DynaResource Inc. (OTCQX:DYNR) Chief Executive Officer Rohan Hazelton caught up with DirectorsTalk to discuss the company’s established gold operations in Mexico, production improvements, and the implications of a new technical report.
Q1: DynaResource has a well-established revenue-generating gold operation in Mexico. Could you just give us a brief overview?
A1: DynaResource owns and operates the San Jose de Gracia gold mine in western Mexico, which has a land package of about 4,500 hectares.
We’ve been operating this for almost 10 years, grown it from a small operation of about 100 tonnes a day and about 10,000 ounces a year to the current production rate of about 800 tonnes per day and between 25,000 and 30,000 ounces a year. We’ve owned the concessions for almost 25 years, and we’ve been listed on the OTCQX for approximately just over 15 years.
In all that time period we’ve invested significantly in both exploration in early years and then also in bringing the mine into production, as mentioned approximately 10 years ago. We have a very experienced management team with significant experience in Mexico specifically, local team, and also our small executive team including myself who previously lived in Mexico and spent a lot of years working on Goldcorp Mexico assets.
Q2: Your Q1 report was recently released. Could you share what specific changes have been implemented to improve margins? Additionally, could you elaborate on efforts to increase recoveries and how you expect these initiatives to impact operating profitability?
A2: Since I joined the company in the middle of last year, we’ve been working hard to increase both production, improve efficiencies and reduce costs throughout the past 12 months and into the beginning of this year.
We’ve been working on a number of initiatives to do both. Specifically on the cost reduction side, we have recently reduced the number of our underground contractors and rationalised both the underground contracting as well as some of our supply chain overall. We’re down to two underground mine contractors and focused significantly on increasing development and improving grade control and efficiency.
In terms of improving the efficiency, we’ve introduced new drilling and blasting training and controls and again, with the idea of reducing dilution and improving our overall mining. With a significant focus on underground development, this year we’ve been expanding our underground development at a rate of approximately 40 metres per day, which is about double the rate from the prior year. We’ve opened up the number of working faces that we can work on underground to approximately 20 this year, versus 6-10 last year.
Why that’s important is that it improves our flexibility every day in order to not only meet our tonnage goals, but also to improve our flexibility to blend, grade and to bring in the optimal mineral type and grade into the mill.
We continue to work on other areas in terms of in the mill, in recoveries, and most importantly, we are installing an increased gravity circuit in the next month, before the end of this quarter, which will be three Falcon concentrators, which will allow us to produce a gravity concentrate. Currently today, we have a flotation circuit where we produce 100%, a full flotation concentrate, which we truck and ship down to the port of Manzanillo. We have one Falcon concentrator that we’ve been testing at the end of the circuit, it’s managed to improve our recoveries approximately 1-2%.
By installing a gravity circuit just after the milling circuit, we expect to increase recoveries at least 5%. We’re targeting 80% recoveries, up from 75% that we’re achieving now and I expect we’ll be able to increase that even higher to say approximately in the mid-80s. We have a high proportion of gold in mineralisation that is free gold, approximately say 20-30% and that is not recovered as well through the flotation circuit and through recent lab testing.
We’re very confident we’ll be able to increase the recovery significantly with a gravity circuit.
Q3: Could you provide an overview of the company’s drilling programme for the current year? Does the company intend to maintain the current level of drilling activity or are there plans to expand operations?
A3: Our overall plan for the year is approximately 15,000 metres of exploration, approximately 50% from underground and 50% from surface. So far this year, to date, we’ve been focused on the underground drilling and that’s mainly focused both on extending our mineralised zones in our three main operating deposits, which is Tres Amigos, San Pablo and Mochomera. Also, discovering new veins and areas where we can look to expand both from underground and surface to expand our overall reserve and resource.
From surface, which we expect to begin in the next quarter, Q3, we look to begin the first surface drilling programme in a couple of years, and be focused on expanding our overall resource base, especially to the north, an area north of Tres Amigos called La Haciendita, where we see significant progress potential in the long run of estimating perhaps even in the 500,000 ounce range of potential. We see in our overall property potential to add possibly one to two million ounces in terms of the type of geology that we see, of course, that will take significant programme and in multi years.
However, what we’re looking to achieve by the end of this year is to show evidence of mineralisation in some of the targets that we see and really expand on the thesis for growing the mine life and the reserve and resource at San Jose de Gracia.
Q4: On the 20th of May, the company released its updated technical report. Could you explain the significance of the report and what it means for the complete strategic direction or valuation?
A4: We issued a pre-feasibility study on May 20th in accordance with the U.S. rules, S-K 1300, which are very similar to Canadian 43-101 and others. These demonstrated a proven and probable reserve base of 253,000 ounces and also an inferred resource base. This highlights a seven-year reserve-only mine life and shows the potential for mine life extension through the inferred’s that we published and also, some of the targets that we have going forward.
What’s very important about the technical report, this is the first updated resource report in approximately 13 years, and it’s also the first reserves that have been published on the property. This allows us to be able to fit a different classification within SEC regulation and accounting.
So, first of all, going forward from now, we will be more comparable to other similar mining companies with reserves ability to capitalise our appropriate capital and underground development, which previously was being expensed. It’s something that makes it hard to compare some of our prior financials.
Also, most importantly, having a current technical report will allow us to pursue some of the corporate objectives we have for the company in terms of fundraising and attracting potentially institutional shareholders and looking to uplist the company on a major exchange.
Q5: DynaResource are currently listed on the OTCQX so there are plans then to uplist to a major exchange? If that’s the case, then what’s the anticipated timeline or key milestones required to achieve that?
A5: We’re looking to uplist to a major exchange by the end of this year, overall, an average timeline for an uplist would be say approximately six months. By being listed already on the OTCQX, registered with the SEC, meeting our public filing disclosure obligations, there may be a possibility to accelerate that somewhat.
The key milestones are really number one, issuing this technical report, which we have done. Number two, doing a final selection of a partner that we’d like to work with in terms of a bank on an uplist, and then filing an S1 registration with the SEC, the review of that can take anywhere from two to three months. Following that, moving into a process of the actual uplist and, of course, working with an exchange throughout that time.
At the moment, our plans are to uplist on a U.S. exchange, given our U.S. shareholder base and our current listing on the OTCQX.
