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Hot Stocks: Dynacor Gold Mines, immune from dilution?

Dynacor Gold Mines (TSX:DNG) has a business model that we find very appealing. One of the biggest risks junior exploration companies face is stock dilution, but it is one risk from which this Peru-focused exploration company is largely immune. Why? It has a cash cow, a  wholly-owned gold milling plant that generates the cash flow it needs for the exploration of its mining properties: Acari, Casaden, and the flagship gold and copper project, Tumipampa.

In 2010, annual gold production from custom milling totalled 33,525 ounces, up 43 per cent from 2009 and surpassing the company’s target of 25,000 to 28,000 ounces. This helped Dynacor end the year in a strong financial position, holding on to $4.1 million in cash and short-term investment, in addition working capital of $4.8 million by the year’s end. This year, the company aims to produce 45,000 ounces from its milling operations and to advance the Tumipampa project, where a 16,700-metre drilling campaign is ongoing.

Tumipampa hosts a recently discovered gold and copper-rich skarn deposit that is more than four kilometres long. The very first intercept of a 30-drill-hole program launched last March discovered 0.73 per cent Cu over 10.6m, including 3.55 per cent Cu, 72.27 g/t Ag and 1.13 g/t Au over 2.18m. These preliminary, yet highly encouraging results at Tumipampa spurred Dynacor to aggressively pursue its 16,700-meter drilling campaign through the following months.

“We are very optimistic for 2011 based on Dynacor’s robust business model of generating cash flow from its growing custom milling business… the Tumipampa drilling campaign is in full motion and drill results will be released on an on-going basis throughout 2011,” said Jean Martineau, president and CEO of Dynacor.

Evaluate Dynacor’s values and projects here.

This presentation may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, receipt of property titles, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The Issuer relies upon litigation protection for forward-looking statements. This piece is for information purposes only and is not a recommendation to buy or sell any securities.

Disclosure: No Positions