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DNG: Solid Q3 Revenue and Cashflow Generation

What you need to know:
• DNG reported Q3 financial results that were mixed relative to our expectations, missing on production results and beating on financials.
• Q3 revenue was $100.5M compared to our estimate of $89.7M, and Q3 OCF (before WC) was $6.6M compared to our estimate of $4.7M.
• Management maintained its annual guidance for production, revenue, and net income but does not expect to hit its capex guidance. We encourage investors to look out to 2026 when DNG’s growth investments start to make an impact.

This morning, Dynacor Group (DNG:TSX, DNGDF:OTC) announced its Q3 financial results that were mixed compared to our estimates, but beat on all financial metrics. Revenue grew 32% YoY, largely due to the increased gold price. DNG confirmed its 2025 guidance for revenue and net income but outlined that capex will be below its expectations as certain planned investments will be made in 2026. We remain bullish on DNG as it sets up for a strong 2026 when the story returns to growth mode. We are maintaining our BUY rating and C$7.50/share target price on Dynacor.

Key Highlights
• Tonnes processed for Q3 came in at 39.5Kt (-17% YoY), below our estimate of 42.9Kt. The decline was due to two weeks of artisanal miner road blockades in July, but the plant has operated at full capacity since then. DNG would have processed 43Kt, excluding the disruption.
• Production for the quarter was 28.9Koz AuEq (-4% YoY), ahead of our estimate of 28.0Koz.
• Q3 sales came in at a record $100.5M (+32% YoY), beating our estimate of $89.7M, due to the higher gold price. Our model assumed a gold price of $3,200/oz vs. the $3,494/oz realized by DNG.
• Gross cash margin in Q3 was 13%, slightly above our forecast of 12%. Cash gross operating margin per ounce sold was a record $440/oz.
• OCF (before working capital) was $6.6M (7% of revenue) in Q3 vs. our estimate of $4.7M and $6.7M in Q3/24. Adjusted EBITDA was a record $9.0M in the quarter.
• Net income for Q3 came in at $5.5M vs. our estimate of $3.8M and $5.9M in Q3/24.
• Capex for the quarter was $3.3M, below our estimate of $6.0M.
• The Company finished the quarter with $36.9M in cash and equivalents and $0.7M in debt.