Dynacor Group

Transforming gold

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All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

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Note: This article has been updated as of March 30, 2025. The original release was on July 19, 2023, when the stock was trading at C$3.06/share.

Introduction and business model

Dynacor Group is a Canadian company with operations in Peru (though currently undergoing international expansion), dedicated to producing gold bars and silver pellets by processing ore purchased from local artisanal miners. It is listed on the Canadian market under the ticker DNG.TO, trading at C$4.89/share, with a total market capitalization of $150M (C$214M). Its business model revolves around purchasing raw ore from gold and silver producers and transforming it into value-added products. The company buys metals from artisanal producers in various regions of the country registered in public records and sells its processed products at international prices to a single client (the Swiss refinery PX Precinox), although there is no concentration risk, as its product is fungible and could be sold to any other buyer. In addition to the processing plant, the company holds rights to several mining properties, which are still in the exploration phase, the most notable being the Tumipampa project.

Specifically, the company operates a processing plant in southern Peru (which was expanded in 2021 and 2022) and has plans to expand its operations both within the country and internationally, targeting regions where artisanal mining represents a significant and sufficient volume, such as in West Africa, with a first step this year through the creation of a pilot plant in Senegal.

As a summary snapshot of Dynacor, the following chart illustrates its journey—from a mining company that built a processing plant to complement its operations, to what it is today. The key features that define it as an investment opportunity are: an operational track record of over 20 years in the region, an uninterrupted (and growing, as we will see later) history of profitability, optionality in the exploration of mining assets and expansion into new geographies, all combined with a strong balance sheet and a highly attractive shareholder return program.

Dynacor’s business is very straightforward. They receive ore from artisanal miners and, after an initial crushing process, perform an analysis of the material (around 600 samples per day). If the result is positive, they pay the miner. They then process the material in one of the most efficient recovery plants in the market (with a recovery rate above 93%), extracting the gold, which they transport and sell to Precinox in Switzerland.

We recently conducted an interview with the company’s CEO, which cleared up many of the doubts we had about the business and laid out a clear roadmap for continued value creation. The company’s stock performance has been outstanding over the past 15 years, with a compound annual return of 24%, and now we are entering the most exciting phase in its history. Is there still an opportunity? Let’s take a look.

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Investment thesis

Let's review the operational, financial, and balance aspects of the company in order to perform an evaluation and reach a conclusion about the company. Specifically, we will analyze the following points, which form the basis of the investment thesis:

• Operations

• Cash generation

• International expansion

• Balance sheet

• Capital structure

• Risks