Dynacor 2022: Reports Its 12th Consecutive Annual Profit, With a Net Income of US$12.0 Million (US$0.31 or CA$0.40 Per Share)
Including a Yearly Gold Production Record Exceeding 110,000 AuEq OuncesDynacor Group Inc. (TSX: DNG) (Dynacor or the Corporation) released its audited annual consolidated financial statements and the management's discussion and analysis (MD&A) for the year ended December 31, 2022.
These documents have been filed electronically with SEDAR at www.sedar.com and will be available on the Corporation's website www.dynacor.com.
(All figures in this press release are in Ms of US$ unless stated otherwise. All amounts per share are in US$. All variance % are calculated from rounded figures. Some additions might be incorrect due to rounding).
2022 OVERVIEW AND HIGHLIGHTS
OVERVIEW
Dynacor completed 2022 with both production and financial historical high performances representing its twelfth (12th) consecutive year of profit. The Corporation achieved a production record of 110,359 AuEq ounces powering total sales to $197.5 million (CA$256.9 million) just surpassing 2021 sales, and a net income of $12.0 million (US$0.31 or CA$0.40 per share).
During the fourth quarter of 2022, the Corporation completed another plant expansion at its Veta Dorada plant, in Chala, Peru, increasing its mill capacity by an additional 16% to 500 tpd from previously 430 tpd. This capacity increase followed the 25% increase that was completed in mid-2021.
Thanks to its high level of ore inventory at the opening of the year and the increasing volume of ore supplied, the mill has been able to operate at full capacity throughout the year averaging a new record high processing rate of 413 tpd.
HIGHLIGHTS
Operational
- Higher ore volume supplied. Total ore volume supplied reached an all time high of 147,500 tonnes in 2022 (141,400 tonnes in 2021). Year-end ore inventory was over 10,000 tonnes which represents more than 20 days of production throughput;
- Increased plant capacity. In Q4-2022, the plant capacity was increased by 16%, which followed a 25% increase in Q2-2021;
- Highest yearly volume processed. In 2022, the Veta Dorada plant processed a historical high volume of 150,819 tonnes of ore (413 tpd average) compared to 134,269 tonnes in 2021 (368 tpd) a 12.3% increase;
- Record high yearly gold production. In 2022, the gold equivalent production amounted to 110,359 AuEq ounces compared to 106,862 AuEq ounces in 2021 a 3.3% increase.
Financial
- Decreasing trend in gold prices, the inflation and lower grades of ore processed impacted 2022 financial performance;
- Solid cash position. Cash on hand remained solid at $25.6 million at year-end 2022 compared to $27.1 million at year end 2021;
- Total sales similar to 2021. Sales amounted to $197.5 million in 2022 compared to $195.9 million in 2021;
- Decreased in gross operating margin. Gross operating margin amounted to $24.4 million (12.4% of sales) in 2022, compared to $27.1 million (13.8% of sales) in 2021;
- Operating income of $18.1 million in 2022 compared to $21.2 million in 2021 mainly due to the decrease in gross margin;
- Cash gross operating margin of $249 per AuEq ounce sold (1) compared to $269 in 2021;
- EBITDA (2) of $21.2 million, compared to $23.5 million in 2021;
- Stable cash-flows. Cash flows from operating activities before change in working capital items of $14.9 million ($0.38 per share) (3) compared to $15.1 million ($0.39 per share) in 2021.
- Increased net income. Dynacor recorded an historical high net income of $12.0 million in 2022 ($0.31 or CA$0.40 per share) compared to $11.8 million ($0.30 or CA$0.38 per share) in 2021.
Return to Shareholders
- Share buy-back. 819,416 common shares repurchased for $1.9 million (CA$2.4 million) in 2022, compared to 441,340 common shares for $0.9 million (CA$1.2 million) in 2021;
- Increased dividends. Continuation of monthly dividend payments which had been increased by 25% at the start of 2022 to CA$0.10 per share per year for a total of $3 million. This was recently followed by a new increase to CA$0.12 per year from January 2023.
| (1) Cash gross operating margin per AuEq ounce is in US$ and 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 basis, 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
Consolidated Statement of net income and comprehensive income
|
| For the years ended December 31, | |
| (in $'000) | 2022 | 2021 |
|
|
|
|
| Sales | 197,545 | 195,906 |
| Cost of sales | (173,120) | (168,850) |
| Gross operating margin | 24,425 | 27,056 |
| General and administrative expenses | (5,970) | (5,808) |
| Other projects expenses | (318) | (34) |
| Operating income | 18,137 | 21,214 |
| Financial income and expenses | 85 | (231) |
| Foreign exchange loss | (105) | (344) |
| Income before income taxes | 18,117 | 20,639 |
| Current income tax expense | (6,548) | (8,339) |
| Deferred income tax (expense) recovery | 445 | (519) |
| Net income and comprehensive income | 12,014 | 11,781 |
|
|
|
|
| Earnings per share |
|
|
| Basic | $0.31 | $0.30 |
| Diluted | $0.30 | $0.30 |
Total sales amounted to $197.5 million compared to $195.9 million in 2021. The $1.6 million increase is explained by higher average selling prices and quantities sold each contributing to a $0.8 million increase.
The 2022 gross operating margin amounted to $24.4 million (12.4% of sales) compared to $27.1 million (13.8% of sales) in 2021. The 2022 gross operating margin was negatively impacted by lower grades and the global inflation affecting our unit cost of production, by the overall trend in gold market prices compared to 2021 even though the 2022 average gold selling price was slightly higher.
General and administrative expenses amounted to $6.0 million in 2022 comparable to 2021.
Other projects represent the expenses incurred by the Corporation to duplicate its unique business model in other jurisdictions.
The 2022 net income was also affected by the recording of a $6.1 million income tax expense including $0.7 million of withholding tax paid on dividends received from the subsidiary and a -$0.5 million (non-cash) deferred income tax recovery. The deferred tax expense or recovery is mainly explained by the variance throughout the period of the Peruvian Sol against the US$ which affect long term assets local tax basis.
Reconciliation of non-IFRS measures
| (in $'000) | For the years ended December 31, | |
|
| 2022 | 2021 |
| Reconciliation of net income and comprehensive income to EBITDA |
|
|
| Net income and comprehensive income | 12,014 | 11,781 |
| Income taxes expense (current and deferred) | 6,103 | 8,858 |
| Financial expenses (income) | (85) | 229 |
| Depreciation | 3,205 | 2,639 |
| EBITDA | 21,237 | 23,507 |
CONSOLIDATED CASH FLOW FROM OPERATING, INVESTING AND FINANCING ACTIVITIES AND WORKING CAPITAL AND LIQUIDITY
Operating activities
For the year ended December 31, 2022, the cash flow from operations, before changes in working capital items, amounted to $14.9 million compared to $15.1 million for the year ended December 31, 2021. Net cash from operating activities amounted to $6.2 million compared to $21.9 million for the year ended December 31, 2021. Changes in working capital items amounted to (-$8.7 million) compared to $6.8 million for the year ended December 31, 2021.
Investing activities
During the year ended December 31, 2022, the Corporation invested a net amount of $3.5 million ($3.2 million for the year ended December 31, 2021). This amount includes investments at the plant notably in relation to its capacity increase (+16% throughput level), improvements in production processes and new vehicles. All investments have been financed with internally generated cash-flows.
Additions to exploration and evaluation assets were limited to the maintaining and safekeeping of assets in 2022 and 2021.
Financing activities
In 2022, monthly dividends of CA$0.0083 representing an annual total of CA$0.10 per share were disbursed for a total consideration of $3.0 million (CA$3.9 million). In 2021, due to the changes in the dividend policy, a quarterly dividend and eleven monthly dividends totaling CA$0.082 per share were disbursed for a total consideration of $2.5 million (CA$ 3.2 million). An increase in monthly dividend per share paid were attributed from January 2022.
In 2022, 819,416 common shares were repurchased under the Corporation normal course issuer bid share buyback program for a total cash consideration of $1.9 million (CA$ 2.4 million) (441,340 shares for a total cash consideration of $0.9 million (CA$1.2 million in 2021)).
In 2022, the Corporation received $0.9 million (CA$ 1.1 million) for the exercise of purchase options ($0.4 million in 2021 (CA$ 0.5 million)).
In 2022, the Corporation made repayments of lease liabilities and assets retirement obligations for $0.3 million ($0.3 million in 2021).
Working capital and liquidity
As at December 31, 2022, the Corporation's working capital amounted to $43.7 million, including $25.6 million in cash ($36.4 million, including $27.1 million in cash at December 31, 2021).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31, 2022, total assets amounted to $96.9 million ($91.4 million as at December 31, 2021). Major variances since last year-end come from the significant increase in accounts receivables (fully collected after year-end) and in inventories and the variance in the current tax position.
| (in $'000) |
| As at December 31, | As at December 31, |
|
|
| 2022 | 2021 |
| Cash |
| 25,595 | 27,099 |
| Accounts receivable |
| 12,298 | 8,407 |
| Inventories |
| 16,447 | 14,764 |
| Prepaid |
| 223 | 139 |
| Current tax assets |
| 371 | - |
| Property, plant and equipment |
| 21,392 | 20,759 |
| Right-of-use assets |
| 701 | 341 |
| Exploration and evaluation assets |
| 18,543 | 18,516 |
| Other non-current assets |
| 1,332 | 1,332 |
| Total assets |
| 96,902 | 91,357 |
|
|
|
|
|
| Trade and other payables |
| 11,168 | 11,680 |
| Asset retirement obligations |
| 3,642 | 3,553 |
| Current tax liabilities |
| - | 2,217 |
| Deferred tax liabilities |
| 1,110 | 1,555 |
| Lease liabilities |
| 701 | 343 |
| Shareholders' equity |
| 80,281 | 72,009 |
| Total liabilities and equity |
| 96,902 | 91,357 |
OUTLOOK 2023
Ore processing
For 2023, the Corporation forecasted sales (1) in the range of $210-235 million representing a growth of 6.5-20.0% over 2022 sales. This would result in a net income in the range of $8.5-11.5 million ($0.22-0.30 per share) (CA$0.30-0.41 per share).
Dynacor's 2023 capital budget of $7.0 million includes investments at the Veta Dorada plant for new efficiency improvement equipment's, an increasing tailing pound capacity and additional vehicles for our ore purchase team.
The Corporation has also budgeted approximately $1.0 million to advance other projects in other jurisdictions.
| (1) Using a market gold price ranging between $1,800 and $1,900 per ounce |
ABOUT DYNACOR
Dynacor is a dividend-paying industrial gold ore processor headquartered in Montreal, Canada. The corporation is engaged in gold production through the processing of ore purchased from the ASM (artisanal and small-scale mining) industry. At present, Dynacor operates in Peru, where its management and processing teams have decades of experience working with ASM miners. It also owns a gold exploration property (Tumipampa) in the Apurimac department.
The corporation intends to expand its processing operations in other jurisdictions as well.
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 pay 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 for our artisanal and small-scale miner's communities.
Dynacor is listed on the Toronto Stock Exchange (DNG).
FORWARD-LOOKING INFORMATION
Certain statements in the preceding 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.
Shares Outstanding: 38,428,048
Website: http://www.dynacor.com
Twitter: http://twitter.com/DynacorGold
Dynacor completed 2022 with both production and financial historical high performances representing its twelfth (12th) consecutive year of profit.
Contact
Director, Shareholder Relations
Dale Nejmeldeen
Dynacor Group Inc.
T: 514-393-9000 #230
E: investors@dynacor.com