Dynacor AGM: Activist Highlights Cash Flow and Governance Gaps

FREIENBACH, Switzerland – iolite Partners, Dynacor Group's largest shareholder, laid out sharp concerns about the company's finances and board conduct after the June 19 annual meeting. The activist investor said Dynacor's shares trade below where they were 18 months ago, even as gold prices hit records. Record sales of about US$500 million should have produced roughly US$50 million in earnings before interest and tax at the margins Dynacor earned in earlier years. It is not close, iolite said.

Operating cash flow trails reported profitability, the shareholder added. Capital expenditure at the Chala mill, which should be maintenance work, has climbed well above historical levels. The company held US$31 million in cash as of March, with a costly expansion program and underwhelming growth despite heavy investment.

The capital raise drew particular fire. Chief Executive Mr. Martineau called it well-timed at an all-time-high share price, iolite noted. He had told shareholders the day before the raise that the company was materially undervalued and no raise was planned. Dynacor now signals further dilutive raises may come.