DYNACOR 2022: REPORTS ITS 12TH CONSECUTIVE ANNUAL PROFIT, WITH A NET INCOME OF US$12.0 MILLION (US$0.31 OR CA$0.40 PER SHARE) INCLUDING A YEARLY GOLD PRODUCTION RECORD EXCEEDING 110,000 AUEQ OUNCES

Dynacor Group Inc. has released its audited annual consolidated financial statements and the management's discussion and analysis (MD&A) for the year ended Dec. 31, 2022.

These documents have been filed electronically with SEDAR and will be available on the corporation's website.

(All figures in this press release are in-millions of United States dollars unless stated otherwise. All amounts per share are in U.S. dollars. All variance percentages are calculated from rounded figures. Some additions might be incorrect due to rounding.)

Two thousand twenty-two overview and highlights

Overview

Dynacor completed 2022 with both production and financial historical high performances representing its twelfth (12th) consecutive year of profit. The corporation achieved a production record of 110,359 AuEq (gold equivalent) ounces powering total sales to $197.5-million ($256.9-million (Canadian)) just surpassing 2021 sales, and a net income of $12-million (31 cents or 40 Canadian cents per share).

During the fourth quarter of 2022, the corporation completed another plant expansion at its Veta Dorada plant in Chala, Peru, increasing its mill capacity by an additional 16 per cent to 500 tpd from previously 430 tpd. This capacity increase followed the 25-per-cent increase that was completed in mid-2021.

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 operate at full capacity throughout the year averaging a new record high processing rate of 413 tpd (tonnes per day).

Highlights

Operational:

• Higher ore volume supplied. Total ore volume supplied reached an all time high of 147,500 tonnes in 2022 (141,400 tonnes in 2021). Year-end ore inventory was over 10,000 tonnes which represents more than 20 days of production throughput;
• Increased plant capacity. In Q4 2022, the plant capacity was increased by 16 per cent, which followed a 25-per-cent increase in Q2 2021;
• Highest yearly volume processed. In 2022, the Veta Dorada plant processed a historical high volume of 150,819 tonnes of ore (413 tpd average) compared with 134,269 tonnes in 2021 (368 tpd), a 12.3-per-cent increase;
• Record high yearly gold production. In 2022, the gold equivalent production amounted to 110,359 AuEq ounces compared with 106,862 AuEq ounces in 2021, a 3.3-per-cent increase.

Financial:

• Decreasing trend in gold prices, the inflation and lower grades of ore processed impacted 2022 financial performance;
• Solid cash position. Cash on hand remained solid at $25.6-million at year-end 2022 compared with $27.1-million at year-end 2021;
• Total sales similar to 2021. Sales amounted to $197.5-million in 2022 compared with $195.9-million in 2021;
• Decreased in gross operating margin. Gross operating margin amounted to $24.4-million (12.4 per cent of sales) in 2022, compared with $27.1-million (13.8 per cent of sales) in 2021;
• Operating income of $18.1-million in 2022 compared with $21.2-million in 2021 mainly due to the decrease in gross margin;
• Cash gross operating margin of $249 per AuEq ounce sold compared with $269 in 2021;
• EBITDA (earnings before interest, taxes, depreciation and amortization) of $21.2-million, compared with $23.5-million in 2021;
• Stable cash-flows. Cash flows from operating activities before change in working capital items of $14.9-million (38 cents per share) compared with $15.1-million (39 cents per share) in 2021.
• Increased net income. Dynacor recorded an historical high net income of $12-million in 2022 (31 cents or 40 Canadian cents per share) compared with $11.8-million (30 cents or 38 Canadian cents per share) in 2021.

Return to shareholders:

• Share buy-back. 819,416 common shares repurchased for $1.9-million ($2.4-million (Canadian)) in 2022, compared with 441,340 common shares for $900,000 ($1.2-million (Canadian)) in 2021;
• Increased dividends. Continuation of monthly dividend payments which had been increased by 25 per cent at the start of 2022 to 10 Canadian cents per share per year for a total of $3-million. This was recently followed by a new increase to 12 Canadian cents per year from January, 2023.

Results from operations

Total sales amounted to $197.5-million compared with $195.9-million in 2021. The $1.6-million increase is explained by higher average selling prices and quantities sold each contributing to an $800,000 increase.

The 2022 gross operating margin amounted to $24.4-million (12.4 per cent of sales) compared with $27.1-million (13.8 per cent of sales) in 2021. The 2022 gross operating margin was negatively impacted by lower grades and the global inflation affecting the company's unit cost of production, by the overall trend in gold market prices compared with 2021 even though the 2022 average gold selling price was slightly higher.

General and administrative expenses amounted to $6-million in 2022 comparable to 2021.

Other projects represent the expenses incurred by the Corporation to duplicate its unique business model in other jurisdictions.

The 2022 net income was also affected by the recording of a $6.1-million income tax expense including $700,000 of withholding tax paid on dividends received from the subsidiary and a negative $500,000 (non-cash) deferred income tax recovery. The deferred tax expense or recovery is mainly explained by the variance throughout the period of the Peruvian Sol against the U.S. dollar which affects long-term assets local tax basis.

Consolidated cash flow from operating, investing and financing activities, and working capital and liquidity

Operating activities

For the year ended Dec. 31, 2022, the cash flow from operations, before changes in working capital items, amounted to $14.9-million, compared with $15.1-million for the year ended Dec. 31, 2021. Net cash from operating activities amounted to $6.2-million compared with $21.9-million for the year ended Dec. 31, 2021. Changes in working capital items amounted to negative $8.7-million, compared with $6.8-million for the year ended Dec. 31, 2021.

Investing activities

During the year ended Dec. 31, 2022, the corporation invested a net amount of $3.5-million ($3.2-million for the year ended Dec. 31, 2021). This amount includes investments at the plant notably in relation to its capacity increase (plus 16 per cent throughput level), improvements in production processes and new vehicles. All investments have been financed with internally generated cash-flows.

Additions to exploration and evaluation assets were limited to the maintaining and safekeeping of assets in 2022 and 2021.

Financing activities

In 2022, monthly dividends of 0.83 Canadian cent, representing an annual total of 10 Canadian cents per share were disbursed for a total consideration of $3-million ($3.9-million (Canadian)). In 2021, due to the changes in the dividend policy, a quarterly dividend and 11 monthly dividends totalling 8.2 Canadian cents per share were disbursed for a total consideration of $2.5-million ($3.2-million (Canadian)). An increase in monthly dividend per share paid were attributed from January, 2022.

In 2022, 819,416 common shares were repurchased under the corporation normal course issuer bid share buyback program for a total cash consideration of $1.9-million ($2.4-million (Canadian)) (441,340 shares for a total cash consideration of $900,000 ($1.2-million (Canadian) in 2021)).

In 2022, the corporation received $900,000 ($1.1-million (Canadian)) for the exercise of purchase options ($400,000 in 2021 ($500,000 (Canadian))).

In 2022, the corporation made repayments of lease liabilities and assets retirement obligations for $300,000 ($300,000 (Canadian) in 2021).

Working capital and liquidity

As at Dec. 31, 2022, the corporation's working capital amounted to $43.7-million, including $25.6-million in cash ($36.4-million, including $27.1-million in cash at Dec. 31, 2021).

Consolidated statement of financial position

As at Dec. 31, 2022, total assets amounted to $96.9-million ($91.4-million as at Dec. 31, 2021). Major variances since the previous year-end came from the significant increase in accounts receivables (fully collected after year-end) and in inventories and the variance in the current tax position.

Outlook 2023

Ore processing

For 2023, the corporation forecasted sales in the range of $210-million to $235-million, representing a growth of 6.5 to 20 per cent over 2022 sales. This would result in a net income in the range of $8.5-million to $11.5-million (22 cents to 30 per share) (30 to 41 Canadian cents per share).

Dynacor's 2023 capital budget of $7-million includes investments at the Veta Dorada plant for new efficiency improvement equipment's, an increasing tailing pound capacity and additional vehicles for the company's ore purchase team.

The corporation has also budgeted approximately $1-million to advance other projects in other jurisdictions.

About Dynacor Group Inc.

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 jewellery, watchmakers and investment sectors pay a small premium to the company's customer and strategic partner for this PX Impact gold. The premium provides direct investment to develop health and education projects for the company's artisanal and small-scale miner's communities.

Dynacor is listed on the Toronto Stock Exchange (TSX).

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