Mr. Dale Nejmeldeen reports

DYNACOR REPORTS A RECORD PRODUCTION OF MORE THAN 32,500 AUEQ OUNCES GENERATING QUARTERLY SALES OF $64.5 MILLION AND A NET INCOME OF $4.5 MILLION IN Q2-2023 (US$0.12 OR CA$0.16 PER SHARE)

Dynacor Group Inc. has released its unaudited condensed interim consolidated financial statements and the management's discussion and analysis (MD&A) for the second quarter ended June 30, 2023.

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 U.S. 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.

Q2 2023 overview and highlights

Overview

Dynacor completed the three-month period ended June 30, 2023 (Q2 2023), with a record production of 32,693 gold equivalent ounces, quarterly sales of $64.5-million and a net income of $4.5-million (12 cents per share) compared with sales of $53.9-million (a 19.7-per-cent increase) and a net income of $2.6-million (seven cents per share) for the second quarter of 2022 (Q2 2022) (a net income increase of 73.1 per cent compared with Q2 2022).

Following its 16-per-cent increase capacity to 500 tpd (tonnes per day) at the end of 2022, Dynacor's ore procurement team was able to increase the tonnage of ore supplied in order to operate the plant at its full capacity during the quarter. The level of ore inventory at the plant continued to rise, reaching 9,600 tonnes at the end of Q2 2023 which represents more than 19 days of production.

Contrary to Q1 2023, which has seen a positive trend in gold market price, Q2 2022 and the strong Q2 2023 financial results were affected by the declining trend in the gold market price.

At the end of Q2 2023 the company's total assets are exceeding $100-million for the first time.

Highlights

Operational:

• Highest ore volume supplied. Total ore volume supplied reached a historical high of 45,730 tonnes in Q2 2023 compared with 32,415 tonnes for the same period of last year.
• Higher volume processed. The Veta Dorada plant processed a volume of 40,747 tonnes of ore (448 tpd average) compared with 35,822 tonnes in Q2 2022 (394 tpd), a 13.7-per-cent increase.
• Higher gold production. In Q2 2023, gold equivalent production amounted to 32,693 AuEq ounces compared with 27,875 AuEq ounces in Q2 2022 a 17.3-per-cent increase. The Q2 2023 production was positively affected by higher volumes and grades of ore processed.

Financial:

• High gold price and full 500 tpd capacity production drive Q2 2023 financial performance;
• Solid cash position. Cash on hand of $30.1-million at the end of Q2 2023 compared with $25.6-million at year-end 2022;
• Increase of 19.7 per cent in sales. With greater quantities and a higher average gold market price, sales amounted to $64.5-million in Q2 2023 compared with $53.9-million in Q2 2022;
• Increase in gross operating margin. Gross operating margin of $7.7-million (11.9 per cent of sales) in Q2 2023, compared with $6.3-million (11.7 per cent of sales) in Q2 2022;
• Increased operating income. Operating income of $5.6-million in Q2-2023 compared with $4.5-million in Q2 2022, a 24.4-per-cent increase;
• Net income increase of 73.1 per cent. Dynacor recorded a net income of $4.5-million in Q2-2023 (12 cents or 16 Canadian cents per share) compared with $2.6-million (seven cents or nine Canadian cents per share) in Q2 2022;
• Cash gross operating margin exceeding $250 per AuEq ounce. Cash gross operating margin of $256 per AuEq ounce sold compared with $242 in Q2 2022;
• Increased EBITDA. EBITDA (earnings before interest, taxes, depreciation and amortization) of $6.6-million, compared with $5.2-million in Q2 2022, a 26.9-per-cent increase;
• Strong cash flows. Cash flows from operating activities before change in working capital items of $5.2-million (14 cents per share) compared with $3.4-million (nine cents per share) in Q2 2022.

Return to shareholders:

• Share buyback. A total of 40,300 common shares repurchased for $100,000 ($100,000 (Canadian)) in Q2 2023, compared with 90,360 common shares for $200,000 ($300,000 (Canadian)) in Q2 2022;
• Increased dividends. A monthly dividend of one Canadian cent per share paid during the quarter. On an annual basis, the 2023 dividend will represent 12 Canadian cents per share or 4-per-cent dividend yield based on the current share price.

Total sales amounted to $64.5-million compared with $53.9-million in Q2 2022. The $10.6-million increase is explained by higher quantities of gold ounces sold (up 13.1 per cent or up $7.1-million) and a higher average gold price (up $3.5-million).

Cumulative sales increased by $17.2-million compared with last year with higher quantities sold contributing to a $13.9-million increase. Since the 16-per-cent increase capacity in Q4 2022, the Chala plant has been running at its maximum 500 tpd throughput.

The Q2 2023 gross operating margin amounted to $7.7-million (11.9 per cent of sales) compared with $6.3-million (11.7 per cent of sales) in Q2 2022 and were both affected by the unfavourable trend in gold market prices during the periods compared with a favourable trend in both Q1 2023 and Q1 2022.

General and administrative expenses remained stable at $1.8-million in both Q2 2023 and Q2 2022.

The Q2 2023 net income was also affected by the recording of a $1.5-million income tax expense net of a negative $300,000 (non-cash) deferred income tax recovery ($1.8-million with no deferred tax variance in Q2 2022). The tax expense is also affected by the variance throughout the period of the Peruvian sol against the U.S. dollar.

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

Operating activities

During Q2 2023, the cash flow from operations, before changes in working capital items, amounted to $5.2-million ($10.2-million for the six-month period ending June 30, 2023), compared with $3.4-million in Q2 2022 ($8.6-million for the six-month period ending June 30, 2022).

During Q2 2023, total cash from operating activities amounted to $1.4-million ($11.2-million for the six-month period ending June 30, 2023) compared with $9.1-million in Q2 2022 ($9.6-million for the six-month period ending June 30, 2022). Changes in working capital items amounted to negative $3.8-million ($1-million for the six-month period ending June 30, 2023) compared with $5.7-million in Q2 2022 ($1-million for the six-month period ending June 30, 2022). The variances are mainly attributable to the increase in inventories.

Investing activities

During the three-month period ended June 30, 2023, the corporation invested $1.1-million (cumulative six-month 2023 of $4.9-million). These amounts mainly include 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 Q2 2023, monthly dividends totalling three Canadian cents per share were disbursed for a total consideration of $800,000 ($1.2-million (Canadian)) (cumulative six months of six Canadian cents). In Q2 2022, monthly dividends totalling 2.5 Canadian cents per share were disbursed for a total consideration of $800,000 ($1-million (Canadian)). Increases in monthly dividend were disbursed from January, 2022, and then from January, 2023.

In Q2 2023, 40,300 common shares were repurchased under the corporation's normal course issuer bid share buyback program for a total cash consideration of $100,000 ($100,000 (Canadian)) (cumulative six months of 69,380 shares) (90,360 shares for a total cash consideration of $200,000 ($300,000 (Canadian)) in Q2 2022).

Working capital and liquidity

As at June 30, 2023, the corporation's working capital increased to $48.6-million, including $30.1-million in cash ($43.7-million, including $25.6-million in cash at Dec. 31, 2022).

Consolidated statement of financial position

As at June 30, 2023, total assets amounted to $103.9-million ($96.9-million as at Dec. 31, 2022). Major variances since last year-end come from the significant increase in cash and property plant and equipment.

Follow-up 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 cents per share) (30 Canadian cents to 41 Canadian cents per share). So far in 2023, the corporation is within the upper financial forecast range.

Capital expenditure

The board of directors approved a capital budget up to $10-million which includes investments at the Veta Dorada plant for new efficiency improvement equipment, an increasing tailing pound capacity, additional vehicles for its purchase team, and administrative and ore purchasing buildings. Depending on certain circumstances, management believes 2023 investments will amount between $7-million and $10-million.

Other project expenses

The corporation has also budgeted approximately $1-million to advance other projects in other jurisdictions and has spent $400,000 so far in 2023.

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.

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