, 2020, IXM agreed to suspend the quarterly requirement to
purchase secondary materials above targeted levels until April 30, 2021.
Debt
As at December 31, 2020, the Company’s total outstanding debt was $nil (December 31, 2019 – $10.0
million) and the Company was in compliance with all of its debt covenants.
As at December 31, 2020, the Company’s total debt, net of cash, as a percentage of total capital, was
negative 23% (December 31, 2019 – negative 2%).
DPM RCF
DPM has a committed RCF with a consortium of banks. In June 2020, the Company amended the RCF by
reducing the tranche B of the facility from $175.0 million to $150.0 million and extending its maturity date
from February 2022 to February 2023. In early February 2021, DPM’s RCF lenders approved the RCF
being extended by one year to February 2024, subject to the execution of formal documentation. The
Company’s borrowing spread above LIBOR is 2.5%, and can range between 2.5% and 3.5% depending
upon the Company’s funded net debt to adjusted EBITDA (“Debt Leverage Ratio”), as defined in the RCF
agreement. The RCF is secured by pledges of the Company’s investments in Ada Tepe, Chelopech and
Tsumeb and by guarantees from each of these subsidiaries.
The RCF contains financial covenants that require DPM to maintain: (i) a Debt Leverage Ratio below 3.75:1,
(ii) a current ratio (including the addition of any unutilized credit within tranche B to current assets) of greater
35 I DUNDEE PRECIOUS METALS INC.
than 1.5:1, and (iii) a minimum net worth of $500.0 million plus (minus) 50% of ongoing annual net earnings
(loss).
As at December 31, 2020, $nil (December 31, 2019 – $10.0 million) was drawn under the RCF.
Tsumeb Overdraft Facility
In April 2020, Tsumeb increased its demand overdraft facility from Namibian $50.0 million ($3.4 million) to
Namibian $100.0 million ($6.8 million). This facility is guaranteed by DPM and bears interest at a rate equal
to the Namibian Prime Lending Rate minus 0.5%. As at December 31, 2020 and December 31, 2019, $nil
was drawn from this facility.
Credit Agreements and Guarantees
Chelopech and Ada Tepe have a $16.0 million multi-purpose credit facility that matures on November 30,
2022. This credit facility is guaranteed by DPM. As at December 31, 2020, $6.1 million (December 31, 2019
– $5.7 million) had been utilized against this multi-purpose revolving facility in the form of letters of credit
and letters of guarantee.
Chelopech and Ada Tepe also have a Euro 21.0 million ($25.8 million) credit facility to support mine closure
and rehabilitation obligations. This credit facility matures on November 30, 2022 and is guaranteed by DPM.
As at December 31, 2020, $25.8 million (December 31, 2019 – $23.6 million) had been utilized against this
credit facility in the form of letters of guarantee, which were posted with the Bulgarian Ministry of Energy.
Ada Tepe has a $5.3 million multi-purpose credit facility that matures on November 30, 2022. This credit
facility is guaranteed by DPM. As at December 31, 2020, $0.2 million (December 31, 2019 – $0.1 million)
had been utilized against this multi-purpose revolving facility in the form of letters of credit and letters of
guarantee.
Advances under these facilities bear interest at a rate equal to the one month U.S. Dollar LIBOR plus 2.5%.
The letters of credit and guarantee bear a fee of 0.6% based on the amounts issued.
Outstanding Share Data
DPM’s common shares are traded on the TSX under the symbol DPM. As at February 11, 2021,
181,510,125 common shares were issued and outstanding.
DPM also has 2,806,087 stock options outstanding as at February 11, 2021 with exercise prices ranging
from Cdn$2.21 to Cdn$8.50 per share (weighted average exercise price – Cdn$3.56 per share).
Normal Course Issuer Bid
Effective February 21, 2020, DPM renewed its normal course issuer bid (the “Bid”) to repurchase certain of
its common shares (“Shares”) through the facility of the TSX.
The number of Shares that can be purchased during the period of the Bid, which commenced February 28,
2020 and terminates on February 27, 2021, will not exceed 9,000,000 Shares, being approximately 5% of
the outstanding Shares as of February 18, 2020. Pursuant to the terms of the Bid, the Company will not
acquire on any given trading day more than 134,336 Shares, representing 25% of the average daily volume
of Shares for the six months ended January 31, 2020. The price that the Company will pay for Shares in
open market transactions will be the market price at the time of purchase and any Shares that are
purchased under the Bid will be cancelled. The actual timing and number of Shares that may be purchased
pursuant to the Bid will be subject to DPM’s ongoing capital requirements and management’s view that,
from time to time, DPM’s Shares may trade at prices well below the underlying value of the Company and
during these periods the repurchase of Shares represents an excellent opportunity to enhance shareholder
value. No purchases of Shares have been made under the Bid as at the date of this MD&A.
FOURTH QUARTER 2020 I 36
The Board of Directors has approved the renewal of the Bid (the “New Bid”), however, the renewal is subject
to acceptance by the TSX. If accepted, the New Bid will be made in accordance with the applicable rules
and policies of the TSX and applicable Canadian securities laws. Pursuant to the New Bid, it is expected
that the Company will be able to purchase up to 9,000,000 common shares, representing approximately
5% of the total issued and outstanding common shares as of February 8, 2021, over a period of twelve
months commencing after TSX approval.
A copy of the TSX Form 12 for the Bid and the New Bid (once filed) can be obtained, without charge, by
contacting the Company at info@dundeeprecious.com.
Other
The Company is involved in legal proceedings, from time to time, arising in the ordinary course of its
business. It is not expected that any material liability will arise from current legal proceedings or have a
material adverse effect on the Company’s future business, operations or financial condition.
FINANCIAL INSTRUMENTS
Investments at fair value
As at December 31, 2020, the Company’s investments at fair value were $106.6 million (December 31,
2019 - $59.4 million), the vast majority of which related to the value of its investment in Sabina common
shares and special warrants and its investment in INV and Velocity’s common shares.
As at December 31, 2020, DPM held: (i) 30,537,746 common shares of Sabina or 9.4% of the outstanding
common shares and (ii) 5,000,000 Series B special warrants, which will be automatically exercised upon a
positive production decision with respect to the Back River project or upon the occurrence of certain other
events. Each of the special warrants is exercisable into one common share until 2044.
The fair value of the Sabina special warrants was based on the fair value of the Sabina common shares,
which was determined based on the closing bid prices as at December 31, 2020. For the three and twelve
months ended December 31, 2020, the Company recognized unrealized gains on the Sabina special
warrants of $3.2 million (2019 – $0.4 million) and $5.7 million (2019 – $3.9 million), respectively, in other
(income) expense in the consolidated statements of earnings (loss).
During the fourth quarter of 2020, DPM acquired a 9.9% equity interest in Velocity for a total cost of $5.1
million.
For the three and twelve months ended December 31, 2020, the Company recognized unrealized gains on
publicly traded securities, which are primarily comprised of Sabina, INV and Velocity’s common shares, of
$22.8 million (2019 – $5.8 million) and $36.5 million (2019 – $16.6 million), respectively, in other
comprehensive income (loss) that will not be reclassified subsequently to profit or loss.
Commodity swap contracts
The Company enters into cash settled commodity swap contracts from time to time to swap future
contracted monthly average metal prices for fixed metal prices to eliminate or substantially reduce the metal
price exposure associated with the time lag between the provisional and final determination of concentrate
sales (“QP Hedges”).
As at December 31, 2020, the Company’s outstanding QP Hedges, all of which mature within six months
from the reporting date, are summarized in the table below:
Commodity hedged
Payable gold
Payable copper
Volume hedged
50,265 ounces
13,062,374 pounds
Weighted average fixed price
of QP Hedges
$1,882.13/ounce
$3.13/pound
37 I DUNDEE PRECIOUS METALS INC.
The Company also enters into production hedges (“Production Hedges”), from time to time, using cash
settled commodity swap contracts to reduce its future metal price exposures. Commodity swap contracts
are entered to swap future contracted monthly average prices for fixed prices. Commodity option contracts
are entered to provide price protection below a specified “floor” price and price participation up to a specified
“ceiling” price. These option contracts are comprised of a series of call options and put options (which when
combined create a price “collar”) that are generally structured so as to provide for a zero upfront cash cost.
As at December 31, 2020, the Company had outstanding commodity swap contracts in place in respect of
its projected copper production as summarized in the table below:
Year of projected
production
2021
Volume of copper hedged
(pounds)
6,195,886
Average fixed price
($/pound)
3.53
As at December 31, 2020, approximately 18% of projected payable copper to be sold in 2021 has been
hedged.
The Company designates the spot component of commodity swap contracts and the intrinsic value of the
commodity option contracts in respect of Production Hedges as cash flow hedges and the spot component
of commodity swap contracts in respect of QP Hedges as fair value hedges.
The fair value gain or loss on commodity swap contracts is calculated based on the corresponding LME
forward copper prices and New York Commodity Exchange forward gold and silver prices, as applicable.
As at December 31, 2020, the net fair value loss on all outstanding commodity swap contracts was $5.7
million (December 31, 2019 – $1.4 million), of which $0.1 million (December 31, 2019 – $nil) was included
in other current assets and $5.8 million (December 31, 2019 – $1.4 million) in accounts payable and accrued
liabilities.
The Company recognized net losses of $5.5 million (2019 – $1.9 million) and $11.1 million (2019 – $2.7
million) for the three and twelve months ended December 31, 2020, respectively, in revenue on these
commodity swap contracts.
Foreign exchange forward and option contracts
The Company enters into foreign exchange forward and option contracts from time to time to reduce the
foreign exchange exposure associated with projected operating expenses and capital expenditures
denominated in foreign currencies.
Foreign exchange forward contracts are entered to fix foreign exchange rates on future operating expenses
and capital expenditures. Foreign exchange option contracts are entered to provide price protection below
a specified “floor” rate and participation up to a specified “ceiling” rate. The option contracts entered are
comprised of a series of call options and put options (which when combined create a price “collar”) that are
structured so as to provide for a zero upfront cash cost.
As at December 31, 2020, the Company had outstanding foreign exchange option contracts in respect of a
portion of its projected Namibian dollar denominated operating expenses, which is linked to the ZAR, as
summarized in the table below:
Year of projected
operating expenses
2021
Amount hedged
in ZAR
1,426,200,000
Call options sold
weighted average ceiling rate
US$/ZAR
18.58
Put options purchased
weighted average floor rate
US$/ZAR
15.77
Approximately 80% of projected Namibian dollar operating expenses for 2021 have been hedged.
FOURTH QUARTER 2020 I 38
The Company designates the spot component of the foreign exchange forward contracts and the intrinsic
value of option contracts as cash flow hedges. The time value component of foreign exchange forward and
option contracts is treated as a separate cost of hedging.
The fair value gain or loss on these outstanding contracts is calculated based on foreign exchange forward
rates quoted in the market. As at December 31, 2020, the net fair value gain on all outstanding foreign
exchange option contracts was $6.4 million (December 31, 2019 – $3.9 million), of which was included in
other current assets.
For the three and twelve months ended December 31, 2020, the Company recognized unrealized gains of
$6.4 million (2019 – $1.4 million) and $3.4 million (2019 – $1.1 million), respectively, in other comprehensive
income (loss) on the spot component of the outstanding foreign exchange option contracts. The Company
also recognized realized losses of $0.1 million (2019 – realized gains of nil) and $3.5 million (2019 – realized
gains of $0.7 million), respectively, for the three and twelve months ended December 31, 2020 in cost of
sales on the spot component of settled contracts in respect of foreign denominated operating expenses.
For the three and twelve months ended December 31, 2020, the Company recognized unrealized gains of
$2.5 million (2019 – $4.4 million) and unrealized losses of $0.9 million (2019 – unrealized gains of $3.5
million), respectively, on the time value component of the outstanding foreign exchange option contracts in
other comprehensive income (loss) as a deferred cost of hedging.
The Company is also exposed to credit and liquidity risks in the event of non-performance by counterparties
in connection with its commodity swap contracts, and foreign exchange forward and option contracts. These
risks, which are monitored on a regular basis, are mitigated, in part, by entering into transactions with
financially sound counterparties and, where possible, ensuring contracts are governed by legally
enforceable master agreements.
EXPLORATION
Chelopech Mine
In 2020, a total of 45,441 metres of resource development diamond drilling was completed, which
comprised of:
(cid:2) 19,686 metres of grade control and drilling aimed to better define the shape and volume of existing
ore bodies;
(cid:2) 25,487 metres of extensional drilling, designed to explore for new mineralization along modeled
trends; and
(cid:2) 268 metres of exploration drilling which completed the testing of targets within the South East
breccia pipe zone (SEBPZ).
Resource development diamond drilling was concentrated on targets in upper levels of Chelopech deposit.
During the year block Blocks 5, 7, 19, 17, 10 and 25 were drilled in Central area of the Mine whilst Blocks
151, 149, 147 and 103 were drill tested in the Western area. In 2020, two new ore bodies were added to
the Mineral Resource inventory, Blocks 146 and 700. A review of the drilling program results is discussed
below.
Central Area
Blocks 5, 17 and 25
During the year, Blocks 5, 17 and 25, which are located in the Central area of the Chelopech deposit, were
explored. From three separate locations, a total of 909 metres of grade control drilling and 4,202 metres of
extensional drilling was completed. Drilling was designed to verify the continuity of mineralization along
strike on the upper levels of the blocks. From this program, several drill holes on the western flank of Block
25 between level 410 and 280 mRL returned narrow, structurally controlled ore bodies. Significant
intercepts from this program are presented in the table below from drill holes EXT149_360_07 and
EXT25_405_12.
39 I DUNDEE PRECIOUS METALS INC.
During the first quarter of 2020, six drill holes from level 405 were completed, testing the southern boundary
of Block 17 for possible extensions. A new area of mineralization was defined within the silica envelope of
Block 17, south of the main body. This zone was intersected in drill holes EXT17_405_06 & EXT17_405_07
(significant drill intercepts are shown in the table below). Other extensional holes from this program failed
to return economic mineralization. The new extension still is open in south-east direction. Additional drilling
is required to define the final shape and size.
North of Block 10
During 2020, 6,639 metres of diamond drilling were completed in the north-east flank of the Chelopech
deposit. The target is a section of the mine to the north of Block 10, which is ranked favorably based on
structural trends, geochemical vectoring and the presence of numerous historic records of advanced argillic
alteration in drilling and underground development, occasionally with ore grade intervals. Drilling was
designed to explore for breccia hosted, high sulphidation style copper-gold mineralization.
The results of this program outlined a wide advanced-argillic alteration envelope to the north of Block 10,
dipping in a south – southeast direction. A single significant intersection from hole EXT10_555_37 is
presented in the table below. Other drill holes from this program returned weak mineralization, below the
reporting criteria. This area is still open in numerous directions and will require further drilling to support the
development of geology and Mineral Resource models.
Block 19
In the second quarter of 2020, a total of 1,371 metres of underground diamond drilling was completed on
the western margin of Block 19, between 460 mRL and 360 mRL. Drill holes, designed in a north-northwest
direction, intersected volcanoclastic and coherent subvolcanic intrusives with sericitic to argillic alteration.
Assay results returned low-continuity, erratic mineralization with grades below the reporting criteria.
Block 7
Block 7 is a narrow, steeply dipping zone of mineralization located situated between 400 mRL and 700
mRL, to the north of Block 8 and about 200 metres east of Block 18. The mineralization is a typical high-
sulfidation mineral assemblage presented as a stockwork bearing pyrite, enargite and tennantite.
During 2020, seven holes were undertaken to test the upper levels of Block 7 and the area to the west. Two
of the holes expanded the existing high-grade zones near to the boundary of overlying post mineral
sandstones and host rocks of the Chelopech formation. Significant intercepts within holes EXT7_680_01
and EXT7_680_03 are presented in the table below. The remaining holes drilled to the west of Block 7
failed to intersect significant mineralization.
Block 700
Block 700 is located in central mining area, approximately 150 metres above Block 17. Mineralization
follows a well-defined NW – SE structural trend. Drilling in this area started in 2019 from surface and then
subsequently from underground drilling platforms. Block 700 mineralization is comprised of sulphides,
predominantly pyrite, hosted within a quartz-barite vein coincident within a wide silica alteration zone. The
drilling program in 2020 was designed to follow up on high grade mineralization delineated during 2019, in
order to generate larger and more coherent ore body volumes.
А total of 5,298.1 metres were drilled from underground drill cuddies ND-730-440-BP3 and ND-730-440-
BP10 to clarify the continuity of this mineralization and to look for extensions. Drill hole EXT700_505_01
returned positive results returning high-grade gold intersections from barite rich stockwork located within a
sericitic alteration zone. Such a mineralization style is atypical for the Chelopech deposit and will be a
subject for further investigation.
Drill hole EXT700_680_11, (interval shown in the table below) intersected ore mineralization on the contact
with post-mineral sandstones. This contact demarcates the boundary of the upper extents of Block 700.
FOURTH QUARTER 2020 I 40
The increased drill hole density in this area enhanced geological confidence, allowing Block 700 to be
included within the Mineral Resources inventories. Significant intersections from Block 700 are presented
in table below (EXT700_680_05, EXT700_680_07, EXT700_680_10 and EXT700_680_13). Drill holes
EXT700_680_06 and EXT700_680_09 designed to check for possible extension towards south failed to
return economic mineralization.
Block 700 mineralization is relatively rich in Auriferous pyrite but devoid of copper sulphide minerals.
Metallurgical testwork in the fourth quarter of 2020 showed that samples from Block 700 could be
concentrated into a salable pyrite concentrate at a relatively higher gold grade compared to other ore types
within the Chelopech deposit.
Western Area
Blocks 146, 147 and 149
During Q2 of 2020, an extensional drilling program commenced to test the area surrounding Blocks 147
and 149 for new ore bodies. As result of this program a new zone of mineralization, termed Block 146, was
defined. Block 146 is located 50 metres north of Block 149. Mineralization is located between level 130
mRL and 180 mRL, presented as massive to semi-massive sulfides, hosted predominantly by a
volcanoclastic breccia surrounded by a series of coherent subvolcanic intrusions. The final shape and size
this new zone will be subject to future work and remains open in northwest direction.
A total of 870 metres was drilled from a different position located south of Block 146, designed to follow up
on mineralization discovered during earlier drilling programs. The intersected mineralization from Block 146
comprised of disseminated pyrite-tennantite and minor chalcopyrite. Significant intercepts from holes
EXT146_210_03 and EXT146_210_04 are reported in the table below.
The upper levels of Block 147 were verified by a single drill hole, EXT149_220_02 which returned a
significant intercept, presented in the table below. The results indicate an upward extension of the 147 ore
body between 240 mRL and 270 mRL. Drill testing to further delineate the continuation of mineralization
above the current known extents of ore body in Block 147 will be planned.
Using a different drill cuddy 150-360-EXP, a subsequent drilling program was undertaken to test for upward
extensions of Block 149. Results from this drilling phase returned weak mineralization with grades under
the reporting criteria. Furthermore, the Block 149 grade control drilling program was conducted during the
year, from three cuddies on different elevations. As a result of this drilling, the contours of the high-grade
zone of Block 149 were expanded between 220 mRL and 130 mRL.
Block 151 & 103
Block 151 and 103 are located on the western flank of the Chelopech deposit, with both zones trending in
an SE-NW trend with a steep plunge to the NE. Two extensional drill holes were undertaken from the 405
level. They were designed in a south, south-westerly direction from Block 151 to explore a poorly tested
area between 490 mRL and 400 mRL. These extensional holes confirmed that this area is peripheral to the
productive system, demonstrating relatively lower-temperature hydrothermal alteration that has very low
potential to host mineralization. At the beginning of the holes, the alteration style transitions from argillic to
sericitic style, associated with the alteration enveloping Block 151, entering into the propylitic and hematitic
at the end.
Drilling in 2020 was focused on grade control drilling, designed to infill and to extend mineralization
discovered during earlier drilling programs. By means of grade control drilling, there was a significant
extension to the existing Block 151 contour along the western boundary between 410 mRL and 370 mRL.
Grade control drilling was also the focus in Block 103, to better define the orebody geometry in west part
of the block. As a result, the block contours on the eastern part of the ore body were extended between
levels 400 mRL and 370 mRL.
41 I DUNDEE PRECIOUS METALS INC.
Mineralized intercepts (gold equivalent (“AuEq”) cut-off grade of 3 g/t) received during 2020:
True
Width
(m)
10
12
168
126
HOLE ID
EAST
NORTH RL
AZ
DIP
FROM
TO
EXT10_555_37
6634
30076 558 329.9
-70 154.5
EXT146_210_03
EXT146_210_04
EXT149_220_02
EXT149_360_07
EXT17_405_06
EXT17_405_07
EXT25_405_12
EXT700_680_05
EXT700_680_07
EXT700_505_01
EXT700_680_10
EXT700_680_10
EXT700_680_11
EXT700_680_13
EXT7_680_01
EXT7_680_03
5470
5470
5579
5576
5775
5775
5773
6258
6258
6410
6258
6258
6258
6258
6263
6262
29802 210 335.4
-13.3
111
29802 210 330.6
-24.1
91.5
118.5
24.5
29738 224 338.6
9.3 241.5
252
29585 364
12.6
13.5
126
169.5
29500 412 28.3
-15.9
105
136.5
29500 412 17.3
-2.5
99
142.5
29500 413 340.5
11
237
247.5
29745 687
242
-19 154.5
165
29746 688 249.6
5.8 193.6
206.1
29627 501 267.6
-10
156
29745 687 250.3
-2.5 127.5
168
144
29745 687 250.3
-2.5 209.2
256.5
29745 688 250.3
-2.2
159
187.5
29744 688
258
15.2
150
187
29748 686
21.7
-34 133.5
148.5
10
32
30.5
43.5
10
10
12
11
15
21
22
20
11
29748 686
22.1
-45.5 148.5
165
14.3
AuEq
(g/t)
Au
(g/t)
Ag
(g/t)
Cu
(%)
4.48
6.92
5.78
9.54
7.84
5.3
5.94
9.48
4.75
3.04
1.15
4.04
6.12
4.97
2.87
3.02
7.8
4.5
18.17
0.70
8.36
2.80
14.43
0.84
81.16
1.66
8.63
3.72
17.4
1.39
1.18
1.42
295.14
0.81
183.44
0.12
4.5
4.46
236.73
0.02
3.14
3.99
7.36
3.85
6.21
4.88
6.67
3.06
58.05
0.04
3.82
164.36
0.08
7.34
52.39
0.01
3.8
133.87
0.02
6.14
369.06
0.03
4
50.83
0.42
4.9
29.93
0.86
1) Mineralized intercepts are located within the Chelopech Mine Concession and proximal to the mine workings.
2) AuEq calculation is based on the following formula: Au g/t + 2.06 x Cu %.
3) Minimum downhole width reported is 10 metres with a maximum internal dilution of 4.5 metres.
4) All holes are drilled with NQ diamond core.
5) Coordinates are in mine-grid.
6) No factors of material effect have hindered the accuracy and reliability of the data presented above.
7) No upper cuts applied.
Outlook
In the first quarter of 2021, the Mineral Resource development strategy for Chelopech will be focused on:
(cid:2) Additional drilling of the lower extents of Block 700 based on results from 2020, to define the
down-plunge extents of mineralization.
(cid:2) Continued resource development drilling in the areas North and North-west from Block 147, as
well as in Blocks 17 and 149.
(cid:2) Ongoing flexible planning of grade control drilling to support production requirements.
Sampling Analysis, Quality Assurance and Quality Control (“QAQC”) and Data Verification of
Chelopech Mine drill core
All drill cores are sampled in intervals up to a maximum of three metres, with 1.5 metres sample intervals
being the common length within mineralized zones. The dimensions of the mineralized zones far exceed
the standard sample length. All holes are drilled with NQ diamond core. NQ core is cut by diamond saw,
where one half of the core sample is submitted for assaying and the remaining half is retained in steel core
trays. All drill cores are photographed prior to cutting and/or sampling.
Following DPM exploration standard procedures and internationally accredited standards, a full suite of
certified reference materials, blanks and field duplicates are submitted to the laboratory with each batch of
samples. The overall quality control sample insertion rate is approximately 5% for reference materials, 2%
for blanks, and 5% for field duplicates.
FOURTH QUARTER 2020 I 42
Sample tickets are entered into the bags with a numbering system, which reconciles sample and assayed
results in the acQuire database. The average core recovery within the modeled resource constraints is
99.6% and the various phases of drill data show no issues with regards to recoveries. No relationship was
evident between core recoveries and the copper assay data, or the gold assay data. The weight of a core
sample varies between three and seven kilograms.
Diamond drill core is prepared and assayed at the SGS managed laboratory at Chelopech in Bulgaria,
which is independent of the Company. Samples are routinely assayed for copper, gold, silver, sulphur and
arsenic.
The Company’s Qualified Persons have verified that all results reported in this disclosure have passed
QAQC protocols. Further verification of results included comparison of assay data with geology, alteration
and mineralization logging data.
Chelopech Brownfield Exploration
During 2020, the brownfield exploration program at Chelopech was focused on the surface drilling of copper
gold targets at the Krasta, Wedge and West Shaft prospects within the Sveta Petka exploration license.
Drilling aimed to increase the level of geological understanding and to delineate additional mineral
resources to support registration of a Geological Discovery with the Bulgarian state authorities. A total of
35 drill holes (21,391 metres), as well as electromagnetic survey and geophysical modelling, were
completed. At the surrounding Brevene exploration license, geological mapping, rock sampling and
modelling of historical drill results in preparation for targeting and drilling at the Vozdol prospect were mainly
carried out.
West Shaft Prospect
An intensive drilling program is in progress at the West Shaft target, a newly discovered extension of the
Chelopech magmatic and hydrothermal system that is located approximately one kilometre southwest of
the Chelopech mine. A total of 8,135 metres have been drilled to date (9 holes completed and 1 ongoing
targeting a wide zone of phyllic altered phreatomagmatic breccia that hosts 30 to 50 metres of intense
advanced argillic alteration characterized by semi-massive, vein and stockwork styles of mineralization.
Due to the limitation of only two drill pads being available, and both being situated south of the target, the
follow-up involved directional drilling at about 80 to 120 metres spaced drill-stepouts towards the southwest,
northeast and at depth. The drilling to date confirmed the presence of extensive phyllic alteration and
narrower mineralized intervals along a steeply-dipping NE-SW and E-W trending mineralization zone that
has now been tested to a depth of more than 1,000 metres below surface. Additional drilling is ongoing
from a newly commissioned pad on the northern flank that will test the extension of mineralized zone at
shallower levels. Further to this, drilling will explore for an extension to the south where an additional zone
of gold-copper mineralization was identified within advanced argillic altered phreatomagmatic breccias,
approximately 250 metres southeast from the main mineralized zone.
Wedge Prospect
Drilling continues at the Wedge Target, situated on the northern edge of Chelopech mine, with a total of 9
holes (7,221 metres) completed in 2020. This total includes four closer-spaced follow up daughter holes
completed via directional drilling techniques aiming to extend the modelled NW-SE interpreted mineralized
zones and test the concept that these zones could represent extensions to Blocks 147 and 149 into the
Sveta Petka exploration license.
Additionally, one steep diamond hole has been completed and a follow up directional daughter hole is
ongoing, aiming to test a poorly explored area between the West Shaft and Wedge prospects that sits
below a 750 metre thick post-mineral sedimentary sequence. This drilling is aiming to intersect west and
northwest trending feeders interpreted from magnetic and magneto-telluric geophysical anomalies.
43 I DUNDEE PRECIOUS METALS INC.
Krasta Prospect
Diamond drilling at the Krasta Prospect, located approximately two kilometres northeast of the Chelopech
orebodies continued during the first half of 2020. Seventeen diamond drill holes (holes EX_KR_23 to 39)
totaling 6,035 metres were completed as part of the program. The aim was to extend existing higher-grade
intervals vertically and laterally. Early stage economic evaluation and geo-metallurgical domaining of Krasta
mineralization is underway and will be followed by drilling to extend mineralization into the Chelopech Mine
Concession, along with additional metallurgical testing and optimization.
Exploration activities for the first quarter of 2021 will be focused on the follow up drilling at the West Shaft
and Wedge Prospects within Sveta Petka exploration license aiming to delineate and extend the
mineralization, in preparation for formal declaration and registration of these prospect areas as a
Commercial Discovery with the Bulgarian state authorities.
Mineralized intercepts above gold equivalent (“AuEq”) cut-off grade of 1g/t (Krasta) and 3g/t
received from surface brownfield exploration drilling in 2020 at Chelopech:
HOLE ID
EAST
NORTH
RL
AZ
DIP
From
To
Length
(m)
True
width
(m)
AuEq
(g/t)
Au
(g/t)
Ag
(g/t)
Cu
(%)
Krasta Prospect
EX_KR_26
7195
30965
811
320
-40
171
177
and
190
211
6
21
EX_KR_28
7111
30823
821
320
-40
272.3
292
19.7
5
19
18
1.55
1.23
1.52
0.15
1.58
1.17
0.96
0.20
2.18
0.96
1.56
0.59
including:
287
292
5
4.5
3.49
1.29
1.55
1.07
EX_KR_30
7265
30937
787
325
-45
218.8
234
15.2
EX_KR_32
7135
30719
782
315
-65
350
355
EX_KR_33
7103
30956
854
325
-45
74
95
EX_KR_39
7111
30822
822
307
-32
260
270
including:
265
270
Wedge Prospect
5
21
10
5
14
5
18
9.5
4.8
1.65
1.38
1.39
0.13
1.01
0.62
0.42
0.19
1.54
0.86
1.66
0.33
2.33
1.15
1.98
0.58
3.25
1.48
2.91
0.86
EX_WZ_05
5388
30374
1053
229
-56
837.8
850
12.2
9
3.86
3.23
4.91
0.30
EX_WZ_07
5388
30374
1053
199
-27
969
974
5
4.7
3.26
0.33 36.00 1.42
West Shaft Prospect
EX_WS_01
4581
28641
754
15
-50
589
608.7
19.7
EX_WS_02
5086
28670
737
316
-52
793
805
12
ND
ND
3.04
2.28 11.16 0.37
3.35
2.60
8.49
0.37
1) Significant drill intercepts are located within the Sveta Petka Exploration license, except for intervals EX_KR_28, EX_KR_39 and EX_WZ_07 which are located
within the Chelopech Mine Concession.
2) Coordinates are in Chelopech mine-grid.
3) AuEq calculation is based on the following formula: Au g/t + 2.06 x Cu %.
4) For Krasta Prospect a cut-off grade of 1 g/t AuEq, 5 metres minimum length, 5 metres maximum internal dilution was used.
5) For West Shaft and Wedge Prospects a cut-off grade of 3 g/t AuEq, 5 metres minimum length, 5 metres maximum internal dilution was used.
6) EX_WZ_04 to EX_WZ_10 holes were completed with directional drilling using a Navi-Drill technique. The azimuth and dip values in the table are the
measurement at the end of Navi-Drilled interval.
7) True widths not reported at this stage for the West Shaft Prospect as additional data is required in order to define the geometry of the mineralization (ND – not
determined).
Ada Tepe Grade Control Drilling
During 2020, reverse circulation drilling was conducted in the all four pushbacks of the pit to ensure that
grade control drilling remains at least one year ahead of mining. In total, 82,303 metres were completed
mainly at a 5 by 5 metre spacing with three drill rigs. In particular the areas of pushback one from level 430
FOURTH QUARTER 2020 I 44
to the metamorphic basement (19,385 metres), pushback two area from level 420 to the base of the pit
(9,288 metres) and pushback three from surface to level 420 (50,835 metres).
Subsequently, reverse circulation infill drilling continued in the pushback four area to improve the data
coverage and support the geology model. A total of 2,795 metres was drilled as part of this campaign.
All results from pushback one drilling has now been received and updates to the geologic models has
commenced to support grade control model and mining activities. Analytical results are pending for
pushbacks two, three and four.
During the first quarter of 2021, 55,000 metres of grade control drilling are planned with four rigs. The focus
will be mainly in pushbacks two, three and four. Drilling will target infilling volumes that are scheduled to be
mined later in the mine life.
Ada Tepe Brownfield Exploration
Khan Krum Concession Area
Drilling commenced in the fourth quarter of 2020 at Surnak and Synap prospects, with a total of 9 drill holes
(2,465 metres) completed at the Surnak prospect and 2 drill holes (467 metres) completed at the Synap
prospect. The drilling program targeted under-explored northwestern part of the Surnak prospect and the
western part of the Synap prospect and was supported by a new conceptual structural and geological
model. Drilling will continue in the first quarter of 2021, targeting shallow extensions of mineralization at
Surnak. At Synap, the drilling confirmed the presence of gold mineralization in a relatively wide zone of
hydrothermal alteration close to the sediment-basement contact. Additional drilling is ongoing to test the
extent and grade tenor of the mineralization.
Mineralized intercepts above gold cut-off grade of 0.6 g/t Au from 2020 campaign at Surnak and
Synap prospects:
HOLE ID
EAST
NORTH
RL
AZ
DIP
FROM
(m)
TO
(m)
LENGTH
(m)
Au
(g/t)
Surnak Prospect
SUDD065 384020
4587736
469
91
-52
and
SUDD069 384055
4587705
SUDD073 383945
4587748
475
483
245
260
-45
-45
80
114
1
17
84.9
119.7
11
22.9
4.9
5.7
10
5.9
1.56
0.90
0.88
0.91
Ag
(g/t)
7.93
9.25
0.93
1.23
SYDD008 386456
4586974
SYDD010 386502
4586936
349
340
225
225
-54
-45
46
54
66.5
77
20.5
23.0
0.72
1.01
1.81
0.89
Synap Prospect
1) Coordinates are in UTM grid.
2) Cut-off grade of 0.6 g/t Au, 5.0m min length, 4.0m max internal dilution.
3) For Synap prospect the true widths are 80-85% of downhole interval widths.
4) For Surnak, the true width has not been reported due of the disseminate style of mineralization.
Chiirite EL
During the fourth quarter of 2020, significant mapping, rock sampling and trenching took place with a total
28 trenches (925 metres) completed and sampled at the Chatal Kaya and Golden Creek prospects.
Significant results were returned from CKTR051 with 45.5 g/t Au and 249 g/t Ag (SE part of Chatal Kaya
prospect) and ZDTR004 with 15.7 g/t Au and 25 g/t Ag of Golden Creek prospect. A total of 34 drill holes
with 6,666 metres were drilled at the Chatal kaya prospect during 2020 aiming to define the footprint of the
45 I DUNDEE PRECIOUS METALS INC.
hydrothermal system along its strike and down-dip extents. Additionally, a gradient array survey and several
IP lines were undertaken during the year.
During 2021, additional trenching and scout drilling is planned at the Golden Creek prospect, a newly
discovered target located several hundred metres to the west of Chatal Kaya prospect expressed on
surface as narrow zones of hydrothermal breccias and quartz-sulfide veining. An internal economic
assessment of the of the Chatal Kaya prospect will be undertaken in 2021.
Timok gold project
A series of shallow drilling programs was conducted during 2020 on the Chocolate, Bigar West and Korkan
North targets with 75 holes totaling 5,807 metres completed to date. The programs were designed to target
shallow oxide-gold mineralization in order to support the growth of Mineral Resource inventories at the
Timok gold project. Multiple drill holes from the Chocolate target program intercepted high grade oxide,
transitional and sulfide mineralization and infill and extensional drilling continued during the last quarter of
2020.
Drilling commenced at the Coka Rakita prospect in the fourth quarter of 2020, aiming to test the footprint
of shallow disseminated gold mineralization intersected during historic exploration programs. Whilst at
deeper levels, drilling will test the potential for gold-rich skarn mineralization within the contact zone of a
carbonaceous sedimentary package and a monzonite pluton. Three holes, totaling 2,298 metres, were
completed during 2020 and further holes are in progress.
For 2021, a total of 12,000 metres of infill drilling is planned at the Chocolate target, Coka Rakita and for
the Frasen Zone, a new target on the corridor between Coka Rakita and Chocolate, interpreted to have
potential for polymetallic skarn mineralization.
Significant drill intercepts from the Chocolate prospect during 2020:
HOLE ID
EAST
NORTH
RL
AZ
DIP
BHDD134
569721
4898596
644
and
BHDD138
569861
4898224
BIDD108
570918
4897850
BIDD111
570846
4897698
BIDD114
571349
4897859
BIDD117
571300
4897645
BIDD118
571033
4897735
and
BIDD120
571396
4897747
BIDD122
571196
4897834
and
703
763
788
756
794
754
780
745
BIDD123
571245
4897836
755
and
0
0
0
0
0
0
0
0
0
0
BIDD125
571594
4897207
BIDD126
571218
4897782
BIDD127
571397
4897658
BIDD131
571209
4897740
BIDD132
571543
4896852
884
750
801
743
847
270
0
0
0
270
and
-85
-85
-85
-85
-85
-85
-85
-85
-85
-85
-60
-85
-85
-85
-60
BIDD134
571496
4897680
788
270
-60
FROM
(m)
4
17
0
2
1
60
19
1
32
27
0
35
13
56
1.5
0
21.1
26
12
41
29
TO
(m)
9
31
6
11
10
69
34
26
37.2
58
26
56
37
74
42
11
33
40
24
66
66
LENGTH
(m)
5
14
6
9
9
9
15
25
5.2
31
26
21
24
18
40.5
11
11.9
14
12
25
37
Au
(g/t)
0.73
0.48
1.52
1.56
0.39
2.83
0.69
0.74
0.34
0.73
0.82
1.04
0.55
0.58
2.83
0.66
0.51
0.61
0.25
0.62
0.82
FOURTH QUARTER 2020 I 46
BIDD135
571428
4897816
BIDD136
571306
4897844
and
BIDD137
571215
4897869
BIDD140
571024
4897784
BIDD141
571460
4897732
BIDD142
571067
4897783
and
762
759
748
752
777
746
270
270
210
270
270
270
-60
-60
-70
-60
-65
-60
BIDD146
571000
4897883
754
180
-60
and
and
BIDD151
570903
4897849
BIDD154
571277
4897653
BIDD156
570737
4897797
BIDD157
571321
4897734
755
787
790
782
180
270
270
270
-60
-60
-60
-50
7
29
85
106
0
24
2
28
5
25
43
23.5
1
53
1
17
61
90
113
17
45
8.5
47
13
31
58
33
10
59
30
10
32
5
7
17
21
6.5
19
8
6
15
9.5
9
6
29
0.62
0.53
1.88
1.22
0.44
1.04
1.57
0.36
2.96
0.23
0.27
1.02
0.25
0.32
0.60
1) Coordinates are in UTM 34 North.
2) Intervals are reported at a cut-off grade of 0.2 g/t Au using 5 metres minimum length and 5 metres maximum internal dilution.
Tulare Copper-Gold Project
During 2020, a deep drilling and infill drilling program was completed at the Kiseljak and Yellow Creek
copper-gold porphyry prospects to support the application for a Serbian Mineral Resource and Mineral
Reserve certificate.
Malartic Project, Quebec
In accordance with an order issued by the Government of Quebec to close non-essential business due to
COVID-19, the proposed drilling program for 2020 was curtailed and a total of 2,423 metres was drilled in
three holes. Anomalous gold values intercepted had no economic values. Additional drilling targets were
canceled due to the lack of access during the summer and fall seasons.
In June 2020, the Company completed the acquisition of its 51% interest in the Malartic project by making
a cash payment of Cdn$180,000 and issuing an additional 25,000 Shares to Pershimex pursuant to the
terms of the Phase 1 option under the option agreement. In December 2020, the Company decided not to
proceed with the Phase 2 option to acquire a further 20% interest by incurring Cdn$3.5 million in exploration
expenditures over the next three years.
Sampling, Analysis and QAQC of Exploration Core and Channel Samples
Most exploration diamond drill holes are collared with PQ size, continued with HQ, and are sometimes
finished with NQ. Triple tube core barrels are used whenever possible to improve recovery. All drill core is
cut lengthwise into two halves using a diamond saw; one half is sampled for assaying and the other half is
retained in core trays. All drill core is sampled in intervals ranging up to three metres, however, the common
length for sample intervals within mineralized zones is one metre. Weights of drill core samples range from
three to eight kilograms, depending on the size of core, rock type, and recovery. A numbered tag is placed
into each sample bag, and the samples are grouped into batches for laboratory submissions.
Core and channel samples from exploration programs at Chelopech, Ada Tepe and the Timok gold project
are shipped to the Company’s own exploration laboratory in Bor, Serbia, which is managed by SGS
Minerals.
Quality control samples, comprising certified reference materials, blanks and field duplicates, are inserted
into each batch of samples and locations for crushed duplicates are specified. All drill core and quality
control samples are tabulated on sample submission forms that specify sample preparation procedures and
codes for analytical methods. For internal quality control, the laboratory includes its own quality control
47 I DUNDEE PRECIOUS METALS INC.
samples comprising certified reference materials, blanks and pulp duplicates. All QAQC monitoring data
are reviewed and signed off by an independent QAQC geologist. Chain of custody records are maintained
from sample shipments to the laboratory until analyses are completed and remaining sample materials are
returned to the Company. The chain of custody is transferred from the Company to SGS at the laboratory
door.
Drill core samples submitted to the laboratory are dried at 105°C for a minimum of 12 hours, and then jaw
crushed to about 80% passing 4 millimetres. Sample preparation duplicates are created by riffle splitting
crushed samples on a 1 in 20 basis. Larger samples are riffle split prior to pulverizing, whereas smaller
samples are pulverized entirely. Pulverizing specifications are 90% passing 70 microns.
Gold analyses are done using a conventional 50-gram fire assay and AAS finish. Multi-element analyses
for 49 elements, including Ag, Cu, Mo, As, Bi, Pb, Sb, and Zn, are done using a four-acid digestion and an
ICP-MS finish. Samples returning over 10 ppm for Ag and 1% for Cu, Pb and Zn are re-analyzed using high
grade methods with AAS finish. Sulphur is analyzed using an Eltra Analyzer equipped with an induction
furnace. Gold equivalent (AuEq) calculations at the Chelopech project are calculated using the following
formula: Au g/t + 2.06 x Cu %.
The Company’s Qualified Person has verified that all results reported in this disclosure have passed QAQC
protocols. Further verification of results included comparison of assay data with geology, alteration and
mineralization logging data.
DEVELOPMENT AND OTHER MAJOR PROJECTS
Timok Gold Project, Serbia
The Timok gold project is a sediment hosted gold deposit located in the central-eastern region of the
Republic of Serbia.
A scoping study, based on Mineral Resource Estimates released in 2018, commenced in the same year.
On July 15, 2019, DPM announced the results of the preliminary economic assessment (“PEA”) on the
Timok gold project. The PEA was based on the updated Mineral Resource Estimate completed in
September 2018 and provided a base case, considering primarily oxide and transitional material types.
Highlights of the PEA include:
(cid:2) After-tax NPV5% of $105 million and after-tax IRR of 18.6% assuming a gold price of $1,250 per
ounce;
(cid:2) Cash cost of $618 per ounce;
(cid:2) All-in sustaining cost of $717 per ounce;
(cid:2) Peak annual gold production of approximately 132,000 ounces;
(cid:2)
(cid:2) Mine life of 9 years.
Initial capital costs of $136 million; and
The PEA was prepared by CSA Global Consultants Canada Limited and is dated April 30, 2019. The PEA
is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative
geologically to have the economic considerations applied to them that would enable them to be categorized
as Mineral Reserves. Unlike Mineral Reserves, Mineral Resources do not have demonstrated economic
viability. There is no certainty that the PEA results will be realized. On August 29, 2019, the Company filed
a NI 43-101 Technical Report entitled “NI 43-101 Technical Report, Updated Preliminary Economic
Assessment for the Timok Gold Project, Serbia” effective April 30, 2019 (the “Timok Technical Report”),
which supports the PEA on the Timok gold project and is available on DPM’s website and filed on SEDAR
at www.sedar.com. Refer to the Timok Technical Report for the key assumptions, parameters and risks
associated with the PEA discussed herein.
FOURTH QUARTER 2020 I 48
The Company advanced the PFS for the Timok Gold Project in the fourth quarter of 2020 and expects to
release the results in the first quarter of 2021. As previously announced, the PFS will focus on the oxide
portion of the Mineral Resource. Additional potential upside from the sulphide portion of the Mineral
Resource will require additional variability testwork and will be considered as part of a potential feasibility
study.
Tsumeb Rotary Holding Furnace
The Company continues to assess opportunities to further optimize the inherent value of the Tsumeb
smelter operation, including the installation of a rotary holding furnace. The estimated upfront cost is
expected to range between $47 million and $55 million, up from the prior estimate of $39 million due
primarily to a change in scope and updated cost estimates. This furnace is expected to provide surge
capacity between the Ausmelt furnace and the converters, increase smelter recoveries as well as potentially
bring in additional third party feed and increase the proportion of third party volumes. These opportunities
have the potential to generate additional value, with the rotary furnace installation being a potentially high
return project that is expected to debottleneck and increase the annual throughput of complex concentrate
by over 50% up to 370,000 tonnes and, in turn, generate significant incremental margins, given the fixed
cost nature of the facility. As a result, the Company continues to take steps to support moving forward with
this project, and in particular, securing adequate long-term supply of complex concentrate on acceptable
terms.
Until such supply is secured, DPM will seek to process additional volumes of third party complex
concentrates at Tsumeb, in lieu of Chelopech concentrate, when third party concentrates are available on
acceptable terms and the Company can, in turn, capitalize on market demand for the Chelopech
concentrate. While this has the potential to generate a net overall value for the Company, this would be
realized through lower treatment charges and higher margins at Chelopech offset partially by lower revenue
at Tsumeb. This could, in turn, result in the proposed expansion of the smelter being further delayed and
possibly deferred indefinitely if an acceptable long term contract cannot be secured to support the
expansion.
On December 13, 2019, the Government of Namibia issued an Environmental Clearance Certificate to
Tsumeb, approving its proposed expansion to 370,000 tonnes per year, which remains valid until 2022 with
an option to renew.
OFF BALANCE SHEET ARRANGEMENTS
The Company has not entered into any off-balance sheet arrangements.
49 I DUNDEE PRECIOUS METALS INC.
SELECTED QUARTERLY AND ANNUAL INFORMATION
Selected financial results for the last eight quarters, which have been prepared in accordance with IFRS,
are shown in the table below:
$ millions
except per share amounts
Revenue
Net earnings (loss)
Net earnings (loss) attributable to:
(cid:2) Non-controlling interests
(cid:2) Discontinued operations
(cid:2) Continuing operations
Net earnings (loss) per share:
(cid:2) Discontinued operations
(cid:2) Continuing operations
Net earnings (loss) diluted per share:
(cid:2) Discontinued operations
(cid:2) Continuing operations
Adjusted net earnings (loss) from
2020
2019
Q4
Q3
Q1
151.8 156.0 154.0 147.8
42.5
49.0
53.3
50.1
Q2
Q4
135.4
(93.3)
Q3
88.3
7.5
Q2
97.3
15.6
Q1
83.4
(1.8)
(0.2)
0.1
50.2
0.28
-
0.28
0.27
-
0.27
(0.4)
(1.5)
55.2
0.30
(0.01)
0.31
0.29
(0.01)
0.30
0.2
0.8
48.0
0.27
-
0.27
0.27
-
0.27
(0.7)
(2.5)
45.7
0.24
(0.01)
0.25
0.24
(0.01)
0.25
0.2
(0.6)
0.8
(2.3)
(90.4)
6.5
(0.52) 0.04
(0.01)
-
(0.51) 0.04
(0.52) 0.04
(0.01)
-
(0.51) 0.04
(0.4)
(1.5)
17.5
0.09
(0.01)
0.10
0.09
(0.01)
0.10
(0.3)
(1.3)
(0.2)
(0.01)
(0.01)
-
(0.01)
(0.01)
-
continuing operations
47.0
52.7
45.0
48.7
16.1
3.4
17.3
(0.3)
Adjusted basic earnings (loss) per share
from continuing operations
0.26
0.29
0.25
0.27
0.09
0.02
0.09
-
The variations in the Company’s quarterly results were driven largely by fluctuations in gold and copper
grades and recoveries, volumes of complex concentrate smelted, gold, copper and acid prices, foreign
exchange rates, smelter toll rates, smelter metal recoveries, depreciation, gains and losses related to
Sabina special warrants, realized gains and losses on commodity swap contracts related to hedging the
Company’s metal price exposures, realized gains or losses on foreign exchange option contracts related
to hedging the Company’s foreign denominated operating expenditures, impairment charges and Ada Tepe
achieving commercial production in June 2019, with first concentrate deliveries commencing in the third
quarter of 2019.
The following table summarizes the quarterly average trading price for gold, copper and silver based on the
LBMA for gold and silver and the LME for copper (Grade A) and highlights the quarter over quarter
variability.
2020
2019
Average
LBMA gold ($/oz)
LME settlement copper ($/lb)
LBMA spot silver ($/oz)
Q3
Q2
Q4
1,874
3.25
Q1
1,912 1,710 1,584
2.56
2.42
24.39 24.39 16.33 16.94
2.96
Q4
Q2
Q3
Q1
1,481 1,474 1,310 1,304
2.82
17.31 17.02 14.89 15.57
2.77
2.67
2.63
FOURTH QUARTER 2020 I 50
The following is a summary of selected annual information for the Company’s last three fiscal years:
$ thousands, except per share amounts
At December 31,
Revenue from continuing operations
Impairment charges
Net earnings (loss) attributable to common shareholders from
continuing operations
Net loss attributable to common shareholders from discontinued
operations
Net earnings (loss)
Adjusted net earnings from continuing operations
Basic earnings (loss) per share from continuing operations
Basic loss per share from discontinued operations
Basic earnings (loss) per share
Diluted earnings (loss) per share
Dividend declared per share
Adjusted net earnings per share from continuing operations
Total assets
Non-current liabilities
1) 2019 and 2018 results have been restated to reflect MineRP as discontinued operations.
2020
2019(1)
2018(1)
609,558 404,392
- 107,000
365,998
-
199,074
(66,621)
41,273
(3,072)
194,863
193,434
(4,281)
(72,042)
36,508
(3,160)
37,172
32,186
1.10
(0.02)
1.08
1.07
0.09
1.07
(0.38)
(0.02)
(0.40)
(0.40)
-
0.20
0.23
(0.02)
0.21
0.21
-
0.18
974,860 784,710
859,585
84,500
82,233
127,958
Key items impacting the Company’s financial results over the period from 2018 to 2020 include:
(i)
Commencement of production and gold concentrate deliveries at Ada Tepe following the
achievement of commercial production in June 2019 and full design capacity in the third quarter
of 2019;
Declining gold grades at Chelopech in 2019 relative to 2018, in line with its mine plan;
Increasing gold prices in 2020 relative to 2019 and 2018;
(ii)
(iii)
(iv) Higher volumes of complex concentrate smelted at Tsumeb in 2020 and lower volumes of
complex concentrate smelted at Tsumeb in 2019 relative to 2018 as a result of unplanned
downtime in 2019;
A weaker ZAR relative to the U.S. dollar in 2020, and a stronger U.S. dollar in 2019 and 2018
relative to the local currencies in which the Company’s operating costs are denominated;
(v)
(vi) Growth capital expenditures for the construction of the Ada Tepe incurred in 2019 and 2018;
(vii) Dividend paid in 2020 totaled $10.9 million; and
(viii) An impairment charge of $107.0 million at Tsumeb in 2019.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company’s consolidated financial statements in accordance with IFRS requires
management to make judgments, estimates and assumptions that affect the amounts of assets, liabilities
and contingent liabilities on the date of the consolidated financial statements and the amounts of revenues
and expenses during the periods reported. Estimates and assumptions are evaluated and are based on
management’s experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. However, actual outcomes can differ from these estimates.
The significant areas of estimation and uncertainty considered by management in preparing the
consolidated financial statements include, but are not limited to:
51 I DUNDEE PRECIOUS METALS INC.
(i) Mineral exploration and evaluation expenditures
Exploration and evaluation activities involve the search for Mineral Resources and Mineral Reserves, the
assessment of technical and operational feasibility and the determination of an identified Mineral Resource
or Mineral Reserve’s commercial viability. Once the legal right to explore has been acquired, exploration
and evaluation expenditures are expensed as incurred until economic production is probable. Exploration
expenditures in areas where there is a reasonable expectation to convert existing estimated Mineral
Resources to estimated Mineral Reserves or to add additional Mineral Resources with additional drilling
and evaluations in areas near existing Mineral Resources or Mineral Reserves and existing or planned
production facilities, are capitalized.
Exploration properties that contain Proven and Probable Mineral Reserves, but for which a development
decision has not yet been made, are subject to periodic review for impairment when events or changes in
circumstances indicate the project’s carrying value may not be recoverable.
Exploration and evaluation assets are reclassified to “Mine Properties – Mines under construction” when
the technical feasibility and commercial viability of extracting the Mineral Resources or Mineral Reserves
are demonstrable and construction has commenced or a decision to construct has been made. Exploration
and evaluation assets are assessed for impairment before reclassification to “Mines under construction”,
and the impairment charge, if any, is recognized through net earnings (loss).
The application of the Company’s accounting policy for exploration and evaluation expenditures requires
judgment in determining whether it is probable that future economic benefits will be generated from the
exploitation of an exploration and evaluation asset when activities have not yet reached a stage where a
reasonable assessment of the existence of Mineral Reserves can be determined. The estimation of Mineral
Resources is a complex process and requires significant assumptions and estimates regarding economic
and geological data and these assumptions and estimates impact the decision to either expense or
capitalize exploration and evaluation expenditures. Management is required to make certain estimates and
assumptions about future events and circumstances in order to determine if an economically viable
extraction operation can be established. Any revision to any of these assumptions and estimates could
result in the impairment of the capitalized exploration and evaluation costs. If new information becomes
available after expenditures have been capitalized that the recovery of these expenditures is no longer
probable, the expenditures capitalized are written down to the recoverable amount and charged to net
earnings (loss) in the period the new information becomes available.
(ii) Mine properties
Mine Properties – Mines under construction
All expenditures undertaken in the development, construction, installation and/or completion of mine
production facilities are capitalized and initially classified as "Mines under construction". All expenditures
related to the construction of mine declines and orebody access, including mine shafts and ventilation
raises, are considered to be capital development and are capitalized. Expenses incurred after reaching the
orebody are regarded as operating development costs and are included in the cost of ore hoisted.
Upon the commencement of commercial production, all related assets included in "Mines under
construction" are reclassified to "Mine Properties - Producing mines" or "Property, plant and equipment".
Determination of commencement of commercial production is a complex process and requires significant
assumptions and estimates. The commencement of commercial production is defined as the date when the
mine is capable of operating in the manner intended by management. The Company considers primarily
the following factors, among others, when determining the commencement of commercial production:
(cid:2) All major capital expenditures to achieve a consistent level of production and desired capacity have
been incurred;
(cid:2) A reasonable period of testing of the mine plant and equipment has been completed;
(cid:2) A predetermined percentage of design capacity of the mine and mill has been reached; and
(cid:2) Required production levels, grades and recoveries have been achieved.
FOURTH QUARTER 2020 I 52
Mine Properties – Producing mines
All assets reclassified from “Mines under construction” to “Producing mines” are stated at cost less
accumulated depletion and accumulated impairment charges. Costs incurred for the acquisition of land are
stated at cost.
The initial cost of a producing mine comprises its purchase price or construction cost, any costs directly
attributable to bringing it to a working condition for its intended use, the initial estimate of the rehabilitation
costs, and for qualifying assets, applicable borrowing costs during construction. The purchase price or
construction cost is the aggregate amount of cash consideration paid and the fair value of any other
consideration given to acquire the asset.
When a mine construction project moves into production, the capitalization of certain mine construction
costs ceases, and from that point on, costs are either regarded as inventory costs or expensed as cost of
sales, except for costs related to mine additions or improvements, mine development or mineable reserve
development, which qualify for capitalization.
Depletion
The depletion of a producing mine asset is based on the unit-of-production method over the estimated
economic life of the related deposit.
Mineral Resource and Mineral Reserve estimates
The estimation of Mineral Resources and Mineral Reserves, as defined under NI 43-101 is a complex
process and requires significant assumptions and estimates. The Company prepares its Mineral Resource
and Mineral Reserve estimates based on information related to the geological data on the size, depth and
shape of the orebody which is compiled by appropriately qualified persons. Mineral Resource and Mineral
Reserve estimates are based upon factors such as metal prices, capital requirements, production costs,
foreign exchange rates, geotechnical and geological assumptions and judgments made in estimating the
size and grade of the orebody. Mineral Resource and Mineral Reserve estimates, together with forecast
production, determine the life of mine estimates and therefore changes in the Mineral Resource or Mineral
Reserve estimates may impact the carrying value of exploration and evaluation assets, mine properties,
property, plant and equipment, depletion and depreciation charges, rehabilitation provisions and deferred
income tax assets.
(iii)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment charges.
The initial cost of property, plant and equipment comprises its purchase price or construction cost, any
costs directly attributable to bringing it to a working condition for its intended use, the initial estimate of the
rehabilitation costs, and for qualifying assets, applicable borrowing costs during construction. The purchase
price or construction cost is the aggregate amount of cash consideration paid and the fair value of any other
consideration given to acquire the asset. Where an item of property, plant and equipment is comprised of
significant components with different useful lives, the components are accounted for as separate items of
property, plant and equipment. The capitalized value of a lease is also included in property, plant and
equipment.
Depreciation
The depreciation of property, plant and equipment related to a mine is based on the unit-of-production
method over the estimated economic life of the related deposit, except in the case of an asset whose
estimated useful life is less than the life of the deposit, in which case the asset is depreciated over its
estimated useful life based on the straight-line method. For all other property, plant and equipment,
depreciation is based on the estimated useful life of the asset on a straight-line basis. Depreciation of
property, plant and equipment used in a capitalized exploration or development project is capitalized to the
project.
53 I DUNDEE PRECIOUS METALS INC.
Depreciation of property, plant and equipment, which are depreciated on a straight-line basis over their
estimated useful lives, is as follows:
Asset Category
Buildings
Machinery and Equipment
Vehicles
Computer Hardware
Office Equipment
Estimated useful life
(Years)
15 - 20
3 - 20
5
3
3 - 6
Construction work-in-progress includes property, plant and equipment in the course of construction and is
carried at cost less any recognized impairment charge. These assets are reclassified to the appropriate
category of property, plant and equipment and depreciation of these assets commences when they are
completed and ready for their intended use.
An item of property, plant and equipment, including any significant part initially recognized, is derecognized
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss
arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and
the carrying amount of the asset, is recognized in profit or loss when the asset is derecognized.
The residual values, useful lives and methods of depreciation of all assets are reviewed at each financial
year end and are adjusted prospectively, if appropriate. Significant judgment is involved in the determination
of estimated residual values and useful lives. The actual residual values and useful lives may differ from
current estimates.
Depreciation of mine specific assets is based on the unit-of-production method. The life of these assets is
assessed annually with regard to both their anticipated useful life and the present assessments of the
economically recoverable reserves and resources of the mine property where these assets are located.
These calculations require the use of estimates and assumptions, including the amount of recoverable
reserves and resources. Any changes to these calculations based on new information are accounted for
prospectively.
Rates of depreciation and, in turn, the annual depreciation expense could therefore be materially affected
by changes in underlying estimates. Changes in estimates can be the result of differences in actual
production or changes in forecast future production, changes in Mineral Resources or Mineral Reserves
through exploration activities, differences between estimated and actual costs of mining and differences in
metal prices used in the estimation of Mineral Reserves.
Exploration and evaluation assets, mine properties, property, plant and equipment and intangible assets
balances could be materially impacted if other assumptions and estimates had been used. In addition,
future operating results could be impacted if different assumptions and estimates are applied in future
periods.
(iv)
Impairment of non-financial assets
The carrying values of mine properties, intangible assets and property, plant and equipment are assessed
for impairment whenever indicators of potential impairment exist. If any indication of potential impairment
exists, an estimate of the asset’s recoverable amount is calculated. The recoverable amount is determined
as the higher of the FVLCD and its value in use based on discounted cash flows. This is determined on an
asset-by-asset basis, unless the asset does not generate cash flows that are largely independent of those
from other assets or groups of assets. If this is the case, individual assets are grouped together into a Cash
Generating Unit (“CGU”) for impairment purposes. Such CGUs represent the lowest level for which there
are separately identifiable cash inflows that are largely independent of the cash flows from other assets or
groups of assets. Management has assessed the Company’s CGUs as being an individual operating site.
If the carrying amount of an asset or CGU exceeds its recoverable amount, the carrying amount of the
asset or CGU is reduced to its recoverable amount with the corresponding impairment being charged to
FOURTH QUARTER 2020 I 54
earnings (loss) in the period of impairment. Impairment charges are recognized in the consolidated
statements of earnings (loss) in those expense categories consistent with the function of the impaired asset.
An assessment is also made at each reporting date as to whether there is any change in events or
circumstances relating to a previously recognized impairment. If a change has occurred, the Company
makes an estimate of the recoverable amount for the previously impaired asset or CGU. A previously
recognized impairment charge, other than a charge in respect of goodwill, is reversed only if there has been
a change in the estimates used to determine the asset or CGU’s recoverable amount since the last
impairment charge was recognized. If this is the case, the carrying amount of the asset or CGU is increased
to its newly determined recoverable amount. The increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation and amortization, had no impairment charge been
recognized for the asset or CGU in prior years.
Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances
indicate a potential impairment. For the purpose of impairment testing, goodwill is allocated to the CGU that
is expected to benefit from the business combination in which the goodwill arose. Any impairment in
goodwill is recognized immediately and cannot be subsequently reversed.
The assessment of impairment is based on a number of external and internal factors, some of which are
outside of the Company’s control, and requires the use of estimates and assumptions related to these
factors for each CGU. External factors include considerations such as commodity prices, toll rates, discount
rates, foreign exchange rates, and changes in market, economic and regulatory requirements. Internal
factors include considerations such as production volume, ability to convert resources into reserves, capital
and operating expenditures, and future development and expansion plans.
These significant estimates and assumptions, some of which may be subjective, require that management
make decisions based on the best available information at each reporting period. It is possible that the
actual recoverable amount could be significantly different than those estimates. A significant decline in the
asset’s market value, reductions in metal price forecasts, increases in estimated future costs of production,
increases in estimated future capital costs, reductions in the amount of recoverable reserves, resources
and exploration potential, and/or adverse market conditions can result in a write-down of the carrying
amounts of the Company’s assets. Judgment is also required when considering whether significant
changes in any of these items indicate a previous impairment may have reversed.
(v) Rehabilitation provisions
Mining, processing, development and exploration activities are subject to various laws and regulations
governing the protection of the environment. The Company recognizes a liability for its rehabilitation
obligations in the period when a legal and/or constructive obligation is identified. The liability is measured
at the present value of the estimated costs required to rehabilitate operating locations based on the risk
free nominal discount rates that are specific to the countries in which the operations are located. A
corresponding increase to the carrying amount of the related asset is recorded and depreciated in the same
manner as the related asset.
The nature of these restoration and rehabilitation activities includes: i) dismantling and removing structures;
ii) rehabilitating mines and tailing dams; iii) dismantling operating facilities; iv) closure of plant and waste
sites; and v) restoration, reclamation and re-vegetation of affected areas. Other environmental costs
incurred at the operating sites, such as environmental monitoring, water management and waste
management costs, are charged to profit or loss when incurred.
The liability is accreted over time to its expected future settlement value. The accretion expense is
recognized in finance cost in the consolidated statements of earnings (loss).
The Company assesses its rehabilitation provisions at each reporting date. The rehabilitation liability and
related assets are adjusted at each reporting date for changes in the discount rates and in the estimated
amount, timing and cost of the work to be carried out. Any reduction in the rehabilitation liability and
therefore any deduction in the related rehabilitation asset may not exceed the carrying amount of that asset.
If it does, any excess over the carrying value is immediately credited to profit or loss.
55 I DUNDEE PRECIOUS METALS INC.
Significant estimates and assumptions are made by management in determining the nature and costs
associated with the rehabilitation liability. The estimates and assumptions required include estimates of the
timing, extent and costs of rehabilitation activities, technology changes, regulatory changes, and changes
in the discount and inflation rates. These uncertainties may result in future expenditures being different from
the amounts currently provided.
Changes in the underlying assumptions used to estimate the rehabilitation liability as well as changes to
environmental laws and regulations could cause material changes in the expected cost and expected future
settlement value.
At as December 31, 2020, the undiscounted future cost for estimated mine closure and rehabilitation costs
before inflation was estimated to be $84.1 million. The carrying value of the estimated mine closure and
rehabilitation cost was $52.5 million at December 31, 2020 and $41.4 million at December 31, 2019.
(vi) Revenue recognition
Revenue from the sale of concentrates containing gold, copper and silver is recognized when control has
been transferred, which is considered to occur when products have been delivered and the significant risks
of loss have been transferred to the buyer. Revenue is measured based on the consideration specified in
the contract.
Revenue from the sale of concentrates is initially recorded based on a provisional value which is a function
of prevailing market prices, estimated weights and grades less smelter and other commercial deductions.
Under the terms of the concentrate sales contracts, the final metal price ("settlement price") for the payable
metal is based on a predetermined quotational period of LME and LBMA daily prices. The price of the
concentrate is the sum of the metal payments less the sum of specified deductions, including treatment and
refining charges, penalties for deleterious elements, and freight. The terms of these contracts result in
embedded derivatives because of the timing difference between the prevailing metal prices for provisional
payments and the actual contractual metal prices used for final settlement. These embedded derivatives
are adjusted to fair value at the end of each reporting period through to the date of final price determination
with any adjustments recognized in revenue.
Any adjustments to the amount receivable for each shipment on the settlement date, caused by final assay
results, are adjusted through revenue at the time of determination.
Revenue from processing concentrate is recognized when concentrate has been smelted and is based on
the toll rate specified in the toll agreement, which can vary based on the composition of the concentrate
processed and prevailing market conditions at the time the agreement was entered. Under each toll
agreement, Tsumeb incurs a carrying charge in respect of the concentrate it processes until blister copper
is delivered. This charge is recorded as a reduction of revenue.
Revenue from processing concentrate is also adjusted for any over or under recoveries of metals delivered
relative to contracted rates under the tolling agreement between Tsumeb and IXM. These adjustments
represent metal exposure and are calculated by comparing (i) the copper, gold and silver content in the
concentrate received and processed by Tsumeb multiplied by the percentage accountable in the IXM
contract to (ii) the accountable copper, gold and silver in the blister delivered to IXM and in the in-circuit
material still being processed by Tsumeb. Many aspects of the metal exposure, are subject to estimation,
including the amount of metals contained in concentrate received, in circuit material and blister delivered
where final assays have not been completed. These significant estimates are based on the Company’s
process knowledge, joint surveys with IXM and multiple assay results, the final results of which could differ
from initial estimates.
Revenue from the sale of sulphuric acid, a by-product from processing concentrate at the Tsumeb smelter,
is measured at the price specified in the sales contract and is recognized when the control has been
transferred, which is considered to occur when the products have been delivered to the location specified
in the sales contract and the risk of loss has been transferred to the buyer.
Revenue from MineRP’s software services is recognized over time when the services are rendered. This is
measured based on the actual service provided to the end of the reporting period as a proportion of the
total services to be provided. The estimated revenue or extent of progress toward percentage of completion
FOURTH QUARTER 2020 I 56
is revised if changes occur or circumstances arise that indicate a revision is warranted. Any resulting
increase or decrease in estimated revenue is reflected in the consolidated statements of earnings (loss) in
the period in which such determination is made.
Revenue from licenses entered by MineRP containing software and ongoing services elements is
recognized based on the estimated fair value of each element. The fair value of each element is determined
based on the market price of each element when sold separately. Revenue relating to the software element
is recognized when the control has been transferred to the customer, which occurs on delivery. Revenue
relating to the service element is recognized over time when the services are rendered.
(vii) Deferred revenue
Deferred revenue is recognized in the consolidated statements of financial position when a cash
prepayment is received from one or more customers prior to the sale of product or delivery of service.
Revenue is subsequently recognized in the consolidated statements of earnings (loss) when the sale
occurs, which generally occurs when control has been transferred or in the case of services, when the
services have been rendered.
The Company recognizes the time value of money, where there is a significant financing component and
the period between the payment by the customer and the transfer of the contracted goods or services
exceeds one year.
(viii) Income taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities on the taxable loss or income for the period. The tax rates and tax laws used
to compute the amount are those enacted or substantively enacted by the end of the reporting period.
Current income tax assets and current income tax liabilities are only offset if a legally enforceable right
exists to offset the amounts and the Company intends to settle on a net basis or to realize the asset and
settle the liability simultaneously.
Deferred income tax
Deferred income tax is provided using the balance sheet method on temporary differences on the reporting
date between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred
income tax assets are recognized for all deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses, to the extent that it is probable that taxable income will be generated in
future periods to utilize these deductible temporary differences.
The following temporary differences do not result in deferred income tax assets or liabilities:
(cid:2) The initial recognition of assets or liabilities, not arising from a business combination, that does not
(cid:2)
(cid:2)
affect accounting or taxable profit;
Initial recognition of goodwill, if any; and
Investments in subsidiaries, associates and jointly controlled entities where the timing of the reversal
of temporary differences can be controlled and reversal in the foreseeable future is not probable.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient future taxable income will be generated to
allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets
are reassessed at the end of each reporting period and are recognized to the extent that it has become
probable that future taxable income will be generated to allow the deferred income tax asset to be
recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to be in effect in
the period when the asset is expected to be realized or the liability is expected to be settled, based on tax
rates that have been enacted or substantively enacted by the end of the reporting period.
57 I DUNDEE PRECIOUS METALS INC.
Deferred income tax assets and liabilities are offset if a legally enforceable right exists to offset current
income tax assets against current income tax liabilities and the deferred income taxes relate to the same
taxable entity and the same taxation authority.
Current and deferred income taxes related to items recognized directly in equity are recognized in equity
and not in profit or loss. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
Judgment is required in determining whether deferred income tax assets are recognized on the
consolidated statements of financial position. Deferred income tax assets, including those arising from
unutilized tax losses, require management to assess the likelihood that the Company will generate future
taxable income in order to utilize the deferred income tax assets. Estimates of future taxable income are
based on forecasted cash flows from operations or other activities and the application of existing tax laws
in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from
estimates, the ability of the Company to realize the net deferred income tax assets recorded on the reporting
date could be impacted.
Additionally, future changes in tax laws in the jurisdictions in which the Company operates could impact tax
deductions in future periods and the value of its deferred income tax assets and liabilities.
NON-GAAP FINANCIAL MEASURES
Certain financial measures referred to in this MD&A are not measures recognized under IFRS and are
referred to as Non-GAAP measures. These measures have no standardized meanings under IFRS and
may not be comparable to similar measures presented by other companies. The definitions established and
calculations performed by DPM are based on management’s reasonable judgment and are consistently
applied. These measures are used by management and investors to assist with assessing the Company’s
performance, including its ability to generate sufficient cash flow to meet its return objectives and support
its investing activities and debt service obligations. In addition, the Compensation Committee of the Board
of Directors uses certain of these measures, together with other measures, to set incentive compensation
goals and assess performance. 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. Non-
GAAP financial measures, together with other financial measures calculated in accordance with IFRS, are
considered to be important factors that assist investors in assessing the Company’s performance.
Non-GAAP Cash Cost and All-in Sustaining Cost Measures
Cash cost per tonne of ore processed, cash cost per pound of copper in gold-copper concentrate produced,
cash cost per ounce of gold in gold-copper concentrate produced, cash cost per ounce of gold in gold
concentrate produced, cash cost per ounce of gold sold, net of by-product credits, all-in sustaining cost per
ounce of gold and cash cost per tonne of complex concentrate smelted, net of by-product credits, capture
the important components of the Company’s production and related costs. Management and investors
utilize these metrics as an important tool to monitor cost performance at the Company’s operations. In
addition, the Compensation Committee of the Board of Directors uses certain of these measures, together
with other measures, to set incentive compensation goals and assess performance.
FOURTH QUARTER 2020 I 58
The following tables provide a reconciliation of the Company’s cash cost per tonne of ore processed, cash
cost per pound of copper produced, cash cost per ounce of gold produced and cash cost per tonne of
complex concentrate smelted, net of by-product credits to its cost of sales:
$ thousands, unless otherwise indicated
For the three months ended
December 31, 2020
Ore processed (mt)
Metals contained in gold-copper concentrate
produced(1):
Gold (ounces)
Copper (pounds)
Complex concentrate smelted (mt)
Cost of sales
Add/(deduct):
Depreciation, amortization & other
Change in concentrate inventory
Total cash cost before by-product credits
By-product credits
Total cash cost after by-product credits
Cash cost per tonne ore processed
Cash cost per pound copper produced(2)
Cash cost per ounce gold produced(2)
Cash cost per tonne of complex concentrate
smelted, net of by-product credits
Chelopech
Ada Tepe
541,066
213,428
Tsumeb
-
Total
81,117
27,852
7,659,384
-
30,898
(7,841)
(453)
22,604
(966)
21,638
41.78
0.91
526
26,097
-
-
22,006
(13,132)
126
9,000
(204)
8,796
42.17
-
337
-
-
52,484
28,213
(2,777)
-
25,436
(4,102)
21,334
-
-
-
-
-
406
1) Excludes metals contained in pyrite concentrate produced.
2) Gold and copper are accounted for as co-products. Total cash costs are net of by-product silver revenue.
$ thousands, unless otherwise indicated
For the three months ended
December 31, 2019
Ore processed (mt)
Metals contained in gold-copper concentrate
produced(1):
Gold (ounces)
Copper (pounds)
Complex concentrate smelted (mt)
Cost of sales
Add/(deduct):
Depreciation, amortization & other
Change in concentrate inventory
Total cash cost before by-product credits
By-product credits
Total cash cost after by-product credits
Cash cost per tonne ore processed
Cash cost per pound copper produced(2)
Cash cost per ounce gold produced(2)
Cash cost per tonne of complex concentrate
smelted, net of by-product credits
Chelopech
547,834
Ada Tepe Tsumeb
-
217,489
Total
95,223
29,101
10,031,111
-
34,152
(7,592)
(4,710)
21,850
(827)
21,023
39.88
0.79
449
26,528
-
-
28,993
(16,311)
(2,017)
10,665
(175)
10,490
49.04
-
395
-
-
48,614
32,078
(6,675)
-
25,403
(2,779)
22,624
-
-
-
-
-
465
1) Excludes metals contained in pyrite concentrate produced.
2) Gold and copper are accounted for as co-products. Total cash costs are net of by-product silver revenue.
59 I DUNDEE PRECIOUS METALS INC.
$ thousands, unless otherwise indicated
For the twelve months ended
December 31, 2020
Ore processed (mt)
Metals contained in gold-copper concentrate
produced(1):
Gold (ounces)
Copper (pounds)
Complex concentrate smelted (mt)
Cost of sales
Add/(deduct):
Depreciation, amortization & other
Change in concentrate inventory
Total cash cost before by-product credits
By-product credits
Total cash cost after by-product credits
Cash cost per tonne ore processed
Cash cost per pound copper produced(2)
Cash cost per ounce gold produced(2)
Cash cost per tonne of complex concentrate
smelted, net of by-product credits
Chelopech
2,201,220
Ada Tepe
890,738
Tsumeb
-
Total
124,060
35,642,083
-
113,481
118,727
-
-
92,450
-
-
231,890
124,926 330,857
(29,926)
1,011
84,566
(3,331)
81,235
38.42
0.71
451
(54,351)
(2,410)
35,689
(818)
34,871
40.07
-
294
(15,063)
-
109,863
(22,370)
87,493
-
-
-
-
-
377
1) Excludes metals contained in pyrite concentrate produced.
2) Gold and copper are accounted for as co-products. Total cash costs are net of by-product silver revenue.
$ thousands, unless otherwise indicated
For the twelve months ended
December 31, 2019
Ore processed (mt)
Metals contained in gold-copper concentrate
produced(1):
Gold (ounces)
Copper (pounds)
Complex concentrate smelted (mt)
Cost of sales
Add/(deduct):
Depreciation, amortization & other
Change in concentrate inventory
Total cash cost before by-product credits
By-product credits
Total cash cost after by-product credits
Cash cost per tonne ore processed
Cash cost per pound copper produced(2)
Cash cost per ounce gold produced(2)
Cash cost per tonne of complex concentrate
smelted, net of by-product credits
Chelopech
2,203,242
Ada Tepe Tsumeb
-
470,545
Total
119,928
37,250,240
-
112,367
57,193
-
-
41,515
-
-
215,289
140,651 294,533
(30,628)
(1,763)
79,976
(2,591)
77,385
36.30
0.78
402
(21,909)
3,588
(27,286)
-
23,194 113,365
(22,705)
90,660
-
-
-
(384)
22,810
49.29
-
399
-
-
421
1) Excludes metals contained in pyrite concentrate produced.
2) Gold and copper are accounted for as co-products. Total cash costs are net of by-product silver revenue.
FOURTH QUARTER 2020 I 60
The following table provides, for the periods indicated, a reconciliation of Chelopech cash cost per ounce
of gold sold, net of by-product credits, and all-in sustaining cost per ounce of gold to its cost of sales:
$ thousands, unless otherwise indicated
Ended December 31,
Cost of sales
Add/(deduct):
Depreciation, amortization & other
Other charges, including freight(1)
By-product credits
Cash cost of sales, net of by-product credits
Rehabilitation related accretion expenses
General and administrative expenses(2)
Cash outlays for sustaining capital
Cash outlays for leases
All-in sustaining costs
Payable gold in concentrate sold (ounces)(3)
Cash cost per ounce of gold sold, net of by-product
credits
All-in sustaining cost per ounce of gold
Three Months
2020
30,898
2019
34,152
Twelve months
2020
113,481
2019
112,367
(7,841)
20,211
(26,230)
17,038
81
4,732
4,267
211
26,329
37,399
(7,592)
28,334
(30,712)
24,182
67
4,632
5,482
140
34,503
40,168
(29,926)
99,604
(94,613)
88,546
317
13,807
11,616
645
114,931
150,764
(30,628)
100,744
(95,163)
87,320
312
14,264
12,162
423
114,481
149,205
456
704
602
859
587
762
585
767
1) Includes treatment charges, transportation and other selling costs related to the sale of pyrite concentrate of $6.8 million (2019 – $6.4 million) and $24.7 million
(2019 – 25.5 million) in the fourth quarter and twelve months of 2020, respectively.
2) Represents an allocated portion of DPM’s general and administrative expenses, including share-based compensation, based on Chelopech proportion of total
revenue.
3) Includes payable gold in pyrite concentrate sold in the fourth quarter and twelve months of 2020 of 9,334 ounces (2019 – 9,325 ounces) and 36,111 ounces
(2019 – 36,545 ounces), respectively.
The following table provides, for the periods indicated, a reconciliation of Ada Tepe cash cost per ounce of
gold sold, net of by-product credits, and all-in sustaining cost per ounce of gold to its cost of sales:
$ thousands, unless otherwise indicated
Ended December 31,
Cost of sales
Add/(deduct):
Depreciation, amortization & other
Other charges, including freight
By-product credits
Cash cost of sales, net of by-product credits
Rehabilitation related accretion expenses
General and administrative expenses(1)
Cash outlays for sustaining capital
Cash outlays for leases
All-in sustaining costs
Payable gold in concentrate sold (ounces)
Cash cost per ounce of gold sold, net of by-product
credits
All-in sustaining cost per ounce of gold
Three Months
2020
22,006
2019
28,993
Twelve months
2020
92,450
2019
41,515
(13,132)
819
(169)
9,524
38
2,913
1,559
388
14,422
25,169
(16,311)
1,147
(246)
13,583
26
4,087
1,306
214
19,216
38,941
(54,351)
3,579
(732)
40,946
121
10,300
9,514
1,290
62,171
120,070
(21,909)
1,555
(316)
20,845
55
5,126
2,701
509
29,236
49,035
378
573
349
493
341
518
425
596
1) Represents an allocated portion of DPM’s general and administrative expenses, including share-based compensation, based on Ada Tepe’s proportion of total
revenue.
61 I DUNDEE PRECIOUS METALS INC.
DPM’s cash cost per ounce of gold sold, net of by-product credits, and all-in sustaining cost per ounce of
gold calculations are set out in the following table:
$ thousands, unless otherwise indicated
Ended December 31,
Cash cost of sales, net of by-product credits(1)
Rehabilitation related accretion expenses(1)
General and administrative expenses(2)
Cash outlays for sustaining capital(1)
Cash outlays for leases(1)
All-in sustaining costs
Payable gold in concentrate sold (ounces)
Cash cost per ounce of gold sold, net of by-product
credits
All-in sustaining cost per ounce of gold
Three Months
Twelve months
2020
26,562
119
7,645
5,826
599
40,751
62,568
425
651
2019
37,765
93
8,719
6,788
354
53,719
79,109
477
679
2020
129,492
438
24,107
21,130
1,935
177,102
270,834
2019
108,165
367
19,390
14,863
932
143,717
198,240
478
654
546
725
1) Represents the cash cost of sales, net of by-product credits, rehabilitation related accretion expenses, cash outlays for sustaining capital expenditures and
leases that are specific to Chelopech and Ada Tepe.
2) Represents an allocated portion of DPM’s general and administrative expenses, including share-based compensation, based on Chelopech and Ada Tepe’s
proportion of total revenue.
Adjusted net earnings from continuing operations and adjusted basic earnings per share from
continuing operations
Adjusted net earnings from continuing operations and adjusted basic earnings per share from continuing
operations are used by management and investors to measure the underlying operating performance of
the Company. Presenting these measures from period to period helps management and investors evaluate
earnings trends more readily in comparison with results from prior periods.
Adjusted net earnings from continuing operations are defined as net earnings from continuing operations
attributable to common shareholders, adjusted to exclude specific items that are significant, but not
reflective of the underlying operations of the Company, including:
impairment charges or reversals thereof;
(cid:2)
(cid:2) unrealized and realized gains or losses related to investments carried at fair value;
(cid:2)
(cid:2) non-recurring or unusual income or expenses that are either not related to the Company’s operating
significant tax adjustments not related to current period earnings; and
segments or unlikely to occur on a regular basis.
The following table provides a reconciliation of adjusted net earnings to net earnings (loss) attributable to
common shareholders from continuing operations:
$ thousands, except per share amounts
Ended December 31,
Net earnings (loss) attributable to common
shareholders
Add/(deduct) after-tax adjustments:
Net gains related to Sabina special warrants, net
of income taxes of $nil for all periods
Impairment charge, net of income taxes of $nil
Adjusted net earnings
Basic earnings (loss) per share
Adjusted basic earnings per share
Three Months
2020
2019
Twelve months
2020
2019
50,176
(90,396)
199,074
(66,621)
(3,124)
-
47,052
0.28
0.26
(451)
107,000
16,153
(0.51)
0.09
(5,640)
-
193,434
1.10
1.07
(3,871)
107,000
36,508
(0.38)
0.20
FOURTH QUARTER 2020 I 62
Adjusted EBITDA from continuing operations
Adjusted EBITDA from continuing operations is used by management and investors to measure the
underlying operating performance of the Company’s operating segments. Presenting these measures from
period to period helps management and investors evaluate earnings trends more readily in comparison
with results from prior periods. In addition, the Compensation Committee of the Board of Directors uses
adjusted EBITDA from continuing operations, together with other measures, to set incentive compensation
goals and assess performance.
Adjusted EBITDA from continuing operations excludes the following from earnings before income taxes:
interest income;
finance cost;
impairment charges or reversals thereof;
(cid:2) depreciation and amortization;
(cid:2)
(cid:2)
(cid:2)
(cid:2) unrealized and realized gains or losses related to investments carried at fair value; and
(cid:2) non-recurring or unusual income or expenses that are either not related to the Company’s operating
segments or unlikely to occur on a regular basis.
The following table provides a reconciliation of adjusted EBITDA from continuing operations to earnings
(loss) before income taxes from continuing operations:
$ thousands
Ended December 31,
Earnings (loss) before income taxes
Add/(deduct):
Depreciation and amortization
Finance cost
Interest income
Net gains related to Sabina special warrants
Impairment charge
Adjusted EBITDA
Free cash flow from continuing operations
Three Months
2020
52,588
2019
(85,624)
Twelve months
2020
217,923
2019
(53,582)
23,984
1,481
(87)
(3,124)
-
74,842
30,910
2,689
(48)
(451)
107,000
54,476
100,211
7,022
(194)
(5,640)
-
319,322
80,952
10,164
(271)
(3,871)
107,000
140,392
Free cash flow from continuing operations is defined as cash provided from operating activities from
continuing operations, before changes in non-cash working capital, less cash outlays for sustaining capital
of continuing operations, mandatory principal repayments and interest payments related to debt and leases.
This measure is used by the Company and investors to measure the cash flow available to fund the
Company’s growth capital expenditures.
DPM’s free cash flow from continuing operations calculation is set out in the following table:
$ thousands
Ended December 31,
Cash provided from operating activities
Add (deduct) changes in non-cash working capital
Cash provided from operating activities, excluding
changes in non-cash working capital
Cash outlays for sustaining capital
Principal repayments related to leases
Interest payments
Free cash flow
Three Months
2020
70,536
(20,412)
2019
50,749
(17,629)
50,124
(9,180)
(1,076)
(571)
39,297
33,120
(19,575)
(857)
(1,010)
11,678
Twelve months
2020
196,965
51,640
248,605
(30,478)
(4,008)
(2,692)
211,427
2019
96,878
15,735
112,613
(35,016)
(3,415)
(4,581)
69,601
63 I DUNDEE PRECIOUS METALS INC.
Cash provided from operating activities of continuing operations, before changes in non-cash
working capital
Cash provided from operating activities of continuing operations, before changes in non-cash working
capital, is defined as cash provided from operating activities of continuing operations excluding changes in
non-cash working capital as set out in the Company’s consolidated statements of cash flows. This measure
is used by the Company and investors to measure the cash flow generated by the Company’s operating
segments prior to any changes in non-cash working capital, which at times can distort performance.
Growth capital expenditures
Growth capital expenditures are generally defined as capital expenditures that expand existing capacity,
increase life of assets and/or increase future earnings. This measure is used by management and investors
to assess the extent of discretionary capital spending being undertaken by the Company each period.
Sustaining capital expenditures
Sustaining capital expenditures are generally defined as expenditures that support the ongoing operation
of the asset or business without any associated increase in capacity, life of assets or future earnings. This
measure is used by management and investors to assess the extent of non-discretionary capital spending
being incurred by the Company each period.
Average realized price reconciliation
The following table provides a reconciliation of the Company’s average realized gold and copper prices to
its revenue:
$ thousands, unless otherwise indicated
Three Months
Twelve months
Ended December 31,
Total revenue from continuing operations
2020
151,751
2019
135,436
2020
2019
609,558
404,392
Add/(deduct):
Tsumeb revenue
Treatment charges and other deductions
Unfavourable (favourable) final settlements on
provisional concentrate sales
Silver revenue
Revenue from gold and copper
Revenue from gold
Payable gold in concentrate sold (ounces)
Average realized gold price per ounce
Revenue from copper
Payable copper in concentrate sold (‘000s pounds)
Average realized copper price per pound
RISKS AND UNCERTAINTIES
(34,818)
21,030
2,066
(1,103)
138,926
113,629
62,568
1,816
25,297
7,766
3.26
(23,623)
29,481
6,486
(1,123)
146,658
116,822
79,109
1,477
29,836
11,060
2.70
(147,130)
(140,693)
103,183
102,299
(7,352)
(3,740)
8,470
(2,560)
554,519
371,908
462,916
278,988
270,834
198,240
1,709
91,603
33,389
2.74
1,407
92,920
34,131
2.72
The operating results and financial condition of the Company are subject to a number of inherent risks and
uncertainties associated with its business activities, which include the acquisition, exploration,
development, financing, construction, commissioning and operation of its mine, mill and concentrate
processing facilities. The operating results and financial condition are also subject to numerous external
factors, which include economic, social, geo-political, environmental, regulatory, health, legal, tax and
market risks impacting, among other things, precious metals and copper prices, acid prices, toll rates,
FOURTH QUARTER 2020 I 64
foreign exchange rates, inflation, the availability and cost of capital to fund the capital requirements of the
business and the supply chain related to the business. Each of these risks could have a material adverse
impact on the Company’s future business, results of operations and financial condition, and could cause
actual results to differ materially from those described in any Forward Looking Statements contained in this
MD&A. The Company endeavors to manage these risks and uncertainties in a balanced manner with a
view to mitigating risk while maximizing total shareholder returns. In addition, there are a number of risks
associated with the research, development and sales activities of MineRP, a software vendor for the mining
industry, as well as uncertainties with the completion and the timing of the pending sale of MineRP, which
remains subject to South African competition review and approval, and the potential payments, upside and
expected benefits to the Company from the sale. The Company continually strives to identify and to
effectively manage the risks of each of its business units. This includes developing appropriate risk
management strategies, policies, processes and systems. There can be no assurance that the Company
has been or will be successful in identifying all risks or that any risk-mitigating strategies adopted to reduce
or eliminate risk will be successful. A description of the more significant business risks and uncertainties
affecting the Company are set out below. These risks, along with other potential risks not specifically
discussed in this MD&A, should be considered when evaluating the Company and its guidance. Additional
risks not identified below may affect the Company.
COVID-19
The current outbreak of COVID-19 and the emergence of multiple COVID-19 variants has had an adverse
impact on global economic conditions. Any future emergence and spread of similar or other pathogens
could have a similar adverse impact. The COVID-19 pandemic may continue or worsen which may
adversely impact the Company’s operations, and the operations of its suppliers, contractors and service
providers, the ability to obtain financing and maintain necessary liquidity, the demand for and ability to
transport the Company’s products and its ability to advance its projects and other growth initiatives.
The outbreak and resurgence of COVID-19 continues to significantly impact global economies and the
global upheavals have caused significant volatility in commodity prices. The outbreak and its declaration
as a global pandemic caused companies and governments around the world to impose sweeping
restrictions on the movement of people and goods, including social distancing measures and restrictions
on group gatherings, isolation and quarantine requirements, closure of business and government offices,
travel advisories and travel restrictions. The duration of the various disruptions to businesses locally and
internationally and the related financial impact cannot be reasonably estimated at this time. Furthermore,
governments in relevant jurisdictions may introduce new, or modify existing, laws, regulations, orders or
other measures that could impact the Company’s ability to operate or affect the actions of its suppliers,
contractors and service providers.
While some restrictions have been lifted in certain of the jurisdictions in which the Company operates, other
jurisdictions have reintroduced, re-imposed and/or implemented additional measures to contain the spread
of COVID-19. Should the responses of companies and governments be insufficient to contain the spread
and impact of COVID-19, this may lead to further economic downturn that may adversely impact the
Company’s business, financial condition and results of operations. The outbreak and resurgence of COVID-
19 may also continue to affect financial markets, may adversely affect the Company’s ability to raise capital,
and may cause continued interest rate volatility and movements that may make obtaining financing or
extending existing credit facilities more challenging or more expensive or unavailable on commercially
reasonable terms or at all. In addition, if any number of employees, contractors or consultants of the
Company or any key supplier become infected with COVID-19 or similar pathogens and/or the Company is
unable to source necessary replacements, consumables or supplies or transport its products, due to
government restrictions or otherwise, it could have a material negative impact on the Company’s operations
and prospects, including the partial or complete shutdown, delays in planned activities, including
maintenance, or other disruption of one or more of its operations. Furthermore, an outbreak of COVID-19
at the Company’s operations could cause reputational harm and negatively impact the Company’s social
license to operate. The COVID-19 pandemic has also increased cybersecurity and information technology
risks due to the rise in fraudulent activity and increased number of employees working remotely.
Although, the Company has not experienced any material disruptions to its operations to date, as a result
of measures it has taken, there is no assurance the Company will remain unaffected by the current COVID-
19 pandemic or potential future health crises. The Company will continue to work actively to monitor the
situation and implement further measures as required to mitigate and/or deal with any repercussions that
may occur as a result of the COVID-19 outbreak.
65 I DUNDEE PRECIOUS METALS INC.
Metal Prices
The fluctuation of the price of a metal sold by the Company can significantly impact revenues and can
significantly impact all-in sustaining cost per ounce of gold and copper and other cost measures that are
reported net of by-product credits. Accordingly, the price of gold and copper are major factors influencing
the Company’s business, results of operations and financial condition, and, in turn, the price for its common
shares.
Metal prices can fluctuate widely and are affected by numerous factors beyond the Company’s control,
including overall global market conditions; the sale or purchase of gold and silver by various central banks,
financial institutions and Exchange Traded Funds; interest rates; foreign exchange rates; inflation or
deflation; global and regional supply and demand; and the political and economic conditions of major gold,
silver and copper producing and consuming countries throughout the world. If gold and/or copper prices
were to decline significantly from current levels, there can be no assurance that cash flow from operations,
together with cash on hand and available lines of credit under the Company’s RCF, will be sufficient to meet
the Company’s operating and capital requirements, including its contractual commitments and mandatory
debt repayments, and the Company could be forced to discontinue production, reassess the feasibility of a
particular project, and/or could lose its interest in, or be forced to sell, some of its properties. In addition, a
significant commodity price decline could result in significant reductions in Mineral Reserve and Mineral
Resource estimates, which could have a material adverse impact on the value of one or more of the
Company’s cash generating units and result in an impairment of the carrying value of certain assets,
including exploration and evaluation assets, mine properties, and property, plant and equipment.
In accordance with established risk management policies, from time to time, the Company enters into cash
settled commodity swap contracts to swap future contracted monthly average metal prices for fixed metal
prices in order to reduce the metal price exposure associated with the time lag between the provisional and
final determination of concentrate sales as well as its by-product metals price exposure on future sales.
The Company also selectively enters into commodity option contracts from time to time to reduce its price
exposure. These contracts are entered primarily to provide price protection below a specified “floor” price
and, to reduce the upfront cost of these contracts, are typically accompanied by option contracts that
provide price participation up to a specified “ceiling” price. The Company sells and hedges gold and copper
metal contained in concentrates produced at prices that are effectively determined by reference to the
traded prices on major commodity exchanges, including the LME and the LBMA. As at December 31, 2020,
approximately 18% of the Company’s expected payable copper to be sold in 2021 has been hedged at an
average price of $3.53 per pound.
Smelter Toll Rates, Sulphuric Acid Prices, Metal Recoveries and Feed
The availability of sufficient volumes of high value complex concentrate, at suitable toll rates, is critical to
the profitability of the Tsumeb smelter, given the fixed cost nature of the operation. To facilitate the
procurement of complex concentrates, the Company entered into an agreement with IXM that currently
matures on December 31, 2023. There is no assurance that this agreement will be renewed with IXM upon
its expiry on December 31, 2023.
Under this agreement, the Company typically secures complex concentrate volumes at specified toll rates
covering the next 12-24 months. Currently, the Company has contracted sufficient quantities of suitable
high value complex concentrate through to mid-2023. There can be no assurance that such concentrate
will be available to the smelter in future or that the parties will agree on contracted toll rates that will be
sufficient to generate an adequate return. From time to time the Company may increase the amount of third
party concentrate and reduce the amount of Chelopech concentrate processed at Tsumeb. To the extent
the volume of complex concentrate from Chelopech is reduced at Tsumeb, it will affect the profitability of
the Tsumeb smelter. Failure to find sufficient quantities of suitable high value complex concentrate to be
processed at acceptable toll rates could have a material adverse impact on the Company’s business,
financial condition and results of operations.
Under the agreement with IXM, Tsumeb must return specified quantities of copper, gold and silver. Metal
over and under recoveries at the smelter are subject to smelter processing capabilities, contracted terms,
and various estimates, including the quantities of metal contained in concentrate received, material in-
process and blister delivered. These estimates are based on the Company’s process knowledge and
multiple assay results. Actual metal deliveries could differ materially from initial estimates and could have
a material adverse impact on the Company’s business, financial condition and results of operations as any
over or under recovery of metals is recorded in revenue.
FOURTH QUARTER 2020 I 66
Tsumeb produces sulphuric acid as a by-product of the smelting operation. The majority of this acid is sold
to customers in Namibia, with the balance exported to other countries in Africa. The revenue from the sales
of sulphuric acid make up a significant portion of Tsumeb’s revenue and changes in the market price of and
demand for sulphuric acid can have a material impact on Tsumeb’s financial results. As of December 31,
2020, approximately 65% of Tsumeb’s sulphuric acid production for the next 5 years has been sold under
a reference price contract which includes floor and ceiling prices. The remainder of Tsumeb’s acid
production will be sold at market terms under spot or longer-term agreements.
Foreign Exchange
By virtue of its international operations, the Company incurs costs and expenses in a number of foreign
currencies. The revenue from its mining and smelting operations received by the Company is denominated
in U.S. dollars since the prices of the metals that it produces are referenced in U.S. dollars, while the
majority of operating and capital expenditures of its mining and smelter operations are denominated in
Bulgarian leva, which is pegged to the Euro, the Namibian dollar, which is tied to the South African rand,
and the Canadian dollar. Fluctuations in these foreign exchange rates give rise to foreign exchange
exposures, either favourable or unfavourable, which could have a material impact on the Company’s
business, financial condition and results of operations. Fluctuations in the U.S. dollar relative to certain
currencies can also have an impact on commodity prices quoted in U.S. dollars, such that a stronger U.S.
dollar tends to have a negative impact on U.S. quoted prices while a weaker U.S. dollar tends to have a
favourable impact. As a result, this relationship is considered in conjunction with the Company’s risk
assessment.
From time to time, the Company enters into forward and option foreign exchange contracts in order to
reduce the foreign exchange exposures associated with projected operating expenses and capital
expenditures denominated in foreign currencies. Approximately 80% of projected Namibian dollar operating
expenses for 2021 have been hedged with a series of call and put options with a weighted average floor
and ceiling rates of 15.77 and 18.58, respectively. Currently, no hedges are in place for the Company’s
2021 projected Canadian dollar and Euro denominated operating expenses and capital expenditures.
Counterparty Risk
The Company is exposed to counterparty risk, including market pricing and credit-related risk, in the event
any counterparty, whether a customer, debtor or financial intermediary, is unable or unwilling to fulfill their
contractual obligations to the Company or where such agreements are otherwise terminated and not
replaced with agreements on substantially the same terms.
Under the terms of the Company’s existing concentrate sale contracts, the risk to counterparties is
mitigated, in part, through required provisional payments that range between 70% and 95% of the
provisional value of each lot at the time title of the concentrate transfers. A final adjusting payment, reflecting
the actual metal prices for the specified quotation period, is made when final weights and assays are
established. During 2020, the Company had contracts with 18 customers in connection with its mining and
smelting operations, one of whom accounted for approximately 57% (2019 - 60%) of the Company’s
revenue. All contractual commitments are subject to force majeure clauses which, if implemented, could
have a material adverse impact on the Company’s business, financial condition and results of operations.
While there can be no assurance that the Company will not experience a material loss for non-performance
by any counterparty with whom it has a commercial relationship, the Company has established policies to
manage its credit exposure that include assessing financial strength, limiting aggregate exposure to new
and existing counterparties, and using contractual arrangements, including provisional payments and
letters of credit. Should any such losses arise, they could have a material adverse impact on the Company’s
business, financial condition and results of operations.
Operations
Mining operations and related processing and infrastructure facilities are subject to a number of risks,
including risks related specifically to the mining and metals industry. Such risks include, without limitation,
environmental hazards, industrial accidents, disruptions in the supply of critical materials and supplies,
disruptions due to pandemic conditions, delays in obtaining work visas or other authorizations, labour
disputes, changes in laws, technical difficulties or failures, equipment failure, failure of retaining dams
around tailings disposal areas which may result in environmental pollution and consequent liability, unusual
and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding and other conditions
involved in the drilling and removal of material. Such risks could result in damage to, or destruction of,
mines and other processing facilities, damage to life or property, environmental damage, delays in mining
67 I DUNDEE PRECIOUS METALS INC.
and processing, delays in scheduled maintenance, losses and possible legal liability. Any prolonged
downtime or shutdowns at the Company’s mining and processing facilities could have a material adverse
impact on the Company’s business, financial condition and results of operations.
Success of the Company’s operations also depends on adequate public infrastructure. Reliable roads,
bridges, power sources and water supplies are important determinants which affect capital and operating
costs. Natural events, such as seismic events and severe climatic conditions, as well as sabotage,
government or other interference in the maintenance or provision of such infrastructure could have a
material adverse impact on the Company’s business, financial condition and results of operations.
Dependence on a Restricted Portfolio of Assets
The Company’s operations at the Chelopech mine and Ada Tepe mine accounted for all of the Company’s
gold, silver and copper production in 2020. Any adverse condition affecting the Chelopech mine or Ada
Tepe mine could have an adverse impact on the Company’s business, financial condition and results of
operations. Until such time as the Company acquires or develops other significant producing assets, the
Company will continue to be dependent on its operations at the Chelopech mine and Ada Tepe mine for all
of its cash flow provided by mining activities.
Production, Operating and Shipping Costs
The Company prepares estimates of future production, operating costs and other costs for its operations.
Despite the Company’s best efforts to budget and estimate such costs, many unforeseen factors can impact
the Company’s future production and total cash costs of production, such as the cost of inputs used in
mining and processing operations, including the cost of fuel, energy, consumables, labour and equipment;
availability of suitable high value complex concentrates to be processed at the smelter; regulatory factors;
adequate offtake arrangements for acid produced; grades and recoveries; royalties and taxes; foreign
exchange rates; adverse climatic conditions and natural phenomena; and industrial accidents can impact
the accuracy of these projections. As such, there can be no assurance that production and production cost
estimates will be achieved. Failure to achieve production or total cash cost estimates could have a material
adverse impact on the Company’s business, financial condition and results of operations.
The Company contracts for the shipment of its concentrates to its customers on varying terms and
conditions, all subject to the prevailing rates, availability and general circumstances surrounding this
market. Any material changes to the shipping markets and/or the terms and conditions of shipping contracts
could have a material adverse impact on the Company’s business, financial condition and results of
operations.
Mineral Resources and Mineral Reserves
The Mineral Resources and Mineral Reserves disclosed by the Company are estimates and no assurance
can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery
will be realized. There are numerous uncertainties inherent in estimating Mineral Resources and Mineral
Reserves, including many factors beyond the Company’s control. Such estimation is a subjective process
and the accuracy of any Mineral Resource estimate is a function of the quantity and quality of available
data and of the assumptions made and judgments used in engineering and geological interpretation. Short-
term operating factors, such as the need for orderly development of the ore bodies or the processing of
new or different ore grades, may cause the mining operation to be unprofitable in any particular accounting
period. In addition, there can be no assurance that gold, silver or copper recoveries in small scale laboratory
tests will be duplicated in larger scale tests under on-site conditions or during production.
Fluctuations in gold, silver and copper prices, results of drilling, change in cut-off grades, metallurgical
testing, production and the evaluation of mine plans subsequent to the date of any estimates may require
revision of such Mineral Resource and Mineral Reserve estimates. The volume and grade of Mineral
Reserves mined and processed, and the recovery rates achieved may not be the same as currently
anticipated. Any material reduction in the estimated Mineral Resources and Mineral Reserves could have
a material adverse impact on the Company’s business, financial condition and results of operations. A
significant decrease in the Mineral Resource and Mineral Reserve estimates could have a material adverse
impact on the carrying value of exploration and evaluation assets, mine properties, property, plant and
equipment, depletion and depreciation charges, and estimated mine closure and rehabilitation costs, and
could result in an impairment of the carrying value.
FOURTH QUARTER 2020 I 68
Inferred Mineral Resources
Inferred Mineral Resources cannot be converted to Mineral Reserves unless they are first converted into
Measured and Indicated Resources as a result of continued exploration. Due to the uncertainty which may
be attached to Inferred Mineral Resources, there can be no assurance that Inferred Mineral Resources will
be upgraded to Measured and Indicated Resources. Mineral Resources that are not Mineral Reserves do
not have demonstrated economic viability.
Need for Mineral Reserves
As mines have limited lives based on Proven and Probable Mineral Reserves, the Company must
continually develop, replace and expand its Mineral Reserves and Mineral Resources as its mines produce
gold, copper and silver concentrates. The Company’s ability to maintain or increase its annual production
of gold, copper and silver and its aggregate Mineral Reserves will be significantly dependent on its ability
to expand its Mineral Resource base both at its existing mines and new mines it intends to bring into
production in the future.
Exploration
Exploration is speculative and involves many risks that even a combination of careful evaluation, experience
and knowledge utilized by the Company may not eliminate. Once a site with mineralization is discovered,
it may take several years from the initial phases of drilling until production is possible. Substantial
expenditures are normally required to locate and establish Mineral Reserves and to permit and construct
mining and processing facilities. While the discovery of mineralization may result in substantial rewards if
an orebody is proven, few properties that are explored are ultimately developed into producing mines.
Financing and Liquidity
The Company relies on the cash flows generated from its mining and smelting operations, including
provisional payments received from its customers, cash on hand, available lines of credits under its RCF,
and its ability to raise debt and equity from the capital markets to fund its operating, investment and liquidity
needs. The cyclical nature of the Company’s businesses, general economic conditions and the volatility of
capital markets are such that conditions could change dramatically, affecting the Company’s cash flow
generating capability, its ability to maintain, or draw upon, its RCF or the existing terms under its concentrate
sales or toll agreements, as well as its liquidity, cost of capital and its ability to access additional capital,
which could have a material adverse impact on the Company’s earnings and cash flows and, in turn, could
affect total shareholder returns. To reduce these risks, the Company: (i) prepares regular cash flow
forecasts to monitor its capital requirements, available liquidity and compliance with its debt covenants; (ii)
strives to maintain a prudent capital structure that is comprised primarily of equity financing and a long-term
committed RCF; and (iii) targets a minimum level of liquidity comprised of surplus cash balances and/or
available committed lines of credit to avoid being placed into a situation where it is required to raise
additional capital at times when the costs or terms would be regarded as unfavourable.
Furthermore, there can be no assurance that the Company’s operations will be profitable or that the
Company will be able to raise capital on terms that it considers reasonable. Adverse commodity market,
general economic conditions and adverse capital market conditions could result in a delay or the indefinite
postponement of development or construction projects and could have a material adverse impact on the
Company’s business, financial condition, results of operations and share price.
Dividends
into
taking
The declaration amount and payment of future dividends will be subject to the sole discretion of the Board
position,
after
current and forecast operating results, overall market conditions, its outlook for sustainable free cash flow
and capital and any restrictions contained in any debt instrument and/or credit agreement to which the
Company may be party to from time to time. Despite the implementation of a regular dividend policy, there
is no guarantee of the amount, timing and sustainability of the dividend.
the Company’s financial
account,
among
things,
other
Foreign Country and Political
The majority of the Company’s operations and business are outside of Canada, primarily in Eastern Europe
and southern Africa, and as such, the Company’s operations are exposed to various political and other
risks and uncertainties.
These risks and uncertainties vary from country to country and include, but are not limited to, corruption;
crime; extreme fluctuations in foreign currency exchange rates; high rates of inflation; labour unrest;
69 I DUNDEE PRECIOUS METALS INC.
expropriation and nationalization; renegotiation or nullification of existing concessions, licenses, permits
and contracts; absence of reliable rule of law, regulatory and judiciary processes; illegal mining;
environmental policies; extreme weather conditions; changes in taxation or royalty policies; restrictions on
foreign exchange and movements of capital; changing political conditions; inappropriate laws and
regulations; and governmental regulations that favour or require the awarding of contracts to local
contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction; the risks of war or civil unrest; terrorism; hostage taking or detainment of personnel; and military
repression.
Any changes in mining or investment policies or shifts in political attitude in the countries in which the
Company conducts its business and operations may have a material adverse impact on the Company’s
business, financial condition and results of operations. It is difficult to predict the future political, social and
economic direction of the countries in which the Company operates, and the impact government decisions
could have on its business. Any political or economic instability in the countries in which the Company
currently operates could have a material adverse impact on the Company’s business, financial condition
and results of operations. Furthermore, the consequences of factors such as pandemics and climate
change may result in further political or economic instability in the countries in which the Company currently
operates as scarce resources may be redistributed.
In addition, authorities and court systems in the countries in which the Company conducts its business and
operations may be unpredictable. Challenges to foreign asset ownership, operations and regulatory
compliance may be brought by government authorities for reasons that cannot be predicted and that may
not be motivated by substantive law. It is also not unusual, in the context of a dispute resolution, for a party
in these foreign jurisdictions to use the uncertainty of the legal environment as leverage in its business
negotiations.
Failure to comply with applicable laws, regulations and local practices relating to mineral right applications
and tenure could result in loss, reduction or expropriation of entitlements.
Anti-Bribery and Anti-Corruption
The Company’s operations are governed by, and involve interactions with, public officials and many levels
of government in numerous countries. The Company’s operations take place in jurisdictions ranked
unfavourably under Transparency International’s Corruption Perception Index. These jurisdictions may be
vulnerable to the possibility of bribery, corruption, collusion, kickbacks, theft, improper commissions,
facilitation payments, conflicts of interest and related party transactions. The Company is required to comply
with anti-bribery and anti-corruption laws, including the Canadian Corruption of Foreign Public Officials Act
(“CFPOA”), as well as similar laws in the countries in which the Company conducts its business (together,
the “Anti-Corruption Laws”). In recent years, there has been a general increase in both the frequency of
enforcement and the severity of penalties under such laws, resulting in greater scrutiny and punishment to
companies convicted of violating anti-corruption and anti-bribery laws. Furthermore, a company may be
found liable for violations by not only its employees, but also by third parties, with whom the Company has
a business relationship, such as, but not limited to, contractors, suppliers, consultants, agents and
customers. Although the Company has adopted a number of steps to mitigate bribery and corruption risks,
which include, among other things, developing policies and procedures, establishing a robust third party
due diligence process, implementing training programs and performing regular internal monitoring activities
and audits, such measures may not always be effective in ensuring the strict compliance with Anti-
Corruption Laws by the Company, its employees or third parties. If the Company finds itself subject to an
enforcement action or is found to be in violation of such laws, this may result in significant penalties, fines
and/or sanctions imposed on the Company resulting in a material adverse impact on the Company’s
reputation, business, financial condition and results of operations.
Environmental, Health and Safety
Mining and smelting operations, including exploration, development and production of mineral deposits and
disposal of tailings and hazardous materials, generally involve a high degree of risk and are subject to
conditions and events beyond the Company’s control. The Company’s operations are subject to all of the
hazards and risks normally encountered in the mining and smelting sectors including: adverse
environmental conditions; industrial and environmental accidents; metallurgical and other processing
problems; unusual or unexpected rock formations; ground or slope failures; structural cave-ins or slides;
flooding or fires; seismic activity; rock bursts; equipment failures; failures to contain hazardous materials
(including arsenic) within the designated areas, and periodic interruptions due to weather conditions, as
well as intentional acts by individuals or groups who intend to harm or disrupt the Company’s operations.
FOURTH QUARTER 2020 I 70
These risks could result in the destruction of mines or processing facilities, the failure of tailings
management facilities and damage to infrastructure, causing partial or complete shutdowns, personal injury
or death, environmental or other damage to the Company’s properties or the properties of others, monetary
losses and potential legal liability. Although the Company conducts extensive maintenance and monitoring
and incur significant costs to maintain the Company’s operations, equipment and infrastructure, including
tailings management facilities, unanticipated failures or damage may occur that could cause injuries,
production loss or environmental pollution resulting in significant legal and/or economic liability.
The Company’s mining and smelting operations are subject to extensive environmental, health and safety
regulations in the various jurisdictions in which it operates. These regulations address, among other things,
emissions; air and water quality standards; land use; rehabilitation and reclamation; and safety and work
environment standards, including human rights. They also set forth limitations on the generation,
transportation, storage and disposal of various wastes, including hazardous wastes. Environmental, health
and safety legislation continues to evolve and, while the Company takes active steps to monitor this
legislation, it could result in stricter standards and enforcement, increased capital and operating costs and
burdens to achieve compliance, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and a heightened degree of responsibility for companies
and their officers, directors and employees. Amendments to current laws and regulations governing the
Company’s mining, processing, development and exploration activities, or more stringent implementation
thereof, could have a material adverse impact on the Company’s business, financial condition and results
of operations, and cause increases in exploration expenses, capital expenditures, production costs or future
rehabilitation costs or reduction in levels of production at producing properties or require abandonment or
delays in development of new mining properties and/or expansion of existing properties.
Environmental hazards may exist on the properties in which the Company holds interests, which are
unknown to the Company at present, and which have been caused by previous or existing owners or
operators of the properties. The Company may also acquire properties with known or undiscovered
environmental risk. Any indemnifications by the previous owners or others may not be adequate to pay all
the fines, penalties and costs incurred related to such properties. Some of the Company’s properties have
also been used for mining and related operations for many years before the Company acquired them and
were acquired “as is” or with assumed environmental liabilities from previous owners or operators. The
Company has been required to address contamination at its properties in the past and may need to do so
in the future, either for existing environmental conditions or for leaks, discharges or contamination that may
arise from its ongoing operations or other contingencies. The cost of addressing environmental conditions
or risks, and liabilities associated with environmental damage may be significant, and could have a material
adverse impact on the Company’s business, financial condition and results of operations. Production at the
Company’s mines and processing facilities involves the use of various chemicals, including certain
chemicals that are designated as hazardous substances. Contamination from hazardous substances, either
at the Company’s own properties or other locations for which it may be responsible, may subject the
Company to liability for the investigation or remediation of contamination, as well as for claims seeking to
recover costs for related property damage, personal injury or damage to natural resources. The occurrence
of any of these events could have a material adverse impact on the Company’s business, financial condition
and results of operations.
In 2016, the Company completed a major multi-year capital program at its smelter in Namibia directed at
modernizing the environmental equipment being utilized and debottlenecking its processing capacity. This
included the completion of a sulphuric acid plant, which has reduced the plant’s SO2 emissions. The
Company is committed to making further improvements to the health, safety and environmental
performance of the smelter and is continuously assessing the scope of any capital expenditures required
to support these further improvements. The Company’s environmental and occupational health and safety
performance will be subject to continued monitoring by the Namibian authorities and deviation from
expected environmental and occupational health and safety outcomes could have a material adverse
impact on the Company’s future production, business, financial condition and results of operations.
Climate Change
Global climate change continues to attract considerable public, scientific and regulatory attention.
Governments and regulatory bodies at the international, national, regional and local levels have introduced
or may introduce legislative changes to respond to the potential impacts of climate change. Additional
government action to regulate climate change, including regulations on carbon emissions and energy use,
could increase direct and indirect costs to the Company’s operations and may have a material adverse
impact on the Company. The Company’s primary operations are located in Bulgaria and Namibia, both of
71 I DUNDEE PRECIOUS METALS INC.
which are signatories to the Paris Agreement Under the United Nations Framework Convention on Climate
Change (the “Paris Agreement”). Additional requirements from the Paris Agreement or other climate change
regulations could lead to increased costs for the Company. For example, the European Green Deal, which
is an ambitious set of policy initiatives brought forward by the European Commission with the overarching
aim of making Europe climate neutral by 2050, will likely have significant effects which are not yet fully
quantifiable.
In addition, the Company’s operations are subject to the physical risks of climate change, which may include
increased extreme weather events, rising sea levels and significantly restricted water availability. In the
long term, the Company may be required to respond to the physical effects of climate change which could
have a material adverse impact on the Company and cause increases in expenditures and costs or require
abandonment or delays in developing new mining properties.
Management completed a focused climate change assessment during 2020. The report follows the
recommendations of the Task Force for Climate-related Financial Disclosure, highlights DPM’s efforts to
achieve reductions in energy and water use, emissions and its consumption of raw materials, and outlines
the major identified risks and opportunities related to climate change. Based on the results of the
assessment, existing management and governance practices will be supplemented to ensure climate
change effects are, among other things, minimized, adequately included in the ongoing assessment of the
risk and opportunities for the Company, and disclosed based on the requirements of the Financial Stability
Board’s Task Force on Climate-related Financial Disclosures recommendations. Based on this assessment
and other factors, management does not view climate change as an immediate material risk faced by the
Company. However, as time goes on, it may have an impact on how the Company conducts its business.
Reclamation and Mine Closure Costs
Although variable depending on location and the governing authority, land reclamation and mine closure
requirements are generally imposed on mining companies in order to minimize long-term effects of land
disturbance. The Company is required by governments in the jurisdictions where it operates to provide
financial assurances to cover any reclamation and mine closure obligations that it may have at its mine
sites. The amount and nature of the Company’s financial assurance obligations depend on a number of
factors, including the Company’s financial condition and reclamation and mine closure cost estimates.
Reclamation and mine closure cost estimates can escalate because of new regulatory requirements,
changes in site conditions, conditions in the receiving environment, or changes in analytical methods or
scientific understanding of the impacts of various constituents in the environment. Changes to the form or
amount of the Company’s financial assurance obligations in respect of reclamation and mine closure
obligations could significantly increase the Company’s costs, making the maintenance and development of
existing or new mines less economically feasible. Increases in financial assurance requirements could
severely impact the Company’s credit capacity and its ability to raise capital for other projects or
acquisitions. The Company may be unable to obtain letters of credit or surety bonds to satisfy these
requirements, in which case it may be required to deposit cash as financial assurance. If the Company is
unable to satisfy these requirements, it may face loss of permits, fines and other material and negative
consequences, which could have a material adverse impact on the Company’s business, financial condition
and results of operations.
The Company recognizes a liability for its rehabilitation expenses when a legal and/or constructive
obligation is identified. The liability is measured at the present value of estimated costs required to
rehabilitate the operating locations based on the risk-free nominal discount rates applicable to the countries
in which the operations are located. The carrying value of the rehabilitation provision was $52.5 million and
$41.4 million at December 31, 2020 and 2019, respectively. Changes in the underlying assumptions used
to estimate the mine closure and rehabilitation costs as well as changes to environmental laws and
regulations could cause material changes in the expected cost and the fair value of the estimated mine
closure and rehabilitation costs and these changes could have a material adverse impact on the Company’s
business, financial condition and results of operations.
MineRP
In December 2020, the Company announced that it had entered into a definitive agreement for the sale of
100% of MineRP to Epiroc Canada Holding Inc., a subsidiary of Epiroc Drills AB. The Company’s closing
proceeds are estimated to be approximately $40 million and are comprised of cash proceeds relating to the
Company’s 70% fully-diluted equity ownership of MineRP, the repayment of its shareholder loans, and any
accrued interest. The Company may receive potential additional proceeds from an earn-out of up to $28.7
million, which are payable upon the achievement of certain revenue targets by MineRP in 2021 and 2022.
FOURTH QUARTER 2020 I 72
The closing of the sale transaction remains subject to certain conditions, including South African
competition review and approval. There can be no assurance that the Company will be able to satisfy all
closing conditions for the completion of the transaction and realize the benefits inherent to the transaction,
nor is there any assurance that the Company will receive any additional targeted payments from the earn-
out.
Additionally, there is no assurance that the Company will realize anticipated financial results from MineRP
prior to the transaction being completed or thereafter in the event the transaction is not completed. Failure
to realize anticipated financial results from MineRP could have an adverse impact on the Company’s
business, financial condition and results of operations.
MineRP’s business as a software vendor is reliant upon the ownership, protection and ongoing
development of key intellectual properties. There is no assurance that such ownership rights will not be
challenged and that MineRP will successfully maintain its rights in such intellectual properties. Further,
there is no assurance that MineRP will be able to develop and market commercially successful intellectual
property assets.
Inadequate Controls over Financial Reporting
The Company assessed and tested its internal control procedures in order to satisfy the requirements of
National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”),
which require an annual assessment by management of the operating effectiveness of the Company's
internal control over financial reporting. The Company's failure to satisfy the requirements of NI 52-109 on
an ongoing and timely basis could result in the loss of investor confidence in the reliability of its financial
statements, which in turn could have a material adverse impact on the Company's business and common
share price. In addition, any failure to implement required new or improved controls, or difficulties
encountered in their implementation, could have a material adverse impact on the Company's business,
financial condition, results of operations and share price.
No evaluation can provide absolute assurance that the Company's internal control over financial reporting
will detect or uncover all material information required to be reported. Furthermore, there can be no certainty
that the Company’s internal control over financial reporting will prevent or detect all errors and fraud. In
addition, with ever increasing regulations and changes in the Company’s business it is expected that the
Company’s internal control over financial reporting will continue to evolve and improve over time.
Stakeholder Relations and License to Operate
The Company’s relationships with stakeholders are critical to ensure the future success of its existing
operations and the construction and development of its projects. There is an increasing level of public
concern relating to the perceived effect of mining and smelter activities on the environment and on
communities impacted by such activities. Non-governmental organizations (“NGOs”) and civil society
groups, some of which oppose globalization and resource development, are often vocal critics of the mining
industry and its practices, including the use of hazardous substances and the handling, transportation and
storage of various waste, including hazardous waste. Adverse publicity generated by such NGOs and civil
society groups or others related to the extractive industries generally, or the Company’s operations
specifically, could have a material adverse impact on, including but not limited to, the laws under which the
Company operates, its ability to secure new permits and its reputation. Reputation loss may result in
decreased investor confidence, increased challenges in developing and maintaining community relations
and an impediment to the Company’s overall ability to advance its projects, obtain permits and licenses
and/or continue its operations, which could have a material adverse impact on the Company’s business,
results of operations and financial condition.
Development Projects
As part of the Company’s growth strategy, it expects to invest in the development, design, construction,
operation and optimization of existing and new facilities to enhance operations and increase future
production. In developing these new projects, the Company may be required to incur significant preliminary
engineering, environmental, permitting and legal-related expenditures prior to determining whether a
project is technically feasible and economically viable. The commercial viability of development projects is
based on many factors, including: in the case of a mine, the particular attributes of the deposit, such as
size, grade and proximity to infrastructure; metal recoveries, metal prices and, in the case of the smelter,
toll rates, each of which are highly cyclical; availability of complex concentrate; government regulations;
capital and operating costs of such projects; and foreign currency exchange rates. Development projects
are also subject to the successful completion of feasibility studies, issuance of necessary governmental
73 I DUNDEE PRECIOUS METALS INC.
permits, subsequent appeals of such permits, including favourable EIA decisions, the acquisition of
satisfactory surface or other land rights and having adequate funding arrangements in place.
All projects are approved for development on a project-by-project basis after considering strategic fit,
inherent risks, and expected financial returns. This approach, which incorporates a gated project
governance model, and combined with an experienced management team, staff and contract personnel,
mitigates some of the risk associated with development projects. However, there can be no assurance that
there will not be delays in obtaining the necessary permits or that the development or construction of any
one or more projects will be completed on time, on budget or at all, or that the ultimate operating cost of
the operation will not be higher than originally envisaged. In addition, to secure long lead times required for
ordering equipment, the Company may place orders for equipment and make deposits thereon or advance
projects before obtaining all requisite permits and licenses. Such actions are taken only when the Company
reasonably believes such licenses or permits will be forthcoming prior to the requirement to expend the full
amount of the purchase price. In the event a project, which was deemed economically viable, is not
completed or does not operate at anticipated performance levels, the Company may be unable to fully
recover its investment and be required to record a write-down. This, in turn, may have a material adverse
impact on the Company’s business, financial condition and results of operations.
It is not unusual in the mining industry, especially in jurisdictions like Bulgaria, Serbia and Namibia, for
operations to experience construction challenges or delays and unexpected problems during the start-up
phase, resulting in delays and requiring more capital than anticipated. Given the inherent risks and
uncertainties associated with any major capital project, there can be no assurance that construction will
proceed in accordance with current expectations or at all, or that construction costs will be consistent with
the budget, or that the operation will operate as planned.
Information Technology Systems and Information Technology Systems Security Threats
DPM has entered into agreements with third parties for hardware, software, telecommunications and other
technology services/systems in connection with its operations (including information technology,
operational technology and digital). The Company’s operations depend, in part, on technology
services/systems and how well the Company and its suppliers protect networks, equipment, technology
systems and software against damage from a number of threats, including, but not limited to, cable cuts;
damage to physical plants; natural disasters; terrorism; fire; power loss; hacking; computer viruses;
vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and
replacement of networks, equipment, technology systems and software as well as specific cybersecurity
systems and governance to mitigate the risk of failures. Any of these and other events could result in data
leakage, information loss, system failures, business interruptions and/or increases in capital expenses,
which could have a material adverse impact the Company’s reputation, business, financial condition and
results of operations.
Although to date the Company and its operations have not experienced any material losses relating to
cyber-attacks or other information security breaches, there can be no assurance that DPM will not incur
such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated
because of, among other things, the evolving nature of these threats. As a result, cyber security and the
continued development and enhancement of controls, processes and practices designed to protect
systems, computers, software, company and personal data and networks from attack, damage or
unauthorized access remain a priority. As cyber threats continue to evolve, the Company may be required
to expend additional resources to continue to modify or enhance protective measures or to investigate and
remediate any security vulnerabilities.
The Company is or will be subject to privacy and data security regulations in several of the jurisdictions that
it operates in, such as Canada, Namibia and the European Union. The European Union’s General Data
Protection Regulation, or GDPR, took effect in May 2018 and introduced increased regulations relating to
personal data security. The GDPR requires companies to satisfy new requirements regarding the handling
of personal and sensitive data, including its use, protection and the ability of persons whose data is stored
to correct or delete such data about themselves. The Company could incur substantial costs in complying
with various national privacy regulations as a result of having to make changes to prior business practices.
Such developments may also require the Company to make system changes and develop new processes,
further affecting its compliance costs. In addition, violations of privacy-related regulations can result in
significant penalties and reputational harm, which in turn could adversely impact the Company’s business
and results of operations.
FOURTH QUARTER 2020 I 74
Competition
The Company faces competition from other mining companies in connection with the acquisition of
properties producing, or capable of producing and processing, precious and base metals, as well as the
ultimate sale of its production. Many of these companies may have greater financial resources, operational
experience and technical capabilities than the Company. As a result of this competition, there can be no
assurance that the Company will be able to acquire or maintain cost competitive operations or sell its
production or toll complex concentrate on economically acceptable terms, which could have a material
adverse impact on the Company’s business, financial condition and results of operations.
The Company also faces competition from other smelting companies as well as trading companies, notably
those with blending operations, to secure complex feed for its Tsumeb smelter operation. Such competitive
forces and supply-demand dynamics could cause terms for complex copper concentrate to fall below levels
at which it is economic for the Company to smelt this material and therefore have a material adverse impact
on the Company’s business, financial condition and results of operations.
MineRP faces competition from other software vendors in the development and sale of its intellectual
properties. There can be no assurance that MineRP will be able to successfully develop and market its
products.
Impairment
The Company is required to undertake regular assessments to determine whether an impairment is
required for any of its assets. The assessment of impairment requires significant judgments over a number
of external and internal factors, some of which are outside of the Company’s control, and requires the use
of estimates and assumptions related to these factors for each CGU. External factors include considerations
such as commodity prices, toll rates, discount rates, foreign exchange rates, and changes in market,
economic and regulatory requirements. Internal factors include considerations such as production volume,
ability to convert resources into reserves, capital and operating expenditures, and future development and
expansion plans. There can be no assurance that management’s estimate of the future will reflect actual
events, further impairment charges may materialize and the timing and amount of such impairment charges
are difficult to predict and may have a material adverse impact on the Company’s business, financial
condition and results of operations.
Enforcement of Legal Rights
The Company’s material subsidiaries are organized under the laws of foreign jurisdictions. Given that the
Company’s material assets are located outside of Canada, investors may have difficulty in effecting service
of process within Canada and collecting from or enforcing against the Company, any judgments obtained
by the Canadian courts or Canadian securities regulatory authorities and predicated on the civil liability
provisions of Canadian securities legislation or otherwise. Similarly, in the event a dispute arises from the
Company’s foreign operations, the Company may be subject to the exclusive jurisdiction of foreign courts
or may not be successful in subjecting foreign persons to the jurisdictions of courts in Canada.
Insurance and Uninsured Risks
The Company’s business is subject to numerous risks and hazards, including severe climatic conditions,
industrial accidents, equipment failures, labour disputes, unusual or unexpected geological conditions,
ground or slope failures, cave-ins, changes in the regulatory environment and other natural events such as
earthquakes. Such occurrences could result in damage to mineral properties or processing facilities,
personal injury or death, environmental damage to the Company’s properties or the properties of others,
delays in mining and processing, monetary losses and possible legal liability.
In order to eliminate or reduce certain risks, the Company purchases and maintains insurance coverage,
subject to limits and deductibles that are considered reasonable and prudent. This insurance coverage
does not cover all potential risks because of customary exclusions and/or limited availability, and in some
instances, the Company’s view that the cost of certain insurance coverage is excessive in relation to the
risk or risks being covered. Further, there can be no assurance that insurance coverage will continue to be
available on commercially reasonable terms, that such coverage will ultimately be sufficient, or that insurers
will be able to fulfill their obligations should a claim be made.
Due to recent dam failures, there has been increased scrutiny by insurance underwriters on tailings
management facilities and insurance underwriters’ tolerance for writing risk in the pollution liability market
has been reduced due to the elevated level of risk. As a result, the Company opted not to acquire pollution
75 I DUNDEE PRECIOUS METALS INC.
liability insurance in 2020 relating to liquefaction results from tailings management facilities failures due to
its view that the cost is excessive in relation to the limited risk or risks being covered. Furthermore, material
losses that may arise from the COVID-19 outbreak are not covered by the Company’s insurance. Losses
arising from any events that are not fully insured may cause the Company to incur significant costs that
could have a material adverse impact on its business, financial condition and results of operations.
Value of Investment Portfolio
The value of the Company’s investment portfolio of securities will vary based on the underlying value of the
securities acquired by the Company. The business activities of issuers in the resource industry (“Resource
Issuers”) are speculative and may be adversely affected by factors outside the control of those issuers.
Resource Issuers may not hold or discover commercial quantities of precious metals or minerals, have
limited access to capital, and profitability may be affected by adverse fluctuations in commodity prices,
demand for commodities, general economic conditions and cycles, unanticipated depletion of reserves or
resources, native land claims, liability for environmental damage, competition, imposition of tariffs, duties
or other taxes and government regulations, as applicable. Since the Company has and may continue to
invest primarily in securities issued by Resource Issuers engaged in the mining industry or related resource
businesses (including junior issuers), the value of the Company’s investment portfolio of securities may be
more volatile than portfolios with a more diversified investment focus. In some cases, the value of securities
owned by the Company may also be affected by such factors as investor demand, specified rights or
restrictions associated with the security, general market trends or regulatory restrictions. Fluctuations in the
market values of such securities may occur for a number of reasons beyond the control of the Company,
and there can be no assurance that an adequate liquid market will exist for securities or that quoted market
prices at any given time will properly reflect the value at which the Company could monetize these
securities.
Laws, Regulations and Permitting
The activities of the Company are subject to various laws and regulations governing prospecting,
exploration, development, production, taxes, labour commercial standards and occupational health, mine
safety, toxic substances, land use, water use, land claims of local people, archaeological discovery and
other matters. Although the Company currently carries out its operations and business in accordance with
all applicable laws, rules and regulations, no assurance can be given that new laws, rules and regulations
will not be enacted or that existing laws, rules and regulations will not be changed or be applied in a manner
which could limit or curtail production or development. Furthermore, amendments to current laws and
regulations governing operations and activities of mining, milling and processing or more stringent
implementation thereof could cause costs and delays that could have a material adverse impact on the
Company’s business, financial condition and results of operations.
The Company’s current and future operations and development activities are subject to receiving and
maintaining permits from appropriate governmental authorities. Although the Company currently has the
required permits for its current operations, there can be no assurance that delays will not occur in
connection with obtaining all necessary renewals of such permits for the existing operations or additional
permits for planned new operations or changes to existing operations that could have a material adverse
impact on the Company’s business, financial condition and results of operations.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement
actions, including orders issued by regulatory or judicial authorities causing operations to cease or be
curtailed and may include corrective measures requiring capital expenditures, installation of additional
equipment or remedial actions. Parties engaged in mining and processing operations or in the exploration
or development of mineral properties may be required to compensate those suffering loss or damage by
reason of the mining and processing activities and may have civil or criminal fines or penalties imposed for
violations of applicable laws or regulations, including environmental laws.
Labour Relations
While the Company has good relations with both its unionized and non-unionized employees, there can be
no assurance that it will be able to maintain positive relationships with its employees or that new collective
agreements will be entered into without work interruptions. In addition, relations between the Company and
its employees may be impacted by regulatory or governmental changes introduced by the relevant
authorities in whose jurisdictions that the Company operates. Adverse changes in such legislations or in
the relationship between the Company and its employees could have a material adverse impact on the
Company’s business, financial condition and results of operations.
FOURTH QUARTER 2020 I 76
The Company has entered into a collective agreement with its employees in Bulgaria, for Chelopech and
Ada Tepe, and an additional annex executed in July 2020, provides that the agreement is in effect until July
2021. Tsumeb’s unionized employees continue to operate under the terms of the collective agreement
agreed for 2019, with negotiations for a new agreement expected to commence in the first quarter of 2021.
Income and Other Taxes
The Company operates in Canada and several foreign jurisdictions, through a number of subsidiary
intermediary entities. As a result, it is subject to potential changes in tax laws, judicial interpretations in
respect thereof, and the administrative and/or assessing practices of tax authorities in each jurisdiction.
While these tax risks are proactively managed and monitored by senior management and outside tax
experts, there can be no assurance that there will not be changes to these laws or interpretations that could
have a material adverse impact on the Company’s business, financial condition and results of operations.
In December 2020, the Namibian Ministry of Finance announced that tax incentives under the EPZ Act
would no longer be granted, effective December 31, 2020, and that companies with EPZ status, such as
Tsumeb, would continue to benefit from these incentives up to December 31, 2025. The EPZ regime is
expected to be replaced by a new SEZ, the details of which are expected to be released in the first half of
2021.
The Company believes that it is not currently a passive foreign investment company (“PFIC”) for U.S.
Federal income tax purposes and it does not anticipate becoming a PFIC in the foreseeable future.
However, the PFIC rules are complex, and, as a Canadian company publicly listed on the TSX, the
Company does not operate its business in a manner specifically intended to avoid being classified as a
PFIC. Accordingly, there can be no assurance that the Company will not be considered a PFIC. The
Company also has not and does not expect to provide any shareholder with information that will enable a
U.S. shareholder to make a qualified electing fund election in respect of the Company. To the extent that
the Company is a PFIC in respect of any taxable year, its status as such would have adverse tax
consequences for taxable U.S. investors. U.S. investors should consult their own tax advisors regarding
the PFIC rules and the potential adverse U.S. Federal income tax consequences to which they may be
subject to in respect of an investment in the Company’s common shares.
Future Plans
As part of its overall business strategy, the Company examines, from time to time, opportunities to acquire
and/or develop new mineral projects and businesses. A number of risks and uncertainties are associated
with these potential transactions and DPM may not realize all of the anticipated benefits. The acquisition
and the development of new projects and businesses are subject to numerous risks, including the particular
attributes of the deposit, political, regulatory, design, construction, labour, operating, technical, and
technological risks, as well as uncertainties relating to the availability and cost of capital, future metal prices,
foreign currency rates and toll rates, in the case of the smelter. Failure to successfully realize the anticipated
benefits associated with one or more of these initiatives successfully could have a material adverse impact
on the Company’s business, financial condition and results of operations.
Acquisitions and Integration
From time to time the Company examines opportunities to acquire additional mining assets and businesses.
Any acquisition that the Company may choose to complete may be of a significant size, may change the
scale of the Company’(cid:86) business and operations, and may expose the Company to new geographic,
political, operating, financial and geological risks. The Company’s success in its acquisition activities
depends on its ability to identify suitable acquisition candidates, negotiate acceptable terms for any such
acquisition, and integrate the acquired operations successfully with those of the Company. Any acquisitions
would be accompanied by risks. For example, there may be a significant change in commodity prices after
the Company has committed to complete the transaction and established the purchase price or exchange
ratio; a material ore body may prove to be below expectations; the Company may have difficulty integrating
and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies
and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform
standards, policies and controls across the organization; the integration of the acquired business or assets
may disrupt the Company’s ongoing business and its relationships with employees, customers, suppliers
and contractors; and the acquired business or assets may have unknown liabilities which may be significant.
In the event that the Company chooses to raise debt capital to finance any such acquisition, the Company’s
leverage will be increased. If the Company chooses to use equity as consideration for such acquisition,
existing shareholders may experience dilution. Alternatively, the Company may choose to finance any such
77 I DUNDEE PRECIOUS METALS INC.
acquisition with its existing resources. There can be no assurance that the Company would be successful
in overcoming these risks or any other problems encountered in connection with such acquisitions.
Land Title
Although the title to the properties owned by the Company were reviewed by, or on behalf of, the Company,
there can be no assurances that there are no title defects affecting such properties or the shares of
subsidiaries that hold such properties. Title insurance generally is not available, and the Company’s ability
to ensure that it has obtained a secure claim to individual mineral properties or mining concessions may be
severely constrained. The Company has not conducted surveys of the claims in which it holds direct or
indirect interests and, therefore, the precise area and location of such claims may be in doubt.
Accordingly, the Company’s interest in mineral properties may be subject to prior unregistered liens,
agreements, transfers or claims, and title may be affected by, among other things, undetected defects. In
addition, the Company may be unable to operate its properties as permitted or to enforce its rights with
respect to its properties.
Market Price of Common Shares
The common shares of the Company are listed on the TSX. The price of these and other shares making
up the mining sector have historically experienced substantial volatility, often based on factors unrelated to
the financial performance or prospects of the companies involved. These factors include macroeconomic
developments in North America and globally, including those impacting the price of commodities, interest
rates, market perceptions concerning equity securities generally and the precious and base metal sectors
in particular, and factors that may be specific to the Company, including daily traded volumes of the common
shares.
As a result of any of these factors, the market price of the common shares at any given point in time may
not accurately reflect the Company’s long-term value, which in turn could impact the ability of the Company
to raise equity or raise equity on terms considered to be acceptable. Securities class action litigation often
has been brought against companies following periods of volatility in the market price of their securities.
The Company may in the future be the target of similar litigation. Securities litigation could result in
substantial costs and damages and divert management’s attention and resources and have a material
adverse impact on the Company’s business, financial condition and results of operations.
Dilution to Common Shares
During the life of the Company’s outstanding stock options granted under its share-based compensation
plans, the holders are given an opportunity to profit from an increase in the market price of the Company’s
common shares with a resulting dilution in the interest of shareholders. The holders of stock options may
exercise such securities at a time when the Company may have been able to obtain any needed capital by
a new offering of securities on terms more favourable than those provided by the outstanding rights. The
increase in the number of common shares in the market, if all or part of these outstanding rights were
exercised, and the possibility of sales of these additional shares may have a negative effect on the price of
the Company’s common shares.
The Company may need to raise additional financing in the future through the issuance of additional equity
securities. If the Company raises additional funding by issuing additional equity securities, such financings
may substantially dilute the interests of shareholders of the Company and reduce the value of their
investment in the Company’s securities.
Reputational Risk
As a result of the increased usage and the speed and the global reach of social media and other web-based
applications used to generate, publish and discuss user-generated content and to connect with others, the
Company is at a much greater risk of losing control over how it is perceived by the public. Damage to the
Company's reputation can be the result of the actual or perceived occurrence of any number of events (for
example, with respect to the handling of environmental matters, community relations or litigation), and could
include any negative publicity, whether credible, factual, true or not. While the Company places a great
emphasis on protecting and nurturing its reputation, it does not ultimately have direct control over how it is
perceived by others, including how it is viewed on social media and other web-based applications.
Reputation loss may lead to increased challenges in developing and maintaining community relations,
decreased investor confidence and an impediment to the Company’s overall ability to advance its projects,
thereby having a material adverse impact on the Company’s business, financial condition and results of
operations.
FOURTH QUARTER 2020 I 78
Foreign Subsidiaries
The Company conducts its operations through foreign subsidiaries and substantially all of its assets are
held in such entities. Accordingly, any limitation on the transfer of cash or other assets between or among
DPM and such entities, could restrict or impact the Company’s ability to fund or receive cash from its
operations. Any such limitations, or the perception that such limitations may exist now or in the future, could
have a material adverse impact on the Company’s business, financial condition and results of operations.
In addition, the corporate law and other laws governing the Company’s foreign subsidiaries differ materially
from Canadian corporate and other laws. Challenges to the Company’s ownership or title to the shares of
such subsidiaries or the subsidiaries’ title or ownership of their assets may occur based on alleged
formalistic defects or other grounds that are based on form rather than in substance. Any such challenges
may cost time and resources for the Company or cause other adverse effects.
Key Executives and Senior Personnel
The Company is dependent on the services of key executives, including its President and CEO and a
number of highly skilled and experienced executives and senior personnel. The loss of these persons or
the Company’s inability to attract and retain additional highly skilled employees could have a material
adverse impact on the Company’s future operations and business.
Conflicts of Interest
Certain of the directors and officers of the Company also serve as directors and/or officers of other
companies involved in natural resource exploration and development or investment in or provide services
to natural resource companies, including Dundee Corporation, and other companies in which the Company
has investments, and consequently there exists the possibility for such directors and officers to be in a
position of conflict. The Board is aware of these potential conflicts and these individuals recuse themselves
from the Board deliberations and voting when necessary. The Company expects that any decision made
by any of such directors and officers will be made in accordance with their duties and obligations to deal
fairly and in good faith with a view to the best interests of the Company and its shareholders, but there can
be no assurance in this regard. In addition, each of the directors is required to declare and refrain from
voting on any matter in which such directors may have a conflict of interest in accordance with the
procedures set forth in the Canadian Business Corporations Act and other applicable laws.
Litigation Risk
Legal proceedings may be brought against the Company, for example, litigation based on its business
activities, environmental laws, tax matters, volatility in its stock price or failure to comply with its disclosure
obligations, which could have a material adverse effect on its financial condition or prospects. Regulatory
and government agencies may bring legal proceedings in connection with the enforcement of applicable
laws and regulations, and as a result the Company may be subject to expenses of investigations and
defense, fines or penalties for violations if proven, and potentially cost and expense to remediate, increased
operating costs or changes to operations, and cessation of operations if ordered to do so or required in
order to resolve such proceedings. The Company may also become party to disputes governed by the rules
of international arbitration. In the event of a dispute arising at its foreign operations, the Company may be
subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons
to the jurisdiction of courts in Canada. The Company’s inability to enforce its rights could have an adverse
effect on its future cash flows, earnings, results of operations and financial condition.
Interest Rate
The Company’s exposure to the risk of changes in market interest rates relates primarily to the interest
earned on the Company’s cash and cash equivalents, and potential interest paid on future drawdowns
under its RCF, which is based on a floating reference rate.
Shareholder Activism
In recent years, publicly-traded companies have been increasingly subject to demands from activist
shareholders advocating for changes to corporate governance practices, such as executive compensation
practices, social issues, or for certain corporate actions or reorganizations. There can be no assurances
that activist shareholders will not publicly advocate for the Company to make certain corporate governance
changes or engage in certain corporate actions. Responding to challenges from activist shareholders, such
as proxy contests, media campaigns or other activities, could be costly and time consuming and could have
an adverse effect on the Company reputation and divert the attention and resources of the Company
79 I DUNDEE PRECIOUS METALS INC.
management and the Company’s board of directors, which could have an adverse effect on the Company’s
business and results of operations. Even if the Company does undertake such corporate governance
changes or corporate actions, activist shareholders may continue to promote or attempt to effect further
changes and may attempt to acquire control of the Company to implement such changes. If shareholder
activists seeking to increase short-term shareholder value are elected to the Company’s board of directors,
this could adversely affect the Company’s business and future operations. Additionally, shareholder
activism could create uncertainty about the Company’s future strategic direction, resulting in loss of future
business opportunities, which could adversely affect the Company’s business, future operations,
profitability and ability to attract and retain qualified personnel.
Public Company Obligations
The Company’s business is subject to evolving corporate governance and public disclosure regulations that
have increased both the Company’s compliance costs and the risk of non-compliance, which could have a
material adverse impact on the Company’s share price.
The Company is subject to changing rules and regulations promulgated by a number of governmental and
self-regulated organizations, including the Canadian Securities Administrators, the TSX, and the
International Accounting Standards Board. These rules and regulations continue to evolve in scope and
complexity creating many new requirements. The Company’s efforts to comply with rules and obligations
could result in increased general and administration expenses and a diversion of management time and
attention from revenue-generating activities.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company’s management, under the supervision of the Chief Executive Officer (“CEO”) and the Chief
Financial Officer (“CFO”), has designed disclosure controls and procedures (“DC&P”) and internal control
over financial reporting (“ICFR”), as defined in NI 52-109 based on the Internal Control – Integrated
Framework (2013) developed by COSO (Committee of Sponsoring Organizations of the Treadway
Commission).
The CEO and CFO evaluated or caused to be evaluated under their supervision the design and operating
effectiveness of the DC&P and ICFR as defined by NI 52-109 as of December 31, 2020. Based on this
evaluation, the CEO and CFO concluded that the Company's DC&P and ICFR were designed and operating
effectively as of December 31, 2020.
NI 52-109 also requires Canadian public companies to disclose in their MD&A any change in ICFR that has
materially affected, or is reasonably likely to materially affect, ICFR. No material changes were made to
ICFR in the year ended December 31, 2020. Only reasonable, rather than absolute assurance, that
misstatements are prevented or detected on a timely basis by ICFR can be provided due to the inherent
limitations of the ICFR system. Such limitations also apply to the effectiveness of ICFR as it is also possible
that controls may become inadequate because of changes in conditions or deterioration in compliance with
policies and procedures.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements and other information included in this MD&A and our other disclosure documents
constitute “forward looking information” or “forward looking statements” within the meaning of applicable
securities legislation, which we refer to collectively hereinafter as “Forward Looking Statements”.
Forward Looking Statements are statements that are not historical facts and are generally, but not always,
identified by the use of forward looking terminology such as “plans”, “expects”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “outlook”, “intends”, “anticipates”, “believes”, or variations of such
words and phrases or that state that certain actions, events or results “may”, “could”, “would”, “might” or
“will” be taken, occur or be achieved, or the negative of any of these terms or similar expressions. The
Forward Looking Statements in this MD&A relate to, among other things: measures the Company is
undertaking in response to the COVID-19 outbreak, including its impacts on the Company’s global supply
chains, the level of and duration of reductions or curtailments in operating levels at any of the Company’s
operations or in its exploration and development activities; expected cash flows; the price of gold, copper,
silver and acid, toll rates, metals exposure and stockpile interest deductions at Tsumeb; the estimation of
FOURTH QUARTER 2020 I 80
Mineral Reserves and Mineral Resources and the realization of such mineral estimates; estimated capital
costs, operating costs and other financial metrics, including those set out in the three-year outlook provided
by the Company; currency fluctuations; the impact of any impairment charges; the processing of Chelopech
concentrate; timing of further optimization work at Tsumeb; potential benefits of any upgrades and/or
expansion, including the planned rotary furnace installation, at the Tsumeb smelter; results of economic
studies; success of exploration activities; achieving the results set out in the PEA; the completion and
results of the PFS for the Timok gold project; the commencement, completion and results of a FS for the
Timok gold project (if any); success of permitting activities; permitting timelines; success of investments,
including potential acquisitions; requirements for additional capital; government regulation of mining and
smelting operations; environmental risks; reclamation expenses; potential or anticipated outcome of title
disputes or claims; benefits of digital initiatives; the payment of dividends; the timing and number of common
shares of the Company that may be purchased pursuant to the Company’s normal course issuer bid (the
“NCIB”); and timing and possible outcome of pending litigation, if any.
Forward Looking Statements are based on certain key assumptions and the opinions and estimates of
management and Qualified Persons (in the case of technical and scientific information), as of the date such
statements are made, and they involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of the Company to be materially different from
any other future results, performance or achievements expressed or implied by the Forward Looking
Statements. In addition to factors already discussed in this document, such factors include, among others:
risks relating to the Company’s business generally and the impact of global pandemics, including changes
to the Company’s supply chain, product shortages, delivery and shipping issues, closure and/or failure of
plant, equipment or processes to operate as anticipated, employees and contractors becoming infected,
lost work hours and labour force shortages; fluctuations in metal and acid prices, toll rates and foreign
exchange rates; possible variations in ore grade and recovery rates; inherent uncertainties in respect of
conclusions of economic evaluations and economic studies, including the PEA, the PFS and the FS;
changes in project parameters, including schedule and budget, as plans continue to be refined;
uncertainties with respect to actual results of current exploration activities; uncertainties and risks inherent
to developing and commissioning new mines into production, which may be subject to unforeseen delays;
uncertainties inherent with conducting business in foreign jurisdictions where corruption, civil unrest,
political instability and uncertainties with the rule of law may impact the Company’s activities; limitations on
insurance coverage; accidents, labour disputes and other risks of the mining industry; delays in obtaining
governmental approvals or financing or in the completion of development or construction activities; actual
results of current and planned reclamation activities; opposition by social and non-governmental
organizations to mining projects and smelting operations; unanticipated title disputes; claims or litigation;
failure to achieve certain cost savings or the potential benefits of any upgrades and/or expansion, including
the planned rotary furnace installation, at the Tsumeb smelter; cyber-attacks and other cybersecurity risks;
there being no assurance that the Company will purchase additional common shares of the Company under
the NCIB; risks related to the implementation, cost and realization of benefits from digital initiatives; there
being no assurance that the sale of MineRP will close; uncertainties with respect to obtaining required South
African regulatory approvals; discretion of the Company with respect to the use of proceeds from the sale
of MineRP; uncertainties with respect to realizing the targeted MineRP earn-outs; uncertainties with respect
to realizing the benefits of the sale of MineRP; failure to realize projected financial results from MineRP;
risks related to operating a technology business reliant on the ownership, protection and ongoing
development of key intellectual properties; as well as those risk factors discussed or referred to in any other
documents (including without limitation the Company’s most recent AIF) filed from time to time with the
securities regulatory authorities in all provinces and territories of Canada and available on SEDAR at
www.sedar.com.
This list is not exhaustive of the factors that may affect any of the Company’s Forward Looking Statements.
The Forward Looking Statements are based on what the Company’s management considers to be
reasonable assumptions, beliefs, expectations and opinions based on the information currently available to
it. Without limitation to the foregoing, the following section outlines certain specific Forward Looking
Statements contained in the “Three-Year Outlook” section of this MD&A, unless otherwise noted, and
provides certain material assumptions used to develop such Forward Looking Statements and material risk
factors that could cause actual results to differ materially from the Forward Looking Statements (which are
provided without limitation to the additional general risk factors discussed herein):
81 I DUNDEE PRECIOUS METALS INC.
Ore processed: assumes Chelopech and Ada Tepe mines perform at planned levels. Subject to a number
of risks, the more significant of which is failure of plant, equipment or processes to operate as anticipated.
Cash cost per tonne of ore processed: assumes Chelopech and Ada Tepe ore mined/milled are in line with
the guidance provided; foreign exchange rates remain at or around current levels; and operating expenses
at Chelopech and Ada Tepe are at planned levels. Subject to a number of risks, the more significant of
which are: lower than anticipated ore mined/milled; a weaker U.S. dollar relative to the Euro; and
unexpected increases in labour and other operating costs.
Metals contained in concentrate produced: assumes grades and recoveries are consistent with current
estimates of Mineral Resources and Mineral Reserves and DPM’s current expectations; and ore
mined/milled is consistent with guidance. Subject to a number of risks, the more significant of which are:
lower than anticipated ore grades, recovery rates and ore mined/milled.
All-in sustaining costs: assumes that metals contained in concentrate produced and cash cost per tonne of
ore processed at Chelopech and Ada Tepe are each in line with the guidance provided; copper and silver
prices remain at or around current levels; the timing, destination and commercial terms in respect of
concentrate deliveries are consistent with DPM’s current expectations; payable metals in concentrate sold
are consistent with the guidance provided, and general and administrative expenses, sustaining capital
expenditures and leases, are consistent with the guidance provided. Subject to a number of risks, the more
significant of which are: lower than anticipated metals contained in concentrate produced, concentrate
deliveries and metal prices; a higher than anticipated cash cost per tonne of ore processed; and higher
than anticipated sustaining capital expenditures, leases and general and administrative expenses.
Complex concentrate smelted at Tsumeb: assumes no significant disruption in equipment availability,
planned maintenance activities or concentrate supply. Subject to a number of risks, the more significant of
which are: unanticipated operational issues; delays in maintenance activities; lower than anticipated
equipment availability; and disruptions to or changes in the supply of complex concentrate, including
changes in the proportion of third party and Chelopech feed.
Cash cost per tonne of complex concentrate smelted: assumes complex concentrate smelted is consistent
with the guidance provided; no delays in planned maintenance activities; acid prices are at or around current
levels; acid production and operating expenses are at planned levels; and foreign exchange rates remain
at or around current levels. Subject to a number of risks, the more significant of which are: complex
concentrate smelted and acid production are lower than anticipated; acid prices are lower than anticipated;
strengthening of the ZAR relative to the U.S. dollar; and higher than anticipated operating and transportation
costs due to a variety of factors, including higher than anticipated inflation, labour and other operating costs.
Sustaining and growth capital expenditures: assumes foreign exchange rates remain at or around current
levels, and all capital projects proceed as planned and at a cost that is consistent with the budget
established for each project. Subject to a number of risks, the more significant of which are: technical
challenges, delays related to securing necessary approvals, equipment deliveries, equipment performance,
and the speed with which work is performed; availability of qualified labour; and changes in project
parameters and estimated costs, including foreign exchange impacts.
Liquidity (see comments contained in “Liquidity and Capital Resources” section): assumes the operating
and cost performance are consistent with current expectations; metal and acid prices, and foreign exchange
rates remain at or around current levels; concentrate and acid sales agreements, and smelter toll terms are
consistent with current terms and/or forecast levels; progress of capital projects is consistent with current
expectations; and DPM’s RCF remains in place. Subject to a number of risks, the more significant of which
are: lower than anticipated metals production at Chelopech and Ada Tepe, complex concentrate throughput
and acid production at Tsumeb, concentrate deliveries and metal prices; lower than anticipated reductions
in secondary materials at Tsumeb; weaker U.S. dollar relative to local operating currencies; changes in
contractual sales and/or toll terms and acid prices; changes to capital project parameters, schedule and/or
costs; and the inability to draw down on DPM’s RCF due to a breach or potential breach of one of its
covenants.
FOURTH QUARTER 2020 I 82
General: assumes ability to carry on exploration and development activities; ability to operate in a safe,
efficient and effective manner; no significant unanticipated operational or technical difficulties; maintenance
of good relations with the communities surrounding Chelopech, Ada Tepe and Tsumeb; and no significant
events or changes relating to regulatory, environmental, health and safety matters, including that the
Company does not experience any negative effects as a result of the COVID-19 pandemic.
The reader is cautioned that the foregoing list is not exhaustive of all factors and assumptions which may
have been used. Although the Company has attempted to identify important factors that could cause actual
actions, events or results to differ materially from those described in Forward Looking Statements, there
may be other factors that cause actions, events or results not to be anticipated, estimated or intended.
There can be no assurance that Forward Looking Statements will prove to be accurate, as actual results
and future events could differ materially from those anticipated in such statements. The Company’s Forward
Looking Statements reflect current expectations regarding future events and are only as of the date hereof.
Other than as it may be required by law, the Company undertakes no obligation to update Forward Looking
Statements if circumstances or management’s estimates or opinion should change. Accordingly, readers
are cautioned not to place undue reliance on Forward Looking Statements.
CAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING DIFFERENCES IN REPORTING OF
MINERAL RESOURCE ESTIMATES
This MD&A was prepared in accordance with Canadian standards for reporting of mineral resource
estimates, which differ in some respects from United States standards. In particular, and without limiting
the generality of the foregoing, the terms “inferred mineral resources,” “indicated mineral resources,”
“measured mineral resources” and “mineral resources” used or referenced in this MD&A are Canadian
mineral disclosure terms as defined in accordance with NI 43-101 under the guidelines set out in the
Canadian Institute of Mining, Metallurgy and Petroleum Standards for Mineral Resources and Mineral
Reserves, Definitions and Guidelines, May 2014 (the “CIM Standards”). Until recently, the CIM Standards
differed significantly from standards in the United States. The U.S. Securities and Exchange Commission
(the “SEC”) has adopted amendments to its disclosure rules to modernize the mineral property disclosure
requirements for issuers whose securities are registered with the SEC under the U.S. Securities Exchange
Act of 1934, as amended (the “Exchange Act”). These amendments became effective February 25, 2019
(the “SEC Modernization Rules”) with compliance required for the first fiscal year beginning on or after
January 1, 2021. The SEC Modernization Rules replace the property disclosure requirements for mining
registrants that were included in SEC Industry Guide 7, which will be rescinded from and after the required
compliance date of the SEC Modernization Rules. As a result of the adoption of the SEC Modernization
Rules, the SEC now recognizes estimates of “measured mineral resources”, “indicated mineral resources”
and “inferred mineral resources”. In addition, the SEC has amended its definitions of “proven mineral
reserves” and “probable mineral reserves” to be “substantially similar” to the corresponding definitions
under the CIM Standards that are required under NI 43-101. Investors are cautioned that while the above
terms are “substantially similar” to the corresponding CIM Definition Standards, there are differences in the
definitions under the SEC Modernization Rules and the CIM Definition Standards. Accordingly, there is no
assurance any mineral reserves or mineral resources that the Company may report as “proven mineral
reserves”, “probable mineral reserves”, “measured mineral resources”, “indicated mineral resources” and
“inferred mineral resources” under NI 43-101 would be the same had the Company prepared the mineral
reserve or mineral resource estimates under the standards adopted under the SEC Modernization Rules.
Readers are cautioned that “inferred mineral resources” have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic feasibility. It cannot be assumed that all or any part
of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates
of inferred mineral resources may not form the basis of feasibility or other economic studies, except in
limited circumstances. The term “resource” does not equate to the term “reserves”. Readers should not to
assume that all or any part of measured or indicated mineral resources will ever be converted into mineral
reserves. Readers are also cautioned not to assume that all or any part of an inferred mineral resource
exists, or is economically mineable.
83 I DUNDEE PRECIOUS METALS INC.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The accompanying consolidated financial statements of Dundee Precious Metals Inc. (the “Company”)
and all information in this financial report are the responsibility of management. The consolidated
financial statements have been prepared in accordance with International Financial Reporting
Standards and, where appropriate,
judgments.
Management has reviewed the financial information presented throughout this report and has ensured
it is consistent with the consolidated financial statements.
include management’s best estimates and
Management maintains a system of internal control designed to provide reasonable assurance that
assets are safeguarded from loss or unauthorized use, and that financial information is timely and
reliable. However, any system of internal control over financial reporting, no matter how well designed
and implemented, has inherent limitations and may not prevent or detect all misstatements.
The Board of Directors is responsible for ensuring that management fulfils its responsibilities for
financial reporting and is ultimately responsible for reviewing and approving the consolidated financial
statements. The Board carries out this responsibility principally through its Audit Committee.
The Board of Directors appoints the Audit Committee, and all of its members are independent
directors. The Audit Committee meets periodically with management and the auditors to review
internal controls, audit results, accounting principles and related matters. The Board of Directors
approves the consolidated financial statements on recommendation from the Audit Committee.
PricewaterhouseCoopers LLP, an independent firm of Chartered Professional Accountants, was
appointed by the shareholders at the last annual meeting to examine the consolidated financial
statements and provide an independent professional opinion. PricewaterhouseCoopers LLP has full
and free access to the Audit Committee.
_(signed) “David Rae”_________
_(signed) “Hume Kyle”
David Rae
President and Chief Executive Officer
Hume Kyle
Executive Vice President and
Chief Financial Officer
February 11, 2021
FOURTH QUARTER 2020 I 84
Independent auditor’s report
To the Shareholders of Dundee Precious Metals Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Dundee Precious Metals Inc. and its subsidiaries (together, the Company) as at
December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the consolidated statements of financial position as at December 31, 2020 and 2019;
the consolidated statements of earnings (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) for the years then ended;
the consolidated statements of cash flows for the years then ended
the consolidated statements of changes in shareholders’ equity for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2
T: +1 416 863 1133, F: +1 416 365 8215
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
85 I DUNDEE PRECIOUS METALS INC.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2020. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Assessment of impairment indicators on property,
plant and equipment related to the smelter at
Tsumeb
Our approach to addressing the matter included the
following procedures, among others:
(cid:120) Evaluated the reasonableness of
management’s assessment of impairment
indicators, which included the following:
(cid:16) Assessed the completeness of factors that
could be considered as indicators of
impairment on the Company’s property,
plant and equipment.
(cid:16) Professionals with specialized skill and
knowledge in the field of valuation assisted
us in assessing the reasonableness of the
discount rate determined by management.
(cid:16) Evaluated the Company’s actual financial
and operational performance relative to
previously forecasted projections.
(cid:16) Evaluated the reasonableness of future
commodity prices, toll rates and exchange
rate by comparing them to economic
analysts’ forecasts and other independent
data sources.
Refer to note 2.2 – Significant accounting policies,
note 4 – Impairment charges and note 9 – Property,
plant and equipment to the consolidated financial
statements
The company’s property, plant and equipment at the
Tsumeb Cash Generating Unit (CGU) amounted to
$106.5 million, as at December 31, 2020. In
accordance with International Accounting Standard
36, Impairment of Assets, the Company’s carrying
values of property, plant and equipment are assessed
for impairment whenever indicators of potential
impairment exist. An assessment is also made at each
reporting date as to whether there is any change in
events or circumstances relating to a previously
recognized impairment. Management makes
significant judgements in assessing whether indicators
of impairment exist that would necessitate impairment
testing. Factors assessed by management in
determining whether there are any indicators of
impairment include the following factors, some of
which are partially or totally outside the Company’s
control, such as:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
commodity prices, toll rates and foreign exchange
rate;
discount rate;
production volume;
capital and operating expenditures;
changes in market, economic, or regulatory
requirements; and
future expansion plans.
We considered this a key audit matter due to (i) the
significance of the property, plant and equipment
FOURTH QUARTER 2020 I 86
balance, (ii) the significant judgment that is exercised
by management, (iii) the significant audit effort and
subjectivity in applying audit procedures to assess the
internal and external factors evaluated by
management in its assessment of impairment
indicators and (iv) assistance provided by
professionals with specialized skill and knowledge in
the field of valuation.
Revenue recognition of metal exposure
adjustment related to the smelter at Tsumeb
Our approach to addressing the matter included the
following procedures, among others:
(cid:120) Tested the operating effectiveness of the
internal control activities over metal accounting
and the estimated metal exposure, including the
estimated amount of metal contained in
concentrate received, in-circuit material and
blister delivered.
(cid:120) Observed the stockpile survey performed at
year-end.
(cid:120) Obtained year-end customer confirmation in
respect of the estimated quantities of metal.
(cid:120) Evaluated the reasonableness of the estimated
metal contained in concentrate received, blister
delivered to the customer and in the in-circuit
material still being processed where final
assays have not been completed at year-end by
reviewing historical adjustments to provisional
assays.
(cid:120) Recalculated the mathematical accuracy of the
calculations supporting the estimated metal
exposure and agreed quantities of metal to
customer confirmation and prices to
independent data sources.
Refer to note 2.2 – Significant accounting policies,
note 5 – Accounts receivable, note 11 – Accounts
payable and accrued liabilities and note 28 –
Operating segment information to the consolidated
financial statements
Revenue from processing concentrate was adjusted
by $0.4 million for the metal exposure that was
included within accounts payable in the consolidated
statement of financial position as at December 31,
2020. Revenue from processing concentrate is
adjusted for any over or under recoveries of metals
delivered relative to contracted rates under the tolling
agreement between Tsumeb and its customer. These
adjustments are calculated by comparing (i) the
copper, gold and silver content in the concentrate
received and processed by Tsumeb multiplied by the
percentage payable in the agreement to (ii) the
copper, gold and silver in the blister delivered to the
customer and in the in-circuit material still being
processed.
The metal exposure adjustment is subject to
estimation, including the amount of metal contained in
concentrate received, in-circuit material and blister
delivered where final assays have not been
completed.
We considered this a key audit matter due to (i) the
potential significant variability of the metal exposure
balance, (ii) the significant judgment made by
management in making assumptions to estimate the
metal exposure and (iii) the significant audit effort and
subjectivity in performing audit procedures to test the
reasonableness of the underlying assumptions and
estimated metal exposure.
87 I DUNDEE PRECIOUS METALS INC.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
FOURTH QUARTER 2020 I 88
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
(cid:120)
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
(cid:120) Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
(cid:120) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
(cid:120) Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
(cid:120) Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
(cid:120) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
89 I DUNDEE PRECIOUS METALS INC.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is James Lusby.
(Signed) “PricewaterhouseCoopers LLP”
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 11, 2021
FOURTH QUARTER 2020 I 90
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31, 2020 and 2019
(in thousands of U.S. dollars)
ASSETS
Current Assets
Cash
Accounts receivable
Inventories
Other current assets
Assets Held for Sale
Non-Current Assets
Investments at fair value
Mine properties
Property, plant & equipment
Intangible assets
Deferred income tax assets
Other long-term assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities
Income tax liabilities
Current portion of deferred revenue
Current portion of long-term liabilities
Liabilities Held for Sale
Non-Current Liabilities
Long-term debt
Deferred revenue
Rehabilitation provisions
Share-based compensation plans
Deferred income tax liabilities
Other long-term liabilities
TOTAL LIABILITIES
EQUITY
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Equity attributable to common shareholders
of the Company
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
Notes
5
6
7(c),7(d)
3
7(a),7(b )
8
9
10
21
11
21
13
15
3
12
13
14
17
21
15
December 31,
2020
December 31,
2019
23,440
149,532
38,309
84,920
43,049
38,033
10,818 5,244
288,319 105,026
30,713 -
319,032 105,026
106,595
59,362
155,438 180,732
364,337 387,181
16,139
40,034
9,470 9,048
3,849 3,327
655,828 679,684
974,860 784,710
59,736
72,234
910 2,579
-
42,176
5,929 5,092
79,073 109,583
6,003 -
85,076 109,583
-
10,000
- 3,207
40,799
51,338
19,002
11,700
- 1,137
14,160
15,390
82,233
84,500
169,576 191,816
525,219 522,351
7,078 9,150
45,007
224,701
10,108
41,671
25(b )
798,669 586,616
6,615 6,278
805,284 592,894
974,860 784,710
The accompanying notes are an integral part of the consolidated financial statements
Signed on behalf of the Board of Directors
(Signed) "David Rae"
David Rae, Director
(Signed) "Donald Young"
Donald Young, Director
91 I DUNDEE PRECIOUS METALS INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, except per share amounts)
Continuing Operations
Revenue
Costs and expenses
Cost of sales
General and administrative expenses
Corporate social responsibility expenses
Exploration and evaluation expenses
Impairment charges
Finance cost
Other (income) expense
Earnings (loss) before income taxes
Current income tax expense
Deferred income tax expense (recovery)
Net earnings (loss) from continuing operations
Discontinued Operations
Net loss from discontinued operations
Net earnings (loss)
Net earnings (loss) attributable to:
Common shareholders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
Net earnings (loss)
Earnings (loss) per share attributable to
common shareholders of the Company
- Basic
From continuing operations
From discontinued operations
- Diluted
From continuing operations
From discontinued operations
Notes
2020
2019
28
18
18
18
4
19
20
21
21
3
22
22
22
22
22
609,558
404,392
330,857
30,604
4,571
19,072
-
7,022
(491)
391,635
294,533
28,191
2,815
14,356
107,000
10,164
915
457,974
217,923
(53,582)
23,353
(4,462)
199,032
12,060
896
(66,538)
(4,169) (5,504)
(72,042)
194,863
199,074
(66,621)
(3,072) (4,281)
(1,139) (1,140)
(72,042)
194,863
1.10
(0.02)
(0.38)
(0.02)
1.09
(0.02)
(0.38)
(0.02)
The accompanying notes are an integral part of the consolidated financial statements
FOURTH QUARTER 2020 I 92
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars)
Net earnings (loss)
Other comprehensive income (loss) items that may be
reclassified subsequently to profit or loss:
Foreign exchange forward and option contracts
designated as cash flow hedges
Unrealized gains (losses), net of income tax recovery
of $nil (2019 - $25)
Deferred cost of hedging, net of income tax recovery
of $nil (2019 - $8)
Realized (gains) losses transferred to cost of sales, net of
income tax expense of $nil (2019 - $nil)
Commodity swap contracts designated as cash flow hedges
Unrealized gains, net of income tax expense of $9
(2019 - $nil)
Deferred cost of hedging, net of income tax recovery of $2
(2019 - $nil)
Currency translation adjustments from discontinued operations
Other comprehensive income (loss) items that will not be
reclassed subsequently to profit or loss:
Unrealized gains on publicly traded securities, net of
income tax expense of $5,019 (2019 - $nil)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Common shareholders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
Comprehensive income (loss)
2020
2019
194,863
(72,042)
(114)
(947)
1,656
3,291
3,486
(704)
78
-
(18) -
796
(3,395)
31,451
30,541
225,404
16,571
21,610
(50,432)
233,010
(45,991)
(5,445) (3,485)
(2,161) (956)
(50,432)
225,404
The accompanying notes are an integral part of the consolidated financial statements
93 I DUNDEE PRECIOUS METALS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars)
OPERATING ACTIVITIES
Earnings (loss) before income taxes
Revenue transferred from deferred revenue
Depreciation and amortization
Impairment charges
Changes in non-cash working capital
Other Items not affecting cash
Payments for settlement of derivative contracts
Income taxes paid
Cash provided from operating activities of
continuing operations
Cash provided from operating activities of
discontinued operations
INVESTING ACTIVITIES
Purchase of publicly traded securities
Proceeds from disposal of mine properties, property,
plant and equipment and intangible assets
Expenditures on mine properties
Expenditures on property, plant and equipment
Expenditures on intangible assets
Cash used in investing activities of
continuing operations
Cash used in investing activities of
discontinued operations
FINANCING ACTIVITIES
Proceeds from share issuance
Repayments of credit facilities
Lease obligations
Dividend paid
Interest and finance fees paid
Cash used in financing activities of
continuing operations
Cash used in financing activities of
discontinued operations
Increase in cash of continuing operations
Increase (decrease) in cash of discontinued operations
Cash at beginning of year, continuing operations
Cash at beginning of year, discontinued operations
Cash at end of year, continuing operations
Cash at end of year, discontinued operations
Notes
13
4
24(a)
24(b)
3
7(b)
2020
2019
217,923
(46,674)
100,211
-
(53,582)
(16,521)
80,952
107,000
(51,640) (15,735)
6,042
(9,103) (896)
(28,174) (10,382)
14,422
196,965
96,878
101
2,551
(5,119)
(8,927)
124
8,264
(8,012) (32,356)
(25,447) (34,877)
(4,097) (1,654)
(42,551) (69,550)
3
(1,301)
(92)
12(a)
25(a)
1,776
4,480
(10,000) (19,000)
(4,008) (3,415)
(10,866)
-
(3,067) (5,069)
(26,165) (23,004)
3
(375) (386)
128,249
(1,575)
21,283
2,157
149,532
582
4,324
2,073
16,959
84
21,283
2,157
The accompanying notes are an integral part of the consolidated financial statements
FOURTH QUARTER 2020 I 94
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, except for number of shares)
December 31, 2020
Number
Amount
December 31, 2019
Number
Amount
Share capital
Authorized
Unlimited common and preference shares
with no par value
Issued
Fully paid common shares with one vote
per share
Balance at beginning of year
180,537,053
522,351
178,547,639
515,658
Shares issued as part of an exploration
option agreement
25,000
153
20,000
74
838,072
1,776
1,969,414
4,391
Shares issued on exercise of stock options
(note 17)
Transferred from contributed surplus
on exercise of stock options
Balance at end of year
181,400,125
Contributed surplus
Balance at beginning of year
Share-based compensation expense
Transferred to share capital on exercise
of stock options
Other changes in contributed surplus
Balance at end of year
Retained earnings
Balance at beginning of year
Net earnings (loss) attributable to common
shareholdes of the Company
Dividend distribution (note 25(a))
Balance at end of year
Accumulated other comprehensive income (loss)
(note 25(b))
Balance at beginning of year
Other comprehensive income
Realized losses on foreign exchange forward
contracts and cost of hedging transferred to
mine properties, net of income tax recovery
of $nil (2019 - $33)
Balance at end of year
Total equity attributable to common shareholders
of the Company
Non-controlling interests
Balance at beginning of year
Net loss attributable to non-controlling interests
Other comprehensive income (loss) attributable to
non-controlling interests
Other changes in non-controlling interests
Balance at end of year
Total equity at end of year
939
525,219
9,150
1,314
(939)
(2,447)
7,078
180,537,053
2,228
522,351
12,085
1,063
(2,228)
(1,770)
9,150
45,007
115,909
196,002
(16,308)
224,701
10,108
31,563
-
41,671
798,669
6,278
(1,139)
(1,022)
2,498
6,615
805,284
(70,902)
-
45,007
(11,652)
21,426
334
10,108
586,616
6,181
(1,140)
184
1,053
6,278
592,894
The accompanying notes are an integral part of the consolidated financial statements
95 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
1.
CORPORATE INFORMATION
Dundee Precious Metals Inc. (“DPM”) is a Canadian based, international gold mining company engaged in
the acquisition of mineral properties, exploration, development, mining and processing of precious metals.
DPM is a publicly listed company incorporated in Canada with limited liability under legislation of the
Province of Ontario. DPM has common shares traded on the Toronto Stock Exchange (“TSX”). The address
of DPM’s registered office is 1 Adelaide Street East, Suite 500, P. O. Box 195, Toronto, Ontario, M5C 2V9.
As at December 31, 2020, DPM’s consolidated financial statements include DPM and its subsidiary
companies (collectively, the “Company”).
Continuing operations:
DPM’s principal subsidiaries include:
(cid:2) 100% of Dundee Precious Metals Chelopech EAD (“Chelopech”), which owns and operates a gold,
copper and silver mine located east of Sofia, Bulgaria;
(cid:2) 100% of Dundee Precious Metals Krumovgrad EAD (“Ada Tepe”), which owns and operates a gold
mine located in south eastern Bulgaria, near the town of Krumovgrad; and
(cid:2) 92% of Dundee Precious Metals Tsumeb (Proprietary) Limited (“Tsumeb”), which owns and operates
a custom smelter located in Tsumeb, Namibia.
DPM holds interests, directly or indirectly, in a number of exploration properties located in Serbia, Canada
and Ecuador including:
(cid:2) 100% of Avala Resources Ltd., which is focused on the exploration and development of the Timok
gold project and other early stage projects in Serbia;
(cid:2) 9.4% of Sabina Gold and Silver Corp. (“Sabina”), which is focused on the development of the Back
River project in southwestern Nunavut, Canada;
(cid:2) 19.4% of INV Metals Inc. (“INV”), which is focused on the exploration and development of the Loma
Larga gold property located in Ecuador; and
(cid:2) a 51% interest in the Malartic gold project located in the Archean Abitibi greenstone belt near Val-
d’Or, Canada, with the remaining 49% held by Pershimex Resources Corporation.
Discontinued operations (note 3):
DPM also owns:
(cid:2) 73.7% (70% on a fully diluted basis) of MineRP Holdings (Proprietary) Limited, an independent
mining software vendor with operations in Canada, South Africa, Australia and Chile, through
MineRP Holdings Inc. (“MineRP”).
2.1 BASIS OF PREPARATION
The Company’s consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and
Interpretations of the IFRS Interpretations Committee. These consolidated financial statements were
approved by the Board of Directors on February 11, 2021.
2.2 SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared on a historical cost basis except for publicly
traded securities and derivative assets and liabilities (note 7) that are measured at fair value.
The Company’s significant accounting policies are set out below. The Company has consistently applied
these accounting policies to all periods presented in these consolidated financial statements.
FOURTH QUARTER 2020 I 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a) Basis of consolidation
Subsidiaries are all entities over which the Company has control. The Company controls an entity when the
Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The Company uses the acquisition method of accounting for business combinations. The fair value of the
acquisition of a subsidiary is based on the fair value of the assets acquired and liabilities assumed, and the
fair value of the consideration. The fair value of the assets acquired and liabilities assumed includes any
contingent consideration arrangement. Acquisition related costs are expensed as incurred. At the date of
acquisition, identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values. The Company also recognizes any non-controlling
interest in the acquiree at fair value.
The excess, if any, of the consideration paid and the amount of any non-controlling interest recognized over
the fair value of the identifiable net assets acquired is recorded as goodwill. In the case of a bargain
purchase, where the total consideration paid and the non-controlling interest recognized are less than the
fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the
consolidated statements of earnings (loss).
Subsidiaries are fully consolidated from the date on which control is acquired by the Company and they are
deconsolidated from the date that control ceases. The financial statements of the subsidiaries are prepared
for the same reporting period as the parent company using consistent accounting policies. All inter-company
balances, revenues and expenses and earnings and losses resulting from inter-company transactions are
eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are a separate component of the
Company’s equity. Non-controlling interests consist of the non-controlling interests on the date of the
original business combination plus the non-controlling interests’ share of changes in equity since the date
of acquisition.
(b) Critical accounting estimates and judgments
The preparation of the Company’s consolidated financial statements in accordance with IFRS requires
management to make judgments, estimates and assumptions that affect the amounts of assets, liabilities
and contingent liabilities on the date of the consolidated financial statements and the amounts of revenues
and expenses during the period reported. Estimates and assumptions are evaluated and are based on
management’s experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. However, actual outcomes can differ from these estimates.
The significant areas of estimation and/or judgment considered by management in preparing the
consolidated financial statements include, but are not limited to:
commencement of commercial production (note 2.2(k));
(cid:2)
(cid:2) Mineral Resource and Mineral Reserve estimates (note 2.2(k));
(cid:2)
(cid:2)
(cid:2)
(cid:2) deferred income tax assets and liabilities (note 2.2(v)).
impairment of non-financial assets (note 2.2(o));
rehabilitation provisions and contingencies (note 2.2(p));
revenue recognition related to toll smelting arrangements (note 2.2(r)); and
97 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Presentation and functional currency
The Company’s presentation currency is the U.S. dollar and the functional currency of DPM and its
consolidated subsidiaries from continuing operations is the U.S. dollar as it was assessed by management
as being the primary currency of the economic environment in which the Company operates.
(d) Foreign currency
Foreign currency transactions
Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at
exchange rates on the reporting date. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated at the exchange rates on the dates that their fair
values are determined. Non-monetary assets and liabilities denominated in foreign currencies that are
measured at historical cost are translated at the exchange rates on the dates of the transactions. Income
and expense items are translated at the exchange rate on the dates of the transactions. Exchange gains
or losses resulting from the translation of these amounts are included in net earnings (loss), except those
arising on the translation of equity instruments that are fair valued through other comprehensive income
(loss).
Foreign operations
Foreign operations are comprised of subsidiaries of the Company that have a functional currency other
than the U.S. dollar. The assets and liabilities of foreign operations, including fair value adjustments arising
on acquisition, are translated into U.S. dollars at exchange rates on the reporting date. The income and
expenses of foreign operations are translated into U.S. dollars at exchange rates on the dates of the
transactions. Foreign currency differences are recognized as currency translation adjustments in other
comprehensive income (loss). Accumulated currency translation adjustments are reclassified to net
earnings (loss) upon the disposal of the associated foreign operation when the gain or loss on disposal is
recognized. As at December 31, 2020 and 2019, MineRP is the only foreign operation of the Company with
a functional currency being South African Rand (“ZAR”) and its subsidiaries with functional currencies
denominated in the currencies of the primary economic environments in which each of the subsidiaries
operates.
(e)
Inventories
Inventories of ore and concentrates are measured and valued at the lower of average production cost and
net realizable value. Net realizable value is the estimated selling price of the concentrates in the ordinary
course of business based on the prevailing metal prices on the reporting date, less estimated costs to
complete production and to bring the concentrates to sale. Production costs that are inventoried include the
costs directly related to bringing the inventory to its current condition and location, such as materials, labour,
other direct costs (including external services and depreciation, depletion and amortization), production
related overheads and royalties.
Inventories of sulphuric acid, arsenic calcines, spare parts, supplies and other materials are valued at the
lower of average cost and net realizable value. Obsolete, redundant and slow moving inventories are
identified at each reporting date and written down to their net realizable values. Arsenic calcines not
expected to be processed in the next 12 months are classified as long-term inventory and included in other
long-term assets.
FOURTH QUARTER 2020 I 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Financial assets and liabilities excluding derivative instruments related to hedging activities
Financial assets
Initial recognition and measurement
Non-derivative financial assets are classified and measured as “financial assets at fair value”, as either
through profit or loss (“FVPL”) or through other comprehensive income (“FVOCI”), and “financial assets at
amortized cost”, as appropriate. The Company determines the classification of financial assets at the time
of initial recognition based on the Company’s business model and the contractual terms of the cash flows.
All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL,
directly attributable transaction costs on the trade date at which the Company becomes a party to the
contractual provisions of the instrument.
Financial assets with embedded derivatives are considered in their entirety when determining their
classification at FVPL or at amortized cost. The Company has classified accounts receivable on
provisionally priced sales as financial assets measured at FVPL. Other accounts receivable held for
collection of contractual cash flows are measured at amortized cost.
Subsequent measurement – Financial assets at FVPL
Financial assets measured at FVPL include financial assets management intends to sell in the short term
and any derivative financial instrument that is not designated as a hedging instrument in a hedge
relationship. Financial assets measured at FVPL are carried at fair value in the consolidated statements of
financial position with changes in fair value recognized in other (income) expense in the consolidated
statements of earnings (loss). The Company’s investment in Sabina special warrants and its accounts
receivable on provisionally priced sales are classified as financial assets at FVPL.
Subsequent measurement – Financial assets at FVOCI
Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and
the Company has made an irrevocable election at the time of initial recognition to measure the assets at
FVOCI. The Company’s investments in publicly traded equity securities are classified as financial assets at
FVOCI.
After initial measurement, investments measured at FVOCI are subsequently measured at fair value with
unrealized gains or losses recognized in other comprehensive income (loss) in the consolidated statements
of comprehensive income (loss).
Subsequent measurement – Financial assets at amortized cost
Financial assets measured at amortized cost are non-derivative financial assets that are held for collection
of contractual cash flows, where those cash flows represent repayments of principal and interest. The
Company’s other accounts receivable is classified as financial assets at amortized cost.
Dividends from all financial assets are recognized in other (income) expense in the consolidated statements
of earnings (loss) when the right to receive the dividend is established.
Derecognition
A financial asset is derecognized when the contractual rights to the cash flows from the asset expire or are
transferred, or the Company no longer retains substantially all the risks and rewards of ownership.
99 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On derecognition of a financial asset, the difference between the carrying amount measured at the date of
derecognition and the consideration received is recognized in other (income) expense in the consolidated
statements of earnings (loss) except for financial assets at FVOCI, for which the cumulative gain or loss
remains in accumulated other comprehensive income (loss) and is not reclassified to profit or loss.
Impairment of financial assets
The Company’s only financial assets subject to impairment are other accounts receivable, which are
measured at amortized cost. The Company has elected to apply the simplified approach to impairment as
permitted by IFRS 9, Financial Instruments, which requires the expected lifetime loss to be recognized at
the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable have
been grouped based on shared credit risk characteristics, including the number of days past due. An
impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the
decrease can be objectively related to an event occurring after the initial impairment was recognized.
Financial liabilities
Recognition and measurement
Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is
the case for held for trading or derivative instruments, or the Company has opted to measure the financial
liability at FVPL. The Company’s financial liabilities include accounts payable and accrued liabilities and
long-term debt, which are initially recognized at fair value and subsequently measured at amortized cost.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires
with any associated gain or loss recognized in other (income) expense in the consolidated statements of
earnings (loss).
(g) Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the dates they are entered into and are subsequently re-
measured at their fair value at the end of each reporting period. The method of recognizing the resulting
gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged.
For a derivative instrument to qualify for hedge accounting, the Company documents at the inception of the
transaction the relationship between a hedging instrument and hedged item, as well as its risk management
objectives and strategy for undertaking the hedging transaction. The Company also documents its
assessment, both at inception and on an ongoing basis, of whether the derivative used to hedge an
underlying exposure is highly effective in offsetting changes in the cash flows of the hedged item.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining
maturity is more than 12 months.
Foreign exchange forward and option contracts designated as cash flow hedges
The Company designates the spot component of foreign exchange forward contracts and the intrinsic value
of foreign exchange option contracts entered to hedge a portion of its projected operating expenses and
capital expenditures denominated in foreign currencies as cash flow hedges.
FOURTH QUARTER 2020 I 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The effective portion of changes in fair value of the spot component of the forward contracts and in the
intrinsic value of the options are initially recognized in other comprehensive income (loss) in the
consolidated statements of comprehensive income (loss). For hedges of operating expenses, the
accumulated fair value change initially recognized in other comprehensive income (loss) in the consolidated
statements of comprehensive income (loss) is subsequently recognized in cost of sales in the consolidated
statements of earnings (loss) in the period when the underlying hedged operating expenses occur. For
hedges of capital expenditures, the accumulated fair value change initially recognized in other
comprehensive income (loss) in the consolidated statements of comprehensive income (loss) is
subsequently included in the carrying value of the underlying assets hedged in the period the underlying
hedged capital expenditures occur.
The time value, which forms a component of these foreign exchange forward and option contracts, is treated
as a separate cost of hedging. As a result, any unrealized fair value change in the time value component
of the outstanding foreign exchange forward and option contracts is initially recognized as a deferred cost
of hedging in other comprehensive income (loss) in the consolidated statements of comprehensive income
(loss). The accumulated cost of hedging is subsequently recognized in cost of sales or included in the
carrying value of the underlying assets hedged in the period the underlying hedged operating expenses or
capital expenditures occur.
Commodity swap contracts designated as cash flow hedges
The Company also designates the spot component of commodity swap contracts to hedge future metal
price exposures (“Production Hedges”) as cash flow hedges.
The effective portion of changes in fair value of the spot component of the swaps are initially recognized in
other comprehensive income (loss) in the consolidated statements of comprehensive income (loss). The
accumulated fair value change is subsequently recognized in revenue in the consolidated statements of
earnings (loss) in the period the underlying hedged sales occur.
The forward points, or time value, which form a component of these commodity swap contracts, are treated
as a separate cost of hedging. As a result, any unrealized fair value change in the time value component
of the outstanding commodity swap contracts is initially recognized as a deferred cost of hedging in other
comprehensive income (loss) in the consolidated statements of comprehensive income (loss). The
accumulated cost of hedging is subsequently recognized in revenue in the period the underlying hedged
sales occur.
Commodity swap contracts designated as fair value hedges
The Company designates the spot component of commodity swap contracts to hedge the metal price
exposure associated with the time lag between the provisional and final determination of concentrate sales
(“QP Hedges”) as a fair value hedge.
The effective portion of changes in fair value of the spot component of these commodity swap contracts
are recognized in revenue in the consolidated statements of earnings (loss), together with any changes in
the fair value of the hedged accounts receivable on the provisionally priced sales.
The forward point component of these commodity swap contracts is accounted for separately as a cost of
hedging. As a result, any change in the fair value of the forward point component is recognized in revenue
in the consolidated statements of earnings (loss).
101 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria
for cash flow hedge accounting, the accumulated deferred gains or losses remain in other comprehensive
income (loss) until the period the underlying transaction that was hedged occurs at which point they are
reclassified and recognized in revenue in the consolidated statements of earnings (loss). If the underlying
hedged transaction is no longer expected to occur, the accumulated gains or losses that were initially
recognized in other comprehensive income (loss) are immediately reclassified to other (income) expense
in the consolidated statements of earnings (loss).
The gains or losses relating to the ineffective portion of all cash flow or fair value hedges, if any, are
recognized immediately in other (income) expense in the consolidated statements of earnings (loss).
(h) Offsetting of financial instruments
Financial assets and financial liabilities are offset if there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, or realize the assets and settle the
liabilities simultaneously.
(i)
Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each reporting date is determined
by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price
for short positions), without any deduction for transaction costs.
For instruments not traded in an active market, the fair value is determined using appropriate valuation
techniques. Such techniques may include using recent arm’s length transactions; reference to the current
fair value of another instrument that is substantially the same; discounted cash flow analysis or other
valuation models. These valuation models require the use of assumptions, including future stock price
volatility and probability of exercise.
Changes in the underlying assumptions could materially impact the Company’s investments at FVPL.
Further details on measurement of the fair values of financial instruments are provided in note 7.
(j) Mineral exploration and evaluation expenditures
Exploration and evaluation activities involve the search for Mineral Resources and Mineral Reserves, the
assessment of technical and operational feasibility and the determination of an identified Mineral Resource
or Mineral Reserve’s commercial viability. Once the legal right to explore has been acquired, exploration
and evaluation expenditures are expensed as incurred until economic production is probable. Exploration
expenditures in areas where there is a reasonable expectation to convert existing estimated Mineral
Resources to estimated Mineral Reserves or to add additional Mineral Resources with additional drilling
and evaluations in areas near existing Mineral Resources or Mineral Reserves and existing or planned
production facilities, are capitalized.
Exploration properties that contain Proven and Probable Mineral Reserves, but for which a development
decision has not yet been made, are subject to periodic review for impairment when events or changes in
circumstances indicate the project’s carrying value may not be recoverable.
Exploration and evaluation assets are reclassified to “Mine Properties – Mines under construction” when
the technical feasibility and commercial viability of extracting the Mineral Resources or Mineral Reserves
are demonstrable and construction has commenced or a decision to construct has been made. Exploration
and evaluation assets are assessed for impairment before reclassification to “Mines under construction”,
and the impairment charge, if any, is recognized through net earnings (loss).
FOURTH QUARTER 2020 I 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The application of the Company’s accounting policy for exploration and evaluation expenditures requires
judgment in determining whether it is probable that future economic benefits will be generated from the
exploitation of an exploration and evaluation asset when activities have not yet reached a stage where a
reasonable assessment of the existence of Mineral Reserves can be determined. The estimation of Mineral
Resources is a complex process and requires significant assumptions and estimates regarding economic
and geological data and these assumptions and estimates impact the decision to either expense or
capitalize exploration and evaluation expenditures. Management is required to make certain estimates and
assumptions about future events and circumstances in order to determine if an economically viable
extraction operation can be established. Any revision to any of these assumptions and estimates could
result in the impairment of the capitalized exploration and evaluation costs. If new information becomes
available after expenditures have been capitalized that the recovery of these expenditures is no longer
probable, the expenditures capitalized are written down to the recoverable amount and charged to net
earnings (loss) in the period the new information becomes available.
(k) Mine properties
Mine Properties – Mines under construction
All expenditures undertaken in the development, construction, installation and/or completion of mine
production facilities are capitalized and initially classified as “Mines under construction”. All expenditures
related to the construction of mine declines and orebody access, including mine shafts and ventilation
raises, are considered to be capital development and are capitalized. Expenses incurred after reaching the
orebody are regarded as operating development costs and are included in the cost of ore hoisted.
Upon the commencement of commercial production, all related assets included in “Mines under
construction” are reclassified to “Mine Properties – Producing mines” or “Property, plant and equipment”.
Determination of commencement of commercial production is a complex process and requires significant
assumptions and estimates. The commencement of commercial production is defined as the date when the
mine is capable of operating in the manner intended by management. The Company considers primarily
the following factors, among others, when determining the commencement of commercial production:
(cid:2) All major capital expenditures to achieve a consistent level of production and desired capacity have
been incurred;
(cid:2) A reasonable period of testing of the mine plant and equipment has been completed;
(cid:2) A predetermined percentage of design capacity of the mine and mill has been reached; and
(cid:2) Required production levels, grades and recoveries have been achieved.
Mine Properties – Producing mines
All assets reclassified from “Mines under construction” to “Producing mines” are stated at cost less
accumulated depletion and accumulated impairment charges. Costs incurred for the acquisition of land are
stated at cost.
The initial cost of a producing mine comprises its purchase price or construction cost, any costs directly
attributable to bringing it to a working condition for its intended use, the initial estimate of the rehabilitation
costs, and for qualifying assets, applicable borrowing costs during construction. The purchase price or
construction cost is the aggregate amount of cash consideration paid and the fair value of any other
consideration given to acquire the asset.
When a mine construction project moves into production, the capitalization of certain mine construction
costs ceases, and from that point on, costs are either regarded as inventory costs or expensed as cost of
sales, except for costs related to mine additions or improvements, mine development or mineable reserve
development, which qualify for capitalization.
103 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depletion
The depletion of a producing mine asset is based on the unit-of-production method over the estimated
economic life of the related deposit.
Mineral Resource and Mineral Reserve estimates
The estimation of Mineral Resources and Mineral Reserves, as defined under National Instrument 43-101,
Standards of Disclosure for Mine Projects (“NI 43-101”), is a complex process and requires significant
assumptions and estimates. The Company prepares its Mineral Resource and Mineral Reserve estimates
based on information related to the geological data on the size, depth and shape of the orebody which is
compiled by appropriately qualified persons. Mineral Resource and Mineral Reserve estimates are based
upon factors such as metal prices, capital requirements, production costs, foreign exchange rates,
geotechnical and geological assumptions and judgments made in estimating the size and grade of the
orebody. Mineral Resource and Mineral Reserve estimates, together with forecast production, determine
the life of mine estimates and therefore changes in the Mineral Resource or Mineral Reserve estimates
may impact the carrying value of exploration and evaluation assets (note 2.2(j)), mine properties, property,
plant and equipment (note 2.2(l)), depletion and depreciation charges (note 2.2(l)), rehabilitation provisions
(note 2.2(o)), and deferred income tax assets (note 2.2(v)).
(l)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment charges.
The initial cost of property, plant and equipment comprises its purchase price or construction cost, any
costs directly attributable to bringing it to a working condition for its intended use, the initial estimate of the
rehabilitation costs, and for qualifying assets, applicable borrowing costs during construction. The purchase
price or construction cost is the aggregate amount of cash consideration paid and the fair value of any other
consideration given to acquire the asset. Where an item of property, plant and equipment is comprised of
significant components with different useful lives, the components are accounted for as separate items of
property, plant and equipment. The capitalized value of a lease is also included in property, plant and
equipment.
Depreciation
The depreciation of property, plant and equipment related to a mine is based on the unit-of-production
method over the estimated economic life of the related deposit, except in the case of an asset whose
estimated useful life is less than the life of the deposit, in which case the asset is depreciated over its
estimated useful life based on the straight-line method. For all other property, plant and equipment,
depreciation is based on the estimated useful life of the asset on a straight-line basis. Depreciation of
property, plant and equipment used in a capitalized exploration or development project is capitalized to the
project.
Depreciation of property, plant and equipment, which are depreciated on a straight-line basis over their
estimated useful lives, is as follows:
Asset Category
Buildings
Machinery and Equipment
Vehicles
Computer Hardware
Office Equipment
Estimated useful life
(Years)
15 - 20
3 - 20
5
3
3 - 6
FOURTH QUARTER 2020 I 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Construction work-in-progress includes property, plant and equipment in the course of construction and is
carried at cost less any recognized impairment charge. These assets are reclassified to the appropriate
category of property, plant and equipment and depreciation of these assets commences when they are
completed and ready for their intended use.
An item of property, plant and equipment, including any significant part initially recognized, is derecognized
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss
arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and
the carrying amount of the asset, is recognized in profit or loss when the asset is derecognized.
The residual values, useful lives and methods of depreciation of all assets are reviewed at each financial
year end and are adjusted prospectively, if appropriate. Significant judgment is involved in the determination
of estimated residual values and useful lives. The actual residual values and useful lives may differ from
current estimates.
Depreciation of mine specific assets is based on the unit-of-production method. The life of these assets is
assessed annually with regard to both their anticipated useful life and the present assessments of the
economically recoverable reserves and resources of the mine property where these assets are located.
These calculations require the use of estimates and assumptions, including the amount of recoverable
reserves and resources. Any changes to these calculations based on new information are accounted for
prospectively.
Rates of depreciation and, in turn, the annual depreciation expense could therefore be materially affected
by changes in underlying estimates. Changes in estimates can be the result of differences in actual
production or changes in forecast future production, changes in Mineral Resources or Mineral Reserves
through exploration activities, differences between estimated and actual costs of mining and differences in
metal prices used in the estimation of Mineral Reserves.
Major maintenance and repairs
Expenditures on major maintenance include the cost of replacing part of an asset and overhaul costs. When
part of an asset is being replaced and it is probable that future economic benefits associated with the
replacement or overhauled item will flow to the Company through an extended life, the expenditure is
capitalized as a separate asset and the carrying amount of the replaced part is written off.
(m)
Intangible assets
Intangible assets include software, exploration and software licenses, intellectual properties, customer
relationships, long-term customer contracts and goodwill.
Intangible assets acquired are measured upon initial recognition at cost, which comprises the purchase
price plus any costs directly attributable to the preparation of the asset for its intended use. Identifiable
intangible assets acquired through business combinations are initially recognized at fair value as at the
date of acquisition. Goodwill is initially measured as described in note 2.2(a) through business
combinations.
Research expenditures are recognized as an expense as incurred. Development costs that are directly
attributable to the design and testing of an identifiable software product are capitalized and recognized as
an intangible asset.
Goodwill is carried at cost less any accumulated impairment losses and is not subject to amortization. All
other intangible assets are carried at cost less accumulated amortization and any accumulated impairment
charges. Other intangible assets are amortized on a straight-line basis over their estimated useful lives.
105 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The amortization periods applicable to intangible assets amortized on a straight-line basis over their
estimated useful lives are as follows:
Asset Category
Computer Software
Exploration and Software Licenses
Intellectual Property
Customer Relationships
Customer Contract
Estimated useful life
(Years)
3 - 5
3 - 5
10
15
14
Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the intangible assets require the use of estimates and assumptions and are accounted for by
changing the amortization period or method, as appropriate, and are treated as changes in accounting
estimates. The amortization expense attributable to an intangible asset is recognized in the consolidated
statements of earnings (loss) in the applicable expense category to which the intangible asset relates.
The gain or loss arising from the derecognition of an intangible asset is measured as the difference between
the net disposal proceeds and the carrying amount of the asset and is recognized in profit or loss when the
asset is derecognized.
(n) Assets and liabilities held for sale and discontinued operations
Non-current assets or assets in a disposal group that are expected to be recovered primarily through sale
rather than through continuing use are classified as assets held for sale. A disposal group is a group of
assets which the Company intends to dispose of in a single transaction. These assets are measured at the
lower of their carrying amount and fair value less cost to sell. Impairment charges on initial classification as
held for sale and subsequent gains or losses on re-measurement are recognized in net earnings (loss) from
discontinued operations. The reversal of any previously recognized impairment charge cannot exceed the
carrying amount that would have been determined had no impairment charge been recognized for the asset
held for sale.
Assets and liabilities in a disposal group are classified as held for sale and are presented separately in the
consolidated statements of financial position.
The measurement of assets held for sale requires the use of estimates and assumptions related to the
carrying value and its recoverability through sale. Actual sale proceeds may differ materially from the
carrying value.
A discontinued operation is a component of the Company that has been disposed of or is classified as held
for sale and represents a separate line of business or geographical area of operations. The operating results
and cash flows of discontinued operations are presented separately in the consolidated statements of
earnings (loss) and cash flows.
FOURTH QUARTER 2020 I 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o)
Impairment of non-financial assets
The carrying values of mine properties, intangible assets and property, plant and equipment are assessed
for impairment whenever indicators of potential impairment exist. If any indication of potential impairment
exists, an estimate of the asset’s recoverable amount is calculated. The recoverable amount is determined
as the higher of the fair value less costs of disposal (“FVLCD”) and its value in use based on discounted
cash flows. This is determined on an asset-by-asset basis, unless the asset does not generate cash flows
that are largely independent of those from other assets or groups of assets. If this is the case, individual
assets are grouped together into a Cash Generating Unit (“CGU”) for impairment purposes. Such CGUs
represent the lowest level for which there are separately identifiable cash inflows that are largely
independent of the cash flows from other assets or groups of assets. Management has assessed the
Company’s CGUs as being an individual operating site.
If the carrying amount of an asset or CGU exceeds its recoverable amount, the carrying amount of the
asset or CGU is reduced to its recoverable amount with the corresponding impairment being charged to
earnings (loss) in the period of impairment. Impairment charges are recognized in the consolidated
statements of earnings (loss) in those expense categories consistent with the function of the impaired asset.
An assessment is also made at each reporting date as to whether there is any change in events or
circumstances relating to a previously recognized impairment. If a change has occurred, the Company
makes an estimate of the recoverable amount for the previously impaired asset or CGU. A previously
recognized impairment charge, other than a charge in respect of goodwill, is reversed only if there has been
a change in the estimates used to determine the asset or CGU’s recoverable amount since the last
impairment charge was recognized. If this is the case, the carrying amount of the asset or CGU is increased
to its newly determined recoverable amount. The increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation and amortization, had no impairment charge been
recognized for the asset or CGU in prior years.
Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances
indicate a potential impairment. For the purpose of impairment testing, goodwill is allocated to the CGU that
is expected to benefit from the business combination in which the goodwill arose. Any impairment in
goodwill is recognized immediately and cannot be subsequently reversed.
The assessment of impairment is based on a number of external and internal factors, some of which are
outside of the Company’s control, and requires the use of estimates and assumptions related to these
factors for each CGU. External factors include considerations such as commodity prices, toll rates, discount
rates, foreign exchange rates, and changes in market, economic or regulatory requirements. Internal factors
include considerations such as production volume, ability to convert resources into reserves, capital and
operating expenditures, and future development and expansion plans.
These significant estimates and assumptions, some of which may be subjective, require that management
make decisions based on the best available information at each reporting period. It is possible that the
actual recoverable amount could be significantly different than those estimates. A significant decline in the
asset’s market value, reductions in metal price forecasts, increases in estimated future costs of production,
increases in estimated future capital costs, reductions in the amount of recoverable reserves, resources
and exploration potential, and/or adverse market conditions can result in a write-down of the carrying
amounts of the Company’s assets. Judgment is also required when considering whether significant
changes in any of these items indicate a previous impairment may have reversed.
107 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Provisions and contingencies
General
Provisions are recognized when: a) the Company has a present obligation (legal or constructive) as a result
of a past event; and b) it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made for the amount of the obligation. Where
some or all of the expenditure required to settle a provision is expected to be reimbursed by another party,
the reimbursement shall be recognized when it is virtually certain that reimbursement will be received if the
Company settles the obligation. The reimbursement shall be treated as a separate asset. If the effect of the
time value of money is material, provisions are discounted using a current pre-tax discount rate that reflects,
where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision
as a result of the passage of time is recognized in finance cost in the consolidated statements of earnings
(loss).
A contingent liability is not recognized in the case where no reliable estimate can be made; however,
disclosure is required unless the possibility of an outflow of resources embodying economic benefits is
remote. By its nature, a contingent liability will only be resolved when one or more future events occur or
fail to occur. The assessment of a contingent liability inherently involves the exercise of significant judgment
and estimates of the outcome of future events.
Rehabilitation provisions
Mining, processing, development and exploration activities are subject to various laws and regulations
governing the protection of the environment. The Company recognizes a liability for its rehabilitation
obligations in the period when a legal and/or constructive obligation is identified. The liability is measured
at the present value of the estimated costs required to rehabilitate operating locations based on the risk
free nominal discount rates that are specific to the countries in which the operations are located. A
corresponding increase to the carrying amount of the related asset is recorded and depreciated in the same
manner as the related asset.
The nature of these restoration and rehabilitation activities includes: i) dismantling and removing structures;
ii) rehabilitating mines and tailing dams; iii) dismantling operating facilities; iv) closure of plant and waste
sites; and v) restoration, reclamation and re-vegetation of affected areas. Other environmental costs
incurred at the operating sites, such as environmental monitoring, water management and waste
management costs, are charged to profit or loss when incurred.
The liability is accreted over time to its expected future settlement value. The accretion expense is
recognized in finance cost in the consolidated statements of earnings (loss).
The Company assesses its rehabilitation provisions at each reporting date. The rehabilitation liability and
related assets are adjusted at each reporting date for changes in the discount rates and in the estimated
amount, timing and cost of the work to be carried out. Any reduction in the rehabilitation liability and
therefore any deduction in the related rehabilitation asset may not exceed the carrying amount of that asset.
If it does, any excess over the carrying value is immediately credited to profit or loss.
Significant estimates and assumptions are made by management in determining the nature and costs
associated with the rehabilitation liability. The estimates and assumptions required include estimates of the
timing, extent and costs of rehabilitation activities, technology changes, regulatory changes, and changes
in the discount and inflation rates. These uncertainties may result in future expenditures being different from
the amounts currently provided.
FOURTH QUARTER 2020 I 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the
agreement on the inception date.
As a lessee, the Company recognizes a lease obligation and a right-of-use asset in the consolidated
statements of financial position on a present-value basis at the date when the leased asset is available for
use. Each lease payment is apportioned between a finance charge and a reduction of the lease obligation.
Finance charges are recognized in finance cost in the consolidated statements of earnings (loss). The right-
of-use asset is included in property, plant and equipment and is depreciated over the shorter of its estimated
useful life and the lease term on a straight-line basis.
Lease obligations are initially measured at the net present value of the following lease payments:
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
(cid:2)
(cid:2) variable lease payment that are based on an index or a rate;
(cid:2) amounts expected to be payable under residual value guarantees;
(cid:2)
the exercise price of a purchase option if the Company is reasonably certain to exercise that option;
and
(cid:2) payments of penalties for terminating the lease, if the lease term reflects the Company exercising
that option.
Lease payments are discounted using the interest rate implicit in the lease, or if this rate cannot be
determined, the Company’s incremental borrowing rate.
Right-of-use assets are initially measured at cost comprising the following:
the amount of the initial measurement of the lease obligation;
(cid:2)
(cid:2) any lease payments made at or before the commencement date less any lease incentives received;
(cid:2) any initial direct costs; and
(cid:2)
rehabilitation costs.
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-
line basis as an expense in the consolidated statements of earnings (loss). Short-term leases are leases
with a lease term of 12 months or less. Low-value assets comprise primarily small equipment.
(r) Revenue recognition
Revenue from the sale of concentrates containing gold, copper and silver is recognized when control has
been transferred, which is considered to occur when products have been delivered and the significant risks
of loss have been transferred to the buyer. Revenue is measured based on the consideration specified in
the contract.
Revenue from the sale of concentrates is initially recorded based on a provisional value which is a function
of prevailing market prices, estimated weights and grades less smelter and other commercial deductions.
Under the terms of the concentrate sales contracts, the final metal price ("settlement price") for the payable
metal is based on a predetermined quotational period of London Metal Exchange and London Bullion
Market daily prices. The price of the concentrate is the sum of the metal payments less the sum of specified
deductions, including treatment and refining charges, penalties for deleterious elements, and freight. The
terms of these contracts result in embedded derivatives because of the timing difference between the
prevailing metal prices for provisional payments and the actual contractual metal prices used for final
settlement. These embedded derivatives are adjusted to fair value at the end of each reporting period
through to the date of final price determination with any adjustments recognized in revenue.
Any adjustments to the amount receivable for each shipment on the settlement date, caused by final assay
results, are adjusted through revenue at the time of determination.
109 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue from processing concentrate is recognized when concentrate has been smelted and is based on
the toll rate specified in the toll agreement, which can vary based on the composition of the concentrate
processed and prevailing market conditions at the time the agreement was entered. Under each toll
agreement, Tsumeb incurs a carrying charge in respect of the concentrate it processes until blister copper
is delivered. This charge is recorded as a reduction of revenue.
Revenue from processing concentrate is also adjusted for any over or under recoveries of metals delivered
relative to contracted rates under the tolling agreement between Tsumeb and IXM S.A. (“IXM”). These
adjustments represent metal exposure and are calculated by comparing (i) the copper, gold and silver
content in the concentrate received and processed by Tsumeb multiplied by the percentage accountable in
the IXM contract to (ii) the accountable copper, gold and silver in the blister delivered to IXM and in the in-
circuit material still being processed by Tsumeb. Many aspects of the metal exposure are subject to
estimation, including the amount of metal contained in concentrate received, in-circuit material and blister
delivered where final assays have not been completed. These significant estimates are based on the
Company’s process knowledge, joint surveys with IXM and multiple assay results, the final results of which
could differ from initial estimates.
Revenue from the sale of sulphuric acid, a by-product from processing concentrate at the Tsumeb smelter,
is measured at the price specified in the sales contract and is recognized when the control has been
transferred, which is considered to occur when the products have been delivered to the location specified
in the sales contract and the risk of loss has been transferred to the buyer.
Revenue from MineRP’s software services is recognized over time when the services are rendered. This is
measured based on the actual service provided to the end of the reporting period as a proportion of the
total services to be provided. The estimated revenue or extent of progress toward percentage of completion
is revised if changes occur or circumstances arise that indicate a revision is warranted. Any resulting
increase or decrease in estimated revenue is reflected in the consolidated statements of earnings (loss) in
the period in which such determination is made.
Revenue from licenses entered by MineRP containing software and ongoing services elements is
recognized based on the estimated fair value of each element. The fair value of each element is determined
based on the market price of each element when sold separately. Revenue relating to the software element
is recognized when the control has been transferred to the customer, which occurs on delivery. Revenue
relating to the service element is recognized over time when the services are rendered.
(s) Deferred revenue
Deferred revenue is recognized in the consolidated statements of financial position when a cash
prepayment is received from one or more customers prior to the sale of product or delivery of service.
Revenue is subsequently recognized in the consolidated statements of earnings (loss) when the sale occurs,
which generally occurs when control has been transferred or in the case of services, when the services
have been rendered.
The Company recognizes the time value of money, where there is a significant financing component and
the period between the payment by the customer and the transfer of the contracted goods or services
exceeds one year.
FOURTH QUARTER 2020 I 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(t) Borrowing costs
Borrowing costs directly related to the acquisition and the construction of a qualifying capital asset are
capitalized and added to the cost of the asset until such time as the asset is considered substantially ready
for its intended use. Where funds are borrowed specifically to finance a project, the amount capitalized
represents the actual borrowing costs incurred. Where funds used to finance a project form part of general
borrowings, the amount capitalized is calculated using the weighted average cost applicable to relevant
general borrowings of the Company during the period. All other borrowing costs are recognized in profit or
loss in the period in which they are incurred.
(u) Share-based compensation transactions
Equity-settled transactions
Stock options are granted to directors and selected employees to buy common shares of the Company.
Options vest equally over a three-year period and expire five years from the date of grant. Grants of stock
options are based on the closing price of the common shares on the TSX the day before the effective grant
date and reflect the Company’s estimate of the number of awards that will ultimately vest. The stock options
are measured on the date of grant by reference to the fair value determined using a Black-Scholes valuation
model, further details of which are given in note 17. The value is recognized as a general and administrative
expense in the consolidated statements of earnings (loss) and an increase to contributed surplus in the
consolidated statements of changes in shareholders’ equity over the period in which the performance and/or
service conditions are fulfilled.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of
diluted earnings per share.
Cash-settled transactions
A Deferred Share Unit (“DSU”) Plan was established for directors and certain employees in lieu of cash
compensation. The DSUs are paid in cash based on the five-day volume weighted average price (“Market
Price”) of DPM’s publicly traded common shares on the date the employee ceases to be employed by DPM or
a subsidiary thereof or at any time before the end of the year following the year in which the director ceases to
be a director of DPM or a subsidiary thereof. The cost of the DSUs is measured initially at fair value based on
the closing price of DPM’s common shares preceding the day the DSUs are granted. The cost of the DSUs is
recognized as a liability under share based compensation plans in the consolidated statements of financial
position and as a general and administrative expense in the consolidated statements of earnings (loss). The
liability is remeasured to fair value based on the Market Price of DPM’s common shares at each reporting date
up to and including the settlement date, with changes in fair value recognized in general and administrative
expenses in the consolidated statements of earnings (loss).
A Restricted Share Unit (“RSU”) Plan was established for directors, certain employees and eligible contractors
(“Participant”) of DPM and its wholly-owned subsidiaries in consideration of past services to the Company.
Under this plan, the Board of Directors may, at its sole discretion, (i) grant non-performance based RSUs
and RSUs with a performance-based component, referred to as performance share units (“PSUs”), subject
to performance conditions to be achieved by the Company; and (ii) determine the entitlement date or dates
of such RSUs and PSUs. The non-performance based RSUs vest equally over a three-year period and are
paid in cash based on the Market Price of DPM’s publicly traded common shares on the entitlement date
or dates. The PSUs vest after three years from the grant date and are paid in cash based on the Market
Price of DPM’s publicly traded common shares, subject to performance criteria established by the Board of
Directors on the entitlement date or dates.
111 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The cost of the RSUs and PSUs is measured initially at fair value on the authorization date based on the
closing price of DPM’s common shares preceding the day the RSUs and PSUs are granted. The cost of
RSUs and PSUs is recognized as a liability under share based compensation plans, with the current portion
recognized in accounts payable and accrued liabilities, in the consolidated statements of financial position
and as an expense in the consolidated statements of earnings (loss) over the vesting period. The liability is
remeasured to fair value based on the Market Price of DPM’s common shares and, in the case of PSUs,
subject to performance criteria, at each reporting date up to and including the settlement date, with changes
in fair value recognized in the consolidated statements of earnings (loss).
(v)
Income taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities on the taxable loss or income for the period. The tax rates and tax laws used
to compute the amount are those enacted or substantively enacted by the end of the reporting period.
Current income tax assets and current income tax liabilities are only offset if a legally enforceable right
exists to offset the amounts and the Company intends to settle on a net basis or to realize the asset and
settle the liability simultaneously.
Deferred income tax
Deferred income tax is provided using the balance sheet method on temporary differences on the reporting
date between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred
income tax assets are recognized for all deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses, to the extent that it is probable that taxable income will be generated in
future periods to utilize these deductible temporary differences.
The following temporary differences do not result in deferred income tax assets or liabilities:
(cid:2) The initial recognition of assets or liabilities, not arising from a business combination, that does not
(cid:2)
(cid:2)
affect accounting or taxable profit;
Initial recognition of goodwill, if any; and
Investments in subsidiaries, associates and jointly controlled entities where the timing of the reversal
of temporary differences can be controlled and reversal in the foreseeable future is not probable.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient future taxable income will be generated to
allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets
are reassessed at the end of each reporting period and are recognized to the extent that it has become
probable that future taxable income will be generated to allow the deferred income tax asset to be
recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to be in effect in
the period when the asset is expected to be realized or the liability is expected to be settled, based on tax
rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets and liabilities are offset if a legally enforceable right exists to offset current
income tax assets against current income tax liabilities and the deferred income taxes relate to the same
taxable entity and the same taxation authority.
FOURTH QUARTER 2020 I 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Current and deferred income taxes related to items recognized directly in equity are recognized in equity
and not in profit or loss. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and establishes provisions where
appropriate.
Judgment is required in determining whether deferred income tax assets are recognized on the
consolidated statements of financial position. Deferred income tax assets, including those arising from
unutilized tax losses, require management to assess the likelihood that the Company will generate future
taxable income in order to utilize the deferred income tax assets. Estimates of future taxable income are
based on forecasted cash flows from operations or other activities and the application of existing tax laws
in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from
estimates, the ability of the Company to realize the net deferred income tax assets recorded on the reporting
date could be impacted.
Additionally, future changes in tax laws in the jurisdictions in which the Company operates could impact tax
deductions in future periods and the value of its deferred income tax assets and liabilities.
(w) Earnings per share
Basic earnings per share is computed by dividing the net earnings available to common shareholders by
the weighted average number of shares outstanding during the reporting period.
Diluted earnings per share reflects the potential dilution that could occur if additional common shares are
assumed to be issued under securities that entitle their holders to obtain common shares in the future. The
number of additional shares for inclusion in diluted earnings per share is determined using the treasury
stock method, whereby stock options and warrants, whose exercise price is less than the average market
price of the Company’s common shares, are assumed to be exercised at the beginning of the period with
proceeds based on the average market price for the period. The incremental number of common shares
issued under stock options and warrants is included in the calculation of diluted earnings per share.
3.
ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS
On December 22, 2020, DPM and other shareholders of MineRP collectively entered into a definitive
agreement with Epiroc Canada Holding Inc., a subsidiary of Epiroc Rock Drills AB (“Epiroc”) for the sale of
MineRP through disposition of all of the issued and outstanding shares of MineRP (the “MineRP
Disposition”). The MineRP Disposition is subject to South African competition review approval and is
expected to close in the first half of 2021. Under the MineRP Disposition, the consideration for DPM’s fully
diluted 70% equity interest in MineRP and the repayment of DPM shareholder loans consists of (i)
approximately $40.0 million in cash subject to a working capital adjustment following closing and (ii)
potential additional proceeds in the form of an earn-out of up to $28.7 million, which are payable on the
achievement of certain revenue targets by MineRP in 2021 and 2022.
As a result of the MineRP Disposition, the assets and liabilities of MineRP have been presented as held for
sale in the consolidated statement of financial position as at December 31, 2020 and the operating results
and cash flows of MineRP have been presented as discontinued operations in the consolidated statements
of earnings (loss) and cash flows for the years ended December 31, 2020 and 2019. As a consequence,
certain comparative figures in the consolidated statements of earnings (loss) and cash flows have been
reclassified to conform with current year presentation.
113 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
The following table summarizes the assets and liabilities of MineRP which have been aggregated and
presented as held for sale as at December 31, 2020:
Cash
Accounts receivable
Property, plant & equipment
Intangible assets
Other long-term assets
Total assets held for sale
Accounts payable and accrued liabilities
Current portion of long-term liabilities
Deferred income tax liabilities
Other long-term liabilities
Total liabilities held for sale
December 31, 2020
582
1,524
1,265
27,153
189
30,713
4,038
303
950
712
6,003
The following table summarizes the operating results of MineRP which have been aggregated and
presented as discontinued operations for the years ended December 31, 2020 and 2019:
Revenue
Costs and expenses
Cost of sales
General and administrative expenses
Finance cost
Other income
2020
11,495
10,160
6,424
96
(581)
16,099
2019
14,670
11,826
6,356
91
(193)
18,080
Loss before income taxes
(4,604) (3,410)
Current income tax expense
Deferred income tax expense (recovery)
Net loss from discontinued operations
212
(647)
(4,169)
9
2,085
(5,504)
The Company performed impairment testing of goodwill, which was recognized upon the acquisition of
MineRP, before reclassifying it to assets held for sale. As at December 31, 2020, the recoverable amount
of MineRP was higher than its carrying amount including the goodwill and therefore no impairment charge
was required for the year ended December 31, 2020. MineRP’s recoverable amount was determined based
on the estimated consideration expected from the MineRP Disposition.
4.
IMPAIRMENT CHARGE
As at December 31, 2019, the Company assessed the recoverable amount of Tsumeb triggered by the
timing of the anticipated expansion project being delayed and the ability to optimize the mix of feed being
processed by the smelter.
FOURTH QUARTER 2020 I 114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
As at December 31, 2019, the carrying value of Tsumeb exceeded its estimated recoverable amount
resulting in an impairment charge of $107.0 million being recognized in the consolidated statements of
earnings (loss), of which $104.9 million related to property, plant and equipment and $2.1 million related to
intangible assets. This charge was primarily attributable to the opportunity to process additional volumes of
third party complex concentrate at Tsumeb by capitalizing on, from time to time, market demand to process
Chelopech concentrate, which has more available outlets than other complex third party concentrate
processed by Tsumeb. While this has the potential to generate additional overall value for the Company,
this would be realized through lower treatment charges and higher margins at Chelopech rather than higher
throughput and higher margins at Tsumeb. The ability to optimize mix as well as the actual timing and
volume of expected additional third party complex concentrate coming to market, could also result in
Tsumeb’s expansion being further delayed and possibly deferred indefinitely, if a long term contract cannot
be secured to support the expansion to 370,000 tonnes. In 2019, the Company contracted additional supply
under its tolling agreement with IXM, on terms in line with existing arrangements, such that the smelter’s
existing capacity was fully contracted for the following three years. In addition, the Government of Namibia
issued an Environmental Clearance Certificate to the Company, which provided the approval required to
move forward with the expansion.
Tsumeb’s recoverable amount of $125.0 million as at December 31, 2019 was determined using FVLCD,
which was calculated based on projected future cash flows utilizing the latest information available and
management’s estimates including throughput ranging from 242,000 tonnes to 370,000 tonnes, toll rates,
which were based on historical terms received and the Company’s knowledge of the complex concentrate
market, third party concentrate feed ranging from 70% to 100% of total feed, operating costs and capital
expenditures in line with current levels, and foreign exchange rates ranging from 13.7 to 14.9. These
projected cash flows were prepared in current dollars and discounted using a real discount rate of 10.2%,
representing the estimated weighted average real cost of capital. This rate was estimated based on the
Capital Asset Pricing Model where the costs of equity and debt were based on, among other things,
estimated interest rates, market returns on equity, share volatility, leverage and risks specific to the mining
sector and Tsumeb. Management’s estimates of Tsumeb’s FVLCD are classified as level 3 in the fair value
hierarchy.
Sensitivities
The projected cash flows and estimated FVLCD can be affected by any one or more changes in the
estimates used. Changes in operating costs, volumes of concentrate smelted, third party toll rates, and
foreign exchange rates have the greatest impact on value, with a 5% change in any one ranging between
$15 million and $30 million as at December 31, 2020. Should the expansion of Tsumeb not proceed and/or
the concentrate mix at Tsumeb shifts to process significant additional volumes of third party complex
concentrate instead of Chelopech concentrate, a further impairment charge could be required, notwithstanding
any such decision being accretive to the Company overall.
5.
ACCOUNTS RECEIVABLE
Accounts receivable (a)
Supplier advances and other prepaids
Value added tax recoverable
December 31,
2020
December 31,
2019
74,506
8,501
1,913
84,920
30,695
5,985
1,629
38,309
(a) As at December 31, 2020, the Company’s accounts receivable included a liability of $0.4 million
(December 31, 2019 – a recoverable of $0.6 million) related to Tsumeb’s metals exposure.
115 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
6.
INVENTORIES
Ore and concentrates
Spare parts, supplies and other
December 31,
2020
14,382
28,667
43,049
December 31,
2019
13,067
24,966
38,033
For the year ended December 31, 2020, the cost of inventories recognized as an expense and included in
cost of sales was $186.4 million (2019 – $148.0 million).
7.
FINANCIAL INSTRUMENTS
Set out below is a comparison, by category, of the carrying amounts of the Company’s financial instruments
that are recognized in the consolidated statements of financial position:
Financial assets
Cash
Accounts receivable
on provisionally priced sales
Other accounts receivable
Restricted cash
Sabina special warrants (a)
Publicly traded securities (b)
Commodity swap contracts (c)
Foreign exchange option
contracts (d)
Financial liabilities
Accounts payable
and accrued liabilities
Debt (note 12(a))
Commodity swap contracts (c)
Financial instrument
classification
Carrying Amount
December 31, December 31,
2020
2019
Amortized cost
149,532
23,440
FVPL
Amortized cost
Amortized cost
FVPL
FVOCI
Derivatives for fair value hedges
52,957
31,963
2,111
12,128
94,467
104
11,246
27,063
2,177
6,488
52,874
-
Derivatives for cash flow hedges
6,364
3,938
Amortized cost
Amortized cost
Derivatives for cash flow and
fair value hedges
66,465
-
58,320
10,000
5,769
1,416
The carrying values of all the financial assets and liabilities approximate their fair values as at December
31, 2020 and 2019.
(a) Sabina special warrants
As at December 31, 2020, DPM held: (i) 30,537,746 common shares of Sabina; and (ii) 5,000,000 Series B
special warrants, which will be automatically exercised upon a positive production decision with respect to
the Back River project or upon the occurrence of certain other events. Each of the special warrants is
exercisable into one common share until 2044.
The fair value of the special warrants was based on the fair value of the Sabina common shares, which
was determined based on the closing bid prices as at December 31, 2020 and 2019.
The fair value of the Sabina special warrants was included in investments at fair value in the consolidated
statements of financial position.
FOURTH QUARTER 2020 I 116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
For the year ended December 31, 2020, the Company recognized unrealized gains on the Sabina special
warrants of $5.7 million (2019 – $3.9 million) in other (income) expense (note 20) in the consolidated
statements of earnings (loss).
(b) Publicly traded securities
Publicly traded securities include a portfolio of equity investments in publicly traded mining and exploration
companies, comprised primarily of Sabina, INV and Velocity Minerals Ltd (“Velocity”).
During the year ended December 31, 2020, DPM acquired a 9.9% equity interest in Velocity for a total cost
of $5.1 million.
For the year ended December 31, 2020, the Company recognized unrealized gains on these publicly traded
securities of $36.5 million (2019 – $16.6 million) in other comprehensive income (loss) that will not be
reclassified subsequently to profit or loss.
(c) Commodity swap contracts
The Company enters into QP Hedges, being cash settled commodity swap contracts from time to time to
swap future contracted monthly average metal prices for fixed metal prices to eliminate or substantially
reduce the metal price exposure associated with the time lag between the provisional and final
determination of concentrate sales.
As at December 31, 2020, the Company’s outstanding QP Hedges, all of which mature within six months
from the reporting date, are summarized in the table below:
Commodity hedged
Payable gold
Payable copper
Volume hedged
50,265 ounces
13,062,374 pounds
Weighted average fixed price
of QP Hedges
1,882.13/ounce
3.13/pound
The Company also enters into Production Hedges, being cash settled commodity swap contracts from time
to time to reduce its future metal price exposures. Commodity swap contracts are entered to swap future
contracted monthly average prices for fixed prices.
As at December 31, 2020, the Company had outstanding commodity swap contracts in place in respect of
its projected copper production as summarized in the table below:
Year of projected
production
Volume of copper hedged
(pounds)
Average fixed price
($/pound)
2021 6,195,886
3.53
The Company designates the spot component of commodity swap contracts in respect of Production
Hedges as cash flow hedges and the spot component of commodity swap contracts in respect of QP
Hedges as fair value hedges.
The fair value gain or loss on commodity swap contracts is calculated based on the corresponding London
Metal Exchange forward copper prices and New York Commodity Exchange forward gold and silver prices,
as applicable. As at December 31, 2020, the net fair value loss on all outstanding commodity swap contracts
was $5.7 million (December 31, 2019 – $1.4 million), of which $0.1 million (December 31, 2019 – $nil) was
included in other current assets and $5.8 million (December 31, 2019 – $1.4 million) in accounts payable
and accrued liabilities.
117 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
All commodity swap contracts are subject to master netting agreements. As at December 31, 2020, $0.1
million of commodity swap assets were set-off against commodity swap liabilities of $5.8 million in accounts
payable and accrued liabilities. As at December 31, 2019, there was no set-off of assets and liabilities in
connection with these contracts in the consolidated statements of financial position.
The Company recognized net losses of $11.1 million (2019 – $2.7 million) for the year ended December
31, 2020 in revenue on these commodity swap contracts.
(d) Foreign exchange forward and option contracts
The Company enters into foreign exchange forward and option contracts from time to time to reduce the
foreign exchange exposure associated with projected operating expenses and capital expenditures
denominated in foreign currencies.
Foreign exchange forward contracts are entered to fix foreign exchange rates on future operating expenses
and capital expenditures. Foreign exchange option contracts are entered to provide price protection below
a specified “floor” rate and participation up to a specified “ceiling” rate. The option contracts entered are
comprised of a series of call options and put options (which when combined create a price “collar”) that are
structured so as to provide for a zero upfront cash cost.
As at December 31, 2020, the Company had outstanding foreign exchange option contracts in respect of a
portion of its projected ZAR denominated operating expenses as summarized in the table below:
Year of projected
operating expenses
Put options purchased
Weighted average
floor rate US$/ZAR
2021 1,426,200,000 18.58 15.77
Call options sold
Weighted average
ceiling rate US$/ZAR
Amount hedged
in ZAR (i)
(i) The Namibian dollar is pegged to the ZAR on a 1:1 basis.
The Company designates the spot component of the foreign exchange forward contracts and the intrinsic
value of option contracts as cash flow hedges. The time value component of foreign exchange forward and
option contracts is treated as a separate cost of hedging.
The fair value gain or loss on these outstanding contracts is calculated based on foreign exchange forward
rates quoted in the market. As at December 31, 2020, the net fair value gain on all outstanding foreign
exchange option contracts was $6.4 million (December 31, 2019 – $3.9 million), which was included in
other current assets. All foreign exchange option contracts are subject to master netting agreements. As at
December 31, 2020 and 2019, there was no set-off of assets and liabilities in the consolidated statements
of financial position.
For the year ended December 31, 2020, the Company recognized unrealized gains of $3.4 million (2019 –
$1.1 million) in other comprehensive income (loss) on the spot component of the outstanding foreign
exchange option contracts. The Company also recognized realized losses of $3.5 million (2019 – realized
gains of $0.7 million) for the year ended December 31, 2020 in cost of sales on the spot component of
settled contracts in respect of foreign denominated operating expenses.
For the year ended December 31, 2020, the Company recognized unrealized losses of $0.9 million (2019
– unrealized gains of $3.5 million) on the time value component of the outstanding foreign exchange option
contracts in other comprehensive income (loss) as a deferred cost of hedging.
FOURTH QUARTER 2020 I 118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Effects of hedge accounting
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic
prospective effectiveness assessments to ensure that an economic relationship exists between the hedged
items (the Company’s accounts receivable on provisionally priced sales, projected payable metal
production, and projected operating expenses and capital expenditures denominated in foreign currencies)
and the hedging instruments (commodity swap contracts and foreign exchange forward and option
contracts). The hedges are effective when the critical terms of the hedging instrument match with the critical
terms of the hedged item.
Hedge ineffectiveness can arise from:
(cid:2) Differences in the timing and/or amount of the cash flows of the hedged item and the hedging
instrument; and
(cid:2) Fair value movements related to counterparty credit risk, which impact the hedging instrument and
the hedged item differently.
The Company’s hedging relationships are such that the ratio between the underlying hedged item and the
hedging instrument is 1:1. To measure for potential hedge ineffectiveness, the Company compares change
in the fair value of the hedging instrument to change in the fair value of the underlying hedged item.
Set out below is a summary of effects of hedge accounting on the Company’s consolidated statements of
financial position by risk category for its fair value and cash flow hedges:
2020
2019
Commodity swap contracts
designated as fair value hedges (i)
Carrying amount
Assets included in other current assets
Liabilities included in accounts payable and accrued liabilities
Notional amount
Changes in fair value used for measuring ineffectiveness
Hedging instruments
Hedged items
Commodity swap contracts
designated as cash flow hedges
Carrying amount
Assets included in accounts payable and accrued liabilities
Notional amount
Changes in fair value used for measuring ineffectiveness
Hedging instruments
Hedged items
Foreign exchange option contracts
designated as cash flow hedges
Carrying amount
Assets included in other current assets
Notional amount ZAR (in 000's)
Changes in fair value used for measuring ineffectiveness
Hedging instruments
Hedged items
104
(5,836)
(5,732)
135,513
(5,666)
5,444
67
21,883
87
(87)
-
(1,416)
(1,416)
49,671
(1,152)
1,228
-
-
-
-
6,364
1,426,200
3,938
1,468,720
5,350
(5,350)
1,978
(1,978)
(i) The carrying value of the hedged item, comprised of accounts receivable on provisionally priced sales,
as at December 31, 2020 was $53.0 million (December 31, 2019 – $11.2 million).
119 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
See note 25(b) for the effects of hedge accounting on the consolidated statements of earnings (loss) and
the consolidated statements of comprehensive income (loss).
Fair value hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
(cid:2) Level 1: based on quoted (unadjusted) prices in active markets for identical assets or liabilities;
(cid:2) Level 2: based on inputs which have a significant effect on fair value that are observable, either
directly or indirectly from market data; and
(cid:2) Level 3: based on inputs which have a significant effect on fair value that are not observable from
market data.
The following table illustrates the classification of the Company’s financial instruments within the fair value
hierarchy as at December 31, 2020 and 2019:
Financial assets
Accounts receivable on provisionally
priced sales
Sabina special warrants
Publicly traded securities
Commodity swap contracts
Foreign exchange option contracts
Financial liabilities
Commodity swap contracts
Financial assets
Accounts receivable on provisionally
priced sales
Sabina special warrants
Publicly traded securities
Foreign exchange option contracts
Financial liabilities
Commodity swap contracts
Level 1
Level 2
December 31, 2020
Total
Level 3
-
-
94,467
-
-
52,957
-
-
104
6,364
-
12,128
-
-
-
52,957
12,128
94,467
104
6,364
-
5,769
-
5,769
Level 1
Level 2
December 31, 2019
Total
Level 3
-
-
52,874
-
11,246
-
-
3,938
-
6,488
-
-
11,246
6,488
52,874
3,938
-
1,416
-
1,416
During the years ended December 31, 2020 and 2019, there were no transfers between Level 1 and Level
2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.
The following table reconciles Level 3 fair value measurements from January 1, 2019 to December 31,
2020:
Balance at beginning of year
Unrealized gains included in net earnings (loss) (note 20)
Balance at end of year
December 31,
2020
December 31,
2019
6,488
5,640
12,128
2,617
3,871
6,488
FOURTH QUARTER 2020 I 120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
8. MINE PROPERTIES
Cost:
Balance as at January 1, 2019
Additions
Capitalized depreciation
Change in rehabilitation provisions
Disposals
Transfers
Balance as at December 31, 2019
Additions
Capitalized depreciation
Change in rehabilitation provisions
Balance as at December 31, 2020
Accumulated depletion and impairment:
Balance as at January 1, 2019
Depletion
Depletion relating to disposals
Balance as at December 31, 2019
Depletion
Balance as at December 31, 2020
Net book value:
As at December 31, 2019
As at December 31, 2020
Producing
Mine under
Mines Construction (a)
Total
164,821
5,640
545
(723)
(595)
129,307
298,995
9,367
480
5,161
314,003
267,134
30,560
202
1,437
431,955
36,200
747
714
-
(595)
(299,333) (170,026)
298,995
-
9,367
-
480
-
-
5,161
-
314,003
94,933
23,912
(582)
118,263
40,302
158,565
-
-
-
-
-
-
94,933
23,912
(582)
118,263
40,302
158,565
180,732
155,438
-
-
180,732
155,438
(a) Mine under Construction represented the Ada Tepe gold project which achieved commercial production
in June 2019.
Included in additions were capitalized borrowing costs amounting to $3.0 million for the year ended
December 31, 2019, at a weighted average interest rate of 5.94%.
Of the total depletion expense, $37.7 million (2019 – $21.7 million) was charged to cost of sales for the
year ended December 31, 2020.
121 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
9.
PROPERTY, PLANT AND EQUIPMENT
Machinery Construction
Work-in-
Progress
and
Equipment
Buildings
Cost:
Balance as at January 1, 2019
Additions
Capitalized depreciation
Disposals
Impairment charge (note 4)
Change in rehabilitation provisions
Transfers
Balance as at December 31, 2019
Additions
Capitalized depreciation
Disposals
Change in rehabilitation provisions
Transfers
Reclassified as assets held for sale
(note 3)
Balance as at December 31, 2020
Accumulated depreciation and impairment:
Balance as at January 1, 2019
Depreciation expense
Capitalized depreciation
Currency translation adjustment
Depreciation relating to disposals
Impairment charge (note 4)
Balance as at December 31, 2019
Depreciation expense
Capitalized depreciation
Currency translation adjustment
Depreciation relating to disposals
Reclassified as assets held for sale
(note 3)
54,899
726
-
-
(12,107)
214
30,262
73,994
2,727
-
(373)
3,919
486
(1,240)
79,513
19,796
6,305
93
-
-
(3,242)
22,952
8,087
-
-
(248)
539,024
9,389
-
(23,208)
(139,604)
133
161,327
547,061
17,757
-
(4,774)
198
16,524
(476)
576,290
245,370
52,544
696
(41)
(20,511)
(45,525)
232,533
51,595
990
(135)
(4,617)
(405)
(46)
Balance as at December 31, 2020
30,386
280,320
22,713
22,332
42
-
(1,913)
-
(21,563)
21,611
14,129
510
-
-
(17,010)
-
19,240
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
616,636
32,447
42
(23,208)
(153,624)
347
170,026
642,666
34,613
510
(5,147)
4,117
-
(1,716)
675,043
265,166
58,849
789
(41)
(20,511)
(48,767)
255,485
59,682
990
(135)
(4,865)
(451)
310,706
Net book value:
As at December 31, 2019
As at December 31, 2020
51,042
49,127
314,528
295,970
21,611
19,240
387,181
364,337
Of the total depreciation expense from continuing operations, $59.3 million (2019 – $55.3 million) was
charged to cost of sales and $0.7 million (2019 – $0.8 million) was charged to general and administrative
expenses for the year ended December 31, 2020.
See note 16 for the carrying value of right-of-use assets under leases recognized in property, plant and
equipment as at December 31, 2020 and 2019 and other related information for the years ended December
31, 2020 and 2019.
FOURTH QUARTER 2020 I 122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
10.
INTANGIBLE ASSETS
Cost:
Balance as at January 1, 2019
Additions
Currency translation adjustment
Disposals
Impairment charge (note 4)
Balance as at December 31, 2019
Additions
Currency translation adjustment
Disposals
Reclassified as assets held for sale
(note 3)
Balance as at December 31, 2020
Accumulated amortization and impairment:
Balance as at January 1, 2019
Amortization
Amortization relating to disposals
Impairment charge (note 4)
Balance as at December 31, 2019
Amortization
Amortization relating to disposals
Reclassified as assets held for sale
(note 3)
Balance as at December 31, 2020
Net book value:
As at December 31, 2019
As at December 31, 2020
Goodwill
Other
Intangibles
Total
21,978
-
535
-
-
22,513
-
(942)
-
58,473
36,495
5,171
5,171
667
132
(5,562) (5,562)
(3,569) (3,569)
55,180
7,476
(84) (1,026)
(56)
(56)
32,667
7,476
(21,571)
-
-
-
-
-
-
-
-
-
-
22,513
-
(7,889)
32,114
(29,460)
32,114
12,758
3,876
12,758
3,876
(62) (62)
(1,426) (1,426)
15,146
3,192
(56) (56)
15,146
3,192
(2,307)
15,975
17,521
16,139
(2,307)
15,975
40,034
16,139
Of the total intangible asset amortization expense from continuing operations, $2.2 million (2019 – $3.0
million) was charged to cost of sales and $0.3 million (2019 – $0.2 million) was charged to general and
administrative expenses for the year ended December 31, 2020.
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable
Accrued liabilities
Commodity swap contracts (note 7(c))
Dividend payable (note 25(a))
Value added tax payable
123 I DUNDEE PRECIOUS METALS INC.
December 31,
2020
December 31,
2019
13,110
45,704
5,769
5,442
2,209
72,234
15,839
42,481
1,416
-
-
59,736
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
12. DEBT
(a) DPM Revolving Credit Facility (“RCF”)
DPM has a committed RCF with a consortium of banks. In June 2020, the Company amended the RCF by
reducing tranche B of the facility from $175.0 million to $150.0 million and extending its maturity date from
February 2022 to February 2023. The Company’s borrowing spread above LIBOR is 2.5%, and can range
between 2.5% and 3.5% depending upon the Company’s funded net debt to adjusted earnings before
interest, taxes, depreciation and amortization (“Debt Leverage Ratio”), as defined in the RCF agreement.
The RCF is secured by pledges of the Company’s investments in Ada Tepe, Chelopech and Tsumeb and
by guarantees from each of these subsidiaries.
The RCF contains financial covenants that require DPM to maintain: (i) a Debt Leverage Ratio below 3.75:1,
(ii) a current ratio (including the addition of any unutilized credit within tranche B to current assets) of greater
than 1.5:1, and (iii) a minimum net worth of $500.0 million plus (minus) 50% of ongoing annual net earnings
(loss).
As at December 31, 2020, DPM was in compliance with all financial covenants and $nil (December 31,
2019 – $10.0 million) was drawn under the RCF.
(b) Tsumeb overdraft facility
In April 2020, Tsumeb increased its demand overdraft facility from Namibian $50.0 million ($3.4 million) to
Namibian $100.0 million ($6.8 million). This facility is guaranteed by DPM and bears interest at a rate equal
to the Namibian Prime Lending Rate minus 0.5%. As at December 31, 2020 and 2019, $nil was drawn from
this facility.
(c) Other credit agreements and guarantees
Chelopech and Ada Tepe have a $16.0 million multi-purpose credit facility that matures on November 30,
2022. This credit facility is guaranteed by DPM. As at December 31, 2020, $6.1 million (December 31, 2019
– $5.7 million) had been utilized against this multi-purpose revolving facility in the form of letters of credit
and letters of guarantee.
Chelopech and Ada Tepe also have a Euro 21.0 million ($25.8 million) credit facility to support mine closure
and rehabilitation obligations. This credit facility matures on November 30, 2022 and is guaranteed by DPM.
As at December 31, 2020, $25.8 million (December 31, 2019 – $23.6 million) had been utilized against this
credit facility in the form of letters of guarantee, which were posted with the Bulgarian Ministry of Energy.
Ada Tepe has a $5.3 million multi-purpose credit facility that matures on November 30, 2022. This credit
facility is guaranteed by DPM. As at December 31, 2020, $0.2 million (December 31, 2019 – $0.1 million)
had been utilized against this multi-purpose revolving facility in the form of letters of credit and letters of
guarantee.
Advances under these facilities bear interest at a rate equal to the one month U.S. Dollar LIBOR plus 2.5%.
The letters of credit and guarantee bear a fee of 0.6% based on the amounts issued.
FOURTH QUARTER 2020 I 124
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
13. DEFERRED REVENUE
In September 2016, the Company entered into a prepaid forward gold sales arrangement with several of
DPM’s existing lenders whereby the Company will deliver 45,982 ounces of gold on specified dates over a
21-month period commencing in May 2019 in exchange for an upfront cash prepayment of $50.0 million.
In March 2019, the Company amended its prepaid forward gold sales arrangement whereby the first six
months of gold deliveries originally scheduled to commence in May 2019 are to be now delivered from
November 2019 to April 2020 in addition to the existing quantities due during this period. As a result, total
quantities of gold to be delivered increased by 228 ounces to 46,210 ounces. Deliveries of this gold were
in the form of unallocated gold credits sourced from any of the Company’s own mines and occurred over a
15-month period from October 2019 to December 2020 in satisfaction of the upfront cash prepayment of
$50.0 million that was received in September 2016.
The cash prepayment of $50.0 million, together with a total deemed financing expense of $13.2 million,
was recorded as deferred revenue in the consolidated statements of financial position, which was
subsequently recognized as revenue when deliveries were made under the prepaid forward gold sales
arrangement.
During the year ended December 31, 2020, 34,087 ounces of gold (2019 – 12,123 ounces) were delivered
pursuant to the prepaid forward gold sales arrangement and as a result, $46.7 million (2019 - $16.5 million)
was transferred from deferred revenue to revenue. As at December 31, 2020, the deferred revenue had
been fully recognized as revenue.
14. REHABILITATION PROVISIONS
The rehabilitation provisions represent the present value of rehabilitation costs relating to the Chelopech,
Tsumeb and Ada Tepe sites, which are expected to be incurred between 2021 and 2049.
Key assumptions used in determining the rehabilitation provisions were as follows:
December 31,
2020
December 31,
2019
2021 - 2037
2022 - 2049
2021 - 2040
2020 - 2037
2021 - 2039
2020 - 2040
0.9%
11.4%
2.5%
4.5%
2.0%
10.5%
2.1%
5.5%
Discount period
Chelopech
Tsumeb
Ada Tepe
Local discount rate
Chelopech/Ada Tepe
Tsumeb
Local inflation rate
Chelopech/Ada Tepe
Tsumeb
125 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Changes to rehabilitation provisions were as follows:
Balance as at January 1, 2019
Change in cost estimate
Remeasurement of provisions (b)
Accretion expense (note 19)
Balance as at December 31, 2019
Change in cost estimate (a)
Remeasurement of provisions (b)
Accretion expense (note 19)
Balance as at December 31, 2020
Tsumeb
17,304
-
Ada Tepe
5,661
844
Chelopech
15,423
1,580
Total
38,388
2,424
(899) (215) (573) (1,687)
2,270
41,395
7,738
1,197
2,196
1,838
18,927
1,950
(4,842)
1,758
312
16,416
2,352
4,185
317
120
6,052
3,436
1,854
121
23,270
17,793
11,463
52,526
(a) During the year ended December 31, 2020, Tsumeb and Ada Tepe increased their estimated
rehabilitation costs based on their current activities, updated closure plan and existing closure
obligations.
(b) Remeasurement of provisions resulted from changes in discount rates, inflation rates and foreign
exchange rates at each site.
15. OTHER LONG-TERM LIABILITIES
Leases (note 16)
Other liabilities
Less: Current portion
16. LEASES
December 31,
2020
December 31,
2019
17,083
3,006
20,089
(5,929)
14,160
18,349
2,133
20,482
(5,092)
15,390
The Company leases various property, equipment and vehicles with lease terms ranging between one to ten
years. Extension and termination options are included in a number of property and equipment leases across
the Company. These terms are used to maximize operational flexibility in terms of managing contracts, the
majority of which are exercisable jointly by both the Company and the respective lessor. Lease terms are
negotiated on an individual basis and contain a wide range of terms and conditions. Some of the Company’s
leased assets are pledged as security for the related lease obligations.
Tsumeb has a long-term lease agreement for the supply of oxygen. The original term of the lease was 15
years extending to 2025, payable on a monthly basis. The lease payments were discounted at a rate of
12.5%.
FOURTH QUARTER 2020 I 126
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Right-of-use assets recognized in property, plant and equipment (note 9) as at December 31, 2020 and
2019 were as follows:
Buildings
Machinery and Equipment
December 31,
2020
December 31,
2019
2,431
14,287
16,718
2,868
14,245
17,113
Additions to the right-of-use assets during the year ended December 31, 2020 were $5.3 million (2019 –
$1.3 million)
Lease obligations related to right-of-use assets recognized in other long-term liabilities (note 15) as at
December 31, 2020 and 2019 were as follows:
Current portion of long-term liabilities
Other long-term liabilities
December 31,
2020
4,137
12,946
December 31,
2019
3,892
14,457
17,083
18,349
Expenses related to leases recognized in the consolidated statements of earnings (loss) for the year ended
December 31, 2020 and 2019 were as follows:
Depreciation charge of right-of-use assets
Buildings
Machinery and Equipment
Finance charges (note 19)
Expense relating to short-term leases
Expense relating to leases of low-value assets
that are not short-term leases
Expense relating to variable lease payments
not included in lease obligations
2020
2019
848
3,593
4,441
1,227
572
64
184
686
2,514
3,200
1,404
905
34
146
Total cash outflows for leases for the year ended December 31, 2020 were $5.3 million (2019 – $4.9 million).
17. SHARE-BASED COMPENSATION PLANS
RSU plan
DPM has an RSU Plan for directors, certain employees and eligible contractors of DPM and its wholly-owned
subsidiaries in consideration of past services to the Company. The Board of Directors administers this plan
and determines the grants.
(a) Non-performance based RSUs
These RSUs vest equally over a three-year period and are paid in cash based on the Market Price of DPM’s
publicly traded common shares on the entitlement date or dates, which should not be later than December
31 of the year that is three years after the year of service for which the RSUs are granted, as determined by
the Board of Directors in its sole discretion.
127 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
The following is a summary of the RSUs granted for the years indicated:
Number of RSUs
Amount
Balance as at January 1, 2019
RSUs granted
RSUs redeemed
RSUs forfeited
Mark-to-market adjustments
Balance as at December 31, 2019
RSUs granted
RSUs redeemed
RSUs forfeited
Mark-to-market adjustments
3,210,106
1,292,573
4,987
5,147
(1,577,586) (5,267)
(227,466) (341)
2,647
7,173
5,424
(1,300,789) (4,095)
(232,044) (393)
1,664
2,697,627
1,115,800
Balance as at December 31, 2020
2,280,594
9,773
As at December 31, 2020, there was $2.9 million (December 31, 2019 – $2.8 million) of RSU expenses
remaining to be charged to net earnings in future periods relating to the RSU plan.
(b) PSUs
Under the RSU Plan, the Board of Directors may, at its sole discretion, (i) grant RSUs with a performance-
based component, referred to as PSUs, subject to performance conditions to be achieved by the Company,
and (ii) determine the entitlement date or dates of such PSUs. These PSUs vest after three years and are
paid in cash based on the Market Price of DPM’s publicly traded common shares, subject to established
performance criteria, on the entitlement date or dates, which shall not be later than December 31 of the year
that is three years after the year of service for which the PSUs were granted, as determined by the Board of
Directors in its sole discretion.
The following is a summary of the PSUs granted for the years indicated:
Number of PSUs
Amount
Balance as at January 1, 2019
PSUs granted
PSUs redeemed
PSUs forfeited
Mark-to-market adjustments
Balance as at December 31, 2019
PSUs granted
PSUs redeemed
PSUs forfeited
Mark-to-market adjustments
1,970,450
455,073
4,872
2,218
(751,700) (4,200)
(133,600) (159)
2,619
5,350
2,023
(588,850) (2,842)
(70,737) (191)
2,872
1,540,223
371,454
Balance as at December 31, 2020
1,252,090
7,212
As at December 31, 2020, there was $1.6 million (December 31, 2019 – $1.6 million) of expenses remaining
to be charged to net earnings in future periods relating to these PSUs.
FOURTH QUARTER 2020 I 128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
DSU plans
DPM has a DSU Plan for directors and certain employees.
Under the employee DSU Plan, grants to employees of the Company are determined by the Board of
Directors, or the compensation committee, in lieu of a cash bonus. The DSUs are redeemable in cash
based on the Market Price of DPM’s publicly traded common shares on the date the employee ceases to
be employed by DPM or a subsidiary thereof.
Under the director DSU Plan, directors may receive a portion of their annual compensation in the form of
DSUs. The DSUs are redeemable in cash based on the Market Price of DPM’s publicly traded common
shares at any time before the end of the year following the year in which the director ceases to be a director
of DPM or a subsidiary thereof.
The following is a continuity of the DSUs for the years indicated:
Balance as at January 1, 2019
DSUs granted
Mark-to-market adjustments
Balance as at December 31, 2019
DSUs granted
Mark-to-market adjustments
Number of DSUs
Amount
1,537,994
178,622
1,716,616
152,642
4,013
650
2,830
7,493
844
5,141
Balance as at December 31, 2020
1,869,258
13,478
DPM stock option plan
The Company has established an incentive stock option plan for the directors, selected employees and
consultants. Pursuant to the plan, the exercise price of the option cannot be less than the market price of
DPM’s common shares on the trading date preceding the effective date of the option grant. The aggregate
number of shares that can be issued from treasury under this plan is 12,500,000. Options granted vest
equally over a three-year period and expire five years from the date of grant.
During the year ended December 31, 2020, the Company granted 680,860 (2019 – 701,683) stock options
with a fair value of $1.0 million (2019 – $1.2 million). The estimated value of the options granted will be
recognized as an expense in the consolidated statements of earnings (loss) and an addition to contributed
surplus in the consolidated statements of changes in shareholders’ equity over the vesting period. The
Company recorded stock option expenses of $0.9 million (2019 – $1.0 million) for the year ended December
31, 2020 under this stock option plan.
As at December 31, 2020, there was $0.7 million (December 31, 2019 – $0.8 million) of expenses remaining
to be charged to net earnings in future periods relating to these options.
The fair value of options granted was estimated using the Black-Scholes option pricing model. The expected
volatility is estimated based on the historic average share price volatility. The inputs used in the
measurement of the fair values at the time the options were granted were as follows:
Five year risk free interest rate
Expected life in years
Expected volatility
Dividends per share
129 I DUNDEE PRECIOUS METALS INC.
2020
0.4% - 0.6%
4.75
57.6% - 60.5%
$0.08
2019
1.4% - 1.8%
4.75
61.3% - 62.1%
-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
The following is a stock option continuity for the years indicated:
Balance as at January 1, 2019
Options granted
Options exercised
Options forfeited
Options expired
Balance as at December 31, 2019
Options granted
Options exercised
Options forfeited
Options expired
Balance as at December 31, 2020
Number of
options
5,460,733
701,683
(2,860,214)
(26,700)
(129,937)
3,145,565
680,860
(838,072)
(63,266)
(9,000)
2,916,087
Weighted average
exercise price per share
(Cdn$)
3.03
4.41
3.24
3.71
3.52
3.13
4.56
2.85
4.24
2.97
3.52
The following lists the options outstanding and exercisable as at December 31, 2020:
Options outstanding
Options exercisable
Range of
exercise prices
per share
(Cdn$)
2.21 - 3.28
3.39 - 4.44
4.45 - 8.50
2.21 - 8.50
Number of
options
outstanding
1,672,004
1,201,259
42,824
2,916,087
Weighted
average
remaining
years
1.23
3.72
4.21
2.30
Weighted
average
exercise
price
per share
(Cdn$)
2.79
4.42
6.35
3.52
Weighted
average
exercise
price
per share
(Cdn$)
2.72
4.42
4.46
2.90
Number of
options
exercisable
1,442,715
164,199
6,011
1,612,925
18. EXPENSES BY NATURE
The operating costs, including cost of sales, general and administrative expenses, and exploration and
evaluation expenses, as reported in the consolidated statements of earnings (loss), have been regrouped
by the nature of the expenses as follows:
Raw materials, consumables and spare parts
Staff costs
Service costs
Share-based compensation expense
Royalties
Drilling, assaying and other exploration and evaluation expenses
Insurance
Net (gains) losses on foreign exchange option contracts (note 7(d))
Depletion of mine properties (note 8)
Depreciation of property, plant and equipment (note 9)
Amortization of intangible assets (note 10)
Other costs
Total operating costs
2020
82,554
75,736
63,426
18,184
15,856
13,057
3,834
3,486
37,704
59,973
2,534
4,189
2019
77,881
77,066
59,109
16,494
8,036
8,092
2,960
(704)
21,697
56,063
3,192
7,194
380,533
337,080
FOURTH QUARTER 2020 I 130
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
19. FINANCE COST
Borrowing costs (a)
Deemed interest on prepaid forward gold sales arrangement (a) (note 13)
Finance charges under leases (note 16)
Accretion expense related to rehabilitation provisions (note 14)
2020
2,306
1,293
1,227
2,196
7,022
2019
4,727
1,763
1,404
2,270
10,164
(a) Borrowing costs and deemed interest on prepaid forward gold sales arrangement for the year ended
December 31, 2019 were net of amounts capitalized to mine properties (note 8).
20. OTHER (INCOME) EXPENSE
Net gains on Sabina special warrants (note 7(a))
Net foreign exchange losses
Interest income
Other expense
21.
INCOME TAXES
2020
2019
(5,640) (3,871)
4,988
(194) (271)
69
4,376
967
(491)
915
The major components of income tax expense recognized in net earnings (loss) from continuing operations
are as follows:
Current income tax expense on earnings
Deferred income tax expense (recovery) related to
origination and reversal of temporary differences
Income tax expense
2020
23,353
(4,462)
18,891
2019
12,060
896
12,956
The reconciliation of the combined Canadian federal and provincial government statutory income tax rates
to the effective tax rate is as follows:
Earnings (loss) before income taxes
Combined Canadian federal and provincial
statutory income tax rates
Expected income tax expense (recovery)
Lower rates on foreign (earnings) losses
Unrecognized tax benefit relating to losses
Non-taxable portion of capital (gains) losses
Non-deductible share-based compensation expense
Other, net
Income tax expense
131 I DUNDEE PRECIOUS METALS INC.
2020
217,923
2019
(53,582)
26.5%
57,750
(39,256)
2,906
(3,663)
246
908
18,891
26.5%
(14,199)
15,022
11,677
89
280
87
12,956
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Income taxes recognized in other comprehensive income (loss) for the year ended December 31, 2020
was $5.0 million (2019 – $0.03 million) relating to deferred income taxes on gains on publicly traded
securities and cash flow hedges.
The significant components of the Company’s deferred income taxes as at December 31, 2020 and 2019
are as follows:
December 31,
2020
December 31,
2019
Deferred income tax assets
Non-capital losses
Capital losses
Cumulative Canadian exploration expenses
Depreciable property, plant and equipment
Financing costs
Share-based compensation expense
Rehabilitation provisions
Other
Gross deferred income tax assets
Unrecognized tax benefit relating to tax losses
Total deferred income tax assets
Deferred income tax liabilities
Depreciable property, plant and equipment
Investments
Other
Total deferred income tax liabilities
Net deferred income tax assets
64,117
3,313
2,555
9,215
3,193
5,035
2,861
1,363
91,652
60,475
3,313
2,311
8,828
4,285
3,100
1,726
1,868
85,906
(74,156) (76,101)
9,805
17,496
0
315
5,982
1,729
8,026
9,470
1,243
402
249
1,894
7,911
As at December 31, 2020, the Company had $9.5 million (December 31, 2019 – $9.0 million) of net deferred
income tax assets and $nil (December 31, 2019 – $1.1 million) of net deferred income tax liabilities after
offsetting deferred income tax assets and liabilities incurred by the same legal entities in the same
jurisdictions in its consolidated statements of financial position.
Of the total deferred income tax assets recognized in 2020, $16.3 million (2019 – $8.2 million) is expected
to be recovered after more than 12 months. Of the total deferred income tax liabilities recognized in 2020,
$7.5 million (2019 – $1.7 million) is expected to be payable after more than 12 months.
As at December 31, 2020, the Company had Canadian non-capital losses of $199.6 million (December 31,
2019 – $205.3 million) expiring between 2025 and 2040 and Serbian non-capital losses of $26.7 million
(December 31, 2019 – $18.1 million) expiring between 2021 and 2025 for which no deferred income tax
assets had been recognized.
The Company is subject to assessments by various taxation authorities which may interpret tax legislation
and tax filing positions differently than the Company. Such differences are provided for when it is probable
that the Company’s filing position will not be upheld and the amount of the tax exposure can be reasonably
estimated. As at December 31, 2020 and 2019, no provisions have been made in the consolidated financial
statements for potential tax liabilities relating to such assessments and interpretations.
FOURTH QUARTER 2020 I 132
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
22. EARNINGS (LOSS) PER SHARE
Net earnings (loss) attributable to common shareholders
Net earnings (loss) from continuing operations
Net loss from discontinued operations
Basic weighted average number of common shares
Effect of stock options
199,074 (66,621)
(3,072) (4,281)
181,054,158
1,319,213
179,132,413
995,162
Diluted weighted average number of common shares
182,373,371
180,127,575
2020
2019
Basic earnings (loss) per share
From continuing operations
From discontinued operations
Diluted earnings (loss) per share
From continuing operations
From discontinued operations
23. RELATED PARTY TRANSACTIONS
Key management remuneration
1.10
(0.02)
1.09
(0.02)
(0.38)
(0.02)
(0.38)
(0.02)
The Company’s related parties include its key management. Key management includes directors (executive
and non-executive), the Chief Executive Officer (“CEO”) and the Executive and Senior Vice Presidents
reporting directly to the CEO.
The remuneration of the key management of the Company recognized in the consolidated statements of
earnings (loss) for the years ended December 31, 2020 and 2019 was as follows:
Salaries, management bonuses and director fees
Other benefits
Share-based compensation
Total remuneration
2020
3,229
222
8,703
12,154
2019
5,008
319
9,043
14,370
Included in net loss from discontinued operations for the year ended December 31, 2020 were MineRP
stock options of $0.4 million granted to the Company’s former CEO.
133 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
24. SUPPLEMENTARY CASH FLOW INFORMATION
(a) Changes in non-cash working capital
Increase in accounts receivable and other assets
(Increase) decrease in inventories
Decrease in accounts payable and accrued liabilities
Increase (decrease) in other liabilities
(b) Other items not affecting cash
Net finance cost
Share-based compensation expense
Net gains on Sabina special warrants
Net losses on commodity swap contracts
Net (gains) losses on foreign exchange option contracts
Other, net
2020
(49,867)
(3,134)
(2,444)
3,805
(51,640)
2019
(6,278)
566
(9,758)
(265)
(15,735)
2020
2019
6,828
929
9,894
1,063
(5,640) (3,871)
2,011
(704)
(1,714) (2,351)
6,042
10,533
3,486
14,422
25. SUPPLEMENTARY SHAREHOLDERS’ EQUITY INFORMATION
(a) Dividend
On February 13, 2020, May 6, 2020, July 30, 2020 and November 12, 2020, the Company declared a
quarterly dividend of $0.02 per common share to shareholders of record on March 31, 2020, June 30, 2020,
September 30, 2020 and December 31, 2020, respectively. On December 8, 2020, the Company
announced a 50% increase to its quarterly dividend which commenced with its fourth quarter dividend
previously announced on November 12, 2020, resulting in aggregate dividends of $0.09 per common share
being declared in 2020 and total dividend distributions of $16.3 million recognized against its retained
earnings in the consolidated statements of changes in shareholders’ equity for the year ended December
31, 2020. The Company paid $10.9 million of these dividends which was included in cash used in financing
activities in the consolidated statements of cash flows for the year ended December 31, 2020 and
recognized a dividend payable of $5.4 million in accounts payable and accrued liabilities in the consolidated
statements of financial position as at December 31, 2020.
On February 11, 2020, the Company declared a quarterly dividend of $0.03 per common share payable on
April 15, 2021 to shareholders of record on March 31, 2021.
FOURTH QUARTER 2020 I 134
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
(b) Changes in accumulated other comprehensive income (loss)
Cash flow hedge reserves
Foreign exchange option contracts
Balance at beginning of year
Unrealized gains (losses), net of income taxes
Realized (gains) losses transferred to cost of sales,
net of income taxes
Realized losses transferred to Mine Properties,
net of income taxes
Balance at end of year
Commodity swap contracts
Balance at beginning of year
Unrealized gains, net of income taxes
Realized gains transferred to revenue, net of income taxes
Balance at end of year
Deferred cost of hedging reserves
Foreign exchange option contracts
Balance at beginning of year
Deferred cost of hedging, net of income taxes
Cost of hedging transferred to Mine Properties,
net of income taxes
Balance at end of year
Commodity swap contracts
Balance at beginning of year
Deferred cost of hedging, net of income taxes
Cost of hedging transferred to revenue, net of income taxes
Balance at end of year
Unrealized gains (losses) on publicly traded securities
Balance at beginning of year
Unrealized gains, net of income taxes
Balance at end of year
Accumulated currency translation adjustments
Balance at beginning of year
Currency translation adjustments
Reclassified as held for sale
Balance at end of year
Accumulated currency translation adjustments
related to assets and liabilities held for sale
Accumulated other comprehensive income
2020
2019
1,972
(114)
3,486
-
5,344
-
78
-
78
2,007
(947)
-
1,060
-
(18)
-
(18)
8,378
31,451
39,829
(2,249)
(2,373)
2,176
(2,446)
(2,176)
41,671
887
1,656
(704)
133
1,972
275
-
(275)
-
(1,484)
3,291
200
2,007
(276)
-
276
-
(8,193)
16,571
8,378
(2,861)
612
-
(2,249)
-
10,108
135 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
26. COMMITMENTS AND CONTINGENCIES
(a) Commitments
The Company had the following minimum contractual commitments as at December 31, 2020:
Capital commitments
Purchase commitments
Total commitments
up to 1 year
1 - 5 years
over 5 years
4,923
13,655
18,578
-
16,924
16,924
-
1,176
1,176
Total
4,923
31,755
36,678
As at December 31, 2020, Tsumeb had approximately $76.9 million (December 31, 2019 – $62.9 million)
of recoverable third party in-process secondary materials, which it is obligated to process and return,
generally in the form of blister, to IXM, pursuant to a tolling agreement (the “Tolling Agreement”).
In December 2019, the Company and IXM agreed to amend the existing Tolling Agreement to provide for
lower stockpile interest on excess secondary materials, the establishment of the December 31, 2019 excess
secondary balances as the new targeted levels above which secondary materials would be required to be
purchased by the Company, an extension of the date by which the Company must eliminate excess
secondary materials to March 31, 2021, and an extension of the Tolling Agreement by one year to
December 31, 2023. During the year ended December 31, 2020, the Company purchased $2.5 million of
secondary materials, of which $1.0 million was included in inventories and $1.5 million was included in
other long-term assets in the consolidated statements of financial position. As at December 31, 2020, the
value of excess secondary materials was approximately $45.4 million, which was approximately $29.2
million above the targeted levels under the Tolling Agreement. As at December 31, 2020, IXM has agreed
to suspend the quarterly requirement to purchase secondary materials above targeted levels until April 30,
2021.
(b) Contingencies
The Company is involved in legal proceedings, from time to time, arising in the ordinary course of its
business. It is not expected that any material liability will arise from current legal proceedings or have a
material adverse effect on the Company’s future business, operations or financial condition.
27. FINANCIAL RISK MANAGEMENT
The Company’s principal financial liabilities comprise accounts payable and accrued liabilities and long-
term debt. The main purpose of these financial instruments is to assist with the management of the
Company’s short term and long term cash flow requirements. The Company has various financial assets,
such as cash and accounts receivable, which arise directly from its operations.
The main risks that could adversely affect the Company’s financial assets, liabilities or future cash flows
are market risk (which includes commodity price risk, interest rate risk and foreign currency risk), liquidity
risk and credit risk. Management reviews each of these risks and establishes policies for managing them
as summarized below.
The following discussion also includes a sensitivity analysis that is intended to illustrate the sensitivity to
changes in market variables on the Company’s financial instruments and the impact on net earnings (loss)
and shareholders’ equity, where applicable. Financial instruments affected by market risk include cash,
accounts receivable, investments at fair value, commodity swap and option contracts, foreign exchange
forward and option contracts, long-term debt, accounts payable and accrued liabilities. The sensitivity has
been prepared using financial assets and liabilities held as at the reporting dates.
FOURTH QUARTER 2020 I 136
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
The Company has established financial risk management policies to identify and analyze the risks of the
Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Financial
risk management policies and systems are reviewed regularly to reflect changes in market conditions and
the Company’s activities. The Company, through its training and management standards and procedures,
aims to develop a disciplined and constructive control environment in which all employees involved in
financial risk management activities understand their roles and obligations.
Market risk
Market risk is the risk that the future cash flows or the fair value of a financial instrument will fluctuate
because of changes in market prices. Market risk is comprised of three types of risks: commodity price risk,
interest rate risk and foreign currency risk. The impact of each of these components is discussed below.
Commodity price risk
The Company is subject to price risk associated with fluctuations in the market prices for metals. The
Company sells its products at prices that are effectively determined by reference to the traded prices on
the London Metal Exchange and London Bullion Market. The prices of gold and copper are major factors
influencing the Company’s business, results of operations and financial condition. The Company regularly
enters into commodity swap contracts to reduce the price exposure associated with the time lag between
the provisional and final determination of its concentrate sales. In addition, the Company periodically enters
into commodity swap contracts to reduce the price exposure associated with projected payable copper
production. The Company also selectively enters into commodity swap contracts to reduce its price
exposure applicable to projected payable gold contained in Chelopech’s pyrite concentrate production.
The Company’s risk management policy, which was approved by the Board of Directors, requires
provisional concentrate sales to be fully hedged and permits hedging up to 90%, 85% and 80% of its
projected payable copper production in the subsequent 1, 2, and 3 year reporting periods, respectively.
As at December 31, 2020, the impact of a 5% increase or decrease in metal prices impacting the Company’s
accounts receivable and outstanding commodity swap contracts, with all other variables held constant,
would decrease or increase earnings before income taxes by $3.8 million (2019 – $1.7 million) and would
decrease or increase equity by $4.9 million (2019 – $nil).
The following table demonstrates the effect on 2020 and 2019 earnings before income taxes of a 5%
increase in commodity prices on its sales, excluding the impact of any hedges and with all other variables
held constant. The impact on equity is the same as the impact on net earnings (loss).
Effect of a 5% increase in metal prices on earnings before income taxes
Gold
Copper
Total increase on earnings before income taxes
2020
23,146
4,580
27,726
2019
13,945
4,646
18,591
The effect of a 5% decrease in metal prices, excluding the impact of any hedges and with all other variables
held constant, would decrease earnings before income taxes by an equivalent amount.
Interest rate risk
Interest rate risk is the risk that the future cash flows or fair value of a financial instrument will fluctuate
because of changes in market interest rates. The Company’s exposure to the risk of changes in market
interest rates relates primarily to the Company’s cash and floating rate denominated debt. As at December
31, 2020, the Company had no debt. For the year ended December 31, 2020, a 100 basis point increase
or decrease in interest rates across the yield curve, with all other variables held constant, would increase
or decrease earnings before income taxes by $1.5 million (2019 – $0.1 million). The impact on equity is the
same as the impact on net earnings (loss).
137 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Foreign currency risk
The Company’s foreign currency exposures arise primarily from a significant portion of its operating and
capital costs being denominated in currencies other than the U.S. dollar, the Company’s functional
currency. The Company periodically undertakes to purchase, in advance, a portion of its foreign
denominated cash flow requirements on a spot or forward basis to reduce this exposure. The Company
also enters into foreign exchange forward and option contracts in order to reduce the foreign exchange
exposure associated with projected operating expenses and capital expenditures denominated in foreign
currencies.
The Company’s risk management policy, which was approved by the Board of Directors, permits up to 85%,
80% and 75% of its projected operating expenses denominated in foreign currency to be hedged in the
subsequent 1, 2, and 3 year reporting periods, respectively. The policy also permits projected capital
expenditures denominated in foreign currency to be fully hedged.
For the year ended December 31, 2020, a 5% appreciation of the U.S. dollar relative to the ZAR on the
Company’s outstanding foreign exchange option contracts, with all other variables held constant, would
decrease equity by $6.9 million (2019 – $5.0 million). The effect of a 5% depreciation of the U.S. dollar
relative to ZAR on the Company’s outstanding foreign exchange option contracts, with all other variables
held constant, would be to increase equity by equivalent amounts.
The following table demonstrates the effect on 2020 and 2019 earnings before income taxes and equity of
a 5% appreciation of the U.S. dollar relative to the Company’s key foreign currencies on the Company’s
outstanding financial assets and liabilities denominated in foreign currencies, excluding the impact of any
hedges and with all other variables held constant.
Effect of a 5% appreciation of the U.S. dollar on
Earnings before income taxes
Equity
Euro
Namibian Dollar
Canadian Dollar
Total increase (decrease)
2020
2,120
(74)
(771)
1,275
2019
1,122
414
613
2,149
2020
1,919
(74)
3,952
5,797
2019
997
414
(1,905)
(494)
The effect of a 5% depreciation of the U.S. dollar relative to these foreign currencies on the Company’s
outstanding foreign denominated financial assets and liabilities, excluding the impact of any hedges and
with all other variables held constant, would be to decrease or increase earnings before income taxes and
equity by equivalent amounts.
Credit risk
The exposure to credit risk arises through the potential failure of a customer or another third party to meet
its contractual obligations to the Company. During 2020, the Company had contracts with 18 customers in
connection with its mining and smelting operations, one of whom accounted for approximately 57% (2019
– 60%) of the Company’s revenue. Under the terms of the Company’s concentrate sales contracts, the
purchasers make an initial advance payment equal to 70% to 95% of the provisional value of each lot at the
time title transfers. This serves to mitigate a portion of the Company’s credit risk.
With respect to credit risk arising from the other financial assets of the Company, which comprise cash,
equity investments and derivative financial assets, the Company’s maximum exposure is equal to the
carrying amount of these instruments. The Company limits its counterparty credit risk on these assets by
dealing with highly rated counterparties, issuers that are subject to minimum credit ratings, and/or maximum
prescribed exposures.
FOURTH QUARTER 2020 I 138
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Liquidity risk
The Company relies on the cash flows generated from its operations, including provisional payments
received from its customers, retained cash balances, available lines of credit under its RCF and its ability to
raise debt and equity from the capital markets to fund its operating, investment and liquidity needs. The
cyclical nature of the Company’s businesses and the volatility of capital markets are such that conditions
could change dramatically, affecting the Company’s cash flow generating capability, its ability to maintain, or
draw upon, its RCF or the existing terms under its concentrate sales and/or smelting agreements, as well as
its liquidity, cost of capital and its ability to access new capital, which could adversely affect the Company’s
earnings and cash flows and, in turn, could affect total shareholder returns. To reduce these risks, the
Company: (i) prepares regular cash flow forecasts to monitor its capital requirements, available liquidity and
compliance to debt covenants; (ii) strives to maintain a prudent capital structure that is comprised primarily
of equity financing and long-term debt, currently in the form of a committed RCF; and (iii) targets a minimum
level of liquidity comprised of surplus cash balances and/or undrawn committed lines of credit to avoid having
to raise additional capital at times when the costs or terms would be regarded as unfavourable.
The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual
undiscounted payments.
Accounts payable and accrued liabilities
Commodity swap contracts
Lease obligations
Other obligations
Accounts payable and accrued liabilities
Commodity swap contracts
Long-term debt
Lease obligations
Other obligations
Capital management
As at December 31, 2020
up to 1 year 1 - 5 years over 5 years
66,465
5,769
5,350
648
78,232
-
-
14,000
510
14,510
-
-
871
58
929
Total
66,465
5,769
20,221
1,216
93,671
As at December 31, 2019
up to 1 year
1 - 5 years
over 5 years
58,320
1,416
-
5,371
3,241
68,348
-
-
10,000
15,240
548
25,788
-
-
-
2,111
62
2,173
Total
58,320
1,416
10,000
22,722
3,851
96,309
The Company’s objective for capital management is to: (i) maintain sufficient levels of liquidity to fund and
support its exploration and evaluation, development and operating activities; (ii) maintain a strong financial
position to ensure it has ready access to debt and equity markets to supplement free cash flow being
invested in its growth projects; and (iii) comply with all financial covenants set out in its credit agreements
and guarantees. See note 12 for discussion on the Company’s compliance with these requirements. The
Company monitors its financial position and the potential impact of adverse market conditions on an
ongoing basis. The Company manages its capital structure and makes adjustments to it based on prevailing
market conditions and according to its business plan. The Company's long term funding strategy is to
maintain a capital structure comprised primarily of equity sourced from equity offerings and net earnings
generated from its businesses and, as a result, the targeted level of debt making up the Company’s capital
base is relatively low. Given the long term nature of the assets being funded and the U.S. dollar
denominated revenue stream generated therefrom, the Company’s general strategy around any debt
financing is to raise long-term U.S. dollar denominated debt to supplement these equity financings.
139 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Overall financial leverage is monitored based upon a number of non-financial and financial factors, including
a number of credit related ratios contained in DPM’s loan agreements and net debt (defined as total debt
less cash and cash equivalents) as a percentage of total capital (defined as total equity plus net debt). As
of December 31, 2020, the Company was in compliance with all loan covenants and its net debt as a
percentage of total capital was negative 23% (December 31, 2019 – negative 2%).
Financial Risk Management in response to Coronavirus (“COVID-19”)
In March 2020, the World Health Organization classified COVID-19 as a worldwide pandemic and
governments across the globe undertook extensive measures to combat the spread of this virus. To date,
as a result of the proactive actions being taken within the regions in which we operate and by personnel at
each of our sites, the Company has not experienced any material disruptions to its operations as a result
of COVID-19. The Company’s Chelopech and Ada Tepe mines in Bulgaria continue to operate at full
capacity and have not experienced any disruptions to their operations.
In April 2020, the Tsumeb smelter in Namibia curtailed its operations by shutting down ancillary plants for
30 days in response to a government directive to the natural resources industry aimed at limiting staffing
levels. Full operations resumed in May 2020 with ongoing management of the number of employees and
contractors working at site and continued observance of the COVID-19 controls that have been established
across all sites.
The Company continues to closely assess and monitor the COVID-19 situation, particularly as governments
in various jurisdictions maintain and/or implement new measures to manage a resurgence in the number
of cases and the impact on their medical systems and economies. The Company is continuing with a
number of measures to mitigate the associated risks, including procedures and contingency plans that were
established at each operating location, which are directed at safeguarding employees, managing potential
supply chain disruptions, including complex concentrate feed for the smelter, and maintaining production
at each of its operations. Management of the situation is being overseen by an experienced cross-functional
team that includes members of senior management and leaders at each of the Company’s operations.
The Company has experienced a small number of positive cases within its workforce. These positive cases
are being effectively managed with testing, contact tracing and isolation measures and, to date, the vast
majority of employees have recovered with the remaining employees isolating offsite in accordance with
the Company’s procedures. Given the relatively low number of COVID-19 cases and the management
protocols in effect, the impact on the Company’s operations has been minimal.
At present, there do not appear to be any imminent COVID-19 related circumstances that are expected to
disrupt the Company’s operations, however, given the highly uncertain and evolving nature of this situation,
the Company is not able to reliably estimate the likelihood, timing, duration, severity and scope of this
pandemic and the potential impact it could have on the Company’s operating and financial results.
FOURTH QUARTER 2020 I 140
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
28. OPERATING SEGMENT INFORMATION
Operating segments are components of an entity whose operating results are regularly reviewed by the
chief operating decision maker in deciding how to allocate resources and in assessing performance and for
which separate financial information is available.
The Company has three reportable operating segments – Chelopech and Ada Tepe in Bulgaria and
Tsumeb in Namibia. The nature of their operations, products and services are described in note 1,
Corporate Information. These segments are organized predominantly by the products and services
provided to customers and geography of the businesses. The Corporate and Other segment includes
corporate, exploration and evaluation and other income and cost items that do not pertain directly to an
operating segment. There are no significant inter-segment transactions that have not been eliminated on
consolidation.
The operating results of MineRP have been presented as a discontinued operation and the assets and
liabilities of MineRP have been presented as held for sale as a result of the MineRP Disposition (note 3).
The accounting policies of the segments are the same as those described in note 2.2, Significant
Accounting Policies. Segment performance is evaluated based on several operating and financial
measures, including net earnings (loss), which is measured consistently with net earnings (loss) in the
consolidated financial statements.
The following table summarizes the net earnings (loss) and other relevant information by segment for the
years ended December 31, 2020 and 2019:
Continuing operations
Revenue (a)
Costs and expenses
Cost of sales
General and administrative expenses
Corporate social responsibility expenses
Exploration and evaluation expenses
Finance cost
Other (income) expense
Earnings (loss) before income taxes
Income tax expense (recovery)
Net earnings (loss) from
continuing operatons
Other disclosures
Depreciation and amortization
Capital expenditures (b)
Year ended December 31, 2020
Chelopech Ada Tepe
Tsumeb
Corporate
& Other
Total
264,855
197,573
147,130
-
609,558
113,481
-
-
3,664
714
238
118,097
146,758
13,929
92,450
-
-
2,146
1,617
1,123
97,336
124,926
-
-
-
2,899
462
128,287
-
30,604
4,571
13,262
1,792
(2,314)
47,915
330,857
30,604
4,571
19,072
7,022
(491)
391,635
100,237
9,438
18,843
-
(47,915)
(4,476)
217,923
18,891
132,829
90,799
18,843
(43,439)
199,032
29,753
21,058
54,351
15,523
15,063
9,531
1,044
3,185
100,211
49,297
141 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Continuing operations
Revenue (a)
Costs and expenses
Cost of sales
General and administrative expenses
Corporate social responsibility expenses
Exploration and evaluation expenses
Impairment charges (note 4)
Finance cost
Other (income) expense
Earnings (loss) before income taxes
Income tax expense
Net earnings (loss) from
continuing operatons
Other disclosures
Depreciation and amortization
Capital expenditures (b)
Year ended December 31, 2019
Chelopech
Ada Tepe
Tsumeb
Corporate
& Other
Total
193,989
69,710
140,693
-
404,392
112,367
-
-
2,453
-
812
(1,105)
114,527
79,462
7,893
41,515
-
-
1,169
-
2,054
(362)
44,376
140,651
-
-
-
107,000
3,194
3,959
254,804
-
28,191
2,815
10,734
-
4,104
(1,577)
44,267
294,533
28,191
2,815
14,356
107,000
10,164
915
457,974
25,334
3,167
(114,111)
-
(44,267)
1,896
(53,582)
12,956
71,569
22,167
(114,111)
(46,163)
(66,538)
30,657
20,003
21,909
36,416
27,286
16,142
1,100
1,165
80,952
73,726
(a) Revenues from Chelopech and Ada Tepe were generated from the sale of concentrate, Tsumeb’s
revenues were generated from processing concentrate and acid sales. For the year ended December
31, 2020, $222.0 million or 48% (2019 – $124.6 million or 47%) of revenues from the sale of
concentrate and $125.2 million or 85% (2019 – $118.5 million or 84%) of revenues from processing
concentrate were derived from a single external customer. Revenues from the sale of concentrate of
$123.7 million or 27% (2019 – $46.2 million or 24%) were also derived from another single external
customer.
(b) Capital expenditures represent cash outlays and non-cash accruals to mine properties (note 8),
property, plant and equipment (note 9) and intangible assets (note 10).
The following table summarizes the Company’s revenue recognized for the years ended December 31,
2020 and 2019:
Revenue recognized at a point in time from:
Sale of concentrate (a)
Processing concentrate (b)
Acid sales
Mark-to-market price adjustments
on provisionally priced sales
Total revenue
2020
2019
446,382
125,201
21,929
16,046
609,558
261,542
118,467
22,226
2,157
404,392
(a) For the year ended December 31, 2020, the Company’s revenue from the sale of concentrate included
a $3.9 million (2019 – $2.3 million) adjustment in connection with the final determination and settlement
of prior year provisional sales and net mark-to-market losses of $11.1 million (2019 – $2.7 million) on
commodity swap contracts entered to hedge provisionally priced sales.
FOURTH QUARTER 2020 I 142
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
(b) For the year ended December 31, 2020, the Company’s revenue from processing concentrate
included a metal recovery of $1.5 million (2019 – $0.9 million).
The following table summarizes the total assets and total liabilities by segment as at December 31, 2020
and 2019:
Total current assets
Total non-current assets
Assets held for sale
Total assets
Liabilities
Liabilities held for sale
Chelopech
Ada Tepe
Tsumeb
98,584
175,518
63,651
256,771
46,969
111,750
274,102
320,422
158,719
52,830
27,776
37,660
Total liabilities
52,830
27,776
37,660
Corporate
& Other
79,115
111,789
30,713
221,617
45,307
6,003
51,310
Total
288,319
655,828
30,713
974,860
163,573
6,003
169,576
Total current assets
Total non-current assets
Total assets
Total liabilities
Chelopech
36,525
177,494
214,019
40,566
Ada Tepe
25,607
291,997
317,604
64,083
Tsumeb
27,258
118,671
145,929
43,549
As at December 31, 2019
Corporate
& Other
15,636
91,522
105,026
679,684
Total
107,158
43,618
784,710
191,816
DPM is domiciled in Canada. Revenues by geographic location are based on the location in which the
revenues originate. Revenues by geographic location for the years ended December 31, 2020 and 2019
are summarized below:
Revenue
Year ended December 31, 2020
Canada
-
Europe
462,428
Africa
Total
147,130
609,558
Canada
Europe
Africa
Total
Year ended December 31, 2019
Revenue
-
263,699
140,693
404,392
143 I DUNDEE PRECIOUS METALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
(in thousands of U.S. dollars, unless otherwise indicated)
Assets by geographic location as at December 31, 2020 and 2019 are summarized below:
Total current assets
Financial assets
Deferred income tax assets
Other non-current assets
Assets held for sale
Total assets
Total current assets
Financial assets
Deferred income tax assets
Other non-current assets
Total assets
Canada
74,079
106,595
-
4,203
Europe
167,244
-
9,470
423,811
184,877
600,525
Africa
46,996
1,509
-
110,240
30,713
189,458
Total
288,319
108,104
9,470
538,254
30,713
974,860
As at December 31, 2019
Canada
Europe
Africa
Total
7,839
59,362
-
2,477
69,678
65,613
-
9,048
461,321
535,982
31,574
5,513
-
141,963
179,050
105,026
64,875
9,048
605,761
784,710
FOURTH QUARTER 2020 I 144
CORPORATE
INFORMATION
Directors
Officers
David Rae
President and Chief Executive Officer
Mark Crawley
Vice President, Commercial
Hume Kyle
Executive Vice President and
Chief Financial Officer
Iliya Garkov
Vice President and General Manager,
Bulgaria
Michael Dorfman
Executive Vice President,
Corporate Development
Nikolay Hristov
Vice President,
Sustainability and External Relations
Kelly Stark-Anderson
Executive Vice President, Corporate
Affairs, General Counsel and Corporate
Secretary
Zebra Kasete
Vice President and Managing Director,
Tsumeb
Mirco Nolte
Vice President, Operational Excellence
Matthieu Risgallah
Vice President, Technology
Alex Wilson
Vice President, Human Resources
Sylvia Chen
Global Controller
Walter Farag
Treasurer
Jaimie Donovan4
Toronto, Ontario, Canada
R. Peter Gillin2,5
Toronto, Ontario, Canada
Jonathan Goodman6
Toronto, Ontario, Canada
Jeremy Kinsman2,3
Victoria, British Columbia, Canada
Kalidas Madhavpeddi
Phoenix, Arizona, USA
Effective February 1, 2021
Juanita Montalvo3,4
Toronto, Ontario, Canada
Peter Nixon2,3
Niagara-on-the-Lake, Ontario,
Canada
David Rae
Toronto, Ontario, Canada
Marie-Anne Tawil1,3,4
Westmount, Québec, Canada
Anthony P. Walsh1,2
Vancouver, British Columbia,
Canada
Donald Young1,4
Vancouver, British Columbia,
Canada
Shareholder Contact
Jennifer Cameron
Director, Investor Relations
jcameron@dundeeprecious.com
Tel: 416-365-2549
Fax: 416-365-9080
1 Audit Committee
2 Compensation Committee
3 Corporate Governance and
Nominating Committee
4 Health, Safety and Environment
Committee
5 Lead Director (Deputy Chair,
effective February 11, 2021)
6 Chair
Corporate Office
Operations
Dundee Precious Metals Inc.
1 Adelaide Street East
Suite 500, P.O. Box 195
Toronto, Ontario, Canada, M5C 2V9
Tel: 416-365-5191
Fax: 416-365-9080
Regional Offices
Sofia
Dundee Precious Metals
26 Bacho Kiro Street, 3rd Floor
Sofia 1000, Bulgaria
Tel: +359-2-9301500
Fax: +359-2-9301595
Windhoek
Dundee Precious Metals
Tsumeb (Pty) Limited
35 Schanzen Road
Klein Windhoek
Windhoek, Namibia
Tel: +264-0-61-385000
Fax: +264-0-61-385001
Chelopech Mine
Dundee Precious Metals
Chelopech EAD
Village of Chelopech 2087
Bulgaria
Tel: +359-728-68-226
Fax: +359-728-68-286
Ada Tepe Mine
Dundee Precious Metals
Krumovgrad EAD
1 Hristo Botev Street
District of Kardzhali
6900 Krumovgrad, Bulgaria
+359-0-3641-6803
Tel:
+359-0-3641-7093
Fax:
Tsumeb Smelter
Dundee Precious Metals
Tsumeb (Pty) Limited
P.O. Box 936
Smelter Road, Tsumeb, Namibia
+264-67-223-4000
Tel:
Stock Listing
and Symbol
The Toronto Stock Exchange
DPM – Common Shares
Copies of the Company’s Quarterly and
Annual Reports are available on written
request from our registrar.
Registrar
Computershare
Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, Ontario, Canada M5J 2Y1
Tel:
514-982-7555
(International direct dial)
(toll-free): 800-564-6253
(North America)
416-263-9394 (International)
(toll free): 888-453-0330
(North America)
Tel:
Fax:
Fax:
Website: www.computershare.com
Email: service@computershare.com
www.dundeeprecious.com
1 Adelaide Street East, Suite 500, P.O. Box 195, Toronto, ON M5C 2V9 Canada