Dynacor Plummet Spurs Renewed Investor Interest

Februrary 2, 2014

Shares of Peruvian gold and silver ore processor, Dynacor Gold Mines (DNG.TO; DNGDF), dropped over 20% on news that the company would temporarily halt its ore purchases amid recent customs crackdowns of illegal gold exports and new government requirements for ore processors. The decision to temporarily halt purchases is seen as a "voluntary" step to ensure the company is in full compliance, and the company's plant will remain at full capacity for three weeks by processing its own stockpiles.

The news came just a few days after shares reached an all-time high of $2.20, roughly 100% higher than when we considered investing on June 10, and we think the plunge to $1.59 could soon present us with yet another great buying opportunity. Since last June, Dynacor paid off $1.2M in debt, boosted cash reserves, posted record gold sales, and discovered more high-grade gold at the Tumipampa project. Moreover the company remains profitable, even at a time when most junior producers are struggling with high operating costs.

This is not the first time a decision has been made to suspend ore purchases. The company did so for two weeks in May 2012 in order to ensure compliance with newly enacted legislation. This time, however, management indicated it would wait until the government has approved the company's newly required documentation, whenever that may occur.

Barring an unexpectedly prolonged wait, it's worth monitoring share prices at these levels and accumulating before any positive events arise. Any announcement of the recommencement of ore purchases, the issuance of the Chala mill construction permit, or further high-grade drilling results could provide significant upside momentum.


This article was originally published by Investinations on www.argmaur.com.