During 2010, Dundee Precious Metals Inc. achieved success on several fronts.  The purchase of the Tsumeb Smelter in Namibia in March not only secures the processing of Chelopech concentrate for the long term, it also provides DPM with the scope to explore other project opportunities in the future.  Great progress was also made operationally at Chelopech and Deno, during the year, and both are operating above expectations with more improvements still to come.

In addition to the accomplishments at our sites, during 2010 we also completed the spinout of the majority of our Serbian assets into a newly created public company, Avala Resources, of which DPM owns approximately 50%.  Avala has since completed a successful underwriting and the stock has performed well.  We also finalized an option agreement with Queensland Minerals, to be renamed Dunav, to acquire the balance of our Serbian assets.  Once the option is exercised, DPM will own about 47% of Dunav.

As the owner of 18.5 million Sabina shares, we have also greatly benefitted from the successes of their exploration efforts at the Back River Project in Nunavut, Canada.  The ten million special shares and five million special warrants we also hold provide us with additional upside potential as they become free trading once certain milestones are achieved (50% on the commencement of a feasibility study and 50% on a production decision).  Sabina has also made several new discoveries at Back River and recently issued a Mineral Resource update which has doubled the Indicated Mineral Resources of the project.

Chelopech

The Chelopech expansion project that has long been our hope is finally coming to fruition.  The paste backfill plant was commissioned in August of 2010 and the new Semi Autogenous Grinding (SAG) mill and mill expansion to two million tonnes per year was completed at the end of January 2011.  We expect to process 1.3 million tonnes of ore in 2011 and produce over 90,000 ounces of gold and 32 million pounds of copper.  In 2012, at its fully expanded production rate, Chelopech is expected to produce 140,000 ounces of gold and close to 50 million pounds of copper annually at a unit cash cost, excluding royalties, of approximately US$30/tonne of ore, compared to US$51/tonne in 2010.

At current prices (US$4.40 per pound of copper), the copper will more than cover all operating and smelting costs and the gold will have a negative cost.

As of December 31, 2010, there remains approximately US$69 million to be spent to complete the project. In addition, a new reserve estimate has been completed which confirms at least ten years of reserves at the expanded production rate.  The 2011 exploration program will test for new Chelopech style orebodies to the southwest of the existing orebodies.  As a result, Chelopech appears poised to become a project that will contribute strong cash flows for many years to come.  Management of the Chelopech mine has recently been restructured and we are proud to announce that the senior management team, led by Nikolay Hristov, is now composed almost entirely of Bulgarians who have done and continue to do an excellent job for the company.

Krumovgrad

At Krumovgrad, the project has been completely redesigned resulting in a simpler flowsheet, the elimination of cyanide and a significantly smaller footprint.  Testwork indicates that gold recoveries will be approximately 85%, down from about 93%; however, the project will become virtually benign from an environmental perspective.  Without the use of cyanide, the permitting process becomes much simpler as an Environmental Impact Assessment ("EIA") is now the only major permit required for the project.  Our revised EIA, which was filed in October 2010, was given a positive grade by the Ministry of Environment and Waters of Bulgaria, and we have entered into the public consultation phase of the EIA process.  The culmination of the public consultation phase will be the public hearings, which have not yet been set as of the time of writing.  A new feasibility study is expected to be completed shortly after the end of the first quarter of 2011.  The Krumovgrad project is estimated to be an 85,000 - 110,000 ounce a year producer with cash costs below the 50th percentile of gold mines worldwide.

Armenia

Deno Gold had a banner year in 2010.  In addition to increasing the annual production rate from around 400,000 to 600,000 tonnes, the mine further reduced its operating costs to $66.33/tonne, excluding royalties.  The mine is now profitable.  We were also successful in completing the land acquisitions which allow us to continue drilling on the open pit targets.  This project has come a long way in a short time.  There are now four drills drilling off the open pit potential, the cost of which is being funded out of the cash flow from the mine.  While things are going well, there is still much work to do in Armenia.  In addition to completing the drilling of the open pit, we need to develop a better understanding of the opportunities for the proper disposal of tailings and mine wastes, for which a scoping study will be completed in 2011. 

Tsumeb Smelter

The Tsumeb smelter in Namibia, which was purchased in March, is designed to deal with complex concentrate like that of Chelopech.  Since acquiring the smelter, the commissioning of the expansion from 110,000 to 240,000 tonnes of concentrate per year has been underway.  We are currently operating at around the 170,000 tonnes per year rate, which is expected to increase to the 200,000 tonnes per year rate after the next re-bricking of the ausmelt furnace in April 2011, and will reach its design capacity in mid 2012 once a second oxygen plant has been installed.  A series of environmental initiatives are also being completed, which will dramatically improve the environmental performance of the smelter.

We recently concluded a debt offering to raise gross proceeds of US$68 million which, together with continued strong gold prices, operating cash flow and cash on hand, is expected to be more than sufficient to complete all of our capital programs.

The restructuring of the Company that was begun at the onset of the financial crisis continues.  As a result, Richard Howes has recently been promoted to Executive Vice President and Chief Operating Officer and Adrian Goldstone to Executive Vice President, Sustainable Business Development. 

We are very excited about the direction the Company is taking and the opportunities it provides to grow our assets and increase overall profitability for all our stakeholders.

While the market has begun to reward us for our progress, we still have a long way to go to reach our stated goal of annual gold production of 400,000 ounces by 2015.  We remain focused on the execution of our plans and look forward to achieving the next series of milestones. 

We are extremely proud of the work that has been done by the DPM team and would like to thank them for their many achievements this year.  Thank you also to our shareholders who continue to show us great support.