14 May 2013

Namibia: Lower Production At Tsumeb Smelter

Windhoek — The first quarter of this year saw a dip in the amount of concentrate copper processed at Namibia Custom Smelters in Tsumeb, compared to what was processed in the first quarter of 2012.

Copper concentrates processed in the quarter amounted to 34 493 tonnes processed which is 18 percent lower than the corresponding period in 2012, says the Canadian mining and processing company, Dundee Precious Metals, which owns Namibia Custom Smelters.

The decrease is primary due to the commissioning of project 2012 - environmental improvements that took place between February and March this year, the company said in its quarterly results for 2013. The environmental improvements impacted on contractor issues and a number of identified engineering, as well as construction related, flaws. This also resulted in the commissioning period being extended from nine days to 28 days.

"January 2013 smelter performance, on the other hand, was better than expected and, despite minor residual performance issues, the new dust handling system has performed well in the second quarter. Over the balance of the year, Tsumeb's results are expected to be much stronger after the removal of the current curtailment, planned increases in volumes and scheduled increases in treatment charges. These improvements will be most evident after the annual Ausmelt furnace maintenance and commissioning of the second oxygen plant scheduled for June/July 2013," the company said in a statement released yesterday.

Dundee Precious Metals has interests in exploration, development, mining and processing of precious metals. The company's principal operating assets include the Chelopech operation, which produces a gold, copper and silver concentrate, located east of Sofia, Bulgaria; the Kapan operation, which produces a gold, copper, zinc, and silver concentrate, located in southern Armenia, and the Tsumeb smelter, a concentrate processing facility. The company also holds interests in a number of gold deposits in Bulgaria, Serbia and northern Canada.

The financial position since the first quarter of the year remains strong with US$102 million (about N$918 million) in cash and US$150 million (about N$1.35 billion) in an un-drawn committed revolving credit facility. Net earnings for the first quarter were at US$6.6 million (about N$59.4 million) that translate into US$0.05 per share. Reported first quarter 2013 net earnings attributable to common shareholders were US$0.7 million compared to US$8.2 million for the same period in 2012.

"The quarter over quarter decrease in adjusted net earnings was due primarily to higher operating expenses and lower volumes of concentrate smelted at Tsumeb, driven by a planned outage during the quarter, which resulted in higher treatment charges for Chelopech, lower metal prices, and higher cost per tonne of concentrate sold, depreciation and taxes. These unfavourable variances were partially offset by higher volumes of payable gold and copper in concentrate sold and a stronger US dollar relative to the South African rand and the Armenian dram," the statement said.

Net earnings attributable to common shareholders were also impacted by after-tax unrealised mark-to-market gains of US$1.3 million (2012 - unrealised losses of US$14.6 million) related to the company's metal price hedges and unrealised losses of US$7.2 million (2012 were at US$8.5 million) on the investment in Sabina special warrants.

Adjusted earnings before interest taxes and amortisation in the first quarter was US$26.5 million, compared to US$40.8 million in the corresponding period in 2012, driven by the same factors affecting adjusted net earnings, with the exception of depreciation and income tax. "Our performance in the first quarter of 2013 reflected strong operating results from Chelopech following the completion of our mine expansion in December. Volumes at Kapan and Tsumeb were each lower due to one-off commissioning activities and, in the case of Kapan, lower grades and equipment availability," said Rick Howes, president and chief executive officer.

"I am pleased to say that most of the issues have been resolved and each operation is now returning to expected levels. We are in good shape financially with over US$250 million in cash and un-drawn committed bank lines, which positions us well despite the recent market volatility," said Howes.

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