DYNACOR GOLD MINES INC. 5 YEAR PERFORMANCE REVIEW

Transcription

1 The Makes Money At Any Gold Price Company DYNACOR GOLD MINES INC. 5 YEAR PERFORMANCE REVIEW (Quarter Ended September ) Prepared By: Dale Nejmeldeen

2 TABLE OF CONTENTS QUARTERLY GOLD PRICE 1 EARNINGS PER SHARE 11 CANADIAN/US EXCHANGE RATE 2 PRICE TO EARNINGS RATIO 12 GOLD PRODUCTION 3 CASH FLOW 13 SILVER PRODUCTION 4 CASH FLOW PER SHARE 14 NET PROFIT PER OUNCE 5 NET ASSET VALUE 15 AVERAGE GOLD GRADE 6 NET ASSET VALUE PER SHARE 16 GROSS SALES 7 PRICE TO NET ASSET VALUE RATIO 17 PRICE TO SALES RATIO 8 WEIGHTED SHARES OUTSTANDING 18 GROSS OPERATING MARGIN ($) 9 QUARTERLY AVERAGE SHARE PRICE 19 GROSS MARGIN (%) 10 VETA DORADA PLANT 20

3 FIVE YEAR PERFORMANCE REVIEW The following report looks at a five year review of Dynacor s calendar year quarterly performance in many different valuation metrics. It includes such areas as fundamental financial valuations, stock price performance and peer comparison. FORWARD LOOKING INFORMATION Certain statements in the forgoing 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 review.

4 QUARTERLY GOLD PRICE (US$/OUNCE) Uncertainty about future gold prices is one of the major risks of a pure gold mining or exploration company as it directly affects mining project viability and gold in the ground valuations. For example, the chart to the right shows the average quarterly market price of gold over a?ive- year period. There is a variance of $600 per ounce which makes for a volatile commodity and therefore it is dif?icult to de?ine future trends. The market price becomes even more unpredictable when comparing over a longer period of time. Thus, it is next to impossible for Dynacor or mine analysts to accurately forecast future prices. $1,500 $1,200 $600 US$ Gold Price/Ounce Linear Trend Dynacor mitigates this risk through its business of ore processing which is purchased at a discount to the gold international spot price. Over that period, the Corporation s?inancial results have proven it can achieve net earnings with or with out the presence of a gold bull market. $300 1

5 CANADIAN/US EXCHANGE RATE Canadian/US Exchange Rate Linear Trend It is important to note that Dynacor reports its?inancial results in US dollars due to the adoption of the International Financial Reporting Standards (IFRS). The operational labor costs are in local Peruvian sol, ore purchases are discounted to the 0.70 international price of gold and in US dollars while the majority of corporate expenses are in Canadian dollars

6 GOLD PRODUCTION (OUNCES) Gold production of 15,607 ounces was down in the third quarter 2015 compared to the same period last year (19,217 ounces). Dynacor s gold production guidance for 2015 is 64,000-68,000 ounces. A brand new cost- ef?icient processing plant, Veta Dorada in Chala, is under construction. The new plant should be operational in the?irst semester of 2016 starting at an initial capacity of 102,000 tons per year (300 tpd) with designs to steadily double to 204,000 tons per year (600 tpd). 22,000 16,500 11,000 Gold Production (Ounces) Linear Trend Notably, to start the fourth quarter 2015, the month 5,500 of October was a year to date best. The Company produced 6,808 ounces of gold which on an annualized basis is 81,096 ounces. 0 3

7 SILVER PRODUCTION (OUNCES) 50,000 Silver Production (Ounces) Linear Trend Dynacor s time- tested method (17 years) in processing gold from the ore it purchases also yields continuous amounts of silver by- product which is a commercially viable resource with positive economic impacts. 37,500 25,000 12,

8 NET PROFIT PER OUNCE (US$) The new Veta Dorada plant strategically located Gold Price/Ounce (US$) near Chala, Peru is expected to add incremental Net Profit Per Ounce (US$) production and signi?icantly reduce our cost per ounce The Veta Dorada cost savings estimate is as follows: Energy cost savings: 66% Transportation cost savings: $40/ounce Tailings cost savings: $12/ounce The new plant is scheduled for a?irst quarter 2016 completion (Jan- Mar) with?irst gold pour in the second quarter 2016 (Apr- Jun). 5 $1,350 $

9 AVERAGE GOLD GRADE (OUNCE/TONNE) Dynacor attracts the highest grade producers in Peru. Gold Price/Ounce (US$) As of the third quarter 2011, gold grades delivered to Gold Grade (Ounce/Tonne) the Company have steadily increased. If the gold price stays at these low levels or drops even further, some Gold Grade Linear Trend 1.2 miners will shut down, but the best of the best will remain in business and source the highest grades. $1, The Peruvian government implemented a new policy cracking down on illegal gold ore processors both at the artisanal and semi- industrial levels. Dynacor is one of the very few fully permitted and legal gold processing companies in Peru and is, as such, particularly well positioned in the market to bene?it. The average gold grade in the third quarter 2015 was 0.97 ounces per tonne. 6 $

10 GROSS SALES (US$) Gold Price/Ounce (US$) Gross Sales (US$ 000 s) 40,000 Precious metal sales in the third quarter of 2015 $1,350 30,000 totalled $18.5 million, a 23% decrease from the same period last year ($24.0 million). This was attributable to the lower gold price and its impact on the production of the small scale miners. 7 $450 20,000 10,000 0

11 PRICE TO SALES RATIO (US$) Today's current metals and mining industry has an average price to sales ratio of One can presume with continued weaker gold prices and consistent quarterly pro?its reported from Dynacor, that its price to sales ratio of 0.51 will continue to outperform the mining industry average and move more in- line with the basic materials average of 1.52 times. In other words, investors as of the third quarter 2015 were buying at a value of 0.51 for every dollar of Dynacor sales and 1/3 off of the basic materials price to sales average Price to Sales Ratio (US$) Linear Trend Metals and Mining: industry_valuation_ttm.php?ps&ind= Basic Materials: Industry_Valuation.php?s=

12 GROSS OPERATING MARGIN (US$) 6,000 Gross Operating Margin (US$) Linear Trend Our gross operating margin during the third quarter 2015 was down due to a lower volume of gold sales re?lected by a lower international spot selling price. In the third quarter 2015, Dynacor s gross operating margin amounted to US$ 2.5 million. 4,500 3,000 1,

13 GROSS MARGIN (%) Gross Margin (%) Linear Trend 24% Importantly, even in a period with gold prices weakening, our ore processing operations continued to deliver positive gross margins of 13.5% (cumulative nine- month of 16.4%). 18% 12% 6% 0% 10

14 EARNINGS PER SHARE (EPS) (US$) Gold Price/Ounce (US$) Earnings Per Share (US$).09 For eighteen consecutive quarters, Dynacor has generated pro?its; this during a time in what is considered by many as the worst junior resource bear market in history. $1, Dynacor s current trailing twelve month (TTM) earnings is US$ 0.12 per share. $

15 PRICE TO EARNINGS RATIO (TTM)(US$) Gold Price/Ounce (US$) Price to Earnings Ratio (US$) The Company's earnings multiple is steadily trending up as the market continues to see consistent quarterly pro?its, a rock solid balance sheet and a proven managerial bias against shareholder dilution. By means of Dynacor s new mill coming on stream, a steady increase in production and a developing resource at the Company s?lagship gold project, Tumipampa indicates a signi?icant growth dynamic that justi?ies much higher earnings multiples in the coming quarters. P/E Formula: TTM US$ EPS/Q average US$ Share Price $1,350 $

16 CASH FLOW (US$) Gold Price/Ounce (US$) Cash Flow From Operating Activities (US$) $4,000 3,500 3,468 3,135 $1,350 $3,000 2,4302,470 2,303 2,188 2,013 1,4641,500 1,445 1,254 $450 1,547 1,477 1, $2,000 1,947 1,801 1,259 $1, Q 320 Q Q Q Q Q Q Q Q Q Q Quarter after quarter regardless of the gold price, Dynacor continues to generate a positive cash?low as they say cash is king 13

17 CASH FLOW PER SHARE (US$) Gold Price/Ounce (US$) Cash Flow Per Share (US$).10 Dynacor s current trailing twelve month (TTM) cash?low is US$ 0.17 per share. Some hold a company s cash?low per share with more importance than the earnings per share metric. As the chart to the right shows, Dynacor has no problem in generating cash for its shareholders. $1,350 $

18 NET ASSET VALUE (NAV) (US$) Gold Price/Ounce (US$) Net Asset Value (US$ 000's) $50,000 The company's resilient business model is one that is capable of generating cash internally. Dynacor s higher return on equity compared to its peers is another advantage to our shareholders. Dynacor has a net asset value of US$ 41.2 million. $1,350 $450 $37,500 $25,000 $12,500 15

19 NET ASSET VALUE PER SHARE (US$) Gold Price/Ounce (US$) Net Asset Value Per Share (US$) $1.20 Dynacor s net asset value per share (NAV) is increasing consistently as is proven from eighteen consecutive quarters of growth. Since the?irst quarter of 2011, Dynacor s NAV per share has risen 335% (US$ 1.13 NAV/share in Q3-2015) compared to (US$ 0.26 NAV/ in Q1 2011). $1,350 $

20 PRICE TO NET ASSET VALUE RATIO (US$) Gold Price/Ounce (US$) Price to Net Asset Value/Share (US$) 7.0 Dynacor s price to NAV as of the end of the third- quarter, 2015 was 1.1 which is above the current metals and mining sector average of 0.88 times. Metals and Mining: industry_valuation_ttm.php?pb&ind=108 $1,350 $

21 WEIGHTED SHARES OUTSTANDING (BASIC) Basic Shares Outstanding (000's) 40,000 Dynacor has one of the lowest share counts (37.4 million) in the mining industry. A low share count ensures every investor a slightly larger proportionate stake in the company. As well with lower shares outstanding, key fundamental ratios such as sales, earnings, cash?low and dividend payout amounts increase more quickly than companies with higher share counts. 37,500 35,000 32,500 30,000 18

22 QUARTERLY AVERAGE SHARE PRICE (CAN$) Gold Price/Ounce (US$) Quarterly Share Price (CAN$) Dyancor s quarterly average share price during the third quarter 2015 was CAN$ 1.62 per share. As of the time of this writing (November 18, 2015) Dynacor s share price is down 3.7% year to date. Looking at longer term and over the last?ive years, the share price has risen to CAN$ 1.62 from.40, a 305% gain. $1,350 $

23 New Veta Dorada Plant Under Construction in Chala, Peru Dynacor is a gold ore-processing and exploration Corporation active in Peru since 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 37.4 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. The financial statements and analysis are available on the corporation s website. The documents have been filed electronically with SEDAR. For further information, please contact: Dale Nejmeldeen Investor Relations Director Dynacor Gold Mines Inc. (TSX:DNG) (US:DNGDF) T: M: E: nejmeldeen@dynacor.com