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

We're going to get started. Again, wishing everybody a good morning. Thank you for joining today's webinar. My name is Yaron Conforti, I head Corporate Development at Osino. Earlier today, we announced the acquisition of Osino by Dundee Precious Metals. Of course, a very exciting announcement for all shareholders. Joining us to discuss the transaction today, we have the co-founders of Osino Resources; Heye Daun, President and CEO; and Alan Friedman, Chairman. A quick reminder to all participants, the format as follows, Heye will do a brief presentation. There's a Q&A box at the bottom of your screen. You can enter your questions at any time, and we'll do a brief Q&A session following the presentation. So without further ado, Heye, I'd like to pass it over to you.

All right. Yaron. Thank you very much. I think, Alan, as the Chairman, did you want to make some introductory remarks and then I can carry on with the presentation.

Yes. Thank you, Heye. Thanks, Yaron. Very proud to be on the call this morning. It's been just sort of a decade that Heye and I have been working on Osino. We started the company back in 2013, '14, just after we sold Auryx Gold to B2Gold also in Namibia. And it's been quite a ride since then. I think we've gone through 2 cycles, mining cycles and many discussions with investors and supporting shareholders, brokers and the like. So we're very happy to get to a point where we've made really a significant discovery in Namibia, a jurisdiction that we have really enjoyed working in and a jurisdiction which without doubt is probably the best one in Africa and if not the world. And delighted to be on the call today with all of you, and thanks for everybody's support on the phone -- on the Zoom as we describe what we think to be a very significant transaction in country and for all our shareholders. One word it has been -- just wanted to say that it's been an absolute pleasure working with my partner, Heye Daun, on this. He's really an exceptional executive and it's been just a hell of an opportunity and a privilege for me to have worked with him to get to this point. With that, I'll pass over to Heye, and he'll explain the transaction to you.

Okay. Alan, thank you very much for the generous praise there. So as Yaron said, the format will be a quick presentation. We decided to use the DPM materials for this presentation rather than repeating the Osino deck. Of course, the Osino deck is available on our website. DPM had their own webcast earlier today, and I believe that a recording of that is available on their website as well. So let me just move through this. We might be making some forward-looking statements. Obviously, this is DPM's forward-looking statement. Our own disclaimers are on our website. In summary, most of you know, DPM. We are very pleased to have concluded this transaction with DPM and with that, having secured the technical and financial resources to take the Twin Hills project to the next level. We are also very pleased with the terms of this transaction, and I'll go through the details a little bit later, and we strongly believe that it's in the best interest of our shareholders and the stakeholders -- other stakeholders in Namibia and so forth by fast tracking, continuing to fast track financing and bringing to bear the technical capabilities to take the Twin Hills project to the next level. So DPM is, as you all know, a well-diversified company with very strong cash generation out of Bulgaria. They've also recently made a very, very exciting discovery in Serbia. And with the acquisition of the Twin Hills project and our existing exploration portfolio, I believe that DPM is setting itself up for a very exciting growth-driven future. So as I mentioned, DPM has a very strong balance sheet and is very cash generative. They are one of the lowest cost producers around and they have a long operating history in Namibia of more than 13 years, so they know the lay of the land very well. We have known them for a long time. We've been in discussions on and off with them for a long time. They've done multiple rounds of due diligence. They've really done their homework on us, and we are delighted to be taking the next steps in the development of the project with DPM. We believe that there are complementary capabilities with our own track record, having advanced the project largely through the permitting stage and the technical feasibility study stage, which we've done. And going forward, obviously, there's some detailed engineering and project fine-tuning and optimization to be done where DPM has a lot of value to add. And then post the close of the transaction, DPM with a strong operating expertise will continue to progress Twin Hills through construction and into production. I'm also -- and I have said this previously on multiple webcasts, I'm a strong believer in consolidation, fundamentally speaking. I think as a single-asset junior developer, it has been a very tough market. We didn't pick the best decade to develop a gold project in Namibia. All of you know that the equity markets have been at -- equity market for gold developers, let's say, have been historically depressed. And I think it was a strong consideration in deciding to enter into this transaction with DPM because we believe that it substantially derisks the future prospects for our shareholders through what we are doing here. Osino's compelling exploration upside will continue to be unlocked by strong investment from DPM that will enable us to fast track that exploration without having to worry about the state of the equity markets. So in summary, the transaction summary. It's -- the transaction will be completed by way of the plan of arrangement. The consideration is CAD 1.55 per Osino share comprise 50% of cash and shares, which implies an equity value of approximately USD 200 million. Obviously, on a fully diluted basis, it's slightly higher than that. The pro forma ownership is DPM will own 93% of the combined company with our current Osino shareholders owning the remaining 7%. In terms of approvals, the main ones are shareholder approvals from Osino where we require 66.67% and then Namibian Competition Commission approval and other regulatory approvals, of which the Competition Commission approval is the main one. We expect that getting those approvals will take approximately 3 months. And it's just noting that the transaction has been unanimously approved by the Boards of Directors of both DPM and Osino. Directors have entered into voting support agreements and there are a range of customary provisions relating to some of the other protections for our shareholders. We anticipate our shareholder meeting to be held sometime in March 2024, could be earlier with the closing expected hopefully before the end of the first quarter, but it is subject to the timing of the regulatory approvals. So reminding you Twin Hills is, of course, a high class Tier 2 advanced stage development asset with a current reserve of just over 2.2 million ounces. We are in -- getting towards the end of the detailed engineering phase, which followed the definitive feasibility study, which we announced in June. It has very credible economic numbers and cost -- capital cost and operating cost numbers. It's a low-cost, long-life operation with very robust economics and a very strong exploration potential. So Osino as a company currently, and I've said this before, is a high-class explorer with a very strong and credible study capability. We do not yet have the capability to implement a project. Of course, we -- as part of our base case strategy and as part of our stand-alone plan, we were in the process of building our own implementation capability but I think with the addition or with this combination with Dundee Precious Metals and the addition of their technical team and financing capability, that implementation capability is getting a very significant boost and therefore, derisks the delivery of the Twin Hills project very substantially. With the capital cost at the moment, the official number from the definitive feasibility study is still USD 365 million. DPM is post-closing, we'll do a review, and they have some of their own requirements. So that number may change slightly, but it is -- it remains in the global context, a manageable capital cost. And these costs may come down, but it all depends on the view that DPM takes in terms of how they would like to deliver this project. So our regional exploration portfolio is included in the deal. That comprises the Ondundu Gold deposit that we acquired from B2Gold, which currently has a resource of 900,000 ounces at just around about a gram to just over a gram, 1.1 gram per tonne. And we -- in the past, we haven't spoken much about this, but what is very clear is that with this transaction from DPM, these regional exploration opportunities will get a strong boost. So we expect to get back into Ondundu very quickly, very soon to continue to drill it and to develop a processing route which will enable that project to be -- to add value on a stand-alone basis or as part of a co-development with Twin Hills. Now that the company is not capital constrained anymore, of course, a lot of these studies will be enjoying a lot more attention and a lot more focus. On Eureka, we recently completed an aerial geophysical survey to define the other anomalies in that district better or in that camp and we expect to return to Eureka early next year with further drilling to hopefully make that discovery bigger and better. So all of our activities that you recall also will get a significant boost from the better financing capacity that comes with the DPM deal. Of course, Twin Hills itself, as we've always said, we believe will continue to grow. That is in all directions along strike at depth. There's still a lot of potential. We have a number of additional targets and anomalies that haven't been tested that will be tested. And I do believe that Twin Hills under the ownership of DPM will continue to grow and will grow into a major part of their portfolio. I think Twin Hills definitely has the potential to become Namibia's biggest gold mine and to equal or better the performance that B2Gold has delivered, for example, with the Otjikoto project. Just a word about Namibia. As you all know, I'm a Namibian citizen, in fact, I'm calling from Windhoek right now. We met with the Namibian State President earlier today, together with DPM. It has been an absolute privilege to be working in my home country. Namibia continues to be an excellent jurisdiction for developing mining projects. The regulatory support that we have received from the Namibian-relevant Ministries, Ministry of Mines and Energy, Ministry of Finance, Ministry of Trade and Industry Lands has been astonishing. So we have virtually completed the permitting process for Twin Hills. We have a mining license that's active. There are a few small conditions that still have to be fulfilled. We have environmental approval, and we have most of the site-specific permits in place. Of course, there will be some additional permits that will be secured during the construction, but the project is permitted for construction. Namibia has excellent physical and social infrastructure, which aids the development of this project. And obviously, a very well-established mining industry with high-quality local contractors and no shortage of technical personnel that's going to be required to bring this project to fruition. Maybe a couple of words also on our sustainability track record and growing this as we progress this project with DPM. So Osino has always had a very strong focus on responsible mining and sort of best practice in terms of embedding sustainability into the design of the project. So we've had a very active community relations and corporate social investment strategy and activities. We formed the Twin Hills Trust, which is the vehicle for CSI for Osino, and I hope will continue to be the vehicle to do so for Dundee Precious Metals. We are deeply involved in delivering projects and local economic development, early childhood development, education, infrastructure development, et cetera. So that's one arm of doing good for our local community. But of course, we expect that through the development of the project and the very substantial procurement of goods and services and we will continue to have an outsized impact -- positive impact in addition to mitigating the negative impact that the development of the Twin Hills project will have on the local and regional communities. And we are very pleased with the fact that DPM have subscribed to this whole heartedly. They have a very strong track record in Namibia in this regard themselves. And I think we will join forces here in continuing to put a lot of attention and emphasis on responsible mining and doing the right thing in terms of developing this project. So in terms of the DPM numbers, obviously, I'm not going to go into great detail here. Suffice to say that I'm very excited to be joining forces with DPM here as a significant shareholder in Osino. I think DPM's portfolio of assets in Bulgaria, Serbia and now Namibia places it in a unique position as a low-risk intermediate gold producer with probably one the best growth profiles in the industry going forward. At the same time, very, very low cash cost and very high cash generation, i.e., a much lower cost of capital than Osino would have been able to bring to bear. So I'm very excited about a possible future with DPM, but of course, we need to close this transaction first. So with that, maybe I'll come to the end of this presentation, and we can add up for -- we can open up for questions.

Thank you, Heye. So as Heye just alluded, we'll now turn to the Q&A. We've got a couple that came in while you were presenting. So I'll start with the first, the simplest, why sell now?

It's very simple. Yaron, I think I alluded to it in my presentation. We did some extremely heavy lifting with the discovery of this project and the financing of the exploration and development of this project in what I consider a historically depressed equity capital markets. And as everybody knows, I think Osino right now is suffering from a very significant financing overhang. We made great strides in securing debt and project finance. And I can mention this year, we haven't mentioned it before, but I will mention Orion Mine Finance, who have been working with us to secure the project financing of this project over the last 8 months or so. And I commend them for having taken a view on us in that regard. But notwithstanding that, we would have had to raise a very substantial amount of equity in the region of USD 60 million to USD 80 million, which in a weak market is very risky. And shareholders have voted with their buy or sell orders. And shareholders do not like single asset developers. And that's why I think it's the right thing to do at this time. It's the right thing to do for shareholders. It's the right thing to do for the project. And I think it is the best way for the Twin Hills project to be brought into production through construction in the -- in partnership with a bigger partner. We did that with B2Gold 10 years ago, as Alan said, with the Otjikoto project. B2Gold did a superb, a fantastic job at building and operating that gold mine, we could have never -- we would have never been able to do that ourselves. And I think Twin Hills is similar. We know what our core competence is. We like to stick to our knitting, and we know when the right time is to hand the project over.

Excellent. Another specific question about the interim period until the transaction closes. So the question is, how are you going to finance this interim period until closing? I believe it was alluded to in the press release but maybe you want to provide some detail here?

Yes. People may not have not just because it was kind of buried in the press release a little bit, but DPM has agreed to finance us to the tune of CAD 10 million which enables us to maintain the momentum. I think often what happens when transactions like this take place you might get a reduction in the momentum because naturally speaking, when one party hands over, they might pause. In this case, we do not want to pause. This project is strategically important for Namibia. We are very committed to deliver this project in time and according to the original timetable. And that's why we have to maintain the momentum. That financing that DPM has committed to as part of this transaction will enable us to maintain that momentum.

Excellent. There's a question here. I'm going to address it to both of you, in fact, and just a bit of context. It was mentioned for those that aren't familiar, Heye Daun and Alan Friedman were both leaders, co-founders and leaders of the previous transaction for the Otjikoto mine, which was owned by Auryx Gold, the project which they advanced and then sold to B2Gold. This will be their second transaction in Namibia. And the question, I think, is a lighthearted one, but it says what's next for you 2 guys in Namibia?

Namibia is truly an emerging gold district. I think there's a lot of additional stuff to be found. We, as Osino, obviously picked up the best pieces, but for now, we need to focus on closing the transaction with DPM. We will also help DPM with the transition to -- as much as we can. We certainly are not going to be like the uncle at the party that never wants to leave. So I think Alan and I, as the founders of this company eventually will have to say our goodbyes. Our Namibian management team will continue to be involved and will be integrated with DPM and will become a very significant part of the team that delivers the Twin Hills project. But Alan and I are -- we like starting things. We like building things, not necessarily building mines, although we can if we have to, but we like to create new things. We do have 1 or 2 other ideas and I think post close, shareholders will hear about it. And we will make an effort to make it available to our loyal shareholder base. I must say, at this point, sorry, Yaron, just to digress a little bit. One thing that has been very special, and I wanted to use this opportunity to thank our loyal retail shareholder base. I know that a lot of people feel kind of put out by the fact that we had to end this project over at this stage, a lot of the people were hoping for significantly higher share prices, et cetera, et cetera. We all do, and yes, so let me just thank the retail shareholder base that actually a lot of whom stuck with us from day 1, they're still there. But I think even for them, this is the right thing to do. And -- but as we create new opportunities in the future, we welcome that group of people to join us in possible deals that will come to fruition once the transition with DPM has been completed.

Excellent. I think that brings us to the end. I'll remind everybody that you can reach us via e-mail or phone contact, all of our information is on our website and our press releases. I'd like to offer my congratulations and my thanks to both of you on behalf of all shareholders and very excited as we move forward towards the close of this transaction. So thank you, everybody, again for joining today.

Thank you.

Thank you.