An anonymous director reports

RECORD REVENUE MASKS DEEPENING CORE ISSUES AND ALARMING LACK OF TRANSPARENCY - IOLITE: DYNACOR URGENTLY NEEDS NEW LEADERSHIP

iolite Partners Ltd., the largest shareholder of Dynacor Group Inc., has renewed its call for leadership change following the company's third quarter earnings release.

Record revenue and weaker earnings: Dynacor reported Q3 revenue of $100.5-million (U.S.) (32 per cent year over year), entirely attributable to the gold price rally (40 per cent). Net income declined to $5.5-million (U.S.) (12 U.S. cents per share), down from $5.9-million (U.S.) (16 U.S. cents) last year. Profitability continues to erode despite exceptionally favourable market conditions. Dynacor has lost market share, dropping out of the top-10 gold producers in Peru, down from No. 7 at the start of the year.

Margin erosion despite tailwinds: Gross margin plunged to 11.7 per cent (from 13.6 per cent). Year to date, the company has completely failed to capture the inventory valuation gains such a record gold price rally should have delivered, pointing to impaired sourcing or mounting operational inefficiencies.

Severe throughput decline: The company processed 39,479 tonnes in Q3 2025, averaging 429 tonnes pe day -- a 17-per-cent drop from 519 tpd last year. This throughput gap equates to roughly 13 lost production days at nameplate capacity, or about 20 days versus the achievable rate of 550 tpd. Management pins the shortfall solely on early July roadblocks.

Q3 is typically the strongest quarter for ore availability. The Panamericana Sur near Chala was closed for 10 days. Historically, Veta Dorada maintained at least one month of ore inventory to absorb short disruptions. When ASM blockaded the Panamericana Sur for 10 days in November, 2024, the plant still ran 28 out of 30 days, with the remaining two used for scheduled maintenance, and processed 14,000 tonnes.

Earlier this year, Dynacor attributed weaker gold output to extended and unusually frequent maintenance stoppages. Under those conditions, ore stockpiles should rise since daily purchasing normally continues while the plant is down. That did not happen.

Given the unconvincing explanation provided, the real drivers of the year-to-date decline and the sudden rebound in throughput and grades later in the quarter remain unclear. At what cost was the late quarter surge in sourcing volumes achieved?

Dwindling ore inventory signals supply risks: Ore inventory stood at $10.4-million (U.S.) at the end of June, roughly 10 days of supply at $3,287 (U.S.) per ounce gold and 0.65 ounce per ton grade. Losing two weeks of production indicates that not all reported inventory was available for processing. The Sept. 30 balance of $13.8-million (U.S.) (gold at $3,825 (U.S.) per oz) is therefore likely below 10 days of immediately usable supply as well, just as the wet season is approaching.

Cost inflation without clear justification: Employee-related expenses surged by $1.1-million (U.S.) (35 per cent year over year). Earlier this year, management attributed materially higher personnel costs to one-off restructuring expenses, yet these costs continue to run well above expected levels despite an unchanged operational footprint and weak results. Veta Dorada used to employ roughly 550 people, and Dynacor's Montreal headquarters is small and historically focused on listing and compliance. With expansion projects still in their infancy, this sharp increase raises serious questions about bloat and inefficiency. General and administrative expenses also ballooned, jumping 72 per cent YoY to $3.5-million (U.S.) -- entirely at odds with management's narrative of disciplined cost control.

Opaque capital expenditure deployment: Dynacor spent $900,000 (U.S.) in Peru on maintenance or improvements to plant efficiency -- well above historical levels. The lack of meaningful detail is especially troubling given the concurrent deterioration in throughput and margins.

Unacceptable lack of transparency on the restructuring and internal review: The July, 2025, press release was vague and devoid of substance. Nothing has been disclosed since. The sharp increase in personnel-related costs and the press release itself suggest materiality. Shareholders deserve to know: What exactly is being restructured, how and why? What is being investigated under the internal review? What is its scope and timeline?

The board must explain the sudden need to restructure, given that no such need had been communicated prior to July, even as personnel-related costs had already risen substantially for several quarters. Why are personnel expenses still elevated, apparently tied to an open-ended restructuring, while an investigation is simultaneously under way? Ordinarily, a restructuring follows an investigation, or an investigation is triggered by a specific event. Here, the sequence is reversed: The investigation was announced only after the restructuring had already begun, and both now seem to be dragging on in parallel.

In any case, the sequence of events is peculiar: either something was off before, or something is off now. This raises an unavoidable question: Could the board itself be entangled in matters related to the investigation? If so, how is the company ensuring an investigation that is genuinely independent, unfettered and complete? Given the board's record of dealing with criticism and the length of this process, was this secured from the outset?

Lastly, did the restructuring contribute to the company's material underperformance during one of the strongest gold markets on record -- a period in which competitors prospered while Dynacor lost market share? If so, how?

Expansion narrative cannot mask core weakness: Management showcases photos of a dirt road and a small test mill being shipped to Senegal as evidence of progress, while Peru -- the engine of the business and the source of 100 per cent of current revenue -- continues to materially underperform.

While listed and headquartered in Canada, Dynacor has always been a Peruvian company at its core. As recently as January, 2025, Mr. Martineau described the accomplished Peruvian team as the backbone of Dynacor's international expansion plans. Given the nebulous references to new teams, shareholders deserve clarity: Are the key people who originally built Veta Dorada into Peru's leading and most respected ASM gold aggregator still with the company? If not, the company must provide a full and transparent account of their departure.

If key personnel has indeed been replaced, the next questions write themselves: What company launches a global expansion campaign with an untested team while simultaneously restructuring the only asset that generates cash? Who are the people driving these projects, what exactly are their qualifications and what concrete records justify taking on this level of strategic risk? None of these basic questions have been answered.

Misleading claims on shareholder returns: Management touts its continued focus on shareholder returns and uses the dividend yield as proof of alignment. In reality, the yield reflects a depressed share price, and the dividend is now effectively being financed by the recent capital raise. Earnings per share have fallen sharply due to operational deterioration and shareholder dilution, making the claim of strong returns disingenuous.

Environmental, social and governance and credibility: Dynacor markets itself as an ESG leader, yet, under the current board, its behaviour -- evasiveness, contradictions and a disregard for basic stakeholder rights -- tells a completely different story. Instead of addressing legitimate concerns, leadership has dug in, resisted transparency and largely stopped listening. This falls well short of the governance standard expected of a public company, especially one that claims the moral and ethical high ground.

Call to action: The pattern of weak performance, shifting explanations and lost credibility is undeniable. Shareholders deserve leadership that is fit for purpose. iolite therefore renews its call for Mr. Lepine and Mr. Martineau to step down, so Dynacor can rebuild trust, stabilize its core business and realize its potential. iolite also urges other shareholders to speak out. The company's potential and underlying market tailwinds remain, but Dynacor urgently needs a fresh start under new leadership. Time is running out.

About iolite Partners Ltd.

Founded in 2011, iolite Capital is a Switzerland-based investment manager with a focus on hidden champions: exceptional businesses with untapped potential. iolite serves a select circle of private and institutional clients which share an entrepreneurial mindset, are willing to invest for the long term and would like to have first-hand access to a dedicated portfolio manager with substantial and meaningful skin in the game. Using a private equity approach, iolite conducts deep fundamental research, constructively engages with management and adopts a long-term investment horizon.