Financial Post article on Dynacor Gold - DNG
Dynacor: Back to Front
Resources Wire | Jay Currie | October 18, 2015 7:39 PM ET
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Dynacor Huanca ore-processing mill with a current max capacity of 250 tonnes per day
Dynacor Gold MinesDynacor Huanca ore-processing mill with a current max capacity of 250 tonnes per day
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Dynacor: Back to Front
Conventionally a junior explorer finds a property, raises money, drills, raises more money and if things look promising, builds a mine and a mill.
Dynacor (T.DNG) is doing things in reverse.
Jean Martineau, Dynacor’s President and CEO came to junior mining exploration from the brokerage world, “I was a broker in the 1980’s.” said Martineau, “I was amazed at all the dilution I saw. And I was really frustrated. We needed a way to finance other than dilution.”
The creative solution to this problem was to build a small mill to process the ore mined by Peruvian artisanal miners. “We wanted to use the mill to finance our exploration.”
In 1996 Dynacor commenced construction of its custom gold ore-processing plant in southern Peru. It poured its first gold in 1998.
The mill started at a modest 50 tons per day but has been expanded to handle 250 tons per day. “We have established a reputation in Peru.” said Martineau, “We buy the ore from the small miners. We have achieved a 95% recovery rate which is the highest in Peru. We are looking for a gross margin of 17% and the mill generates between 7 and 10 million dollars a year in cash.”
Dynacor wanted the cash to finance exploration. It acquired its flagship property, Tumipampa, in 2000. The property was acquired because Dynacor found high grade gold veins at surface. Currently all of the land around Tumipampa is claimed by major mining companies such as Southern Copper, Buenaventura, Barrick, Yamana, IAMGold, Fresnillo and the Junefield Group from China.
Over the years the company has explored the property and discovered additional veins – and mantos – have been discovered with gold grades ranging from 6 grams per ton on up to 30 grams per ton.
Dynacor has conducted surface drilling programs to delineate the geology of the property. However, in 2012, Dynacor began to excavate a crosscut which allowed the exploration of the property to be conducted underground. “There is more information underground.” explained Martineau, “We have excavated a 2.5 by 3 meter cross-cut tunnel right through mantos and veins.”
Running off this main cross-cutt are drifts and chimneys which can be drilled or excavated to determine grade. In its October 8th 2015 press release, Dynacor was able to report channel sampling in a raise within the Manto Dorado which exposed a massive (35 meters) high-grade gold-bearing band of copper sulphides. The raise showed an average gold grade of 27.3 grams per ton and copper running an average of 2.19% with an average width of 1.2 meters.
October 15, 2015, Dynacor put out another press release outlining the results of further underground exploration. In this release Alonso Sanchez, Dynacor’s Chief Geologist commented “Our exploration results have clearly demonstrated the presence of high grade gold and copper mineralization in the SW and the NE extensions of the Manto Dorado.”
As the exploration work proceeds Dynacor is preparing a bulk sample of 1500 tons of material. “We’ll mill it ourselves.” said Martineau, “We can test our own ore in our own mill.”
The crosscut adit is being excavated by a local mine contractor and Martineau describes the rock coming out of the ground as mineralized material. It will be the rock used for the bulk sample. “Unlike the situation with many mines we don’t have to sink an expensive shaft before we can reach the mineralized zones. We are basically using local contractors to dig through to the target structures.”
“We hope to have a 43-101 ready by spring 2016.” said Martineau. “The objective of this first reserves/resources report is to apply for a mining permit and prepare a first production.“ As Dynacor is actually building a brand new 300 t/d mill in Chala, which is expected to be in operation in the second quarter of 2016, the actual Metalex mill could be available to be used as a pilot plant and, eventually to process ore coming out of Tumipampa in a first step. This will give the company time and money to finance the development of Tumipampa and build a larger new mill on the property.
“With more than 20 mineralized mantos and veins identified today, we are confident that this part of the property could host and important deposit.” Which would, in itself, make a very interesting mining prospect. However, the Tumipampa property also includes a large skarn and porphyry formation bearing copper and gold. “We are surrounded by gold and copper.” said Martineau, “It is disseminated mineralization. Very similar to the Constancia property being developed nearby by Hudbay Minerals. We’re exploring this structure and we will look in the future at all options available to develop this project if it appears viable.”
Having the cash coming in from its milling operations gives Dynacor a tremendous advantage. “We’ve looked at going to the market to raise funds; but, for example we looked in 2011 and the market was down so we decided not to. We’ve spent between 10 and 15 million dollars on the property so far. This year we’ll spend about 4 million. But we want to avoid dilution.”
With only 36.5 million shares outstanding and a market cap of $68.6 million, Dynacor doesn’t need to go to the market to finance advancing its project. Dynacor’s management and Board hold between 11 and 13% of the shares on a fully diluted basis and several institutions hold positions ranging from 3-7%.
“We don’t have any obligation to finance to survive. We make money from our mill.” said Martineau. In the current market it is an enviable position for a junior exploration company to be in.