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 second quarter ended June 30, 2024.
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These documents have been filed electronically with SEDAR+ at www.sedarplus.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).
Q2-2024 OVERVIEW AND HIGHLIGHTS
OVERVIEW
Dynacor completed the three-month period ended June 30, 2024 (“Q2-2024”) with quarterly sales of $67.4 million, a net income of $4.5 million (US$0.12 per share) and a record EBITDA of $8.3 million compared to sales of $64.5 million, a net income of $4.5 million (US$0.12 per share) and an EBITDA of $6.6 million for the second quarter of 2023 (“Q2-2023”).
During Q2-2024, the Chala plant has continued to run at its maximum 500 tpd capacity, processing almost 43,000 tonnes.
HIGHLIGHTS
Operational
- Ore volume supplied remained high. Total ore volume supplied reached 42,883 tonnes in Q2-2024 compared to 45,730 tonnes for the same period of last year;
- Higher volume processed. The Veta Dorada plant processed a volume of 42,935 tonnes of ore (472 tpd average) compared to 40,747 tonnes in Q2-2023 (448 tpd), a 5.4% increase;
- Gold production reduced due to lower grades of ore processed. In Q2-2024, gold equivalent production reached 28,364 AuEq ounces compared to 32,693 AuEq ounces in Q2-2023.
Financial
- Increases in gold prices from March and operational results positively impacted the Q2-2024 financial results.
- Increased Sales. Sales amounted to $67.4 million in Q2-2024 compared to $64.5 million in Q2-2023, a 4.5% increase;
- Record gross operating margin of $10.0 million (14.8% of sales) in Q2-2024, compared to $7.7 million (11.9% of sales) in Q2-2023;
- Increase of 33.9% in operating income. Operating income of $7.5 million in Q2-2024 compared to $5.6 million in Q2-2023;
- Record cash gross operating margin of $375 per AuEq ounce sold (1) compared to $256 in Q2-2023, a 46.5% increase;
- Record EBITDA (2) of $8.3 million, compared to $6.6 million in Q2-2023, a 25.8% increase;
- Increased cash flows. Cash flows from operating activities before change in working capital items of $5.8 million ($0.16 per share) (3) compared to $5.2 million ($0.14 per share) in Q2-2023, a 11.5% increase;
- Strong net income. Dynacor Group recorded a net income of $4.5 million in Q2-2024 (US$0.12 or CA$0.16 per share) similar to Q2-2023;
- Solid cash position. Cash on hand of $34.7 million at the end of Q2-2024 compared to $22.5 million at year end 2023;
Return to Shareholders
- Share buy-back. 37,200 common shares repurchased for $0.1 million (CA$0.2 million) in Q2-2024, compared to 40,300 common shares for $0.1 million (CA$0.1 million) in Q2-2023;
- Increased dividends. A 16.7% monthly dividend increase is paid since January 2024. On an annual basis, the 2024 dividend will represent CA$0.14 per share or 2.7% dividend yield based on the current share price.
(1) |
Cash gross operating margin per AuEq ounce is in US$ 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 Accounting Standards. 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 Accounting Standards. 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 Accounting Standards. 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. |
RESULTS FROM OPERATIONS
Unaudited Consolidated Statement of net income and comprehensive income |
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Three-month periods
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Six-month periods
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(in $'000) (unaudited) |
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2024 |
2023 |
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2024 |
2023 |
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|
|
|
|
|
|
Sales |
|
67,431 |
64,472 |
|
135,164 |
121,205 |
Cost of sales |
|
(57,437) |
(56,817) |
|
(116,022) |
(105,721) |
Gross operating margin |
|
9,994 |
7,655 |
|
19,142 |
15,484 |
General and administrative expenses |
|
(2,127) |
(1,813) |
|
(3,831) |
(3,366) |
Other projects expenses |
|
(327) |
(202) |
|
(541) |
(426) |
Operating income |
|
7,540 |
5,640 |
|
14,770 |
11,692 |
Financial income net of expenses |
|
168 |
163 |
|
339 |
316 |
Foreign exchange gain (loss) |
|
(125) |
161 |
|
(184) |
211 |
Income before income taxes |
|
7,583 |
5,964 |
|
14,925 |
12,219 |
Current income tax expense |
|
(2,841) |
(1,828) |
|
(5,418) |
(3,807) |
Deferred income tax (expense) recovery |
|
(241) |
343 |
|
(225) |
534 |
Net income and comprehensive income |
|
4,501 |
4,479 |
|
9,282 |
8,946 |
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|
|
|
|
|
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Earnings per share |
|
|
|
|
|
|
Basic |
|
$0.12 |
$0.12 |
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$0.25 |
$0.23 |
Diluted |
|
$0.12 |
$0.12 |
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$0.25 |
$0.23 |
Total sales amounted to $67.4 million compared to $64.5 million in Q2-2023. The $2.9 million increase is explained by higher average gold price (+$10.5 million) partially offset by lower quantities of gold ounces sold (-$7.6 million) due to lower grades of ore processed.
Cumulative sales increased by $13.9 million compared to last year with higher average gold price (+$16.8 million) partially offset by lower quantities of gold ounces sold (-$2.9 million).
The gross operating margin increased by $2.3 million from $7.7 million (11.9% of sales) in Q2-2023 to a record of $10.0 million (14.8% of sales) in Q2-2024 and was positively impacted by the increasing trend in gold market prices during the period compared to a decreasing trend in Q2-2023.
General and administrative expenses amounted to $2.1 million compared to $1.8 million in Q2-2023. The increase is explained by increases in employee expenses.
As budgeted, other projects represent the expenses incurred by the Corporation to duplicate its unique business model in other jurisdictions.
The Q2-2024 net income was also affected by the recording of a $3.1 million income tax expense including a $0.2 million (non-cash) deferred income tax expense ($1.5 million including the recording of withholding taxes on dividends received from a Peruvian subsidiary and a deferred tax recovery of $0.3 million in Q2-2023). The tax expense (current and deferred) is affected by the variance throughout the period of the Peruvian Sol against the US$. Future fluctuations will affect positively or negatively the current and deferred tax at the end of each period.
Reconciliation of non-IFRS measures |
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(in $’000) (unaudited) |
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Three-month periods
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Six-month periods
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2024 |
2023 |
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2024 |
2023 |
Reconciliation of net income and comprehensive income to EBITDA |
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Net income and comprehensive income |
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4,501 |
4,479 |
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9,282 |
8,946 |
Income tax expenses (current and deferred) |
|
3,082 |
1,485 |
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5,643 |
3,273 |
Financial income net of expenses |
|
(186) |
(170) |
|
(357) |
(323) |
Depreciation |
|
911 |
833 |
|
1,796 |
1,617 |
EBITDA |
|
8,308 |
6,627 |
|
16,364 |
13,513 |
CONSOLIDATED CASH FLOW FROM OPERATING, INVESTING AND FINANCING ACTIVITIES AND WORKING CAPITAL AND LIQUIDITY
Operating activities
During Q2-2024, the cash flow from operations, before changes in working capital items, amounted to $5.8 million ($11.5 million for the six-month period ending June 30, 2024), compared to $5.2 million in Q2-2023 ($10.2 million for the six-month period ending June 30, 2023).
During Q2-2024, total cash from operating activities amounted to $9.7 million ($19.3 million for the six-month period ending June 30, 2024) compared to $1.4 million in Q2-2023 ($11.2 million for the six-month period ending June 30, 2023). Changes in working capital items amounted to $3.9 million ($7.8 million for the six-month period ending June 30, 2024) compared to -$3.8 million in Q2-2023 ($1.0 million for the six-month period ending June 30, 2023). The variances are mainly attributable to variances in inventories.
Investing activities
During the three-month period ended June 30, 2024, the Corporation invested $1.6 million (cumulative six-month 2024 of $2.3 million). These amounts mainly include investments at the plant and new vehicles. All investments have been financed with internally generated cash-flows.
Financing activities
In Q2-2024, monthly dividends totaling CA$0.035 per share were disbursed for a total consideration of $0.9 million (CA$1.3 million) (cumulative six-month of CA$0.07). In Q2-2023, monthly dividends totaling CA$0.03 per share were disbursed for a total consideration of $0.8 million (CA$1.2 million). Increases in monthly dividend were disbursed from January 2023 and then from January 2024.
In Q2-2024, 37,200 common shares were repurchased under the Corporation normal course issuer bid share buyback program for a total cash consideration of $0.1 million (CA$0.2 million) (cumulative six-month of 964,000 shares) (40,300 shares for a total cash consideration of $0.1 million (CA$0.1 million) in Q2-2023).
Working capital and liquidity
As at June 30, 2024, the Corporation’s working capital increased to $55.3 million, including $34.7 million in cash ($50.8 million, including $22.5 million in cash at December 31, 2023).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at June 30, 2024, total assets amounted to $114.7 million ($111.8 million as at December 31, 2023). Major variances since last year-end come from the significant increase in cash and working capital items due to the good financial performance.
(in $'000) (unaudited) |
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As at
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As at
|
|
|
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2024 |
2023 |
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Cash |
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34,734 |
22,481 |
|
Accounts receivable |
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9,371 |
13,328 |
|
Inventories |
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25,612 |
31,925 |
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Prepaid |
|
635 |
277 |
|
Property, plant and equipment |
|
25,181 |
24,590 |
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Right-of-use assets |
|
569 |
613 |
|
Exploration and evaluation assets |
|
18,566 |
18,566 |
|
Other non-current assets |
|
54 |
- |
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Total assets |
|
114,722 |
111,780 |
|
|
|
|
|
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Trade and other payables |
|
12,689 |
15,357 |
|
Current tax liabilities |
|
2,369 |
1,799 |
|
Asset retirement obligations |
|
3,768 |
3,724 |
|
Deferred tax liabilities |
|
902 |
677 |
|
Lease liabilities |
|
586 |
636 |
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Shareholders' equity |
|
94,408 |
89,587 |
|
Total liabilities and equity |
|
114,722 |
111,780 |
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FOLLOW-UP OUTLOOK 2024
Ore processing
For 2024, the Corporation forecasted sales (1) ranging between $265-285 million representing a growth of 6-14% over 2023 sales. Net income is forecasted ranging between $12-15 million ($0.33-0.41 per share) (CA$0.45-0.56 per share) and include expenses of $2.7 million to advance other projects in other jurisdictions. So far in 2024, the Corporation is in line with its financial forecast.
(1) |
Using a market gold price ranging between $2,000 and $2,050 per ounce |
Capex
Dynacor Group planned to invest up to $13 million in capital expenditures in 2024. This investment will be used at our Veta Dorada plant for new equipment to improve efficiency, increase tailing pond capacity, buy vehicles to support the security of our purchasers working in remote areas and will include, upon favourable conditions, up to $4 million to pursue the due diligence process and development of new 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: 36,431,706
Website: http://www.dynacor.com
Twitter: http://twitter.com/DynacorGold
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