Dundee's primary focus is Europe

Dundee Precious Metals is focused on developing its business in Europe with the Čoka Rakita gold deposit in Serbia, despite having recently sought to acquire an asset in Namibia, chief executive David Rae told Mining Journal.

The company has defined an initial inferred resource of 1.8Moz grading 5.6gpt at Čoka Rakita, within which about half grade more than 10gpt. The company believes it could be in a position to start building a mine in 2026 to bring initial production in 2028.

"Europe has come to us over the last five years, as [countries] have realised they need to be in the primary part of the business, and there is more interest in supporting companies to do that. There is recognition of what we do at Ada Tepe [in Bulgaria], the first mine in the Balkans for about 40 years. We are well-positioned to look at opportunities in Europe and surrounding areas," said Rae.

Dundee is a miner without a history of success in greenfield exploration. However, a change in exploration strategy and focus resulted in the discovery of Čoka Rakita, which the company announced in January 2023.

"We made some changes in exploration, which caused us to rethink our targeting and when given the opportunity, our exploration group has always wanted to go after this particular target at depth, which they knew was a skarn and not sure whether it would host gold because sometimes they can be washed out. We're very lucky to find something really exciting," said Rae.

The fact that Čoka Rakita is a five-hour drive from Dundee's Chelopech mine in Bulgaria means its eventual development could be simpler. "Development assets are a risk, and we are not a company that wants to populate its portfolio with development-stage projects. Our preference would be to have an operating asset. [The proximity of Chelopech] gives us a good level of confidence that we can build [Čoka Rakita] on time and budget," said Rae.

Namibia

Čoka Rakita may be the medium-term future of Dundee, but it is Namibia where it has been making headlines recently with an offer to buy Osino Resources for C$287 million for the Twin Hills gold development project, its refusal to meet a superior offer from China's Yintai, and then the sale of its Tsumeb Smelter for US$49 million.

Stressing that the timing of the announcements was coincidental as the two transactions were advancing independently, the result is that Dundee will pull out of the country. Much like the future development of Čoka Rakita and proximity to Chelopech, Dundee's history in Namibia with Tsumeb gave it the confidence to develop Twin Hills.

The two transactions highlight the company's strategy: as a miner, it needs to acquire or develop new mines. However, owning a smelter was no longer part of its strategy.

"We are very much a mining company. The need for the smelter occurred in 2010 because we needed the confidence that we had a home for our concentrates coming from Chelopec, our primary operation. This had faced issues through time where it couldn't place the [complex] concentrate and had to shut down. We felt that was something that we did not want to contend with as we expanded the mine in 2012."

"We are looking to exit the smelter because we have found alternative outlets for the concentrate, and so it is now a distraction," said Rae.

With Twin Hills having fallen through, Rae said Dundee could make an opportunistic acquisition for another development-stage asset, although its preference would be for a producing asset. "With one asset, which we are probably going to go ahead and build starting in 2026, we prefer to have an operating asset, but if we found a late-stage development, we would probably accept that, but we don't have to," said Rae.

Loma Larga

Tsumeb would also have received about 15,000tpa of concentrates from Dundee's Loma Larga gold-copper project in Azuay, Ecuador, which is at the permitting stage. Having found another home for Chelopec concentrates, the complex concentrate from Loma Larga is expected to go the same way.

Dundee expects to receive three reports from Ecuador's MAATE environment ministry this year as part of its environmental impact assessment process while also preparing for the next work stream required for a feasibility study, including geotechnical drilling, hydrogeology, and additional resource work.

With the company required to complete a prior consultation process with an indigenous group, Rae is pleased the government published a manual to guide such processes earlier this month.

"It is very good the government has taken a position to clarify exactly what must be done. The president's [Daniel Naboa] is doing a good job of stabilizing [the country], and there's a lot of activity going on with the ministries behind the scenes. The bottom line is the president is talking about the mining sector as a force of future direct investment and an employment vehicle, which he sees as absolutely necessary, particularly for the youth. It is clear that his ministers are very supportive of what he's trying to do and are executing on his vision," said Rae.

2023 results

In 2023, Dundee continued to deliver stand-out results, with gold equivalent production increasing 4.5% to 356,821oz, while its all-in sustaining costs fell 4% to an industry-low $849/oz. The company ended the year with no debt, $595 million in cash, having returned $95.8 million to shareholders via a 4c per share quarterly dividend and share repurchase programme.

"We returned 42% of free cash flow to shareholders. We are not looking to change the dividend but will take the opportunity of buybacks while continuing to add cash to the balance sheet," said Rae.

Dundee has maintained its low-cost position despite facing some of the industry's most brutal energy cost increases, given its European production base. "We were paying $50/MWh, and with the war [in Ukraine], that rose to $500/MWh, which the rest of the world did not experience. … The team figured out ways to combat what was happening to steel and reagent prices, which had knock-on effects on the energy price. The government was able to subsidise everyone, but we still tripled our power cost. We were at $125/MWh last year, and from the middle of last year, we had no subsidy because the costs were below the subsidy level," said Rae.

Shares in Dundee Precious Metals are trading at C$9.84, valuing the company at C$1.8 billion.