About Us - Message to Stock Owners

From the Chairman

In spite of the Company’s significant accomplishments, 2006 was a challenging year! This was occasioned by the ongoing delays in the granting of approvals for our two projects by the Minister of Environment and Waters of Bulgaria. The projects meet or exceed all environmental criteria for both Bulgaria and the European Union. We remain optimistic that the projects will receive the necessary approvals.

Last year I referred to the dedication and extreme efforts of all our employees. Their efforts continue to be commendable under such difficult conditions. The Company is fortunate to have such enthusiastic and competent women and men looking after your interest.

During the year we enlarged our portfolio of mineral properties in several geographic regions and maintained our strong financial condition.

We began 2006 with a share price of $10.05 and while it advanced to $14.55 in May it retreated to end the year at $11.59, which we believe is due to the delays in obtaining approvals.

In 2007, we will continue with our efforts to get the Bulgarian projects moving forward. In so doing, we will apply and maintain the highest environmental and ethical standards in our quest to be a leader in the gold mining business.

William G. Wilson
Chairman
March 23, 2007

From the President and Chief Executive Officer

2006 was a year of achievements and challenges for Dundee Precious Metals. The Company achieved significant financial results from both its mining operations and its investment activities. Operations at the Chelopech mine surpassed all of our predevelopment expectations. We purchased 80% of the Kapan Mine in Armenia and our exploration in Serbia and at Back River went very well. However, it is taking much longer than anticipated to obtain the necessary permits in Bulgaria to develop our projects there.

In late 2005, we filed our Environmental Impact Assessments (“EIA”) for both our Chelopech and Krumovgrad projects which were prepared to meet or exceed the Bulgarian environmental standards and those of the European Union (“EU”). At Chelopech, the EIA was approved twice by the Supreme Expert Environmental Council and is currently awaiting the signature of the Minister of Environment and Waters. It has been a year since the legal time frame for a decision has elapsed and the Minister has still not signed. We have informed the Bulgarian government that we are open to negotiation and we have commenced actively working with the Office of the Prime Minister to achieve a solution to this problem. In the meantime, the mine is profitable due to high metal prices; however, markets for our concentrate are uncertain beyond 2007.

At Krumovgrad, the story is similar. A decision on the EIA was due in November 2005 and, to date, no progress has been made. The Minister of Environment and Waters has recently included our Krumovgrad project in a proposal for Natura 2000, an EU initiative whereby each country designates qualified nature zones. We are encouraged by our recent dialogue with the Office of the Prime Minister and are optimistic that this issue will also be resolved.

These types of problems are pervasive throughout the global mining industry. The industry is plagued with delays that cannot be controlled by the investing companies. Mining investors have had to learn to have patience beyond original expectations and we ask our shareholders to be patient as well.

In Serbia, we are actively drilling our exploration properties in the Bor region. This region has been a huge producer of copper and gold over the last hundred years and there has been little exploration work in the region for a considerable time. We have identified large targets and have commenced a methodical drilling program. We are very excited about the potential in Serbia and expect to release preliminary results by year end.

In Armenia, we are preparing to start a drilling campaign which will outline an open pit that would be designed to augment the current underground mine at Kapan and feed the mill to its 1.2 million tonne per year capacity. In addition, there is considerable exploration potential that will be tested with a view to determining the scale of the deposit.

At Back River, we will be drilling off promising targets identified during last year’s program. The purpose of the program will be to add resources to the project and we are looking forward to the results.

In addition, during 2006 we purchased a 47% interest in Goldbelt Resources, a junior gold mining company which is developing a gold project in Burkina Faso. We are excited by the project and the opportunities within Burkina Faso. We view this as our initial foray into Africa and see many opportunities in the region.

We are proud of the company that we have built. We are proud of the quality of our group of dedicated professionals and are confident that our problems will be overcome and the Company will become a significant low cost gold producer. We recognize that we are operating in a complicated part of the world from a political perspective. We also know that these regions are actively seeking foreign investment and, as with Bulgaria joining the EU, they have adopted many new laws that will help foster a better business climate. We strongly believe that we will find a solution that produces a positive result for the Company, its shareholders and the jurisdictions in which we operate.

Jonathan Goodman
President and Chief Executive Officer
March 23, 2007