Dynacor Group Inc. (TSX: DNG) (Dynacor or the Corporation) released its unaudited condensed interim consolidated financial statements and the management's discussion and analysis (MD&A) for the first quarter ended March 31, 2023.
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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 Ms of US$ unless stated otherwise. All amounts per share are in US$. All variance % are calculated from rounded figures. Some additions might be incorrect due to rounding).
Q1-2023 OVERVIEW AND HIGHLIGHTS
OVERVIEW
Thanks to its high level of ore inventory at the opening of the year and the increasing volume of ore supplied, the mill has been able to process a record high of more than 41,500 tonnes throughout the quarter with an average of 462 tpd.
Dynacor completed the three-month period ended March 31, 2023 (“Q1-2023”) with quarterly sales of $56.7 million and a net income of $4.5 million (US$0.11 per share) compared to sales of $50.1 million and a net income of $5.1 million (US$0.13 per share) for the first quarter of 2022 (“Q1-2022”).
From mid-January 2023, due to political unrest mostly in southern Peru, the Corporation had decided to postpone exports for safety measures. Those exports were completed in February (Refer to February 21, 2023, Press release-DYNACOR REPORTS SALES FOR JANUARY 2023 AND THE RELEASE OF ITS DECEMBER 2019 RETAINED GOLD BARS). This explains the monthly sales variances in Q1-2023.
Q1-2023 beneficiated as well from the sale of the latest portion of the shipment that had been retained in December 2019 for control procedures and released in February 2023 (sale of 1,029 ounces for $1.5 million).
HIGHLIGHTS
Operational
- Higher ore volume supplied. Total ore volume supplied exceeded 36,000 tonnes during the quarter, a 5,000 tonnes increase compared to Q1-2022;
- Highest volume processed. Thanks to the Q4-2022 increase in plant processing capacity, to the level of ore inventory at the beginning of the period and to the volume of ore supplied, the Veta Dorada plant processed a record volume of 41,566 tonnes of ore (462 tpd average) compared to 36,696 tonnes in Q1-2022 (408 tpd), a 13.3% increase;
- Second highest gold production. In Q1-2023, gold equivalent production amounted to 29,299 AuEq ounces compared to 27,691 AuEq ounces in Q1-2022 a 5.8% increase.
Financial
- Solid cash position. Cash on hand of $30.7 million at the end of Q1-2023 compared to $25.6 million at year end 2022;
- Increase of 13.2% in sales. Sales amounted to $56.7 million compared to $50.1 million in Q1-2022;
- Increased gross operating margin. Gross operating margin amounted to $7.8 million (13.8% of sales), compared to $7.5 million (15.0% of sales) in Q1-2022;
- Stable operating income of $6.1 million in both Q1-2023 and Q1-2022;
- Cash gross operating margin of $283 per AuEq ounce sold (1) compared to $306 in Q1-2022;
- Increased EBITDA. EBITDA (2) of $6.9 million, compared to $6.8 million in Q1-2022;
- Strong cash-flow. Cash-flows from operating activities before change in working capital items of $5.0 million ($0.13 per share) (3) compared to $5.2 million ($0.13 per share) in Q1-2022;
- Net income of $4.5 million in Q1-2023 ($0.11 or CA$0.15 per share), a quarter-to-quarter increase of $1.0 million, and a decrease of $0.6 million compared to the $5.1 million net income ($0.13 or CA$0.16 per share) in Q1-2022.
Return to Shareholders
- Share buy-back. 29,080 common shares repurchased for $0.1 million (CA$0.1 million) in Q1-2023, compared to 285,836 common shares for $0.7 million (CA$0.9 million) in Q1-2022;
- Increased dividends. A 20% monthly dividend increase is paid since January 2023. On an annual basis, the 2023 dividend will represent CA$0.12 per share or 3.9% dividend yield based on the current share price.
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(1)Cash gross operating margin per AuEq ounce is in US$ and is calculated by subtracting the average cash cost of sale per equivalent ounces of Au from the average selling price per equivalent ounces of Au and 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 company.
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(2)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 basis, effects due to different tax structures as well as the effects of different capital structures.
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(3) 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.
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RESULTS FROM OPERATIONS
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Consolidated Statement of net income and comprehensive income
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For the three-months
periods ended March 31,
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(in $'000) (unaudited)
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2023
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2022
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Sales
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56,733
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50,080
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Cost of sales
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(48,904)
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(42,555)
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Gross operating margin
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7,829
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7,525
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General and administrative expenses
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(1,553)
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(1,397)
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Other projects expenses
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(224)
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(41)
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Operating income
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6,052
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6,087
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Financial income (expenses)
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153
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(56)
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Foreign exchange gain (loss)
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50
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(18)
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Income before income taxes
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6,255
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6,013
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Current income tax expense
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(1,979)
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(1,515)
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Deferred income tax (expense) recovery
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191
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628
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Net income and comprehensive income
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4,467
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5,126
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Earnings per share
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Basic
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$0.11
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$0.13
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Diluted
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$0.11
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$0.13
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Total sales amounted to $56.7 million compared to $50.1 million in Q1-2022. The $6.6 million increase is mainly explained by higher quantities sold.
The Q1-2023 gross operating margin amounted to $7.8 million (13.8% of sales) compared to $7.5 million (15.0% of sales) in Q1-2022. The Q1-2023 gross operating margin was impacted by lower grades, the global inflation affecting our unit cost of production and by the overall trend in gold market prices compared to Q1-2022.
General and administrative expenses amounted to $1.5 million compared to $ 1.4 million in Q1-2022.
As budgeted, other projects represent the expenses incurred by the Corporation to duplicate its unique business model in other jurisdictions.
The Q1-2023 net income was also affected by the recording of a $1.8 million income tax expense including -$0.2 million (non-cash) deferred income tax recovery (-$ 0.6 million in Q1-2022). The deferred tax expense or recovery is mainly explained by the variance throughout the period of the Peruvian Sol against the US$ which affect long term assets local tax basis.
Reconciliation of non-IFRS measures
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(in $'000) (unaudited)
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For the three-months periods
ended March 31,
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2023
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2022
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Reconciliation of net income and comprehensive income to EBITDA
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Net income and comprehensive income
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4,467
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5,126
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Income taxes expense (current and deferred)
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1,788
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887
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Financial (income) expenses
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(153)
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56
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Depreciation
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784
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683
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EBITDA
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6,886
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6,752
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CONSOLIDATED CASH FLOW FROM OPERATING, INVESTING AND FINANCING ACTIVITIES AND WORKING CAPITAL AND LIQUIDITY
Operating activities
For the three-month period ended March 31, 2023, the cash flow from operations, before changes in working capital items, amounted to $5.0 million compared to $5.2 million for the three-month period ended March 31, 2022. Net cash from operating activities amounted to $9.7 million compared to $0.5 million for the three-month period ended March 31, 2022. Changes in working capital items amounted to $4.7 million compared to (-$4.7 million) for the three-month period ended March 31, 2022.
Investing activities
During the three-month period ended March 31, 2023, the Corporation invested $3.7 million ($0.6 million for the three-month period ended March 31, 2022). This amount mainly includes the purchase of an office in Lima, investments at the plant and new vehicles. All investments have been financed with internally generated cash-flows.
Financing activities
In Q1-2023, monthly dividends totaling CA$0.030 per share were disbursed for a total consideration of $0.9 million (CA$ 1.2 million) compared to CA$0.025 per share for a total consideration of $0.8 million (CA$ 1.0 million) in Q1-2022.
In Q1-2023, 29,080 common shares were repurchased under the Corporation normal course issuer bid share buyback program for a total cash consideration of $0.1 million (CA$ 0.1 million) (285,836 shares for a total cash consideration of $0.7 million (CA$0.9 million) in Q1-2022).
In Q1-2022, the Corporation issued 172,500 common shares following the exercise of purchase options for a consideration of $0.3 million (CA$ 0.4 million).
Working capital and liquidity
As at March 31, 2023, the Corporation’s working capital increased to $45.5 million, including $30.7 million in cash ($43.7 million, including $25.6 million in cash at December 31, 2022).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at March 31, 2023, total assets amounted to $99.7 million ($96.9 million as at December 31, 2022). Major variances since last year-end come from the significant increase in cash, property plant and equipment with the purchase of an office in Lima and variances in working capital items.
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(in $'000) (unaudited)
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As at
March 31,
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As at
December 31,
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2023
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2022
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Cash
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30,729
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25,595
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Accounts receivable
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10,951
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12,298
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Inventories
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13,245
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16,447
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Prepaid
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727
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223
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Current tax assets
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514
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371
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Property, plant and equipment
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24,356
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21,392
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Right-of-use assets
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679
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701
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Exploration and evaluation assets
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18,543
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18,543
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Other non-current assets
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-
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1,332
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Total assets
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99,744
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96,902
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Trade and other payables
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10,637
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11,168
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Asset retirement obligations
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3,663
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3,642
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Deferred tax liabilities
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919
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1,110
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Lease liabilities
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688
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701
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Shareholders' equity
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83,837
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80,281
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Total liabilities and equity
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99,744
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96,902
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OUTLOOK 2023
Ore processing
For 2023, the Corporation forecasted sales (1) in the range of $210-235 million representing a growth of 6.5-20.0% over 2022 sales. This would result in a net income in the range of $8.5-11.5 million ($0.22-0.30 per share) (CA$0.30-0.41 per share). So far in 2023, the Corporation is in line with its financial forecast.
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(1) Using a market gold price ranging between $1,800 and $1,900 per ounce
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Capex
Dynacor’s 2023 capital budget is set between $7.0 and $10.0 million and includes investments at the Veta Dorada plant for new efficiency improvement equipment’s, an increasing tailing pound capacity, additional vehicles for our ore purchase team and administrative and ore purchasing buildings.
Other project expenses
The Corporation has also budgeted approximately $1.0 million to advance other projects in other jurisdictions.
ABOUT DYNACOR
Dynacor is a dividend-paying industrial gold ore processor headquartered in Montreal, Canada. The corporation is engaged in gold production through the processing of ore purchased from the ASM (artisanal and small-scale mining) industry. At present, Dynacor operates in Peru, where its management and processing teams have decades of experience working with ASM miners. It also owns a gold exploration property (Tumipampa) in the Apurimac department.
The corporation intends to expand its processing operations in other jurisdictions as well.
Dynacor produces environmental and socially responsible gold through its PX IMPACT® gold program. A growing number of supportive firms from the fine luxury jewelry, watchmakers and investment sectors pay a small premium to our customer and strategic partner for this PX IMPACT® gold. The premium provides direct investment to develop health and education projects for our artisanal and small-scale miner’s communities.
Dynacor is listed on the Toronto Stock Exchange (DNG).
FORWARD-LOOKING INFORMATION
Certain statements in the preceding 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.
Shares Outstanding: 38,428,048
Website: http://www.dynacor.com
Twitter: http://twitter.com/DynacorGold
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