Mr. Jean Martineau reports
Q3 2018: DYNACOR REPORTS SALES OF US $24.4 M AND NET INCOME OF US $0.7 M
Dynacor Gold Mines Inc. has released its unaudited condensed consolidated financial statements and management's discussion and analysis for the three-month and nine-month periods ended Sept. 30, 2018.
These documents have been filed electronically with SEDAR atwww.sedar.com and will be available on the corporation's websitewww.dynacor.com.
(All figures in this press release are in millions of US$ unless stated otherwise. Earnings per share and cash-flow per share are in US$. All varianceper cent are calculated from rounded figures. Some additions might be incorrect due to rounding).
For the three-month period ended Sept. 30, 2018, Dynacor recorded its 30th consecutive quarter of profits, with a net income $0.7-million ($0.02 per share) compared with $1.2-million ($0.03 per share) for the three-month period ended Sept. 30, 2017 ("Q3 2017").
For the nine-month period ended Sept. 30, 2018, the net income amounts to $3.5-million ($0.09 per share) compared with $2.5-million ($0.06 per share) for the same period in 2017.
Highlights for the third quarter of 2018 (Varianceper cent, are calculated based on rounded figures)
Operational:
Processing of 22,615 tonnes, an increase of 12.9 per cent compared with Q3 2017; Gold production of 19,982 ounces, compared with 20,521 ounces in Q3 2017 due to lower grade partially offset by higher tonnage processed; IP Geophysics on the disseminated mineralization on the Quartzites and on the Sumac Brecciated Quartzite zone of the Tumipampa project and interpretation of results have been completed which will enable to determine definitive drilling targets.
Financial
30th consecutive quarter of profits; Sales of $24.4-million in Q3 2018, compared with $26.8-million in Q3 2017; Gross operating margin of $2.6-million (10.7 per cent) in Q3 2018, compared with $3.7-million (13.8 per cent) in Q3 2017; Net income and comprehensive income of $0.7-million in Q3 2018 ($0.02 per share), compared with $1.2-million in Q3 2017 ($0.03 per share); EBITDA (1) of $2.0-million in Q3 2018, compared with $3.3-million in Q3 2017; Cash flow from operating activities before change in working capital items of $1.6-million and $0.04 per share (2) in Q3 2018, compared with $2.6-million in Q3 2017; Cash on hand of $11.1-million at end of Q3 2018 compared with $4.8-million at year-end 2017.
Strategic
In August 2018, Dynacor announced the initiation of the first quarterly cash dividend to its shareholders which was paid in October 2018; Dynacor appointed Jorge-Luis Cardenas as Vice President Operations.
Overview Q3 2018
During the quarter the market gold price continued its down trend falling promptly in July from approximately $1,300 to $1,200 per ounce and then remained stable in August and September at approximately $1,200 per ounce. This context negatively impacted our quarter sales and gross margin.
The corporation continued increasing its ore purchased level compared with the previous quarter (Q2-2018) at a monthly average exceeding 7,700 tonnes with the objective to achieve 8,500 tonnes in the next quarter.
Total tonnage processed during the quarter was 22,615 tonnes (average of 258 tpd) compared with 20,026 tonnes (average of 229 tpd) in Q3 2017 an increase of 12.9 per cent.
Gold production was 19,982 ounces in Q3 2018 compared with 20,521 in Q3 2017. This slight decrease is explained by lower grade partially offset by higher tonnage processed.
Total sales amounted to $24.4-million compared with $26.8-million in Q3 2017. This $2.4-million decrease is explained by the decrease in gold price ($1.4 M) and the decrease in the number of ounces sold ($1.0 M).
Results from operations
FINANCIAL STATEMENT HIGHLIGHTS (in thousands of U.S. dollars, except per-share amounts) Three months ended Sept. 30, Nine months ended Sept. 30, 2018201720182017Sales$ 24,439$ 26,797$ 78,984$ 73,278Cost of sales (21,819)(23,112)(69,225)(63,795)Gross operating margin2,620 3,685 9,759 9,483 General and administrative expenses(1,182) (863) (3,634) (2,992)Transition, maintenance and other expenses-(479)-(863)Selling expenses-(4) (4) (9)Operating income1,438 2,339 6,121 5,619 Income before income taxes1,316 1,940 5,712 4,548Net income and comprehensive income 694 1,239 3,546 2,460Earnings per share Basic0.020.030.090.06Diluted0.020.030.090.06
The gross operating margin amounted to $2.6-million in Q3 2018 compared with $3.7-million for the same period in 2017. This decrease is mainly attributable to lower sales due to:
The decrease in gold production explained by lower grade partially offset by higher tonnage processed;The decline in gold price.
Net income was $0.7-million for the three-month period ended Sept. 30, 2018, compared with $1.3-million for the same period in 2017. The quarter decrease in net income compared with 2017 is explained by the:
$1.1-million decrease in gross operating margin;$0.3-million increase in general administrative expenses amounted explained by non-recurrent expenses;Absence of transition costs in Q3 2018 (0.5-million in Q3 2017); Reduced financial expenses ($0.3 M) following the debt reimbursement in late 2017.
Cash flow from operating, investing and financing activities and working capital/liquidity
Operating activities
During Q3 2018, the cash flow from operations, before changes in working capital items, amounted to $1.6-million ($6.3-million for the nine-month period ending Sept. 30, 2018), compared with $2.6-million in Q3 2017 ($5.9-million for the nine-month period ending Sept. 30, 2017). This decrease between quarters is primarily explained by the decrease in cash gross operating margin.
During Q3 2018, total cash from operating activities amounted to $1.1-million ($8.7-million for the nine-month period ending Sept. 30, 2018) compared with $3.4-million in Q3 2017 ($7.9-million for the nine-month period ending Sept. 30, 2017). Changes in working capital items amounted to ($0.5)-million ($2.4-million or the nine-month period ending Sept. 30, 2018) compared with $0.8-million and $2.0-million for the same periods in 2017.
Investing Activities
During Q3 2018, there were net investment of $0.2-million ($1.2-million for the nine-month period ending Sept. 30, 2018) for the acquisition of property, plant and equipment ($0.1-million and $0.5-million for the same periods in 2017) mainly relating to additions to the Chala plant and to the expansion of the tailing pond. Additions to exploration and evaluation assets during Q3 2018, amounted to $0.3-million ($0.7-million for the nine-month period ending Sept. 30, 2018) compared with respectively $0.1-million and $0.4-million in 2017).
Financing Activities
For the nine-month period ending Sept. 30, 2018, 1,028,250 share purchase options (91,000 in 2017) were exercised for a cash consideration of $0.5-million (non-significant in Q3 2018).
For the nine-month period ending Sept. 30, 2018, $0.6-million was incurred ($0.2-million in 2017) for closure of facilities (non-significant in Q3 2018).
No repayments of long-term debt or interests were paid in 2018 (respectively $1.7-million and $0.2-million in Q3 2017).
Working capital and liquidity
As at Sept. 30, 2018, the corporation's working capital amounted to $18.9-million, including $11.1-million in cash ($16.0-million, including $4.8-million in cash at Dec. 31, 2017).
Outlook 2018
Ore processing
The corporation's gold production for the year ended Dec. 31, 2017, amounted to 79,897 ounces, an increase of 8.7 per cent, as compared with 2016. In view of the first nine months of gold production, Dynacor expects to reach approximately 82,000 ounces in 2018, which would represent a 2.6 per cent year over year increase and be the highest production in the company's history.
Exploration
In November, IP Geophysics and interpretation of results have been completed which will enable to determine definitive drilling targets. Surface drilling will begin shortly afterwards upon reception of final approval and in consideration of rainy season.
ABOUT DYNACOR GOLD MINES INC.
Dynacor Gold Mines Inc. is a gold production corporation headquartered in Montreal, Canada. The corporation is engaged in production through its government approved ore processing operations. At present, Dynacor produces and explores in Peru where its management team has decades of experience and expertise. In 2017, Dynacor produced 79,897 ounces of gold, a 9 per cent increase as compared with 2016 (73,477 ounces). Dynacor trades on the Toronto Stock Exchange (DNG) and the OTC in the United States under the symbol (DNGDF).
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