Q3-2017: Dynacor Reports Net Income of US $1.2 M and Additional Partial Debt Repayment of $1.7M
MONTREAL, QUEBEC--(Marketwired - Nov. 15, 2017) - Dynacor Gold Mines Inc. (TSX:DNG)(OTC:DNGDF) (Dynacor or the Corporation) a Corporation with gold and silver ore processing operations and exploration projects in Peru, has released its unaudited condensed consolidated financial statements and the management's discussion and analysis ("MD&A") for the three-month and nine-month periods ended September 30, 2017.
These documents have been filed electronically with SEDAR at www.sedar.com and will be available on the Corporation's website www.dynacor.com.
(All figures in this press release are in millions of US$ unless stated otherwise. Earnings per share and cash-flow per share are in US$. All variance %, except for net income, are calculated from rounded figures. Some additions might be incorrect due to rounding).
In Q3-2017 Dynacor completed its twenty-sixth consecutive quarter of profits with net income of $1.2 million ($0.03 per share) compared to $1.3 million ($0.03 per share) in 2016 and a cash flow from operating activities before change in working capital items of $2.6 million and $0.07 per share in Q3-2017 (cumulative $5.8 million and $0.15 per share) compared to $2.4 million and $0.06 per share in Q3-2016 (cumulative $5.4 million and $0.14 per share in 2016).
Highlights for the third quarter of 2017
(Variance %, are calculated based on rounded figures)
- Cash on hand of $10.6 million at September 30, 2017 ($6.2 million as at December 31, 2016);
- Additional partial debt prepayment of $1.7 M during the quarter;
- Gold production of 20,521 ounces (cumulative nine-month of 55,831 ounces) compared to 19,131 ounces in Q3-2016 (cumulative 2016 nine-month production of 52,462 ounces) for respective period increases of 7.3% and 6.4% compared to 2016;
- Sales of $26.8 million (cumulative nine-months of $73.3 million) compared to $27.3 million in Q3-2016 (cumulative $69.3 million in 2016) a decrease of 1.8% between quarters and year to date increase of 5.8% compared to 2016;
- Gross operating margin of $3.7 million (13.8%) in Q3-2017 (cumulative nine-month of $9.5 million (12.9%)) compared to $3.9 million (14.2%) in Q3-2016 (cumulative nine-month of $10.0 million (14.4%) in 2016) for respective decrease of 5.1% and 5.0% compared to 2016;
- Cash flow from operating activities before change in working capital items of $2.6 million and $0.07 per share (2) in Q3-2017 (cumulative nine-month of $5.8 million and $0.15 per share (2) compared to $2.4 million and $0.06 per share (2) in Q3-2016 (cumulative $5.4 million and $0.14 per share (2) in 2016;
- EBITDA (1) of $3.3 million in Q3-2017 (cumulative nine-month 2017 of $7.9 million), compared to $3.2 million in Q3-2016 (cumulative nine-month 2016 of $7.7 million);
Recent event
- Subsequent to the quarter end, the Corporation made an additional partial debt prepayment of $1.2 million on its outstanding term loan for a total amount of repayment made in 2017 of $2,9 million, reducing the outstanding principal to $3.4 million. The Corporation favors the prepayment of its debt. Therefore, if possible, the Corporation will proceed with an additional debt prepayment before year-end.
| (1) | 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. |
| (2) | 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. |
Overview
The Veta Dorada Plant was officially inaugurated on October 3, 2016. This plant is the stepping stone for the future growth of our processing activities in Peru.
The first half of 2017, was affected by extremely heavy rainfalls, occurring mostly in March and until mid-April, which affected the overall miners' production and transport conditions entering the second quarter of 2017. As well in July, the southern part of Peru was struck by an important earthquake which damaged roads and bridges interrupting access of major portion of ore supply to main road of transport.
Despite these challenges, the Corporation gross operating margin continued to improve as processing volume increases, reaching 13.8% in Q3-2017 compared to 12.4% in Q2-2017 and considerably better than the 9.5% margin obtained in Q4-2016 at the Veta Dorada plant which was its initial quarter of operations.
Following a slow start to the quarter, as expected, ore supply picked-up momentum from August on which permitted to complete Q3-2017 on a strong note (refer to October 16, 2017-Dynacor produces 20,521 oz of gold in Q3-2017 press release).
For the first nine-month of 2017, the Corporation produced 55,831 ounces of gold compared to 52,462 ounces of gold 2016, an increase of 6.4%.
Results from operations:
Total sales for the quarter amounted to $26.8 M (cumulative nine month of $73.3 M) compared to $27.3 M for Q3-2016 (cumulative nine-month of $69.3 M in 2016), a slight decrease of 1.8% between quarters (increase of 5.8% over the nine-month period ended September 30, 2016). This increase is due to higher volume of gold sold as gold average market price were slightly lower than in Q3-2016.
The gross operating margin amounted to $3.7 M in Q3-2017 (cumulative of $9.5 M for the nine-month period) compared to $ 3.9 M and cumulative $ 10.0 M for the same periods in 2016. The gross operating margin compared to 2016, was affected by lower average gold selling price and as well by higher operation expenses due to the larger scale operation at the Veta Dorada plant. Those expenses are to be reduced on a per unit basis as production volume increases.
Net income was $1.2 M for the three-month period ended September 30, 2017 ($2.5 M for the nine-month period ended September 30, 2017), compared to $1.3 M (cumulative nine-months of $3.1 M) for the same periods in 2016. The quarter decrease in net income compared to 2016 is explained by the $0.2 M decrease in the gross operating margin, the $0.5 M increase in transition and maintenance expenses relating to the Huanca site, a $0.3 M decrease in foreign exchange loss as well as a $0.2 M decrease in income taxes.
Financial statement highlights
| Three-month periods ended September 30, | Nine-month periods ended September 30, | ||||
| (in $'000) | 2017 | 2016 | 2017 | 2016 | |
| Sales | 26,797 | 27,317 | 73,278 | 69,266 | |
| Cost of sales | 23,111 | 23,449 | 63,795 | 59,295 | |
| Gross operating margin | 3,685 | 3,868 | 9,483 | 9,971 | |
| General and administrative expenses | 863 | 990 | 2,992 | 2,989 | |
| Operating income | 2,339 | 2,707 | 5,619 | 6,190 | |
| Net income and comprehensive Income | 1,239 | 1,310 | 2,460 | 3,077 | |
| EBITDA(1) | 3,308 | 3,174 | 7,885 | 7,725 | |
| Net cash flow from operating activities beforechange in working capital items | 2,614 | 2,358 | 5,775 | 5,379 | |
| Cash flow from operating activities | 3,436 | 2,049 | 7,928 | 3,075 | |
| Earnings per share | |||||
| Basic | 0.03 | 0.03 | 0.06 | 0.08 | |
| Diluted | 0.03 | 0.03 | 0.06 | 0.08 | |
| Reconciliation of net comprehensive income to EBITDA(1) | |||||
| Net comprehensive income | 1,239 | 1,310 | 2,460 | 3,077 | |
| Income taxes | 701 | 850 | 2,088 | 2,137 | |
| Financial expenses | 363 | 248 | 947 | 571 | |
| Depreciation | 1,005 | 766 | 2,296 | 1,969 | |
| Write-off of exploration and evaluation assets | - | - | 94 | - | |
| Gain on revaluation of financial instrument | - | - | - | (29 | ) |
| EBITDA (1) | 3,308 | 3,174 | 7,885 | 7,725 | |
| Reconciliation of net cash flow from operating activities before change in working capital items per share(2) | |||||
| Net cash flow from operating activities before change in working capital items (in $'000) | 2,614 | 2,358 | 5,775 | 5,379 | |
| Basic weighted average number of commonshares outstanding ('000) | 38,765 | 38,400 | 38,730 | 37,798 | |
| Net cash flow from operating activities before change in working capital itemsper share(2) | 0.07 | 0.06 | 0.15 | 0.14 | |
Jean Martineau, Dynacor's CEO and President commented, "Despite the worst rainy season in the last 20 years in Peru which was then followed by the natural disaster, we have achieved solid operational results so far in 2017. We have overcome our challenges, increased our gold production as well as our ore purchases compared to 2016. We generated a solid cashflow which permitted us to reduce our debt by an additional $1.7M. We now continue working on achieving full capacity and improving our operation costs."
Cash flow from operating, investing and financing activities and working capital
Operating activities
During Q3-2017, the cash flow from operations, before changes in working capital items, amounted to $2.6 million (cumulative nine-months of $5.8 million in 2017), compared to $2.4 million and cumulative $5.4 million for the respective periods in 2016. This increase between quarters is primarily explained by the decrease sales expenses and increase in depreciation expenses, slightly offset by the increase in interest expense of $0.1 million during the quarter.
During Q3-2017, total cash from operating activities amounted to $3.4 million compared to $2.0 million in Q3-2016. Changes in working capital items amounted to $0.8 million compared to ($0.3 million) in 2016.
For the nine-month period ended September 30, 2017, total cash generated from operating activities amounted to $7.9 million, compared to $3.1 million in the comparative period. Changes in working capital items amounted to $2.2 million (($2.3 million)) in the comparative period, relating primarily to a decrease in inventory of $2.1 million.
Investing activities
During Q3-2017, there were minor investment of $0.1 million (cumulative nine-month of $0.6 million) for the acquisition of property, plant and equipment compared to $1.9 million and $ 8.3 million for the same periods in 2016 as we were completing construction of the Veta Dorada processing plant. Additions to exploration and evaluation assets during Q3-2017, amounted to $0.1 million ($0.4 million for the nine-month period ended September 30, 2017) compared to $0.2 million and $1.0 million for the same periods in 2016.
Financing activities
During Q3-2017, the Corporation made partial prepayments of principal in the amount of $1.7 million on its long-term debt (cumulative of $1.7 million in 2017). In 2016, there had been an increase in the loan by $2.0 million during Q3-2016 (cumulative increase of $7.0 million in 2016). Interest expenses paid during the period amounted to $0.2 million ($0.1 million in 2016) and $0.5 million for the nine-month period ended September 30, 2017 ($0.3 million in 2016).
Working capital
As at September 30, 2017, the Corporation's working capital amounted to $18.3 million, including $10.6 million in cash ($15.8 million, including $6.2 million in cash at December 31, 2016).
Closure of the Huanca Metalex Plant
The Corporation has just taken the decision to definitively close it old Huanca Metalex Plant and initiate immediate decommissioning and site restoration.
"Considering the current ore market conditions and the ability for Dynacor to increase processing capacity at our new Veta Dorada plant, there was no further need to retain the Huanca plant in care and maintenance. As well, for security purposes, the decision to close down and restore the site was the best in the circumstances" commented Jean Martineau. The site restoration program will be completed over a six-month period. The Corporation has assessed the restoration program costs and updated its provision. It does not anticipate incurring significant additional costs to this regard.
Outlook 2017
Ore processing
The objective for the remainder of 2017 is to control and reduce production costs and ramp up production at the Veta Dorada Plant to its current 300-tpd capacity. Approval for capacity increase to 360 tpd has been obtained. As soon as the production level reaches 300 tpd on a consistent basis, the Corporation will proceed with the capital investment to increase the plant capacity.
Following the major climate issues, the production target had been reviewed in August to between 78,000 and 80,000 ounces. As at September 30, 2017, total production amounts to 55,831 ounces of gold and the Corporation is confident it will meet its 2017 objectives.
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 2016, Dynacor produced 73,476 ounces of gold, a 9% increase as compared with 2015 (67,603 ounces in 2015). 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 Gold Mines Inc. (TSX:DNG)
Website: http://www.dynacor.com
Twitter: http://twitter.com/DynacorGold
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Shares outstanding: 38,812,594
Contact
Jean Martineau
President and CEO
Dynacor Gold Mines Inc.
514-393-9000 ext. 228
Dale Nejmeldeen
Director, Investor Relations
Dynacor Gold Mines Inc.
604.492.0099
604.562.1348 (Mobile)
nejmeldeen@dynacor.com