Dynacor Gold Mines Inc. (TSX: DNG / OTC: DNGDF) (Dynacor or
the Corporation) has released its audited consolidated
financial statements and the management's discussion and analysis
(MD&A) for the year ended December 31, 2019.
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).
The financial results for 2019 reflect Dynacor’s
ninth consecutive year of profits as the Corporation recorded a net
income of $5.2 M ($0.13 or $0.17 CA per share), an increase of 8.3%
compared to 2018.
2019 OVERVIEW AND
HIGHLIGHTS
In 2019, the Corporation purchased a record high
volume of 105,238 tonnes of ore and processed a record volume of
98,649 tonnes at its Veta Dorada plant compared to 91,512 tonnes in
2018, a 7.8% increase.
During the last quarter of 2019, our production
exceeded the daily available capacity of 300 tpd maintaining an
average of 330 tpd.
With a year production of 80,677 ounces of gold
the Corporation reached a volume comparable to 2018 and surpassed
its second half of 2019 revised guidance of between 44,000 and
46,000 ounces of gold with a production of 46,582 ounces.
Financial
- 9th consecutive year of profits;
- Retention by Peruvian authorities in December 2019 for control
procedures of a 2,650 ounces gold shipment which impacted Q4 and
year 2019 sales and net income;
- Sales of $102.5 M in 2019 a decrease of 2.1% compared to
2018;
- Gross operating margin of $13.0 M in 2019, a 1.5% decrease
compared to $13.2 M in 2018;
- Net income and comprehensive income of $5.2 M in 2019 ($0.13
per share), an increase of 8.3% compared to 2018;
- Cash gross operating margin of $208 per ounce equivalent Au
sold (1) compared to $186 per ounce equivalent Au sold in
2018;
- EBITDA (2) of $10.7 M, an increase of 1.9% compared to
2018;
- Cash flow from operating activities before change in working
capital items of $8.4 M ($0.21 per share)(3) similar to 2018;
- Cash on hand of $6.7 M at year-end 2019 compared with $13.9 M
in 2018 due to the increase in inventories and the decision to
delay December 2019 gold exports in January 2020. Current cash on
hand amounts to approximately $15.0 M.
Cash return to Shareholders
- The Corporation continued its normal course issuer bid share
buyback program (847,721 shares were repurchased in 2019 compared
to 446,367 shares in 2018);
- At the end of 2019, Dynacor increased its quarterly cash
dividend payment to its shareholders to CA$0.015 per share (first
increased dividend paid in January 2020).
(1) Cash gross operating margin
per equivalent ounce Au 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. It is therefore possible that this measure could not be
comparable with a similar measure of another company.
(2) EBITDA: “Earnings before
interest, taxes and depreciation” is a non-IFRS 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-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
bases, effects due to different tax structures as well as the
effects of different capital structures.
(3) Cash-flow per share is a
non-IFRS 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-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
Extract from Statement of net income and comprehensive
income
|
For the years ended December 31, |
|
(in
$'000) |
|
2019 |
|
|
2018 |
|
|
|
|
Sales |
|
102,499 |
|
|
104,650 |
|
Cost of sales |
|
(89,531 |
) |
|
(91,484 |
) |
Gross operating
margin |
|
12,968 |
|
|
13,166 |
|
General and administrative
expenses |
|
(4,497 |
) |
|
(4,718 |
) |
Other projects |
|
(155 |
) |
|
- |
|
Operating
income |
|
8,316 |
|
|
8,448 |
|
Income before income
taxes |
|
8,120 |
|
|
7,935 |
|
Net income and
comprehensive income |
|
5,187 |
|
|
4,821 |
|
|
|
|
Earnings per
share |
|
|
Basic |
$ |
0.13 |
|
$ |
0.12 |
|
Diluted |
$ |
0.13 |
|
$ |
0.12 |
|
Total sales for the year 2019 amounted to $102.5
M compared to $104.7 M in 2018, which represents a slight decrease
of 2.1%. In December 2019, the Peruvian customs authorities
retained a 2,650 ounces shipment for control procedures. Following
this, the Corporation temporarily held back exporting until January
2020. In total, Q4 and 2019 sales were reduced by approximately
$12.5 M. Those sales, excluding the value of the retained shipment,
still under review, have been completed in January 2020.
The gross operating margin amounted to $13.0 M
in 2019 compared to $13.2 M in 2018 a slight decrease due to
reduced sales.
General and administrative expenses were limited
to $4.5 M in 2019, a 4.7% decrease compared to 2018.
Other projects represent expenses incurred by
the Corporation with respect to potential expansion projects such
as an ore processing plant in Senegal (ref. Press release dated
June 11, 2019).
Reconciliation of non-IFRS
measures
|
For the years ended December 31, |
(in $'000) |
2019 |
2018 |
Reconciliation of net income
and comprehensive income to EBITDA (2) |
|
|
Net income and comprehensive income |
5,187 |
4,821 |
Income taxes |
2,933 |
3,113 |
Financial expenses |
60 |
196 |
Depreciation |
2,551 |
2,410 |
EBITDA (2) |
10,731 |
10,540 |
Fourth quarter results
During the fourth quarter ended December 31, 2019, the
Corporation recorded a net income of $0.9 M ($0.02 per share)
compared to $1.3 M ($0.03 per share) in the comparative period of
2018.
CASH FLOW FROM OPERATING, INVESTING AND FINANCING
ACTIVITIES AND LIQUIDITY
Operating activities
For the year ended December 31, 2019, the cash
flow from operations, before changes in working capital items,
amounted to $8.4 M, similar to the year ended December 31, 2018.
Total cash from operating activities amounted to (-$5.9 M) compared
to $12.7 M for the year ended December 31, 2018. Changes in working
capital items amounted to (-$14.3 M) compared to $4.4 M for the
year ended December 31, 2018 mainly due to the increase in
inventories.
The variances in working capital items are
mainly attributable to the significant increase level of
inventories including finished products due to higher ore purchase
volume and temporary stoppage of gold export in December 2019.
Investing activities
During the year ended December 31, 2019, the
Corporation invested $1.2 M ($1.3 M for the year ended December 31,
2018) for the acquisition of property, plant and equipment,
relating to additions to the Chala plant and to rolling stocks.
Additions to exploration and evaluation assets during the year,
were limited to $0.2 M ($1.0 M in 2018).
Financing activities
In December 2019, the Corporation entered into a
bank loan agreement with a local Peruvian bank in the amount of
$3.0 M to support its working capital needs following the retention
of its shipment as its ore purchases were reaching record level.
The bank loan was fully reimbursed in February 2020.
A total of 847,721 shares were repurchased in
2019 (446,367 in 2018) for a total cash consideration of $1.1 M
(CA$1.5 M) ($0.6 M or CA$0.7 M in 2018).
In 2019, four quarterly dividend payments of
CA$0,01 per share was disbursed for a total consideration of $1.2 M
(CA$1.6 M) (one quarterly dividend payments of CA$0,01 per share
for a total of $0.3 M or CA$0.4 M in 2018).
In 2019, the corporation made repayments of
lease liabilities for $0.7 M vs. $0.3 M in 2018.
In 2018, the Corporation also made payments on
asset retirement obligations for a total consideration of $0.6M
(insignificant amounts in 2019).
Liquidity
As at December 31, 2019, the Corporation’s
working capital amounted to $19.7 M, including $6.7 M in cash
($19.7 M, including $13.9 M in cash at December 31, 2018).
STATEMENT OF FINANCIAL
POSITION
At December 31, 2019, total assets amounted to
$74.8 M ($66.1 M as at December 31, 2018).
The main impact comes from the inventories:
|
As at December 31, |
(in million
$) |
2019 |
|
2018 |
|
|
|
Ore |
4.5 |
|
1.0 |
Gold in process |
13.5 |
|
4.8 |
Finished goods-Gold dore
bars |
3.4 |
|
- |
Supplies |
0.3 |
|
0.4 |
|
21.7 |
|
6.2 |
Less: long-term portion – other
assets |
(3.4 |
) |
- |
Total |
18.3 |
|
6.2 |
The increase in ore inventory reflects the
continuous efforts of the Corporation to increase its ore purchases
at record levels at year end which will allow to continue the
production at a high level during the rainy season. The Veta Dorada
plant was operating at a level exceeding its nominal capacity of
300 tpd between September 2019 and the recent COVID-19 crisis. The
increase of gold in process (including activated carbon) is
explained by the December 2019 production which exports were
deferred until January 2020 and by the 20% increase in cost per
ounce in line with the increase in gold market prices. The finished
goods-Gold dore bars relates to the December shipment retained by
the Peruvian custom authorities for control procedures. We cannot
predict at this time when this shipment will be released by the
authorities and therefore, we have classified then under other
non-current assets.
2020 OUTLOOK
COVID-19 crisis
Subsequent to year end, the COVID-19 virus
situation became an international crisis. In Peru, the state of
emergency was declared on March 16, 2020 for an initial period of
15 days, and all public and private companies have been informed to
stop their activities. This period has just been extended until
April 13, 2020. Accordingly, the Corporation Peruvian subsidiary
has temporarily ceased its operations until official instructions
to resume are given.
The duration and impacts of this crisis are
still unknown, therefore it could have a prospective material
impact on the Corporation’s activities, cash flow and liquidities.
Following these events, the Corporation has taken and will continue
to take action to minimize the impact. However, it is impossible to
determine the financial implications of these events for the
moment. At the date of this press release the Corporation has
a solid financial situation with no debts and approximately $15 M
in cash and should be well positioned for the market recovery.
In this historical difficult period for all,
worldwide, the Corporation management priority is toward the
protection of all of Dynacor’s employees, suppliers and all their
families and communities. We will get through this.
ABOUT DYNACOR
Dynacor is a dividend-paying gold production
corporation headquartered in Montreal, Canada. The corporation is
engaged in production through the processing of ore purchased from
the ASM (artisanal and small-scale mining) industry. At present,
Dynacor produces and explores in Peru, where its management team
has decades of experience and expertise. In 2019, Dynacor produced
80,677 ounces of gold, in line with 2018 (81,314 ounces).
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 are paying 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 to our small-scale artisanal miner’s communities.
Dynacor trades on the Toronto Stock Exchange
(DNG) and the OTC in the United States under the symbol
(DNGDF).
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 (TSX: DNG / OTC: DNGDF) Website:
http://www.dynacor.com Twitter: http://twitter.com/DynacorGold
Shares outstanding: 38,787,256
PDF
available: http://ml.globenewswire.com/Resource/Download/2472b072-4f51-4830-8d6b-075d9c469165
For more information, please contact: Dynacor
Dale Nejmeldeen
Director, Shareholder Relations
Dynacor
T: (514) 393-9000 (extension 230)
E: investors@dynacor.com
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