Dale Nejmeldeen, Investor Relations for Dynacor, at the San Francisco Hard Assets Resource Investment Conference

Dale Nejmeldeen, manager of Investor Relations for Dynacor, believes that his company offers an underestimated opportunity for investors who are interested in a niche market within the mining industry. 

 The Dynacor model includes not only exploration and development of their flagship property: Tumipampa in Peru, but a growing ore-processing business that literally funds all of their work. Said Nejmeldeen, “There is no need to over-dilute the shares. In most cases in the exploration sector when cash is depleted, companies repeatedly go to the market to feed the exploration and drilling programs. This common business model has a major downside in that it dilutes the original shareholders. At Dynacor, over the years, we have built the cash flow up through the established ore processing side of the business.”

The ore processing business has developed over time with the leadership of Jean Martineau, the President and CEO of Dynacor Gold.  According to Nejmeldeen, Martineau's efforts and guidance have had a significant effect on the company’s success, “Jean has cultivated strong relationships with the small scale miners and authorities in Peru. The proprietary intelligence, a derivative from these relationships, is another strategic advantage for a company with growing cash such as Dynacor. Still it is not as straightforward to decide to move into a foreign country and set up business without securing the mutual respect and trust of the locals and the government.  [Because of that,] we are now producing annually 45,000 ounces of gold from a modest 3,000 ounces in the early days, about a 1600% increase in production.”  Nejmeldeen estimates production will increase to 50-60,000 in 2012; 70-90,000 in 2013.  Said Nejmeldeen, “We are on track to double our gold production within the next two to three years.”

In addition to the ore processing that Dynacor operates, they are also focused on the Tumipampa property in south central Peru.  Said Nejmeldeen, “We bought Tumipampa in 2000 originally for its  gold and silver vein-rich potential.  The company discovered Tumipampa boasted numerous tunnels and stockpiles from the Spanish gold mining camps of 400 years ago. “At the time they purchased it, the plan was to drill the veins and examine the potential to develop an underground mine; however, the gold price at that time did not cooperate; therefore, it was not conducive to proceed with operationally expensive underground mining.  Said Nejmeldeen, “Ten years ago, the gold price at $300 an ounce did not make for many economic mines let alone underground operations. In the middle 2000s, there suddenly was activity brewing and reports of open-pit bulk-mineable discoveries adjacent to Tumipampa. Two major companies caught wind and quickly acquired the smaller juniors. They are now developing in the area.  Xstrata, one of the largest mining companies in the world, entered the area. They secured a major deposit of billion tons of .04 to .06 grams per ton of gold with 5% of copper. Then another giant, Southern Copper Peru reported a 400-500 million ton deposit of 5% copper and .05 grams per ton of gold.”  The presence of other mining companies was encouraging to Dynacor.  As additional exploratory work on their own Tumipampa was revealing similar characteristics to their neighbors, the company began a geochemical campaign. Said Nejmeldeen, “We started by collecting  rock, chip and channel samples showing similar copper grades [as the other companies], but with averages of .5 grams per ton of gold on the surface, ten times greater than Xstrata and Southern Copper.” The company identified a large skarn and porphrhry type deposit consisting of 4 km long by 1.2 km wide. The next step is to resume the drilling program into the 2012 season. Nejmeldeen said, “The surface is the start and the drill results need to confirm the rich grades. We think that the gold grade may be averaging higher due to the gold vein-rich area below the skarn originally discovered back in 2000. It is very exciting. We are closing in on the restart of the drill campaign. Thanks to supplemental data provided by a 10km wide geophysical survey conducted in the summer of 2011, the results corroborate our suspicions of a massive copper and gold deposit.” Nejmeldeen adds, “However, there is much drilling work to do perhaps as much as 100,000 meters before we absolutely understand the size and scope of this potential bulk-mineable deposit, but again we have the cash flow to support the skarn’s progression. The geophysical readings from zone 4 about 600,000 meters squared show the strongest magnetometric and induced polarization anomalies of the entire skarn porphyry deposit; therefore, Dynacor now has a much more narrowed down target to drill in the coming season.”

With part of the drilling already completed, Dynacor has found a completely new zone.  Said Nejmeldeen, “In addition, to the skarn and vein-rich area, the geophysical results unearthed a new zone of gold mineralization showing similar characteristics to our underground veins and Manto Dorado. We have already discovered fifteen high-grade veins up to 23 grams per ton of gold. On these veins alone, our geological team believes Tumipampa could host one to two million ounces of gold. Now that the price of gold is north of $1500 we now have a viable situation where we can put an underground mine into production. We will start with a cross-cutting campaign through the Manto Dorado commencing in 2012. Convert our historical resources to NI 43-101 resource calculation in 2012 and then if economic follow up with a small milling operation of approximately 100 tons per day in the coming years.  You can see including zone 4 and the vein-rich areas we have quite a full season of drilling and development in front of us.” 

With these new advances, Nejmeldeen said they are in good shape financially because of the ore processing side of the business.  He said, “The company does not need to go to the market all the time to advance Tumipampa.”  Currently, in Peru there are over 100,000 small scale and artisanal miners.  They utilize Dynacor Gold's service to produce gold out of ore and get paid for what they truck to the facility.  The benefit to the miners is that they do not expose themselves or their communities or water to dangerous chemicals such as cyanide.  Said Nejmeldeen, “Dynacor’s ore-processing business alleviates the environmental degradation as often-times on-site processors do not have access to modern-day processing equipment or knowledge and use mercury to process their ore. Our operation is quick, clean and efficient as it takes us about one week to ten days to turn the rock into about $250 ounce profit.”

Currently, Dynacor Gold has 35 million shares outstanding that are selling at $0.85 per share with a market cap of $30 million. Nejmeldeen believes that their share price is well undervalued due to the processing side of the business.  He said, “We recently announced that we are planning to increase our capacity at our plant. In 2011, Dynacor started at 170 tons per day and today, organically fueled, we are processing 220 tons per day.”  In addition to expanding their current facility, Dynacor Gold will be creating a second processing center.  Adds Nejmeldeen,  “The new location is located on the Pan-American Highway in Peru. This is another key advantage for our shareholders as the new location will provide the Company access to long-haul trucks with larger shipments of ore. Initially the plan is to start processing at about 300 tons per day in 2013 then grow to 430 tons per day in 2014. At 430 tons per day, Dynacor will be producing just less than 100,000 ounces per year.”

For investors, Dynacor Gold offers an advanced exploration project that has increasing cash flow from operations.  For each share, Dynacor estimates it will generate $0.36-$0.40 of cash flow in 2012.  And, unlike traditional mining projects that have limited resources in the ground, Dynacor is buying from small scale mines therefore supply is not an issue.  Nejmeldeen said, “It's just a matter of time before the market understands that Dynacor is benefitting from their own niche within the mining industry.  We are an emerging producer.”  With a solid business model that will generate an increasing amount of cash to pay for exploration on the multi-element rich Tumipampa deposit”,  Dynacor Gold Mines Inc. is in a position to develop value for stockholders quickly. 

For more information:

http://dynacorgold.com/en/