ANNUAL REPORT 2021
UNLOCKING
VALUE.
DELIVERING
RESULTS.
ABOUT DUNDEE PRECIOUS METALS
Dundee Precious Metals Inc. is a Canadian-based international gold mining company with operations and
projects located in Bulgaria, Namibia, Ecuador and Serbia. The Company’s purpose is to unlock resources
and generate value to thrive and grow together. This overall purpose is supported by a foundation of
core values, which guides how the Company conducts its business and informs a set of complementary
strategic pillars and objectives related 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. DPM’s shares are traded on the Toronto Stock Exchange (symbol: DPM).
PRODUCTION AND FINANCIAL HIGHLIGHTS
All monetary figures are expressed in U.S. dollars unless otherwise stated
Gold and Copper
Contained in
Concentrate Produced
Cost of Sales
($ PER AU OZ SOLD)1
All-in Sustaining Cost
($ PER AU OZ SOLD)1
Earnings (Loss) Before
Income Taxes
($M)
8
9
2
0
1
3
6
7
7
0
6
7
9
2
8
5
2
7
4
5
6
7
5
6
1
3
2
7
3
6
3
5
3
19
20
21
19
20
21
19
20
21
8
1
2
9
2
2
)
4
5
(
19
20
21
Gold (000s ounces)
Copper (M lbs)
Adjusted EBITDA
($M)1
7
3
3
9
1
3
0
4
1
Cash Provided From
Operating Activities
($M)
Free Cash Flow
($M)1
Capital Returns to
Shareholders
($M)
3
5
2
7
9
1
2
5
2
1
1
2
6
9
0
7
1
1
6
1
2
2
19
20
21
19
20
21
19
20
21
20
21
Dividend Distributions
Share Repurchases
1 Cost of sales per ounce of gold sold is a supplementary financial measure, representing Chelopech and Ada Tepe cost of sales divided by the payable gold in concentrate sold.
All-in sustaining cost per ounce of gold sold; adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”); and free cash flow are Non-GAAP financial
measures or ratios. These measures have no standardized meanings under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures
presented by other companies. Refer to the “Non-GAAP Financial Measures” section on pages 55 to 61 of the Company’s Management’s Discussion and Analysis (“MD&A”) for
the year ended December 31, 2021, contained in this report, for a detailed description and a reconciliation of each of these measures to the most directly comparable measure
under IFRS.
GLOBAL PORTFOLIO OF ASSETS
1
CHELOPECH
2
ADA TEPE
Location
Chelopech, Bulgaria
Location
Southern Bulgaria
Ownership
100%
Operation
Underground mine
2022 Guidance
169 – 191 koz Au
32 – 37 Mlbs Cu
Ownership
100%
Operation
Open-pit mine
2022 Guidance
81– 99 koz Au
3
TSUMEB
Location
Tsumeb, Namibia
Ownership
92%
Operation
Specialty smelter
2022 Guidance
210– 240 kt of
concentrate smelted
4
LOMA LARGA
5
TIMOK
Location
Southern Ecuador
Ownership
100%
Stage
Permitting
Production
200 koz Au per
annum (first 5 years)
Location
Serbia
Ownership
100%
Stage
Feasibility study
Production
80 koz Au per annum
(first 6 years)
6
7
1
5
2
Corporate
Head Office
Toronto, Canada
4
3
STRATEGIC INVESTMENT PORTFOLIO
6
SABINA GOLD & SILVER
VELOCITY MINERALS
7
Location
Nunavut, Canada
Ownership
8.9%
Location
Southern Bulgaria
Ownership
8.4%
Forecast/guidance information is subject to a number of risks. Refer to the Company’s
2022 guidance and three-year outlook as disclosed on pages 17 to 20 of the MD&A
contained in this report.
DUNDEE PRECIOUS METALS / ANNUAL REPORT 2021 / 1
2021 PERFORMANCE HIGHLIGHTS
OPERATIONAL
PERFORMANCE
FINANCIAL
PERFORMANCE
GROWTH
OPPORTUNITIES
STAKEHOLDER
VALUE
RECORD
GOLD
PRODUCTION
3 YEARS
Delivered record annual
gold production for third
consecutive year
RECORD
CASH
FLOW
US$253M
Cash provided from
operating activities
US$252M
Free cash flow1
INDUSTRY-LEADING
COST
PERFORMANCE
US$829/oz.
Cost of sales per ounce
of gold sold 1
US$657/oz.
All-in sustaining cost per ounce
of gold sold 1
RECORD
EARNINGS
US$191M
Net earnings attributable to
common shareholders from
continuing operations
US$202M
Adjusted net earnings1
ADVANCING
OUR
PROJECTS
TIMOK PFS
Completed with positive
results and advanced to
feasibility study
RETURNING
CAPITAL
US$33M
Returned to shareholders
through quarterly dividend and
share repurchase program
ADDING
MINE
LIFE
+10%
Net addition to mineral reserve
at Chelopech
INCREASING
DIVIDEND
+33%
Increase to quarterly dividend,
reflecting positive outlook for
the business, strong free cash
flow and balance sheet
FINANCIAL
STRENGTH
US$334M
Cash on the balance sheet
as at December 31, 2021
NO DEBT
HIGH QUALITY
GROWTH
ASSET
LOMA
LARGA
Added to development portfolio
STRONG
ESG
RATINGS
91ST
PERCENTILE
In the 2021 S&P Corporate
Sustainability Assessment
1 Cost of sales per ounce of gold sold is a supplementary financial measure, representing Chelopech and Ada Tepe cost of sales
divided by the payable gold in concentrate sold. All-in sustaining cost per ounce of gold sold; free cash flow; and adjusted
net earnings are Non-GAAP measures or ratios. These measures have no standardized meanings under IFRS and may not be
comparable to similar measures presented by other companies. Refer to the “Non-GAAP Financial Measures” section on pages 55
to 61 of the Company’s MD&A for the year ended December 31, 2021, contained in this report, for a detailed description and a
reconciliation of each of these measures to the most directly comparable measure under IFRS.
2 / DUNDEE PRECIOUS METALS / ANNUAL REPORT 2021
SOLID THREE-YEAR OUTLOOK
Highlights strong production profile, attractive all-in
sustaining cost and DPM’s potential to generate
significant free cash flow.
Strong Gold
Production Profile
Gold contained in concentrate
produced (‘000s ounces)
Stable Copper
Production
Copper contained in
concentrate produced (Mlbs)
Improving Smelter
Performance
Complex concentrate smelted
(‘000 tonnes)
Attractive All-in
Sustaining Cost2
All-in sustaining cost
($ per Au oz sold)
0
1
3
–
5
6
2
0
9
2
–
0
5
2
5
6
2
–
0
3
2
0
1
3
7
3
–
2
3
9
3
–
2
3
5
3
–
0
3
0
4
2
–
0
1
2
0
4
2
–
0
1
2
0
5
2
–
0
2
2
0
9
8
–
0
5
7
0
5
8
–
0
2
7
0
6
7
–
0
3
6
5
3
0
9
1
7
5
6
21
22
Guidance
23
Outlook
24
Outlook
21
22
Guidance
23
Outlook
24
Outlook
21
22
Guidance
23
Outlook
24
Outlook
21
22
Guidance
23
Outlook
24
Outlook
1 Guidance and three-year outlook is subject to a number of risks. Refer to the Company’s 2022 guidance and three-year outlook
as disclosed on pages 17 to 20 of the MD&A contained in this report.
2 Projections of all-in sustaining cost per ounce of gold sold is a Non-GAAP ratio, is not a defined or standardized measure
under IFRS and is forward-looking information. Refer to the “Non-GAAP Financial Measures” section on pages 55 to 61 of the
Company’s MD&A for the year ended December 31, 2021, contained in this report, for a detailed description, and in the case of
historical measures, a reconciliation of this ratio to the most directly comparable measure under IFRS.
DUNDEE PRECIOUS METALS / ANNUAL REPORT 2021 / 3
2021 LETTER TO SHAREHOLDERS
UNLOCKING VALUE. DELIVERING RESULTS.
Dundee Precious
Metals made significant
steps towards building
for our future. We
acquired the high-
quality Loma Larga
project in Ecuador,
which is a great fit with
the core strengths and
unique capabilities
where DPM has a
proven track record
of unlocking value.
Overall, 2021 was another very strong year for Dundee Precious Metals as
we delivered record annual gold production for the third consecutive year
and generated record financial results. We strengthened our asset portfolio
by adding the high-quality Loma Larga development project in Ecuador,
advancing the Timok project to a feasibility study and continuing to advance
our exploration activities at Chelopech, Ada Tepe and Timok. We also
continue to deliver on our ESG priorities and seek further opportunities
to achieve our strategic objective of generating a net positive impact from
our operations.
Review of 2021 Performance
In 2021, we delivered strong operating performance,
producing a record 309,965 gold ounces and
35 million pounds of copper, and continued to
manage our costs, resulting in an industry-leading
all-in sustaining cost of $657 per ounce of gold sold.
This translated into record financial results, including
free cash flow generation of $252 million and
adjusted net earnings of $202 million. Notably, we
delivered these results while achieving an impressive
health and safety record, including 3.5 million hours
without a lost time injury at our Bulgarian operations
and a 41% year-over-year reduction in our Total
Recordable Injury Frequency Rate.
During the year, we made significant steps towards
building for our future. We acquired the high-quality
Loma Larga project in Ecuador, which is a great
fit with the core strengths and unique capabilities
where DPM has a proven track record of unlocking
value. Following the positive results of the
pre-feasibility study (“PFS”), we advanced the Timok
project in Serbia to a feasibility study (“FS”), which
is now nearing completion. We also added Mineral
Reserves at Chelopech, continuing our track record
of extending mine life, and advanced our exploration
activities at Chelopech, Ada Tepe and Timok.
ADA TEPE: DRIVING GROWTH IN PRODUCTION
AND CASH FLOW
Since commencing operations in 2019, Ada Tepe
has continually delivered impressive performance,
quarter after quarter. In 2021, Ada Tepe produced
132,964 ounces of gold and achieved a new record
for quarterly performance, producing 33,774 ounces
of gold in the fourth quarter of the year.
As we look to the year ahead, we are assessing
the results of the accelerated grade control drilling
program at Ada Tepe, which was completed
in January 2022. We are in the process of
incorporating these results into an optimized mine
plan, which is expected to be completed in the third
quarter of 2022.
We are continuing our exploration efforts around
Ada Tepe, with 20,000 metres of drilling planned
in 2022 which will be focused on near-mine target
delineation and drilling within the mine concession
and surrounding Krumovitsa exploration licence,
as well as scout and target delineation on regional
licences, including Chiirite, where several new vein
targets were identified in 2021.
4 / DUNDEE PRECIOUS METALS / ANNUAL REPORT 2021
CHELOPECH: HIGH-QUALITY
CORNERSTONE ASSET
Chelopech continued its track record of consistent
performance, producing 177,001 ounces of gold
and 35 million pounds of copper.
We continue to focus on extending the mine life
through our in-mine and brownfields exploration
programs. In November 2021, we received
approval for a 1-year extension to the Sveta
Petka exploration licence, which surrounds the
Chelopech mine. This allows us to move forward
with the Commercial Discovery phase of work. We
commenced a 50,000-metre drilling campaign,
which is primarily focused on Sveta Petka, during
the first quarter of 2022.
Chelopech has a robust mine life that extends to
2030, based on current Mineral Reserve estimates,
and a strong Mineral Resource base. Combined
with our demonstrated track record of converting
Mineral Resources into Mineral reserves and our in-
mine and growing brownfield exploration programs,
there is strong potential to continue extending mine
life at Chelopech.
TSUMEB: FOCUSED ON OPERATIONAL STABILITY,
EFFICIENCIES AND COST REDUCTION
In 2021, the Tsumeb smelter processed approximately
189,705 tonnes of complex concentrate. This was
slightly below our revised guidance for the year, as
a result of the unplanned maintenance downtime
during the second half of the year.
Despite lower-than-expected throughput, cash cost
performance was in-line with guidance. As we look
to the year ahead, we are expecting cash cost per
tonne to improve at the smelter, relative to 2021, as
a result of increased throughput as well as estimated
cost savings from a comprehensive initiative directed
at optimizing the cost structure of the smelter.
Disciplined Growth
LOMA LARGA: LOW-COST FUTURE GROWTH
In the third quarter of 2021, we completed the
acquisition of INV Metals Inc., which added the
Loma Larga project to our development portfolio.
Loma Larga is a high-quality, advanced stage gold
project with the potential to generate meaningful
production growth and significant value for our
stakeholders.
Loma Larga has the potential to produce
approximately 200,000 ounces of gold annually
(average for the first five years) at a low all-in
sustaining cost which would continue to support
DPM’s peer-leading cost profile. With similar
DUNDEE PRECIOUS METALS / 2021 LETTER TO SHAREHOLDERS
geology, mining method and processing flowsheet
to our Chelopech underground mine in Bulgaria,
which DPM has developed into a world-class,
modern operation, Loma Larga leverages DPM’s
proven operating strengths. As well, the project will
benefit from additional engagement with local and
national stakeholders, as was the case in the initial
stages of development of Ada Tepe, which is now a
highly successful DPM operation that enjoys strong
support from local communities.
Our approach to advancing Loma Larga will
benefit from our firm commitment to the highest
standards for engagement with local communities
and environmental stewardship, in addition to our
development and operating experience to unlock
the significant potential of the project.
Since completing the acquisition in the third
quarter of 2021, we have focused on integration,
stakeholder engagement and permitting
activities, as well as a review and update of
the technical studies.
We are targeting to complete a revised feasibility
study in 2022 and are progressing discussions
with the government of Ecuador on the investor
protection agreement, which we plan to complete
prior to making any significant capital commitments
on the project.
Based on our revised permitting schedule, we are
targeting receipt of major environmental permits
towards the end of 2022, which we expect to
be followed by finalization of an exploitation
agreement with the government and receipt of
construction permits.
In 2021, Dundee
Precious Metals
delivered record
annual gold production
for the third consecutive
year and generated
record financial results.
We also continue to
deliver on our ESG
priorities and seek
further opportunities
to achieve our strategic
objective of generating
a net positive impact
from our operations.
DAVID RAE
President and CEO
DUNDEE PRECIOUS METALS / ANNUAL REPORT 2021 / 5
DUNDEE PRECIOUS METALS / 2021 LETTER TO SHAREHOLDERS
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 PFS, which focused on the
development of the oxide and transitional portions
of the project, and announced that the project is
advancing to a FS.
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.
Growing Financial Strength
In 2021, we generated $252 million of free cash
flow and significantly strengthened our balance
sheet, ending the year with $334 million of cash, no
debt, and approximately $48 million of investments,
comprised primarily of our 8.9% interest in Sabina
Gold and Silver Corp. and 8.4% interest in Velocity
Minerals Ltd.
We have also demonstrated a strong track record
of deploying our capital in a disciplined manner
that balances our desire to reinvest in growing and
optimizing the business with our commitment to
returning capital to our shareholders. In addition
to enhancing our portfolio with the high-quality
Loma Larga project, we have continued to pay
a quarterly dividend since 2020, and in 2021,
repurchased approximately 1.7 million common
shares under our Normal Course Issuer Bid.
In aggregate, we returned approximately $33 million
or 13% of our free cash flow back to our shareholders
in 2021. In February 2022, we announced that we
are further increasing our quarterly dividend by 33%
to $0.04 per share, reflecting our positive outlook
for the business.
Industry-Leading ESG
We are focused on generating value for all of our
stakeholders through our strong ESG performance.
ESG is fundamental to our culture and is integrated
into all levels of our organization. We have long
understood the strategic importance of maintaining
our social license, and have seen first-hand how
excelling in this important area is a competitive
advantage that can unlock additional value and
lead to superior long-term returns.
During 2021, we made progress on a number of
social and environmental initiatives, including work
to define DPM’s approach to climate change. We
are always looking for ways to reduce the impact
of our operations, and we are very proud of what
we have achieved at Chelopech, which has one
of the lowest greenhouse gas emission intensity
rates among gold mines in the world. However, we
also recognize the global importance of climate
change and our responsibility to further contributing
to mitigating its impacts. We previously assessed
the risks and opportunities of climate change on
DPM’s business, which were summarized in our
inaugural climate change report, published at
the end of 2020. In 2021, we continued to work
towards defining our greenhouse gas targets and
commitments and look forward to sharing our
commitments publicly in 2022.
We are a leader in ESG, as demonstrated by our
positive ratings from a growing number of ESG
rating agencies. In 2021, DPM scored in the 91st
percentile for ESG performance among companies
in the metals and mining industry in the S&P Global
Corporate Sustainability Assessment, which is
recognized by investors as a high-quality ESG
rating agency. This result led to our inclusion in the
2022 S&P Global Sustainability Yearbook, which
features companies that scored in the top 15% of
their industry. As well, we received a rating of “A”
by MSCI ESG Research LLC, a well-respected
independent ESG rating agency.
While we are proud of being recognized for our
strong performance, we are constantly seeking
opportunities to improve, and to achieve our
strategic objective of generating a net positive
impact from our operations.
6 / DUNDEE PRECIOUS METALS / ANNUAL REPORT 2021
DUNDEE PRECIOUS METALS / 2021 LETTER TO SHAREHOLDERS
Summary and Outlook
Looking forward, our updated three-year outlook
reflects a strong production and attractive all-in
sustaining cost profile. Over the next three years, we
expect to produce an average of 270,000 gold
ounces and 35 million pounds of copper annually,
with an average all-in sustaining cost of between
$700 to $833 per ounce of gold sold.1,2
I’d like to close by acknowledging the contributions
of our dedicated employees across the company
and local stakeholders globally which contributed
to our strong results. We are proud of what we
accomplished in 2021, and I feel confident that
we have laid the groundwork for an exciting
future ahead.
We believe that DPM represents a compelling value
opportunity relative to our peers, considering our
proven strengths and excellent future prospects,
including:
• Strong free cash flow potential generated through
our strong production and low all-in sustaining
cost profile;
• A strong balance sheet and no debt;
• Our proven track record of disciplined capital
allocation that balances investing in future growth
with returning capital to shareholders;
• Our continued success at extending mine life at our
Chelopech mine;
• A portfolio of attractive growth projects; and
• Our strong ESG performance and constructive
relationships with our host communities and
governments that will enable us to deliver value for
our stakeholders.
We enter 2022 committed to building on our record
of strong operational performance and delivering
superior value for all of our stakeholders, and we are
excited about the opportunities that lie ahead.
On behalf of our entire team, thank you for
your support.
DAVID RAE / President and Chief Executive Officer
Looking forward, our
updated three-year
outlook reflects a
strong production
and attractive all-in
sustaining cost profile.
Over the next three
years, we expect to
produce an average of
270,000 gold ounces
and 35 million pounds
of copper annually,
with an average all-
in sustaining cost of
between $700 to $833
per ounce of gold sold.1,2
We are proud of what
we accomplished
in 2021, and I feel
confident that we have
laid the groundwork for
an exciting future ahead.
1 Average for the next three years.
Guidance and three-year outlook is
subject to a number of risks. Refer to
the Company’s 2022 guidance
and three-year outlook as disclosed
on pages 17 to 20 of the MD&A
contained in this report.
2 Projections of all-in sustaining cost per
ounce of gold sold is a Non-GAAP
ratio, is not a defined or standardized
measure under IFRS and is forward-
looking information. Please refer to
the “Non-GAAP Financial Measures”
section of the MD&A for the year
ended December 31, 2021 contained
in this report for a detailed description,
and in the case of historical measures,
a reconciliation of this ratio to the
most directly comparable measure
under IFRS.
DUNDEE PRECIOUS METALS / ANNUAL REPORT 2021 / 7
(cid:21)(cid:19)(cid:21)(cid:20)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)
TABLE OF CONTENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview
Review of Financial and Operational Consolidated Results
2021 Actual Results Comparison to 2021 Guidance
Three-Year Outlook
Review of Operating Results by Segment
Review of Corporate and Other Segment Results
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: Acquisition of INV Metals Inc. (“INV”)
Note 5: Accounts Receivable
Note 6:
Inventories
Note 7: Financial Instruments
Note 8: Exploration and Evaluation Assets
Note 9: Mine Properties
Note 10: Property, Plant and Equipment
Note 11: Intangible Assets
Note 12: Accounts Payable and Accrued Liabilities
Note 13: Debt
Note 14: Deferred Revenue
Note 15: Rehabilitation Provisions
Note 16: Other Long-Term Liabilities
1
3
9
16
17
21
29
29
30
35
37
45
47
47
48
55
61
78
78
81
83
84
90
91
92
93
94
95
95
95
95
114
116
117
117
117
122
122
123
124
124
125
126
126
127
Note 17: Leases
Note 18: Share-Based Compensation Plans
Note 19: Expenses by Nature
Note 20: Finance Cost
Note 21: Other (Income) Expense
Note 22: Income Taxes
Note 23: Earnings (Loss) per Share
Note 24: Related Party Transactions
Note 25: Supplementary Cash Flow Information
Note 26: Supplementary Shareholders’ Equity Information
Note 27: Commitments and Contingencies
Note 28: Financial Risk Management
Note 29: Operating Segment Information
CORPORATE INFORMATION
127
128
131
131
132
132
134
134
135
135
137
137
141
146
MANAGEMENT’S DISCUSSION AND ANALYSIS
of Consolidated Financial Condition and Results of Operations
for the Three and Twelve Months Ended December 31, 2021
(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, 2021. This MD&A should be read in conjunction with DPM’s audited consolidated financial statements
for the year ended December 31, 2021 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 as in DPM’s audited consolidated
financial statements for the year ended December 31, 2021. 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.
Certain financial measures referred to in this MD&A are not measures recognized under IFRS and are
referred to as Non-GAAP financial measures or ratios. 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 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 and ratios, 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.
The Company uses the following Non-GAAP financial measures and ratios in this MD&A:
(cid:120)
(cid:120)
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(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
cash cost per tonne of ore processed
cash cost per ounce of gold in gold-copper concentrate produced
cash cost per ounce of gold in gold concentrate produced
cash cost per pound of copper in gold-copper concentrate produced
cash cost per tonne of complex concentrate smelted
cash cost per ounce of gold sold
all-in sustaining cost per ounce of gold sold
adjusted net earnings
adjusted basic earnings per share
adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”)
cash provided from operating activities, before changes in working capital
free cash flow
average realized metal prices
DUNDEE PRECIOUS METALS INC. I 1
For a detailed description of each of the Non-GAAP financial measures and ratios used in this MD&A and
a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the “Non-
GAAP Financial Measures” section contained in this MD&A.
The technical and scientific information in this MD&A 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 (“CIM”) – Definition Standards adopted by CIM Council on May 10, 2014 (the “CIM 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
(“QP”) as defined under NI 43-101, and who is not independent of the Company.
This MD&A has been prepared as at February 17, 2022.
FOURTH QUARTER 2021 I 2
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 Environmental Social Governance (“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.
DUNDEE PRECIOUS METALS INC. I 3
Continuing Operations:
As at December 31, 2021, DPM’s principal subsidiaries include:
(cid:120)
(cid:120)
(cid:120)
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, 2021, DPM holds interests, directly or indirectly, in a number of exploration properties
located in Ecuador, Serbia and Canada including:
(cid:120)
(cid:120)
(cid:120)
100% of DPM Ecuador S.A. (“DPM Ecuador”), formerly INV Minerales Ecuador S.A., which is
focused on the exploration and development of the Loma Larga gold project located in Ecuador;
100% of DPM Avala d.o.o., formerly Avala Resources d.o.o., which is focused on the exploration
and development of the Timok gold project in Serbia; and
8.9% of Sabina Gold and Silver Corp. (“Sabina”), which is focused on the development of the Back
River project in southwestern Nunavut, Canada.
Discontinued Operations:
On May 3, 2021, DPM sold its 73.7% ownership interest in MineRP Holdings Inc. (“MineRP”), which owns
MineRP Holdings (Proprietary) Limited, an independent mining software vendor with operations in Canada,
South Africa, Australia and Chile (“MineRP Disposition”). As a result of the MineRP Disposition, DPM no
longer owns any shares of MineRP and the assets and liabilities of MineRP have been presented as held
for sale in the annual 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 three and twelve months ended
December 31, 2021 and 2020.
All operational and financial information contained in this MD&A are related to continuing operations, unless
otherwise stated.
FOURTH QUARTER 2021 I 4
Overview – Operational and Financial Highlights
Revenue
($mm)
Cost of Sales
($mm)
175
162
166
152
138
90
88
97
81
86
Cash Provided from Operating
Activities and Free Cash Flow
1,816
1,779
1,803
1,800
1,780
89
71
76
67
69
66
51
48
39
41
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Complex Concentrate Smelted
('000s tonnes)
Planned
major furnace
maintenance
Gold Production and
Payable Gold Sold
('000s ounces)
85
52
60
55
52
70
69
70
72
66
64
63
83
74
23
Cash from Operating Activities ($mm)
Free Cash Flow ($mm)
Average Realized Gold Price ($/ounce)
Copper Production and
Payable Copper Sold
(mm pounds)
10
9
8
8
9
8
8
8
7
7
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Production
Payable Sold
Production
Payable Sold
Cash Cost Complex
Concentrate Smelted
($/tonne)
967
All-in Sustaining Cost and
Cash Cost
($/ounce)
Planned
major furnace
maintenance
651
605
522
757
701
406
400
393
445
425
390
430
456
540
Cash and Short Term
Investments(1)
($mm)
334
260
269
176
150
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Cash Cost
All-in Sustaining Cost
DUNDEE PRECIOUS METALS INC. I 5
Net Earnings Attributable to Common Shareholders
from Continuing Operations
($mm)
17.7
5.7
1.6
1.2
(1.9)
(16.9)
50.2
(6.2)
44.0
51.4
0.7
52.1
Q4 2020
net earnings
attributable to
common
shareholders
Q4 2020
adjustments
Q4 2020 adjusted
net
earnings
Volumes
of metal
sold
General and
administrative
expenses
Stronger
U.S.
dollar(2)
Metal prices(3)
Other
Operating costs
and royalties
Q4 2021
adjusted net
earnings
Q4 2021
adjustments
Q4 2021
net earnings
attributable to
common
shareholders
Net Earnings Attributable to Common Shareholders
from Continuing Operations
($mm)
52.7
12.9
4.0
2.9
2.0
(6.3)
(24.3)
(30.3)
199.1
(10.7)
188.4
202.0
(11.3)
190.7
2020
net earnings
attributable to
common
shareholders
2020
adjustments
2020
adjusted net
earnings
Metal prices(3) General and
administrative
expenses
Depreciation
Volumes
of metal
sold
Other
Weaker
U.S.
dollar(2)
Operating costs
and royalties
Volumes
of complex
concentrate
smelted
2021
adjusted net
earnings
2021
adjustments
2021
net earnings
attributable to
common
shareholders
Net cash and short-term investments represent cash and short-term investments less total debt at the end of each reporting period. The Company had no debt
at the end of all reporting periods presented above.
Includes net realized gains and losses on foreign exchange option contracts.
Includes net gains and losses on commodity swap contracts recognized in net earnings.
Response to Coronavirus (“COVID-19”)
In March 2020, the World Health Organization classified the COVID-19 epidemic 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 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. Tsumeb’s maintenance shutdown, which was originally planned for 30
days in the first quarter of 2021, was extended to 45 days in part as a result of COVID-19 related safety
protocols, travel restrictions and the use of remote commissioning support.
The Company continues to closely assess and monitor the COVID-19 situation in the jurisdictions in which
it operates. 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 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, widespread
workforce education on COVID-19 and the benefits of getting vaccinated as well as the support for
vaccination programs in the Company’s areas of 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. DPM continues to
FOURTH QUARTER 2021 I 6
engage with local communities and authorities in Bulgaria, Namibia, Serbia and Ecuador as they respond
to the challenges of the pandemic. To date, the Company has contributed approximately $1.2 million to
support numerous COVID-19 related initiatives to benefit local communities. This financial support has
primarily focused on local hospitals to provide additional medical facilities, supplies, transportation and
protective equipment.
The Company has experienced several positive cases of COVID-19 within its workforce. 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 management protocols in effect, the impact on the Company’s
operations has been minimal. Multiple COVID-19 variants have emerged and are circulating globally. These
variants spread more easily and quickly than the original virus resulting in a surge in the number of cases,
including in regions in which the Company operates.
Certain vaccines have received regulatory approval in the countries in which the Company operates, and
the respective governments are progressing vaccination of their populations although vaccination rates
remain low in some jurisdictions. The timing and speed of vaccination in each jurisdiction is uncertain at
this time and depends on several factors including supply of the vaccines and increasing the levels of
vaccine acceptance.
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 pandemic will not have a material adverse impact on the future results of the
Company.
Summary of significant operational and financial highlights
Financial results from operations in 2021 reflected the impact of stronger realized metal prices and strong
production at Chelopech and Ada Tepe.
Consolidated
(cid:120) Record gold production of 309,965 ounces, up 4% relative to 2020, and at the upper end of 2021
(cid:120)
guidance.
Sold a record 279,051 ounces of payable gold and 32.7 million pounds of payable copper, and
smelted 189,705 tonnes of complex concentrate, generating revenue of $641.4 million, up 5%
relative to 2020. Payable gold sold was at the upper end of 2021 guidance and payable copper sold
was in line with 2021 guidance. Complex concentrate smelted was slightly below updated 2021
guidance.
(cid:120) Cost of sales of $359.9 million, up $29.1 million relative to 2020. All-in sustaining cost per ounce of
gold sold of $657 and cash cost per tonne of complex concentrate smelted of $479 were both in line
with 2021 guidance.
(cid:120) Record cash provided from operating activities and free cash flow of $253.1 million and $252.4
million, respectively, up $56.1 million and $41.0 million relative to 2020.
(cid:120) Net earnings attributable to common shareholders from continuing operations of $190.7 million
compared to $199.1 million in 2020. Record adjusted net earnings of $202.0 million compared to
$188.4 million in 2020.
(cid:120) Dividends declared in 2021 totalled $22.4 million ($0.12 per share) representing 9% of free cash
flow, reflecting strong ongoing performance and significant free cash flow generation. Repurchased
1,723,800 of common shares under the Normal Course Issuer Bid (“NCIB”) for a total cost of $10.4
million (Cdn$13.2 million).
(cid:120) Closed sale of MineRP bringing in cash proceeds of $45.2 million.
(cid:120) Completed acquisition of INV Metals Inc. (“INV”), adding Loma Larga, a high quality gold
development project with robust economics located in Ecuador.
Ended 2021 with $334.4 million in cash, an investment portfolio of $48.0 million and no debt.
(cid:120)
Chelopech
(cid:120)
Achieved gold production of 177,001 ounces which was comparable to 2020 and at the upper end
of 2021 guidance. Copper production of 34.7 million pounds was down 3% relative to 2020, and
was in line with 2021 guidance.
DUNDEE PRECIOUS METALS INC. I 7
(cid:120)
Sold 149,297 ounces of payable gold and 32.7 million pounds of payable copper, generating
revenue of $292.8 million, up 11% relative to 2020. Payable gold in concentrate sold was at the
upper end of 2021 guidance, while payable copper sold was in line with 2021 guidance.
(cid:120) Cost of sales of $130.8 million, up 15% relative to 2020, and all-in sustaining cost per ounce of gold
of $722, down 5% relative to 2020.
(cid:120) Reported earnings before income taxes of $156.8 million (2020 - $146.8 million) and adjusted
EBITDA of $179.5 million (2020 - $177.2 million).
Ada Tepe
(cid:120)
(cid:120)
Achieved gold production of 132,964 ounces, up 12% relative to 2020 .
Sold 129,754 ounces of payable gold, up 8% relative to 2020 and within its 2021 guidance,
generating revenue of $229.3 million, up 16% relative to 2020.
(cid:120) Cost of sales of $100.5 million, up 9% relative to 2020, and all-in sustaining cost per ounce of gold
of $583, up 13% relative to 2020.
(cid:120) Reported earnings before income taxes of $127.4 million (2020 - $100.2 million) and adjusted
EBITDA of $182.2 million (2020 - $156.2 million).
Tsumeb
(cid:120)
Achieved throughput of 189,705 tonnes, down 18% relative to 2020 and below the updated 2021
guidance, generating revenue of $119.3 million, down 19% relative to 2020.
(cid:120) Cost of sales of $128.7 million was $3.8 million higher than 2020. Cash cost per tonne of complex
concentrate smelted of $479 was 27% higher than 2020.
(cid:120) Reported loss before income taxes of $13.2 million (2020 - reported earnings before income taxes
of $18.8 million) and adjusted EBITDA of $7.9 million (2020 - $36.7 million).
Loma Larga gold project
(cid:120)
Post-acquisition focus on integration activities, stakeholder engagement and the review,
advancement and optimization of the technical studies and permitting schedule.
Timok gold project
(cid:120) Announced positive results of the prefeasibility study (“PFS”) for the Timok gold project and
proceeded with a feasibility study (“FS”) in the first quarter of 2021.
(cid:120) Received three-year retention of mineral rights and continued other permitting activities associated
with the spatial planning with results of the terms of reference for the spatial plan released during
the fourth quarter of 2021 for public review.
Exploration
(cid:120)
(cid:120)
(cid:120)
At Chelopech, 37,925 metres of target delineation and scout drilling was undertaken, focused on
the Sveta Petka exploration licence and mine concession area, as well as surrounding the Brevene
exploration licence.
At Ada Tepe, a total of 11,622 metres of exploration drilling was completed on the Khan Krum mining
concession area and surrounding exploration licences.
Exploration drilling activities in Serbia focused on the Chocolate and (cid:253)oka Rakita prospects, both
in close vicinity to the Timok gold project, followed by a scout drilling program on the Umka
exploration licence.
Other
(cid:120) DPM was recognized for its strong sustainability performance with its inclusion in the 2021 S&P
Sustainability Yearbook as one of the top scoring companies in the 91st percentile among companies
in the metals and mining industry.
FOURTH QUARTER 2021 I 8
REVIEW OF FINANCIAL AND OPERATIONAL CONSOLIDATED RESULTS
Twelve Months
2020
2021
Three Months
The following tables summarize the Company’s selected financial and operational results:
$ thousands, unless otherwise indicated
Ended December 31,
Financial Results
Revenue
Cost of sales
Depreciation and amortization
General and administrative expenses
Corporate social responsibility expenses
Exploration and evaluation expenses
Finance cost
Other (income) expense
Earnings before income taxes
Income tax expense
Net earnings attributable to common shareholders
151,751
81,117
23,984
9,378
2,327
6,339
1,481
(1,479)
52,588
2,422
166,433
96,846
23,533
3,753
2,967
4,369
1,380
(3,156)
60,274
8,169
641,443
359,940
96,207
18,161
4,838
18,006
5,549
5,531
229,418
38,689
2021
2020
609,558
330,857
100,211
30,604
4,571
19,072
7,022
(491)
217,923
18,891
199,074
196,002
1.10
1.08
319,322
188,415
1.04
196,965
211,427
16,308
-
190,750
210,101
1.02
1.12
336,854
202,081
1.09
253,126
252,393
22,408
10,410
52,108
51,465
0.27
0.27
84,274
51,449
0.27
88,777
65,807
5,744
921
7,419
12,338
19,757
50,176
50,265
0.28
0.28
74,842
44,037
0.24
70,536
39,297
5,422
-
3,389
12,323
15,712
17,068
52,545
69,613
8,505
40,792
49,297
82,824
9,151
64,117
7,659
309,965
34,688
298,289
35,642
73,820
8,175
540
757
51,932
445
62,568
7,766
425
651
52,484
406
279,051
32,680
465
657
189,705
479
270,834
33,389
478
654
231,890
377
December 31,
2021
December 31,
2020
334,377
47,983
1,168,410
1,004,413
191,441
7.82
484,377
149,532
106,595
974,860
805,284
181,400
9.15
299,532
from continuing operations
Net earnings attributable to common shareholders(1)
Basic earnings per share from continuing operations
Basic earnings per share(1)
Adjusted EBITDA
Adjusted net earnings
Adjusted basic earnings per share
Cash provided from operating activities
Free cash flow
Dividend distributions
Share repurchases
Capital expenditures incurred:
Growth(2)
Sustaining(3)
Total capital expenditures
Operational Highlights
Metals contained in concentrate produced:
Gold (ounces)
Copper (‘000s pounds)
Payable metals in concentrate sold:
Gold (ounces)
Copper (‘000s pounds)
Cash cost per ounce of gold sold
All-in sustaining cost per ounce of gold
Complex concentrate smelted (mt)
Cash cost per tonne of complex concentrate smelted
As at,
Financial Position and Available Liquidity
Cash
Investments at fair value
Total assets(1)
Total equity(1)
Number of common shares outstanding (‘000s)
Share price (Cdn$ per share)
Available liquidity(4)
These measures include discontinued operations.
DUNDEE PRECIOUS METALS INC. I 9
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 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.
Available liquidity is defined as cash and short-term investments plus the available capacity under DPM’s Revolving Credit Facility (“RCF”) at the end of each
reporting period.
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$”) can also impact the Company’s results of operations and financial condition.
The following table summarizes the average trading price for gold and copper based on the London Bullion
Market Association (“LBMA”) for gold and the London Metal Exchange (“LME”) for copper (Grade A) for the
three and twelve months ended December 31, 2021 and 2020 and highlights the overall year over year
change in commodity prices.
Metal Prices (Market Average)
Ended December 31,
LBMA gold ($/ounce)
LME settlement copper ($/pound)
Three Months
2021
1,795
4.40
2020 Change
1,874
(4%)
3.25
35%
Twelve Months
2021
1,800
4.22
2020 Change
1,770
2%
2.80
51%
The average realized gold price for the fourth quarter and twelve months of 2021 of $1,780 per ounce and
$1,790 per ounce, respectively, was 2% lower and 5% higher than the corresponding periods in 2020.
These changes reflect year over year market movements as well as the impact of 2020 gold deliveries that
were made in respect of Ada Tepe’s prepaid forward gold sales arrangement, which was fully satisfied with
the final delivery in December 2020.
The average realized copper price for the fourth quarter and twelve months of 2021 of $3.77 per pound and
$3.82 per pound, respectively, was 16% and 39% higher than the corresponding periods in 2020. Realized
prices in 2021 and the increases over 2020 were lower than those based on market as a result of
substantially all payable copper sold during the fourth quarter and twelve months of 2021 being hedged.
The following table sets out the average foreign exchange rates for the principal currencies impacting the
Company and highlights the overall year over year strengthening (weakening) of the U.S. dollar relative to
these currencies.
Foreign Exchange Rates
(Market Average)
Ended December 31,
US$/Cdn$
Euro/US$
US$/ZAR
Three Months
Twelve Months
2021
1.2597
1.1437
15.4203
2021
2020 Change
1.2535
(3%)
4% 1.1833
(1%) 14.7756
1.3029
1.1927
15.6114
2020 Change
(7%)
(4%)
(10%)
1.3412
1.1409
16.4508
In 2021, approximately 91% Namibian dollar operating expenses were hedged with option contracts
providing a weighted average floor price of 15.69 and a weighted average ceiling price of 18.38. As at
December 31, 2021, approximately 83% projected Namibian dollar operating expenses for 2022 have been
hedged with option contracts providing a weighted average floor price of 15.14 and a weighted average
ceiling price of 17.05.
Metals production
Gold contained in concentrate produced in the fourth quarter of 2021 increased by 29% to 82,824 ounces
relative to the corresponding period in 2020 due primarily to higher gold grades at Ada Tepe and improved
gold recoveries at Chelopech. Gold contained in concentrate produced in 2021 increased by 4% to 309,965
ounces relative to 2020 due primarily to higher gold grades at Ada Tepe and improved gold recoveries from
FOURTH QUARTER 2021 I 10
pyrite concentrate at Chelopech, partially offset by mining in lower grade zones at Chelopech in the third
quarter of 2021.
Copper production in the fourth quarter of 2021 increased by 19% to 9.2 million pounds relative to the
corresponding period in 2020 due primarily to higher copper grades. Copper production in 2021 decreased
by 3% to 34.7 million pounds relative to 2020 due primarily to mining in lower grade zones, partially offset
by higher copper recoveries.
Metals sold
Payable gold in concentrate sold in the fourth quarter of 2021 of 73,820 ounces was 18% higher than the
corresponding period in 2020 due primarily to higher gold grades at Ada Tepe and mining in higher grade
zones and higher gold recoveries at Chelopech. Payable copper in concentrate sold in the fourth quarter
of 2021 of 8.2 million pounds was 5% higher than the corresponding period in 2020 due primarily to higher
copper recoveries.
Payable gold in concentrate sold in 2021 of 279,051 ounces was 3% higher than 2020 due primarily to
higher gold grades at Ada Tepe, partially offset by mining in lower gold grade zones at Chelopech. Payable
copper in concentrate sold in 2021 of 32.7 million pounds was 2% lower than 2020 due primarily to mining
in lower grade zones at Chelopech, partially offset by the timing of deliveries.
Complex concentrate smelted
Complex concentrate smelted at Tsumeb during the fourth quarter of 2021 of 51,932 tonnes was
comparable to the corresponding period in 2020. Complex concentrate smelted at Tsumeb in 2021 of
189,705 tonnes was 18% lower than 2020 due primarily to the planned first quarter Ausmelt furnace
maintenance shutdown, as well as unplanned maintenance downtime due to water leaks in the off-gas
system during the second half of 2021.
Revenue
Revenue in the fourth quarter of 2021 of $166.4 million was $14.6 million higher than the corresponding
period in 2020 due primarily to higher volumes of metal sold.
Revenue in 2021 of $641.4 million was $31.9 million higher than 2020 due primarily to higher realized metal
prices and higher volumes of metal sold, partially offset by lower volumes of complex concentrate smelted
at Tsumeb.
Cost of sales
Cost of sales in the fourth quarter of 2021 of $96.8 million was $15.7 million higher than the corresponding
period in 2020 due primarily to higher local currency operating expenses in Bulgaria reflecting higher prices
for electricity and direct materials and higher labour costs.
Cost of sales in 2021 of $359.9 million was $29.1 million higher than 2020 due primarily to higher local
currency operating expenses in Bulgaria reflecting higher prices for electricity and direct materials and
higher labour costs, higher royalties at Ada Tepe reflecting a higher profit-based royalty rate, and a weaker
U.S. dollar, partially offset by lower local currency operating expenses at Tsumeb and lower depreciation.
All-in sustaining cost per ounce of gold
All-in sustaining cost per ounce of gold in the fourth quarter of 2021 of $757 was 16% higher than the
corresponding period in 2020 due primarily to higher local currency operating expenses in Bulgaria and
higher treatment charges at Chelopech, partially offset by higher volumes of gold sold.
All-in sustaining cost per ounce of gold in 2021 of $657 was comparable to 2020 due primarily to higher by-
product credits reflecting higher realized copper prices, partially offset by higher local currency operating
expenses in Bulgaria, higher royalties at Ada Tepe, and higher cash outlays for sustaining capital
expenditures.
DUNDEE PRECIOUS METALS INC. I 11
Cash cost per tonne of complex concentrate smelted
Cash cost per tonne of complex concentrate smelted in the fourth quarter of 2021 of $445 was $39 higher
than the corresponding period in 2020 due primarily to higher local currency operating expenses as a result
of maintenance costs, partially offset by higher sulphuric acid by-product credits reflecting higher sulphuric
acid prices.
Cash cost per tonne of complex concentrate smelted in 2021 of $479 was $102 higher than 2020 reflecting
the fixed cost nature of the facility and the impact of lower volumes of complex concentrate smelted,
combined with a stronger ZAR relative to the U.S. dollar.
General and administrative expenses
General and administrative expenses in the fourth quarter of 2021 were $3.7 million compared to $9.4
million in the corresponding period in 2020 due primarily to lower share-based compensation as a result of
changes in DPM’s share price.
General and administrative expenses in 2021 were $18.2 million compared to $30.6 million in 2020 due
primarily to lower share-based compensation as a result of changes in DPM’s share price, partially offset
by higher information technology related expenses and higher professional fees primarily related to digital
initiatives.
Exploration and evaluation expenses
Exploration and evaluation expenses in the fourth quarter and twelve months of 2021 were $4.4 million and
$18.0 million, respectively, compared to $6.3 million and $19.1 million in the corresponding periods in 2020
due primarily to timing of drilling activities on potential targets in priority areas at Chelopech, Ada Tepe and
Timok.
For a more detailed discussion on the Company’s exploration activities, refer to the “Exploration” section
contained in this MD&A.
Finance costs
Finance costs are comprised of interest and other deemed financing costs in respect of the Company’s
debt facilities, prepaid forward gold sales arrangement settled in 2020, lease obligations and rehabilitation
provisions.
Finance costs in the fourth quarter and twelve months of 2021 were $1.3 million and $5.5 million,
respectively, compared to $1.5 million and $7.0 million in the corresponding periods in 2020. The decrease
in 2021 was due primarily to interest accretion pursuant to a prepaid forward gold sales arrangement, for
which the final delivery of gold was completed in December 2020.
Other (income) expense
Other (income) expense is primarily comprised of unrealized gains or losses on Sabina special warrants
and foreign exchange translation gains or losses.
The following table summarizes the items making up other (income) expense:
$ thousands
Ended December 31,
Net (gains) losses on Sabina special warrants(1)
Net foreign exchange losses(2)
Interest income
Other, net
Total other (income) expense
Three Months
Twelve Months
2021
(659)
218
(254)
(2,461)
(3,156)
2020
(3,124)
2,442
(87)
(710)
(1,479)
2021
6,312
1,628
(632)
(1,777)
5,531
2020
(5,640)
4,376
(194)
967
(491)
Refer to the “Financial Instruments” section contained in this MD&A for more details.
Primarily related to the revaluation of foreign denominated monetary assets and liabilities.
FOURTH QUARTER 2021 I 12
Income tax expense
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, 2021 and 2020, 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 changes in unrecognized tax benefits relating to
corporate operating, exploration and evaluation costs, as well as unrealized gains or losses on the
Company’s publicly traded securities recognized in other comprehensive income (loss).
$ thousands, unless otherwise indicated
Ended December 31,
Earnings before income taxes
Combined Canadian federal and provincial statutory
income tax rates
Expected income tax expense
Lower rates on foreign earnings
Changes in unrecognized tax benefits
Non-taxable portion of capital (gains) losses
Non-deductible share-based compensation expense
Other, net
Income tax expense
Effective income tax rates
Three Months
2021
60,274
2020
52,588
Twelve Months
2021
229,418
2020
217,923
26.5%
15,973
(10,332)
2,477
583
74
(606)
8,169
13.6%
26.5%
13,936
(8,831)
(1,255)
(1,921)
66
427
2,422
4.6%
26.5%
60,796
(41,163)
14,842
3,346
279
589
38,689
16.9%
26.5%
57,750
(39,256)
2,906
(3,663)
246
908
18,891
8.7%
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 Ministry also announced that the EPZ regime will be replaced by a new regime
known as the Sustainable Special Economic Zone (“SSEZ”). In September 2021, the Namibian Ministry of
Industrialisation and Trade issued a draft document entitled “National Policy on Sustainable Special
Economic Zones” for public consultation prior to moving forward to finalize this new policy, which is
expected to be implemented in 2022.
Net earnings attributable to common shareholders from continuing operations
Net earnings attributable to common shareholders from continuing operations in the fourth quarter of 2021
were $52.1 million ($0.27 per share) compared to $50.2 million ($0.28 per share) in the corresponding
period in 2020 due primarily to higher volumes of metal sold and lower share-based compensation as a
result of changes in DPM’s share price, partially offset by higher local currency operating expenses in
Bulgaria.
Net earnings attributable to common shareholders from continuing operations in 2021 were $190.7 million
($1.02 per share) compared to $199.1 million ($1.10 per share) in 2020 due primarily to the planned
maintenance shutdown at Tsumeb in the first quarter of 2021, as well as unplanned maintenance downtime
due to water leaks in the off-gas system during the second half of 2021, higher local currency operating
expenses in Bulgaria, a weaker U.S. dollar and higher royalty rates at Ada Tepe, partially offset by higher
realized gold and copper prices, higher volumes of gold sold and lower share-based compensation as a
result of changes in DPM’s share price.
Adjusted net earnings (loss)
Adjusted net earnings in the fourth quarter and twelve months of 2021 were $51.4 million ($0.27 per share)
and $202.0 million ($1.09 per share), respectively, compared to $44.0 million ($0.24 per share) and $188.4
million ($1.04 per share) in the corresponding periods in 2020. These increases were due primarily to the
same factors affecting net earnings attributable to common shareholders from continuing operations, with
the exception of the adjusting items detailed below.
Adjusted net earnings in the fourth quarter and twelve months of 2021 excluded unrealized gains on Sabina
special warrants of $0.7 million (2020 –$3.2 million) and unrealized losses of $6.3 million (2020 – unrealized
DUNDEE PRECIOUS METALS INC. I 13
gains of $5.7 million), respectively, as well as a deferred income tax recovery adjustment not related to
current period earnings of $nil (2020 – $3.0 million) and a deferred income tax expense adjustment of $5.0
million (2020 – a deferred income tax recovery adjustment of $5.0 million), respectively, both of 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:
$ thousands
Ended December 31,
Chelopech
Ada Tepe
Tsumeb
Corporate & Other
Total adjusted net earnings
Adjusted EBITDA
Three Months
Twelve Months
2021
33,995
28,152
(2,008)
(8,690)
51,449
2020
38,288
17,482
6,414
(18,147)
44,037
2021
140,756
109,956
(13,163)
(35,468)
202,081
2020
132,829
90,799
18,843
(54,056)
188,415
Adjusted EBITDA in the fourth quarter and twelve months of 2021 was $84.3 million and $336.9 million,
respectively, compared to $74.8 million and $319.3 million in the corresponding periods in 2020 reflecting
the same factors that affected adjusted net earnings, except for interest, income tax, depreciation and
amortization, 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
Twelve Months
2021
44,131
45,785
2,449
(8,091)
84,274
2020
50,057
32,304
9,847
(17,366)
74,842
2021
179,510
182,175
7,918
(32,749)
336,854
2020
177,223
156,205
36,682
(50,788)
319,322
In the adjusted net earnings (loss) and adjusted EBITDA tables above, the “Corporate & Other” segment
includes 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.
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
Cash provided from operating activities in the fourth quarter of 2021 of $88.8 million was $18.2 million
higher than the corresponding period in 2020 and higher than the $7.6 million increase in earnings before
taxes, due primarily to the prepaid forward gold sales agreement at Ada Tepe being fully satisfied with the
final delivery in December 2020 and lower income taxes paid, partially offset by an unfavourable period
over period change in working capital mainly related to an increase in accounts receivables as a result of
the timing of deliveries.
Cash provided from operating activities in 2021 of $253.1 million was $56.1 million higher than 2020 and
higher than the $11.5 million increase in earnings before income taxes, due primarily to the prepaid forward
gold sales agreement at Ada Tepe being fully satisfied with the final delivery in December 2020.
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 which resulted 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
FOURTH QUARTER 2021 I 14
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
Free cash flow in the fourth quarter of 2021 of $65.8 million was $26.5 million higher than the corresponding
period in 2020 and higher than the $7.7 million increase in earnings before taxes, due primarily to the
fulfillment of the prepaid forward gold sales agreement at Ada Tepe in December 2020 and lower income
taxes paid.
Free cash flow in 2021 of $252.4 million was $41.0 million higher than 2020 and higher than the $11.5
million increase in earnings before income taxes, due primarily to the fulfillment of the prepaid forward gold
sales agreement at Ada Tepe in December 2020, partially offset by higher cash outlays for sustaining
capital expenditures.
Capital expenditures
Capital expenditures incurred during the fourth quarter and twelve months of 2021 were $19.7 million and
$69.6 million, respectively, compared to $15.7 million and $49.3 million in the corresponding periods in
2020.
Sustaining capital expenditures incurred during the fourth quarter and twelve months of 2021 were $12.3
million and $52.5 million, respectively, compared to $12.3 million and $40.8 million in the corresponding
periods in 2020. The year-over-year increase was due primarily to the planned maintenance shutdown at
Tsumeb in the first quarter of 2021 and accelerated grade control drilling at Ada Tepe initiated in September
2020. Growth capital expenditures incurred during the fourth quarter and twelve months of 2021 were $7.4
million and $17.1 million, respectively, compared to $3.4 million and $8.5 million in the corresponding
periods in 2020 due primarily to work related to the development of the Timok and Loma Larga gold projects.
DUNDEE PRECIOUS METALS INC. I 15
2021 ACTUAL RESULTS COMPARISON TO 2021 GUIDANCE
The following table provides a comparison of the Company’s results to its 2021 original guidance and its
updated guidance.
$ millions, unless otherwise indicated
Ore processed (‘000s tonnes)
Cash cost per tonne of ore processed(3)
Chelopech
Ada Tepe
Metals contained in concentrate produced(4)
Gold (‘000s ounces)
Copper (million pounds)
Payable metals in concentrate sold(4)(5)
Gold (‘000s ounces)
Copper (million pounds)
All-in sustaining cost per ounce of gold(3)
Complex concentrate smelted (‘000s tonnes)
Cash cost per tonne of complex concentrate smelted
Corporate general and administrative expenses(6)
Exploration expenses
Evaluation expenses
Sustaining capital expenditures(7)(8)
Growth capital expenditures(8)
Original
Consolidated
Guidance(1)
2,925 - 3,125
Updated
Consolidated
Guidance(2)
2,925 - 3,125
2021
Consolidated
Results
3,065
42 - 45
46 - 50
271 - 317
34 - 39
243 - 285
31 - 36
625 - 695
220 – 250
450 – 520
19 - 23
13 - 15
2 - 3
56 - 72
16 - 21
46 - 48
52 - 55
271 - 317
34 - 39
243 - 285
31 - 36
625 - 695
195 - 200
450 – 520
19 - 23
13 - 15
2 - 3
52 - 66
17 - 24
47
52
310
35
279
33
657
190
479
18
16
2
53
17
As disclosed in the MD&A issued on February 11, 2021.
As disclosed in the MD&A issued on November 11, 2021.
Includes the treatment charges, transportation and other selling costs related to the sale of pyrite concentrate, and payable gold in pyrite concentrate sold.
Includes gold in pyrite concentrate produced of 60,568 ounces compared to guidance of 50,000 to 56,000 ounces and payable gold in pyrite concentrate sold of
37,747 ounces compared to guidance of 31,000 ounces to 35,000 ounces.
Payable metals contained in concentrate sold are after customary metal deductions associated with smelter treatment terms.
Excludes favourable mark-to-market adjustments on share-based compensation of $1.9 million.
Consolidated sustaining capital expenditures include $2 million to $4 million related to corporate digital initiatives in the updated guidance, down from the original
guidance of $4 million to $6 million.
Updated guidance for Tsumeb sustaining and growth capital expenditures was $14 million to $16 million and $1 million to $3 million, respectively, down from the
original guidance of $16 million to $20 million and $3 million to $4 million.
DPM achieved the upper end of its 2021 production and delivery guidance as a result of continued strong
operating performance at Chelopech and Ada Tepe. Cash cost per tonne of ore processed at Chelopech
and Ada Tepe were within the updated guidance, which were revised as a result of recent price increases
for electricity and direct materials.
Complex concentrate smelted at Tsumeb was slightly below the updated guidance, which was revised as
a result of the longer than anticipated shutdown during the first quarter of 2021, as well as unplanned
maintenance downtime due to water leaks in the off-gas system during the second half of 2021. Cash cost
per tonne of concentrate smelted in 2021 was within 2021 guidance due primarily to higher by-product
credits reflecting higher sulphuric acid prices, partially offset by the fixed cost nature of the facility and the
impact of lower volumes of complex concentrate smelted, combined with a stronger ZAR relative to the
U.S. dollar.
All-in sustaining cost per ounce of gold in 2021 of $657 was within the original guidance of $625 to $695
due primarily to higher by-product credits reflecting higher realized copper prices, higher volumes of gold
sold and lower cash outlays for sustaining capital expenditures, partially offset by higher local currency
operating expenses reflecting higher prices for electricity and direct materials and higher labour costs in
Bulgaria, and higher treatment charges at Chelopech.
FOURTH QUARTER 2021 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 high levels of gold production as highlighted in the 2022 to 2024 outlook
and supplemental detailed 2022 guidance below.
2022 to 2024 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 2023 and 2024, all production and cost
estimates do not yet incorporate 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 posted on the
Company’s website (www.dundeeprecious.com). The following outook is forward looking and based on
certain estimates and assumptions which 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.
Highlights of the three-year outlook include:
(cid:120) Continued solid gold production: Over the next three years, gold production is expected to average
approximately 270,000 ounces per year based on current mine plans. Gold production is expected to
range between 250,000 and 290,000 ounces in 2022, between 265,000 and 310,000 ounces in 2023,
and between 230,000 and 265,000 ounces in 2024.
Stable copper production: Copper production between 2022 and 2024 is expected to average
approximately 35 million pounds per year, based on current mine plans.
(cid:120)
(cid:120)
(cid:120) Attractive all-in sustaining cost: All-in sustaining cost per ounce of gold is expected to range between
$750 and $890 in 2022, between $630 and $760 in 2023, and between $720 and $850 in 2024. The
year over year variations in all-in sustaining cost reflect expected gold grades in concentrate produced
and volumes of gold-copper concentrate delivered to third party smelters, with an overall increase
reflecting higher ocean freight and higher prices for electricity and direct materials.
Stable smelter performance: Annual estimates for complex concentrate smelted vary due to the
timing of scheduled furnace maintenance shutdowns, with the next shutdown scheduled to occur during
the second quarter of 2022. Based on an expected 18-month operating cycle, complex concentrate
smelted is expected to be between 210,000 and 240,000 tonnes in each of 2022 and 2023, and
between 220,000 and 250,000 tonnes in 2024. Cash cost per tonne of complex concentrate smelted is
expected to be between $380 and $460 in 2022, between $350 and $450 in 2023, and between $340
and $440 in 2024, reflecting the impact of increased throughput, as well as estimated cost savings from
a comprehensive initiative directed at optimizing the cost structure of the smelter.
Sustaining capital expenditures: Sustaining capital expenditures vary due to the timing of certain
projects and are expected to be between $57 million and $66 million for 2022, between $46 million and
$54 million for 2023, and between $42 million and $49 million for 2024.
(cid:120)
DUNDEE PRECIOUS METALS INC. I 17
The Company’s three-year outlook is set out in the following table:
$ millions,
Unless otherwise indicated
Gold contained in concentrate produced
(‘000s ounces)(1),(2)
Chelopech
Ada Tepe
Total
Copper contained in concentrate produced
(million pounds)
Chelopech
All-in sustaining cost per ounce of gold(3)
Complex concentrate smelted (‘000s tonnes)
Cash cost per tonne of complex concentrate smelted(3)
Sustaining capital expenditures(3)
Chelopech
Ada Tepe
Tsumeb
Corporate digital initiatives
Consolidated
2021
Results
2022
Guidance
2023
Outlook
2024
Outlook
177
133
310
35
657
190
479
19
18
13
3
53
169 – 191 150 – 170 161 – 182
69 – 83
250 – 290 265 – 310 230 – 265
81 – 99 115 – 140
32 – 39
32 – 37
30 – 35
750 – 890 630 – 760 720 – 850
210 – 240 210 – 240 220 – 250
380 – 460 350 – 450 340 – 440
24 – 27
11 – 13
15 – 18
7 – 8
57 – 66
20 – 22
9 – 10
15 – 18
2 – 4
46 – 54
16 – 17
9 – 10
15 – 18
2 – 4
42 – 49
Gold produced includes gold in pyrite concentrate produced of 48,000 to 54,000 ounces for 2022, and 50,000 to 57,000 ounces in each of 2023 and 2024.
Metals contained in concentrate produced are prior to deductions associated with smelter terms.
All costs and capital expenditures are based on, where applicable, a Euro/US$ exchange rate of 1.16, a US$/ZAR exchange rate of 15.00, a copper price of
$4.25 per pound, and an average sulphuric acid price of $105 per tonne in 2022, $95 per tonne in 2023 and $75 per tonne in 2024, and have not been adjusted
for inflation in 2023 and 2024.
The Company’s detailed guidance for 2022 is set out in the following table:
$ millions,
unless otherwise indicated
Ore processed (‘000s tonnes)
Cash cost per tonne of ore processed
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)
Complex concentrate smelted (‘000s tonnes)
Cash cost per tonne of complex concentrate
smelted (3)
Corporate general and administrative
expenses(4)
Exploration expenses(3)
Sustaining capital expenditures(3) (5)
Growth capital expenditures(3) (6)
Chelopech Ada Tepe
810 – 900
54 – 60
2,090 – 2,200
48 – 53
Tsumeb
-
-
Consolidated
Guidance
2,900 – 3,100
-
169 – 191
32 – 37
81 – 99
-
-
140 – 160
28 – 32
740 – 900
-
80 – 95
-
770 – 880
-
-
-
-
210 – 240
250 – 290
32 – 37
220 – 255
28 – 32
750 – 890
210 – 240
-
-
380 – 460
380 – 460
-
-
24 – 27
2 – 4
-
-
11 – 13
-
-
-
15 – 18
1 – 2
26 – 30
16 – 19
57 – 66
31 – 49
Gold produced includes gold in pyrite concentrate produced of 48,000 to 54,000 ounces and payable gold sold includes payable gold in pyrite concentrate sold
of 31,000 to 36,000 ounces.
Metals contained in concentrate produced are prior to deductions associated with smelter terms.
Based on a Euro/US$ exchange rate of 1.16, a US$/ZAR exchange rate of 15.00, a copper price of $4.25 per pound and an average sulphuric acid price of $105
per tonne, where applicable.
Excludes mark-to-market adjustments on share-based compensation.
Consolidated sustaining capital expenditures include $7 million to $8 million related to corporate new office lease and digital initiatives.
Consolidated growth capital expenditures include estimated costs related to the technical and permitting work for the Loma Larga gold project of $21 million to
$31 million and estimated costs related to the FS for the Timok gold project of $8 million to $12 million (as detailed below).
The foregoing three-year outlook and supplemental detailed 2022 guidance are not expected to occur
evenly throughout the year. The estimated metals contained in concentrate produced, payable metals in
FOURTH QUARTER 2021 I 18
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
furnace maintenance shutdowns at Tsumeb. 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 2022 is expected to be between 169,000 and 191,000 ounces,
which has improved relative to the previous 2022 outlook of 145,000 to 165,000 ounces as a result of higher
recoveries. Gold contained in concentrate produced is expected to range between 150,000 and 170,000
ounces in 2023, and between 161,000 and 182,000 ounces in 2024.
Copper contained in concentrate produced in 2022 is expected to be between 32 and 37 million pounds
declining slightly from the previous 2022 outlook of 32 to 39 million pounds reflecting mining in lower grade
zones. Copper contained in concentrate produced is expected to be between 32 and 39 million pounds in
2023, and between 30 and 35 million pounds in 2024.
Cash cost per tonne of ore processed is expected to be between $48 and $53 in 2022 primarily reflecting
recent price increases for electricity and direct materials.
Sustaining capital expenditures in 2022 are expected to be between $24 million and $27 million, including
approximately $6 million for the next phase of work to continue the upgrade of Chelopech’s tailings
management facility, a portion of which represents 2021 capital deferred to 2022. Growth capital
expenditures related to resource development drilling and margin improvement projects are expected to be
between $2 million and $4 million in 2022. Sustaining capital expenditures are expected to trend lower in
2023, ranging between $20 million and $22 million, including approximately $4 million to complete the
upgrade of the tailings management facility. In 2024, sustaining capital expenditures are expected to decline
further to between $16 million and $17 million.
Ada Tepe
Gold contained in concentrate produced in 2022 is expected to be between 81,000 and 99,000 ounces,
which is approximately 14% below the previous 2022 outlook of 95,000 to 115,000 ounces reflecting the
results from the accelerated grade control drilling program conducted in 2021. Gold contained in
concentrate produced is expected to be between 115,000 and 140,000 ounces in 2023, and between
69,000 and 83,000 ounces in 2024, which will be reviewed and updated, if necessary, following the
completion of the assessment of the accelerated grade control drilling program in the third quarter of 2022.
Cash cost per tonne of ore processed is expected to be between $54 and $60 in 2022 primarily reflecting
recent price increases for electricity and direct materials.
Sustaining capital expenditures in 2022 are expected to be between $11 million and $13 million, up relative
to previous 2022 outlook, including approximately $7 million related to Ada Tepe’s integrated waste
management facility. Sustaining capital expenditures are expected to decline to between $9 million and $10
million in 2023 and remain at this level in 2024.
Tsumeb
Complex concentrate smelted is expected to be between 210,000 and 240,000 tonnes in each of 2022 and
2023, down from the previous 2022 outlook of 220,000 to 250,000 tonnes and 2023 outlook of 230,000 to
265,000 tonnes, reflecting scheduled furnace maintenance shutdowns in the second quarter of 2022 and
at the end of 2023 based on an expected 18-month operating cycle, as well as the recent operating
performance at the smelter. In 2024, complex concentrate smelted is expected to be between 220,000 and
250,000 tonnes reflecting no scheduled furnace maintenance shutdown in 2024. Over 90% of concentrate
feed is currently contracted through to the end of 2023, with the remaining feed in 2022 and 2023 and
additional feed thereafter expected to be contracted in the normal course.
Cash cost per tonne of complex concentrate smelted is expected to range between $380 and $460 in 2022,
between $350 and $450 in 2023, and between $340 and $440 in 2024, reflecting the impact of increased
throughput, as well as estimated cost savings from a comprehensive initiative directed at optimizing the
cost structure of the smelter.
DUNDEE PRECIOUS METALS INC. I 19
Sustaining capital expenditures in 2022 are expected to be between $15 million and $18 million for each of
2022, 2023 and 2024, down from the previous outlook of $16 million to $20 million.
Loma Larga gold project
With positive results from the FS completed by INV prior to the acquisition, the Company is proceeding with
the permitting process while performing technical reviews to optimize the FS, and drilling to further advance
the project. The cost associated with these activities in 2022 is expected to be between $21 million and $31
million and is included in growth capital expenditures.
Timok gold project
The Company is progressing FS work in respect of the Timok gold project which is expected to cost between
$8 million and $12 million in 2022 and is included in growth capital expenditures.
Exploration and evaluation expenditures
Expenditures related to exploration in 2022 are expected to be between $16 million and $19 million and will
be directed primarily toward a 60,000 metre brownfield drilling program on mine concessions and
exploration licences at, or around, the Chelopech and Ada Tepe mines in Bulgaria and the Timok project
in Serbia.
At Chelopech, exploration efforts will concentrate on near mine exploration drilling related to the Sveta
Petka commercial discovery application, with 35,000 metres of drilling planned in 2022.
At Ada Tepe, where 20,000 metres of drilling is planned, almost half of which is dedicated to near-mine
target delineation and drilling within the mining concession and the surrounding Krumovitza exploration
licence. The rest of the budget will be allocated to scout and target delineation drilling on the other regional
licences in the Krumovgrad district, with a focus on the Chiriite exploration licence, where several new vein
targets were identified in 2021.
At Timok, studies to progress Bigar Hill to a mining concession are underway, with exploration activities
focusing on the nearby Umka exploration licence as well as other early-stage licences in Serbia.
At Loma Larga, all geological data will be integrated and reviewed to develop a drilling program focused on
extending the existing mineral resources, which are open in all directions. The Tierras Coloradas
concessions will be transferred to an advanced exploration phase, and a 2,000 metre scout drilling program
will be completed in 2022.
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
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.
FOURTH QUARTER 2021 I 20
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:
569,789
561,986
2021
Three Months
Twelve Months
2020
2021
2020
538,457
541,066
2,206,826 2,182,844
2,199,155 2,201,220
Gold-copper concentrate (%)
Pyrite concentrate (%)
Head grade / recoveries:
Gold (g/mt) / combined recoveries (%)
Copper (%) / %
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)
Cash cost per tonne of ore processed
Cash cost per ounce of gold in gold-copper
concentrate produced
Cash cost per pound of copper in gold-copper
concentrate produced
Gold-copper concentrate delivered (mt)
Pyrite concentrate delivered (mt)
Payable metals in concentrate sold:
Gold in gold-copper concentrate (ounces) (1)
Gold in pyrite concentrate (ounces) (1)
Total payable gold in concentrate sold
Copper (pounds)(1)
Cash cost per ounce of gold sold
All-in sustaining cost per ounce of gold
Cost per tonne of gold-copper concentrate sold(2)
Financial Highlights
Revenue(3)
Cost of sales(4)
Earnings before income taxes
Adjusted EBITDA
Net earnings/Adjusted net earnings
Capital expenditures incurred:
Growth
Sustaining
Total capital expenditures
52.9
25.4
47.8
17.5
50.0
26.0
50.1
22.4
3.47 / 78.3 3.35 / 65.3
0.91 / 80.8 0.85 / 75.7
22,800
51,438
29,034
70,900
3.29 / 76.0 3.50 / 72.5
0.88 / 81.3 0.93 / 78.6
105,765
262,283
109,915
269,084
33,149
15,901
49,050
27,852
10,168
38,020
9,150,837 7,659,384
41.78
53.65
116,433
60,568
177,001
124,060
55,502
179,562
34,687,982 35,642,083
38.42
47.12
521
526
499
451
1.31
26,994
79,788
0.91
24,652
75,102
1.19
112,342
267,569
0.71
106,026
267,897
29,207
11,331
40,538
28,065
9,334
37,399
8,175,296 7,765,680
456
704
1,253
635
833
1,317
111,550
37,747
149,297
114,653
36,111
150,764
32,679,969 33,388,783
587
762
1,070
543
722
1,164
73,486
35,546
38,197
44,131
33,996
992
4,019
5,011
74,380
30,898
42,110
50,057
38,288
1,075
5,202
6,277
292,779
130,798
156,802
179,510
140,756
3,381
19,186
22,567
264,855
113,481
146,758
177,223
132,829
4,147
16,911
21,058
Represents payable metals in gold-copper and pyrite concentrate sold based on provisional invoices.
Represents cost of sales divided by the volume of gold-copper concentrate delivered.
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 favourable final settlements of $0.8 million (2020 – net unfavourable final settlements
of $2.5 million) and net unfavourable final settlements of $1.0 million (2020 – net favourable final settlements of $2.2 million) were recognized in the fourth quarter
and twelve months of 2021, respectively. Deductions during the fourth quarter and twelve months of 2021 were $30.4 million (2020 – $20.2 million) and $101.9
million (2020 – $99.6 million), respectively.
Cost of sales includes depreciation of $5.8 million (2020 – $7.8 million) and $22.1 million (2020 – $29.8 million) in the fourth quarter and twelve months of 2021,
respectively.
DUNDEE PRECIOUS METALS INC. I 21
Review of Chelopech Results
Concentrate and metals production
Gold-copper concentrate produced during the fourth quarter of 2021 of 29,034 tonnes was 27% higher than
the corresponding period in 2020 due primarily to higher copper recoveries as a result of improved recovery
performance, higher copper grades and higher volumes of ore processed. Gold-copper concentrate
produced during 2021 of 109,915 tonnes was 4% higher than 2020 due primarily to higher copper
recoveries, partially offset by lower copper grades.
Pyrite concentrate produced during the fourth quarter and twelve months of 2021 of 70,900 tonnes and
269,084 tonnes, respectively, was 38% and 3% higher than the corresponding periods in 2020 due primarily
to higher gold recoveries.
In the fourth quarter and twelve months of 2021, gold contained in gold-copper and pyrite concentrate
produced was 49,050 ounces and 177,001 ounces, respectively, compared to 38,020 ounces and 179,562
ounces in the corresponding periods in 2020.
Relative to the fourth quarter of 2020, gold contained in gold-copper concentrate produced in the fourth
quarter of 2021 increased by 19% to 33,149 ounces and gold contained in pyrite concentrate produced
increased by 56% to 15,901 ounces. These increases were due primarily to higher gold recoveries and
mining in higher grade zones. Relative to 2020, gold contained in gold-copper concentrate produced in
2021 decreased by 6% to 116,433 ounces due primarily to mining in lower grade zones in the third quarter
of 2021, and gold contained in pyrite concentrate produced of 60,568 ounces was 9% higher due primarily
to higher gold recoveries, partially offset by lower grades.
Copper production of 9.2 million pounds in the fourth quarter of 2021 was 19% higher than the
corresponding period in 2020 due primarily to higher copper grades and recoveries, and higher volumes of
ore processed. Copper production of 34.7 million pounds in 2021 was 3% lower than 2020 due primarily to
mining in lower grade zones, partially offset by higher copper recoveries.
Concentrate deliveries and metals sold
Deliveries of gold-copper concentrate in the fourth quarter and twelve months of 2021 of 26,994 tonnes and
112,342 tonnes, respectively, were 10% and 6% higher than the corresponding periods in 2020 due
primarily to higher gold-copper concentrate production, partially offset by the timing of shipments.
Deliveries of pyrite concentrate in the fourth quarter of 2021 of 79,788 were 6% higher than the
corresponding period in 2020 due primarily to higher pyrite concentrate production and the timing of
shipments. Deliveries of pyrite concentrate in 2021 of 267,569 tonnes were comparable to 2020.
In the fourth quarter of 2021, payable gold in gold-copper concentrate sold increased by 4% to 29,207
ounces and payable copper increased by 5% to 8.2 million pounds, respectively, relative to the
corresponding period in 2020. The increase in payable gold was due primarily to higher gold recoveries
and mining in higher grade zones, partially offset by the timing of deliveries, and the increase in payable
copper was due primarily to higher copper grades and recoveries, and the timing of deliveries. Payable
gold in pyrite concentrate sold in the fourth quarter of 2021 of 11,331 ounces was 21% higher than the
corresponding period in 2020 due primarily to higher gold recoveries and mining in higher grade zones,
partially offset by the timing of deliveries.
In 2021, payable gold in gold-copper concentrate sold decreased by 3% to 111,550 ounces and payable
copper decreased by 2% to 32.7 million pounds, respectively, relative to 2020. These decreases were
consistent with lower volumes of metal in concentrate produced, partially offset by the timing of shipments.
Payable gold in pyrite concentrate sold in 2021 of 37,747 ounces was 5% higher than 2020 and consistent
with higher production.
FOURTH QUARTER 2021 I 22
Inventory
Gold-copper concentrate inventory totalled 2,856 tonnes as at December 31, 2021, down from 5,283 tonnes
as at December 31, 2020 due primarily to the timing of deliveries. Pyrite concentrate inventory totalled
13,301 tonnes as at December 31, 2021, slightly up from 11,786 tonnes as at December 31, 2020 due
primarily to the timing of deliveries.
Cost of sales
Cost of sales during the fourth quarter of 2021 of $35.5 million was $4.6 million higher than the
corresponding period in 2020 due primarily to higher local currency operating expenses related to higher
prices for electricity and direct materials and higher labour costs.
Cost of sales during 2021 of $130.8 million was $17.3 million higher than the corresponding period in 2020
due primarily to higher local currency operating expenses related to higher prices for electricity and direct
materials, higher training and higher maintenance costs due to timing, and the impact of a stronger Euro
relative to the U.S. dollar, partially offset by lower depreciation.
Cash cost measures
Cash cost per tonne of ore processed in the fourth quarter of 2021 of $53.65 was 28% higher than the
corresponding period in 2020 due primarily to higher local currency operating expenses.
Cash cost per tonne of ore processed in 2021 of $47.12 was 23% higher than 2020 due primarily to higher
local currency operating expenses and the impact of a stronger Euro relative to the U.S. dollar.
Cash cost per ounce of gold sold in the fourth quarter of 2021 of $635 was 39% higher due primarily to
higher treatment charges and higher local currency operating expenses, partially offset by higher volumes
of gold sold and higher by-product credits reflecting higher realized copper prices.
Cash cost per ounce of gold sold in 2021 of $543 was 8% lower than 2020 due primarily to higher by-
product credits reflecting higher realized copper prices, partially offset by higher local currency operating
expenses and lower volumes of gold sold.
All-in sustaining cost per ounce of gold in the fourth quarter of 2021 was $833 compared to $704 in the
corresponding period in 2020 due primarily to higher treatment charges and higher local currency operating
expenses, partially offset by higher volumes of gold sold and higher by-product credits reflecting higher
realized copper prices.
All-in sustaining cost per ounce of gold in 2021 was $722 compared to $762 in 2020 due primarily to higher
by-product credits reflecting higher realized copper prices, partially offset by higher local currency operating
expenses, higher cash outlays for sustaining capital and a stronger Euro relative to the U.S. dollar.
Net earnings / Adjusted net earnings
Net earnings and adjusted net earnings in the fourth quarter of 2021 of $34.0 million were $4.3 million lower
than the corresponding period in 2020 due primarily to higher local currency operating expenses, higher
treatment charges, including final cost adjustments on provisional concentrate sales, and lower realized
gold prices, partially offset by higher volumes of metal sold and lower depreciation as a result of the mine
life extension to 2029.
Net earnings and adjusted net earnings in 2021 of $140.8 million were $8.0 million higher than 2020 due
primarily to higher realized metal prices, lower depreciation and lower treatment charges, including final
cost adjustments on provisional concentrate sales, partially offset by higher local currency operating
expenses, lower volumes of metal sold and a stronger Euro relative to the U.S. dollar.
DUNDEE PRECIOUS METALS INC. I 23
The following table summarizes the key drivers affecting the change in adjusted net earnings:
$ millions
Ended December 31,
Adjusted net earnings - 2020
Higher (lower) realized metal prices
Lower depreciation & amortization
(Higher) lower treatment charges, including final settlements
Higher operating expenses(1)
Higher (lower) volumes of metal sold
Income taxes and other
(Stronger) weaker Euro
Adjusted net earnings - 2021
Excludes impact of depreciation and foreign exchange.
Capital expenditures
Three
Months
38.3
(1.1)
2.0
(2.5)
(7.3)
4.4
(0.7)
0.9
34.0
Twelve
Months
132.8
37.4
7.7
3.6
(21.3)
(11.0)
(5.3)
(3.1)
140.8
Capital expenditures during the fourth quarter and twelve months of 2021 of $5.0 million and $22.6 million,
respectively, were $1.2 million lower and $1.5 million higher than the corresponding periods in 2020 and in
line with 2021 guidance.
Mineral Reserve and Mineral Resource update
On March 30, 2021, the Company announced that Chelopech successfully added 3.9 million tonnes to
Mineral Reserves, which more than offset 2020 production depletion of 2.2 million tonnes for a net addition
of 1.7 million tonnes. Relative to the previous Mineral Reserve estimate, this represents an increase of 10%
in tonnage and an increase in metal content of 5% for gold, 13% for silver and 3% for copper, extending
the life of mine to 2029.
Measured and Indicated Mineral Resources, exclusive of Mineral Reserves, increased 22%, representing
a 3.2 million tonnes net increase in tonnage and an increase in metal content of 12% for gold and 6% for
copper, further adding to the potential to extend the mine life, if such Mineral Resources are converted to
Mineral Reserves.
See the Company’s press release dated March 30, 2021 entitled “Dundee Precious Metals Announces
Mine Life Extension and Update to Mineral Resource and Mineral Reserve Estimates for the Chelopech
Mine” for additional information, including key assumptions and parameters relating to the foregoing Mineral
Resource and Mineral Reserve Estimates.
FOURTH QUARTER 2021 I 24
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)
210,223
219,325
2021
Three Months
Twelve Months
2020
2021
2020
256,928
213,428
992,850 1,029,309
890,738
865,587
Gold (g/mt) / %
Gold concentrate produced (mt)
Metals contained in concentrate produced:
Gold (ounces)
Cash cost per tonne of ore processed
Cash cost per ounce of gold in gold concentrate
produced
Gold concentrate delivered (mt)
Payable metals in concentrate sold:
Gold (ounces)(2)
Cash cost per ounce of gold sold
All-in sustaining cost per ounce of gold
Financial Highlights
Revenue(3)
Cost of sales(4)
Earnings before income taxes
Adjusted EBITDA
Net earnings/Adjusted net earnings
Capital expenditures incurred:
Growth
Sustaining
Total capital expenditures
5.75 / 83.4
1,870
4.54 / 83.7
1,515
5.75 / 83.1 4.92 / 84.3
5,926
7,267
33,774
60.27
379
1,930
33,282
425
665
59,373
27,736
32,087
45,785
28,151
-
4,973
4,973
26,097
42.17
337
1,505
25,169
378
573
42,552
22,006
19,000
32,304
17,482
2,126
2,482
4,608
132,964
52.18
118,727
40.07
329
7,329
294
6,138
129,754
375
583
229,314
100,480
127,375
182,175
109,955
-
18,378
18,378
120,070
341
518
197,573
92,450
100,237
156,205
90,799
2,373
13,150
15,523
Recoveries are after the flotation circuit but before filtration.
Represents payable metals in gold concentrate sold based on provisional invoices.
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.
Cost of sales includes depreciation of $14.5 million (2020 – $13.1 million) and $55.3 million (2020 – $54.3 million) in the fourth quarter and twelve months of
2021, respectively.
Review of Ada Tepe Results
Gold production
Gold contained in concentrate produced in the fourth quarter of 2021 of 33,774 ounces was 29% higher
than the corresponding period in 2020 due primarily to higher gold grades.
Gold contained in concentrate produced in 2021 of 132,964 ounces was 12% higher than 2020 due
primarily to higher gold grades, partially offset by lower volumes of ore processed and lower gold recoveries.
Gold sold
Payable gold in concentrate sold in the fourth quarter and twelve months of 2021 of 33,282 ounces and
129,754 ounces, respectively, was 32% and 8% higher than the corresponding periods in 2020 due
primarily to higher gold grades.
Inventory
Gold concentrate inventory totalled 29 tonnes as at December 31, 2021, down from 91 tonnes as at
December 31, 2020.
Cost of sales
Cost of sales during the fourth quarter of 2021 of $27.7 million was $5.7 million higher than the
corresponding period in 2020 due primarily to higher local currency operating expenses reflecting higher
DUNDEE PRECIOUS METALS INC. I 25
prices for electricity and direct materials, higher royalty expense as a result of a higher profit-based royalty
rate, and higher labour costs and increased maintenance activities.
Cost of sales during 2021 of $100.5 million was $8.0 million higher than the corresponding period in 2020
due primarily to higher royalty expense as a result of a higher profit-based royalty rate, higher local currency
operating expenses related to higher prices for electricity and direct materials and higher labour costs, and
the impact of a stronger Euro relative to the U.S. dollar.
Cash cost measures
Cash cost per tonne of ore processed in the fourth quarter of 2021 of $60.27 was 43% higher than the
corresponding period in 2020 due primarily to higher local currency operating expenses, higher royalty
rates, and lower volumes of ore processed, partially offset by a weaker Euro relative to the U.S. dollar.
Cash cost per tonne of ore processed in 2021 of $52.18 was 30% higher than 2020 due primarily to higher
royalty rates, higher local currency operating expenses, and a stronger Euro relative to the U.S. dollar,
partially offset by higher ore processed.
Cash cost per ounce of gold sold in the fourth quarter and twelve months of 2021 of $425 and $375,
respectively, was $47 and $34 higher than the corresponding periods in 2020 due primarily to higher local
currency operating expenses and higher royalty rates, partially offset by higher volumes of gold sold.
All-in sustaining cost per ounce of gold in the fourth quarter of 2021 was $665 compared to $573 in the
corresponding period in 2020 due primarily to higher local currency operating expenses, royalty rates and
cash outlays for sustaining capital expenditures, partially offset by higher volumes of gold sold and lower
allocated general and administrative expenses.
All-in sustaining cost per ounce of gold in 2021 was $583 compared to $518 in 2020 due primarily to higher
cash outlays for sustaining capital expenditures, royalty rates and local currency operating expenses,
partially offset by lower allocated general and administrative expenses and higher volumes of gold sold.
Net earnings / Adjusted net earnings
Net earnings and adjusted net earnings in the fourth quarter of 2021 was $28.2 million compared to $17.5
million in the corresponding period in 2020 due primarily to higher volumes of gold sold and higher realized
gold prices as a result of a prepaid forward gold sales arrangement that was fully settled in December 2020,
partially offset by higher local currency operating expenses and higher royalty rates.
Net earnings and adjusted net earnings in 2021 of $110.0 million were $19.2 million higher than 2020 due
primarily to higher realized gold prices as a result of a prepaid forward gold sales arrangement that was
fully settled in December 2020, and higher volumes of gold sold, partially offset by higher royalty rates and
higher income taxes reflecting higher earnings.
The following table summarizes the key drivers affecting the change in adjusted net earnings:
$ millions
Ended December 31,
Adjusted net earnings – 2020
Higher realized gold prices
Higher volumes of gold sold
(Higher) operating expenses and royalties(1)
Income taxes and other
(Stronger) weaker Euro
Lower depreciation
Adjusted net earnings – 2021
Excludes impact of depreciation and foreign exchange.
Capital expenditures
Three
Months
17.5
2.3
13.3
(4.9)
0.1
0.4
(0.5)
28.2
Twelve
Months
90.8
15.3
13.9
(4.8)
(3.8)
(1.3)
(0.1)
110.0
Capital expenditures during the fourth quarter and twelve months of 2021 of $4.9 million and $18.4 million,
respectively, were $0.3 million and $2.9 million higher than the corresponding periods in 2020 due primarily
to the accelerated life of mine grade control drilling program initiated in September 2020.
FOURTH QUARTER 2021 I 26
Tsumeb – Selected Operational and Financial Highlights
$ thousands, unless otherwise indicated
Ended December 31,
Operational Highlights
Complex concentrate smelted (mt):
Three Months
Twelve Months
2021
2020
2021
2020
Chelopech
Third parties
Total complex concentrate smelted
Cash cost per tonne of complex concentrate
smelted
Sulphuric acid production (mt)
Sulphuric acid deliveries (mt)
Financial Highlights
Toll revenue(1)
Sulphuric acid revenue
Total revenue
Cost of sales(2)
Earnings (loss) before income taxes
Adjusted EBITDA
Net earnings (loss)/Adjusted net earnings (loss)
Capital expenditures incurred:
Growth
Sustaining
Total capital expenditures
9,862
42,070
51,932
445
56,586
57,516
26,960
6,614
33,574
33,564
(2,008)
2,449
(2,008)
526
2,354
2,880
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
187
4,578
4,765
50,569
139,136
189,705
479
201,483
202,054
100,510
18,840
119,350
128,662
(13,163)
7,918
(13,163)
629
12,975
13,604
85,883
146,007
231,890
377
249,235
259,798
125,201
21,929
147,130
124,926
18,843
36,682
18,843
1,985
7,546
9,531
Includes deductions for stockpile interest and favourable or unfavourable estimated metal recoveries.
Cost of sales includes depreciation of $4.7 million (2020 – $2.8 million) and $19.2 million (2020 – $15.1 million) in the fourth quarter and twelve months of 2021,
respectively.
Review of Tsumeb Results
Production & sulphuric acid deliveries
Complex concentrate smelted during the fourth quarter of 2021 of 51,932 tonnes was comparable to the
corresponding period in 2020. Complex concentrate smelted during 2021 of 189,705 tonnes was 18% lower
than 2020 due primarily to the planned Ausmelt furnace maintenance shutdown, which was completed
during the first quarter of 2021, as well as unplanned maintenance downtime due to water leaks in the off-
gas system during the second half of 2021. Originally planned for 30 days, the maintenance shutdown was
extended to 45 days. This was primarily a result of COVID-19 related safety protocols, travel restrictions
and the use of remote commissioning support, as well as an increase in the scope of the maintenance work
around the Ausmelt lining replacement and additional converter maintenance.
Sulphuric acid production during the fourth quarter of 2021 of 56,586 tonnes was 5% higher than the
corresponding period in 2020 due primarily to the mix of concentrate smelted, as a greater proportion of
third party concentrate with higher sulphur content was smelted during the quarter. Sulphuric acid
production during 2021 of 201,483 tonnes was 19% lower than 2020 in line with lower volumes of complex
concentrate smelted.
Sulphuric acid deliveries during the fourth quarter of 2021 of 57,516 tonnes were 9% higher than the
corresponding period in 2020 reflecting the timing of shipments which were temporarily delayed as a result
of transportation constraints in the third quarter of 2021. Sulphuric acid deliveries during 2021 of 202,054
tonnes were 22% lower than 2020 reflecting lower production and the impact of temporary transportation
constraints.
Cost of sales
Cost of sales during the fourth quarter of 2021 of $33.6 million was $5.4 million higher than the
corresponding period in 2020 due primarily to higher local currency operating expenses as a result of higher
maintenance costs and depreciation, partially offset by a weaker ZAR relative to the U.S. dollar. Cost of
DUNDEE PRECIOUS METALS INC. I 27
sales during 2021 of $128.7 million was $3.8 million higher than the corresponding period in 2020 reflecting
the fixed cost nature of the facility, the impact of lower volumes of complex concentrate smelted and a
stronger ZAR relative to the U.S. dollar, partially offset by lower local currency operating expenses.
Cash cost per tonne of complex concentrate smelted
Cash cost per tonne of complex concentrate smelted in the fourth quarter of 2021 of $445 was $39 higher
than the corresponding period in 2020 due primarily to higher local currency operating expenses, partially
offset by higher sulphuric acid by-product credits reflecting higher sulphuric acid prices.
Cash cost per tonne of complex concentrate smelted in 2021 of $479 was $102 higher than 2020 reflecting
the fixed cost nature of the facility and the impact of lower volumes of complex concentrate smelted,
combined with a stronger ZAR relative to the U.S. dollar.
Net earnings (loss) / Adjusted net earnings (loss)
Net loss and adjusted net loss in the fourth quarter of 2021 were $2.0 million compared to net earnings and
adjusted net earnings of $6.4 million in the corresponding period in 2020 due primarily to higher local
currency operating expenses, higher depreciation and lower toll rates.
Net loss and adjusted net loss in 2021 was $13.2 million compared to net earnings and adjusted net
earnings of $18.8 million in 2020 were due primarily to lower volumes of complex concentrate smelted,
lower sulphuric acid deliveries, higher depreciation and a stronger ZAR relative to the U.S. dollar, partially
offset by higher sulphuric acid prices and lower local currency operating expenses.
The following table summarizes the key drivers affecting the change in adjusted net earnings (loss):
$ millions
Ended December 31,
Adjusted net earnings (loss) – 2020
Lower volumes of complex concentrate smelted
Higher (lower) sulphuric acid deliveries
Higher depreciation and amortization
Other
(Stronger) weaker ZAR(1)
Higher (lower) toll rates and sulphuric acid prices
(Higher) lower operating expenses(2)
Higher estimated metal recoveries
Adjusted net earnings (loss) – 2021
Three
Months
6.4
(0.2)
0.2
(1.0)
(2.4)
0.3
(1.1)
(4.7)
0.5
(2.0)
Twelve
Months
18.8
(23.5)
(6.8)
(3.1)
(2.9)
(1.9)
3.1
2.0
1.1
(13.2)
Includes realized gains on foreign exchange option contracts of $0.5 million and $6.5 million in the fourth quarter and twelve months of 2021, respectively,
compared to realized losses of $0.1 million and $3.5 million in the corresponding periods in 2020.
Excludes impact of depreciation and foreign exchange.
Capital expenditures
Capital expenditures during the fourth quarter of 2021 were $2.9 compared to $4.8 million in the
corresponding period in 2020 due primarily to the timing of expenditures. Capital expenditures during 2021
of $13.6 million were $4.1 million higher than 2020 due primarily to expenditures related to the planned
Ausmelt furnace maintenance shutdown.
FOURTH QUARTER 2021 I 28
REVIEW OF CORPORATE & OTHER SEGMENT RESULTS
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
Corporate social responsibility expenses
Exploration and evaluation expenses
Finance cost
Other (income) expense(1)
Loss before income taxes
Adjusted loss before interest, taxes, depreciation
and amortization
Net loss attributable to common shareholders
Adjusted net loss
Three Months
Twelve Months
2021
2020
2021
2020
3,753
2,967
2,215
347
(1,280)
(8,002)
(8,091)
(8,032)
(8,690)
9,378
2,327
4,491
425
(1,684)
(14,937)
(17,366)
(12,008)
(18,147)
18,161
4,838
9,713
1,430
7,454
(41,596)
(32,749)
(46,800)
(35,468)
30,604
4,571
13,262
1,792
(2,314)
(47,915)
(50,788)
(43,397)
(54,056)
Includes net gains on Sabina special warrants of $0.6 million (2020 – $3.1 million) in the fourth quarter of 2021 and net losses on Sabina special warrants of $6.3
million (2020 – net gains of $5.7 million) in 2021, respectively.
General and administrative expenses
General and administrative expenses in the fourth quarter of 2021 were $3.8 million compared to $9.4
million in the corresponding period in 2020 due primarily to lower share-based compensation as a result of
changes in DPM’s share price.
General and administrative expenses in 2021 were $18.2 million compared to $30.6 million in 2020 due
primarily to lower share-based compensation as a result of changes in DPM’s share price, partially offset
by higher information technology related expenses and higher professional fees primarily related to digital
initiatives.
Exploration and evaluation expenses
Exploration and evaluation expenses in the fourth quarter and twelve months of 2021 of $2.2 million and
$9.7 million, respectively, were $2.3 million and $3.6 million lower than the corresponding periods in 2020
due primarily to the timing of drilling activities on potential targets in priority areas at Timok.
For a more detailed discussion on the Company’s exploration activities, refer to the “Exploration” section
contained in this MD&A.
REVIEW OF DISCONTINUED OPERATIONS
MineRP Disposition
On December 22, 2020, the Company and other shareholders of MineRP entered into a definitive
agreement with Epiroc Canada Holding Inc., a subsidiary of Epiroc Rock Drills AB (“Epiroc”) for the sale of
MineRP. The MineRP Disposition closed on May 3, 2021.
The Company received a total cash consideration of $45.2 million for the repayment of DPM shareholder
loans and disposition of its equity interest in MineRP, resulting in a gain on MineRP Disposition of $20.0
million in net earnings from discontinued operations in 2021. Net cash consideration received includes $3.5
million held in escrow on closing to secure against certain representations and warranties for a period up
to 2 years, which was recognized as restricted cash and included in other long-term assets in the
consolidated statements of financial position as at December 31, 2021. The MineRP Disposition also
provides for potential additional proceeds in the form of an earn-out conditional on the achievement of
DUNDEE PRECIOUS METALS INC. I 29
certain revenue targets by MineRP in 2021 and 2022, for which no value has been recognized as at
December 31, 2021.
Financial highlights
Revenue in the fourth quarter and twelve months of 2021 was $nil and $4.5 million, respectively, compared
to $2.6 million and $11.5 million in the corresponding periods in 2020.
Net earnings from discontinued operations attributable to common shareholders in the fourth quarter and
twelve months of 2021 were $nil and $19.4 million, respectively, compared to net losses of $nil and $3.1
million in the corresponding periods in 2020 driven primarily by the gain on MineRP Disposition of $20.0
million.
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2021, the Company had cash of $334.4 million, investments valued at $48.0 million
primarily related to its 8.9% interest in Sabina, 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 sulphuric 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, 2021, the Company’s cash resources and available capital under its RCF continue to
provide sufficient liquidity and capital resources to meet its current operating and capital expenditure
requirements, all contractual commitments, as well as a number of margin improvement and growth related
expenditures. The Company may, from time to time, raise additional capital or amend its RCF to ensure it
maintains its financial strength and has sufficient liquidity to support the funding requirements associated
with one or more of its growth capital projects, such as the Loma Larga and Timok gold 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, 2021 and concluded that it has sufficient
available cash resources to manage the potential impacts that could reasonably be expected to arise.
Capital Allocation – INV Acquisition, Share Repurchases 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.
INV acquisition
On July 26, 2021, the Company acquired all of the issued and outstanding shares it did not already own of
INV, now renamed DPM Ecuador Holdings Inc., which owns DPM Ecuador, the principal assets of which
are comprised of the Loma Larga gold project and certain other exploration licences. This transaction was
accounted for as an asset acquisition and the total consideration for the acquisition consisted of: i) 0.0910
of a DPM common share for each INV common share acquired for a total of 10,664,501 DPM common
shares at a market price of $5.72 (Cdn$7.19) per share with an aggregate value of $61.0 million; ii)
1,119,728 DPM stock options with a fair market value of $2.4 million in exchange for 12,304,700
outstanding INV stock options which vested immediately as at the date of acquisition; and iii) transaction
costs of $2.5 million. The total consideration was allocated primarily to the exploration and evaluation assets
related to the Loma Larga gold project. This acquisition leverages DPM’s proven strengths in developing
FOURTH QUARTER 2021 I 30
world-class assets and applying industry-leading ESG solutions to unlock the significant potential of the
Loma Larga gold project.
For a more detailed discussion on the Loma Larga gold project, refer to the “Development and Other Major
Projects” section contained in this MD&A.
Share repurchases under the NCIB
Effective March 2, 2021, DPM renewed its NCIB to repurchase certain of its common shares through the
facility of the TSX. The number of shares that can be purchased during the period of the NCIB will not
exceed 9,000,000 common shares, being approximately 5% of the outstanding shares as of February 23,
2021. Pursuant to the terms of the NCIB, the Company will not acquire on any given trading day more than
182,760 shares, representing 25% of the average daily volume of shares for the six months ended January
31, 2021. 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 NCIB will be cancelled. The
NCIB will expire on February 28, 2022. In December 2021, the Company initiated an automatic purchase
program under the NCIB to facilitate share repurchases.
In 2021, the Company purchased a total of 1,723,800 shares, of which 1,694,200 shares were cancelled
as at December 31, 2021 with the remaining shares cancelled in January 2022. The total cost of these
purchases was $10.4 million (Cdn$13.2 million) at an average price of $6.02 (Cdn$7.64) per share, $5.3
million of which was recognized as a reduction in share capital and $5.1 million as a reduction in contributed
surplus in the consolidated statements of changes in shareholders’ equity for the year ended December
31, 2021. The Company paid an aggregate of $10.2 million which was included in cash used in financing
activities in the consolidated statements of cash flows for the year ended December 31, 2021 and
recognized an obligation of $0.2 million in accounts payable and accrued liabilities in the consolidated
statements of financial position as at December 31, 2021.
The Board of Directors has approved the renewal of the NCIB (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 17, 2022, over a
period of twelve months commencing after the TSX approval. The New Bid will also allow the Company to
implement an Issuer Repurchase Agreement and automatic share repurchase plan with its designated
broker in order to facilitate the purchase of its shares.
A copy of the TSX Form 12 for the NCIB can be obtained, without charge, by contacting the Company at
info@dundeeprecious.com.
The actual timing and number of shares that may be purchased pursuant to the NCIB 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.
Declaration of dividend
In 2021, the Company declared a quarterly dividend of $0.03 per common share to its shareholders of
record, resulting in total dividend distributions of $22.4 million (2020 – $16.3 million) recognized against its
retained earnings in the consolidated statements of changes in shareholders’ equity. The Company paid
an aggregate of $22.1 million (2020 – $10.9 million) of dividends which were included in cash used in
financing activities in the consolidated statements of cash flows for the year ended December 31, 2021 and
recognized a dividend payable of $5.7 million (December 31, 2020 – $5.4 million) in accounts payable and
accrued liabilities in the consolidated statements of financial position as at December 31, 2021.
On February 17, 2022, the Company declared a dividend of $0.04 per common share payable on April 18,
2022 to shareholders of record on March 31, 2022, representing a 33% increase over the previous quarterly
dividend.
DUNDEE PRECIOUS METALS INC. I 31
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 the estimated capital funding associated with Loma Larga, Timok and other growth
opportunities, which represent 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
The following table summarizes the Company’s cash flow activities:
$ thousands
Ended December 31,
Cash provided from operating activities, before
changes in working capital
Changes in working capital
Cash provided from operating activities
Cash provided from (used in) investing activities
Cash used in financing activities
Increase in cash
Cash and short-term investments
at beginning of period
Cash at end of period
Three Months
Twelve Months
2021
2020
2021
2020
79,900
8,877
88,777
33,058
(7,859)
113,976
50,124
20,412
70,536
(16,828)
(5,049)
48,659
308,595
(55,469)
253,126
(32,073)
(36,208)
184,845
248,605
(51,640)
196,965
(42,551)
(26,165)
128,249
220,401
334,377
100,873
149,532
149,532
334,377
21,283
149,532
The primary factors impacting period over period cash flow movements are summarized below.
Operating activities
Cash provided from operating activities in the fourth quarter of 2021 of $88.8 million was $18.2 million
higher than the corresponding period in 2020 and higher than the $7.6 million increase in earnings before
taxes, due primarily to the prepaid forward gold sales agreement at Ada Tepe being fully satisfied with the
final delivery in December 2020 and lower income taxes paid, partially offset by an unfavourable period
over period change in working capital primarily due to an increase in accounts receivables related to the
timing of deliveries.
Cash provided from operating activities in 2021 of $253.1 million was $56.1 million higher than 2020 and
higher than the $11.5 million increase in earnings before income taxes, due primarily to the prepaid forward
gold sales agreement at Ada Tepe being fully satisfied with the final delivery in December 2020.
Cash provided from operating activities, before changes in working capital, in the fourth quarter and twelve
months of 2021 was $79.9 million and $308.6 million, respectively, compared to $50.1 million and $248.6
million in the corresponding periods in 2020 due primarily to the same factors impacting cash provided from
operating activities as detailed above, except for the impact of changes in working capital.
Investing activities
Cash provided from investing activities in the fourth quarter was $33.1 million compared to cash used in
investing activities of $16.8 million in the corresponding periods in 2020. Cash used in investing activities
in 2021 was $32.1 million compared to $42.6 million in 2020.
The following table provides a summary of the Company’s cash outlays for capital expenditures:
$ thousands
Ended December 31,
Chelopech
Tsumeb
Ada Tepe
Corporate & Other
Total cash capital expenditures
Three Months
Twelve Months
2021
5,149
2,373
5,235
5,127
17,884
2020
5,270
3,475
2,905
61
11,711
2021
18,891
15,660
17,538
12,059
64,148
2020
15,955
6,943
11,661
2,997
37,556
FOURTH QUARTER 2021 I 32
Cash outlays for capital expenditures in the fourth quarter of 2021 of $17.8 million were $6.1 million higher
than the corresponding period in 2020 due primarily to the timing of sustaining capital expenditures and
increased cash outlays for growth capital expenditures related to the Loma Larga project. Cash outlays for
capital expenditures in 2021 of $64.1 million were $26.6 million higher than 2020 due primarily to the
planned Ausmelt furnace maintenance shutdown at Tsumeb completed in the first quarter of 2021, the
planned accelerated life of mine grade control drilling program at Ada Tepe initiated in September 2020,
and increased cash outlays for growth capital expenditures related to the Loma Larga project.
Other factors impacting investing activities period over period are summarized below:
(cid:120)
Proceeds from short-term investments in the fourth quarter of 2021 of $49.7 million compared to
$nil in the corresponding period of 2020; and
(cid:120) Proceeds of $45.2 million from the MineRP Disposition in 2021.
Financing activities
Cash used in financing activities in the fourth quarter and twelve months of 2021 was $7.8 million and $36.2
million, respectively, compared to $5.1 million and $26.2 million in the corresponding periods in 2020.
The primary factors impacting financing activities period over period are summarized below:
(cid:120) Dividends paid in the fourth quarter and twelve months of 2021 of $5.7 million and $22.1 million,
respectively, compared to $3.6 million and $10.9 million in the corresponding periods in 2020;
Payments for shares purchased under the NCIB in the fourth quarter and twelve months of 2021 of
$1.3 million and $10.2 million; and
(cid:120)
(cid:120) Net repayments under the RCF of $10.0 million in 2020.
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(1)
Current liabilities
Liabilities held for sale
Non-current liabilities
Equity attributable to common shareholders(1)
Non-controlling interests(1)
These measures include discontinued operations.
December
31, 2021
334,377
179,416
-
47,983
606,634
1,168,410
85,799
-
78,198
1,004,413
-
December
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)
184,845
40,629
(30,713)
(58,612)
57,401
193,550
6,726
(6,003)
(6,302)
205,744
(6,615)
Cash increased by $184.9 million to $334.4 million during 2021 due primarily to higher realized metal prices,
continued steady operating performance at Chelopech and Ada Tepe, and proceeds from the sale of
MineRP, partially offset by lower volumes of complex concentrate smelted at Tsumeb and an increase in
dividend paid and shares repurchased. Accounts receivable, inventories and other current assets increased
by $40.6 million to $179.4 million due primarily to an increase in accounts receivable as a result of the
timing of customer receipts and higher metal prices. Investments at fair value decreased by $58.6 million
to $48.0 million due primarily to the decrease in Sabina’s share price and the acquisition of INV. As a result
of the Company acquiring 100% of INV on July 26, 2021, INV is no longer reported as an investment at fair
value. Non-current assets, excluding investments at fair value, increased by $57.4 million to $606.6 million
due primarily to the acquisition of the Loma Larga gold project and capital expenditures, partially offset by
depreciation and depletion.
Current liabilities increased by $6.7 million to $85.8 million during 2021 due primarily to an increase in
accounts payable and accrued liabilities as a result of the timing of payments to suppliers and an increase
in income tax liabilities. Non-current liabilities decreased by $6.3 million to $78.2 million due primarily to a
decrease in share-based compensation as a result of the decrease in DPM’s share price. Equity attributable
DUNDEE PRECIOUS METALS INC. I 33
to common shareholders increased by $205.7 million to $1,004.4 million due primarily to net earnings
generated in the period and consideration paid in connection with the INV acquisition, partially offset by a
decrease in accumulated other comprehensive income related to unrealized losses on publicly traded
securities and commodity swap contracts, dividends declared and shares repurchased.
Contractual Obligations, Commitments and Other Contingencies
The Company had the following minimum contractual obligations and commitments as at December 31,
2021:
$ thousands
Lease obligations
Capital commitments
Purchase commitments
Other obligations
Total contractual obligations and commitments
up to 1 year
5,407
9,209
18,985
700
34,301
1 – 5 years over 5 years
1,791
-
-
125
1,916
10,305
-
49
840
11,194
Total
17,503
9,209
19,034
1,665
47,411
As at December 31, 2021, Tsumeb had approximately $73.8 million (December 31, 2020 – $76.9 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 April 2021, the Company and IXM agreed to amend the existing Tolling Agreement to provide for, among
other things: i) targeted declining excess secondary material balances, above which excess secondary
material would be required to be purchased by the Company; ii) the elimination of all excess secondary
material by March 31, 2023; iii) an increase in the defined level of normal secondary material; and iv) an
extension of the Tolling Agreement by three years to December 31, 2026.
As at December 31, 2021, the value of excess secondary materials, as defined in the Tolling Agreement,
was approximately $36.5 million, which was approximately $21.9 million above the targeted levels under
the Tolling Agreement. IXM has agreed to waive the quarterly requirement to purchase secondary materials
above the targeted levels as at December 31, 2021.
Debt
As at December 31, 2021 and 2020, the Company’s total outstanding debt was $nil and the Company was
in compliance with all of its debt covenants.
DPM RCF
DPM has a committed RCF of $150.0 million with a consortium of banks. In February 2021, the Company
extended the RCF’s maturity date from February 2023 to February 2024. 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
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, 2021 and 2020, $nil was drawn under the RCF.
Tsumeb Overdraft Facility
Tsumeb has a Namibian $100.0 million ($6.3 million) demand overdraft facility. 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, 2021 and 2020, $nil was drawn from this facility.
FOURTH QUARTER 2021 I 34
Credit Agreements and Guarantees
In February 2021, Chelopech and Ada Tepe increased its multi-purpose credit facility from $16.0 million to
$21.0 million. This credit facility matures on November 30, 2022 and is guaranteed by DPM. As at
December 31, 2021, $13.9 million (December 31, 2020 – $6.1 million) had been utilized in the form of letters
of credit and letters of guarantee, primarily in respect of concession contracts with the Bulgarian Ministry of
Energy.
Chelopech and Ada Tepe also have a Euro 21.0 million ($23.8 million) credit facility to support mine closure
and rehabilitation obligations in respect of concession contracts with the Bulgarian Ministry of Energy. This
credit facility matures on November 30, 2022 and is guaranteed by DPM. As at December 31, 2021, $23.8
million (December 31, 2020 – $25.8 million) had been utilized in the form of letters of guarantee.
In February 2021, Ada Tepe increased its multi-purpose credit facility from $5.3 million to $10.3 million.
This credit facility matures on November 30, 2022 and is guaranteed by DPM. As at December 31, 2021,
$0.2 million (December 31, 2020 – $0.2 million) had been utilized in the form of letters of credit and letters
of guarantee, primarily in respect of concession contracts with the Bulgarian Ministry of Energy.
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 17, 2022,
190,880,058 common shares were issued and outstanding.
DPM also has 2,818,272 stock options outstanding as at February 17, 2022 with exercise prices ranging
from Cdn$2.69 to Cdn$10.99 per share (weighted average exercise price – Cdn$5.02 per share).
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, 2021, the Company’s investments at fair value were $48.0 million (December 31, 2020
– $106.6 million), the vast majority of which related to the value of its investment in Sabina common shares
and special warrants. Investments at fair value decreased during 2021 due primarily to a decrease in
Sabina’s share price and the Company acquiring 100% of INV on July 26, 2021, resulting in INV no longer
being reported as an investment at fair value.
As at December 31, 2021, DPM held: (i) 31,050,566 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 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, 2021 and 2020.
For the three and twelve months ended December 31, 2021, the Company recognized unrealized gains on
the Sabina special warrants of $0.6 million (2020 – $3.2 million) and unrealized losses of $6.3 million (2020
– unrealized gains of $5.7 million), respectively, in other (income) expense in the consolidated statements
of earnings (loss).
DUNDEE PRECIOUS METALS INC. I 35
For the three and twelve months ended December 31, 2021, the Company recognized unrealized losses
on publicly traded securities of $0.7 million (2020 – unrealized gains of $22.8 million) and $42.6 million
(2020 – unrealized gains of $36.5 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, 2021, 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
18,040 ounces
6,194,982 pounds
Weighted average fixed price
of QP Hedges
$1,803.46/ounce
$4.16/pound
The Company also enters into cash settled commodity swap contracts from time to time to swap future
contracted monthly average prices for fixed metal prices to reduce its future metal price exposure in respect
of its projected production (“Production Hedges”). As at December 31, 2021, the Company had no
outstanding Production Hedges.
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 LME
forward copper prices and New York Commodity Exchange forward gold prices, as applicable. As at
December 31, 2021, the net fair value loss on all outstanding commodity swap contracts was $1.9 million
(December 31, 2020 – $5.7 million), of which $0.02 million (December 31, 2020 – $0.1 million) was included
in other current assets and $1.9 million (December 31, 2020 – $5.8 million) in accounts payable and accrued
liabilities.
For the three and twelve months ended December 31, 2021, the Company recognized net gains of $6.4
million (2020 – net losses of $5.5 million) and net losses of $3.5 million (2020 – $11.1 million), respectively,
on commodity swap contracts in respect of QP Hedges and realized losses of $4.5 million (2020 – $nil) and
$15.7 million (2020 – $nil), respectively, on commodity swap contracts in respect of Production Hedges.
Foreign Exchange Option Contracts
The Company enters into foreign exchange option contracts from time to time to reduce the foreign
exchange exposure associated with projected operating expenses and capital expenditures denominated
in foreign currencies.
Foreign exchange option contracts are entered to provide price protection below a specified “floor” rate and
participation up to a specified “ceiling” rate. The option contracts comprise a series of call options and put
options (which when combined create a price “collar”) that are structured so as to provide for a zero upfront
cash cost.
As at December 31, 2021, the Company had outstanding foreign exchange option contracts in respect of a
portion of its projected Namibian dollar denominated operating expenses, which is linked to the ZAR, as
summarized in the table below:
Year of projected
operating
expenses
2022
Amount hedged
in ZAR
1,464,090,000
Call options sold
weighted average
ceiling rate US$/ZAR
17.05
Put options purchased
weighted average
floor rate US$/ZAR
15.14
As at December 31, 2021, approximately 83% of the Company’s projected Namibian dollar operating
expenses for 2022, respectively, have been hedged.
FOURTH QUARTER 2021 I 36
The Company designates the intrinsic value of foreign exchange option contracts as cash flow hedges. The
time value component of foreign exchange option contracts is treated as a separate cost of hedging.
The fair value gain or loss on these outstanding contracts was calculated based on foreign exchange
forward rates quoted in the market. As at December 31, 2021, the net fair value loss on all outstanding
foreign exchange option contracts was $1.5 million (December 31, 2020 – net fair value gain of $6.4 million),
of which $nil was included in other current assets (December 31, 2020 – $6.4 million) and $1.5 million was
in accounts payable and accrued liabilities (December 31, 2020 – $nil). All foreign exchange option
contracts are subject to master netting agreements. As at December 31, 2021 and 2020, there was no set-
off of assets and liabilities in the consolidated statements of financial position.
The Company recognized realized gains of $0.5 million (2020 – realized losses of $0.1 million) and $6.5
million (2020 – realized losses of $3.5 million), respectively, for the three and twelve months ended
December 31, 2021 in cost of sales on the spot component of settled contracts.
For the three and twelve months ended December 31, 2021, the Company recognized unrealized losses
of $2.4 million (2020 – unrealized gains of $6.4 million) and $5.4 million (2020 – unrealized gains of $3.4
million), respectively, in other comprehensive income (loss) on the spot component of the outstanding
foreign exchange option contracts. For the three and twelve months ended December 31, 2021, the
Company also recognized unrealized losses of $0.1 million (2020 – unrealized gains of $2.5 million) and
$2.5 million (2020 – unrealized losses of $0.9 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 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 2021, a total of 45,585 metres of resource development diamond drilling was completed within the
Chelopech mine, of which 32,393 metres were extensional drilling, which was designed to explore for new
mineralization along modelled trends.
Extensional diamond drilling was concentrated on the upper levels of the Chelopech mine, to test for
possible extensions to Blocks 8, 10 and 700, as well as ‘Target North’, located in the northwestern part of
the deposit and Block 148. A review of the extensional drilling program is discussed below.
Blocks 8, 10 and 700
A total of 12,653 metres were drilled during 2021 from two separate underground drill locations to test the
area between Blocks 8, 18 and 700 and to test the southeastern flank of Block 10 for additional
mineralization. Drilling was also designed to check the lowest part and to define the shape and size of Block
700 and to explore the southwestern part of Block 8.
Drill hole EXT700_505_08 (shown in the table below) returned positive results with high-grade gold
intersections. The first significant interval is presented as discrete barite–quartz–sphalerite and quartz–
sphalerite veins, located within a sericitic alteration zone between 336 metres to 356 metres. The second
intercept is presented as a barite–sphalerite–galena stockwork hosted within an advanced argillic alteration
envelope. The results from this hole extended the interpreted lower limits of Block 700 at depth, by
approximately 20 metres.
From this same program, drill hole EXT700_505_14 (shown in the table below) returned positive results
from the upper levels of Block 18, extending the extents of the prospective silica envelope to the south by
approximately 30 metres, while the remaining holes did not intersect significant mineralization.
DUNDEE PRECIOUS METALS INC. I 37
Assay results from another program, designed to test Block 700 from location ND-730-440-BP10 returned
generally grades below the reporting criteria. However, there was one intercept above the reporting criteria
that extended the Block 700 high grade domain contours by 20 metres to the east, which is reported in the
table below (see drill hole EXT700_680_15).
Target North (NNW of 147 and Wedge Zone Target)
The Target North zone is in the northern section of the mine concession and manifested as isolated,
structurally and lithologically controlled intervals of high-sulphidation type of mineralization. Mineralization
typically appears to be hosted within narrow (10 to 20 metres wide) breccia pipe zones and appears to
predominantly align in a NW-SE strike orientation of mineralization. As part of the Target North exploration
program, 7,476 metres were completed to test for a continuation to mineralization in an area to the
northwest of Blocks 146, 147 and towards Block 148. Sporadic mineralization was observed hosted within
advanced argillic zones, comprised of individual veins of pyrite–tennantite–barite mineralization and
disseminated pyrite–tennantite and minor chalcopyrite.
From this program, EXT148W_210_18 returned positive results, with the mineralization presented as
disseminated pyrite–tennantite–chalcopyrite hosted within an advanced argillic alteration zone. The
updated interpretation based on this result expanded Target 184 up-dip by approximately 50 metres above
the last drill intercept. A second hole, EXT148W_210_04, intercepted narrow structurally controlled
mineralization approximately 90 metres along strike from the western flank of Block 146, however further
infill drilling is needed to determine the continuity of this mineralization.
Block 148
During 2021, an extensional drilling program from level 135 was completed to test the Block 148 zone. The
program aimed to test for new mineralization at depth (between levels 130 mRL and -40 mRL) below Block
148 and to test gaps in drilling between Blocks 148 and 151. Drilling extended the outline of prospective
advanced argillic alteration, but the majority of assay results returned values below the reporting criteria
outlined below. In total two holes, EXT151_135_01 and EXT151_135_09 (presented in table below)
returned significant intersections from the western and eastern flanks, respectively, of Block 144. Both
intercepts extended the current modelled mineralization extents by approximately 15 metres.
Furthermore, holes from location 149S-210-EXP were designed to explore along strike of Block 148. Drilling
during 2021 extended the envelope of prospective advanced argillic alteration, but assay results returned
narrow, low-continuity mineralization that is below the reporting criteria. Only two holes from the program,
EXT148_210_03 and EXT148_210_05, returned significant intercepts from Block 148 (presented in table
below).
Outlook
In the first quarter of 2022, the Mineral Resource development strategy for Chelopech will be focused on:
(cid:120) Continued drilling to test the shallower level of Blocks 144 and 149;
(cid:120) Continued resource development drilling towards Target North; and
(cid:120) Drilling planned on level 480, aiming to test the gap between Blocks 25 and 19 near to the boundary
between pre-mineral dacitic volcanic and post mineral sandstone units.
FOURTH QUARTER 2021 I 38
Significant intercepts (gold equivalent (“AuEq”) cut-off grade of 2.5 g/t) received from extensional
drilling activities during 2021:
Hole ID
East
North
RL
AZ
DIP
From
To
EXT148_210_03
EXT148_210_05
EXT148W_210_04
EXT148W_210_18
EXT151_135_01
EXT151_135_09
EXT700_505_08
EXT700_505_08
EXT700_505_14
EXT700_680_15
5350
5349
5348
5350
5519
5522
6410
6410
6412
6258
29740
29740
29747
29747
29380
29381
29628
29628
29629
29745
213
212
213
213
134
133
503
503
502
688
156.7
177.2
340
20.7
317.7
3.0
169.5
189.0
-39.1
201
211.5
8.6
5.6
0.6
223.15
240.0
309
325.5
259.5
270.0
9.5
-5.9
396.0
417.0
264.7
264.7
301.1
257.7
8.0
8.0
-9.3
-0.6
336.0
355.5
370.9
384.8
241.5
255.0
103.5
129.0
True
Width
(m)
AuEq
(g/t)
Au
(g/t)
19.5
8.0
16.6
16.0
10.5
21.0
19.5
13.5
13.5
25.0
2.85
2.66
3.07
6.57
2.72
3.14
4.32
4.94
13.86
3.52
2.22
1.46
1.02
6.21
1.89
2.34
4.30
4.71
6.19
3.40
Ag
(g/t)
6.65
4.23
Cu
(%)
0.37
0.71
33.17
1.22
4.74
6.64
3.66
0.22
0.49
0.47
33.62
0.01
72.70
0.14
24.27
4.57
80.28
0.07
Significant intercepts are located within the Chelopech mine concession and proximal to the mine workings.
AuEq calculation is based on the following formula: Au g/t + 1.68 x Cu %, based on a gold price of $1,600 per ounce and a copper price of $4.00 per pound and
long term average metallurgical recoveries of 89% for gold and 87% for copper from the Chelopech mine.
Significant intercepts are reported using a minimum downhole width of 10 metres with a maximum internal dilution of 4.5 metres at a 2.5 g/t AuEq cut-off.
All holes are drilled with NQ diamond core.
Coordinates are in mine-grid.
No factors of material effect have hindered the accuracy and reliability of the data presented above.
No upper cuts applied.
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 metre 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.
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 modelled Mineral 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 Minerals (“SGS”) managed laboratory at Chelopech
in Bulgaria, which is independent of the Company. Samples are routinely assayed for copper, gold, silver,
sulphur and arsenic. Gold analyses are done using a 25-gram fire assay and atomic absorption
spectrometry (“AAS”) finish. Assay values over 20 ppm gold are re-analysed using gravimetric finish.
Copper, silver and arsenic analyses are completed using a two-acid digestion and AAS finish. Samples
returning over 100 ppm for silver and 3% for copper are re-analyzed using high grade methods with AAS
finish. Sulphur is analyzed using an Eltra Analyzer equipped with an induction furnace.
The Company’s QP 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.
DUNDEE PRECIOUS METALS INC. I 39
Chelopech Brownfield Exploration
During 2021, a total of 41 drill holes (37,925 metres) were completed as part of the brownfield exploration
program at Chelopech, focused on:
(cid:120)
Target delineation drilling at the Wedge and West Shaft prospects within the Sveta Petka exploration
licence;
(cid:120)
(cid:120) Drill testing of conceptual targets within the Brevene exploration licence (Bridge, Kazana, Aramu
South, Chapel, and Murgana) as well as grade/model evaluation drilling at the Vozdol prospect;
Scout drill testing of the Petrovden gold-copper-molybdenum porphyry prospect, aiming to delineate
higher grade zones that may potentially be amenable to underground mining; and
Exploration drilling to re-evaluate the high-sulphidation type copper-gold mineralization defined
historically at the Sharlo Dere prospect within the mine concession area.
(cid:120)
Within the Sveta Petka exploration licence, following completion of drilling activities at West Shaft and
Wedge prospects early in 2021, a detailed drill core and data review was completed to support an updated
geologic model which will be used to optimize infill and Mineral Resource delineation drilling, planned to
start in the first quarter of 2022. The permitting process, that commenced with a Geologic Discovery
Certificate being issued by the Bulgarian Ministry of Energy in January 2021, is close to completion. The
one-year extension of the exploration program, required for the further assessment and application for a
Commercial Discovery, was received in November 2021 and site access and permitting for drilling pads is
underway.
At the Sharlo Dere prospect in the mine concession, 17 holes totalling nearly 13,000 metres were drilled to
confirm historical intercepts and to better assess the continuity and upside potential of the high sulphidation
copper–gold mineralization. The drilling to date returned a series of advanced argillic intervals with discrete
to semi-massive zones of sulphide/sulphosalt mineralization (significant intercepts reported in the table
below). Dependent on the evaluation of the remaining results, the program will continue in early 2022.
At the Vozdol prospect within the Brevene exploration licence, six holes were completed for a total of 6,066
metres. The program aimed to evaluate the continuity of mineralization as inferred by historical drilling
programs and provide a better understanding of the metallogenetic controls. While assay results are
partially still pending, re-assessment of the geological model is ongoing and expected to be completed in
early 2022.
Drill testing is ongoing at the Petrovden porphyry prospect, located immediately north of the Chelopech
mine. The prospect is a large area of low-grade porphyry style mineralization in the footwall of the Petrovden
fault. It has an alteration footprint of over 1,000 metres in length, over 500 metres wide and over 1,500
metres vertical extension which remains open at depth. A total of 3,693 metres have been completed as
part of two deep drill holes (EX_VD_07 and EX_VD_08). Current observations suggest that the causative
intrusion consists of series of narrow granodiorite dykes that intrude the high-grade metamorphic basement
rocks, following the steeply-dipping and ENE-striking trend of the Petrovden Fault system. More consistent
gold-copper-molybdenum mineralization, with elevated silver and rhenium, is closely correlated with higher
stockwork intensities and pervasive phyllic alteration overprinting potassic alteration. Mineralization has
been intercepted from an elevation of -160 metres and traced to a depth of -700 metres (significant intervals
of available assays from EX_VD_07 are showed below).
Plans for the first quarter of 2022 include completion of the drilling programs at the Sharlo Dere and
Petrovden porphyry prospects, as well as operational and technical preparation for the intensive drilling
program to support the Commercial Discovery application at Sveta Petka exploration licence, expected to
begin in March 2022.
FOURTH QUARTER 2021 I 40
Significant intercepts from brownfield exploration drilling in 2021 at the Sharlo Dere prospect:
Hole ID
East
North
RL
AZ
DIP
From
To
Length
(m)
AuEq
(g/t)
Au
(g/t)
Ag
(g/t)
Cu
(%)
EX_SD_06
EX_SD_09
EX_SD_10
EX_SD_10
including:
EX_SD_10
6948
7092
6534
30674
851
290
30711
789
30487
855
295
185
-60
-57
-50
345
350
414
421
473
479
604
618
607
612
731
736
5
7
6
14
5
5
2.53
3.07
4.93
1.61
2.39
1.98
2.64
0.55
0.65
3.93
69.00
0.56
14.18
8.17
13.51
3.58
35.37
19.41
34.48
9.50
3.94
2.15
9.76
1.12
AuEq calculation is based on the following formula: Au g/t + 1.68 x Cu %, based on a gold price of $1,600 per ounce and a copper price of $4.00 per pound and
long- term average metallurgical recoveries of 89% for gold and 87% for copper from the Chelopech mine.
Significant intercepts are reported using a minimum downhole length of 5 metres and a maximum internal dilution of 5 metres at a 2.5 g/t AuEq cut-off.
No upper cuts applied.
Coordinates are in Chelopech mine-grid.
True widths not reported at this stage, as additional data is required to define the plunge of the mineralization.
Significant intercepts from brownfield exploration drilling in 2021 at the Petrovden prospect:
Hole ID
East
North
RL
AZ DIP
From To
Length
(m)
AuEq
(g/t)
Au
(g/t)
Cu
(%)
Mo
(g/t)
Ag
(g/t)
Re
(g/t)
EX_VD_07
5339
30957
854 150
-60 1,172
1,524
352
0.62
0.14 0.23
115.6
0.60
including:
including:
including:
1,259
1,298
1,379
1,404
1,416
1,463
39
25
47
0.84
0.18 0.35
85.1
0.83
0.76
0.23 0.28
66.8
0.79
0.80
0.16 0.28
210.3
0.57
0.36
0.31
0.24
0.57
AuEq calculation is based on the following formula: Au g/t + 1.71 x Cu % + 0.00078 x Mo (g/t), based on a gold price of $1,600 per ounce, a copper price of $4.00
per pound and a molybdenum price of $40 per kilogram. Theoretical average recoveries of 90% have been assumed for Au, Cu and Mo, which is considered
appropriate based on review of other porphyry operations. No metallurgical tests have been performed and the assumed recoveries are likely to change.
Significant intercepts at 0.5 cut-offs are reported at a 30 metres minimum length and 15 metres internal dilution, while including intercepts that are reported at
0.7 cut-off and 10 metres minimum length and 5 metres internal dilution.
Coordinates are in Chelopech mine-grid.
True widths not reported at this stage, as additional data is required to define the plunge of the mineralization.
Ada Tepe Grade Control Drilling
In 2021, reverse circulation drilling was conducted in pushbacks two, three and four of the Ada Tepe pit as
part of a plan to complete all grade control drilling within the life of mine pit volume.
During 2021, a total of 210,158 metres were completed with four active drill rigs. In the first quarter of 2022,
5,095 metres of grade control drilling are planned. The program is scheduled for completion in the first
quarter of 2022.
Ada Tepe Brownfield Exploration
A total of 51 drill holes (6,085 metres) were drilled in the Surnak, Synap and Kuklitsa prospects. The
significant intercepts from the drilling campaigns are shown in the tables below.
DUNDEE PRECIOUS METALS INC. I 41
Significant intercepts from 2021 drilling campaign at the Surnak prospect:
Hole ID
East
North
RL
AZ
SUDD074
384357
4587658
444
312
and
and
and
SUDD075
and
SUDD076
and
and
SUDD079
SUDD080
SUDD081
and
384025
4587826
448
82
383996
4587783
465
80
384239
4587431
384310
4587364
384355
4587659
480
458
444
259
272
237
DIP
-48
-34
-42
-40
-30
-49
SUDD082
384244
4587433
479
92
-47
From
(m)
87
109
133
216
93
105
116
132
172
0
31
66
78
43
To
(m)
104.1
125.3
151
234.8
99
110.3
122
142
179
13
36
72
86
49
Length
(m)
17.1
16.3
18
18.8
6
5.3
6
10
7
13
5
6
8
6
Au
(g/t)
1.40
1.06
0.81
1.32
1.22
1.47
0.86
1.04
0.80
0.82
0.62
1.04
1.64
0.60
Coordinates are in UTM grid.
Cut-off grade of 0.6 g/t Au, 5 metres minimum length, 4 metres maximum internal dilution.
The true width has not been reported due to the disseminated style and variable geometry of mineralization.
Significant intercepts from 2021 drilling campaign at the Kuklitsa and Synap prospects:
Hole ID
East
North
RL
AZ
DIP
From
(m)
KUDD032
KUDD038
KUDD044
SYDD011
SYDD012
SYDD013
SYDD014
SYDD015
SYDD016
and
SYDD017
SYDD020
386550
4585344
386557
4585721
386736
4585937
386456
4586977
386500
4586935
386594
4586856
386500
4586936
386498
4586934
386458
4586979
386457
4586979
386616
4586701
SYDD026
386571
4586942
402
355
329
348
337
335
340
340
349
349
279
334
111
124
83
272
41
225
260
233
48
311
220
227
Kuklitsa Prospect
-54
-43
-58
7
64.6
43
Synap Prospect
-46
-51
-45
-46
-71
-52
-42
-41
-38
44
64
95
48
44
70
96
53
8
88
To
(m)
11
71
56
65
109
99
69
66.4
91
107
57
12
102
Coordinates are in UTM grid.
Cut-off grade of 0.6 g/t Au, 4 metres minimum length, 4 metres maximum internal dilution.
The true width has not been reported due to the disseminated style and variable geometry of mineralization.
Length
(m)
4
6.4
13
21
45
4
21
22.4
21
11
4
4
14
Au
(g/t)
12.23
0.91
0.64
0.63
0.66
0.80
0.94
0.88
0.70
0.89
0.99
4.18
0.82
Ag
(g/t)
10.66
9.59
9.21
7.05
9.04
9.54
7.46
8.83
1.59
12.33
3.26
8.89
9.19
3.44
Ag
(g/t)
7.6
2.65
1.29
1.65
0.69
2.18
0.58
0.73
0.73
0.72
1.16
1.98
2.15
After completion of the drilling campaign, the geological activities were focused on an extensive target
delineation campaign that encompassed the Surnak, Skalak, Synap and Kuklitsa prospects of the Khan
Krum mining concession area, as well as the Lada prospect and on the newly granted Krumovitsa
exploration licence. This included systematic geological mapping, rock sampling and trenching, as well as
ground electrical, radiometric and seismic surveys.
Rock samples taken during detailed mapping returned up to 6.64 g/t gold south of the Surnak main zone
and up to 6.35 g/t gold along its north-western extension. Based on these results and updated
interpretations, at Surnak there are indications for the potential extension of mineralization in approximately
0.5 kilometres to both the North-West and the South directions.
FOURTH QUARTER 2021 I 42
The target delineation work completed during 2021 will form the foundation of a drilling campaign expected
to take place in the middle of 2022, with 41 drill pads being already submitted for permitting.
Exploration activities during the last quarter of 2021 were focused at the Elhovo exploration licence with
nine drill holes for a total of 2,206 metres completed on the Rigel and Ralichevo prospects. In parallel to
scout drilling, detailed geological mapping and additional trenching was also completed in Rigel North
prospect.
Significant gold assay results received during the fourth quarter of 2021 include drill hole ELHDD011 with
a reported downhole width of five metres at 1.13 g/t gold, including one metre with 2.94 g/t gold. The results
from trenching and rock sampling are still pending. Elevated gold grades are associated with sulphide
mineralization hosted in structurally controlled tectonic zones overprinted by silica and argillic alteration.
Significant drill intercepts from the Elhovo exploration licence received in the fourth quarter of 2021:
Hole ID
East
North
RL
AZ
DIP
ELHDD010
ELHDD011
ELHDD015
376197
4583253
376346
4583081
374205
4583655
584
571
515
43
342
343
-61
-52
-44
From
(m)
228
0
16
To
(m)
233
5
20
Length
(m)
5
5
4
Au
(g/t)
0.65
1.13
0.78
Coordinates are in UTM grid.
Cut-off grade of 0.6 g/t Au, 4 metres minimum length, 4 metres maximum internal dilution.
The true width has not been reported due to the disseminated style and variable geometry of mineralization.
At Chiriite exploration licence, detail geological mapping (1:1000 scale) with rock sampling and trenching
was conducted at the Golden Creek, Chernichino and Kara Tepe prospects. A total of 27 trenches (634
metres) were completed with the best intercept from trench CHETR013, returning six metres at 1.65 g/t
gold (including one metre at 5.94 g/t gold). Additionally, rock sampling at the Kara Tepe prospect delineated
a footprint of more than one kilometre of anomalous gold values with rock samples returning up to 11.9 g/t
gold.
The permitting process for a total of 50 drill sites is ongoing and scout drilling is expected to commence in
the first quarter of 2022, aiming to confirm the continuity of the veins and mineralized breccias at depth and
evaluate the potential connection with the near-by Chatal Kaya prospect.
Ecuador Exploration
After the acquisition of the Loma Larga project, a drilling program has been prepared to support various
studies complementary to the refinement of the feasibility study. The drilling program will consist of 15,800
metres of hydrogeological, geotechnical, metallurgical, condemnation and extension drilling. The drilling
commenced in the first quarter of 2022 and is expected to be completed in the third quarter of 2022. All the
geological data will be integrated and reviewed to develop an exploration program on the Loma Larga
concessions during the second half of 2022.
Prospecting, mapping and sampling have been undertaken on the Tierras Coloradas license in 2021 and
a 450-kilometre line HD Magnetic helicopter-borne survey was completed in January 2022. A magnetic
survey of 475 kilometres has also been planned on the Rubescada property during the second quarter of
2022.
Timok Gold Project Brownfield Exploration
In 2021, DPM continued to advance exploration activities at the Timok gold project with a focus on adding
resources to extend the project mine life. Early in the year the exploration drilling was focused on shallow
oxide resource delineation at the Chocolate and Chocolate south targets, proximal to Bigar Hill, as well as
target delineation drilling for high-grade Au-Cu manto-skarn mineraliza(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:81)(cid:3) (cid:253)(cid:82)(cid:78)(cid:68)(cid:3) (cid:53)(cid:68)(cid:78)(cid:76)(cid:87)(cid:68)(cid:15)(cid:3) (cid:41)(cid:85)(cid:68)(cid:86)(cid:72)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)
other targets within Umka and Potaj-(cid:253)(cid:88)(cid:78)(cid:68)-Tisnica exploration licences.
DUNDEE PRECIOUS METALS INC. I 43
In the third quarter of 2021, a three-year retention period for the Potaj-(cid:253)(cid:88)(cid:78)(cid:68)-Tisnica exploration licence was
granted, allowing DPM to carry on monitoring and desktop mandatory studies required for progression of
the Bigar Hill to a mining concession. Initial metallurgical testing has been completed for the (cid:253)(cid:82)(cid:78)(cid:68)(cid:3)Rakita
prospect and the results on five orientation samples show that the mineralization encountered is amenable
to both flotation and leaching.
On the Umka exploration licence, a high-resolution ground magnetic survey of 26 square kilometres at 100
metre line spacing was undertaken in late 2021, and a scout drilling program commenced with 5 drill holes
with a total of 5,279 metres completed. Drilling revealed large areas with calc-silicate altered sedimentary
host rocks and weakly mineralized porphyry stocks. Existing intersects include only narrow gold mineralized
intervals and assays are still pending for multiple holes.
Plans for 2022 include follow-up target delineation and drilling at Umka, based on the results to date and
additionally a ground-based gravity survey is planned to commence late in the first quarter of 2022, as well
as regional field activities on other early-stage licences.
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.
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
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 75 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.
The Company’s QP 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.
FOURTH QUARTER 2021 I 44
DEVELOPMENT AND OTHER MAJOR PROJECTS
Loma Larga Gold Project
In the third quarter of 2021, DPM completed the acquisition of the high-quality, advanced stage Loma Larga
gold project in Ecuador. The project adds approximately 2.6 million gold equivalent ounces (gold equivalent
based on a gold price of $1,250 per ounce, silver price of $18 per ounce and copper price of $3 per pound
and assumes 100% metallurgical recovery). These gold equivalent ounces of high-grade mineral reserves
for an initial 12-year mine life and has the potential to produce an annual average of approximately 200,000
gold ounces in the first five years. Life of mine production is estimated to be approximately 170,000 gold
ounces per year at an attractive all-in sustaining cost of approximately $630 per ounce of gold, which
continues to support DPM’s peer-leading cost profile.
For more information, including key assumptions, risks and parameters relating to the FS, refer to the
Technical Report entitled “NI 43-101 Feasibility Study Technical Report, Loma Larga Project, Azuay
Province, Ecuador” dated April 8, 2020 and re-issued by DPM on November 29, 2021, which has been
posted on the Company’s website at www.dundeeprecious.com and has been filed on SEDAR at
www.sedar.com.
Located in the Azuay province of Ecuador, the project has similar geology, mining method and processing
flow sheet to our Chelopech underground mine. Loma Larga is expected to produce a pyrite gold
concentrate that can be sold to various copper and gold smelting operations, as well as a small quantity of
complex concentrate, which DPM could process at its Tsumeb smelter.
Following closing of the acquisition, the Company has been focused on integration activities, stakeholder
engagement and a review of the technical studies and permitting schedule. DPM mobilized its Enterprise
Project Management Office to provide support for the initial integration phase and is now implementing its
well-established project development methodology. A comprehensive stakeholder and social engagement
strategy is being developed and a review is underway to assess the alignment of the environmental and
social studies against leading international practices. The permitting schedule has also been reviewed and
is now being optimized. DPM is targeting completion of a revised FS in 2022 and has commenced scoping
the FS optimization work as well as the design of a metallurgical test program, the results of which will be
incorporated into the revised FS. A 15,800 metre drill program that will consist of metallurgical,
geotechnical, hydrogeological and condemnation drilling is planned to optimize specific aspects of the
previous FS and has commenced in the first quarter of 2022. Based on the revised permitting schedule,
DPM is targeting to receive the major environmental permits by the end of 2022, followed by finalization of
the exploitation agreement and construction permits. DPM is engaging with local communities, government
authorities and other stakeholders, utilizing leading international practices, while concurrently adhering to
a disciplined approach to project development in order to minimize up-front spend during the permitting
process. The Company is also progressing discussions that are expected to result in the execution of an
investor protection agreement with the government of Ecuador prior to making any significant capital
commitments.
Timok Gold Project
The Timok gold project is a sediment hosted gold deposit located in the central-eastern region of the
Republic of Serbia.
On February 23, 2021, DPM announced the results of the PFS for the Timok gold project which focused on
the development of the oxide and transitional portions of the Mineral Resource. The PFS was based on the
updated Mineral Resource Estimate, dated May 29, 2020, which considered primarily oxide and transitional
material types.
The PFS included the following highlights:
(cid:120)
After-tax NPV5% of $135 million and internal rate of return of 21% assuming a gold price of $1,500
per ounce;
DUNDEE PRECIOUS METALS INC. I 45
(cid:120)
(cid:120)
547,000 gold ounces recovered over an eight-year mine life, with annual gold production estimated
to average approximately 80,000 ounces per annum in years 1 to 6, and approximately 70,000
ounces per annum over the life of mine; and
Life of mine average all-in sustaining cost of $693 per ounce of gold.
Based on the positive results of the PFS, the Company has proceeded with a FS, which is scheduled for
completion and release in the second quarter of 2022.
Initial capital for the Timok gold project is estimated to be $211 million, with several initiatives underway
directed at reducing the initial capital estimate and optimizing overall economics, including the potential for
contractor mining and adding potential mineral resources associated with the Chocolate prospect into the
mine plan, to be evaluated as part of the FS.
The FS engineering commenced in June 2021 and continued to focus on the oxide portion of the deposit.
The Company completed the planned FS fieldwork activities in the second quarter of 2021.
The three-year retention of mineral rights was received during the third quarter of 2021. Other permitting
activities associated with the spatial planning continued during the third quarter of 2021 with the objective
of securing the mining rights for the project. The terms of reference for the spatial plan were released during
the fourth quarter of 2021 for public review.
For additional details, including key assumptions, risks and parameters relating to the PFS, refer to the
news release entitled “Dundee Precious Metals Announces Positive Pre-Feasibility Study and Encouraging
New Exploration Results for the Timok Gold Project in Serbia” dated February 23, 2021 and the Technical
Report entitled “NI 43-101 Technical Report, Timok Project, Pre-Feasibility Study, Zagubica, Serbia”
effective March 30, 2021, which have been posted on the Company’s website at www.dundeeprecious.com
and have been filed on SEDAR at www.sedar.com.
Tsumeb Rotary Holding Furnace
The Company continues to assess opportunities to further optimize the inherent value of the Tsumeb
smelter operation. Am assessment was completed in respect of 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 would 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
monitor and pursue potential opportunities to secure additional long-term supply of complex concentrate
on acceptable terms that would support this expansion.
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 December
2022 with an option to renew.
FOURTH QUARTER 2021 I 46
OFF BALANCE SHEET ARRANGEMENTS
The Company has not entered into any off-balance sheet arrangements.
SELECTED QUARTERLY 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
Net earnings (loss) attributable to:
(cid:120) Continuing operations
(cid:120) Discontinued operations
(cid:120) Non-controlling interests
Net earnings (loss) per share:
(cid:120) Continuing operations
(cid:120) Discontinued operations
Net earnings (loss) diluted per share:
(cid:120) Continuing operations
(cid:120) Discontinued operations
Adjusted net earnings(1)
Adjusted basic earnings per share(1)
2021
Q3
Q4
Q1
166.4 162.3 174.7 138.0
19.8
51.5 50.4 88.1
Q2
52.1 50.4 67.5
20.7
(0.6)
-
(0.1)
-
-
0.27 0.27
0.48
0.27 0.27 0.37
0.11
-
-
0.27 0.26
0.48
0.27 0.26 0.37
0.11
67.1
0.37
-
51.4
0.27
-
52.5
0.28
20.7
(0.7)
(0.2)
0.11
0.11
-
0.11
0.11
-
31.0
0.17
2020
Q3
156.0
53.3
Q2
Q1
154.0 147.8
42.5
49.0
55.2
(1.5)
(0.4)
0.30
0.31
(0.01)
0.29
0.30
(0.01)
51.6
0.28
48.0
0.8
0.2
0.27
0.27
-
0.27
0.27
-
44.1
0.25
45.7
(2.5)
(0.7)
0.24
0.25
(0.01)
0.24
0.25
(0.01)
48.6
0.27
Q4
151.8
50.1
50.2
0.1
(0.2)
0.28
0.28
-
0.27
0.27
-
44.0
0.24
Adjusted net earnings and adjusted basic earnings per share for the second, third and fourth quarters of 2020 were decreased by $0.9 million ($0.00 per share),
$1.1 million ($0.01 per share) and $3.0 million ($0.02 per share), respectively, to conform with current period presentation. These adjustments pertain to a
deferred tax recovery not related to current period earnings resulting from changes in unrecognized tax benefits triggered by unrealized gains on publicly traded
securities, which, together with the related deferred income tax expense, were recognized in other comprehensive income (loss).
The variations in the Company’s quarterly results were driven largely by fluctuations in gold and copper
grades and recoveries, volumes of complex concentrate smelted, gold, copper and sulphuric acid prices,
foreign exchange rates, smelter toll rates, smelter metal recoveries, depreciation, gains and losses related
to Sabina special warrants, gains and losses on commodity swap contracts related to hedging the
Company’s metal price exposures, realized gains or losses on foreign exchange option contracts related
to hedging the Company’s foreign denominated operating expenditures, the MineRP Disposition and
impairment charges.
The following table summarizes the quarterly average realized prices for gold and copper and highlights
the quarter over quarter variability:
2021
2020
Q4
Q2
Q1
1,780 1,800 1,803
3.72 3.99
3.77
Q1
1,779
3.76
Q4
Q3
1,816 1,835
2.88
3.26
Q2
1,649
2.36
Q1
1,547
2.56
Average Realized Metal Prices
Gold ($/ounce)
Copper ($/pound)
DUNDEE PRECIOUS METALS INC. I 47
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 earnings (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 earnings (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
2019 results have been restated to reflect MineRP as discontinued operations.
2021
641,443
-
2020
609,558
-
2019(1)
404,392
107,000
190,750
199,074
(66,621)
19,351
209,824
202,081
(3,072)
194,863
188,415
(4,281)
(72,042)
36,508
1.02
0.10
1.12
1.12
0.12
1.09
1.10
(0.02)
1.08
1.07
0.09
1.04
(0.38)
(0.02)
(0.40)
(0.40)
-
0.20
1,168,410
78,198
974,860
84,500
784,710
82,233
(i)
(ii)
Key items impacting the Company’s financial results over the period from 2019 to 2021 include:
Improved combined gold recoveries at Chelopech in 2021 relative to 2020;
Declining gold grades at Chelopech in 2021 relative to 2020 due to mining in lower grade zones
in the third quarter of 2021 and increasing gold grades at Chelopech in 2020 relative to 2019, in
line with its mine plan;
Increasing gold and copper prices in 2021 relative to 2020 and 2019;
Lower volumes of complex concentrate smelted at Tsumeb in 2021 relative to 2020 and 2019 as
a result of planned maintenance and operational issues in 2021; higher volumes of complex
concentrate smelted at Tsumeb in 2020 relative to 2019 as a result of unplanned downtime in
2019;
A weaker U.S. dollar in 2021 and 2019 and a stronger U.S. dollar in 2020 relative to the local
currencies in which the Company’s operating costs are denominated;
(iii)
(iv)
(v)
(vi) Acquisition of INV accounted for as an asset acquisition in 2021;
(vii)
(viii) Growth capital expenditures for the Timok and Loma Larga gold projects incurred in 2021 and for
The MineRP Disposition in 2021;
(ix)
(x)
(xi)
the construction of the Ada Tepe incurred in 2019;
Dividend distribution of $22.4 million in 2021 compared to $16.3 million in 2020 and $nil in 2019;
Purchased 1,723,800 common shares under the NCIB for a total cost of $10.4 million;
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; and
(xii) 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:
FOURTH QUARTER 2021 I 48
(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:120)
All major capital expenditures to achieve a consistent level of production and desired capacity have
been incurred;
A reasonable period of testing of the mine plant and equipment has been completed;
A predetermined percentage of design capacity of the mine and mill has been reached; and
(cid:120)
(cid:120)
(cid:120) Required production levels, grades and recoveries have been achieved.
DUNDEE PRECIOUS METALS INC. I 49
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.
FOURTH QUARTER 2021 I 50
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
At each reporting date, the carrying values of mine properties, intangible assets and property, plant and
equipment are assessed for impairment if 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
DUNDEE PRECIOUS METALS INC. I 51
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 market considerations ranging from overall economic activity
and the supply of and demand for the materials used in and products produced by the Company to changes
in commodity prices, toll rates, discount rates, foreign exchange rates 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.
FOURTH QUARTER 2021 I 52
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, 2021, the undiscounted future cost for estimated mine closure and rehabilitation costs
before inflation was estimated to be $77.6 million. The carrying value of the estimated mine closure and
rehabilitation cost was $51.6 million at December 31, 2021 and $52.5 million at December 31, 2020.
(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 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.
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 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
DUNDEE PRECIOUS METALS INC. I 53
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 licences 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:120)
(cid:120)
(cid:120)
The initial recognition of assets or liabilities, not arising from a business combination, that does not
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.
FOURTH QUARTER 2021 I 54
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.
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 financial measures or ratios. 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 Human Capital and
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 and ratios, 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, all-in sustaining cost per ounce of gold and cash
cost per tonne of complex concentrate smelted are Non-GAAP ratios. These measures 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 Human Capital and Compensation Committee of the Board of Directors uses certain of these measures,
together with other measures, to set incentive compensation goals and assess performance.
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 to its cost of sales:
DUNDEE PRECIOUS METALS INC. I 55
$ thousands, unless otherwise indicated
For the three months ended December 31, 2021
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, net of by-product credits
Cash cost per tonne of ore processed(2)
Cash cost per pound of copper produced(2),(3)
Cash cost per ounce of gold produced(2),(3)
Cash cost per tonne of complex concentrate
smelted (4)
$ 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, net of by-product credits
Cash cost per tonne of ore processed(2)
Cash cost per pound of copper produced(2),(3)
Cash cost per ounce of gold produced(2),(3)
Cash cost per tonne of complex concentrate
smelted (4)
Chelopech
561,986
Ada Tepe
219,325
Tsumeb
-
Total
96,846
33,149
9,150,837
33,774
-
35,546
27,736
(7,683)
2,289
30,152
(925)
29,227
53.65
1.31
521
(14,264)
(253)
13,219
(353)
12,866
60.27
-
379
-
-
51,932
33,564
(3,734)
-
29,830
(6,695)
23,135
-
-
-
-
-
445
Chelopech
541,066
Ada Tepe
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
Excludes metals contained in pyrite concentrate produced.
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.
Gold and copper are accounted for as co-products. Total cash cost is net of by-product silver revenue.
Total cash cost is net of by-product sulphuric acid revenue.
FOURTH QUARTER 2021 I 56
$ thousands, unless otherwise indicated
For the twelve months ended December 31, 2021 Chelopech
Ore processed (mt)
2,199,155
Metals contained in gold-copper concentrate
Ada Tepe
865,587
Tsumeb
-
Total
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, net of by-product credits
Cash cost per tonne of ore processed(2)
Cash cost per pound of copper produced(2),(3)
Cash cost per ounce of gold produced(2),(3)
Cash cost per tonne of complex concentrate
smelted (4)
116,433
34,687,982
132,964
-
130,798
100,480
-
-
189,705
128,662 359,940
(23,980)
(3,196)
103,622
(4,283)
99,339
47.12
1.19
499
(55,065)
(247)
45,168
(1,294)
43,874
52.18
-
329
(18,853)
-
109,809
(18,921)
90,888
-
-
-
-
-
479
$ thousands, unless otherwise indicated
For the twelve months ended December 31, 2020 Chelopech
2,201,220
Ore processed (mt)
Metals contained in gold-copper concentrate
Ada Tepe
890,738
Tsumeb
-
Total
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, net of by-product credits
Cash cost per tonne of ore processed(2)
Cash cost per pound of copper produced(2),(3)
Cash cost per ounce of gold produced(2),(3)
Cash cost per tonne of complex concentrate
smelted (4)
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
Excludes metals contained in pyrite concentrate produced.
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.
Gold and copper are accounted for as co-products. Total cash cost is net of by-product silver revenue.
Total cash cost is net of by-product sulphuric acid revenue.
DUNDEE PRECIOUS METALS INC. I 57
The following table provides, for the periods indicated, a reconciliation of Chelopech cash cost per ounce
of gold sold 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
Treatment charges, transportation and other
related selling costs(1)
By-product credits(2)
Cash cost of sales, net of by-product credits
Rehabilitation related accretion expenses
General and administrative expenses(3)
Cash outlays for sustaining capital
Cash outlays for leases
All-in sustaining costs
Payable gold in concentrate sold (ounces)(4)
Three Months
2021
35,546
2020
30,898
Twelve Months
2021
130,798
2020
113,481
(7,683)
(7,841)
(23,980)
(29,926)
29,571
(31,703)
25,731
70
3,568
4,158
237
33,764
40,538
20,211
(26,230)
17,038
81
4,732
4,267
211
26,329
37,399
102,901
(128,636)
81,083
256
10,019
15,511
936
107,805
149,297
99,604
(94,613)
88,546
317
13,807
11,616
645
114,931
150,764
Cash cost per ounce of gold sold
All-in sustaining cost per ounce of gold
635
833
456
704
543
722
587
762
Includes treatment charges, transportation and other selling costs related to the sale of pyrite concentrate of $8.0 million (2020 – $6.8 million) and $24.9 million
(2020 – $24.7 million) in the fourth quarter and twelve months of 2021, respectively.
Represents copper and silver revenue.
Represents an allocated portion of DPM’s general and administrative expenses, including share-based compensation, based on Chelopech’s proportion of total
revenue.
Includes payable gold in pyrite concentrate sold in the fourth quarter and twelve months of 2021 of 11,331 ounces (2020 – 9,334 ounces) and 37,747 ounces
(2020 – 36,111 ounces), respectively.
The following table provides, for the periods indicated, a reconciliation of Ada Tepe cash cost per ounce of
gold sold 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
Treatment charges, transportation and other
related selling costs
By-product credits(1)
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)
Three Months
2021
27,736
2020
22,006
Twelve Months
2021
100,480
2020
92,450
(14,264)
(13,132)
(55,065)
(54,351)
964
(285)
14,151
32
2,361
5,235
347
22,126
33,282
819
(169)
9,524
38
2,913
1,559
388
14,422
25,169
4,310
(1,038)
48,687
125
7,847
17,469
1,466
75,594
129,754
3,579
(732)
40,946
121
10,300
9,514
1,290
62,171
120,070
Cash cost per ounce of gold sold
All-in sustaining cost per ounce of gold
425
665
378
573
375
583
341
518
1) Represents silver revenue.
2) Represents an allocated portion of DPM’s general and administrative expenses, including share-based compensation, based on Ada Tepe’s proportion of total
revenue.
FOURTH QUARTER 2021 I 58
DPM’s cash cost per ounce of gold sold and all-in sustaining cost per ounce of gold calculations are set out
in the following table:
$ thousands, unless otherwise indicated
Ended December 31,
Cost of sales (1)
Add/(deduct):
Depreciation, amortization & other(1)
Treatment charges, transportation and other
related selling costs(1)
By-product credits(2)
Cash cost of sales, net of by-product credits(1)
Rehabilitation related accretion expenses(1)
General and administrative expenses(3)
Cash outlays for sustaining capital(1)
Cash outlays for leases(1)
All-in sustaining costs
Payable gold in concentrate sold (ounces)
Three Months
2021
63,282
2020
52,904
Twelve Months
2021
231,278
2020
205,931
(21,947)
(20,973)
(79,045)
(84,277)
30,535
(31,988)
39,882
102
5,929
9,393
584
55,890
73,820
21,030
(26,399)
26,562
119
7,645
5,826
599
40,751
62,568
107,211
(129,674)
129,770
381
17,866
32,980
2,402
183,399
279,051
103,183
(95,345)
129,492
438
24,107
21,130
1,935
177,102
270,834
Cash cost per ounce of gold sold
All-in sustaining cost per ounce of gold
540
757
425
651
465
657
478
654
1) Represents costs specific to Chelopech and Ada Tepe.
2) Represents copper and silver revenue.
3) 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 and adjusted basic earnings per share
Adjusted net earnings is a Non-GAAP financial measure and adjusted basic earnings per share is a Non-
GAAP ratio 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 are defined as net earnings attributable to common shareholders, adjusted to exclude
specific items that are significant, but not reflective of the underlying operations of the Company, including:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
impairment charges or reversals thereof;
unrealized and realized gains or losses related to investments carried at fair value;
significant tax adjustments not related to current period earnings; and
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 net earnings to net earnings attributable to common
shareholders from continuing operations:
$ thousands, except per share amounts
Ended December 31,
Net earnings attributable to common shareholders
from continuing operations
Add/(deduct):
Net (gains) losses related to Sabina special
warrants, net of income taxes of $nil for all
periods
Deferred tax expense (recovery) adjustments not
related to current period earnings(1)
Adjusted net earnings
Basic earnings per share
Adjusted basic earnings per share
Three Months
2021
2020
Twelve Months
2021
2020
52,108
50,176
190,750
199,074
(659)
(3,124)
6,312
(5,640)
-
51,449
0.27
0.27
(3,015)
44,037
0.28
0.24
5,019
202,081
1.02
1.09
(5,019)
188,415
1.10
1.04
Represents changes in unrecognized tax benefits included in net earnings related to unrealized gains (losses) on publicly traded securities, which, together with
the related deferred income tax expense (recovery), were recognized in other comprehensive income (loss).
DUNDEE PRECIOUS METALS INC. I 59
Adjusted EBITDA
Adjusted EBITDA is a Non-GAAP financial measure 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 Human Capital and Compensation Committee of the Board
of Directors uses adjusted EBITDA, together with other measures, to set incentive compensation goals and
assess performance.
Adjusted EBITDA excludes the following from earnings before income taxes:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
depreciation and amortization;
interest income;
finance cost;
impairment charges or reversals thereof;
unrealized and realized gains or losses related to investments carried at fair value; and
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 to earnings before income taxes:
$ thousands
Ended December 31,
Earnings before income taxes
Add/(deduct):
Depreciation and amortization
Finance cost
Interest income
Net (gains) losses related to Sabina special
warrants
Adjusted EBITDA
Three Months
2021
60,274
23,533
1,380
(254)
(659)
84,274
2020
52,588
23,984
1,481
(87)
(3,124)
74,842
Twelve Months
2021
229,418
2020
217,923
96,207
5,549
(632)
100,211
7,022
(194)
6,312
336,854
(5,640)
319,322
Cash provided from operating activities, before changes in working capital
Cash provided from operating activities, before changes in working capital, is a Non-GAAP financial
measure defined as cash provided from operating activities excluding changes in 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 working capital, which at times can distort performance.
Free cash flow
Free cash flow is a Non-GAAP financial measure defined as cash provided from operating activities, before
changes in working capital, less cash outlays for sustaining capital, 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.
FOURTH QUARTER 2021 I 60
The following table provides a reconciliation of cash provided from operating activities, before changes in
working capital and free cash flow to cash provided from operating activities:
$ thousands
Ended December 31,
Cash provided from operating activities
Add:
Changes in working capital
Cash provided from operating activities, before
changes in working capital
Cash outlays for sustaining capital
Principal repayments related to leases
Interest payments
Free cash flow
Average realized metal prices
Three Months
2021
88,777
2020
70,536
Twelve Months
2021
253,126
2020
196,965
(8,877)
(20,412)
55,469
51,640
79,900
(12,724)
(1,165)
(204)
65,807
50,124
(9,180)
(1,076)
(571)
39,297
308,595
(49,758)
(4,455)
(1,989)
252,393
248,605
(30,478)
(4,008)
(2,692)
211,427
Average realized gold and copper prices are Non-GAAP ratios used by management and investors to
highlight the price actually realized by the Company relative to the average market price, which can differ
due to the timing of sales, hedging and other factors.
Average realized gold and copper prices represent the average per unit price recognized in the Company’s
consolidated statements of earnings (loss) prior to any deductions for treatment charges, refining charges,
penalties, freight and final settlements to adjust for any cost differences relative to the provisional invoice.
The following table provides a reconciliation of the Company’s average realized gold and copper prices to
its revenue:
$ thousands, unless otherwise indicated
Ended December 31,
Total revenue
Add/(deduct):
Tsumeb revenue
Treatment charges and other deductions
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
Three Months
2021
166,433
2020
151,751
Twelve Months
2021
641,443
2020
609,558
(33,574)
30,535
(1,127)
162,267
131,407
73,820
1,780
30,860
8,175
3.77
(34,818)
23,096
(1,103)
138,926
113,629
62,568
1,816
25,297
7,766
3.26
(119,350)
107,211
(4,831)
624,473
499,630
279,051
1,790
124,843
32,680
3.82
(147,130)
95,831
(3,740)
554,519
462,916
270,834
1,709
91,603
33,389
2.74
RISKS AND UNCERTAINTIES
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, sulphuric acid prices, toll
rates, 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
DUNDEE PRECIOUS METALS INC. I 61
a view to mitigating risk while maximizing total shareholder returns. 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 COVID-19 pandemic 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.
Authorities in the jurisdictions in which the Company operates mandated restrictions and additional
measures to contain the spread of COVID-19. While there is some easing of restrictions, should these
measures and ongoing vaccination efforts 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, if required, and may cause
continued interest rate volatility and movements that may make obtaining financing or extending existing
credit facilities, if required, 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 licence 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 not be adversely affected by the current
COVID-19 pandemic or other 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.
Metal Prices
The fluctuation in the price of a metal sold by the Company can significantly impact revenues as well as all-
in sustaining cost per ounce of gold and other cost measures that are reported net of by-product credits.
FOURTH QUARTER 2021 I 62
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 board approved 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. The Company also selectively enters into cash
settled commodity swap and option contracts from time to time to reduce its price exposure on future sales
and in respect of certain cost measures that are impacted by variability in by-product metal credits. 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. The Company currently has no hedges in place
its expected payable copper to be sold in 2022.
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 ongoing viability and 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. As of December 31, 2021, the Company has contracted high value
complex concentrate covering over 90% of its expected concentrate requirements through to the end of
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 can 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, and
maintain specified maximum levels of in-process metal. 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.
In the event that in-process metals at the smelter exceed specified maximum contractual levels, Tsumeb
DUNDEE PRECIOUS METALS INC. I 63
may be required to purchase such excess in-process metal. IXM may agree to waive such purchase
requirement, and has done so in 2020 and 2021, when in-process metal exceeded maximum contractual
levels.
Tsumeb produces sulphuric acid as a by-product of the smelting operation. Historically, the vast majority of
this sulphuric acid has been sold to customers in Namibia, with the balance exported to other countries in
Africa. In 2021, no sulphuric acid was exported out of Namibia. The revenue from the sales of sulphuric
acid make up approximately 15% to 20% 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,
2021, approximately 74% of Tsumeb’s forecast sulphuric acid production over the next 4 years is expected
to be sold domestically under a reference price contract which includes floor and ceiling prices. The
remainder of Tsumeb’s sulphuric acid production is expected to be sold at market terms under spot or
longer-term agreements. An inability to sell or deliver sufficient acid production whereby Tsumeb’s sulphuric
acid storage capacity is exceeded would result in a reduction of smelter operating levels up to and including
a full stoppage.
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 83% of projected Namibian dollar operating
expenses for 2022 have been hedged with a series of call and put options with a weighted average floor
and ceiling rates of 15.14 and 17.05, respectively.
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 and volumes for the specified quotation period, is made when final weights and
assays are determined. During 2021, the Company had contracts with 14 customers in connection with its
mining and smelting operations, one of whom accounted for approximately 40% (2020 - 57%) 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.
FOURTH QUARTER 2021 I 64
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
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 2021. 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 sulphuric 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
DUNDEE PRECIOUS METALS INC. I 65
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.
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, Interest Rate 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.
FOURTH QUARTER 2021 I 66
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 short-term investments and potential interest paid on future drawdowns
under its RCF, which is based on a floating reference rate.
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
The declaration amount and payment of future dividends will be subject to the sole discretion of the Board
after taking into account, among other things, the Company’s financial position, 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.
Foreign Country and Political
The majority of the Company’s operations and business are outside of Canada, primarily in Eastern Europe,
southern Africa and Ecuador, 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;
expropriation and nationalization; renegotiation or nullification of existing concessions, licences, 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.
DUNDEE PRECIOUS METALS INC. I 67
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.
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 incurs significant costs to maintain its 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
FOURTH QUARTER 2021 I 68
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, processing, smelting 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
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 and issued a report in December 2020,
following the TCFD recommendations that 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 for DPM 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 TCFD 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. The Company’s report on the impact of climate change has been posted on the Company’s
website at www.dundeeprecious.com.
DUNDEE PRECIOUS METALS INC. I 69
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 $51.6 million and
$52.5 million at December 31, 2021 and 2020, 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.
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 Licence 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
FOURTH QUARTER 2021 I 70
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 licences
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 invests 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 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 licences. Such actions are taken only when the Company
reasonably believes such licences 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, Ecuador 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.
Opposition to Mining
The Company’s ability to advance its exploration and development activities, particularly in respect of its
Loma Larga and Timok projects, may be affected to varying degrees by opposition to mining activities
causing delays in obtaining or the inability to obtain necessary permits and/or resulting in government
regulations with respect to, but not limited to, restrictions on future exploitation and production. Any shifts
in political attitudes or changes in laws that may result in, among other things, significant changes to mining
laws or any other national or local regulations or policies are beyond the Company’s control and there is
the risk that governments may adopt policies, which may extend to the deemed or actual expropriation of
assets or revocation or cancellation of mining concession rights, that could adversely affect DPM’s
business.
DUNDEE PRECIOUS METALS INC. I 71
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.
Personal Data Security
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. Emerging legislation to address privacy issues could impose
additional obligations on the Company. 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.
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 process 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’s Tsumeb operation also faces competition from other smelting companies as well as trading
companies, notably those with blending operations, to secure complex feed. These competitive forces,
together with changes in regulations for complex concentrate could affect the supply-demand dynamics of
this market and could negatively affect Tsumeb’s ability to secure complex copper concentrate on terms
that are economic for Tsumeb to smelt this material and therefore have a material adverse impact on the
Company’s business, financial condition and results of operations.
FOURTH QUARTER 2021 I 72
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
ranging from overall economic activity and the supply of and demand of the materials used in and products
produced by the Company, to changes in commodity prices, toll rates, discount rates, foreign exchange
rates 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
liability insurance in 2021 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
DUNDEE PRECIOUS METALS INC. I 73
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.
The Company has entered into a collective agreement with its employees in Bulgaria, for Chelopech and
Ada Tepe, that is in effect until July 2023. Tsumeb entered into a new collective agreement with its
employees as of March 2021 which will continue to be in effect until February 2023.
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
FOURTH QUARTER 2021 I 74
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 regime known as the SSEZ, which is expected to be implemented in
2022.
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.
Business Development, Acquisitions and Integration
From time to time the Company examines opportunities to acquire and/or develop new mineral projects,
additional mining assets and businesses. Any acquisition and/or development that the Company may
choose to complete may be of a significant size, may change the scale of the Company’s business and
operations, and may expose the Company to new geographic, political, operating, financial and geological
risks. The Company’s success in its acquisition and/or development activities depends on its ability to
identify suitable acquisition candidates, negotiate acceptable terms for any such acquisition or
development, and integrate the acquired operations successfully with those of the Company. Any
acquisitions and/or developments would be accompanied by 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 a smelter. Furthermore, 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 or
development, the Company’s leverage will be increased. If the Company chooses to use equity as
consideration for such acquisition or development, existing shareholders may experience dilution.
Alternatively, the Company may choose to finance any such acquisition or development 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 or developments. Failure to
successfully realize the anticipated benefits associated with one or more of these initiatives successfully
DUNDEE PRECIOUS METALS INC. I 75
could have a material adverse impact on the Company’s business, financial condition and results of
operations.
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
FOURTH QUARTER 2021 I 76
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.
Foreign Subsidiaries and Repatriation of Funds
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 Key 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 key 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.
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
DUNDEE PRECIOUS METALS INC. I 77
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
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, 2021. 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, 2021.
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 the
ICFR in the year ended December 31, 2021. 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”, “guidance”, “outlook”, “intends”, “anticipates”, “believes”, or variations
FOURTH QUARTER 2021 I 78
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 sulphuric acid; toll rates, metals exposure and stockpile interest deductions at Tsumeb; Tsumeb’s
ability to continue to benefit from the EPZ/SSEZ tax incentives in Namibia; the estimation of Mineral
Reserves and Mineral Resources and the realization of such mineral estimates; estimated capital costs,
all-in sustaining costs, operating costs and other financial metrics, including those set out in the outlook and
guidance 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 potential rotary holding furnace installation at the Tsumeb
smelter; DPM’s strategy, plans, targets and goals in respect of environmental, social and governance
issues, including climate change, greenhouse gas emissions reduction targets, tailings management
facilities and human rights initiatives; results of economic studies (including the Timok PFS and the Loma
Larga FS); expected milestones; success of exploration activities; the timing of the completion and results
of a FS for the Timok gold project; expectations with respect to the potential to incorporate additional
existing Mineral Resources into the Timok mine plan by processing the sulphide portion of the ore body;
development of the Loma Larga project, including expected production, successful negotiations of an
investment protection agreement and exploitation agreement and granting of environmental and
construction permits in a timely manner; 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 timing and amount of dividends; the
timing and number of common shares of the Company that may be purchased pursuant to the NCIB; and
timing and possible outcome of pending litigation or legal proceedings, if any.
Forward Looking Statements are based on certain key assumptions and the opinions and estimates of
management and QP (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 COVID-19, resulting in
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, low vaccination rates, lost work hours and labour force shortages; fluctuations in metal and
sulphuric acid prices, toll rates and foreign exchange rates; regulatory changes, including changes
impacting the complex concentrate market; inability of Tsumeb to secure complex copper concentrate on
terms that are economic; possible variations in ore grade and recovery rates; inherent uncertainties in
respect of conclusions of economic evaluations and economic studies, including the Timok PFS and the
Loma Larga FS; uncertainties with respect to timing of the Timok FS; changes in project parameters,
including schedule and budget, as plans continue to be refined; uncertainties with respect to realizing the
anticipated benefits from the acquisition of INV and the development of the Loma Larga project;
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 potential rotary holding furnace installation at the Tsumeb smelter; increased costs and physical risks,
including extreme weather events and resource shortages, related to climate change; 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; uncertainties with respect to realizing the targeted MineRP earn-outs as well as those
risk factors discussed or referred to in any other documents (including without limitation the Company’s
DUNDEE PRECIOUS METALS INC. I 79
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):
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; sulphuric acid prices are at or
around current levels; sulphuric 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 sulphuric acid production are lower than anticipated; sulphuric
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 permits and 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.
FOURTH QUARTER 2021 I 80
Liquidity (see comments contained in “Liquidity and Capital Resources” section): assumes the operating
and cost performance are consistent with current expectations; metal and sulphuric acid prices, and foreign
exchange rates remain at or around current levels; concentrate and sulphuric 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 sulphuric acid production at Tsumeb, concentrate deliveries and metal
prices; lower than anticipated reductions in secondary material at Tsumeb; a weaker U.S. dollar relative to
local operating currencies; changes in contractual sales and/or toll terms and sulphuric 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.
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 significant 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 has been prepared in accordance with the requirements of Canadian securities laws, which
differ from the requirements of United States securities laws. Canadian reporting requirements for
disclosure of mineral properties are governed by NI 43-101. Subject to the SEC Modernization Rules
described below, the United States reporting requirements are currently governed by the United States
Securities and Exchange Commission (“SEC”) Industry Guide 7 (“SEC Industry Guide 7”) under the
Securities Act of 1933. The definitions used in NI 43-101 are incorporated by reference from the CIM
Definition Standards. For example, the terms “mineral reserve”, “proven mineral reserve” and “probable
mineral reserve” are Canadian mining terms as defined in NI 43-101, and these definitions differ from the
definitions in SEC Industry Guide 7. Furthermore, while the terms “mineral resource”, “measured mineral
resource”, “indicated mineral resource” and “inferred mineral resource” are defined in NI 43-101, these
terms are not defined terms under SEC Industry Guide 7. Under SEC Industry Guide 7 standards, a “final”
or “bankable” feasibility study is required to report reserves and the primary environmental analysis or report
must be filed with the appropriate governmental authority. Further, under SEC Industry Guide 7,
mineralization may not be classified as a “reserve” unless the determination has been made that the
mineralization could be economically and legally produced or extracted at the time the reserve
determination is made. Any reserves reported by the Company in the future and in compliance with NI 43-
101 may not qualify as “reserves” under SEC Industry Guide 7. Further, until recently, the SEC has not
recognized the reporting of mineral deposits which do not meet the SEC Industry Guide 7 definition of
“reserve”. The SEC adopted amendments to its disclosure rules to modernize the mineral property
disclosure requirements for issuers whose securities are registered with the SEC under the Securities
Exchange Act of 1934, as amended. 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 historical disclosure requirements for mining issuers 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
DUNDEE PRECIOUS METALS INC. I 81
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 CIM Definition Standards,
incorporated by reference in NI 43-101. Readers 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 reserve or resource
estimates under the standards adopted under the SEC Modernization Rules. Readers are also cautioned
that while the SEC will now recognize “measured mineral resources”, “indicated mineral resources” and
“inferred mineral resources”, it should not be assumed that any part or all of the mineralization in these
categories will ever be converted into a higher category of mineral resources or into mineral reserves.
Mineralization described using these terms has a greater amount of uncertainty as to their existence and
feasibility than mineralization that has been characterized as reserves. Accordingly, readers are cautioned
not to assume that any “measured mineral resources”, “indicated mineral resources” or “inferred mineral
resources” that the Company reports are or will be economically or legally mineable. Further, “inferred
mineral resources” have a greater amount of uncertainty as to their existence and as to whether they can
be mined legally or economically. Therefore, readers are also cautioned not to assume that all or any part
of the “inferred mineral resources” exist. In accordance with Canadian securities laws, estimates of “inferred
mineral resources” cannot form the basis of feasibility or other economic studies, except in limited
circumstances where permitted under NI 43-101. For the above reasons, information contained in this
MD&A containing descriptions of the Company’s mineral deposits may not be comparable to similar
information made public by United States companies subject to the reporting and disclosure requirements
under the United States federal securities laws and the rules and regulations thereunder.
FOURTH QUARTER 2021 I 82
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 the 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 17, 2022
DUNDEE PRECIOUS METALS INC. I 83
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, 2021 and 2020, 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:3511)
(cid:3511)
(cid:3511)
(cid:3511)
(cid:3511)
(cid:3511)
the consolidated statements of financial position as at December 31, 2021 and 2020;
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.
FOURTH QUARTER 2021 I 84
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, 2021. 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
Our approach to addressing the matter included the
following procedures, among others:
(cid:404) Evaluated the reasonableness of management’s
assessment of indicators of impairment or
impairment reversal of the PP&E related to the
Tsumeb CGU:
(cid:16) Assessed the completeness of external and
internal factors that could be considered as
indicators of impairment or impairment reversal
of the PP&E by considering evidence obtained
in other areas of the audit.
(cid:16) Assessed the external and internal factors
related to changes in forecasted toll rates, the
foreign exchange rate, production volumes and
capital and operating expenditures by
comparing to historical and current toll rates in
tolling agreements, analyst consensus data
and considering the current and past
performance of the Tsumeb CGU.(cid:3)
(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:3)
Assessment of indicators of impairment or
impairment reversal of property, plant and
equipment related to the Tsumeb CGU
Refer to note 2.2 – Significant accounting policies
and note 10 – Property, plant and equipment to the
consolidated financial statements.
The Company’s property, plant and equipment
(PP&E) net book value amounted to $335.3 million
as at December 31, 2021, which includes a portion
related to the Tsumeb Cash Generating Unit
(CGU). Management assesses at each reporting
date whether indicators of impairment or
impairment reversal exist. If any indication of
impairment or impairment reversal exists, an
estimate of the CGU’s recoverable amount is
calculated.
Management uses significant judgment in
assessing whether indicators of impairment or
impairment reversal exist that would necessitate
impairment testing, including external and internal
factors related to changes in forecasted toll rates,
the foreign exchange rate, production volumes,
capital and operating expenditures, and the
discount rate.
We considered this a key audit matter due to (i) the
significant judgment by management in assessing
whether indicators of impairment or impairment
reversal exist that would necessitate impairment
testing of the PP&E related to the Tsumeb CGU; (ii)
the significant audit effort and subjectivity in
performing procedures related to management’s
assessment; and (iii) the assistance of
professionals with specialized skill and knowledge
in the field of valuation.
DUNDEE PRECIOUS METALS INC. I 85
Key audit matter
How our audit addressed the key audit matter
Recognition of the Tsumeb metal exposure
adjustment
Our approach to addressing the matter included the
following procedures, among others:
(cid:404) Tested the operating effectiveness of controls
relating to the metal exposure process, including
management’s estimate of the metal exposure
adjustment.
(cid:404) Observed the metal stockpile survey performed
near year-end.
(cid:404) Obtained a customer confirmation in respect of the
quantities of concentrate treated, blister returned
and metal in-circuit at year-end.
(cid:404) Tested how management estimated the Tsumeb
metal exposure adjustment at year-end and
evaluated the reasonableness of the estimated
amount of metal contained in concentrate received,
in-circuit material and blister delivered, where final
assays have not been completed at year-end, by
comparing to historical recovery rates and
historical adjustments to provisional assays.
Refer to note 2.2 – Significant accounting policies
and note 5 – Accounts receivable to the
consolidated financial statements.
As at December 31, 2021, the Company’s accounts
receivable included a metal recovery of $2.2 million
related to estimated metal exposure at Tsumeb.
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 metal exposure adjustments are calculated
by comparing (i) the copper, gold and silver
(together, metal) content in the concentrate
received and processed by Tsumeb multiplied by
the percentage payable in the agreement to (ii) the
metal 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
significant judgment by management in estimating
the Tsumeb metal exposure adjustment, including a
high degree of estimation uncertainty and (ii) the
significant audit effort and subjectivity in performing
procedures related to management’s assumptions.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
FOURTH QUARTER 2021 I 86
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express an opinion or 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 on the other information that we obtained prior to the date of this
auditor’s report, 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. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
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.
DUNDEE PRECIOUS METALS INC. I 87
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:3511)
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:3511) 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:3511) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
(cid:3511) 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:3511) 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:3511) 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.
FOURTH QUARTER 2021 I 88
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 Michael Hawtin.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 17, 2022
DUNDEE PRECIOUS METALS INC. I 89
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31, 2021 and 2020
(in thousands of U.S. dollars)
December 31,
2021
December 31,
2020
ASSETS
Current Assets
Cash
Accounts receivable
Inventories
Other current assets
Assets held for sale
Non-Current Assets
Investments at fair value
Exploration and evaluation assets
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 long-term liabilities
Liabilities held for sale
Non-Current Liabilities
Rehabilitation provisions
Share-based compensation plans
Other long-term liabilities
TOTAL LIABILITIES
EQUITY
Notes
5
6
7(c),7(d)
3
7(a),7(b)
8
9
10
11
22
12
22
16
3
15
18
16
334,377
128,338
49,626
1,452
513,793
-
513,793
47,983
98,925
138,037
335,305
17,359
8,685
8,323
654,617
1,168,410
77,170
2,395
6,234
85,799
-
85,799
50,401
13,933
13,864
78,198
163,997
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
Equity attributable to common shareholders
585,050
8,629
412,394
(1,660)
26(c)
of the Company
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
1,004,413
-
1,004,413
1,168,410
149,532
84,920
43,049
10,818
288,319
30,713
319,032
106,595
-
155,438
364,337
16,139
9,470
3,849
655,828
974,860
72,234
910
5,929
79,073
6,003
85,076
51,338
19,002
14,160
84,500
169,576
525,219
7,078
224,701
41,671
798,669
6,615
805,284
974,860
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) "Anthony Walsh"
Anthony Walsh, Director
FOURTH QUARTER 2021 I 90
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
For the years ended December 31, 2021 and 2020
(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
Finance cost
Other (income) expense
Earnings before income taxes
Current income tax expense
Deferred income tax expense (recovery)
Net earnings from continuing operations
Discontinued Operations
Net earnings (loss) from discontinued operations
Net earnings
Net earnings (loss) attributable to:
Common shareholders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
Net earnings
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
2021
2020
29
19
19
19
20
21
22
22
3
23
23
23
23
641,443
609,558
359,940
18,161
4,838
18,006
5,549
5,531
412,025
229,418
33,625
5,064
190,729
330,857
30,604
4,571
19,072
7,022
(491)
391,635
217,923
23,353
(4,462)
199,032
19,095 (4,169)
194,863
209,824
190,750
199,074
19,351 (3,072)
(277) (1,139)
194,863
209,824
1.02
1.10
0.10 (0.02)
1.02
0.10
1.09
(0.02)
The accompanying notes are an integral part of the consolidated financial statements
DUNDEE PRECIOUS METALS INC. I 91
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars)
Net earnings
Other comprehensive income (loss) items that may be
reclassed subsequently to profit or loss:
Foreign exchange option contracts designated as
2021
2020
209,824
194,863
cash flow hedges
Unrealized gains (losses), net of income tax of $nil (2020 - $nil) 1,175 (114)
Deferred cost of hedging, net of income tax of $nil (2020 - $nil)
(2,504) (947)
Realized (gains) losses transferred to cost of sales, net of
income tax of $nil (2020 - $nil)
Commodity swap contracts designated as
cash flow hedges
Unrealized gains (losses), net of income tax expense (recovery)
(6,525) 3,486
of $(1,525) (2020 - $9)
(13,723) 78
Deferred cost of hedging, net of income tax recovery
of $56 (2020 - $2)
Realized losses transferred to revenue, net of
income tax recovery of $1,516 (2020 - $nil)
Cost of hedging transferred to revenue, net of
income tax recovery of $58 (2020 - $nil)
Currency translation adjustments from discontinued operations
Other comprehensive income (loss) items that will not be
reclassified subsequently to profit or loss:
Unrealized gains (losses) on publicly traded securities, net of
income tax expense (recovery) of $(5,019) (2020 - $5,019)
Comprehensive income
Comprehensive income (loss) attributable to:
Common shareholders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
Comprehensive income
(504) (18)
13,645 -
522 -
(3,395)
(908)
(37,593)
(46,415)
163,409
145,243
18,682
(516)
163,409
31,451
30,541
225,404
233,010
(5,445)
(2,161)
225,404
The accompanying notes are an integral part of the consolidated financial statements
FOURTH QUARTER 2021 I 92
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars)
OPERATING ACTIVITIES
Earnings before income taxes
Revenue transferred from deferred revenue
Depreciation and amortization
Changes in 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 (used in) operating activities of
discontinued operations
INVESTING ACTIVITIES
Proceeds from MineRP Disposition
Cash payment for acquisition of INV, net of cash acquired
Purchase of publicly traded securities
Proceeds from disposal of mine properties, property,
plant and equipment and intangible assets
Expenditures on exploration and evaluation assets
Expenditures on mine properties
Expenditures on property, plant and equipment
Expenditures on intangible assets
Increase in restricted cash
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
Dividends paid
Payments for share repurchases
Interest and finance fees paid
Notes
14
25(a)
25(b)
3
3
4
7(b)
4
3
13(a)
26(a)
26(b)
Cash used in financing activities of continuing operations
Cash used in financing activities of discontinued operations
Increase in cash of continuing operations
Decrease in cash of discontinued operations
Cash at beginning of year, continuting operations
Cash at beginning of year, discontinued operations
Cash at end of year, continuing operations
Cash at end of year, discountinued operations
The accompanying notes are an integral part of the consolidated financial statements
DUNDEE PRECIOUS METALS INC. I 93
2021
2020
229,418
-
96,207
(55,469)
26,209
(14,082)
(29,157)
253,126
217,923
(46,674)
100,211
(51,640)
14,422
(9,103)
(28,174)
196,965
(442)
101
45,188
(1,569)
(8,307)
263
(10,100)
(16,862)
(33,648)
(3,538)
(3,500)
(32,073)
-
2,810
-
(4,455)
(22,143)
(10,207)
(2,213)
(36,208)
(140)
184,845
(582)
149,532
582
-
-
(5,119)
124
-
(8,012)
(25,447)
(4,097)
-
(42,551)
(1,301)
1,776
(10,000)
(4,008)
(10,866)
-
(3,067)
(26,165)
(375)
128,249
(1,575)
21,283
2,157
334,377
149,532
-
582
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, except for number of shares)
December 31, 2021
Amount
Number
December 31, 2020
Amount
Number
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
Shares issued as part of an exploration
option agreement
Shares issued on exercise of stock options (note 18)
Shares issued on acquisition of INV (note 4)
Share repurchases (note 26(b))
Transferred from contributed surplus
on exercise of stock options
Balance at end of year
Contributed surplus
Balance at beginning of year
Share based compensation expense
Transferred to share capital on exercise of stock options
MineRP Disposition (note 3)
Stock options issued on acquisition of INV (note 4)
Share repurchases (note 26(b))
Other changes in contributed surplus
Balance at end of year
Retained earnings
Balance at beginning of year
Net earnings attributable to common shareholders
of the Company
Dividend distributions (note 26(a))
Balance at end of year
Accumulated other comprehensive income (loss)
(note 26(c))
Balance at beginning of year
Other comprehensive income (loss)
MineRP disposition (note 3)
Balance at end of year
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:31)
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
MineRP disposition (note 3)
Other changes in non-controlling interests
Balance at end of year
Total equity at end of year
The accompanying notes are an integral part of the consolidated financial statements
181,400,125
525,219
180,537,053
522,351
1,070,774
10,664,501
(1,694,200)
191,441,200
25,000
838,072
-
-
181,400,125
-
2,810
60,844
(5,269)
1,446
585,050
7,078
1,052
(1,446)
4,741
2,366
(5,141)
(21)
8,629
224,701
210,101
(22,408)
412,394
41,671
(46,176)
2,845
(1,660)
1,004,413
6,615
(277)
(239)
(6,010)
(89)
-
1,004,413
153
1,776
-
-
939
525,219
9,150
1,314
(939)
-
-
-
(2,447)
7,078
45,007
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
FOURTH QUARTER 2021 I 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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 under the federal laws of Canada. 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, 2021, DPM’s consolidated financial statements include DPM and its subsidiary
companies (collectively, the “Company”).
Continuing operations:
DPM’s principal subsidiaries include:
(cid:120) 100% of Dundee Precious Metals Chelopech EAD (“Chelopech”), which owns and operates a gold,
copper and silver mine located east of Sofia, Bulgaria;
(cid:120) 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:120) 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 Ecuador, Serbia
and Canada including:
(cid:120) 100% of DPM Ecuador S.A. (“DPM Ecuador”), formerly INV Minerales Ecuador S.A., which is
focused on the exploration and development of the Loma Larga gold project located in Ecuador (note
4);
(cid:120) 100% of DPM Avala d.o.o., formerly Avala Resources d.o.o., which is focused on the exploration and
development of the Timok gold project in Serbia; and
(cid:120) 8.9% of Sabina Gold and Silver Corp. (“Sabina”), which is focused on the development of the Back
River project in southwestern Nunavut, Canada.
Discontinued operations (note 3):
On May 3, 2021, DPM sold its 73.7% ownership interest in MineRP Holdings Inc. (“MineRP”), which owns
MineRP Holdings (Proprietary) Limited, an independent mining software vendor with operations in Canada,
South Africa, Australia and Chile.
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 17, 2022.
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.
DUNDEE PRECIOUS METALS INC. I 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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(l));
(cid:120)
(cid:120) Mineral Resource and Mineral Reserve estimates (note 2.2(l));
(cid:120)
(cid:120)
(cid:120)
(cid:120)
impairment of non-financial assets (note 2.2(p));
rehabilitation provisions and contingencies (note 2.2(q));
revenue recognition related to toll smelting arrangements (note 2.2(t)); and
deferred income tax assets and liabilities (note 2.2(x)).
FOURTH QUARTER 2021 I 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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. Prior to the sale of MineRP in May 2021, MineRP was 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 operated.
(e)
Cash and cash equivalents
Cash and cash equivalents comprise cash deposits, guaranteed investment certificates and/or other highly
rated and liquid securities with an original maturity of less than three months.
(f)
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.
DUNDEE PRECIOUS METALS INC. I 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g)
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.
FOURTH QUARTER 2021 I 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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).
(h) 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 option contracts designated as cash flow hedges
The Company designates 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.
DUNDEE PRECIOUS METALS INC. I 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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 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 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 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).
FOURTH QUARTER 2021 I 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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).
(i)
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.
(j)
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.
(k) 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).
DUNDEE PRECIOUS METALS INC. I 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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.
(l)
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:120) All major capital expenditures to achieve a consistent level of production and desired capacity have
been incurred;
(cid:120) A reasonable period of testing of the mine plant and equipment has been completed;
(cid:120) A predetermined percentage of design capacity of the mine and mill has been reached; and
(cid:120) 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.
FOURTH QUARTER 2021 I 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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(k)), mine properties, property,
plant and equipment (note 2.2(m)), depletion and depreciation charges (note 2.2(m)), rehabilitation
provisions (note 2.2(q)), and deferred income tax assets (note 2.2(x)).
(m) 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
DUNDEE PRECIOUS METALS INC. I 103
Estimated useful life
(Years)
15 - 20
3 - 20
5
3
3 - 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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.
(n)
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.
FOURTH QUARTER 2021 I 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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.
(o) 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.
DUNDEE PRECIOUS METALS INC. I 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p)
Impairment of non-financial assets
At each reporting date, the carrying values of mine properties, intangible assets and property, plant and
equipment are assessed for impairment if 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 market considerations ranging from overall economic activity
and the supply of and demand for the materials used in and products produced by the Company to changes
in commodity prices, toll rates, discount rates, foreign exchange rates 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.
FOURTH QUARTER 2021 I 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q)
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.
DUNDEE PRECIOUS METALS INC. I 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r)
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:120)
(cid:120) variable lease payment that are based on an index or a rate;
(cid:120) amounts expected to be payable under residual value guarantees;
(cid:120)
the exercise price of a purchase option if the Company is reasonably certain to exercise that option;
and
(cid:120) 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:120)
(cid:120) any lease payments made at or before the commencement date less any lease incentives received;
(cid:120) any initial direct costs; and
(cid:120)
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.
(s)
Share capital
Common shares issued by DPM are classified as equity. Costs directly attributable to the issuance of new
shares are recognized in equity as a deduction from the share proceeds. Costs to repurchase and cancel
the Company’s shares are recognized as a reduction in share capital to the extent of its book value and the
excess of the purchase price over the book value is recognized as a reduction in contributed surplus in the
consolidated statements of changes in shareholders’ equity.
(t) 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.
FOURTH QUARTER 2021 I 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
DUNDEE PRECIOUS METALS INC. I 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) 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.
(v)
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.
(w) 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 18. 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.
FOURTH QUARTER 2021 I 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash-settled transactions
A Director Deferred Share Unit (“Director DSU”) Plan and an Employee Deferred Share Unit (“Employee
DSU”) Plan were established for directors and certain employees in lieu of cash compensation. The Director
DSUs are paid in cash following separation of a director from the Company based on the closing price of
DPM’s common shares on the applicable redemption date as elected by the director. The Employee DSUs
are paid in cash based on (i) the five-day volume weighted average price (“Market Price”) of DPM’s common
shares on the date the employee ceases to be employed by DPM or a subsidiary thereof (“Separation
Date”); or (ii) if a deferred redemption date has been elected by the employee (“Deferred Redemption
Date”), a cash payment by the Company to the employee based on the Market Price or the closing price of
DPM’s common shares on the day preceding the Deferred Redemption Date; or (iii) the Market Price of
DPM’s common shares if the Deferred Redemption Date is December 15 of the calendar year commencing
after the Separation Date. 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 common shares, subject to performance criteria established by the Board of Directors on the
entitlement date or dates.
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).
(x)
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.
DUNDEE PRECIOUS METALS INC. I 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
2.2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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:120) The initial recognition of assets or liabilities, not arising from a business combination, that does not
affect accounting or taxable profit;
(cid:120) Initial recognition of goodwill, if any; and
(cid:120) 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.
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.
FOURTH QUARTER 2021 I 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
(y)
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.
DUNDEE PRECIOUS METALS INC. I 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
3.
ASSETS AND LIABILITIES HELD FOR SALE AND DISCONTINUED OPERATIONS
On December 22, 2020, the Company and other shareholders of MineRP entered into a definitive
agreement with Epiroc Canada Holding Inc., a subsidiary of Epiroc Rock Drills AB (“Epiroc”) for the sale of
MineRP (the “MineRP Disposition”). The MineRP Disposition closed on May 3, 2021.
MineRP Disposition
Net cash consideration received for DPM's equity interest in MineRP:
Total purchase price
Cash received for settlement of DPM loan to MineRP
Working capital adjustment
Closing indebtedness
Closing cash
Cash consideration
Less: transaction costs
Net cash consideration
Cash paid to non-controlling interests
Net cash consideration received for DPM's equity interest in MineRP(a), (b)
Net assets disposed:
Cash
Accounts receivable
Property, plant & equipment
Intangible assets
Other long-term assets
Total assets disposed
Accounts payable and accrued liabilities
Loan payable to Epiroc
Current portion of long-term liabilities
Deferred income tax liabilities
Other long-term liabilities
Total liabilities disposed
Non-controlling interests
Net assets disposed
Reclassification of currency translation adjustments from
accumulated other comprehensive income
Gain on MineRP Disposition included in net earnings
from discontinued operations
59,000
(20,571)
(1,485)
(534)
276
36,686
(3,048)
33,638
(9,021)
24,617
276
2,231
1,137
26,760
230
30,634
5,835
20,571
311
950
630
28,297
607
1,730
(2,845)
20,042
(a) Net cash consideration received included $5.1 million held in escrow on closing to secure against any
post closing adjustments related to working capital and certain representations and warranties, of
which $1.6 million related to working capital items. The working capital adjustment was finalized in
December 2021, resulting in an unfavourable final adjustment of $0.6 million to the Company which
was recognized as a reduction in the gain on MineRP Disposition included in net earnings from
discontinued operations for the year ended December 31, 2021. As at December 31, 2021, the
remaining cash held in escrow of $3.5 million related to other indemnities was recognized as restricted
cash included in other long-term assets in the consolidated financial statements of financial position.
FOURTH QUARTER 2021 I 114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
(b) The MineRP Disposition also provides for potential additional proceeds in the form of an earn-out
conditional on the achievement of certain revenue targets by MineRP in 2021 and 2022, for which no
value has been recognized as at December 31, 2021 based on the assessment of its fair market value.
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, 2021 and 2020.
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
Non-controlling interests of net assets held for sale
6,504
The following table summarizes the operating results of MineRP which have been aggregated and
presented as discontinued operations for the years ended December 31, 2021 and 2020:
Revenue
Costs and expenses
Cost of sales
General and administrative expenses
Other income
Loss before income taxes
Current income tax expense
Deferred income tax recovery
Net loss from discontinued operations
before gain on MineRP Disposition
Gain on MineRP Disposition
Net earnings (loss) from discontinued operations
2021
4,521
3,726
2,384
(631)
5,479
2020
11,495
10,160
6,424
(485)
16,099
(958) (4,604)
-
(11)
212
(647)
(947) (4,169)
20,042
19,095
-
(4,169)
DUNDEE PRECIOUS METALS INC. I 115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
4.
ACQUISITION OF INV METALS INC. (“INV”)
On July 26, 2021, the Company acquired all of the issued and outstanding shares it did not already own of
INV, now renamed DPM Ecuador Holdings Inc., which owns DPM Ecuador, the principal assets of which
are comprised of the Loma Larga gold project and certain other exploration licenses. As consideration for
the acquisition, DPM issued 10,664,501 common shares representing 0.0910 of a DPM common share for
each INV common share acquired at a market price of $5.72 (Cdn$7.19) per share with an aggregate value
of $61.0 million.
This transaction was accounted for as an asset acquisition with the consideration paid allocated primarily
to the exploration and evaluation assets related to the Loma Larga project. The following table summarizes
the consideration paid and the allocation of this consideration to the assets acquired and liabilities assumed
as at the date of acquisition.
Consideration paid
DPM common shares issued, net of share issuance costs
Fair value of previously held equity interest(a)
DPM stock options(b)
Transaction costs
Total consideration paid
Assets acquired and liabilities assumed
Cash
Accounts receivable
Investments at fair value
Exploration and evaluation assets
Property, plant and equipment
Other long-term assets
Accounts payable and accrued liabilities
Current portion of long-term liabilities
Other long-term liabilities
Net assets acquired
60,844
17,988
2,366
2,463
83,661
1,029
556
151
86,372
589
897
(4,677)
(220)
(1,036)
83,661
(a) The fair value of the 35,344,424 INV shares previously held by DPM (note 7(b)) was based on the
market price of $0.51 (Cdn$0.64) per INV share as at the date of acquisition.
(b) As at the date of acquisition, 12,304,700 outstanding INV stock options vested immediately and were
exchanged for 1,119,728 DPM stock options, the fair value of which was estimated using the Black-
Scholes option pricing model.
The Company recognized a post-acquisition net loss of $0.6 million from DPM Ecuador in the consolidated
statements of earnings (loss) for the year ended December 31, 2021. Had DPM Ecuador been consolidated
from January 1, 2021, the Company would have reported a net loss of $8.6 million, including change of
control payments as a result of the acquisition, in its consolidated statements of earnings (loss) for the year
ended December 31, 2021.
FOURTH QUARTER 2021 I 116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
5.
ACCOUNTS RECEIVABLE
Accounts receivable (a)
Supplier advances and other prepaids
Value added tax receivable
December 31,
2021
December 31,
2020
116,699
9,618
2,021
128,338
74,506
8,501
1,913
84,920
(a) As at December 31, 2021, the Company’s accounts receivable included a metal recovery of $2.2 million
(December 31, 2020 – a liability of $0.4 million) related to estimated metal exposure at Tsumeb.
6.
INVENTORIES
Ore and concentrates
Spare parts, supplies and other
December 31,
2021
18,012
31,614
49,626
December 31,
2020
14,382
28,667
43,049
For the year ended December 31, 2021, the cost of inventories recognized as an expense and included in
cost of sales was $209.5 million (2020 – $186.4 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 instrument
December 31, December 31,
2020
2021
Amortized cost
334,377
149,532
FVPL
Amortized cost
Amortized cost
FVPL
FVOCI
Derivatives for cash flow and
fair value hedges
Derivatives for cash flow hedges
85,083
43,255
5,730
5,816
42,167
21
-
52,957
31,963
2,111
12,128
94,467
104
6,364
Amortized cost
Derivatives for cash flow and
fair value hedges
73,735
1,946
66,465
5,769
Derivatives for cash flow hedges
1,489
-
Financial assets
Cash
Accounts receivable
on provisional 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
Commodity swap contracts (c)
Foreign exchange option
contracts (d)
DUNDEE PRECIOUS METALS INC. I 117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
The carrying values of all the financial assets and liabilities approximate their fair values as at December
31, 2021 and 2020.
(a) Sabina special warrants
During the year ended December 31, 2021, the Company purchased an additional 512,820 common shares
of Sabina at an average price of $1.56 (Cdn$1.95) per share. As at December 31, 2021, DPM held: (i)
31,050,566 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, 2021 and 2020.
The fair value of the Sabina special warrants was included in investments at fair value in the consolidated
statements of financial position.
For the year ended December 31, 2021, the Company recognized unrealized losses on the Sabina special
warrants of $6.3 million (2020 – unrealized gains of $5.7 million) in other (income) expense (note 21) 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. As a result of the Company acquiring 100% of INV on July 26,
2021, INV is no longer reported under investments at fair value (note 4).
For the year ended December 31, 2021, the Company recognized unrealized losses on these publicly
traded securities of $42.6 million (2020 – unrealized gains of $36.5 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, 2021, 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
18,040 ounces
6,194,982 pounds
Weighted average fixed price
of QP Hedges
1,803.46/ounce
4.16/pound
The Company also enters into Production Hedges, being cash settled commodity swap contracts from time
to time to swap future contracted monthly average prices for fixed metal prices to reduce its future metal
price exposure in respect of its projected production. As at December 31, 2021, the Company had no
outstanding Production Hedges.
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.
FOURTH QUARTER 2021 I 118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
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, 2021, the net fair value loss on all outstanding commodity swap contracts
was $1.9 million (December 31, 2020 – $5.7 million), of which $0.02 million (December 31, 2020 – $0.1
million) was included in other current assets and $1.9 million (December 31, 2020 – $5.8 million) in accounts
payable and accrued liabilities.
All commodity swap contracts are subject to master netting agreements. As at December 31, 2021, there
was no set-off of assets and liabilities in the consolidated statements of financial position. 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.
For the year ended December 31, 2021, the Company recognized, in revenue, net losses of $3.5 million
(2020 – $11.1 million) on commodity swap contracts in respect of QP Hedges and realized losses of $15.7
million (2020 – $nil) on commodity swap contracts in respect of Production Hedges.
(d) Foreign exchange option contracts
The Company enters into foreign exchange option contracts from time to time to reduce the foreign
exchange exposure associated with projected operating expenses and capital expenditures denominated
in foreign currencies.
Foreign exchange option contracts provide price protection below a specified “floor” rate and participation
up to a specified “ceiling” rate. The option contracts comprise a series of call options and put options (which
when combined create a price “collar”) that are structured so as to provide for a zero upfront cash cost.
As at December 31, 2021, the Company had outstanding foreign exchange option contracts in respect of a
portion of its projected ZAR denominated operating expenses as summarized in the table below:
Year of projected
operating expenses
Put options purchased
Weighted average
floor rate US$/ZAR
2022 1,464,090,000 17.05 15.14
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 intrinsic value of option contracts as cash flow hedges. The time value
component of foreign exchange 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, 2021, the net fair value loss on all outstanding foreign
exchange option contracts was $1.5 million (December 31, 2020 – net fair value gain of $6.4 million), of
which $nil was included in other current assets (December 31, 2020 – $6.4 million) and $1.5 million
(December 31, 2020 – $nil) in accounts payable and accrued liabilities. All foreign exchange option
contracts are subject to master netting agreements. As at December 31, 2021 and 2020, there was no set-
off of assets and liabilities in the consolidated statements of financial position.
The Company recognized realized gains of $6.5 million (2020 – realized losses of $3.5 million) for the year
ended December 31, 2021 in cost of sales on the spot component of settled contracts.
For the year ended December 31, 2021, the Company recognized unrealized losses of $5.4 million (2020
– unrealized gains of $3.4 million) in other comprehensive income (loss) on the spot component of the
outstanding foreign exchange option contracts. For the year ended December 31, 2021, the Company also
recognized unrealized losses of $2.5 million (2020 – $0.9 million) on the time value component of the
outstanding foreign exchange option contracts in other comprehensive income (loss) as a deferred cost of
hedging.
DUNDEE PRECIOUS METALS INC. I 119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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:120) Differences in the timing and/or amount of the cash flows of the hedged item and the hedging
instrument; and
(cid:120) 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:
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
2021
2020
21
(1,946)
(1,925)
58,281
(1,892)
1,914
-
-
-
-
104
(5,836)
(5,732)
135,513
(5,666)
5,444
67
21,883
87
(87)
Assets included in other current assets
Liability included in accounts payable and accrued liabilities
Notional amount ZAR (in 000's)
Changes in fair value used for measuring ineffectiveness
Hedging instruments
Hedged items
-
(1,489)
1,464,090
6,364
-
1,426,200
-
-
5,350
(5,350)
(i)
The carrying value of the hedged item, comprised of accounts receivable on provisionally priced
sales, as at December 31, 2021 was $85.1 million (December 31, 2020 – $53.0 million).
FOURTH QUARTER 2021 I 120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
See note 26(c) 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:120) Level 1: based on quoted (unadjusted) prices in active markets for identical assets or liabilities;
(cid:120) 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:120) 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, 2021 and 2020:
Financial assets
Accounts receivable on provisionally
priced sales
Sabina special warrants
Publicly traded securities
Commodity swap contracts
Financial liabilities
Commodity swap contracts
Foreign exchange option contracts
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
Level 1
Level 2
As at December 31, 2021
Total
Level 3
-
-
42,167
-
-
-
85,083
-
-
21
1,946
1,489
-
5,816
-
-
-
-
85,083
5,816
42,167
21
1,946
1,489
Level 1
Level 2
As at 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
During the years ended December 31, 2021 and 2020, 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, 2021 to December 31,
2021:
Balance at beginning of year
Unrealized gains (losses) included in net earnings (note 21)
Balance at end of year
December 31,
2021
December 31,
2020
12,128
(6,312)
5,816
6,488
5,640
12,128
DUNDEE PRECIOUS METALS INC. I 121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
8.
EXPLORATION AND EVALUATION ASSETS
Balance at beginning of year
Additions (a)
Acquisition of INV (note 4)
Capitalized depreciation
Balance at end of year
December 31,
2021
-
12,444
86,372
109
98,925
(a)
In February 2021, the Company announced the results of a pre-feasibility study for its Timok gold
project in Serbia. Based on the results of the PFS, the Board of Directors approved proceeding with a
feasibility study (“FS”). As a result, $8.5 million costs related to the FS for the Timok gold project were
capitalized to exploration and evaluation assets in the consolidated statements of financial position as
at December 31, 2021.
Exploration and evaluation expenditures expensed directly to net earnings from continuing operations
amounted to $18.0 million (2020 - $19.1 million) for the year ended December 31, 2021.
9. MINE PROPERTIES
Cost:
Balance at beginning of year
Additions
Capitalized depreciation
Change in rehabilitation provisions
Balance at end of year
Accumulated depletion and impairment:
Balance at beginning of year
Depletion
Balance at end of year
Net book value:
At beginning of year
At end of year
December 31,
2021
December 31,
2020
314,003
16,837
537
(1,115)
330,262
158,565
33,660
192,225
155,438
138,037
298,995
9,367
480
5,161
314,003
118,263
40,302
158,565
180,732
155,438
The costs comprising mine properties related to producing mines. Of the total depletion expense, $31.0
million (2020 – $37.7 million) was charged to cost of sales for the year ended December 31, 2021.
FOURTH QUARTER 2021 I 122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
10. PROPERTY, PLANT AND EQUIPMENT
Machinery Construction
Work-in-
Progress
and
Equipment
Buildings
Cost:
Balance as at January 1, 2020
Additions
Capitalized depreciation
Disposals
Change in rehabilitation provisions
Transfers
Reclassified as assets held for sale (note 3)
Balance as at December 31, 2020
Additions
Acquisition of INV (note 4)
Capitalized depreciation
Disposals
Impairment charge
Change in rehabilitation provisions
Transfers
Balance as at December 31, 2021
Accumulated depreciation and impairment:
Balance as at January 1, 2020
Depreciation expense
Capitalized depreciation
Currency translation adjustment
Depreciation relating to disposals
Reclassified as assets held for sale (note 3)
Balance as at December 31, 2020
Depreciation expense
Capitalized depreciation
Depreciation relating to disposals
Impairment charge
Balance as at December 31, 2021
Net book value:
As at December 31, 2020
As at December 31, 2021
73,994
2,727
-
(373)
3,919
486
(1,240)
79,513
3,106
263
-
(1,506)
(6)
(609)
167
80,928
22,952
8,087
-
-
(248)
(405)
30,386
7,635
48
(1,116)
(3)
36,950
547,061
17,757
-
(4,774)
198
21,611
14,129
510
-
-
16,524 (17,010)
-
19,240
15,971
-
802
(305)
-
-
(12,225)
23,483
(476)
576,290
16,406
326
-
(3,274)
(5,506)
(1,262)
12,058
595,038
232,533
51,595
990
(135)
(4,617)
(46)
280,320
53,958
1,382
(3,175)
(5,291)
327,194
-
-
-
-
-
-
-
-
-
-
-
-
Total
642,666
34,613
510
(5,147)
4,117
-
(1,716)
675,043
35,483
589
802
(5,085)
(5,512)
(1,871)
-
699,449
255,485
59,682
990
(135)
(4,865)
(451)
310,706
61,593
1,430
(4,291)
(5,294)
364,144
49,127
43,978
295,970
267,844
19,240
23,483
364,337
335,305
Of the total depreciation expense from continuing operations, $61.3 million (2020 – $59.3 million) was
charged to cost of sales and $0.6 million (2020 – $0.7 million) was charged to general and administrative
expenses for the year ended December 31, 2021.
See note 17 for the carrying value of right-of-use assets under leases recognized in property, plant and
equipment as at December 31, 2021 and 2020 and other related information for the years ended December
31, 2021 and 2020.
DUNDEE PRECIOUS METALS INC. I 123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
11.
INTANGIBLE ASSETS
Cost:
Balance as at January 1, 2020
Additions
Currency translation adjustment
Disposals
Reclassified as assets held for sale
(note 3)
Balance as at December 31, 2020
Additions
Disposals
Balance as at December 31, 2021
Accumulated amortization and impairment:
Balance as at January 1, 2020
Amortization
Amortization relating to disposals
Reclassified as assets held for sale
(note 3)
Balance as at December 31, 2020
Amortization
Captalized depreciation
Amortization relating to disposals
Balance as at December 31, 2021
Net book value:
As at December 31, 2020
As at December 31, 2021
Goodwill
Other
Intangibles
Total
22,513
-
(942)
-
55,180
32,667
7,476
7,476
(1,026)
(84)
(56) (56)
(21,571) (7,889) (29,460)
32,114
4,609
(697)
32,114
4,609
(697)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,026
36,026
15,146
3,192
15,146
3,192
(56) (56)
(2,307)
15,975
3,370
17
(2,307)
15,975
3,370
17
(695) (695)
18,667
18,667
16,139
17,359
16,139
17,359
Of the total intangible asset amortization expense from continuing operations, $2.4 million (2020 – $2.2
million) was charged to cost of sales and $1.0 million (2020 – $0.3 million) was charged to general and
administrative expenses for the year ended December 31, 2021.
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable
Accrued liabilities
Commodity swap contracts (note 7(c))
Foreign exchange option contracts (note 7(d))
Dividend payable (note 26(a))
Value added tax payable
December 31,
2021
December 31,
2020
20,380
43,982
1,946
1,489
5,743
3,630
77,170
13,110
45,704
5,769
-
5,442
2,209
72,234
FOURTH QUARTER 2021 I 124
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
13. DEBT
(a) DPM Revolving Credit Facility (“RCF”)
DPM has a committed RCF of $150.0 million with a consortium of banks. In February 2021, the Company
extended the RCF’s maturity date from February 2023 to February 2024. 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, 2021 and 2020, DPM was in compliance with all financial covenants and $nil was
drawn under the RCF.
(b) Tsumeb overdraft facility
Tsumeb has a Namibian $100.0 million ($6.3 million) demand overdraft facility. 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, 2021 and 2020, $nil was drawn from this facility.
(c) Other credit agreements and guarantees
In February 2021, Chelopech and Ada Tepe increased its multi-purpose credit facility from $16.0 million to
$21.0 million. This credit facility matures on November 30, 2022 and is guaranteed by DPM. As at
December 31, 2021, $13.9 million (December 31, 2020 – $6.1 million) had been utilized in the form of letters
of credit and letters of guarantee, primarily in respect of concession contracts with the Bulgarian Ministry of
Energy.
Chelopech and Ada Tepe also have a Euro 21.0 million ($23.8 million) credit facility to support mine closure
and rehabilitation obligations in respect of concession contracts with the Bulgarian Ministry of Energy. This
credit facility matures on November 30, 2022 and is guaranteed by DPM. As at December 31, 2021, $23.8
million (December 31, 2020 – $25.8 million) had been utilized in the form of letters of guarantee.
In February 2021, Ada Tepe increased its multi-purpose credit facility from $5.3 million to $10.3 million.
This credit facility matures on November 30, 2022 and is guaranteed by DPM. As at December 31, 2021,
$0.2 million (December 31, 2020 – $0.2 million) had been utilized in the form of letters of credit and letters
of guarantee, primarily in respect of concession contracts with the Bulgarian Ministry of Energy.
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.
DUNDEE PRECIOUS METALS INC. I 125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
14. 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 undertook to deliver specified quantities of gold on specified
dates in exchange for an upfront cash prepayment of $50.0 million. Deliveries in the form of unallocated
gold credits sourced from the Company’s existing mines occurred over a 15-month period from October
2019 to December 2020.
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 were delivered pursuant to the prepaid
forward gold sales arrangement and as a result, $46.7 million was transferred from deferred revenue to
revenue. As at December 31, 2020, the deferred revenue had been fully recognized as revenue.
15. 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 2022 and 2049.
Key assumptions used in determining the rehabilitation provisions were as follows:
Discount period
Chelopech
Tsumeb
Ada Tepe
Local discount rate
Chelopech/Ada Tepe
Tsumeb
Local inflation rate
Chelopech/Ada Tepe
Tsumeb
Changes to rehabilitation provisions were as follows:
Balance as at January 1, 2020
Change in cost estimate (a)
Remeasurement of provisions (b)
Accretion expense (note 20)
Balance as at December 31, 2020
Change in cost estimate
Remeasurement of provisions (b)
Accretion expense (note 20)
Tsumeb
Chelopech
18,927
16,416
2,352
1,950
4,185 (4,842)
1,758
17,793
-
(1,702) (980)
1,999
317
23,270
834
256
Balance as at December 31, 2021
22,658
18,812
10,156
December 31,
2021
December 31,
2020
2022 - 2043
2022 - 2049
2022 - 2038
2021 - 2037
2022 - 2049
2021 - 2040
1.3%
11.1%
2.5%
4.5%
Ada Tepe
6,052
3,436
1,854
121
11,463
-
(1,432)
125
0.9%
11.4%
2.5%
4.5%
Total
41,395
7,738
1,197
2,196
52,526
834
(4,114)
2,380
51,626
FOURTH QUARTER 2021 I 126
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
(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.
16. OTHER LONG-TERM LIABILITIES
Leases (note 17)
Other liabilities
Less: Current portion
17. LEASES
December 31,
2021
December 31,
2020
15,188
4,910
20,098
(6,234)
13,864
17,083
3,006
20,089
(5,929)
14,160
The Company leases various property, equipment and vehicles with lease terms ranging between one to 15
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%.
Right-of-use assets recognized in property, plant and equipment (note 10) as at December 31, 2021 and
2020 were as follows:
Buildings
Machinery and Equipment
December 31,
2021
December 31,
2020
3,741
7,024
10,765
2,431
14,287
16,718
Additions to the right-of-use assets during the year ended December 31, 2021 were $2.9 million (2020 –
$5.3 million).
Lease obligations related to right-of-use assets recognized in the current portion of long-term liabilities and
other long-term liabilities (note 16) as at December 31, 2021 and 2020 were as follows:
Current portion of long-term liabilities
Other long-term liabilities
DUNDEE PRECIOUS METALS INC. I 127
December 31,
2021
4,405
10,783
December 31,
2020
4,137
12,946
15,188
17,083
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
Expenses related to leases recognized in the consolidated statements of earnings (loss) for the year ended
December 31, 2021 and 2020 were as follows:
Depreciation charge of right-of-use assets
Buildings
Machinery and Equipment
Finance charges (note 20)
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
2021
2020
870
3,954
4,824
1,163
494
59
1,194
848
3,593
4,441
1,227
572
64
184
Total cash outflows for leases for the year ended December 31, 2021 were $5.5 million (2020 – $5.3 million).
18. 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.
The following is a summary of the RSUs granted for the years indicated:
Number of RSUs
Amount
Balance as at January 1, 2020
RSUs granted
RSUs redeemed
RSUs forfeited
Mark-to-market adjustments
Balance as at December 31, 2020
RSUs granted
RSUs redeemed
RSUs forfeited
Mark-to-market adjustments
2,697,627
1,115,800
7,173
5,424
(1,300,789) (4,095)
(232,044) (393)
1,664
9,773
3,869
(1,199,532) (7,700)
(82,749) (89)
433
2,280,594
726,258
Balance as at December 31, 2021
1,724,571
6,286
As at December 31, 2021, there was $3.1 million (December 31, 2020 – $2.9 million) of RSU expenses
remaining to be charged to net earnings in future periods relating to the RSU plan.
(b) PSUs
FOURTH QUARTER 2021 I 128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
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, 2020
PSUs granted
PSUs redeemed
PSUs forfeited
Mark-to-market adjustments
Balance as at December 31, 2020
PSUs granted
PSUs redeemed
Mark-to-market adjustments
Balance as at December 31, 2021
1,540,223
371,454
5,350
2,023
(588,850) (2,842)
(70,737) (191)
2,872
7,212
1,403
(511,316) (5,599)
471
1,252,090
240,928
981,702
3,487
As at December 31, 2021, there was $1.7 million (December 31, 2020 – $1.6 million) of expenses remaining
to be charged to net earnings in future periods relating to these PSUs.
DSU plans
DPM has a DSU Plan for directors and certain employees.
Under the Director DSU Plan, directors receive a portion of their annual compensation in the form of DSUs.
The DSUs are redeemable in cash equal to the closing price of DPM’s common shares on the applicable
redemption date as elected by the director.
Under the Employee DSU Plan, grants to employees of the Company are determined by the Board of
Directors, or the Human Capital & Compensation Committee, in lieu of a cash bonus. The DSUs are
redeemable in cash based on (i) the Market Price of DPM’s common shares on the Separation Date; or (ii)
the Market Price or the closing price of DPM’s common share on the day preceding the Deferred
Redemption Date; or (iii) the Market Price of DPM’s common shares if the Deferred Redemption Date is
December 15 of the calendar year commencing after the Separation Date.
The following is a continuity of the DSUs for the years indicated:
Balance as at January 1, 2020
DSUs granted
Mark-to-market adjustments
Balance as at December 31, 2020
DSUs granted
DSUs redeemed
Mark-to-market adjustments
Balance as at December 31, 2021
DUNDEE PRECIOUS METALS INC. I 129
Number of DSUs
Amount
1,716,616
152,642
1,869,258
179,883
(297,007)
1,752,134
7,493
844
5,141
13,478
1,093
(2,078)
(1,876)
10,617
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
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, 2021, the Company granted 464,443 (2020 – 680,860) stock options
with a fair value of $1.1 million (2020 – $1.0 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 $1.1 million (2020 – $0.9 million) for the year ended December
31, 2021 under this stock option plan.
As at December 31, 2021, there was $0.7 million (December 31, 2020 – $0.7 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
2021
0.8% - 0.9%
4.75
52.6% - 54.6%
$0.12
2020
0.4% - 0.6%
4.75
57.6% - 60.5%
$0.08
The following is a stock option continuity for the years indicated:
Balance as at January 1, 2020
Options granted
Options exercised
Options forfeited
Options expired
Balance as at December 31, 2020
Options granted
INV options (note 4)
Option exercised
Options expired
Balance as at December 31, 2021
Number of
options
3,145,565
680,860
(838,072)
(63,266)
(9,000)
2,916,087
464,443
1,119,728
(1,070,774)
(34,139)
3,395,345
Weighted average
exercise price per share
(Cdn$)
3.13
4.56
2.85
4.24
2.97
3.52
7.67
6.74
3.27
10.11
5.17
FOURTH QUARTER 2021 I 130
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
The following lists the options outstanding and exercisable as at December 31, 2021:
Options outstanding
Options exercisable
Range of
exercise prices
per share
(Cdn$)
2.69 - 3.28
3.29 - 4.45
4.46 - 8.50
8.51 - 10.99
2.69 - 10.99
Number of
options
outstanding
922,537
1,394,946
790,484
287,378
3,395,345
Weighted
average
remaining
years
0.74
2.20
2.77
0.30
1.78
Weighted
average
exercise
price
per share
(Cdn$)
3.07
4.42
6.86
10.92
5.17
Weighted
average
exercise
price
per share
(Cdn$)
3.07
4.41
5.62
10.92
4.85
Number of
options
exercisable
922,537
775,742
304,292
287,378
2,289,949
19. 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 9)
Depreciation of property, plant and equipment (note 10)
Amortization of intangible assets (note 11)
Other costs
Total operating costs
20. FINANCE COST
Borrowing costs
Deemed interest on prepaid forward gold sales arrangement (note 14)
Accretion expense related to rehabilitation provisions (note 15)
Finance charges under leases (note 17)
2021
104,648
85,467
70,917
4,156
21,468
11,095
4,855
(6,525)
30,960
61,877
3,370
3,819
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
396,107
380,533
2021
2,006
-
2,380
1,163
5,549
2020
2,306
1,293
2,196
1,227
7,022
DUNDEE PRECIOUS METALS INC. I 131
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
21. OTHER (INCOME) EXPENSE
Net (gains) losses on Sabina special warrants (note 7(a))
Net foreign exchange losses
Interest income
Other (income) expense
2021
2020
6,312 (5,640)
4,376
1,628
(632) (194)
967
(1,777)
5,531
(491)
22.
INCOME TAXES
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
2021
33,625
5,064
38,689
2020
23,353
(4,462)
18,891
The reconciliation of the combined Canadian federal and provincial government statutory income tax rates
to the effective tax rate is as follows:
Earnings before income taxes from continuing operations
Combined Canadian federal and provincial
statutory income tax rates
Expected income tax expense
Lower rates on foreign earnings
Changes in unrecognized tax benefits
Non-taxable portion of capital (gains) losses
Non-deductible share-based compensation expense
Other, net
Income tax expense
2021
229,418
2020
217,923
26.5%
60,796
26.5%
57,750
(41,163) (39,256)
2,906
3,346 (3,663)
246
908
18,891
279
589
38,689
14,842
A deferred income tax recovery of $8.2 million (2020 – a deferred income tax expense of $5.0 million)
relating to publicly traded securities and cash flow hedges was also recognized in other comprehensive
income (loss) for the year ended December 31, 2021.
FOURTH QUARTER 2021 I 132
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
The significant components of the Company’s deferred income taxes as at December 31, 2021 and 2020
are as follows:
December 31,
2021
December 31,
2020
Deferred income tax assets
Non-capital losses
Capital losses
Cumulative Canadian exploration and evaluation expenses
Depreciable property, plant and equipment
Financing costs
Share-based compensation expense
Rehabilitation provisions
Investments
Other
Gross deferred income tax assets
Unrecognized tax benefits
Total deferred income tax assets
0
Deferred income tax liabilities
Depreciable property, plant and equipment
Investments
Other
Total deferred income tax liabilities
Net deferred income tax assets
72,565
3,354
2,308
8,897
2,345
3,541
2,754
1,360
1,055
98,179
64,117
3,313
2,555
9,215
3,193
5,035
2,861
-
1,363
91,652
(88,724) (74,156)
17,496
9,455
649
-
121
770
8,685
315
5,982
1,729
8,026
9,470
As at December 31, 2021, the Company had $8.7 million (December 31, 2020 – $9.5 million) of net deferred
income tax assets and $nil (December 31, 2020 – $nil) 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 2021, $8.6 million (2020 – $16.3 million) is expected
to be recovered after more than 12 months. Of the total deferred income tax liabilities recognized in 2021,
$0.6 million (2020 – $7.5 million) is expected to be payable after more than 12 months.
As at December 31, 2021, the Company had Canadian non-capital losses of $255.3 million (December 31,
2020 – $199.6 million) expiring between 2026 and 2041 and Serbian non-capital losses of $31.8 million
(December 31, 2020 – $26.7 million) expiring between 2022 and 2026 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, 2021 and 2020, no provisions have been made in the consolidated financial
statements for potential tax liabilities relating to such assessments and interpretations.
DUNDEE PRECIOUS METALS INC. I 133
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
23. EARNINGS (LOSS) PER SHARE
Net earnings (loss) attributable to common shareholders
Net earnings from continuing operations
Net earnings (loss) from discontinued operations
Basic weighted average number of common shares
Effect of stock options
190,750
19,351
199,074
(3,072)
186,135,033
1,342,045
181,054,158
1,319,213
Diluted weighted average number of common shares
187,477,078
182,373,371
2021
2020
Basic earnings (loss) per share
From continuing operations
From discontinued operations
Diluted earnings (loss) per share
From continuing operations
From discontinued operations
24. RELATED PARTY TRANSACTIONS
Key management remuneration
1.02
0.10
1.10
(0.02)
1.09
1.02
0.10 (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 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, 2021 and 2020 was as follows:
Salaries, management bonuses and director fees
Other benefits
Share-based compensation
Total remuneration
2021
3,290
210
1,897
5,397
2020
3,229
222
8,703
12,154
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.
FOURTH QUARTER 2021 I 134
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
25. SUPPLEMENTARY CASH FLOW INFORMATION
(a) Changes in working capital
Increase in accounts receivable and other assets
Increase 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) losses on Sabina special warrants
Net losses on commodity swap contracts
Net (gains) losses on foreign exchange option contracts
Other, net
2021
(42,190)
(5,103)
(1,714)
(6,462)
(55,469)
2020
(49,867)
(3,134)
(2,444)
3,805
(51,640)
2021
2020
6,828
4,917
929
1,052
(5,640)
6,312
10,533
19,289
(6,525)
3,486
1,164 (1,714)
14,422
26,209
26. SUPPLEMENTARY SHAREHOLDERS’ EQUITY INFORMATION
(a) Dividend
During the year ended December 31, 2021, the Company declared a quarterly dividend of $0.03 per
common share to its shareholders of record, resulting in total dividend distributions of $22.4 million (2020
– $16.3 million) recognized against its retained earnings in the consolidated statements of changes in
shareholders’ equity. The Company paid an aggregate of $22.1 million (2020 – $10.9 million) of dividends
which were included in cash used in financing activities in the consolidated statements of cash flows for the
year ended December 31, 2021 and recognized a dividend payable of $5.7 million (December 31, 2020 –
$5.4 million) in accounts payable and accrued liabilities in the consolidated statements of financial position
as at December 31, 2021.
On February 17, 2022, the Company declared a dividend of $0.04 per common share payable on April 18,
2022 to shareholders of record on March 31, 2022, representing a 33% increase over the previous quarterly
dividend.
(b) Share repurchases under the Normal Course Issuer Bid (“NCIB”)
Effective March 2, 2021, DPM renewed its NCIB to repurchase certain of its common shares through the
facility of the TSX. The number of shares that can be purchased during the period of the NCIB will not
exceed 9,000,000 shares. The NCIB will expire on February 28, 2022. In December 2021, the Company
initiated an automatic purchase program under the NCIB to facilitate share repurchases.
During the year ended December 31, 2021, the Company purchased a total of 1,723,800 shares, of which
1,694,200 shares were cancelled as at December 31, 2021 with the remaining shares cancelled in January
2022. The total cost of these purchases was $10.4 million at an average price of $6.02 (Cdn$7.64) per
share, $5.3 million of which was recognized as a reduction in share capital and $5.1 million as a reduction
in contributed surplus in the consolidated statements of changes in shareholders’ equity for the year ended
December 31, 2021. The Company paid an aggregate of $10.2 million which was included in cash used in
financing activities in the consolidated statements of cash flows for the year ended December 31, 2021 and
recognized an obligation of $0.2 million in accounts payable and accrued liabilities in the consolidated
statements of financial position as at December 31, 2021.
DUNDEE PRECIOUS METALS INC. I 135
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
(c) 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
Balance at end of year
Commodity swap contracts
Balance at beginning of year
Unrealized gains (losses), net of income taxes
Realized losses 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
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 on publicly traded securities
Balance at beginning of year
Unrealized gains (losses), 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
Balance at beginning of year
Classified as held for sale
MineRP disposition (note 3)
Balance at end of year
Accumulated other comprehensive income (loss)
2021
2020
5,344
1,175
(6,525)
(6)
78
(13,723)
13,645
-
1,060
(2,504)
(1,444)
(18)
(504)
522
-
39,829
(37,593)
2,236
(2,446)
-
-
(2,446)
(2,176)
(669)
2,845
-
(1,660)
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)
-
(2,176)
41,671
FOURTH QUARTER 2021 I 136
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
27. COMMITMENTS AND CONTINGENCIES
(a) Commitments
The Company had the following minimum contractual commitments as at December 31, 2021:
Capital commitments
Purchase commitments
Total commitments
up to 1 year
1 - 5 years
9,209
18,985
28,194
-
49
49
Total
9,209
19,034
28,243
As at December 31, 2021, Tsumeb had approximately $73.8 million (December 31, 2020 – $76.9 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 April 2021, the Company and IXM agreed to amend the existing Tolling Agreement to provide for, among
other things: i) targeted declining excess secondary material balances, above which excess secondary
material would be required to be purchased by the Company; ii) the elimination of all excess secondary
material by March 31, 2023; iii) an increase in the defined level of normal secondary material; and iv) an
extension of the Tolling Agreement by three years to December 31, 2026.
As at December 31, 2021, the value of excess secondary materials, as defined in the Tolling Agreement,
was approximately $36.5 million, which was approximately $21.9 million above the targeted levels under
the Tolling Agreement. IXM has agreed to waive the quarterly requirement to purchase secondary materials
above the targeted levels as at December 31, 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.
28. 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 contracts, foreign exchange 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.
DUNDEE PRECIOUS METALS INC. I 137
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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, 2021, 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 $2.0 million (2020 – $3.8 million) and would
decrease or increase equity by $2.0 million (2020 – $4.9 million).
The following table demonstrates the effect on 2021 and 2020 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.
Effect of a 5% increase in metal prices on earnings before income taxes
Gold
Copper
Total increase on earnings before income taxes
2021
25,129
6,883
32,012
2020
23,146
4,580
27,726
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, 2021, the Company had no debt. For the year ended December 31, 2021, 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 $3.4 million (2020 – $1.5 million). The impact on equity is the
same as the impact on net earnings.
FOURTH QUARTER 2021 I 138
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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 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, 2021, 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 $1.9 million (2020 – $6.9 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 2021 and 2020 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.
Euro
Namibian Dollar
Canadian Dollar
Total increase
Effect of a 5% appreciation of the U.S. dollar on
Earnings before income taxes
Equity
2021
1,731
(353)
(773)
605
2020
2,120
(74)
(771)
1,275
2021
1,521
(353)
1,335
2,504
2020
1,919
(74)
3,952
5,797
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 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 2021, the Company had contracts with 14 customers in
connection with its mining and smelting operations, one of whom accounted for approximately 40% (2020
– 57%) 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.
DUNDEE PRECIOUS METALS INC. I 139
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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
Foreign exchange option contracts
Lease obligations
Other obligations
Accounts payable and accrued liabilities
Commodity swap contracts
Lease obligations
Other obligations
Capital management
As at December 31, 2021
up to 1 year 1 - 5 years over 5 years
73,735
1,946
1,489
5,407
700
83,277
-
-
-
10,305
840
11,145
-
-
-
1,791
125
1,916
Total
73,735
1,946
1,489
17,503
1,665
96,338
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
The Company’s objective for capital management is to: (i) maintain sufficient levels of liquidity to fund and
support its exploration, evaluation, development and operating activities; (ii) maintain a strong financial
position to ensure it has ready access to debt and equity markets to supplement its existing cash balance
and free cash flow being used to fund its growth activities; and (iii) comply with all financial covenants set
out in its credit agreements and guarantees. See note 13 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 strategy. 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.
FOURTH QUARTER 2021 I 140
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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, 2021, the Company was in compliance with all loan covenants and its net debt as a
percentage of total capital was negative 50% (December 31, 2020 – negative 23%).
Financial Risk Management in response to Coronavirus (“COVID-19”)
In March 2020, the World Health Organization classified the COVID-19 epidemic 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 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. During the first quarter of 2021, Tsumeb’s maintenance shutdown, which
was originally planned for 30 days, was extended to 45 days in part as a result of COVID-19 related safety
protocols, travel restrictions and the use of remote commissioning support.
The Company continues to closely assess and monitor the COVID-19 situation. 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 directed at safeguarding employees, managing potential
supply chain disruptions, 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 several positive cases of COVID-19 within its workforce. 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.
29. 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.
DUNDEE PRECIOUS METALS INC. I 141
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
The operating results of MineRP have been presented as a discontinued operation for the years ended
December 31, 2021 and 2020 and the assets and liabilities of MineRP have been presented as held for
sale as at December 31, 2020 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, 2021 and 2020:
Year ended December 31, 2021
Chelopech Ada Tepe
Tsumeb
Corporate
& Other
Total
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
Net earnings (loss) from
continuing operatons
Other disclosures
Depreciation and amortization
Capital expenditures (b)
292,779
229,314
119,350
-
641,443
130,798
-
-
6,089
722
(1,632)
135,977
100,480
-
-
2,204
430
(1,175)
101,939
128,662
-
-
-
2,967
884
132,513
-
18,161
4,838
9,713
1,430
7,454
41,596
359,940
18,161
4,838
18,006
5,549
5,531
412,025
156,802
16,046
127,375
17,419
(13,163) (41,596)
5,224
-
229,418
38,689
140,756
109,956
(13,163)
(46,820)
190,729
22,063
22,567
54,405
18,378
18,202
13,604
1,537
15,064
96,207
69,613
FOURTH QUARTER 2021 I 142
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(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
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
(a) Revenues from Chelopech and Ada Tepe were generated from the sale of concentrate and Tsumeb’s
revenues were generated from processing concentrate and acid sales. For the year ended December
31, 2021, $237.7 million or 46% (2020 – $222.0 million or 48%) of revenues from the sale of
concentrate and $100.5 million or 84% (2020 – $125.2 million or 85%) of revenues from processing
concentrate were derived from a single external customer. Revenues from the sale of concentrate of
$157.5 million or 30% (2020 – $123.7 million or 27%) were also derived from another single external
customer.
(b) Capital expenditures represent cash outlays and non-cash accruals in respect of exploration and
evaluation assets (note 8), mine properties (note 9), property, plant and equipment (note 10) and
intangible assets (note 11).
The following table summarizes the Company’s revenue recognized for the years ended December 31,
2021 and 2020:
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
2021
2020
518,607
100,509
18,841
3,486
641,443
446,382
125,201
21,929
16,046
609,558
(a) For the year ended December 31, 2021, the Company’s revenue from the sale of concentrate included
a $1.8 million (2020 – $3.9 million) adjustment in connection with the final determination and settlement
of prior year provisional sales and net mark-to-market losses of $19.3 million (2020 – $11.1 million)
on commodity swap contracts entered to hedge provisionally priced sales.
DUNDEE PRECIOUS METALS INC. I 143
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
(b) For the year ended December 31, 2021, the Company’s revenue from processing concentrate
included a metal recovery of $2.6 million (2020 – $1.5 million) related to the estimated metal exposure
at Tsumeb.
The following table summarizes the total assets and total liabilities by segment as at December 31, 2021
and 2020:
Chelopech
Ada Tepe
Tsumeb
Corporate &
Other
Total current assets
Total non-current assets
Total assets
117,806
173,894
291,700
110,689
216,702
327,391
33,440
106,392
139,832
251,858
157,629
409,487
Total
513,793
654,617
1,168,410
As at December 31, 2021
Total liabilities
54,388
31,660
41,865
36,084
163,997
Total current assets
Total non-current assets
Assets held for sale
Total assets
Liabilities
Liabilities held for sale
Total liabilities
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
52,830
27,776
37,660
As at December 31, 2020
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
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, 2021 and 2020
are summarized below:
Revenue
Revenue
Year ended December 31, 2021
Europe
522,093
Africa
Total
119,350
641,443
Year ended December 31, 2020
Europe
Africa
Total
462,428
147,130
609,558
FOURTH QUARTER 2021 I 144
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2021 and 2020
(in thousands of U.S. dollars, unless otherwise indicated)
Assets by geographic location as at December 31, 2021 and 2020 are summarized below:
Total current assets
Financial assets
Deferred income tax assets
Other non-current assets
Total assets
Total current assets
Financial assets
Deferred income tax assets
Other non-current assets
Assets held for sale
Canada
242,595
51,520
-
4,587
298,702
Canada
74,079
106,595
-
4,203
Europe
234,924
-
8,685
391,603
635,212
Europe
167,244
-
9,470
423,811
Total assets
184,877
600,525
As at December 31, 2021
Ecuador
(note 4)
Total
2,678
-
-
91,830
94,508
513,793
52,908
8,685
593,024
1,168,410
Africa
33,596
1,388
-
105,004
139,988
As at December 31, 2020
Africa
Ecuador
Total
46,996
1,509
-
110,240
30,713
189,458
-
-
-
-
-
-
288,319
108,104
9,470
538,254
30,713
974,860
DUNDEE PRECIOUS METALS INC. I 145
(cid:3)
(cid:6)(cid:18)(cid:21)(cid:19)(cid:18)(cid:21)(cid:4)(cid:23)(cid:8)(cid:3)
(cid:12)(cid:17)(cid:9)(cid:18)(cid:21)(cid:16)(cid:4)(cid:23)(cid:12)(cid:18)(cid:17)(cid:3)
Officers
Directors
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 Donovan3.4
Toronto, Ontario, Canada
R. Peter Gillin1,2,5
Toronto, Ontario, Canada
Jonathan Goodman6
Toronto, Ontario, Canada
Jeremy Kinsman2,3
Victoria, British Columbia, Canada
Kalidas Madhavpeddi1,4
Phoenix, Arizona, USA
Juanita Montalvo3,4
Toronto, Ontario, Canada
David Rae
Toronto, Ontario, Canada
Marie-Anne Tawil1,2,3
Westmount, Québec, Canada
Anthony P. Walsh1,2
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 Human Capital and Compensation
Committee
3 Corporate Governance and
Nominating Committee
4 Sustainability Committee
5 Deputy Chair
6 Chair
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
Corporate Office
Operations
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:
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
Ecuador
Cuenca office:
Dundee Precious Metals
Padre Julio Matovelle 755 y Migue Díaz
Tel: +593 7 2815 161
Quito office:
Dundee Precious Metals
El Tiempo N37-67 y El Comercio
Tel: +593 2 2468 674
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
150 King Street West
Suite 902
Toronto, ON
M5H 3T9
Canada
www.dundeeprecious.com