Janet Reid - Manager, IR Rick Howes - President and CEO Hume Kyle - EVP, CFO David Rae - EVP, COO

Trevor Turnbull - Scotiabank

Good morning, everyone and welcome to Dundee Precious Metals' fourth quarter and full year 2017 results call. With me today are Rick Howes, President and CEO and Hume Kyle, Chief Financial Officer, who will each comment on the quarter; as well as David Rae, Chief Operating Officer, Nikolay Hristov, Senior Vice President, Sustainable Development; and John Lindsay, Senior Vice President, Projects who are here today to assist with answering questions following our formal remarks.

After close of business yesterday, we released our fourth quarter and annual results and hope you've had an opportunity to review our material. All forward-looking information provided during this call is subject to the forward-looking qualification which is detailed in our news release and incorporated in full for purposes of today's call.

Certain financial measures referred to during this call are not measures recognized under IFRS and are referred to as non-GAAP measures. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies.

The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.

Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. Please note that unless otherwise stated, the operational and financial information communicated during this call relates to continuing operations in US dollars, which has generally been rounded.

And any references to 2016 or prior period pertain to the comparable periods in 2017. On this morning's call, Rick will comment on our fourth quarter and annual operating results as well as the progress being made on our capital projects and exploration programs for the quarter.

Hume will then provide an overview of our fourth quarter and annual financial results and our guidance for 2018. With that, I'll turn the call over to Rick Howes.

Thanks, Janet, and hello everyone, and thanks, for joining us today for our fourth quarter 2017 conference call. I'm pleased to provide you with an update of our fourth quarter and 2017 annual results, outlook for 2018 and progress on our key projects and initiatives.

As the gold economy continues its gradual recovery from the financial crisis, commodities are benefiting. The gold price moved above $1,300 in December and was up 13.5% in 2017 and sits above $1,350 today.

Prospect for gold remain strong with US Dollar weakening slowing gold supply growth and strong demand growth trajectories in both India and China, the large consumers of gold. Despite the continued rise in interest rates as the Fed continues its policy of monitory tightening, gold still build momentum and with soaring equity values and low interest rate environment, gold is store of wealth offers investors a good alternative and hedge against potential rising inflation and geopolitical uncertainty.

Copper was one of the best performing base metals in 2017 rising 31% to back over $3 a pound with only Cobalt outperforming if albeit by a long shot which rose about 130%. The copper market remains relatively imbalanced but is expected to go into deficit after 2019 with very few large projects slated to come on-stream and increasing demand for electrical vehicles and general global growth.

In the near term copper prices are expected to remain relatively flat, but could be sensitive to any major supply disruption such as strike. Global base metal equity significantly outperformed global gold equities in 2017 rising almost 28% compared to gold equities which remained relatively unchanged over 2017.

Our share price moved up 33% in 2017 as we advanced our low cost organic gold growth project at Krumovgrad, which we expect to reach production stage in the fourth quarter of this year. With the strong fourth quarter performance both from Chelopech and Tsumeb operations resulting in annual adjusted earnings per share of $0.09, we achieved record annual gold production of 197,000 ounces which exceeded even our updated guidance.

Our annual copper production of 35.8 million pounds was within guidance and the all-in sustaining cost per ounce of gold for the full year $729, well below our original guidance range. At our Tsumeb smelter, we smelted 219,252 tons a complex concentrate in 2017 which is 9.5% increase over 2016 and well within our guidance.

Our Krumovgrad project remains on track for concentrate in Q4, this year. Sustaining capital expenditures will be below 2017 guidance primarily due to delays and the expertise in certain project and cancellation of projects no longer necessary as a result of process improvements at Tsumeb.

Growth capital expenditure also below 2017 guidance due to the timing of certain expenditures related to the Krumovgrad gold project and a reduction in estimated capital cost. As of December 31, 2017 approximately $79 million has been incurred on the Krumovgrad project with an additional $83 million to $89 million forecast in 2018.

The aggregate cost of the project was expected to be between $162 million to $168 million compared to the original estimate of $178 million. With Krumovgrad project construction now we're halfway complete.

Our balance sheet remains strong with $28 million in cash, $250 million in undrawn revolving credit facility as well as investments at fair value of $48 million. We continue to execute strategy to create value by optimizing operating performance advancing our organic growth projects and building and pipeline on future growth opportunities while we maintain our balance sheet strength.

For 2018, the company's total growth capital expenditures are expected to range between $92 million to $100 million, which primarily relates to the completion of the Krumovgrad gold project. The balance of $9 million to $11 million of additional growth capital includes $2 million of resource development drilling at Chelopech, as well as $7 million to $9 million of margin improvement projects at Chelopech and Tsumeb.

Sustaining capital expenditures are expected to be between $29 million and $39 million. The exploration budget for 2018 has been increased to $14 million from $9 million in 2017.

The increased budget will fund drilling programs at Chelopech, Krumovgrad, Timok gold project in Siberia and our Malartic project in Quebec. The smelter performance in Q4 continues the trend of more reliable and consistent operating performance.

We smelted 59,000 tons of complex copper concentrate to cast off to $406 a ton. For the full year we smelted 219,000 tons which was 9.5% improvement over 2016.

This performance generated $14 million in EBITDA and with the capital spend of $8.6 million resulted in annual positive cash flow from the business for the first time. One key factor that help gets us improved performance was to better temperature control in the Ausmelt furnace which helps to extend the life of furnace lining to more than 12 months.

The addition of matte holding furnace in June 2017 also allowed for significant higher throughput of the hot metal section during single converter operations which occurs above 30% of the time. Before reliability of the high pressure oxygen plant was the bigger factor hampering the smelter performance during 2017.

Improved monitoring and data analytics along with more proactive and predictive maintenance is being put in place, so we expect this will improve in 2018. Significant progress was made in 2017 on reducing the secondary copper inventories that accumulated during the construction and commissioning of the asset plan in copper converters.

This reduction will continue through 2018 as we expect to be back to normal levels in 2019. This will result in reductions in metal exposures, stockpile interest and allow higher throughput capacity for fresh concentrates.

Throughput for 2018 is expected to range between 220,000 and 250,000 tons as we continue to optimize the performance on this newly upgraded and interconnected facility. Volumes of complex concentrates smelted in the first half of 2018 are expected to be lower than the second half due to the timing of the annual maintenance shutdown, which currently expected to take place in the first half of 2018.

A number of improvement projects are planned for 2018 to improve smelter throughput and reduce cost. Most significant ones are the [indiscernible] project, the maintenance transformation project and the operating practices and controls project.

We're targeting to increase throughput by 10% and reduce cost by 7% in 2018. We continue to advance the smelter expansion project to increase the throughput of complex concentrate to as much as 370,000 tons per annum.

The feasibility study was completed in the fourth quarter of 2016 and comparing the robust project economics with an estimated implementation capital cost of approximately $52 million. Scope of project includes the rotary holding furnace, additional cooling and other operational the Ausmelt furnace as well as upgrades to the slag mill area.

Work is progressing on securing the necessary furnace to support this planned increased. Early discussions are underway to securing sufficient complex concentrate feed to fill the expanding capacity, but the project will not proceed until acceptable commercial arrangements are reached, which is not likely to occur until at least 2019.

Chelopech had record gold production in 2017 of 197,000 ounces at an all-in sustaining cost of $729 an ounce which even exceeded our revised guidance. This was primarily a result of the positive gold grade reconciliation from a one of three smelting block and higher gold and copper recoveries from mill optimization work.

Gold grades were 9% higher and copper grades were 7% lower than 2016. Cash cost per ton of ore processed in Q4 full year 2017 were higher than 2016 primarily due to the stronger Euro.

Gold containing concentrate produce is expected to be between 165,000 and 195,000 ounces and copper between 33 million and 40 million pounds in 2018. We expect gold grades to return closer to reserve average grades in 2018 and copper grades to be similar to 2017 copper grades.

Gold production in the first half of 2018 is expected to higher than the second half based on the planned sequencing. We have several projects to further increase stope intensity and cycle time and to optimize production and costs.

In addition, we'll be introducing rapid mine planning and dynamic scheduling using the MineRP software as part of a broader initiative to implement both fully integrated dynamic business planning and execution model. We will also continue our process plant optimization work designed to improve processes, reduce consumables, consumption and proved metal recoveries.

In our regional exploration program around Chelopech in 2018, we will begin our 15,000 meter program designed to systematically drill test the 1.6 kilometer straight line target known as the Southeast Breccia Pipe Zone as well as several other targets identified through geophysics and geochemistry work completed in 2017. Early drilling has already identified several minerals on the copper, gold mineralization on several of these targets.

41,000 meters resource definition drilling was completed in 2017 on a number of existing and new ore bodies including the newly discovered 153 ore body. Updated resources and reserves will be released with the annual information form in March.

At Krumovgrad the end of December construction on project was approximately 51% complete based on installed quantities and the project remains on track for first concentrate production in the fourth quarter of 2018. The estimated cost of the project at completion is currently expected to be $162 million and between $162 million and $168 million of which $78.5 million has been incurred to-date.

The key relative to 2015 estimate of $178 million was primarily due to a reforecast of the contingency more favorable exchange rate than budgeted and reduction in earthwork quantities. Key milestones of the Krumovgrad project in 2018 include the completion of the integration mine waste facility earthworks, mechanical, structural, electrical and instrumentation installation and pre-stripping of the mine.

Coal and hot commissioning are on track for the second and third quarters respectively followed by first concentrate production and commencement of the ramp-up to full design capacity in the fourth quarter. The operating team is focused on operational readiness and deploying shared service model to maximize the synergies with Chelopech.

Fourth quarter gold production of approximately 3,000 ounces is expected to occur prior declaring commercial production as result is - and as the result is excluded from the above 2018 guidance. Exploration has identified a number of satellite deposits in a few kilometers of Krumovgrad during 2017; a total of 3,600 meters of diamond drilling the 14 holes was completed.

Drilling focused on Kupel North target area. A geological discovery at Kupel North was approved by the Minister of Energy in April 2017 drilling in Surnak will begin in Q1 of this year followed by drilling on the Kuklitsa satellite and several other targets identified by ground magnetic and geochemistry.

At our Timok Gold Project in Serbia following the discovery of the Korkan West deposit in 2017, we will continue to advance exploration of this area in 2018 with the goal of adding more ounces to the existing Timok Gold resource. During 2017, a total of 9,300 meters of diamond drilling was completed including two phases of the drilling in the Korkan West which resulted in a gold mineralization being found over strike plank of 220 meters along our North West structurally controlled zone.

All drilling intervals in this zone were fully oxidized. An additional 8,000 meters of drilling was planned in 2018 on Korkan West and several other advanced targets.

We're currently conducting leachability test for oxidized material determined viability for heap leaching. If successful this will lead to an updated mineral resource estimate and internal scoping study later in 2018.

At our Malartic joint venture with Quebec activities commensurate in the third quarter of 2017 following the option agreement signing in June 2017. During the fourth quarter of 2017 detailed geophysical and geochemical surveys as well as geological mapping and drill ore logging were focused to the perspective areas located within volcano sedimentary Blake River Group.

Where targets are represented by [indiscernible] related and shear zone-hosted gold mineralization. Results from high resolution drone-based and land, aerial, vehicle magnetic covering 12 square kilometer and full [indiscernible] IP surveys and new multi-geochemical data are currently being processed and integrated into a historical exploration database and a new 3D geological model is being generated.

Initial drill holes are being targeted to begin drilling in the first quarter of 2018. So on summary for 2018, our focus will be on increasing the profitability of the business and successfully executing our organic growth projects.

Specifically the successful construction completion, commissioning and ramp up of the long anticipated high graded low cost Krumovgrad gold project in Bulgaria, which will generate significant growth in gold production and cash flow starting in 2019. The continued optimization of the Tsumeb smelter performance, so that we reach target smelting raising cost and continuing to pursuing both opportunities within our existing portfolio of assets through brownfield exploration programs in Bulgaria, near Chelopech and Krumovgrad and in Serbia at our Timok gold project as well as through disciplined investments and any new development opportunities.

Thank you. I will now turn the call over to Hume, who will review the financial results and 2016 guidance following which we'll open the floor for questions.

Thanks Rick. Good morning, everybody.

On the back of the improved operating results that Rick commented on overall we reported significantly stronger financial results in 2017. With reported adjusted net earnings of $0.09 per share compared to an adjusted loss of $0.15 in 2016 and adjusted EBITDA of $92 million compared to $73 million in 2016.

These increases were primarily due to higher volumes and realized pricing on payable metals and higher smelter throughput and poles, partially offset by higher treatment charges at Chelopech and higher operating cost at Tsumeb. For the fourth quarter we reported adjusted net earnings of $0.02 per share compared with $0.04 in 2016 and adjusted EBITDA of $22 million compared to $30 million in 2016.

These decreases were driven primarily by higher treatment charges reflecting increased deliveries to Tsumeb and favorable adjustments on provisionally invoiced sales in the fourth quarter of 2016 the effect of which more than offset higher volume and realized pricing of payable [ph] metals. Fourth quarter and annual 2017 adjusted earnings were also impacted by lower depreciation at Tsumeb as the result of changes made to the estimate useful life of certain assets and impairment charges taken at Tsumeb in 2016 as well as the copper hedging we did in conjunction with de-risking moving forward with our Krumovgrad project that resulted in us not fully realizing the upward movement copper pricing during 2017.

From a cash flow perspective, funds from operations during the quarter a 12 months of 2017 were $20 million and $90 million respectively compared to $25 million and $122 million during the comparable periods in 2016. Free cash flow which we defined us funds from continuing operations, less cash outlays for sustaining capital and mandatory debt service allocations with $15 million and $46 million in the fourth quarter and 12 months of 2017 compared with $11 million and $75 million during the comparable periods in 2016.

These year-over-year cash flow decreases can be attributed entirely to the receipt of $50 million from the prepaid forward gold sale we completed in 2016 as both Chelopech and Tsumeb reported increased operating and financial results during the period. Turning to our cash costs measures fourth quarter and annual 2017 cash costs per ton of ore processed was $37 and $34 respectively up 13% and 4% from 2016, primarily reflecting the US weaker dollar and higher royalties as a result of increased production and higher metal prices.

Fourth quarter all-in sustaining cost of $802 up from $190 in 2016 [technical difficulty] was impacted by the higher treatment charges related to increased deliveries to Tsumeb and favorable adjustments on provisional invoice sales before 2016 which more than offset higher gold sale and by-product credits. All-in sustaining in 2017 was $729 down $18 from 2016 due primarily to higher gold sales which more than offset higher treatment charges due principally to increased deliveries to Tsumeb.

At Tsumeb cash cost per ton in the fourth quarter was $406, up $37 from 2016 due to lower volumes of complex concentrate smelted and higher electricity contractor and labor rates. For the year cash cost was $458 up $18 from 2016 due to higher electricity contractor and labor rates and partially offset by higher volumes of concentrates smelted.

Total sustaining and growth capital expenditures for the fourth quarter of 2017 were $5 million and $24 million for an aggregate of $29 million up from $14 million in the corresponding period of 2016. 2017 sustaining and growth capital expenditures were $21 million and $75 million for an aggregate spend of $96 million up from $51 million in 2016.

These increases related to the Krumovgrad gold project where we've incurred approximately $79 million to-date including $9 million for Q4, 2016. All major construction contracts have now been awarded and rates are locked in for the balance of the project.

During the quarter no additional hedging was undertaken beyond the regular QP hedging we do, which locks in the pricing associated with the all reported revenue. As a result, our 2018 hedge positions are as follows; 93% of our expected 28 payable copper production has been hedged, 56% was hedged to 262, as part of our hedging to de-risk to Krumovgrad project and 37% was hedged using options providing the minimum price of 280 per pound at a maximum price of $332 per pound.

28% of our Namibian operating costs were hedged at 13.59 and substantially all of our Euro capital expenditures in respect to the Krumovgrad project were hedged in the all-in weighted average rate of 1.12. Coming in 2018, we're in great financial shape.

We have $281 million of cash resources including $252 million under our long-term credit facility and $29 million of cash, as well as 10% interest in being valued at approximately $48 million and as a result, we're well positioned to complete our Krumovgrad project and advance our other growth capital initiatives. Looking forward, we're focused on number of initiatives at Chelopech, Krumovgrad and Tsumeb that will further increase the expected profitability of each of these assets.

Completing the Krumovgrad project on time, on budget and achieving first world production in the fourth quarter. As well as pursuing growth opportunities within our existing portfolio of assets through brownfield exploration programs and disciplined investments and new development opportunities.

These are all laid out in the material we released yesterday including our 2018 operational and cost guidance which I'll summarize. At Chelopech mine production is expected to be between 2.1 million and 2.2 million tons and this range is similar to 2017 and reflects the annual production being limited to 2.2 million tons pending an increase in mineral reserves.

Gold production is expected to be between 165,000 and 195,000 ounces below our record production in 2017 of 198 ounces which benefited from higher than anticipated grades following 2018 we're expecting grades to return to life of mine levels. Copper production is expected to be between 34 million and 40 million pounds compared to 36 million pounds in 2017.

And as result, our payable goal is expected to be between 140,000 and 170,000 ounces compared to 172,000 ounces in 2017 and payable copper sold is expected to be between 31 million and 37 million pounds compared to 34 million pounds at 2017. As Rick noted, we expect Krumovgrad to produce 3,000 ounces of gold in the fourth quarter and this has been excluded from our guidance as expected to occur prior to declaring commercial production.

Tsumeb throughput is expected to be 220,000 tons to 250,000 tons up as much as 14% over 2017 and it continues, as it continues to optimize and ramp up the facility to the nameplate capacity and will continue to focus on increasing the availability of the oxygen and power plant and continuing to decrease secondary levels. From a cost perspective, cash cost are generally expected to be in line with 2017 levels although they're being impacted by the current weak US dollar environment.

In particular, cash cost per ton ore processed is expected to be between $37 and $40 up from $34 in 2017. All-in sustaining cost per ounce of gold is expected to be between $640 and $855 compared to $729 in 2017 and cash costs per ton of complex concentrate smelted is expected to be between $440 and $500 compared to $458 in 2017.

On the capital front, sustaining capital expenditures for 2018 are expected to be between $29 million and $39 million and this is up from $21 million in 2017. This increase is the result of higher level of activity at Tsumeb due to several projects being shifted from 2017 to 2018 and approximately $9 million at Chelopech to raise the elevation of its management facility which is expected to be completed in 2019 at a total cost of $12 million.

Growth capital expenditures for 2018 are expected to between $92 million and $100 million; up from $75 million we spent in 2017 primarily relating to the capital associated with completing the Krumovgrad gold project. The balance of between $9 million and $11 million includes $2 million of reserves development at Chelopech as well as $7 million to $9 million of margin improvement capital at Chelopech and Tsumeb.

Exploration expenditures for 2018 are expected to be between $10 million and $15 million up from $9 million in 2017 and are being directed towards increased drilling activity at Chelopech, Krumovgrad and the Timok gold project of Serbia as well as Greenfield projects in Bulgaria, Serbia and the Malartic project in Quebec. In closing, we anticipate exiting 2018 with a strong balance sheet and with Krumovgrad construction project completed expected to see a significant increase in reported production of free cash flow generating commencing in 2019.

With that, I'll turn the call back over to the operator.

Rick, I just had a question a little bit about the guidance at Tsumeb, you're talking about I think 220,000 to 250,000 tons going through the smelter. And kind of looking back at previous presentations you had that a little bit higher more like 240,000 to 265,000 for 2018 at least.

Is that a function of the oxygen plant availability kind of coming back up to speed in 2018?

I'll let Dave, to handle that. Well he's little closer to that.

I think what's been happening is that we've seen steady and sustained improvement in performance that's reflected in the numbers the last year despite the fact we have the oxygen plant issues, which were a very large part of our expanding capacity as you may recall from under implementation in 2014. So what we're doing is, we're looking at the oxygen plants improved availability so we're certainly seeing that back to where it was two years ago and we're expecting to continue with this other performance improvement stability for various reasons and I don't want to go into unless you specific want to have details on it.

So we think a 250 is definitely on, as all those things come together. We're expecting 265 to be a final optimization, that's why we're not expecting to get this year.

We still think we need number of things to come together to get to that point. What we see is, at most of the moment the steady improvement in performance, maintenance activity, oxygen plants activity, general stability to our process and then sort of generally fishing in terms of rework what we put income [indiscernible] re-circulations.

So as these come in, so you'll see the capacity increase after that 265 point [ph].

And I would assume that in terms of adding capacity you would like to see kind of all these optimizations vetted down before you really pursue adding capacity or is that not correct.

You'll be quite right, so what we find to do is, we've actually just implemented a number of processes which really target stability and then moving what is the production based on having all these of things aligned to the process and only after that, we look at putting in additional capital to raise the tonnage. So quite right, we want to see those things vetted down first before we start to put money in.

so to the point if you recall, even the same within our 2017 it was some deferred capital that's because we no longer needed that capital at that point because the optimizations that we've made in places like the [indiscernible] were already coming through. Similarly the furnace instead of running for five to six months was actually now running more than 12 months of that, so its 33% increase on the previous best concentrates that we've seen through this vessel.

So that end defer the water cooling so quite right, capital will only come once we've seen these improvement initiatives that are now.

And I probably asked you this before and maybe this is a question for Rick, but with higher copper prices and potentially higher copper outlook. Does this mean you're seeing more demand for the Tsumeb services?

Certainly the higher copper prices for sort of new projects is probably the best influence on those projects are waiting to come on stream that maybe complex in nature, in terms of the material. So definitely effect on new supply, but that we don't anticipate any of those sort of major complex projects to come on stream before 2021, so.

Okay, great.

We think biggest influence.

And then I just had a kind of housekeeping question for Hume on the financials. With respect to Q4 specifically, can you just break out what G&A was in Q4 for Hume?

I'm kind of having trouble backing into it with the stock-based compensation and everything.

Just trying to remember, we know what the - can you just remind me what the mark-to-market was for Q4?

$2 million a little over that.

G&A influenced $2 million of mark-to-market for share based compensation.

And sorry, do you remember what just the stock-based comp number was with or without that?

I can get back to you, but I don't know what that is, right off [indiscernible].

Okay, I'm happy to follow-up afterwards, thanks guys.

All right, well thank you for joining us this morning and I wish everybody a good weekend. Thanks, bye.