Dynacor Refuses to Call Requisitioned Special Meeting – iolite calls Meeting for April 9, 2025

Associated Press

06-03-2025

iolite Capital Management AG, a Switzerland-based investment manager, requisitioned a Special Shareholder Meeting of Dynacor Group Inc. (TSX:DNG, the Company) on January 30 to have Mr. Robert Leitz, elected to the board. Dynacor has failed to call the meeting, as required. Consequently, iolite is now calling the meeting itself, which will be held on April 9, 2025, at 10 am ET. Further details regarding the meeting's location and logistics will be announced shortly.
Dynacor's unnecessary, heavily discounted, and unfair capital raise exposed major governance flaws.
This, along with the board's subsequent actions, raises serious concerns regarding entrenchment and a misalignment with fiduciary duties. Shareholders deserve better representation, communication, and accountability.
iolite, the Company's largest shareholder, seeks to have Mr. Leitz, elected to Dynacor's board to protect value, ensure fair and responsible capital allocation, and drive sustainable earnings-per-share growth. This is in the Company's best interest.
More than 30 days after iolite's requisition, Dynacor has neither convened a meeting nor offered a meaningful proposal to address the situation. Instead, the Company has chosen to ignore iolite's voice, dismiss its rightful call for a special meeting, block a justified board seat request with false arguments, and persist in dilatory tactics - all while a constructive process initiated and maintained by iolite remains active.
Dynacor's lack of M&A and international expansion experience, combined with the CEO's suggestion of further dilutive raises, underscores the need for improved oversight. This is particularly urgent given the Company's significant cash reserves, which are at risk of being mismanaged.
Shareholders should be concerned that 2025 guidance shows severely eroding profitability despite record production volumes and historically high gold prices.
Capital Raise & Capital Allocation Concerns
On January 28 and 29, iolite met with board members in Montreal to discuss the state of matters at Dynacor and Mr. Leitz's potential board appointment, the Company's growth strategy, funding needs, and its persistent undervaluation. The Company had arranged for Mr. Leitz to meet the remaining board members as a final step in a lengthy nomination process. However, on January 30 - while Mr. Leitz was en route to the airport - Dynacor unexpectedly announced an unnecessary and heavily discounted capital raise. This move directly contradicted iolite's indications that such a raise was not in the best interest of Dynacor, especially given the recent record earnings, dividend increase, and share buybacks. Notably, the Company made no mention of exploring alternative financing options, such as factoring or bank debt, despite Mr. Leitz suggesting the day before that cheaper financing solutions were available if ever needed.
The raise immediately and unnecessarily destroyed C$25 million (US$17 million) in shareholder value, a loss likely to compound over time. Many existing shareholders, including iolite, were excluded from participating in this handpicked offering, creating an inherently unfair situation. Subsequent press releases from Dynacor confirmed that the Company had no immediate need for a capital raise - a fact that further frustrated shareholders who already suspected as much.
The Company's 2025 guidance projects positive free cash flow, including growth initiatives, and underscores that Dynacor's balance sheet was and remains overcapitalized. With a growth-adjusted net profit margin projected at 5% - a multi-year low compared to the 8% reported in Q3 2024 - the sharp decline in profitability remains a critical concern, particularly considering record production volumes and record-high gold prices.
Key Financial Metrics
US$ million
FY 23
LTM Sep 24
pre raise
LTM Sep 24
post raise
Guidance 25
LOW
Guidance 25
HIGH
Market cap @ C$ 5.50/share
138
138
160
Net cash
22
42
65
Net working capital
30
19
19
Enterprise value
86
77
76
Sales
250
284
284
345
375
EBITDA
25
31
31
NPAT (net profit) adjusted for growth
15
21
21
14+3
17+3
Margin
6.0%
7.4%
7.4%
4.9%
5.3%
Capex - excl. Senegal
7
4
4
8
5
Capex - Senegal
7
5
FCF (NPAT + D&A - total capex)
13
21
21
6
14
EV/EBITDA
3.4x
2.5x
2.5x
Dividends
3
4
4
Buybacks
3
6
6
Key Questions
iolite's well-founded questions and concerns continue to be disregarded by the Company:
Buyback program: What drove the decision to halt the buyback program on November 8, and why was no public statement issued at the time?
Dividend increase vs. dilution: Why did the Company announce a dividend increase on December 19, only to surprise the market with a discounted capital raise on January 30? This dilution more than erases the benefit of the dividend payout - it's highly unusual for a company to raise equity while increasing its dividend.
Disclosure: Given that the Company's growth plans have been known for some time, why was there no communication to public investors about a potential equity raise?
Upsizing the raise: What prompted the decision to increase the size of the capital raise? What necessity did this serve, and what benefits were expected from doing so?
Rights offering: Why wasn't a rights offering conducted, which would have given all shareholders an opportunity to participate?
Discount on the raise: The capital was raised at a 10% discount, despite board members stating on January 28 and 29 that the Company was undervalued. What is the explanation for this apparent contradiction?
'Broad shareholder support': Board members claim 'broad shareholder support' for these decisions. On what basis is this claim made? Which shareholders - by percentage or otherwise - actually supported the raise?
Alternative financing options: Why didn't the Company explore other financing options, such as factoring or debt financing, instead of opting for a deep discount equity offering that destroys value?
Further capital raises: Board members have indicated the need for further capital raises. What justifies this need, especially considering that the Company appears overcapitalized despite its ambitious growth plans?
Board members confirmed that no capital raise was planned as recently as late November. So why the sudden urgency? Dynacor was undervalued with no immediate need for capital? Issuing discounted shares for an undervalued company without pressing capital needs is not responsible. In December, the Company's shares traded at an average daily volume of 40,370 shares (~C$ 242,220 at C$ 6.00/share) - indicative of sufficient liquidity. iolite itself was able to purchase 10% of the Company primarily through open-market transactions.
Governance Concerns
Dynacor urgently needs additional perspective representation aligned with the owners of the Company on its board to protect shareholder value, ensure fair and responsible capital allocation, and drive sustainable earnings-per-share growth. This urgency is heightened by the Company's significant cash reserves, which are at risk of being mismanaged. Dynacor lacks a proven track record in M&A and international expansion, and the CEO has already hinted at further dilutive raises on the horizon.
Over the years, iolite has been a steadfast supporter of Dynacor's vision - even urging the Company to take on more risk by accelerating international expansion. Bringing Mr. Leitz onto the board would infuse the team with highly relevant expertise, a deep understanding of the business, and a true ownership perspective. As one of nine directors bound by fiduciary duties, he would offer essential insights to ensure fair capital allocation, support sustainable EPS growth, and boost corporate credibility. Appointing Mr. Leitz is in the Company's best interest.
Any reasonable leadership team and board would welcome such a major shareholder's representative to help drive a shared vision. Instead, Dynacor has chosen to ignore iolite's voice, dismiss its call for a special meeting, block a justified board seat request with false arguments, and persist in sending threatening letters. Shareholders deserve better.
iolite has repeatedly expressed its wishes to avoid legal battles and public confrontations. Regrettably, the Company has failed to take any meaningful steps toward resolving the situation. Dynacor could have - and still can - recognize the proper exercise of shareholders' rights and engage constructively with a significant shareholder to add a director to the board who can bring not only experience but also a much-needed different perspective in the best interest of the Company. The refusal to either do so or call the special meeting of shareholders does not reflect the standards directors should uphold and gives the impression that the motivation is to entrench existing directors aligned with management.
About iolite
Founded in 2011 by Robert Leitz, iolite Capital is a Switzerland-based investment manager with a focus on hidden champions: good businesses at attractive valuations. iolite serves a select circle of private and institutional clients who share the same entrepreneurial mindset, are willing to invest for the long term, and who would like to have first-hand access to a dedicated portfolio manager with substantial and meaningful skin in the game. Using a private equity approach, iolite conducts deep fundamental research, constructively engages with management, and adopts a long-term investment horizon. For more information on iolite, please visit www.iolitecapital.com.
About Robert Leitz
Robert Leitz brings 25 years of experience in finance and commodities. His expertise in international M&A and distressed debt investing equips him to contribute effectively to the Company's success. iolite holds a diverse portfolio of commodity-related investments across Australia, Canada, Switzerland, and Africa. Before founding iolite, Mr. Leitz held positions at Glencore and several financial institutions, including TPG Credit, Goldman Sachs' European Special Situations Group, and KPMG Corporate Restructuring. He holds a Master of Science in Business Administration and Economics from the University of St. Gallen (HSG), Switzerland, and completed his master's thesis under the guidance of Prof. Eli Noam at Columbia University, New York.
Information in Support of Public Broadcast Solicitation
The information contained in this news release does not and is not meant to constitute a solicitation of a proxy by iolite within the meaning of applicable corporate and securities laws. Although iolite has requisitioned a meeting (the 'Special Meeting') of the shareholders of Dynacor, there is currently no record or meeting date and shareholders are not being asked at this time to execute a proxy in favor of iolite`s nominee or any other resolutions set forth in the requisition. In connection with the Special Meeting, iolite is voluntarily providing the disclosure required under sections 9.2(4) and 9.2(6) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with corporate and securities laws applicable to public broadcast solicitations.
This news release and any solicitation made by iolite in advance of the Special Meeting is, or will be, as applicable, made by iolite and not by or on behalf of the management of Dynacor.
Shareholders of Dynacor are not being asked at this time to execute proxies in favor of iolite's nominee (in respect of the Special Meeting) or any other resolution that may be set forth in the requisition. iolite intends to make its solicitation primarily by mail, but proxies may also be solicited personally by telephone, email or other electronic means, as well as by newspaper or other media advertising or in person. In addition, iolite may solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, by way of public broadcast, including press release, speech or publication, and in any other manner permitted under applicable Canadian laws. Any members, partners, directors, officers or employees of iolite and its affiliates or other persons who solicit proxies on behalf of iolite will do so for no additional compensation. The costs incurred in the preparation and mailing of a circular in connection with the Special Meeting, and the solicitation of proxies by iolite will be borne by iolite, provided that, subject to applicable law, iolite may seek reimbursement from Dynacor of iolite's out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful vote at the Special Meeting.
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SOURCE: iolite Capital Management AG
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PUB: 03/06/2025 05:32 AM/DISC: 03/06/2025 05:32 AM