Profits surge at Dundee Precious Metals (May 11, 2011)

With increased production and higher prices, Dundee Precious Metals (DPM-T) managed to facilitate a massive turnaround from where results were this time last year.

DPM reported first quarter net earnings of US$14 million or 11¢ per share. Those numbers look particularly good when put up against results from the same period last year which were highlighted by a loss of US$49 million or 48¢ per share.

The uptick in earnings was built on the back of stronger revenues which came in at US$68.4 million — US$47.9 million higher than revenues last year. That large increase came mostly from a 64% increase in deliveries of concentrates, a 25% increase in gold prices, a 34% increase in copper prices and an 87% increase in silver prices.

Higher prices and greater production were also complimented by lower production costs at the company’s flagship project, Chelopech, in Bulgaria.

Other than what the company did do to generate more revenue, another big reason for the turnaround was what the Bulgarian government didn’t do.

A key factor 2010 first quarter losses was the Bulgarian court’s decision to revoke an environmental impact assessment on a metal processing facility in Chelopech. That ruling led DPM to take an impairment charge of $50.6 million.

As for production in the first quarter, the company says a total of 23,724 tonnes of concentrate was sold. A breakdown of that tonnage shows it to be composed of 21,582 oz. of gold, 6.7 million lbs of copper, and 5 million lbs of zinc and 135,136 oz. of silver. All of those numbers represent significant increases over last year’s tallies.

With better operational results DPM’s balance sheet and statement of cash flows are also looking rosier. The company currently has cash and cash equivalents of US$136.4 million — US$48.4 of that comes from its 51% interest in Avala Resources (AVZ-V). DPM spun its Serbian gold assets out into Avala early last year.

“DPM continues to be well funded as we progress with the Chelopech and the smelter expansions, and the Deno open pit exploration program, which will lead to increased overall profitability for all our stakeholders,” DPM’s president and chief executive Jonathan Goodman said in a statement.

Cash costs per tonne at Chelopech for the first quarter came in at US$51.43 was — 8% lower than last year. The decrease came courtesy of higher volumes mined, lower spending on materials and maintenance and lower spending on backfill.

Chelopech mine sits roughly 70 km east of the Bulgarian capital Sofia.

In stark contrast to last years bad news from the government regarding Chelopech last year, 2011 saw the approval of a of a 30 year concession to develop the Khan Krum Deposit in Krumovgrad, Bulgaria.

Krumovgrad sits in south-eastern Bulgaria, near the town of Krumovgrad.

But DPM’s story isn’t entirely a Bulgarian one, the company also owns Namibia Custom Smelters, a copper concentrate processing facility located in Tsumeb, Namibia, and the Kapan mine, a gold, copper, zinc, silver concentrates producer that sits 32- km south east of the capital city of Yerevan in Armenia.