Mr. Jean Martineau reports
Q1-2018: DYNACOR REPORTS NET INCOME OF US $1.6 M
Dynacor Gold Mines Inc. has released its unaudited condensed consolidated financial statements and the management's discussion and analysis (MD&A) for the three-month period ended March 31, 2018.
These documents have been filed electronically with SEDAR and will be available on the corporation's website.
(All figures in this press release are in millions of U.S. dollars unless stated otherwise. Earnings per share and cash flow per share are in U.S. dollars. All variance percentages are calculated from rounded figures. Some additions might be incorrect due to rounding.)
Dynacor recorded its 28th consecutive quarter of profits which saw its net income increase by 77.8 per cent over 2017, as it earned a net income of $1.6-million (four cents per share) compared with $900,000 (two cents per share) for the three-month period ended March 31, 2017 (Q1 2017).
Highlights for the first quarter of 2018 (variance percentages are calculated based on rounded figures)
Strategic
The corporation has planned its drilling campaign which will test the disseminated zone of its flagship gold project, Tumipampa, to begin during Q2 2018.
Operational
Gold production of 19,072 ounces, an increase of 11.4 per cent compared with Q1 2017;Dynacor continued the site restoration of its old Huanca Metalex plant.
Financial
Sales of $26.6-million in Q1 2018, an increase of 7.7 per cent compared with Q1 2017;Gross operating margin of $3.6-million (13.6 per cent) in Q1 2018, an increase of 16.1 per cent compared with Q1 2017;Net income and comprehensive income of $1.6-million in Q1 2018 (four cents per share), an increase of 77.8 per cent compared with Q1 2017;EBITDA (earnings before interest, taxes, depreciation and amortization) of $3.0-million in Q1 2018, an increase of 20.0 per cent compared with Q1 2017;Cash flow from operating activities before change in working capital items of $2.4-million and six cents per share in Q1 2018, an increase of 33.3 per cent compared with Q1 2017;Cash on hand of $8.6-million in Q1 2018 compared with $4.8-million at year-end 2017.
Recent events
The Toronto Stock Exchange has approved the corporation's request to establish a normal course issuer bid share buyback program.Isabel Rocha was nominated to the board of directors of the corporation. Mrs. Rocha has lengthy experience in environmental and social governance both internationally and in Latin America.
Overview Q1 2018
In Peru, the rainy season occurs during the first quarter of the year where production has historically been lower than for all other quarters. Nevertheless, during the quarter ended March 31, 2018, the corporation continued increasing its level of ore purchased which led to an increased production (21,035 tonnes processed, a 25.2-per-cent increase compared with the same period of 2017), in line with the company's 360-tonne-per-day production forecast in December, 2018.
Total sales amounted to $26.6-million compared with $24.7-million in Q1 2017, a 7.7-per-cent increase due to increased gold price ($2.3-million) and slight decrease due to sales volumes ($400,000). Q1 2017 volume had been positively impacted by the high level of ore in process at year-end 2016 which turned into 2017 sales.
RESULTS FROM OPERATIONS Financial statement highlights (in thousands of U.S. dollars)For the three-month periods ended March 31, 2018 2017 Sales $26,590$24,728Cost of sales (22,966) (21,628)Gross operating margin3,6243,100 General and administrative expenses(1,120)(1,074)Transition, maintenance and other expenses- (187)Selling expenses (3)(3)Operating income2,5011,836 Net income and comprehensive income 1,601937 Earnings per share Basic $0.04$0.02Diluted $0.04$0.02
The gross operating margin amounted to $3.6-million in Q1 2018 compared with $3.1-million for the same period in 2017 due to higher sales.
Net income was $1.6-million for the three-month period ended March 31, 2018, compared with $900,000 for the same period in 2017. The quarter increase in net income compared with 2017 is explained by the increase in gross operating margin combined with the absence of interest on the long-term loan and of transition costs in Q1 2018.
Cash flow from operating, investing and financing activities, and working capital
Operating activities
During Q1 2018, the cash flow from operations, before changes in working capital items, amounted to $2.4-million, compared with $1.8-million in Q1 2017. This increase between quarters is primarily explained by the increase in net income combined with the decrease in unrealized foreign exchange gain ($200,000) partially offset by the absence of interest on the long-term loan ($200,000) in Q1 2018.
During Q1 2018, total cash from operating activities amounted to $4.4-million compared with $3.1-million in Q1 2017. Changes in working capital items amounted to $2.0-million compared with $1.3-million in 2017.
Investing activities
During Q1 2018, there were limited investments of $300,000 for the acquisition of property, plant and equipment ($200,000 for the same period in 2017) mainly relating to the additions to the Chala plant. Additions to exploration and evaluation assets during Q1 2018 amounted to $100,000 (similar to Q1 2017).
Financing activities
In Q4 2017, the corporation fully reimbursed the long-term loan 13 months before the term. In Q1 2017, the transaction costs and interests represented $300,000. In Q1 2018, the corporation continued the site restoration of its old Huanca Metalex plant and therefore reducing its asset retirement obligation by $500,000. Work should be completed as expected and within budget in the second quarter of 2018. Government approval of work performed should be received upon inspection in the following months.
Liquidity
As at March 31, 2018, the corporation's working capital amounted to $17.7-million, including $8.6-million in cash ($16.0-million, including $4.8-million in cash at Dec. 31, 2017).
Outlook 2018
Ore processing
Dynacor expects 2018 to be its best year ever with a gold production estimated between 90,000 and 94,000 ounces. The gold production target for 2018 is based on the current price of gold and current operating conditions. The corporation expects to return to its full 300 tpd capacity soon after the rainy season and plans to expand the capacity to 360 tpd by the end of the year.
During Q1 2018, the corporation produced 19,072 oz of gold in line with the 2018 forecasts of between 90,000 to 94,000 oz of gold.
Exploration
Following a new agreement with one of the two local communities, the drilling program will begin after the reception of the exploration permit and after the completion of the IP geophysics on the disseminated mineralization on the quartzites and on the Sumac brecciated quartzite zone. The approved budget is $2.4-million over the next 24 months.
During Q2 2018, the corporation will finalize the selection of drill targets with the compilation of geological surface mapping, geochemical rock assays, mobile metal ion soil geochemistry and detailed IP survey results, all compiled to select favourable drill targets to be carried out at the end of Q2 2018 and/or beginning of Q3 2018.
About Dynacor Gold Mines Inc.
Dynacor Gold Mines is a gold production corporation headquartered in Montreal, Canada. The corporation is engaged in production through its government-approved ore processing operations.
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