The Governance Time Bomb at Dynacor: Why This Gold Stock Could Explode—or Blow Up

Dynacor Group Inc. (TSX:DNG), a key player in Peru's mineral processing sector, is now at the center of a governance firestorm that could redefine its future—and investors must pay attention. Shareholder activist Iolite Partners has lit the fuse with a bold call to withhold votes for Chairman Pierre Lépine at the company's upcoming annual meeting. This isn't just a boardroom squabble; it's a high-stakes showdown over whether Dynacor can survive its own mismanagement. Let's dive into why this matters and what it means for your portfolio.

The Governance Crisis Heating Up

Iolite's open letter to shareholders paints a dire picture: Dynacor's leadership has failed to capitalize on rising gold prices, eroded margins, and squandered shareholder value through erratic capital decisions. The company's share price has plummeted 21% since January 2025, even as gold prices surged 26% and the junior gold miner index jumped 43%. That's not a typo—Dynacor is losing value despite tailwinds for its sector.

Why Lépine's Leadership Is Under the Microscope

The crux of the issue isn't just poor performance—it's a pattern of governance failures. Iolite accuses Lépine of entrenching a board that's too large (eight directors for a single-asset company?), resistant to oversight, and disconnected from shareholder interests. Key red flags:

1. Margin Meltdown: Cash margins dropped from 17.2% to 14%, and EBITDA margins plunged to 8.8%, despite record sales. This isn't just a hiccup—it's a management crisis.
2. Cash Hoarding, Value Destroying: With $59 million in cash (42% of its market cap!), Dynacor still can't deliver growth. Investors are asking: What's the plan?
3. Legal Theater Over Substance: Instead of addressing governance gaps, the board sued Iolite to block a shareholder meeting, calling it “illegal.” Courts rejected the move—ouch for management's credibility.

What's at Stake for Investors?

This isn't academic. Dynacor's operations in Peru's mining sector face real risks if governance doesn't improve:

• Permitting Risks: A weak board could slow approvals for projects like its stalled Senegal pilot plant (announced in 2020, still vaporware) or its Ecuador venture, which has been in talks for two years.
• Production Targets: Margins are shrinking, and April sales fell 8.8% YoY. If leadership can't fix this, production goals are at risk.
• Partnership Deals: Dynacor's ambitious international expansion hinges on trust. Without a credible board, partners may walk.

The Vote: A Crossroads for Dynacor

Iolite's call to withhold votes for Lépine isn't just a symbolic protest—it's a lever to force change. If shareholders side with Iolite, Dynacor's board must evolve: trimming its size, adding independent directors, and rethinking capital allocation. But if Lépine survives, the status quo persists—meaning more underperformance and a stock stuck in the mud.

So, Should You Buy, Sell, or Sit Tight?

The Bull Case: If governance reforms happen, Dynacor's $59 million cash pile and Peru's robust mining economy could fuel a turnaround. The EV/EBITDA multiple (2.9x vs. peers at 8–10x) is a screaming buy if management executes.

The Bear Case: A Lépine-led board means more of the same: missed targets, dilutive capital raises, and a stock that trades like a “zombie company.” The market has already priced in disappointment—why double down?

Action Alert: Time to Decide

This isn't a “wait-and-see” situation. The June 17 AGM is a make-or-break moment. Here's what to do:

Backtest the performance of Dynacor (TSX:DNG) when 'buy on the date of annual shareholder meetings' and 'hold for 30 trading days', from 2020 to 2025.

• Buy the Dip: If you believe reforms will unlock value, go all in after the vote—if Lépine is ousted. Target a price below $0.80 (current trading around $0.75), with a stop at $0.60.
• Avoid the Landmine: If Lépine survives, sell. The stock could tank further as investors lose patience with a board that can't get its act together.

Dynacor's governance crisis isn't just a boardroom drama—it's a test of whether leadership can adapt to survive. With gold prices high and Peru's mining sector booming, this is a stock with potential—but only if the right people are steering the ship. The clock is ticking. Will you bet on change, or walk away?