Dynacor Group Inc. (DNGDF)

[investor15]

Where to Buy Gold in Difficult Times: Jay Taylor

Source: Sally Lowder of The Gold Report
2/20/13
The Gold Report

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JT: That is a tough call. The mining industry is so capital intensive. On the other hand, companies realize that they need to get their share prices up to a reasonable level. There is a real push and a pull.

"You can make a good case that China and other underdeveloped countries are just getting started. Ultimately, that is bullish for gold and silver."

There is no question that companies that can provide a dividend will do much better in the market. For my newsletter, I am looking for companies that are cash-flow positive, companies that do not have to raise capital. If a mining company has to raise capital to drill highly speculative holes in the ground, the market will not support that today.

TGR: Of course, many of the companies that have sufficient cash are invisible to investors because they do not need—or get—the attention of investment banks and analysts. Can you tell us about any of these diamonds in the rough—companies that are producing, have healthy treasuries and balance sheets and are able to reward their shareholders with increased production and share price profiles?

JT: One is Dynacor Gold Mines Inc. (DNG:TSX). There are lots of small, family-owned, high-grade mining projects in Peru, too small to warrant building a mill. Dynacor provides that processing service, using environmentally accepted practices. The company has been able to get higher recoveries than other operations that were not working within environmental and other regulations. Basically, Dynacor can now select the grades it wants; as a result, its earnings are growing rapidly. It just got permitted to build a second mill. Within two years, I expect annual production will be near 100,000 ounces (100 Koz).

It does not pay a dividend, but its earnings are growing nicely. Production at its processing plant in Peru is increasing and it also has an exploration project with blue-sky potential. The property is in the middle of major copper-gold pour-free targets. Dynacor does not issue shares; it is growing organically. Its shares are selling at two or three times cash flow right now.

TGR: And Dynacor does not have to get the gold out of the ground.

JT: It does not. Other people bring the gold to Dynacor.

The company does have its own non-NI 43-101 resource of more than 600 Koz or 800 Koz in a high-grade, underground vein system at a project called Tumipampa. It is a pour-free skarn gold-and-silver target, in the middle of some major deposits. Dynacor has some very good surface showings. The company expects to mine Tumipampa itself.

TGR: Dynacor has gone from $0.60 to $1.33/share in the last six months. Only a handful of mining companies could boast that.

JT: Yes, and it did it in a horrible market environment.

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