understanding the tsumeb smelter

22
DPM TSUMEB LUNCH AND LEARN MARCH 20, 2014 DUNDEE PRECIOUS METALS UNDERSTANDING THE TSUMEB SMELTER

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Page 1: Understanding the tsumeb smelter

DPM TSUMEB LUNCH AND LEARN

MARCH 20, 2014

DUNDEE PRECIOUS METALS

UNDERSTANDING THE

TSUMEB SMELTER

Page 2: Understanding the tsumeb smelter

2

This presentation contains “forward-looking information” or "forward-looking statements" that involve a number of risks and

uncertainties. Forward-looking information and forward-looking statements include, but are not limited to, statements with respect to

the future prices of gold and other metals, the estimation of mineral reserves and resources, the realization of mineral estimates, the

timing and amount of estimated future production and output, costs of production, capital expenditures, costs and timing of the

development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional

capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims,

limitations on insurance coverage and timing and possible outcome of pending litigation. Often, but not always, forward-looking

statements can be identified by the use of words such as “plans”, “expects”, or “does not expect”, “is expected”, “budget”, “scheduled”,

“estimates”, “forecasts”, “intends”, “anticipates”, or “does not anticipate”, or “believes”, or variations of such words and phrases or state

that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking

statements are based on the opinions and estimates of management as of the date such statements are made, and they involve

known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the

Company to be materially different from any other future results, performance or achievements expressed or implied by the forward-

looking statements. Such factors include, among others: the actual results of current exploration activities; actual results of current

reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future

prices of gold; possible variations in ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated;

accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the

completion of development or construction activities, fluctuations in metal prices, as well as those risk factors discussed or referred to

in this presentation under and in the Company’s annual information form under the heading "Risk Factors" and other documents filed

from time to time with the securities regulatory authorities in all provinces and territories of Canada and available at www.sedar.com.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially

from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be

anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual

results and future events could differ materially from those anticipated in such statements. Accordingly, readers are cautioned not to

place undue reliance on forward-looking statements.

FORWARD LOOKING STATEMENTS

Page 3: Understanding the tsumeb smelter

SITE OVERVIEW

Dundee Precious Metals 3

Effluent plant Acid plant

Ausmelt

New converters

Acid storage tanks

Oxygen plants

Ausmelt baghouse

Hygiene baghouse

Arsenic plant

Old converters

Acid plant

laydown area

Page 4: Understanding the tsumeb smelter

Dundee Precious Metals

UNIQUE SMELTER EQUIPPED TO TREAT

COMPLEX CONCENTRATES

• Secures capacity to treat Chelopech concentrate and derives additional

revenues processing complex concentrates from 3rd parties

• Toll rates for complex concentrate command a substantial premium

• Most recent 3rd party contracts at higher rates than pre-existing

arrangements prior to DPM ownership

One of a few smelters with ability to process large volumes of complex

concentrate

Project 2012 dust and emissions upgrades complete

Production curtailment has been lifted

Additional upgrades reduce SO2 emissions, increase capacity and

lower costs

4

• New off-gas and emissions management

• New dust management systems

• Smelter hygiene improvements

• Ramping up to 100% capacity in Q1 2014

• New sulphuric acid plant subject to lump sum turnkey contract

• Long-term acid off-take agreement with Rössing

• Potential installation of a holding furnace

Page 5: Understanding the tsumeb smelter

Dundee Precious Metals

HISTORY OF TSUMEB SMELTER

• Built in 1960-62, commissioned 1963

• Designed specifically to treat complex

polymetallic ores from Tsumeb Mine which

contained high levels of copper, lead, zinc,

arsenic and cadmium

• DPM Tsumeb Smelter purchased from

Weatherly Mining in March 2010

• Capacity increased from 147,000 tonnes

concentrate in 2010 to a current capacity of

240,000 tonnes per annum

5

Asset Overview

DPM Ownership 100%

Location Namibia

Acquisition March 2010 $50M

Technology / Product Ausmelt

Product Copper blister bars

2013 concentrate throughput 152,457 tonnes

Expanding smelter capacity 320 ktpy

Emissions & dust capture upgrades $110 M

Sulphuric acid capture plant (Q3 ’14) ~$240 million

Holding furnace (2017) $70+ million E

Complex

Concentrate

Smelted (‘000 t)

2010 2011 2012 2013 2014E

Chelopech

Concentrate 56 89 112 74

190-220 3rd Party

Concentrate 64 92 47 78

Cash Cost (US$/t) 268 293 374 433 280-350

EBITDA (US$M) 2 3 (3) (7) n/a

Page 6: Understanding the tsumeb smelter

Dundee Precious Metals

IMPACT OF CAPITAL SPEND ON ARSENIC

CONTROLS

6

mg/m

3

mg/m

3

Page 7: Understanding the tsumeb smelter

Dundee Precious Metals

COPPER SMELTING OVERVIEW

Feed

preparation

Offgas

cleaning

As2O3

production

Slag Mill Copper

making

(converting)

Concentrate

Reverts

Fluxes

Fuels

Cu Dusts

Matte 55% Cu

Slag 2.5% Cu

Feed 20% Cu

Offgas

Dust

Copper 98.5% Cu

7

Page 8: Understanding the tsumeb smelter

Dundee Precious Metals

CU CONVERTER NORMAL

8

Page 9: Understanding the tsumeb smelter

Dundee Precious Metals

COPPER CONVERTING

Oxides (slag) to slagmill

Cu-sulfide (Matte)

To Converters

Offgas to gas cleaning section

Blister copper

9

Page 10: Understanding the tsumeb smelter

Dundee Precious Metals

ACID PLANT SIMPLIFIED PROCESS

Process

Gases

Drying Tower Converter Absorption

Tower

Clean &

Dry SO2

Conversion of

SO2 to SO3

SO3

Sulphuric

Acid

Product

(98%)

Page 11: Understanding the tsumeb smelter

Dundee Precious Metals

PRODUCTION

11

119,557

180,403

159,356152,457

220,000-

190,000

0

50,000

100,000

150,000

200,000

250,000

2010(Q2-Q4)

2011 2012 2013 2014(guidance)

Co

ncen

trate

(to

nn

es)

Concentrate smelted

152

52 118

3(11)

215

100

120

140

160

180

200

220

240

Actual 2013performance

Oxygenplant late

Project2012 tie-in

shut overrun

Water leaks,buildups, tapblock issues

Project2012 follow-

upshutdowns

Highersmeltingrates +better

availabilities

2013Expected

performance

Concentr

ate

s s

melted (

'000 tonnes) 2013 Smelting Performance Factors

Page 12: Understanding the tsumeb smelter

Dundee Precious Metals

OPERATIONAL EXPENSES

12

Fixed cost Variable cost inv. variable cost

268295

374

433

0

100

200

300

400

500

2010(Q2-Q4)

2011 2012 2013 2014(guidance)

Cash

co

st

/ to

nn

e

of

co

ncen

trate

sm

elt

ed

(U

SD

)

Cash cost / tonne of concentrate smelted

380 -305

27%

16%

12%4%

2%3%

7%9%

5%

6% 2%7% 100%

0%

20%

40%

60%

80%

100%

perc

en

tag

e f

rom

to

tal exp

en

ses

Expenses breakdown

Page 13: Understanding the tsumeb smelter

Dundee Precious Metals

MOVING TO OPPORTUNITY -

NEW OXYGEN PLANT – 420 T/D

•Smelting capacity increased

from 170kt per annum

to potential of 420kt per annum

•Old Plant 170t/d

13

Page 14: Understanding the tsumeb smelter

Dundee Precious Metals

INCREASING SMELTING CAPACITY

Approved capital Anticipated future capacity

170

7036

44

100

240

420

0

50

100

150

200

250

300

350

400

450

base capacity(170 tpd O2)

new oxygenplant

operational (420tpd O2)

optimise smelteravailability

holding furnace 2 oxygen plants(590 tpd O2) +

coolant

co

nc

en

tra

tes

ktp

a

14

Page 15: Understanding the tsumeb smelter

Dundee Precious Metals

AUSMELT AVAILABILITY

OPERATIONAL PERFORMANCE IMPROVEMENT

• Ausmelt availability (excl. annual shut down): Currently: 78%

Aim 2014: 87%

Aim 2015: 90%

• Further availability gains targeted by:

− Decreasing shutdown duration

− Increasing campaign life

− Increasing crane availability

Current 2014

improvements

2015

improvements

Dropbox cleaning 3% - 3% -

Build ups in offgas system 7% - 3% - 1 %

Taphole brick replacement 3% - 1% - 1 %

Water leaks 2% - 1% - 0.5 %

Feed rate reductions 1% - 1% -

Power outages (O2 plant) 0.5% - -

TOTAL: 16.5% - 9 % - 2.5%

15

Page 16: Understanding the tsumeb smelter

Dundee Precious Metals

TREATMENT CHARGES

Bulk Smelting Market

• Global copper concentrate sales have transparent benchmarks.

• These typically range from $90 to 130/t between contract and spot tonnage.

• Contract durations are normally 1-year and therefore negotiated annually.

• Concentrates need to be free of deleterious materials or face being rejected

or attract penalties for treatment.

• Treating complex elements requires blending with clean concentrates.

Complex Concentrates Market

• Tsumeb is a niche complex concentrate treatment facility with core arsenic

capability.

• The complex market concludes multi-year agreements and attracts TC

premiums to the clean market of $30 to $50/t.

• Thresholds for core arsenic penalties vary but generally start above 0.5%

• Charges are on a $ per 0.1% increment over 0.5% and the $ per 0.1%

penalty will increase as the arsenic level increases.

• Additional Penalties possible - Lead, Zinc, Se, Te, Bi, moisture, etc.

16

Page 17: Understanding the tsumeb smelter

Dundee Precious Metals

CAPEX SPEND

17

8,357 8,820 6,108 9,281

17,051

56,926

130,528

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2010 (Q2-Q4) 2011 2012 2013

tho

usan

d U

SD

Capital expenditures

Growth

Sustaining

Page 18: Understanding the tsumeb smelter

Dundee Precious Metals

EBITDA PERFORMANCE

18

2,214

2,798

-2,593

-6,998

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

2010 (Q2-Q4) 2011 2012 2013

th

ou

san

d U

SD

EBITDA

Page 19: Understanding the tsumeb smelter

ACID PLANT PROJECT

PS converters, Gas Cleaning plant, Sulphuric

Acid plant and Effluent Treatment plant

Page 20: Understanding the tsumeb smelter

Dundee Precious Metals

• Gas Capture and conversion to H2SO4

• Environmental systems upgrade

• High Efficiency Scrubbing

• Metals Recovery

• Dispatch by rail and road

• Water reclamation

• Pearce-Smith Converter Replacement

• Operational readiness

ACID PLANT PROJECT

20

Page 21: Understanding the tsumeb smelter

Dundee Precious Metals

ACID PLANT PROJECT

21

Page 22: Understanding the tsumeb smelter

dundeeprecious.com

One Adelaide Street East Suite 500

Toronto, Ontario M5C 2V9 T: 416 365-5191

Investor Relations T: 416 365-2851

[email protected]

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