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

Thanks very much, Peter. It's my pleasure to provide you with a brief outline of our performance in 2023 and discuss why we believe DPM continues to be uniquely positioned to deliver super value to our stakeholders now and for the long term. I will also outline the strong foundation for growth we are building and why we are excited about what lies ahead for the company and our stakeholders. Before I begin, let me draw your attention to the cautionary statements on Slide 6, as I will be discussing forward-looking information during my remarks and to the non-GAAP disclosures outlined on Slide 7. Overall, the leadership team at DPM is very proud of what our global team has achieved in 2023, which is an exceptional year for the company. We delivered strong operating results and robust free cash flow generation, significantly increased our return of capital to shareholders and further strengthened our balance sheet. We achieved our guidance for gold production driven by record production at Ada Tepe and continued steady, consistent performance at Chelopech, while maintaining our position as one of the lowest cost gold producers despite industry-wide cost pressures. This translated into strong financial results, including free cash flow generation from continuing operations of USD 228 million, and we returned $96 million to shareholders through quarterly dividends and an enhanced share buyback program. We continue to strengthen our financial position, ending the year with $595 million in cash and strong liquidity, including $150 million undrawn credit facility and no debt. And importantly, we continue to deliver on our ESG priorities, scoring in the 90 percentile in the S&P Global's Corporate Sustainability Assessment, and we were recognized as one of the industry's top performers for the third year in a row. We've also made significant steps towards building for the future, including the discovery and rapid progress we've made at Coka Rakita in Serbia, where we recently announced the results of a preliminary economic assessment. Advancing permitting and stakeholder engagement activities at Loma Larga in Ecuador and continuing our track record of mine life extensions at Chelopech, which now extends to 2032. And entering into an agreement to sell our interest in the Tsumeb Smelter, streamlining our portfolio as we focus on our core mining business. We continued our strong track record of disciplined capital allocation in 2023, returning capital to shareholders through a sustainable quarterly dividend and share repurchases. In 2023, we returned a total of $96 million to shareholders, representing 42% of our free cash flow. We continually review our capital allocation strategy of balancing the need to fund our growth with returning capital to shareholders. And given our financial strength, we are in a unique position among growing gold producers that we have the ability to fund our internal development pipeline while maintaining our quarterly dividend. And while it was disappointing to walk away from the opportunity we saw in the proposed transaction of Osino Resources and DPM, we ultimately believe that terminating our offer after Osino received a superior bid was the right decision, one which demonstrates our disciplined approach to M&A and how we prioritize value accretion to our shareholders. Our updated 3-year outlook demonstrates our solid production profile and potential for continuing free cash flow generation. We expect to maintain gold production at an average of approximately 240,000 ounces per year and have stable copper production of approximately 33 million pounds of copper. So our attractive all-in sustaining cost profile over the next 3 years continues to rank us among the lowest cost gold producers. As we announced last night, we're off to a strong start in 2024 with strong first quarter production and all-in sustaining costs, and we are well positioned to achieve our guidance expectations for the year. Looking ahead to our future, we significantly transformed our growth prospects last year adding a major organic asset into our growth portfolio with Coka Rakita. At the beginning of 2023, we were pleased to announce this new high-grade discovery at the Coka Rakita prospect located 3 kilometers southeast of our historical Timok project. In the 16 months since that announcement, we've continued our aggressive drilling program, completed an initial mineral resource estimate, demonstrating a high-grade 1.8 million ounce resource at 5.7 grams per tonne and published the results of the PEA. This rapid progress is not only a testament to the quality of the Coka Rakita project, but also to our exploration and technical teams. The PEA results, which we published last week confirmed our view that Coka Rakita is a very robust project with the potential to add strong economic returns and a very high-margin gold production growth to our portfolio. What makes Coka Rakita particularly exciting is that it's not only an attractive project on a stand-alone basis, with an IRR of 33% at a $1,700 gold price, but it also has significant exploration potential across our 4 licenses. We are continuing our scout drilling program, which is focused on aggressively pursuing additional skarn targets and following up on the positive results we published at the end of February. Overall, we're very excited by Coka Rakita's potential in a region where we have had a strong presence for years and where we have developed relationships with our local stakeholders and government. Turning to Loma Larga, which is our high-quality underground gold copper development project in Ecuador. We continue to advance permitting and stakeholder engagement activities. During 2023, we entered into an investment protection agreement with the government of Ecuador, which provides us with tax stability and incentives, along with legal protection, such as resolution of disputes through international arbitration. We also received clarity regarding the permitting process for the project, and we're actively working with the government to fulfill these requirements. For example, we recommenced the environmental consultation process and successfully completed the information stage of the process during the first quarter of 2024. We also recently received approval to the 69 kV power line associated with the project. Our exploration project at Tierras Coloradas, also in Ecuador continued throughout 2023, and we recently completed the 10,000-meter drilling campaign we initiated last year. As we progress our activities in Ecuador, future investments, for both Loma Larga and Tierras Coloradas, will be disciplined and based on overall operating environment in country and the company's other capital allocation priorities. I'd now like to highlight one of our strategic pillars, which is both a core strength and a competitive advantage for DPM as we look to develop our future pipeline. From early on and informed by our company's values, we've been committed to delivering strong ESG performance. As a result, we have seen firsthand how excelling in this important area can unlock additional value and lead to superior long-term returns. Importantly, we've also seen how our activities have created lasting benefits in the communities where we operate. Our approach to ESG is centered around generating a net positive impact from our operations, which is a broad concept that goes beyond measuring our economic impact to also capture how effective we are at minimizing environmental impact, maximizing socioeconomic value, nurturing stakeholder relationships and building sustainable livelihoods that will extend beyond the life of our mines. We will be publishing our 2023 sustainability performance data supplement shortly, which will provide a fuller picture of our sustainability performance over the past year as well as the actions we are taking. But I would like to summarize some of those highlights today. First, our dedication to safety remains our top priority with company-wide performance on par with the previous year and better than the industry average. Despite excellent safety performance at Ada Tepe last year with 0 lost time injuries were recorded we did see a company-wide increase in total recordable injury frequency rate. At DPM, we are committed to ensuring every worker goes home safely every day and achieving our goal of 0 incidents requires constant dedication. So we launched an executive safety task force whose role is to lead the drive to a generative safety culture to make this commitment reality and take a step forward on the outstanding results we've achieved historically. With regards to our climate performance, we continue to reduce our Scope 1 and 2 greenhouse gas emissions and made progress towards our 2035 goal emissions reduction target. Work is also underway to meet our commitment of developing the Scope 3 target by 2025. In 2023, we also achieved strong performance on our activities related to water, recycling 42% of water consumed by our operations and having 0 industrial wastewater discharged at our mine sites. And we engaged in work to respect human rights, updating our due diligence assessments and conducting training across all sites as well as identifying areas for further improvement. These were detailed in our first supply chain report, which was prepared in line with Canada's Supply Chain Act and is available on our website. Our strong sustainability performance was once again recognized and we scored in the 90 percentile of the S&P Corporate Sustainability Assessment and were included in the Sustainability Yearbook for the third consecutive year. We take particular pride in our history of cooperative relationships with local communities, which are based on mutual trust and our focus on creating sustainable benefits to ensure communities will continue to thrive well beyond the lives of our mines. In 2023, we were honored to celebrate the 20th year anniversary of our acquisition of our assets in Bulgaria. Over this period, we have transformed the Chelopech mine into a modern and highly efficient operation permitted and built Ada Tepe into a mine that continues to exceed our expectations and developed a high-performing local team with a strong culture of safety and innovation. We marked the occasion with a celebration that featured representatives from our local communities, governments and other partnerships that DPM has developed over our 20-year history in Bulgaria. It was remarkable to hear directly from our stakeholders, the positive impact that DPM has had in the communities where we operate in line with our purpose of unlocking resources and generating value to thrive and grow together. Our experiences, track record and approach to establishing trusted relationships with our stakeholders will serve as well as we advance our future development projects. In closing, 2023 was an exceptional year for DPM one that demonstrated our core purpose and highlighted the unique value opportunity that DPM represents for investors. We continue to believe that DPM represents a compelling value opportunity with our proven track record, strong future outlook and unique strengths, which include strong and consistent production from our operations, one of the lowest all-in sustaining costs in the gold industry, strong free cash flow generation, a proven record of disciplined capital allocation and returning capital to shareholders, an attractive growth pipeline, the financial strength to fund our growth pipeline, leading ESG performance that is embedded in our culture and a strong technical team with a history of adding value through innovation. On behalf of our employees and our Board of Directors, I'd like to thank you for your continued support and your time today. I would now be happy to take any questions from the audience.

[Operator Instructions] Perhaps while we're waiting for anything to come in from the audience, Dave, you highlighted Coka Rakita as the next development project in DPM pipeline, perhaps you could expand a little bit on the next steps for the project now that the PEA is complete.

Yes. Thanks, Jennifer. So the activities at the moment are currently focused on progressing a number of different activities towards the ability to make a decision on this project and give the approval to invest capital such that in 2026, such that we can come to an operating position in 2028. So our immediate goals on that moving to a PFS are to complete that feasibility -- pre-feasibility study during 2024 with completion anticipated in early 2025. So this will include investments of approaching $30 million, which will allow us to complete drilling, which would include condemnation drilling hydrogeology, geotech the placement of our infrastructure and facilities, location of our development to go underground and also then completion of the work we need to do to upgrade the resource and provide additional confidence in the economics. Although this is such a strong project economically, it's really more a question of just confirming the level of confidence that we have in this project.

Great. Thank you, Dave. So at this time, there are no questions from the audience, so that will conclude the question-and-answer session for this meeting. Thank you all for joining us.

Thank you. This concludes the meeting. You may now disconnect.