DNG: Q2 Results Benefit from Gold Price; Growth Expected in 2026
What you need to know:• DNG reported Q2 financial results that were mixed relative to our expectations, missing on production results and beating on financials.
• Q2 revenue was $79.9M compared to our estimate of $78.6M and Q2 OCF (before WC) was $4.2M compared to our estimate of $4.0M.
• Management has updated its annual guidance to reflect ore supply headwinds seen in Q2. We encourage investors to look out to 2026.
• We recently published an interview with management, watch it here.
This morning, Dynacor Group (DNG:TSX, DNGDF:OTC) announced its Q2 financial results, which were mixed relative to our expectations. Similar to Q1, Q2 was led by the increased gold price, turning an 11% YoY decline in tonnes into an 18% YoY increase in sales. Margins remained slightly low with gross cash margins of 10% and operating cashflow at 5% of revenue. Management stated that it is already seeing improvements in Q3 and expects a stronger H2. Management has also updated its annual guidance to reflect to slow quarter. We are maintaining our BUY rating and C$7.50/share target price on Dynacor.
Key Highlights
• Tonnes processed for Q2 came in at 38.2Kt (-11% YoY), below our estimate of 44.2Kt. This was led by ore supply headwinds experienced in the latter months of the quarter, including a government-mandated curfew on ASMs in certain regions of Northern Peru.
• Production for the quarter was 25.0Koz AuEq (-12% YoY), compared to our estimate of 28.1Koz.
• Q2 sales came in at $79.7M (+18% YoY), beating our estimate of $78.6M, due to the higher gold price. Our model assumed a gold price of $2,800/oz vs. the $3,300/oz realized by DNG.
• Gross cash margin for the quarter was 10%, compared to our forecast of 12%.
• OCF (before working capital) was $4.2M (5% of revenue) in Q2 vs. our estimate of $4.0M and $5.8M in Q2/24.
• Net income for Q2 came in at $3.5M vs. our estimate of $3.1M and $4.5M in Q2/24.
• Capex for the quarter was $1.3M, lower than our estimate of $3.5M. Management expects annual capex of $12M for Peru & Senegal and $7.25M for Ecuador, implying a ramp up through the remainder of 2025.
• The Company finished the quarter with $58.4M in cash and equivalents and $0.7M in debt.
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