Dundee Precious Metals Inc

TSX:DPM

Earnings Call Transcript

[Operator]

Good day, and thank you for standing by. Welcome to the Dundee Precious Metals Fourth Quarter 2024 Earnings Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jennifer Cameron. Please go ahead.

[Jennifer Cameron, executive]

Thank you, and good morning. I'm Jennifer Cameron, Director of Investor Relations, and I'd like to welcome you to the Dundee Precious Metals fourth quarter conference call. Joining us today are members of our senior management team, including David Rae, President and CEO; and Navin Dyal, Chief Financial Officer.

Before we begin, I'd like to remind you that 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 the purposes of today's call.

Certain non-GAAP -- certain financial measures referred to during this call are not financial measures recognized under IFRS and are referred to as non-GAAP measures or ratios. 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, operational and financial information communicated during this call are related to continuing operations and have generally been rounded, references to 2023 pertain to the comparable period in 2023, and references to averages are based on midpoints of our outlook or guidance.

I'll now turn the call over to David Rae.

[David Rae, executive]

Thank you, Jennifer. Good morning, and thank you all for joining us.

Our excellent Q4 and year-end results reinforce the DPM's strength that underpin our strategy to become a mid-tier precious metals company. At first, we're a responsible and efficient operator, where we once again achieved our gold production and all-in-sustaining cost guidance, continuing our exceptional 10-year track record of delivery. Most importantly, we've accomplished this while maintaining a high standard for responsible mining with a strong safety and environmental track record, which has ranked us at the top of our industry for the past 4 years.

Second, we focused on developing quality assets. We've rapidly advanced Coka Rakita, a testament to the quality of our team and project, completing the pre-feasibility study at the end of last year and we're focused on completing the feasibility study by the end of this year.

We have a proven track record in project development, having delivered the $180 million Ada Tepe project on time and on budget as well as the Chelopech expansion that doubled production, and other investments to improve operations and enhance value.

And we've also established our exploration credentials, with 3 discoveries in Serbia and our long track record of adding mine life at Chelopech and exploration will continue to be a significant DPM focus in 2025.

Third, we maintain a strong financial position to support growth. So we've consistently delivered free cash flow generation, including a record $305 million in 2024, which has grown our cash position to over $800 million at the beginning of 2025 and further strengthened our financial capacity to fund growth.

At the same time, our investors are benefiting from our low-cost, high-margin gold production as we harvest free cash flow by returning excess capital to shareholders. We've returned $261 million to shareholders since 2020 and plan up to $200 million of additional share purchases in 2025.

Overall, our accomplishments in 2024 have culminated in an exceptional track record that provides confidence in our ability to grow the business and deliver on our strategic objective to become a mid-tier precious metals company.

As we enter 2025, we're focused on growth as demonstrated by the advancement of our exploration and project portfolio, which is reflected in our 3-year outlook. Navin will review the details in a moment, so I'll emphasize our priorities.

We continue to fund our high-quality organic growth pipeline by investing more than $90 million this year between growth capital and exploration following on several recent successes. We also continue to deliver on our strong operational track record, producing just under 200,000 ounces of gold and 30 million pounds of copper annually over the next 3 years, and continue to be one of the lowest-cost gold producers.

Turning to Coka Rakita. What makes Coka Rakita particularly exciting is the significant exploration potential within the footprint of the project, where we have made 2 additional discoveries, Dumitru Potok and Frasen prospect, which are located approximately 1 kilometer north of Coka Rakita. Results from these targets are demonstrating camp scale potential for high-grade copper-gold mineralization.

And we're completing additional work in order to understand the footprint, the continuity, the overall size potential and the metallurgy. This will be a significant focus for us in 2025 with planned exploration spending of between $23 million and $25 million and similar levels forecast for '26 and '27.

With Coka Rakita, our growth priority is advancing Coka Rakita to production, which is targeted for 2028. In less than 24 months since announcing the initial discovery, we have outlined a very robust, highly value-accretive project that adds high-margin gold production growth to our portfolio. We proceeded immediately to a feasibility study while advancing permitting activities in parallel with the goal of commencing construction in mid-2026.

In 2025, our focus will be on completing surface and underground geotechnical and hydrogeological drilling and the completion of the feasibility study, which is expected by year-end.

Completed in December, the PFS results featured several improvements from the PEA, including accelerated gold production in the first 5 years, averaging 170,000 ounces of gold per year, lower all-in sustaining costs, which we're now expecting at $644 per ounce of gold over the life of mine and a derisked project timeline and execution plan. And we intend to utilize existing processing facilities and mine equipment from Ada Tepe, leveraging the project's proximity to Chelopech to train and develop key personnel for operating roles.

Overall, we're very excited by Coka Rakita's potential in a region where we've had a presence for many years. That has a long history of exploration and mining development and where we've developed strong relationships with local stakeholders.

With Chelopech and specifically Chelopech mine life, we're also prioritizing in-mine and brownfields exploration work to further extend mine life, targeting an increase to over 10 years. Reflecting this priority in 2025, we are increasing the brownfields exploration budget for Chelopech as we focus on testing near-mine targets on the Chelopech concession.

Chelopech today has a mine life that extends to 2032 based on our reserves, a substantial 1.2 million ounce mineral resource base, and a 4,100 hectare land package with significant opportunities to continue the track record of mine life extensions. In addition, the Chelopech North concession approval is anticipated before the end of 2025 and we've just received the geological discovery confirmation in Q4 for Brevene.

At Loma Larga, the progress we've made with permitting in 2024, we've chosen to complete an updated feasibility study for the project in the second quarter of 2025. This will update the project economics to reflect the current gold price, capital, and operating costs as well as demonstrating the value and optionality for our growth portfolio. The prior informed indigenous consultation process, which is the last step of the 4 before the environmental license is issued was also initiated and engage with the -- engagement with the community progressed during Q4.

For 2025, we have budgeted $12 million to $14 million in growth capital for Loma Larga, reflecting the updated feasibility study and our disciplined approach to the business. We will continue allocating additional capital to the project depending on achieving certain permitting milestones, and the intent will be to fund resuming drilling and further advancing permitting. Loma Larga remains an attractive growth option in our portfolio with mineral reserves of 1.9 million ounces of gold and 80 million pounds of copper, that is a great fit with our technical and operating expertise.

I'll now turn the call over to Navin for a review of the financial results.

[Navindra Dyal, executive]

Thanks, Dave. I'll be touching on the financial highlights for the year, provide an overview of our 2025 guidance and 3-year outlook, and conclude with some commentary on our balance sheet and return of capital program. All of my remarks will focus on results from continuing operations unless otherwise noted.

Looking at our financial highlights for the year. We achieved consolidated production and costs in line with our guidance and delivered record financial results. Revenue of $607 million, adjusted net earnings of $232 million or $1.29 per share, cash flow provided from operating activities of $297 million, and free cash flow of $305 million. Overall, results during the year reflect our strong operating performance, the low-cost structure of our operations, and a favorable commodity price environment.

Looking at our earnings and cash flow in more detail. Revenue was higher than the prior year due primarily to higher realized metal prices and lower treatment charges at Chelopech, partially offset by lower volumes of gold sold at Ada Tepe.

Adjusted net earnings increased compared to the prior year due primarily to higher revenue and interest income, partially offset by higher planned exploration and evaluation expenses, higher income taxes and higher labor costs.

Cash flow provided from operating activities was higher than the prior year due primarily to higher earnings and higher cash interest received, partially offset by the timing of collections from sales and payments to suppliers. Free cash flow, which is calculated before changes in working capital was higher than the prior year due primarily to higher earnings generated during the year.

Taking a closer look at our cost metrics, all-in sustaining cost of $872 per ounce of gold sold for the year was 3% higher than the prior year due primarily to lower volumes of gold sold, higher labor costs, and timing of maintenance activities, largely offset by lower treatment charges at Chelopech and higher byproduct credits as a result of higher realized copper prices.

In terms of our capital spending, sustaining capital expenditures of $34 million for the year were higher compared to 2023 due primarily to the timing of expenditures and higher deferred stripping costs as a result of higher stripping ratios at Ada Tepe.

Growth capital expenditures of $17 million for the year were lower than the prior year due primarily to lower capital expenditures related to the Loma Larga gold project as expected.

Last night, we provided an updated 3-year outlook, which has been outlined in detail on Slide 15 of the webcast. We continue to fund our high-quality organic growth pipeline while maintaining our portfolio of high-margin operations, which has generated our exceptional track record of delivery.

Over the next 3 years, gold production is expected to average approximately 200,000 ounces per year, bolstered by strong and consistent performance from Chelopech. Ada Tepe's production profile reflects its mine life ending in mid-2026, in line with our plans to utilize its processing equipment and infrastructure for the Coka Rakita project.

I'd like to note that in 2025, gold production at Ada Tepe is forecast to be approximately 50% lower in the first half of the year as compared to the second half due to sequencing of the cells of the integrated mine waste facility.

Copper production over the next 3 years is expected to average approximately 30 million pounds per year based on current mine plans.

All-in sustaining cost over the next 3 years is expected to average approximately $865 per ounce of gold sold, continuing to position DPM as one of the lowest-cost highest-margin gold producers. Our outlook reflects variations in gold and copper production and sales year-over-year, as well as the impact of higher local currency operating costs and allocated general and administrative expenses, partially offset by a stronger U.S. dollar assumption relative to the euro. We are forecasting consistent investment in exploration over the next 3 years reflecting our success in generating value through the drill [ bit ].

Our sustaining capital over the next 3 years has remained unchanged from our previous outlook with the exception of sustaining capital at Ada Tepe in 2025, which is expected to be approximately $14 million, which includes reclassified expense costs for waste stripping.

Our 3-year outlook for growth capital primarily relates to the Coka Rakita project, which is expected to commence construction mid-2026 and achieve first production of concentrate in 2028. The company will start capitalizing costs related to the Coka Rakita project from 2025 onwards, as a result of the project's advancement to the feasibility study stage.

In 2025, growth capital expenditures also include expenditures related to the Loma Larga gold project, including planned expenditures to complete an updated feasibility study in the second quarter of 2025. Upon achievement of certain milestones for the project, the company may increase its guidance for capital expenditures related to the Loma Larga gold project.

We continue to maintain a strong balance sheet and cash position with a consolidated cash balance of $635 million, no debt, and a $150 million undrawn revolving credit facility. Including an additional $171 million in cash received in early January 2025, following the conclusion of the DPM tolling arrangement as part of the Tsumeb Disposition, our year end cash balance rises to over $800 million.

As Dave pointed out during his remarks, we have consistently demonstrated our disciplined approach to capital allocation, which is based on 3 fundamental considerations: maintaining a strategic cash position to fund organic growth and pursue strategic transactions; reinvestment in the business to grow value and the long-term sustainability of our business; and returning excess capital to shareholders through a mix of dividends and share repurchases with a view to maximizing total shareholder returns over the long-term.

In line with this approach, over the past 5 years, we have returned $261 million of capital to shareholders, approximately 25% of our total free cash flow over that period. In 2024, we repurchased 5.7 million shares at a total cost of $50.9 million under the company's Normal Course Issuer Bid or NCIB and paid $28.9 million of dividends. The current NCIB expires on March 17, 2025. The company's Board of Directors has approved the renewal of the NCIB, subject to approval by the TSX.

The company expects to be able to purchase up to 10% of the public float of common shares over a period of 12 months under the renewal. Continuing our track record of peer-leading capital returns for the calendar year 2025, the company's Board of Directors has authorized the repurchase of up to $200 million worth of the company's shares. And we ramped up share repurchases through January in line with this approach.

In closing, we continue to deliver strong performance from our mining operations and we are in a strong cash position to achieve our guidance and continuing our track record of generating significant free cash flow.

I'll now turn the call back to Dave for his [ closing remarks ].

[David Rae, executive]

Thanks, Navin. It's another exciting year for DPM as we advance our organic pipeline and continue to build value and momentum in 2025. Our portfolio is generating solid consistent results and we're very well-positioned as one of the lowest-cost producers. We are harvesting free cash flow and delivering peer-leading returns to shareholders through our enhanced share buyback program.

We're also progressing the Coka Rakita feasibility study for an accelerated construction decision. So we got substantial financial strength to fund growth opportunities and fund exploration following our success in 2024, and we're focused on executing our strategy to deliver above-average returns for our shareholders as a mid-tier precious metals company. DPM is a clear path forward and we're very excited about our future.

And I'd now like to open up the call for any questions.

[Operator]

[Operator Instructions] And our first question today comes from Cosmos Chiu of CIBC.

[Cosmos Chiu, analyst]

Maybe my first question is on Ada Tepe here. I know it's coming to an end in terms of mine life. But Dave, based on exploration and drilling, is there really -- are you really not able to extend the mine life here? Remember I was on site with you when I first started. I was always thinking that there was a potential possibility sometime down the road that you could actually, find more ounces, extend a mine life, but here we are.

[David Rae, executive]

Yes, Cosmos, we continue to explore at Ada Tepe. So we've got $3 million to $4 million in the budget for next year. It's recognizing that while there still may be some potential for additional ounces in the pit, you're not talking quarters or years, you're talking about maybe months. And so what we focused on is what the potential future could be, for these [ indiscernible ].

And it does take a good time - a good amount of time to permit mining projects in Bulgaria. So what we're doing is we're making the decision that even if we found something today, it's going to take probably 2 years or more to permit a new project. So that being the case, we've decided that the right thing to do at the moment is on completion of the Ada Tepe mine, and the treatment of that material will basically move our assets across to Coka Rakita. We continue to explore and have additional plans, particularly around the current asset over the next year or 2 to do that.

I would like to say, if we do find something, it's going to be a long-term opportunity as an organic growth - an organic project. And it's quite likely that the metallurgical process could be different from what we've got, which also then means that it makes sense for us to reuse that facility of Coka Rakita in the interim.

[Cosmos Chiu, analyst]

Maybe this will make Navin's life even harder, but whenever there's a mine closure, there's always accounting complexities. I think Navin kind of touched on it in terms of some of the stripping costs. But is there anything that we should be aware of? Like depreciation can be a bit wonky, as you enter the last years of mine life. Any closure cost, reclamation cost that we should be aware of, which can be even more complex since you're transferring some of the equipment to Serbia, so - or is that really a 2026 issue? Anything that you can share with us?

[Navindra Dyal, executive]

Sure, Cosmos. Yes, it's probably more of a 2026 impact. But to note that we already have an asset retirement obligation for Ada Tepe. I think that's going to change much with our decision to move that equipment over to Coka Rakita. As we've said before, the reason we're doing that and the real benefit to doing that is really from a timing perspective, in terms of execution of the plan to complete Coka Rakita. It's not so much going to save us a whole lot of money. So we have in our account records in our books, an asset retirement obligation, we also have reclamation, letters of credit that we have outstanding as well. So I don't think you should expect to see anything unusual as part of that.

[Cosmos Chiu, analyst]

And then one last question on Ada Tepe. As you mentioned, you're taking some of the equipments and infrastructure again to Coka Rakita. How about the employees? Like are there any plans for the employees at Ada Tepe?

[David Rae, executive]

We take a lot of pride in developing people in the place at, which we operate longer term, but certainly, there's opportunities in the meantime. We will be doing training of people from Serbia at Ada Tepe. We'll also be having our maintenance people or the assumption is we'll have our maintenance people supporting the commissioning activities that we have at Coka Rakita.

So we do have opportunities for employment, but what we are also trying to do as an alternative to that is we're looking at what we can do to continue our support of developing small businesses, with the people at Ada Tepe, and we're encouraging them at the moment to look for opportunities that are not related to the mine and therefore can outlast the mine.

Currently, we've got about half of our employee based in terms of numbers, so around 140 to 150 people employed in small businesses that we've encouraged and supported the development of through the course of the life of mine of the project. And we're going to continue to do things that encourage that going forward. So it's a mix of different things. At some part, there will be transfer of people, particularly to support the early days of the operation. Then we'll have some commissioning and maintenance opportunities, which again complete the construction involved in the commissioning. And then in addition to that, we'll be doing what we can to mitigate the impact by continuing to support small business generation in Ada Tepe.

[Cosmos Chiu, analyst]

And then, Dave, maybe one last question here. Great to see that Coka Rakita is really moving ahead, and you have a target of starting production in 2028. But when I look at your 3-year production guidance last night, nonetheless, based on the discussion on the Ada Tepe as well, there's going to be a dip in 2027 in terms of production. Is that something that keeps you up at night?

And then maybe a second part to that question is, as you mentioned -- Navin mentioned, over $800 million in cash and liquidity -- or in cash, not just liquid, in cash. And you've touched on capital allocation, you've touched on return of capital, you've turned out reinvesting in the business. Could you maybe talk a bit more on external opportunities as well, to the extent anything that you can share with us?

[David Rae, executive]

Okay. So let's start with, does it keep me awake at night? Obviously prefer to be to have a growing profile moving forward. Clearly not the situation with Ada Tepe coming off in 2026, and continuing to develop through that time of Coka Rakita, but being absent a second operation until the second half of 2028. I would say that's priced into our share price. So from a share price point-of-view, that's not really an issue, but obviously, we would like to see an ability to grow the organization.

So what are we doing? We do keep an eye out for M&A opportunities. We're particularly looking for things that we can bring synergies to, because it's a highly competitive environment where people are paying full price and more for other assets. So we do continue to look for that. But if you go back to the Osino transaction, we're disciplined in terms of what we are prepared to do. So it needs to be in and itself interesting as an asset we might consider. So first of all, quality, then we consider risks. And then we sort of bring what we can provide in terms of technical expertise, or perhaps if it's an operating asset. Our operating track record bringing improved production reliability and performance. We're very well positioned I think, to be able to act on these value-generating opportunities. But like I said, I would prefer that we had a growth profile rather than a dip in 2027, but that's not what's keeping me up at night.

[Operator]

And our next question comes from Don DeMarco of National Bank Financial.

[Don DeMarco, analyst]

Congratulations on a strong Q4 and also strong outlook and '25 guidance. So first, looking at the Chelopech production outlook, what drove the favorable delta versus the '23 mine plan, particularly in '27, where I see the outlook at about 20,000 more ounces of gold per year than the mine plan?

[David Rae, executive]

So anytime that we do a review of the outlook, we consider what opportunities do we have to maximize value of the asset. So while we're very disciplined and we don't make changes, let's say, for frivolous reasons, we are constantly looking to see what those opportunities might be in terms of sequence of opportunities. We also bring in, of course, what additional drilling information we have, because we get closer to these assets to production, so we have more information at a tighter drill spacing.

So I would say this is just part of our ongoing review, when we do look at the outlook. So we look 1-year out, 2 years out, 5 years out in terms of the sort of windows that we look within. And then what new information is coming in, what does that tell us in terms of, how we can actually maximize the asset. And I would say one of the reasons that we've been successful with our all-in sustaining costs over time, is we continue to look for these opportunities to maximize the asset, and that's why you see that type of variability.

[Don DeMarco, analyst]

I'm encouraged to see that. And what is the pecking order prospects at Chelopech? I mean, the financials, the MD&A mentioned Sharlo Dere target 154, when do you expect the potential resource for these and/or an updated mine plan at Chelopech?

[David Rae, executive]

I did say that we'd be doing work through 2024 and part of 2025 in terms of Sharlo Dere, which is one of the areas where historically there's not been a lot of drilling, we've been focusing our attention. So that's certainly one, and that's effectively in the gap between the center of Chelopech and up towards the Northeast. So that's something that you'll see additional information coming out during the course of this year.

Other things that Chelopech can be smaller, but higher grade. So if you remember back to 147 and 154 -- well, 154 specifically, this was a smaller, but high-grade asset quite close to existing infrastructure that we identified back in about 2015 and subsequently, I think we ended with about 4 million tonnes coming out of that area and high-grade value of that. So at this point as well, we're also working on something called 700. We've got 147, 149. So the -- there's tonnes and there's quality in terms of this conversation and I would say Sharlo Dere is more likely to be tonnes, and quality will be things like area 707 and so on, 149 and 147.

Then I also mentioned earlier on that one of the things that we're doing to try and increase our real estate we can work within is adding Chelopech North. So this was previously Sveta Petka. And we're anticipating during the course of this year, to get the concessions for that to be able to do more work there and consider bringing that into our mine plans. And then we've just gone to a geological discovery at [Technical Difficulty]. So what this is doing is it's opening up the opportunity rather than just being constrained to the concession.

Our primary goal at Chelopech is to get to beyond 10 years of mine life as an imperative. We believe that the opportunity is there and that's why we ramped up the amount that we have in 2025.

[Don DeMarco, analyst]

And we'll stay tuned as drilling progresses at Chelopech over the year. So a question for Navin. So Navin in Q4, it appears that there was another $60 million spent in build up working capital related to Tsumeb. What was the nature of these expenditures? And did the post-quarter $170 million cash inflow include a repayment of this?

[Navindra Dyal, executive]

Yes, Don. So the $60 million was additional purchases of concentrate material during that period of time as we were still within that temporary tolling agreement. And the $171 million that we have there that we collected in the early part of January, $162 million of that is essentially clearing out of the majority of that working capital that we committed to those purchases of that raw material. And it included a small portion of [ indiscernible ] that we sold back to ISM. There's a relatively small amount of accounts receivable still left to collect that we'll collect in the normal course, over the next 6 months as that material is processed.

[Don DeMarco, analyst]

And then just as a final question, David, back to you. M&A -- I mean, you've got a pipeline here with Coka Rakita, you've got Loma Larga, which seems to be advancing. Is M&A part of your playbook? And how does it rank in terms of priority and where you might be looking at this point?

[David Rae, executive]

Don, I think the priority depends on we keep a look for opportunities that make sense, where we can bring synergy as an organization, as I already mentioned. And that will stack up against the other opportunities that we have internally. So we don't just see that we have Chelopech expansion, Coka Rakita, and Loma Larga as our opportunities. We think there's significant potential still in Serbia.

So clearly, if there's more organic opportunity for us, where we're not paying something upfront in order to then build a project and realize value that would take priority. But I would say that we look for exciting opportunities that we can bring in quality first, can we manage the risk, what difference does it make to the organization and then where would that fit in terms of our priorities. But at the moment we're [ indiscernible ] within our project portfolio as well.

[Don DeMarco, analyst]

So I think I heard you say that, there's good organic opportunities within Serbia, maybe Bulgaria and so those might take priority over singular outright new M&A at this point.

[David Rae, executive]

It's a question of looking for what can actually change the dynamic of what's the priority. We'd love to have something that [ indiscernible ], but effectively, we focus on creating a platform for robust growth. And that could be a mix of organic opportunities plus acquisitions. And the intent is overall that we find something that's not for sure accretive with above-average returns for investors.

[Don DeMarco, analyst]

And congratulations on the strong finish to the year and good luck in '25.

[David Rae, executive]

Thanks, Don.

[Operator]

And our next question comes from Jeremy Hoy of Canaccord Genuity.

[Jeremy Hoy, analyst]

Great quarter. I was hoping we could talk a bit about Loma Larga. We've been focusing on Coka Rakita, the growth potential at Chelopech and M&A. But you sort of have an opportunity in Loma Larga, it's been on the back burner. I think you're expressing a bit more confidence now moving ahead with this feasibility study. If all goes well with permitting and you get the green light to build that, how are you thinking about that asset strategically?

[David Rae, executive]

Yes. Thanks for recognizing that this is something that we've been basically playing fairly low key while continuing to make good progress in terms of advancing, some of the things we need to do to get to a construction decision.

So how does this fit? Should we get a green light? So we have 3 out of the 4 items that we require at the moment to complete what was required by the constitutional court. And we actually came very close to completing these before the end of the year. So we anticipate that ongoing work with Escaleras, which is the community in which we have to do the prior informed consultation that will happen and probably closing out at some time shortly after the second stage of the presidential election. And at that point, we'll see what it is then we need to do.

So let me just differentiate something just for clarity in terms of what we're doing in terms of the additional capital, and operating cost assessment we're doing as part of the feasibility. Why we're doing this first piece of work now, is we realized that we haven't had an update since 2020 in terms of what would be the capital cost, what would be operating cost, and what does that mean in terms of the valuation of the project.

Historically, what we've done is we've said when we get the clearance with the environmental commissions, we'll then go back in, do the drilling for geotech, hydrogeology, condemnation as well as doing a small amount of resource drilling. We've not been able to do that to this point, and basically came to the conclusion that we'd like to do what we can to understand the value of this project and it be public.

So the intent of this first piece of work, which should be completed in the second quarter, is really to update the capital costs and the operating costs. And from that then with resource that we [ indiscernible ] 2023, then the value of this asset can be understood. There's still a further piece of work then done -- to be done. Once we get the environmental clearance, we'll still have to go in and do the drilling, which will be, as I said, geotech, hydrogeology, condemnation.

In order to confirm that all of the assumptions, particularly in the location of the metallurgical facility, and the tailings facility are correct. And then we'll finalize the feasibility study, which would then be the thing taking us to a decision on construction. So 2 different studies going on. And when we talk about the work for Q2, it's really more intent of surfacing and understanding value, and then there'll be a further piece of work after that.

[Jeremy Hoy, analyst]

Understood. That's great color. And then in terms of, I guess, sort of the strategic options, do you -- I assume you wouldn't want to build that at the same time as Coka Rakita, but maybe you could do if there's capacity on all fronts, does it slot in right after? Would you consider partners divesting it? Could you talk a bit about that?

[David Rae, executive]

So we're looking to realize value for the organization and that could be any or all of what we've just discussed. So there are companies in the region that have a tremendous track record, which we could look to participate in what we're doing. Obviously, a decision to move ahead could also be a decision that it makes more sense with somebody else. So if we find more within Serbia that could be something we decide. But ultimately, it's all down to how is it that we develop an exciting organic growth portfolio, which makes sense for us as DPM. At this point, Loma Larga, we believe has got lots of upside potential. It's an attractive project given its large resource and upside on that resource and it's got a relatively low all-in sustaining cost.

So I would say, to your point, we would be open to different options in terms of whether we build it, others build it, and how we go about sort of taking that transition. But it really depends on what's happening in the rest of our organic growth portfolio and any potential M&A that we do in the meantime.

[Jeremy Hoy, analyst]

Yes, understood. A lot of factors to consider. That's pretty clear. One quick final one from me. We've sort of been poking at this M&A question quite a bit, but a specific one from a client, and in the past for opportunities and filters for opportunities, you've been pretty clear about the regions you like and size, which is, I believe around 150,000 ounces or above. With Coka Rakita already coming in and then Loma Larga, is there any opportunity to look at potential earlier stage things, or even smaller producers below that 150 mark?

[David Rae, executive]

Yes, we're definitely open to - all the conversations so far has been around the short-term. And we're definitely open to longer-term opportunities that, may be a good fit with us as an organization as we look beyond, say, 2030. At this point, the opportunity is up to 2030. We're already stacking up a good list of things.

And by the way, I didn't answer your one question, which was, could we build Coka Rakita and Loma Larga at the same time? The answer is yes, financially that would not stress the organization. We could still do that.

So I would say that in terms of what we're going to do to going forward, we're really intense on the overall health of the company and building an organization, which is generating great returns, mid-tier producer, bottom quartile of cost, generating free cash flow and returning value to shareholders.

And how we get there will be something that will be dynamic, with the extension and the performance of our current assets, what comes about in Serbia, which is something beyond just Coka Rakita, as well as what opportunities transpire with Loma Larga or external acquisitions.

[Jeremy Hoy, analyst]

Yes, definitely a lot of opportunity on that property there in Serbia.

[Operator]

I'm showing no further questions at this time. I'd like to turn it back to Jennifer Cameron for closing remarks.

[Jennifer Cameron, executive]

Well, thank you all for joining us. We hope you enjoy the long weekend for those here in Ontario. Should you have any questions, please feel free to reach out, we'll be happy to connect. Thank you and take care.

[Operator]

This concludes today's conference call. Thank you for participating and you may now disconnect.