Optimism gathers around Dynacor in Peru

Dynacor Gold Mines (DNG-T) has been steadily adding to its market cap over the last few months and word that the drills have started turning at a key exploration project in Peru furthered its advance. 

The Montreal-based gold miner’s shares were up 7% in Toronto on Jan. 28 – the day that the news was released – to $1.67 on 120,000 shares traded. Its share price began the year trading at $1.26 and those same shares were trading for as low as 39¢ late last September.

The latest round of optimism has come on the back of expectations for its 2011 drilling campaign at its Tumipampa gold-copper property in southern Peru.

The property sits in what is quickly becoming the world-renowned Andahualas-Yauri formation – which is an extension of Chile’s copper belt and hosts world-class mines like Tintaya, Antapacay, Las Bambas, Los Chancas, Haquira and Constancia.

More specifically, Tumipampa sits 60 km south of the city of Abancay and 500 km southeast of Lima at an altitude of between 4,200 and 4,800 metres and covers a 42-sq.- km area.

Last November the company announced that it would spend $5.45 million on drilling the property.

Phase one (16,700 metres) will focus on the 4.1-by-1.2 km skarn deposit in order to determine the depth of mineralization and verify the high-grade gold and copper mineralization recently discovered in surface channel samples.

Three to four drill holes will target four anomalous mineralized zones that have been identified by the surface geological studies.

Phase two is set to get underway in the third quarter and will see 10,500 metres with targets to be determined by phase one.

The company expects the first drill results in early March.

Before then, however, investors can expect to see results of channel surface samples that were taken late last year from the skarn deposit.

Dynacor currently generates cash flows from gold production at its custom milling plant in Peru.

On Jan. 21, the company announced that fourth-quarter 2010 gold production doubled to 10,478 oz. Annual production at the mill was up 43% to 33,525 oz. for the year.

The company gave guidance on the operation for 2011, saying it expects to generate gross margins of $9.5 million based on gold sales of 45,000 oz. and an average cash gross margin of US$210 per oz.