Te operation is no aj Mahal; it looks much like any of the other Peruvian operations in the region, except for the Canadian ﬂag ﬂying along side that of Peru. Tat’s probably good camouﬂage that reduces security concerns, but the actual reason for the lack of fresh paint is that the company has known for some time that it will be moving operations to a new plant as soon as it’s built, and that makes expenditures on nonessential sustaining capital a luxury. Tis brings us to the mainspring of value added we’re betting on: the new plant… which has not yet been permitted. Tat’s the biggest Push on the horizon. Given that the ﬁnal permit has been delayed, it seems likely that the added value has
been fully priced into the stock, and that’s an opportunity.Could the permit be denied? Tat’s unlikely, with the critical environmental impact assessment having already been approved. Of course, a Latin American bureaucracy is no easy horse to handicap, but in this case, Dynacor’s environmentally responsible processing facilities actually help the government achieve its goals of bringing the informal miners into compliance with the law. (Remember, unlicensed mills have been and are being shut down, so these miners need Dynacor to process their ore, and Dynacor can only do that if the miners can show that they have registered with the government and submitted to regulation.)So, yes, I expect the permit to be approved—which brings us to the question of when. Obviously I have no crystal ball with which to predict that bit of the future, but all the work has been done, all the questions have been answered, and we’re just waiting on the ﬁnal paper. Tat could literally happen tomorrow, or it may take a few weeks, but I’ll be surprised if it does not arrive by the end of the year. Whenever it happens, the company already has the cash in hand to build the new plant, so the news should have a strong positive impact on share prices.One more plus I should mention about this side of the story: Dynacor’s business model combined with the Peruvian government shutdown of illegal mining allows it to pick and choose which suppliers to do business with. Te company’s reputation for transparency and tough but fair dealing has created a greater supply of exceptionally high-grade ore than it can process. Hence the plan for the new plant. Tis also means that it can keep raising the cutoﬀ of the grade it will buy. Dynacor has more inventory on hand now than it really needs, and in its case, oversupply results in higher-grade throughput. Very bullish.
Our main speculation on Dynacor is as above; the company’s umipampa exploration project has always been a bonus, in my view. Management was initially focused on elephant hunting, with both skarn-type and disseminated bulk tonnage targets in their sights. I was not terribly impressed with past results, but since the company was working on doubling production or more, the potential for a big discovery was not bad for a freebie, “also in the asset portfolio.”However, the company’s Manto Dorado discovery is changing all of this, with recent results including 36.5 g/t gold over 4.9 meters. Tose big targets are still there and will eventually see some serious exploration, but Manto Dorado appears to be a big, thick, high-grade vein that could deliver substantial high-grade tonnage in the near term.