jay taylor comments on dng comments from jay taylor's weekly:
Dynacor continues to under promise and over deliver, at least so far in 2011. The company’s rate of gold
production from its milling operations is now approximately 3,400 to 3,700 ounces. Given the fact that
management has an excellent track record in delivering what it promises, the following guidance for this year carries considerable weight:
The company is expecting to almost double its 2010 earnings.
It expects to increase capacity from current 180 tpd by approximately 12% this year and is quite
comfortable with forecasting 45,000 oz.
They are planning for $250/oz cash margin in the future as they expect the new plant to increase capacity to about 70,000 oz/yr.
With the stock down more than 60% from its early 2011 range, there is no interest in diluting shareholder
interest by issuing more shares at this time, especially given positive cash flows from operations.
Silver recoveries are starting to show a positive impact on the company’s bottom line.
I believe the market for Dynacor’s shares should recover in 2011 as higher earnings are reported. Management is very confident about where it is taking this company and it is very excited about the skarn deposit and the new development of the gold veins underneath the skarn target.
The company is beginning to gain some coverage from analysts in New York City and I am expecting to
introduce this company to some institutional and high net worth investors in Switzerland in the fall. I would
expect a new level of sophisticated investor to come into this stock in the not too distant future, especially if the skarn deposit begins to look like it has the potential to evolve into a world-class deposit.
Why have these shares been so weak even though there is nothing but good news to report? First of all, notice that all the gold shares have trended down in 2011, even as the price of gold has risen significantly. Secondly, note that uncertainty in the Peruvian elections has undoubtedly hurt the stock, and perhaps some investors were looking for instant gratification with Skarn drill results. Those of us who have been around this industry for a number of years know major gold deposits are not outlined within a few weeks or even months.
There is nothing to decrease my optimism that Dynacor has a good chance of outlining a major gold-copper deposit on this bulk mineable target. Nothing has changed except that the news is consistently better than promised by management. We can’t demand the same on the exploration front because Mother Nature calls the shots there.
But on the things that management can control, Jean Martineau—president and chief executive officer—and his team have done a masterful job.
Regarding the election victory of Ollanta Humala, management says they are very comfortable with it. Here is what one member of the Dynacor team told me:
“Many people believe he is not about to tamper with Peru’s number one driving force, mining. He will more fairly share with the people; that is a good thing for Peru and for DNG as the local communities’ support of foreign mining projects will build, as they are receiving a larger share of the profits. Mr. Humala has actually moderated significantly just as the other leftist leaders in the region. When Mr. Alejandro Toledo joined forces with Humala two weeks ago, many people thought this is a positive sign, as Mr. Toledo’s party could help manage the economy. Mr. Lula De Silva, former successful President of Brazil, has been assisting the Humala Administration. The company thinks Peru could be headed in the same direction as Mr. De Silva and his Brazilian accomplishments.”