Gold Co. Expands into Second Country with Acquisition
Research Report

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Disclosures for Atrium Rsearch, Dynacor Group, July 8, 2025

Disseminated on Behalf of Dynacor Group

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Dynacor Group Inc. (DNG:TSX; DNGDF:OTCMKTS) signed a share purchase agreement to acquire Arkham Metals SAS (Ecuador) from Pelorus Minerals Ltd. for US$9.75 million (US$9.75M) in cash, a strategic move to expand geographically, reported Ben Pirie, equity research analyst at Atrium Research, in a July 8 research note. The transaction is expected to close July 14.

"This acquisition is a key first step in Dynacor's growth plan to achieve 500,000 ounces (500 Koz) by 2030," wrote Pirie, by expanding into additional countries through acquisitions and organic investments. "The transaction allows DNG to continue moving forward with its plans to become a multiasset producer, specifically strengthening its presence in Latin America."

This company, headquartered in Canada, produces gold by processing ore from artisanal and small-scale mining (ASM) operations. Thus far, Dynacor's focus mostly has been on Peru where it has multidecade experience running a carbon-in-leach plant.

66% Implied Return

Atrium maintained its CA$7.50 per share target price on Dynacor, noted Pirie. At the time of his report, the stock was trading at CA$4.53 per share, trading at a discount to Canadian industrial peers as well as mining service company peers despite having posted one of the best sales and EBITDA compound annual growth rates (CAGRs) in the group.

From this share price, the return to target is 66%.

Dynacor remains a Buy. Its market cap is US$142.9 million (US$142.9M).

Highlight of Acquisition

With the acquisition of Arkham Metals, Dynacor gains the Svetlana processing plant, the related infrastructure and three tailings storage facilities, two of which are inactive.

These facilities sit on 33 hectares in Portovelo, in the El Oro province of southern Ecuador, the center of the country's gold mining district. Power for Svetland is through the grid and there is a full generator set on site for backup. The plant is fully permitted for 1,500 tons per day (1,500 tpd) though historically the maximum processing rate was 730 tpd. Past production, albeit intermittent,  totaled between 15 Koz and 30 Koz of gold. Pelorus Minerals Ltd., a subsidiary of Arkham Metals Ltd. Australia, has owned Svetlana since July 2021.

"Ecuador offers potential for multiple plants if Dynacor is successful with Svetlana," Pirie wrote.

Capitalizing on Svetlana

Dynacor plans to invest about US$15.25M on upgrading the plant, preparing the site and taking it into production. Along with the US$9.75M acquisition cost, the total investment will be US$25M. The company will be able to fund it all with its existing cash of US$59M, CA$31.6M of which it raised last fall. This capital allows Dynacor to accelerate its growth plans by about a year.

Right away, the company will start developing its ore purchasing network and continue fostering its already strong relationship with the Ecuadorian government. As for a timeline to getting Svetlana onstream, the upgrades and site prep are expected to be done by Q1/26. Production could start in Q2/26 then ramp up to the initial throughput rate of 300 tpd.

Pirie highlighted that at US$2,800 per oz gold, Svetlana should be able to generate US$210M in revenue and US$10M-plus in operating cash flow (OCF), "representing 2.5x OCF paid versus DNG at 4.5x 2025E cash flow." Dynacor will pay the federal government a 3% royalty on total gold sales payable from the project.

The government supports Dynacor's model and plan for Svetlana, to buy fresh ore from miners and transform it into doré, similar to what it does in Peru. Currently, most miners in Ecuador either process their ore themselves or send it to a flotation toll mill to be processed into a concentrate. Then the concentrate is sold to aggregators or exported internationally. When Dynacor's Svetlana operation is up and running, gold ASMs will have a more convenient alternative.

"This will likely attract miners to Dynacor, assisting in the buildout of its ore purchasing network," noted Pirie. The network could be sizable given that Ecuador is home to about 100,000 gold ASMs, which supply 85% of the country's gold.

Other Expansion Progress

DNG has had other recent successes regarding its growth initiatives, reported Pirie. Most recently, it reorganized its Peruvian subsidiary Veta Dorada to prepare for expanding internationally. This included beefing up its Canadian management team, reallocating roles, and aligning internal processes with corporate goals.

In early June, the company signed a 12-month memorandum of understanding (MOU) with Ghana-based Ansong Askew Ltd., whose work involves integrating Ghana's artisanal gold sector into responsible global supply chains. The MOU outlines the two companies, via a joint venture, establishing a government-permitted, traceable gold processing operation in Ghana. This would take Dynacor into West Africa.

"This initiative aligns with Dynacor's strategy to replicate its proven model in Peru and expand its footprint across high-potential ASM jurisdictions," Pirie wrote.

The company participated in the recent Mining in Motion summit, spotlighting Ghana's ASM sector, to engage with stakeholders and evaluate potential sites.

Given Dynacor's plans to grow at a 32% CAGR through 2030, Atrium raised its 2026 production and revenue estimates for the company, albeit conservative, noted Pirie. Atrium forecasts 2026 production will rise 42% year over year (YOY), reaching 169 Koz, and revenue will increase 42% YOY, hitting US$477M.

What is to Like

Along with Dynacor's ambitious growth plan, Pirie presented four other of the company's features Atrium finds compelling. They are its:

1) Proven Track Record: Over the last decade, Dynacor's total ore processed has grown at a 9% CAGR, sales at a 12% CAGR and OCF (before working capital) at a 10% CAGR.

2) Steady Profitability: Dynacor has generated a profit for the past 14 years, during which it raised operating income consistently.

3) Strong Balance Sheet: Dynacor has US$59.3M in cash and negligible debt.

4) Dividend: Dynacor started paying shareholders a dividend in 2018 and increased it since at about a 20% CAGR such that it now is 3.4%.

Events to Watch For

Investors can expect quarterly production and financial results from Dynacor, on an ongoing basis, noted Pirie.

Other potential stock-boosting events this year and next include updates on permitting, developments regarding its growth efforts and progress with expansion of Svetlana.