MONTREAL, QUEBEC--(Marketwired - Aug 12, 2015) - Dynacor Gold Mines Inc. (DNG.TO)(DNGDF) (Dynacor or the Corporation) a Corporation with gold and silver ore processing operations and exploration projects in Peru, has released its unaudited condensed consolidated financial statements and the management's discussion and analysis "MD&A" for the three-month and six-month period ended June 30, 2015.
These documents have been filed electronically with SEDAR at www.sedar.com and will be available on the Corporation's website www.dynacor.com.
(All figures in this press release are in millions of US$ unless stated otherwise. Earnings per share and cash-flow per share are in US$. All variance % are calculated from rounded figures. Some additions might be incorrect due to rounding).
Despite the continuous decline of the world market gold price and the increase in non-recurrent and non-cash general and administrative expenses which affected the Corporation 2nd quarter financial results, the Corporation recorded a net income of $0.8M ($0.02 per share) (cumulative six-month of $2.1M and $0.06 per share) compared to $2.1M ($0.06 per share) (cumulative six-month of $2.9M and $0.08 per share), 27.6% cumulative year to date decrease compared to 2014.
The current ore market in Peru is affected by a decrease in production by small scale miners which is attributable mainly to the decrease in world market gold price and to a lesser extent the formalization process in this sector.
Q2-2015 highlights
Dynacor's overall ore processing operations results after six-months are comparable to those of 2014, however their quarterly breakdown is quite different. In Q1-2014, gold exports of dore bars had been temporarily stopped which led to an increase of gold dore bars inventory at the end of Q1-2014. These dore bars were subsequently sold during Q2-2014 which inflated the Q2-2014 sales and gross margin data. Therefore analysis of year to date comparative with 2014 is important.
- Cash on hand of $13.3 M at June 30, 2015 compared to $14.0 M at December 31, 2014;
- Gold market price continued on its decreasing trend affecting the Corporation overall results;
- Gold and silver sales of $20.2 M (cumulative six-months $39.0 M) compared to $26.8 M in Q2-2014 (cumulative six-months of $39.1 M in 2014) a quarter to quarter decrease of $6.6 M (24.6%) explained by the sales, in Q2-2014, of accumulated dore inventory produced in Q1-2014. (Cumulative six-month decrease of 0.3%);
- Gold production of 16,594 oz in Q2-2015 (cumulative six-month of 32,152 oz) compared to 17,608 oz in Q2-2014 (cumulative six-month 29,783 in 2014) a quarter to quarter decrease of 5.8 % and year to date increase of 8.0%;
- Gross operating margin of 16.8% in Q2-2015 (cumulative six-month of 17.7%) compared to 17.2% in Q2-2014 (cumulative six-month 18.41% in 2014);
- Net income of $0.8M in Q2-2015 ($0.02 per share) (cumulative six-month of $2.1M and $0.06 per share) compared to $2.1M ($0.06 per share) (cumulative six-month of $2.9M and $0.08 per share), a 61.9% quarter to quarter and 27.1% cumulative decrease compared to 2014;
- EBITDA(1) of $2.0 M in Q2-2015 (cumulative $4.6M) compared to $3.5M in Q2-2014 (cumulative $5.4 M) a 42.9% quarter to quarter and 14.9% cumulative decrease compared to 2014;
- Cash flow from operating activities before change in working capital items of $1.5 M ($0.04 per share)(2) (cumulative six-month of $3.3 M and $0.09 per share)(2) in 2015 compared to $2.4M in Q2-2014 ($0.07 per share)(2) (cumulative six-month of $3.7 M and $0.10 per share)(2) a 37.5% quarter to quarter and 10.8% cumulative decrease compared to 2014;
(1) EBITDA: "Earnings before interest, taxes and depreciation" is a non-GAAP financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. The Corporation uses this non-GAAP 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 bases, effects due to different tax structures as well as the effects of different capital structures. See the 'Non-GAAP Measures' section 15 of this report.
(2) Cash-flow per share is a non-GAAP financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. See the 'Non-IFRS Measures' section of this MDA. The Corporation uses this non-GAAP 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:
Gold production in Q2-2015 was 16,594 ounces (cumulative six-month of 32,152 ounces) compared to 17,608 ounces of gold in Q2-2014 (cumulative six-month of 29,783 in 2014) a 5.8% quarter to quarter decrease and a 8.0% year to date increase compared to 2014.
The quarter to quarter variance is due to a decrease in ore grade processed compared to Q2-2014. The overall six-month production increase is attributable to the higher volume of ore processed of 34,372 DMT compared to 30,832 DMT in 2014. The average gold grade for Q2-2015 was 1.02 oz/DMT compared to 1.10 oz/DMT Q2-2014.
During Q2-2015, Dynacor sold 16,961 gold equivalent ounces compared to 20,777 gold equivalent ounces sold in Q2-2014 an 18.4% decrease compared to Q2-2014. In Q1-2014 part of the gold production was kept in finished-goods inventory at quarter end and was subsequently sold in Q2, as the Corporation was waiting
for gold export situation to settle in Peru which explains the variance in sales.
Total sales for the period amounted to $20.2M (cumulative six-month $39.0 M) compared to $26.8M (cumulative $39.1 M) for the same period in 2014, a quarter to quarter decrease of $6.6 M and 24.6% and year to date decrease of 0.3% compared to 2014. This decrease is explained by a higher volume gold sales in Q2-2014 due to the situation described above, and to the reduction of average sale price which adversely affected sales by $1.6M in Q2-2015 and $3.1 M for the six-month period. Average gold price per gold equivalent ounce sold which was $1,192 per ounce in Q2-2015 compared to $1,289 in Q2-2014 a 7.5% average selling gold price decrease.
The gross operating margin for the period amounted to $3.4 M (16.8%) (cumulative six-month of $ 6.9 M or (17.7%)) compared to $4.6 M (17.2%) (cumulative six-month of $ 7.2 M (18.4%), a $1.2 M or 26.1% quarter to quarter (year to date $0.3 M decrease) compared to 2014. This gross operating margin of 16.8% for Q2-2015 continues to reflect the ability of Dynacor's business model to generate positive cash flow from operations even during a period where gold price is weakening.
During the period, general and administrative expenses amounted to $1.3 M and increase of $0.3 M compared to Q2-2014 amount of $1.0 M. The increase is explained by an increase of $0.2 M in non-cash share based compensation expenses related to the grant of share purchase options and attribution of deferred share units and $0.2 M in expenses and fees related to the proxy solicitation fight for the annual shareholders meeting, which occurred in June of 2015. Selling expenses were down by $0.1M compared to Q2-2014 since they are directly related to the sales level.
Income tax provision increased by $0.3 M as it includes a provision for potential Peruvian taxable valuation gain of USD monetary items such as cash, when translated into Peruvian soles basis on which tax provision is calculated.
Financial highlights
| |
|
|
|
| |
For the three-month
periods ended June 30, |
|
For the six-month
periods ended June 30, |
| (in $'000) |
2015 |
2014 |
|
2015 |
2014 |
| |
|
|
|
|
|
| Sales |
20,220 |
26,781 |
|
38,968 |
39,085 |
| Cost of sales |
16,869 |
22,153 |
|
32,039 |
31,901 |
| Gross operating margin |
3,351 |
4,628 |
|
6,929 |
7,184 |
| General and administrative expenses |
1,316 |
1,000 |
|
2,112 |
1,812 |
| Operating income |
1,708 |
3,170 |
|
4,160 |
4,723 |
| Net income and comprehensive income |
819 |
2,051 |
|
2,122 |
2,910 |
| EBITDA(1) |
2,046 |
3,521 |
|
4,620 |
5,354 |
| |
|
|
|
|
|
| Net Cash flow from operating activities before changes in working capital items |
1,548 |
2,430 |
|
3,349 |
3,683 |
| Cash flow from operating activities |
2,081 |
3,796 |
|
4,193 |
5,049 |
| |
|
|
|
|
|
| Earnings per share |
|
|
|
|
|
| Basic |
$0.02 |
$0.06 |
|
$0.06 |
$0.08 |
| Diluted |
$0.02 |
$0.05 |
|
$0.06 |
$0.07 |
| |
|
|
|
|
|
| Reconciliation of Net comprehensive income to EBITDA(1) |
|
|
|
|
|
| |
|
|
|
|
|
| Net comprehensive income |
819 |
2,051 |
|
2,122 |
2,910 |
| Income taxes |
748 |
1,041 |
|
1,593 |
1,645 |
| Financial expenses |
32 |
27 |
|
60 |
55 |
| Depreciation |
447 |
402 |
|
845 |
744 |
| EBITDA |
2,046 |
3,521 |
|
4,620 |
5,354 |
| |
|
|
|
|
|
(1) EBITDA: "Earnings before interest, taxes and depreciation" is a non-GAAP financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. The Corporation uses this non-GAAP 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 bases, effects due to different tax structures as well as the effects of different capital structures. See the 'Non-GAAP Measures' section 15 of this report.
CASH FLOW FROM OPERATING, INVESTING AND FINANCING ACTIVITIES AND WORKING CAPITAL
Operating Activities
Cash flows from operating activities before changes in working capital items amounted to $1.5M (cumulative six-months of $3.3 M in 2015) compared to $2.4 M and cumulative of $3.7 M in 2014).
Total cash generated from operating activities amounted to $2.1 M compared to $3.8 M in Q2-2014 a $1.7 M and 45.2% decrease compared to Q2-2014 due to the decrease in gross margin and a $0.9 M increase in net changes in working capital items during the period. At June 30, 2015 ore inventory represented 3.5 days of production (4.5 days of inventory at December 31, 2014 year-end).
Investing Activities
During the period, the Corporation invested $2.1M in property, plant and equipment including $1.3M for the new Veta Dorada plant construction project in Chala, and additions to the Metalex Huanca processing plant (cumulative of $3.0 M in 2015) ($0.5M in Q2-2014 and cumulative of $1.1 M in 2014).
Additions to exploration and evaluation assets amounted to $1.2 M in Q2-2015 (cumulative $1.8 M in 2015) ($0.5 M in Q2-2014 and cumulative $0.7 M in 2014) as the cross-cut underground exploration campaign at Tumipampa is ongoing. In 2014 work consisted in the start of the improvement work of the Tumipampa 26 km access road, building of enhance camp facilities on site, geophysical study, sampling and analysis, advance to suppliers, exploration salaries and other exploration expenses at Tumipampa.
Liquidity
As at June 30, 2015, the Corporation's working capital amounted to $19.3M including $13.3M in cash ($20.9 M including $14.0M in cash at December 31, 2014).
2015- Ore processing outlook
Ore processing operation
The Corporation had set its 2015 production guidance in the range of 75,000 to 80,000 ounces of gold.
Gold production for Q2-2015 was 16,594 ounces for a cumulative six-month total of 32,162 ounces, which is below the forecasted range. Despite the fact that processed ore tonnage of 34,372 as at June 30, 2015 is greater than the 30,832 DMT for the same period in 2014, management considers that because of uncertainty in the price of gold it is difficult to predict the availability of ore during the second half of 2015. Based on current ore purchases from our suppliers, we need to lower our 2015 guidance to a range of 64,000 to 68,000 ounces of gold. We will update this guidance if necessary in step with market conditions.
Veta Dorada Chala Plant
During the second quarter of 2015, work resumed toward the construction of the new plant. Contractors have been selected and many are already on site. Buildings for the camp and kitchen are mostly completed as well as detail topography of all the project site. Earth movement has begun in different areas and work includes the preparation of the ore storage area, the excavation and leveling of the crushing circuit, milling and sampling area. Five km of water line have also been laid. Concrete platforms have started to be installed in the production area and concrete work will continue into the third quarter. Procurement for plant equipment is underway. The first pieces of equipment will be installed during the third quarter.
ABOUT DYNACOR GOLD MINES INC.
Dynacor is a gold ore-processing and exploration Corporation active in Peru since 1996. The Corporation differentiates itself from pure exploration companies as it generates income from its wholly owned ore-processing plant. Dynacor's basic share count at 36.5 million outstanding is in the lowest quartile of the resource sector. The Corporation's assets include three exploration properties, including the advanced high-grade gold Tumipampa property and an operating 85,000 TPA capacity gold and silver ore processing mill at Metalex-Huanca. The Corporation recently obtained its permit to construct a brand new 300 tpd mill in Chala Peru. This represents an important milestone for the Corporation's future growth. The Corporation's strength and competitive advantage comes with the experience and knowledge it 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.
Dynacor Gold Mines Inc. (DNG.TO)
Website: http://www.dynacor.com
Twitter: http://twitter.com/DynacorGold
Facebook: facebook.com/DynacorGoldMines
Shares outstanding: 36,491,736