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Dynacor Gold Mines Announces Operation Update from Custom-Milling Plant in Peru

Dynacor Gold Mines Inc. (TSX:DNG) has announced an operations update. During the fourth quarter 2010, the Company produced 10,478 ounces of gold from its custom-milling plant in Peru, an increase of 101% as compared to Q4-2009 (5,201 ounces).

As of December 31, 2010, annual gold production from custom milling totalled 33,525 ounces, surpassing the Company's 2010 target of between 25,000 to 28,000 ounces and representing an increase of 43 % as compared to total production in 2009 of 23,411 ounces.

Currently, the mill is operating at an average milling rate of 165 tonnes per day, an increase of 41% as compared to the average milling rate in 2009 which was about 117 tpd. In 2010, the rate of production increased sharply in Q3-2010 due to the increase in working capital in June 2010 as a result of a financing agreement (see press release dated June 7, 2010). Overall in 2010, gold produced from custom milling increased from 5,179 ounces in Q1 to 10,478 ounces in Q4.

In November, Dynacor completed the construction of a new cyanidation tank and is currently building another one. These two new tanks will increase the residence time in the process circuit and consequently maximise the yield and enable to company to run the plant at its full rated capacity of 180 tonnes/day which is equivalent to 11,250 ounces of gold per quarter or approximately 45,000 ounces of gold per year.

Gold production from custom milling is expected to continue to increase through the balance of 2011 and into 2012 as a result of higher throughput at the mill and future expansion.

Mr. Pierre Monet, Vice-President and CFO of Dynacor, stated: "In 2011, cash gross margin generated from custom milling operations is forecasted to be about $9.5 million based on gold sales of 45,000 ounces and an average cash gross margin per ounce of gold of $210. It should be noted in the third quarter of 2010, Dynacor reported a cash gross margin per ounce of gold of $237".

Mr. Jean Martineau, President and CEO of Dynacor, stated: "Dynacor has surpassed its production target for 2010 and is now producing at an annualized rate of over 40,000 ounces. Management is expecting, in the fourth quarter of 2010, to report another solid quarter of cash flow from operations. Looking forward, we expect the cash flow from the custom milling business to continue to provide capital to finance our Tumipampa exploration program and the continued growth of our custom-milling business."

Management expects to be able to publish an update on its Tumipampa drilling and exploration campaign within the next two weeks.

Source: Dynacor Gold Mines Inc.

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