DPM Metals Inc. (DPM) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Dundee Precious Metals, Inc. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Jonathan Goodman. Sir, the floor is yours.

Thank you. Good afternoon, and welcome to Dundee Precious Metals 2021 Annual Meeting of Shareholders. I now call the meeting to order. My name is Jonathan Goodman, and as Chair of the company, I will chair today's meeting. We once again decided to hold our annual meeting in a virtual format in response to the ongoing COVID-19 global pandemic as we continue our efforts to mitigate the risks to the health and safety of our shareholders, colleagues and communities. We're using the power of technology to hold this meeting in a virtual format via a live webcast, which allows all shareholders and appointed proxy holders from any location to attend, participate and vote at the meeting. Guests are also welcome to attend and listen to our meeting. We'd like to set a few rules for our orderly conduct of the meeting. One, questions may be submitted using the instant messaging service of the virtual interface. Please note that there may be a slight delay in questions being received by us after they've been submitted. Please follow the instructions in the virtual platform, which will ask you to indicate your name, which entity you represent, if any, and confirm whether you are a registered shareholder or a duly appointed proxy holder. Two, questions in respect of a motion can only be submitted by a registered shareholder or duly appointed proxy holder. When reading out a question on a motion, we will note the name of the registered shareholder or proxy holder submitting the question. Three, following the formal part of the meeting and management's presentation, there will be a Q&A session, where all registered shareholders, proxy holders and guests are welcome to ask questions of a more general nature. In order to deal with all questions in a timely fashion, questions of a similar nature will be answered once and duplicative questions will not receive a response. If we're unable to address your questions during the meeting due to time constraints, a representative of the company will reach out to you following the meeting with a response. Voting on all matters -- number four, voting on all matters will be conducted by electronic ballot. To allow sufficient time for voting, the polls will be open at the beginning of the meeting, and you will receive a message on the virtual interface requesting you to start registering your votes. I remind you that only registered shareholders and duly appointed proxy holders who have properly logged in with their control numbers and user name will be able to see the screen motions being brought forth at this meeting and will be asked to vote on each business item. We remind you that if you are a registered shareholder and you have already voted by proxy, you need not vote again unless you wish to change your vote. If you plan to vote at the meeting, you may choose to vote on each resolution immediately or wait to cast your vote until after an item is discussed following the conclusion of discussions on all voting matters. To vote, simply click on your choice for or withhold or against, as applicable. A confirmation message will appear to show your vote has been received. To change your vote, simply change your selection. The votes you have submitted on each polling item at the time of the poll closes will be recorded. Totals in favor or against or withheld, as the case may be, for each resolution item will be tallied by the scrutineers once the voting is complete, and the Chair will report on the outcome of all motions at the end of the meeting. We will now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move all motions as the proxy appointee. I'd like to introduce the members of the executive team and other directors present at the meeting. We have David Rae, our President and Chief Executive Officer; Hume Kyle, Executive Vice President and Chief Financial Officer; Kelly Stark-Anderson, Executive Vice President, Corporate Affairs, General Counsel and Corporate Secretary; and Michael Dorfman, Executive Vice President, Corporate Development. I'd now like to welcome our newest members of the Board: Jaimie Donovan, who joined us last November; and Kalidas Madhavpeddi, who joined our Board this past February. We also have with us today Peter Gillin, our recently appointed Deputy Chair and formerly Lead Director; Jeremy Kinsman; Juanita Montalvo; Marie-Anne Tawil; Anthony Walsh; and myself, Jonathan Goodman. Before I proceed, I'd like to take a moment to extend a sincere thank you to our retiring directors, Peter Nixon and Don Young, for their dedication over many years of valuable service to the company. Their guidance and expertise have contributed significantly to the company as we have transitioned to a mid-tier producer. Following the formal business, David Rae will highlight our 2020 performance, and we'll review the first quarter results and respond to questions. I now ask that the 2021 Annual Meeting of Shareholders of the company come to order. I declare that the polls are open on all resolutions and will remain open until the last item of business of the meeting has been completed. Kelly Stark-Anderson, Corporate Secretary of the company, will act as secretary of the meeting. For the purposes of this meeting, I appoint Computershare Investor Services as scrutineers to compute the votes of any polls taken at this meeting to report thereon to the secretary. The items of business for today's meeting are set out in the Management Information Circular of the company, dated March 24, 2021. This year, we mailed to shareholders using notice and access and delivered your meeting materials by providing you with a notice and posting the materials on our website at www.dundeeprecious.com, only mailing materials to shareholders who previously registered (sic) [ requested ) paper copies. The meeting materials, along with the audited consolidated financial statements and related MD&A for the year ended December 31, 2020, were mailed on April 5, 2021. Unless there is any objection, which may be voiced only by registered shareholders or duly appointed proxy holders by using the instant messaging service of the virtual interface, I will dispense with the reading of the notice of the meeting. Copies of the Management Information Circular and other meeting materials are available on the company's profile on the SEDAR website. As no objections have been received, we will continue. Our transfer agent, Computershare Investor Services, has attested to the proper mailing of the notice calling this meeting. The transfer agent has filed with me proof of service of such mailing, and I direct that a copy of such proof of service be retained within the records of the company. I've been advised that there are 2 or more people attending the meeting who hold or represent by proxy shares, representing more than 25% of all outstanding voting shares of the company. Therefore, a quorum of shareholders is present and the meeting is properly called and duly constituted for the transaction of business. I have received the scrutineer's report, and I direct that their formal report be retained with the records of the company. As the first item of business on the agenda for today's meeting, I present the audited consolidated financial statements of the company for the year ended December 31, 2020, together with the auditor's report to the shareholders thereon. Copies of such documents have been mailed to shareholders who requested them. The next item of business is the election of directors. In accordance with the advance notice bylaws of the company for nominations of directors by shareholders, we did not receive any notice of any director nomination for this year's meeting. Accordingly, the only persons eligible to be nominated for election as directors of the company are the persons nominated by management. The 9 directors to be elected by the shareholders of the company shall hold office until the close of business of the first annual meeting of shareholders of the company following election or until their successors are elected or appointed. Jaimie Donovan, Peter Gillin, David Rae, Jeremy Kinsman, Kalidas Madhavpeddi, Juanita Montalvo, Marie-Anne Tawil, Anthony or Tony Walsh and myself, Jonathan Goodman, have been nominated as directors for the ensuing year or until their successors are elected or appointed. Each of the persons nominated has confirmed that he or she is prepared to serve as a director. Since there are no other nominations, I move a motion to elect each of the individuals nominated as directors. Unless there are any questions, I'll move to the next item of business. The next item of business is the appointment of the auditor of the company for the ensuing year and to authorize the Board of the company to fix the auditor's remuneration. The Board of Directors of the company has approved, subject to shareholder confirmation, the appointment of PricewaterhouseCoopers LLP, Chartered Professional Accountants, as the auditor of the corporate -- of the company. I move that PricewaterhouseCoopers LLP, Chartered Professional Accountants, be appointed the auditor of the company until the next annual meeting of the shareholders and that the Board of Directors be authorized to fix the auditor's remuneration. Unless there are any questions, I will move to the next item of business. The next and final item of business is to pass a nonbinding advisory resolution accepting the company's approach to executive compensation. The form of this resolution is outlined in the circular. I move that the nonbinding advisory resolution accepting the company's approach to executive compensation as set out in the circular be approved and confirmed. As we mentioned today, voting today is being conducted by electronic ballots. I will now take a moment for the registered holders and appointed proxy holders to complete the voting. [Voting]

For those of you who have not yet cast your votes, please do so now. We will provide registered shareholders and duly appointed proxy holders approximately 1 more minute to complete the electronic ballots. Once the ballot closes, the voting page will disappear, and your votes will automatically be submitted. [Voting]

Voting is now closed. I would ask that the scrutineer compile the report regarding the results of the voting on all business matters. However, I've been advised that based on the proxies we received today, all voted overwhelmingly in favor of all the matters today. Each of the 9 nominees received no less than 86% of the votes in favor of his or her election as director of the company to serve until the next annual meeting of shareholders or until their successors are elected or appointed. 99.94% have voted in favor of the appointment of PricewaterhouseCoopers LLP as the auditor of the company and to authorize the Board of Directors to fix their remuneration. And 97.44% have voted in favor of passing a nonbinding advisory resolution accepting the company's approach to executive compensation. I declare that each of the 9 nominees have been duly elected as directors. PricewaterhouseCoopers LLP has been duly appointed as the auditor of the company and the nonbinding advisory resolution accepting the company's approach to executive compensation has been duly passed. I confirm that the results will be published on SEDAR and by press release following the meeting. The formal items of business as set out in the notice of meeting have now been dealt with. I move that this meeting now terminate. As there is no further business to come before the meeting, I declare that the formal part of the meeting to be concluded. I will now turn the meeting over to David Rae, who will highlight our strong 2020 results and achievements, which will be followed by a question-and-answer period. If you've not already done so, I ask that all attendees who would like to ask a question use the instant messaging feature of the virtual interface to do so. We will answer as many questions as time permits. When asking your question, please state your name, the entity you represent, if any. We will give the attendees a moment to type in their question. For each question we answer, we will summarize the questions and read out loud the name of the person who asked a question and, if applicable, the entity such person represents. David?

Thank you, Jonathan. It goes without saying that 2020 was a very challenging year around the world as a result of the COVID-19 pandemic. Despite these challenges, the strength of our people and relationships with our stakeholders as well as the quality of our asset portfolio enabled us to deliver an exceptional year. It is my pleasure to provide an update on our business, review our Q1 results and discuss how well we are positioned for the future. As a reminder, we will be taking questions after I finish my remarks. For those of you who wish to ask a question, you may do so at any point using the Ask a Question feature in the webcast interface. Before we begin, let me draw your attention to our cautionary statement on Slide 8, as we will be discussing forward-looking information during our remarks. I'll begin with Slide 9. In 2020, we engaged the entire organization from our mine site employees to our Board of Directors in a comprehensive process to define our corporate purpose. As a result, we established a purpose statement, unlocking resources and generating value to thrive and grow together. Our purpose is supported by a strong foundation of 6 core values that guide how we conduct our business and how we behave as an organization. Informed by our purpose and core values, we also refreshed DPM's strategic objectives, which are focused around 4 strategic pillars, those being ESG, innovation, optimization of our existing portfolio and growth. We believe our strong performance in each of these strategic pillars drove our achievements in 2020 and has laid a strong foundation for the future. Touching briefly on the COVID-19 pandemic, it's fair to say that our values were exemplified in 2020 by the efforts of our teams made to support local communities that were significantly impacted by the pandemic. As you can see on Slide 10, we launched a number of initiatives to assist and respond to the needs of our local communities in Bulgaria, Namibia and Serbia. Collectively, we contributed approximately $1 million, which was primarily focused on assisting hospitals by providing additional medical facilities, supplies, transportation and medical equipment. We continue to prioritize the health and safety of our workforce and local communities as we manage the challenges of the ongoing pandemic. Moving now to Slide 11. Focusing on our overall performance in 2020, it would normally be my pleasure to begin a review of our annual performance by highlighting our strong health and safety record. That is sadly not the case this past year. Tragically, and as previously reported, there was a fatality at our smelter operation in Namibia, which overshadowed what was otherwise an exceptional year. The safety and well-being of our people is our highest priority, and we are focused on applying what we've learned from this incident across the organization to ensure every employee arrives home safely each day. 2020 was a milestone year for DPM across a number of areas. We delivered exceptional operational performance with all our operations meeting or exceeding their annual guidance and achieved a new record for gold production of 298,000 ounces. Each of our operations delivered strong cost performance with overall all-in sustaining costs for the year of $654 per gold ounce at the low end of our revised guidance. We generated record financial results, including $211 million of free cash flow and $193 million in adjusted net earnings. We significantly strengthened our balance sheet, ending the year with $150 million of cash, no debt and over $100 million of investments. And we delivered all remaining ounces under our prepaid gold sales arrangement at Ada Tepe, which is expected to positively impact the 2021 free cash flow going forward. Turning to Slide 12. You can see that during the year, we also made significant steps towards building for our future. Our exploration programs yielded strong results, including the addition of 2 years of mine life at our Chelopech operation. We were excited to make an additional investment in Bulgaria through a strategic equity placement in Velocity Minerals, a gold exploration company operating nearby our Ada Tepe mine. And we also announced positive pre-feasibility study result for the Timok Gold Project, advanced it to the feasibility stage and also released encouraging exploration results on the project. Overall, we were pleased to see that our accomplishments in 2020 were recognized by the market, with our share price increasing by approximately 64% in 2020, outperforming both the GDX and GDXJ indices. Our strong 2020 results demonstrate our ability to deliver significant free cash flow and our commitment to deploying this capital in a disciplined manner. Looking forward, we can expect another strong year in 2021. Our detailed guidance for the year reflects higher production and improved costs relative to our previous 3-year outlook. This reflects our current mine plans, including the optimized mine plan for Ada Tepe we announced in October last year. The updated 3-year outlook, as shown on Slide 13, highlights our strong gold production profile, attractive all-in sustaining costs and positions us well to continue delivering strong returns for our shareholders. As you can see on Slide 14, the first quarter of 2021 was a solid start to the year as we continued to generate significant free cash flow, driven by a record quarterly gold production at Ada Tepe, an excellent all-in sustaining cost performance of $522 per gold ounce. We also continue to build our financial strength, exiting the quarter with a cash balance of $176 million, no debt and $150 million available under our undrawn credit facility. On Monday, we also announced the closing of the sale of MineRP Holdings, generating cash proceeds of approximately $41 million. We continue to retain upside from this sale through potential earn-out payments payable upon achievements of certain MineRP revenue targets in 2021 and 2022. We are committed to maintaining a disciplined approach to capital allocation that balances our desire to maintain balance sheet strength, as previously discussed, provide a cash return to our shareholders and reinvest in our business, as highlighted in Slide 15. In February 2020, we were pleased to introduce a quarterly dividend of $0.02 per share. In the fourth quarter, less than a year later, we increased it by 50% to $0.03 per share, an increase which reflects our ongoing strong operational performance, significant free cash flow generation and a growing cash balance. Further demonstrates our confidence in our operations as well as our commitment to delivering superior returns to our shareholders through disciplined capital allocation. Few companies of our size have implemented a dividend, and we believe this will further distinguish us from our peers. We also recognize the need to deploy capital to sustain and grow our business through margin improvement initiatives, aggressive exploration at our projects and sites, and advancing organic opportunities such as Timok while evaluating external M&A opportunity. I'd now like to highlight 2 of our strategic pillars that continue to set us apart from our peers and are making an important contribution to value generation, namely our industry-leading ESG performance and our continuing success in adding value to our operations through innovation. Being a leader in the areas of Environmental, Social and Governance has always been a key focus for DPM. We've long understood the strategic importance of maintaining our social license and have seen firsthand how excelling in this important area is a competitive advantage that can unlock additional value and lead to superior long-term returns. Starting with our purpose and values, ESG is an important part of our culture and is integrated at all levels of our organization from our Board of Directors to our workforce. Our approach to ESG is centered around maximizing the net positive impact from our operations. In our view, this is a broad concept that goes beyond measuring our financial and economic impact, that has also captured how effectively we are minimizing environmental impact, maximizing socioeconomic value, nurturing trusted stakeholder relationships and building sustainable livelihoods that will extend beyond the life of our mines. In order to provide a robust framework for assessing net positive impact going forward, we've adopted the concept of the 6 capitals. We believe this framework will allow for us to more efficiently measure the impact of our operations and the value we are generating for our stakeholders. I'll move now to Slide 17. This approach to ESG was exemplified in 2020, not only by the efforts of our teams to support the local communities impacted by COVID-19, which I highlighted earlier, but also through the progress we've made on a number of social and environmental initiatives. I'm pleased to share some of the highlights from our 2020 sustainability report, which we released a little earlier today. We've been reporting on our sustainability performance since 2011. So we believe it's a transparent way for all stakeholders to measure our performance. 2020 marks our sixth sustainability report following the GRI standards, introduces SASB industry-specific standards into our reporting and provides an update to our inaugural TCFD climate change report, which we published in December. As you can see from Slide 18, we achieved significant progress in a number of important social and environmental areas. Among the highlights of the year, we continue to have one of the lowest intensity rates, for mining, of greenhouse gas emissions amongst our peers. We achieved a low freshwater intensity rate and 0 discharge of industrial wastewater from all operations. We established an independent tailings review board in conjunction with the review of our tailings management standard. In terms of local employment and gender diversity, we are very unique, with our management teams being comprised almost entirely of local employees and women representing a significant portion of senior management positions. And we continue to see the positive impact of our operations in the surrounding communities. There's a municipality surrounding Chelopech and Ada Tepe mines, represent the areas with the highest average salary and the highest growth in population and income. Our efforts and track record have been recognized by others and resulted in DPM receiving an A rating by MSCI, a well-respected independent ESG rating agency. These results are a testament not only to the skills, knowledge and ability of all of our employees, but the way in which our core values are instinctively integrated into our behaviors throughout the organization. I'd like to turn to Slide 19 and highlight an example that helps to illustrate how we are contributing to and strengthening the livelihoods of the communities where we operate, which is an integral part of our approach to sustainability. We developed and implemented a small and medium enterprise fund at Ada Tepe, which is designed to help provide the local community with sustainable livelihoods that will extend beyond the life of mine through entrepreneurship and enterprise development. To date, we've funded over 20 projects, which have created 52 new local jobs and have seen the positive impact of our operations, as the region now has more people returning to live and work than was the historical case of more emigrating abroad. We are currently migrating to a similar program at Chelopech after the success at Ada Tepe and expanding our existing SME funding at Tsumeb, where we have provided support to SMEs that provide goods and services to the smelter and local markets. I would encourage you to download a copy of our sustainability report to find out more about our approach to sustainability and to learn about other examples of how we are putting this into action. For a number of years, we've also established a reputation as an innovative mining company for our work in applying new technologies to drive value in our business. Through this focus on innovation, we've developed the capabilities to quickly assess new technologies and efficiently incorporate them into our business to create further value. Turning to Slide 21. When assessing those new technologies, we look for the potential to increase safety, lower mining costs, improve operating performance and reduce our environmental impact. The integrated mine waste facility at Ada Tepe is a great example that highlights how this emphasis on innovation is driving value in our business. The first of its kind in Europe enabled us to significantly reduce the footprint of the mine and address community and environmental concerns about the project. We've integrated a technology to increase efficiency and safety at our Chelopech underground mine with the use of autonomous aerial drones for underground surveying. We also introduced the use of mechanized emulsion charging at Chelopech, which is improving drill and blast efficiencies and overall safety. It's more environmentally friendly as it helps to eliminate packaging waste and reduces nitrates in mine water. We've also been focused on developing an innovative way of managing arsenic waste at the Tsumeb smelter with an investment in a demonstration arsenic vitrification plant, which transforms arsenic waste into a nonhazardous form. Results of initial tests were very encouraging, and we're undertaking additional studies in 2021. As we move forward, we see a lot of opportunity as we deliver on our strategy, with our strategic pillars of ESG and innovation supporting our asset optimization and growth ambitions. To wrap up before we open the meeting for questions, overall, DPM has never been in a stronger position. We've demonstrated the potential of our portfolio to generate significant free cash flow and that we are committed to deploying this capital in a disciplined manner. With continued volatility in global markets, we expect the strong fundamentals for gold to continue. DPM is extremely well positioned to benefit in this environment of high gold prices and can also better withstand any fluctuations that may occur. We firmly believe that DPM's strong fundamentals continue to represent a compelling value opportunity for investors. On behalf of our employees and our Board of Directors, I would like to thank you for your continued support. Thank you for your attention today. We'd now like to answer any questions that have been submitted through the virtual interface.

[Operator Instructions] And while we wait for the audience to submit any questions, we often receive interest from investors about the potential for mine life extension. And as Dave noted, there was a 2-year addition at Chelopech this year. Dave, can you comment on further potential for mine life extension?

Sure. Thanks, Jennifer. So we've been increasing the amount of exploration that we've been doing around our existing assets, believing this is an opportunity to create value as an organization. We've, in the last couple of years, been doing a lot of work in the license immediately around our mine concession at Chelopech, known as the Sveta Petka exploration license. And at the end of last year, we applied for and received a geological discovery recognition, which basically moves us to the second phase of the taking an exploration license through to a production concession. So where we are at the moment is that we're busy negotiating that contract with the government in Bulgaria. Expect that to be done shortly, and that will trigger a year of work, which we'll be looking to do additional drilling and increase confidence to a level where we can say that this is a commercial discovery. After that and completing an EIA on the project, that then would go into an application for a mining concession, which would be a significant extension to what we currently have at Chelopech. And I'm looking forward to that situation. In the meantime, while we're waiting for the authorities to trigger our next phase of exploration work, we now have started work on the Brevene license, which is around the existing Chelopech concession and the Sveta Petka now geological discovery. This year, we're doing 38,000 meters of drilling in the Brevene license and the Sveta Petka license in addition to the 44,000 meters that we have been doing underground traditional. So we're very happy this year to see that we've turned around our track record of replacement of resources but at a lower rate than consumption. Basically, we're replacing at a rate of 1 year of production -- sorry, 6 months of production for every year that we were operating. And this year, we added 2 years of mine life and a further 2 years in resources subject to whatever the conversion rate is from resources to reserves. So I'm happy to say that at Chelopech, it's an interesting and exciting situation with some very interesting ground to do work on. Looking forward to reporting on the results of that through the course of the year.

Thank you, Dave. At this time, there are no audience questions. This concludes our question-and-answer session. So thank you all for joining us.

Thank you.

Thank you all. Thank you to all who participated in this meeting. In addition, shareholders are always welcome to ask questions by e-mailing our Investor Relations department at -- sorry, at info -- [email protected]. Thank you very much, and thank you for attending.

And this concludes the meeting. You may now disconnect.