Dynacor shareholder iolite calls for new leadership

Executive Summary

• iolite Partners Ltd., the largest shareholder of Dynacor Group Inc., has issued a public statement renewing its call for the resignation of CEO Mr. Lepine and President Mr. Martineau, citing deepening core operational issues and a lack of transparency.
• The release argues that Dynacor’s record revenue is masking significant deterioration in profitability, throughput, and inventory management, with the company losing market share in Peru despite favorable gold price conditions.
• iolite highlights specific operational failures, including a 17% drop in throughput, severe margin erosion, unexplained cost inflation, and an opaque restructuring process, while criticizing the company's ESG claims and misleading shareholder return narratives.

Key Details

• Financial Performance:
  • Q3 Revenue: $100.5 million (U.S.), a 32% year-over-year increase, attributed entirely to a 40% rise in gold prices.
  • Net Income: $5.5 million (U.S.) (12 U.S. cents per share), down from $5.9 million (U.S.) (16 U.S. cents) in the prior year.
  • Gross Margin: Plunged to 11.7% from 13.6% in the prior year.
  • General and Administrative Expenses: Surged 72% year-over-year to $3.5 million (U.S.).
  • Employee-Related Expenses: Increased by $1.1 million (U.S.) (35% year-over-year).
• Operational Metrics:
  • Throughput: Processed 39,479 tonnes in Q3 2025, averaging 429 tonnes per day. This represents a 17% decline from 519 tonnes per day in the prior year.
  • Capacity Gap: The throughput gap equates to roughly 13 lost production days at nameplate capacity, or approximately 20 days versus the achievable rate of 550 tonnes per day.
  • Inventory Levels: Ore inventory stood at $10.4 million (U.S.) at the end of June (approx. 10 days of supply) and $13.8 million (U.S.) at the end of September. iolite argues these levels are insufficient given the approaching wet season and recent production losses.
  • Maintenance: Dynacor spent $900,000 (U.S.) in Peru on maintenance or plant efficiency improvements, described as well above historical levels.
• Governance and Strategic Concerns:
  • Restructuring and Investigation: iolite criticizes the sequence of events, noting that a restructuring was announced in July 2025 followed by an internal review, with no substantive details provided. They question the independence of the investigation and the board's potential entanglement.
  • Personnel Changes: Questions raised regarding the departure of key Peruvian personnel who built the Veta Dorada operation, and the qualifications of new teams driving global expansion (e.g., Senegal) while the core Peruvian business underperforms.
  • Shareholder Returns: iolite claims the dividend yield is misleading, reflecting a depressed share price and being financed by recent capital raises rather than organic earnings growth.
  • Market Position: Dynacor has dropped out of the top-10 gold producers in Peru, falling from No. 7 at the start of the year.
• Call to Action: iolite demands the immediate resignation of Mr. Lepine and Mr. Martineau to rebuild trust and stabilize the core business.

Notable Quotes

• "Record revenue masks deepening core issues and alarming lack of transparency."
• "Profitability continues to erode despite exceptionally favourable market conditions."
• "The board must explain the sudden need to restructure... Why are personnel expenses still elevated, apparently tied to an open-ended restructuring, while an investigation is simultaneously under way?"
• "Dynacor urgently needs a fresh start under new leadership."