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DNG: Closing Off a Record Year; Set Up for Growth Acceleration

What you need to know:
• DNG reported Q4 financial results that were mixed relative to our expectations due to lower grades and annual maintenance at its plant.
• Q4 revenue was $73.1M compared to our estimate of $60.0M and Q4 OCF (before WC) was $2.8M compared to our estimate of $4.3M.
• DNG solidified another great year, supporting its long-term growth CAGRs of ~10%. We believe DNG is entering a period of accelerated growth and the current valuation does not reflect that.

Yesterday after market close, Dynacor Group (DNG:TSX, DNGDF:OTC) announced its Q4 and full year financial results, which were softer than our expectations but still came ahead of management’s 2024 guidance. The miss was attributed to annual maintenance at its facility and lower grades of ore processed. Despite this, DNG has now compounded revenue at 12% and OCF at 10% over the last decade. DNG recently reported its 2025 guidance, please refer to our last note here. We are maintaining our BUY rating and C$7.50/share target price on Dynacor.

Key Highlights
• Tonnes processed for Q4 came in at 41.2Kt (-6% YoY) compared to our estimate of 46.5Kt due to annual maintenance during the quarter. 2024 tonnes processed was 175.9Kt (+3% YoY) vs. our estimate of 181.1Kt.
• Production for the quarter was 27.4Koz AuEq (-19% YoY), lower than our estimate of 30.0Koz. Full year production results came in at 117.6Koz AuEq (-10% YoY) vs. our estimate of 120.1Koz AuEq.
• Q4 sales came in at $73.1M (+11% YoY), beating our estimate of $60.0M, due to the higher gold price. 2024 sales were $284.4M (+14% YoY) vs. our $271.3M and management’s guidance of $265-285M.
• Gross cash margin for the quarter was 10%, missing our estimate of 14%. 2024 gross cash margin came in at 14% vs. our 15% estimate.
• OCF (before working capital) was $2.8M (4% of revenue) in Q4 vs. our estimate of $4.3M. 2024 OCF was $21.0M (7% of revenue) vs. our estimate of $22.4M and guidance of $15-18M.
• Net income for Q4 came in at $1.7M vs. our estimate of $3.4M. This was negatively impacted by a larger Q4 tax charge due to FX. Full year 2024 revenue was $16.9M vs. our estimate of $18.0M and guidance of $12-15M.
• Capex for the year was $5.2M lower than our estimate of $8.7M.
• The Company finished the year with $25.8M in cash and equivalents and $1.1M in debt, not including its recent equity raise.