Dynacor Reports Second Quarter 2017 Results
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2017
Dynacor Gold Mines Inc. (Dynacor)
Symbol: DNG
Toronto Stock Exchange (TSX)
OTC: DNGDF
Shares outstanding: 38,764,911
PR-2017-08-11
DYNACOR REPORTS SECOND QUARTER 2017 RESULTS
Montreal, August 14, 2017 – Dynacor Gold Mines Inc. (TSX : DNG ) (Dynacor or the Corporation ) a
Corporation with gold and silver ore processing operations and exploration projects in Peru, has released its
unaudited condensed consolidated financial statements and the management's discussion and analysis (“MD&A”)
for the three-month and six-months periods ended June 30, 2017.
These documents have been filed electronically with SEDAR at www.sedar.com and will be available on the
Corporation's website www.dynacor.com.
(All figures in this press release are in millions of US$ unless stated otherwise. Earnings per share and cash-flow per share are in US$. All
variance %, except for net income, are calculated from rounded figures. Some additions might be incorrect due to rounding).
In a period where heavy rains which impacted on the volume of ore provided to its Veta Dorada mill in Chala,
Peru (Refer to June 19th, 2017 press release), Dynacor recorded its 25th consecutive profitable quarter for the
three-month period ended June 30, 2017 (“Q2,-2017”) as it earned a net income of $0.3 M or $0 .01 per share,
compared to $1.1 M or $0.03 per share for the three-month period ended June 30, 2016 (“Q2-2016”).
Highlights for the second quarter of 2017
(Variance %, are calculated based on rounded figures)
Gold production of 18,185 ounces in Q2 -2017 (35,310 ounces for the six -month period ended June
30, 2017), compared to 17,525 ounces for Q2 -2016 (33,332 ounces for the six -month period ended
June 30, 2016), an increase of 3.8% between quarters (increase of 5.9% over the six -month period
ended June 30, 2016);
Sales of $21.8 M in Q2-2017 ($46.5 M for the six-month period ended June 30, 2017 ), compared to
$21.5 M in Q2-2016 ($41.9 M for the six -month period ended June 30, 201 6), an increase of 1.4%
between quarters (increase of 11.0% over the six-month period ended June 30, 2016);
Gross operating margin of $ 2.7 M (12.4%) in Q2-2017 ($5.8 M and 12.5% for the six -month period
ended June 30, 2017), compared to $3.1 M (14.4%) in Q2-2016 ($6.1 M and 14.6% for the six-month
period ended June 30, 2016), a decrease in dollars of 12.9% from Q2-2016;
EBITDA (1) of $2.0 M in Q2-2017 ($4.6 M for the six-month period ended June 30, 2017), compared to
$2.3 M in Q2-2016 ($4.6 M for the six-month period ended June 30, 2016), a decrease of 13% between
quarters;
Cash flow from operating activities before change in working capital items of $1.4 M and $0.04 per
share(2) in Q2-2017 ($3.2 M and $0.08 per share(2) for the six -month period ended June 30, 2017),
compared to $1.6 M and $0.04 per share (2) in Q2-2016 ($3.0 M and $0.08 per share (2) for the six -
month period ended June 30, 2016);
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Cash on hand of $9.5 M at June 30, 2017, compared to $6.2 M as at December 31, 2016.
Recent event
Subsequent to quarter end, the Corporation executed a partial prepayment of $1.0 M on its outstanding
debt, reducing the total principal balance owed to $5.3 M.
(1) EBITDA: “Earnings before interest, taxes and depreciation” is a non -IFRS financial performance measure with no standard definition
under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. The
Corporation uses this non -IFRS measure as an indicator of the cash generated by the operations and allows investor to compare the
profitability of the Corporation with others by canceling effects of different assets bases, effects due to different tax structures as well as
the effects of different capital structures.
(2) Cash-flow per share is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that
this measure could not be comparable with a similar measure of another Corporation. The Corporation uses this non-IFRS measure which
can also be helpful to investors as it provides a result which can be compared with the Corporation market share price.
Overview
The Veta Dorada Plant was officially inaugurated on October 3, 2016. This plant is the stepping stone for the
future growth of our processing activities in Peru.
The first half of 2017 was highlighted by extremely heavy rainfalls, occurring mostly in March and up to mid April
and which caused extensive flooding and loss of lives in the northern regions of Peru. El Nino like conditions that
deployed near Peru’s coast affected the overall miners’ production and transport conditions entering the second
quarter of 2017. As well, the current ore purchase market conditions are very competitive, as available ore supply
is down due to the ongoing volatile gold price and unfavorable climate conditions.
Despite these challenges, the gross operating margin obtained at the Veta Dorada Plant in Q2 -2017 was 12.4%
consistent with Q1-2017 (12.5%), and better compared to the 9.5% margin during its initial quarter of operations
in Q4-2016.
During Q2-2017, monthly gold production has progressively increased and reached a yearly high of 6,895 oz in
June. The lack of accumulated ore inventory at March 31, 2017 and the extreme weather conditions, affected the
Corporation’s overall gold production during Q2-2017. In that period the Corporation produced 18,185 ounces of
gold in Q2 -2017, as compared to 17,525 o unces of gold in Q2 -2016, an increase of 3.8%. Nevertheless,
production increased by 6.0% from the 17,125 ounces produced in the previous quarter (Q1-2017) (refer to July
21, 2017 press release).
Overall for the first six-months of 2017, the Corporation produced 35,310 ounces of gold in the six -month period
ended June 30, 2017, as compared to 33,332 ounces of gold in the six months ended June 30, 2016, a 5.9%
increase.
Results from operations:
Total sales amounted to $21.8 M (cumulative of $46.5 M for the six-month period ended June 30, 2017), compared
to $21.5 M for Q2-2016 ($41.9 M for the six-month period ended June 30, 2016), an increase of 1.4% between
quarters (increase of 11.0% over the six-month period ended June 30, 2016).
The gross oper ating margin amounted to $2.7 M in Q2-2017 (cumulative of $5.8 M for the six -month period)
compared to $ 3.1 M and $ 6.1 M for the same periods in 2016. In 2017 gross margin was reduced by a sales
discount which reduced sales, in lieu of selling expenses which were all supported by our customer in 2017. Even
though this had no effect on the Corporation’s net income, the gross margin was reduced by approximately $0.2
M and $0.4 M in the three-month and six-month period of 2017. As well, the gross operating margin is affected by
higher operation expenses due to the larger scale operation at the Veta Dorada plant. Those expenses are to be
reduced with increase production.
Net income was $0.3 M for the three-month period ended June 30, 2017 ($1.2 M for the six-month period ended
June 30, 2017), compared to $1.1 M for the three-month period ended June 30, 2016 ($1.8 M for the six-month
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period ended June 30, 2016. The quarter decrease in net income compared to 2016 is explained by the $ 0.3 M
decrease in the gross operating margin as well as increases in transition expenses of $0.2 M, in financial expenses
of $0.2 M, in other expenses of $0,2 M, in tax expenses of $0.1 M and positively by a decrease of $0.3 M in selling
expenses.
Jean Martineau, Dynacor’s CEO and President commented, “Despite the worst rainy season in the last 20 years
in Peru, we have achieved solid operational re sults. We have managed to increase not only our gold product ion
but also our ore purchases and ore processing volumes compared to the first quarter of 2017 and 2016 six-month
period. This clearly shows the impact of our new plant and sustained efforts on the ground . Now we have to
overcome our challenges, fill-up the plant capacity as soon as possible and fine tune our production cost to
achieve better cost per unit results.”
Financial statement highlights
Three-month periods
ended June 30,
Six-month periods
ended June 30,
(in $'000) 2017 2016 2017 2016
Sales 21,754 21,521 46,482 41,949
Cost of sales 19,056 18,401 40,684 35,846
Gross operating margin 2,698 3,121 5,798 6,103
General and administrative expenses 1,055 1,116 2,129 1,998
Operating income 1,444 1,726 3,280 3,483
Net income and comprehensive Income 284 1,066 1,221 1,767
EBITDA(1) 2,045 2,268 4,578 4,551
Net cash flow from operating activities before
change in working capital items 1,404 1,551
3,161 3,021
Cash flow from operating activities 1,425 441 4,492 1,027
Earnings per share
Basic $0.01 $0.03 $0.03 $0.05
Diluted $0.01 $0.03 $0.03 $0.05
Reconciliation of net comprehensive income
to EBITDA (1)
Net comprehensive income 284 1,066 1,221 1,767
Income taxes 733 594 1,387 1,287
Financial expenses 291 87 585 323
Depreciation 643 571 1,291 1,203
Write-off of exploration and evaluation assets 94 - 94 -
Gain on revaluation of financial instrument - (50) - (29)
EBITDA (1) 2,045 2,268 4,578 4,551
Reconciliation of net cash flow from
operating activities before change in
working capital items per share (2)
Net cash flow from operating activities before
change in working capital items (in $'000)
1,404
1,551
3,161
3,021
Basic weighted average number of common
shares outstanding (‘000)
38,754
37,584
38,730
37,970
Net cash flow from operating activities
before change in working capital items
per share (2)
$0.04
$0.04
$0.08
$0.08
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Cash flow from operating, investing and financing activities and working capital
Operating activities
During Q2-2017, the cash flow from operations, before changes in working capital items, amounted to $1.4 M
($3.2 M for the six-month period ended June 30, 2017), compared to $1.6 M in Q2-2016 ($3.0 M for the six-month
period ended June 30, 2016). This reduction is primarily explained by the decrease in net income bet ween
quarters, mostly offset by the increase in inte rest expense, increase in deferred tax expense and the write -off of
exploration and evaluation assets for $0.1 M during the quarter.
During Q2 -2017, total cash from operating activities amounted to $1.4 M compared to $0.4 M in Q2 -2016.
Changes in working capital items increased by $0.02 M (decrease of $1.1 M in Q2-2016).
For the six -month period ended June 30, 2017, total cash generated from operating activities amounted to
$4.5 M, compared to $1.0 M in 2016. Changes in working capital items amounted to $1.3 M (decrease of $2.0 M
in the comparative period) relating primarily to a decrease in inventory ($2.2 M), which was offset by a decrease
in trade and other receivables ($0,2 M) and an increase in trade and other payables ($0.8 M).
Investing activities
During Q2-2017, the Corporation invested $0.2 M ($0.5 M for the six-month period ended June 30, 2017) for the
acquisition of property, plant and equipment ($3.0 M and $ 6.4 M for the same periods in 2016) . Additions to
exploration and evaluation assets during Q2 -2017, amounted to $0.2 M ($0.3 M for the six-month period ended
June 30, 2017) compared to $0.2 M and $0.7 M for the same periods in 2016.
The decrease from the comparative periods was expected a s the Veta Dorada Plant is no longer in construction
and the next phase of the Tumipampa exploration has not yet commenced.
As a non cash transaction During the three-month period ending June 30, 2017, considering the ongoing inability
to perform any exploration work in this agricultural region, the Company did not renew the Casaden claims and
consequently the amount of $0.1 M capitalized as mining right cost was written -off into the statement of
comprehensive income as at June 30, 2017.
Financing activities
In the first six-months of 2017, financing activities relate primarily to the payment of interest and transaction costs
for the term loan. Interest expenses paid during the period amounted to $0.2 M ($0.1 M in 2016) and ($0.3 M for
the six-month period ended June 30, 2017 ($0.2 M in 2016)).
Working capital
As at June 30, 2017, the Corporation’s working capital amounted to $18.0 M, including $9.5 M in cash ($15.8 M,
including $6.2 M in cash at December 31, 2016).
Outlook 2017
Ore processing
The objective for the remainder of 2017 is to control and reduce production costs and ramp up production at the
Veta Dorada Plant to its current 300 -tpd capacity. Approval for capacity increase to 360 tpd has been obtained,
however until full consistent production volume at 300 tpd is achieved and mineralized material inventory
accumulates, the capital investment to increase capacity will be delayed on a month to month basis.
The production objective for 2017 was set between 88,000 and 92,000 ounces of gold. However with the
described issues affecting ore supply and with roads still not fully open for transport, we have adjusted our target
down to between 78,000 and 80,000 ounces. As at June 30, 2017, the Corporation production amounts to 35,310
ounces of gold.
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ABOUT DYNACOR GOLD MINES INC.
Dynacor Gold Mines Inc. is a gold production corporation headquartered in Montreal, Canada. The Corporation is engaged in pro duction
through its government approved ore processing operations. At present, Dynacor produces and explores in Peru where its management team
has decades of experience and expertise. In 2016, Dynacor produced 73,476 ounces of gold, a 9% increase as compared with 2015 (67,603
ounces in 2015). For 2017, the corporation revised its production target to between 78,000 and 80,000 ounces of gold. Dynacor trades on
the Toronto Stock Exchange (DNG) and the OTC in the United States under the symbol (DNGDF).
FORWARD LOOKING INFORMATION
Certain statements in the foregoing may constitute forward -looking statements, which involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of Dynacor, or industry results, to be materially different from
any future result, performance or achievement expressed or implied by such forward -looking statements. These statements reflect
management’s current expectations regarding future events and operating performance as of the date of this news release.
Dynacor Gold Mines Inc. (TSX: DNG)
Website: http://www.dynacor.com
Twitter: http://twitter.com/DynacorGold
Facebook: facebook.com/DynacorGoldMines
For more information, please contact: Dynacor Gold Mines Inc.
Jean Martineau
President and CEO
#1105, 625 René-Lévesque Blvd.
Dynacor Gold Mines Inc.
Montreal, Quebec H3B 1R2
T: 514-393-9000 ext. 228
Dale Nejmeldeen
Director, Investor Relations
Dynacor Gold Mines Inc.
T: 604.492.0099 | M: 604.562.1348