Dynacor Announces Record Sales of US$74.6 Million and Net Income of US$3.4 Million in Fiscal 2011
MONTREAL, QUEBEC–(Marketwire – March 29, 2012) – Dynacor Gold Mines Inc. (TSX:DNG) (Dynacor or the Company) a company with exploration projects and profitable ore processing operations in Peru, has released its audited consolidated financial statements for the year-ended December 31, 2011. The Company is pleased to report that in 2011, it recorded a net income of $3.4 M ($0.10 per share) compared to a net loss of $2.6 M in 2010 (loss of ($0.09) per share in 2010) and cash flow from operating activities of $4.5M ($0.13 per share) compared to $3.2 M ($0.09 per share) The audited consolidated financial statements along with the management’s discussion and analysis are available on the Company’s website www.dynacorgold.com, and the documents have been filed electronically with SEDAR at www.sedar.com.
All figures in this press release are in millions of US$ except where noted. Earning and loss per share and gross margin per ounce are in US$.
- Net income of $3.4 M in 2011 ($0.10 per share) compared to a loss of $2.6 M (loss of ($0.09) per share) in 2010;
- Sales of $74.6 M ($42.6 M in 2010) a 75.1% increase over 2010;
- Adjusted EBITDA of $7.0 M compared to $3.4 M in 2010;
- Cash flow from operating activities before change in working capital items of $4.5 M in 2011 ($0.13 per share) compared to $3.3 M in 2010 ($0.09 per share) a 30.3% increase over 2010;
- Mill capacity increased from 180 tpd to 220 tpd during second half of 2011 a 22.2% increase;
- 64,041 DMT (dry metric tonne) processed (40,101 DMT in 2010) a 59.6% increase over 2010);
- 46,026 ounces of gold produced (33,525 ounces in 2010) a 37.3% increase;
- Gross operating margin per ounce of gold sold of $244 compared to ($245 in 2010);
- Exploration program on Tumipampa identifies new targets and NI 43-101 report warrants further drilling to be initiated in April 2012;
Results from operations:
During the year ended December 31, 2011, Dynacor recorded a net income of $3.4 M ($0.10 per share) compared to a net loss of $2.7 M in 2010 (net loss of $0.09 per share in 2010). In 2010, the Company had recorded a provision of $1.6 M on the Peruvian sales taxes withheld and an impairment of exploration asset in the amount of $3.5 M which adversely affected the 2010 results.
Total sales in 2011 amounted to $74.6 M compared to $42.6 M in 2010 an increase of $32.0 M and 75.1% over 2010. This increase is explained by larger volume of gold produced and sold combined with increased gold price.
The gross operating margin amounted to $11.0 M in 2011 ($244/ounce of gold sold) compared to $8.1 M ($245/ounce of gold sold) a 35.8% increase compared to 2010.
During 2011 the Company processed 64,041 (dry metric tonnes) “DMT” of ore compared to 40,101 DMT in 2010 a 59.7% increase which resulted in increased production and sales volume.
Total gold production from purchased ore processing amounted to 46,026 ounces in 2011 compared to 33,526 ounces in 2010 an increase of 37.3 % and total ounces of gold sold amounted to 45,258 compared to 33,037 ounces in 2010 an increase of 37.0% over 2010. Average gold selling price per ounce was also higher at $1,580 in 2011 compared to $1,250 in 2010 due to higher gold market price in 2011.
The gold cash gross operating margin per ounce sold was at $231 in 2011 compared to $239 in 2010 a 3.3% decrease compared to 2010 mainly due lower ore grade and greater volume processed during the year. Purchased ore grade processed decreased by 11.5% from 0.87 ounces of gold per DMT in 2010 to 0.77 ounces of gold per DMT in 2011.
International Financial Reporting Standards (“IFRS”)
On January 1, 2011, International Financial Reporting Standards (“IFRS”) became Canadian GAAP for publicly-accountable enterprises. Dynacor’s annual financial statements are therefore prepared in accordance with IFRS as of January 1, 2011 and comparable figures for 2010 have been restated accordingly. Dynacor has also therefore adopted the US dollar as its functional and reporting currency.
The following tables provide a summary of Dynacor’s financial performance in 2011 in comparison with 2010:
|For the year ended December 31,|
|(in millions of US $)||2011||2010|
|Gross operating margin||11.0||8.1|
|General and administrative expenses||3.3||2.4|
|Net income (loss)||3.4||(2.6||)|
|Net Cash flow from operating activities before and change in working capital items||4.5||3.3|
|Earnings (loss) per share in US$||0.10||(0.09||)|
|For the year ended December 31,|
|Reconciliation of Net comprehensive income to Adjusted EBITDA (1)|
|Net comprehensive income (loss)||3,382||(2,646||)|
|Impairment of exploration assets||–||3,530|
|Revaluation of warrants||(304||)||–|
|(1)||Adjusted EBITDA: “Adjusted Earnings before interest, taxes, depreciation and amortization and impairment” is a non-GAAP financial performance measure with no standard definition under IFRS and Canadian GAAP.|
Ore processing statistics summary
|2011||2010||Variance in %|
|Tonnes processed (in DMT)||64,041||40,101||+59.7||%|
|Average daily processing volume (in DMT)||190.5||119.1||+60.0||%|
|Ore grade (in ounce Au /DMT||0.77||0.87||-11.5||%|
|Gold production (in ounces )||46,026||33,525||+37.3||%|
|Gold sales ( in ounces )||45,258||33,027||+37.0||%|
|Sales (millions US$)||74.6||42.6||+75.1||%|
|Gross operating margin (millions US$)||11.0||8.1||+35.8||%|
|Gross operating margin (%)||14.8||%||19.0||%||-22.2||%|
|Gross margin per ounce of gold sold ($)||244.00||245.00||-0.5||%|
CASH FLOW FROM OPERATING, INVESTING AND FINANCING ACTIVITIES AND WORKING CAPITAL
Increased processing capacity and increased gold price combined to generate $4.5 M in cash flow from operations before changes in non-cash working capital items ($3.3 M in 2010), an increase of $1.3 M (30.3% increase) compared to 2010.
During the year the Company invested $1.2 M in the acquisition of property, plant and equipment mainly to increase processing and tailing ponds capacity and improved plant processing efficiency. During 2011, all exploration expenses were performed on the Tumipampa property where an amount of $0.9 M was spent mostly for drilling, airborne geophysics, sampling analysis and program planning.
During 2011, the Company did not complete any share issue financing. The Company reimbursed two payable debentures in the aggregate principal amount of CAD$1.5 M plus accrued interest and contracted a new loan of CAD$1.2 M bearing interest at 12% payable quarterly and principal repayment term of 18 month.
Liquidity and working capital
As at December 31, 2011, the Company’s working capital amounted to $7.9M including $2.1M in cash as compared to ($4.3 M, including $4.2 M in cash and short-term investments at December 31, 2010).
CHANGES IN MINING LEGISLATION IN PERU
The Company’s management is reviewing the recent changes to the Peruvian mining legislation which came into effect on March 16, 2012. The new law has been put in place with the objective to formalize all informal miners referred to as “informales” by establishing formalization mechanism and also eliminate illegal mining activities in Peru. This informal activity which up to that date was only considered as an administrative offence in the country includes the extraction, exploitation and processing activities and may now be subject to penalties which could include prison sentence. It is expected that Peruvian Government will issue a new decree within the next 15 days, which will amend and refined the new law and include a transition period in order for “informales” to comply to the new legal framework.
The Company is in compliance with law and it will continue to monitor the situation and assess the impact if any, of this new legal framework on its current procedures and will implement diligently any necessary adjustments to its operations, in order to ensure full compliance with new legislation. The Company expects that this new mining law will clarify the current situation of the Peruvian mining industry situation and will in fact open up new opportunities for the Company and facilitate the Company’s operations in Peru.
Dynacor’s focus is to continue using the cash flow generated by its ore processing business to build long-term value for its shareholders by:
- Advancing the exploration of its properties and defining mineral resources and particularly its gold resources at Tumipampa; and
- Continuing to increase its gold and silver production from the processing of purchased ore.
In April 2012, a new $ 2.3 million exploration campaign will begin at Tumipampa and includes drilling on zone four (4) of the skarn and the excavation of a 300-meter long cross-cut through the Manto Dorado structure and the Rosa Vein in order define underground resources and prepare for underground definition drilling later this year.
In the short term, the Company expects that, in 2012, it will process 75,000 tonnes of ore at its Acari plant and produce approximately 50,000 ounces of gold generating sales of approximately $ 85 M assuming a $1,650 per ounce gold market price and processed ore grades similar to last year’s ore grades.
During the last quarter of 2011, the Board of directors of the Company also approved a $4.5M budget for the purpose of building a new 300 tpd ore processing facility to be strategically located in Chala along the Pan American Highway, Peru. The new plant which has been designed to be readily upgraded to 430tpd should be funded through a combination of debt and working capital.
The Company has filed applications for environment and construction permits, which it expects to obtain in the upcoming months.
ABOUT DYNACOR GOLD MINES INC.
Dynacor is a gold exploration and mining company active in Peru through its subsidiaries since 1996. The Company’s assets include the Tumipampa, Casaden and Acari exploration properties along with a wholly owned 220 tonnes per day “tpd” ore processing mill. Dynacor’s gold mill produces gold from the processing of ore purchased from local producers. Dynacor’s strength and competitive advantage comes with the experience and knowledge the Company has developed while working in Peru. Its pride remains in maintaining respect and positive work ethics toward its employees, partners and local communities.
FORWARD LOOKING INFORMATION
Certain statements in the foregoing 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.
President and CEO
514-288-3224 ext. 228
Dynacor Gold Mines Inc.