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Dynasty Metals & Mining Inc
Symbol DMM
Shares Issued 42,461,083
Close 2015-03-31 C$ 0.72
Market Cap C$ 30,571,980
Recent Sedar Documents

Dynasty Metals loses $2.73-million (U.S.) in 2014

2015-04-01 05:28 ET - News Release

Mr. Nick Furber reports

DYNASTY REPORTS FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2014

Dynasty Metals & Mining Inc. has released its audited consolidated financial statements for the year ended Dec. 31, 2014. The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, the financial statements and the related notes thereto, and the company's management's discussion and analysis, which are available on the company's website and on SEDAR.

(All dollar amounts are in U.S. dollars unless otherwise stated.)

There are no comparable operating results for the year ended Dec. 31, 2013, since the company commenced accounting for the Zaruma project as being in commercial production commencing on Oct. 1, 2013, as the project was meeting production milestones to be operating, for accounting purposes, in the way intended by management.

The average grade of material processed during year ended Dec. 31, 2014, was 8.43 grams per tonne. With the exception of the second quarter of 2014 where lower-grade, non-resource development material was mined, substantially all the high-grade material mined during the year ended Dec. 31, 2014, was from certain sections of the Soroche group of veins.

As previously disclosed, it is not uncommon or unexpected to encounter areas of mineral deposit at the Zaruma project with significantly higher or lower grades as compared with the average grade disclosed in the company's mineral resource estimate, since the resource at Zaruma is known to contain a significant variability in grade between different areas, which are often in close proximity to each other. As a result, it is unlikely that the company will achieve a consistent monthly production profile during this early production phase of operations until material is mined from multiple veins.

Cash costs per ounce and all-in sustaining cash costs per ounce for the year ended Dec. 31, 2014, were $973 and $1,328, respectively, which was impacted by a combination of a number of factors, including:

  • Normal course maintenance and development work, which resulted in decreased tonnage delivered to the mill in the first quarter of 2014;
  • A decrease in the average grade of material mined during the second quarter of 2014 due to limited access to regions of veins with higher grade while development work on these areas was continuing during this period;
  • Has adopted a policy to expense any further development expenditure as it is incurred in respect of a mine property subsequent to the commencement of commercial production, unless substantial new future economic benefits are derived from such expenditure, at which point it will be capitalized; as a result, all of the costs of carrying out the decline maintenance and development work were all expensed in the period and therefore included in the per ounce cost calculations;
  • The company's operations consisting of a large fixed-cost proportion, with the actual cash expenditure not varying a great deal between periods.

The attached table shows selected consolidated financial information as at Dec. 31, 2014, and Dec. 31, 2013, and for the years ended Dec. 31, 2014, and 2013.

                         FINANCIAL HIGHLIGHTS
                                                          2014       2013 (a)

Operating revenues                                $ 37,014,115  $ 15,937,132
Operating costs
Mining and processing                               26,894,664     7,501,301
Royalties                                            1,628,354       794,852
Depreciation and depletion                           4,587,208     1,418,870
Total                                               33,110,226     9,715,023
Earnings from mine operations                        3,903,889     6,222,109
Expenses
Corporate administration                             4,704,716     4,352,991
Stock-based compensation                               880,195       458,067
Total                                                5,584,911     4,811,058
Earnings (loss) before income taxes                 (1,681,022)    1,411,051
Income taxes
Current tax expense                                    536,326     1,446,349
Unrecoverable tax prepayments                          513,186       538,991
Net (loss) and comprehensive (loss) for the year  $ (2,730,534) $   (574,289)
Basic and diluted (loss) per share                $      (0.06) $      (0.01)

(a) For accounting purposes, the company commenced recognizing revenue and
net income from production, effective Oct. 1, 2013.

Zaruma mine operations update

The company previously commenced the development of three separate declines, being Cabo de Hornos (the main decline), Ayapamba and Barbasco, at the Zaruma project to access the resource contained therein. Primarily as a result of budget constraints since 2013, the company has concentrated development activities on the main decline, Cabo de Hornos, since it provided the best access to the in situ resources and where the installation of an electrical substation allows the mine to be powered from the main grid.

The main decline has advanced approximately 3.3 kilometres from the portal entrance at mine Level 700 reaching a vertical depth of 340 metres and is now on Level 360. The dimension of the main decline is between 4.5 by five metres and five by five metres throughout. The majority of the high-grade material mined during the year ended Dec. 31, 2014, was extracted from the Soroche group of veins operating between Level 600 to Level 450. The proximity of old underground workings, some sections of which still contain water, has meant it has been more efficient in the short term to advance the decline deeper rather than expanding the mine laterally on these levels.

The company has now advanced the main decline to Level 360, which, based on the old mine plans available, is a depth at which the majority of old workings never reached. It is from this point that the company has now split the decline and is advancing one extension to the north and one to the south. This is expected to provide simultaneous access to multiple veins, including the Soroche vein, the Matalanga vein, the Abundacia vein, the St. Ernest vein, the Nudo vein and other subparallel veins in the future.

The northern extension has currently advanced 100 metres and has reached the Soroche vein at Level 360. In the near term, concurrent with the development of the Soroche vein to prepare it for mining, the northern extension will continue to advance for another 150 m, which is the estimated length of the Soroche vein. From here, it is expected that the Soroche vein will be available to be mined upward for approximately 80 m on average.

The southern extension has currently advanced 100 m and needs to extend a further 100 m to reach the Matalanga vein, which is expected to take between four to six weeks. Once the Matalanga vein has been reached, concurrent with the development of the Matalanga vein to prepare it for mining, the southern extension will continue to advance for another 70 metres, which is the estimated length of the Matalanga vein. From here, it is expected that the Matalanga vein will be available to be mined upward for approximately 60 m on average.

To expedite this decline development and to facilitate the mining of multiple faces on multiple veins in the future at a deeper level of the mine, the company has made significant investments of its mining and financial resources to advance these declines in 2015 to date, including:

  • The purchase of a new Atlas Copco two Boom Jumbo for approximately $1-million; the company now owns three of these machines, which are operational, as well as an additional Jumbo, which is in the process of being fully refurbished in the workshop; having three Jumbos currently operational means that at any given time a Jumbo is operating on each extension of the main decline whilst the other is being serviced in the company workshop;
  • A significant upgrade of the mine ventilation system, including the purchase and installation of a 500-horsepower exhaust fan;
  • Additional investment to the mine pumping systems;
  • The purchase of two new motors to refurbish two of the company's underground loaders;
  • The installation of another underground transformer deep in the mine, as well as upgrades to electrical cables;
  • The recent employment of two underground mine decline specialists from the United States and an experienced underground mine superintendant from Chile.

With this new infrastructure in place, the company is now advancing the two extensions of the main decline at approximately eight m per day in aggregate.

The reallocation of the company's focus and resources from the mining of resource-grade material to development has resulted in a decrease in the grade of the material mined and hence a decrease in gold production in the first quarter of 2015 as compared with the three months ended Dec. 31, 2014, and the three months ended Sept. 30, 2014.

Zaruma plant operations update

The Zaruma processing plant operated efficiently during the year ended Dec. 31, 2014, recovering an average of 93.7 per cent of gold contained in the material processed. Recent and continuing investments in the plant include:

  • The purchase of an additional crushing circuit to be used after the material goes through the current crushing circuit; the purpose of this investment is not to increase crushing capacity but to have finer material delivered to the ball mills so as to decrease future wear on the ball mills;
  • The construction of a dam for a new tailings pond which is scheduled for completion in July of this year;
  • The expansion of the current tailings facility, which required the plant to be shut down for an additional week beyond the normal operating schedule, during which mined material was stockpiled; this tailings facility is now expected to have sufficient capacity to be operated until the new tailings facility is operational.

Liquidity

As at Dec. 31, 2014, the company had cash resources of $3.5-million and a working capital surplus (current assets less current liabilities) of $1.3-million compared with cash resources of $4.9-million and a working capital surplus of $200,000 as at Dec. 31, 2013.

Subsequent to Dec. 31, 2014, as a result of the previously discussed recent decrease in grade being mined and the temporary disruption to gold-processing operations while the tailings facility was being expanded, coupled with coming concession fee and taxation payments coming due to the Ecuadorean government, the company deemed it prudent to enter into a short-term loan with Valorium International Inc. so that it can meet these obligations without reallocating funds, which could potentially cause delays in the main decline development.

Valorium, a company managed by the company's chief executive officer and president, has agreed to lend the company up to $1-million. The loan will be used for working capital and general corporate purposes while the company focuses expenditures on mine development. The loan is payable upon demand, is non-interest bearing, and is not convertible, exchangeable or repayable into equity or voting securities of the company. The loan is secured by the company's equipment, inventory, accounts receivable and other intangibles. The loan has been approved by the company's board of directors which has determined that the loan is on reasonable commercial terms that are not less advantageous to the company than if the loan were obtained from a person dealing at arm's length with the company.

Ecuadorean Ministry of Mines

The government of Ecuador recently formed a Ministry of Mines and appointed Javier Cordova as the Minister of Mines, which the company believes to be a positive development, which will not only raise the profile of the Ecuadorian mining industry domestically and internationally, but also help facilitate the growth of the industry, which has the potential to be an important contributor to the future national economy of Ecuador.

Brian Speechly, a fellow of AusIMM (Australian Institute of Mining and Metallurgy), a director of the company, a qualified person within the definition of that term in the National Instrument 43-101, has supervised the preparation of and has verified the technical information contained in this news release.

We seek Safe Harbor.

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