Dynacor Group Inc. — Interim / Quarterly Report 2021

May 14, 2021

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Dynacor Gold Mines Inc.

Management Discussion and Analysis For the three-month period ended

March 31, 2021

Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Index MANAGEMENT DISCUSSION AND ANALYSIS ........................................................................................ 3 Introduction ................................................................................................................................................ 3 Responsibility of financial reports .............................................................................................................. 3 Business and strategy ............................................................................................................................... 4 Covid-19 Update ........................................................................................................................................ 4 1-Q1-2021 - OVERVIEW AND HIGHLIGHTS .............................................................................................. 5 2-KEY ECONOMIC TRENDS ....................................................................................................................... 7 Gold market price ...................................................................................................................................... 7 Exchange rates .......................................................................................................................................... 7 3-OVERALL PERFORMANCE ..................................................................................................................... 8 4-CONSOLIDATED RESULTS AND GOLD ORE PROCESSING OPERATIONS ..................................... 9 Extract from Consolidated Statement of net income and comprehensive income .................................... 9 Production, sales and gross operating margin ........................................................................................ 10 Net income and comprehensive income variance analysis .................................................................... 11 Reconciliation of non-IFRS measures ..................................................................................................... 12 Ore processing production statistics and financial summary .................................................................. 13 5-CONSOLIDATED CASH FLOW AND LIQUIDITY .................................................................................. 14 6-CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................ 15 7-QUARTERLY REVIEW ........................................................................................................................... 18 8-INFORMATION ON OUTSTANDING SHARES ...................................................................................... 18 9-TRANSACTIONS WITH RELATED PARTIES ....................................................................................... 19 10-MINING EXPLORATION PROPERTIES ............................................................................................... 20 11- FOLLOW-UP OUTLOOK-2021 ............................................................................................................ 20 12-RISKS AND UNCERTAINTIES ............................................................................................................. 21 13-JUDGMENTS, ESTIMATES AND ASSUMPTIONS ............................................................................. 21 14-ACCOUNTING POLICIES AND MODIFICATIONS .............................................................................. 21 15-NON-IFRS MEASURES ........................................................................................................................ 21 16-DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING ............................................................................................................................................... 21 17-CAUTION REGARDING FORWARD LOOKING STATEMENTS ........................................................ 22 18-CORPORATE INFORMATION ............................................................................................................. 23

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

MANAGEMENT DISCUSSION AND ANALYSIS

Introduction

This Management Discussion and Analysis (the “MD&A”) for Dynacor Gold Mines Inc. (“Dynacor” or the “Corporation”) is intended to help the reader understand the strategy, continuing operations and financial performance of the Corporation and comments on the Corporation’s major activities which have occurred during the three-month period ended March 31, 2021 (“Q1-2021”) as well as the subsequent period up to May 13, 2021. This MD&A should be read in conjunction with Dynacor’s audited consolidated financial statements as at and for the year ended December 31, 2020 (the “Annual Financial Statements”), and is intended to supplement and complement the unaudited condensed interim consolidated financial statements and notes thereto as of March 31, 2021, and for the three-month periods ended March 31, 2021 and 2020 (the “Financial Statements”).

The Corporation has prepared the MD&A with reference to National Instrument 51-102, “Continuous Disclosure Obligations” of the Canadian Securities Administrators.

All amounts are in United States dollars (in “US dollars”), unless otherwise indicated, which is the Corporation’s presentation and functional currency.

Where we say “we”, “us”, “our”, the “Corporation” or “Dynacor”, we mean Dynacor Gold Mines Inc. and/or one or more or all its subsidiary, as it may apply. The information provided herein, effective May 13, 2021, is based on assumptions related to future events and results, which may vary. Further information on the Corporation and its operations has been filed electronically on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

Responsibility of financial reports

Management is responsible for the preparation of the Financial Statements and the MD&A. The Corporation’s Board of Directors (the “Board”) has the responsibility to ensure that management assumes its responsibilities with regards to the preparation of the Financial Statements and the MD&A. To assist management, the Board has created an Audit Committee. The Audit Committee meets with management to discuss the operating results and the financial situation of the Corporation. It then makes its recommendations and submits the Financial Statements and the MD&A to the Board for their review and approval. Following the recommendation of the Audit Committee, the Board has approved the Financial Statements and the MD&A on May 13, 2021.

The Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. Consequently, all comparative financial information presented in the MD&A reflects the consistent application of IFRS. The Financial Statements have been filed electronically on SEDAR at www.sedar.com.

Listing

Dynacor is a publicly traded Corporation listed on the Toronto Stock Exchange (“TSX”) under the symbol “DNG” and on the OTC in the United States under the symbol “DNGDF”.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Business and strategy

Dynacor’s activities consist of the production of gold and silver from the processing of purchased ore and the exploration of its mining properties located in Peru, with the potential for commercial extraction of gold and other precious metals. The Corporation purchases ore from local government registered artisanal ore producers from various regions of Peru which is then processed at its wholly owned milling facility to produce gold dores and silver pellets which are sold internationally at market prices. All the Corporation’s gold sales were with one sole customer. However, management considers economic dependence does not exist as the Corporation can sell its gold to numerous clients worldwide. The Corporation also owns the rights on several mining properties which are at the exploration stage, including its flagship exploration gold, copper and silver prospect, the Tumipampa property (“Tumipampa”). During 2019, the Corporation has entered into an agreement with a group of artisanal miners for them to extract ore from Tumipampa which we then purchase and transport to our plant for process. A total volume of more than 1,600 tonnes was extracted since 2019.

The Corporation’s strategy is to maximize shareholders’ value by effectively managing its existing assets as well as pursuing organic and strategic growth opportunities. With its ore processing activities, Dynacor has succeeded in implementing and growing a solid source of cash flow which enables the Corporation to fund the exploration and development of its exploration assets where a $1.0 million budget was put in place, as well as to face difficult market conditions by not being required to rely on the equity markets to raise capital. The drilling exploration program will begin upon agreement with local communities.

In 2020 and despite a temporary three-month shut-down in Q2 due to the Covid-19 crisis, the Corporation achieved a production of 51,369 AuEq ounces at its Veta Dorada plant in Peru from the processing of purchased ore.

In December 2019, the Peruvian authorities retained one of our shipment containing 2,650 ounces of gold. Following this export retention, the Corporation temporarily stopped exporting gold. However, it continued purchasing and processing ore at record levels and consequently increased its ore and gold in process inventory at the end of 2019. In January 2020, exports and sales resumed and 2019 year-end accumulated gold in process inventory was poured to gold and sold. Although we are closely following this situation, we cannot predict at this time when this shipment will be released by the authorities and consequently, we have classified them under other non-current assets. There is no development at the date of this report.

Covid-19 Update

In 2020, the Covid-19 became a worldwide crisis. Following the state of emergency decree in Peru, which was declared on March 16, 2020, the Corporation had to temporarily stop its ore purchase and process operations. On June 6, 2020, the Corporation successfully resumed its operations upon receiving approval of its health and safety protocol from the Peruvian Ministry of Health. The Corporation achieved to gradually increase its monthly ore purchase and processing volume. In Q3-2020, the Corporation returned to production levels achieved before the Covid-19 crisis and has maintained it since.

The resumption of activities, together with the return of employees and suppliers, was in full compliance with the Ministry of Health guidelines. Our Covid-19 sanitary protocol contains measures to monitor the risk of exposure to the Covid-19 at our workplaces, as well as establishing prevention and control standards to avoid the appearance and/or the spread of the virus and to ensure the health and safety of our workers, suppliers, customers, and visitors.

The Covid-19 virus is still very well active in Peru and surely a great concern. Vaccine campaigns have started however at very slow pace.

Although the Corporation succeeded going through the first and second wave of the crisis with limited effect, the duration and future impacts of this pandemic are still unknown, therefore it could have a prospective material impact on the Corporation’s activities, cash flow and liquidities. The Corporation has taken and will continue to take actions to minimize any eventual impacts.

The Covid-19 virus crisis and economic uncertainties impacted stock markets. The markets will remain volatile at least until this world crisis ends.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

1-Q1-2021 - OVERVIEW AND HIGHLIGHTS

OVERVIEW

Dynacor completed the three-month period ended March 31, 2021 (“Q1-2021”) with quarterly record sales of $40.9 million and a net income of $2.1 million (US$0.05 per share), ahead of annual guidance, compared to sales of $30,9 million and a net income of $2.4 million (US$0.06 per share) in the first quarter of 2020 (“Q1-2020”).

Despite the annual rainy season period in Peru, the Corporation continued attracting large volume of ore, purchasing 32,135 tonnes which is just under the level of purchases in Q4-2020. This resulted as well in the highest Q1 gold production in the Corporation history.

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Despite a slightly declining gold market price, the Corporation was able to increase its quarterly sales for the third consecutive quarter.

Compared to last year, the increase in sales is even more remarkable given that Q1-2020 sales included approximately $8.7 million coming from December 2019 postponed gold exports.

The Corporation also recently announced a $1.8 million investment through internally generated cash flow to expand its Veta Dorada ore processing plant capacity. The new plant expansion will enable to increase production, improve cost efficiencies, create jobs and elevate Dynacor as Peru's largest ASM gold ore purchaser and processer.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

HIGHLIGHTS

Operational

• Highest quarterly volume processed. In Q1-2021 the Veta Dorada plant processed a volume of 29,327 tonnes of ore (326 tpd) compared to 22,901 tonnes (297 tpd) in Q1-2020 a 28.1% increase and historical Q1 high. (Considering 90 days in Q1-2021 and 77 potential working days due to Covid-19 restrictions plant shutdown in Q1-2020);

• Significant increase in quarterly production. During Q1-2021, gold equivalent production amounted to 21,975 AuEq ounces compared to 13,542 AuEq ounces in Q1-2020, representing an increase of 62.3%;

• 32,135 tonnes in Q1-2021, the Corporation completed Q1-2021 with a level of inventory exceeding 11,000 tonnes. Consequently, the Corporation decided to bring forward the mill expansion.

Financial

• 32.4% increase in Sales . With higher quantities and average gold market price, sales amounted to $40.9 million in Q1-2021 compared with $30.9 million in Q1-2020;

• Increased gross operating margin. Gross operating margin of $5.3 million in Q1-2021, an increase of 8.2% compared to $4.9 million in Q1-2020;

• Quarter to quarter increase in Net income. Net income and comprehensive income of $2.1 million ($0.05 per share) compared to $1.4 million in Q4-2020 and $2.4 million in Q1-2020;

• Strong cash gross operating margin. Cash gross operating margin of $257 per AuEq ounce sold[(1)] compared to $283 in Q1-2020;

• Increased EBITDA[(2)] . $4.6 million compared to $4.3 million in Q1-2020;

• Stable cash-flow from operating activities before change in working capital items. Cash flow from operating activities before change in working capital items of $3.1 million ($0.08 per share) [ (3)] similar to Q1-2020;

• Improved cash position. Cash on hand of $17.2 million at March 31, 2021 compared to $11.9 million at year-end 2020.

Cash Return to Shareholders

• Change in dividend policy. Starting in February 2021, a CA$0.005 monthly dividend per share is paid replacing the CA$0.015 quarterly dividend. During Q1-2021, dividends totaling $0.8 million (CA$ 1.0 million) were paid.

( Variance %, are calculated based on rounded figures)

(Detailed variance calculations and explanations are contained in section 4)

(1) Cash gross operating margin per AuEq ounce is in US$ and is calculated by subtracting the average cash cost of sale per equivalent ounces of Au from the average selling price per equivalent ounces of Au and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another company. See the “non-IFRS Measures” section 15 of this MD&A.

(2) EBITDA: “Earnings before interest, taxes and depreciation” is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. The Corporation uses this non-IFRS measure as an indicator of the cash generated by the operations and allows investor to compare the profitability of the Corporation with others by canceling effects of different assets bases, effects due to different tax structures as well as the effects of different capital structures. EBITDA is calculated on p.12 of this MD&A. See the “Non-IFRS Measures” section 15 of this MD&A.

(3) Cash-flow per share is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. This measure is calculated on p.12 of this MD&A. See the “Non-IFRS Measures” section 15 of this MD&A. The Corporation uses this non-IFRS measure which can also be helpful to investors as it provides a result which can be compared with the Corporation market share price.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

2-KEY ECONOMIC TRENDS

Gold market price

During Q1-2021, the average market price of gold was $1,798/oz, compared to $1,583/oz in Q1-2020 an increase of 13.6%.

Below, are presented the charts of the overall market price of gold for the first months of 2021 and 2020. In 2021, and contrary to 2020, the gold market price followed a decreasing trend up to mid-March. On May 10, 2021 the gold market price is $1 840/oz. In 2020, except during the third week of March, the gold price increased all over the period. This gold price context impacts our level of sales and margin.

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Exchange rates

The quarter-end and quarterly average exchange rates for 2021 and 2020 were as follows:

March 31 (closing rate) Q-1 (average rate) December 31 (closing rate)	$US/$CA 2021 2020 1.258 1.419 1.266 1.345 1.273	$US/Soles 2021 2020
		3.762 3.435 3.660 3.394 3.618

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During Q1-2021 following a +9.1% gain over the Peruvian Sol in 2020, the US dollar has gained an additional 4.0% over the Peruvian Sol.

The Corporation has not entered into any hedging contracts.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

3-OVERALL PERFORMANCE

Given the high ore inventory level built at year-end 2020, and our continuously strong level of purchases in Q1-2021, we were able to process 29,327 tonnes in Q1-2021 which represents the highest quarter ever and to increase our level of inventory compared to Q4-2020.

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As shown in the figure below, our gold production has historically been lower in the first quarter of each year compared to all other quarters. In Q1-2021 our gold production was in line with Q4-2020 and was our best first quarter ever.

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During the first quarter of 2021, our production reached an historical high of 326 tpd[(1)] . The Q1-2021 production also beneficiated from a significantly higher gold recovery compared to Q1-2020.

Other variances of gross margin and net income are detailed in section 4.

(1) considering potential 90 working days during the last quarter of 2020.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

4-CONSOLIDATED RESULTS AND GOLD ORE PROCESSING OPERATIONS

Extract from Consolidated Statement of net income and comprehensive income

(in $'000) (unaudited) Sales Cost of sales Gross operating margin General and administrative expenses Other project expenses Operating income Income before income taxes Current income tax expense Deferred income tax expense Net income and comprehensive income Earnings per share Basic Diluted	For the three-month periods ended March 31, 2021 2020
	40,909 30,869 (35,606) (25,920)
	5,303 4,949 (1,208) (1,091) (16) (128)
	4,079 3,730 3,928 3,647 (1,554) (1,223) (268) (39) 2,106 2,385 $0.05 $0.06 $0.05 $0.06

Total sales amounted to $40.9 million compared to $30.9 million in Q1-2020. The $10.0 million increase is explained by higher volume of gold sold ($5.4 million) at a higher average gold price ($4.6 million). The Q1-2021 gold production also beneficiated from a significantly higher gold recovery (+3.4%) compared to Q1-2020.

The Q1-2021 gross operating margin reached $5.3 million which represents 13.0% of sales. This level is higher than the forecast of the Corporation. Compared to 2020, the gross operating margin was negatively impacted by the declining trend of gold market price.

General and administrative expenses amounted to $1.2 million in Q1-2021, a $0.1 million increase compared to Q1-2020.

The Q1-2021 net income was impacted by the recording of a $0.3 million deferred income tax expense resulting from FX variances between the $US and the Peruvian Sol applying on long term assets local tax basis.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Production, sales and gross operating margin

Gold production and sales for the three-month periods ended March 31, 2021 and 2020, are summarized as follows:

Gold Production (ounces) Gold Production (AuEq ounces) Gold sales (AuEq ounces) Total sales Total cash cost of sales(1) Cash gross operating margin(2) Depreciation Gross operating margin Gross Operating Margin per AuEq ounce sold ($/ounce) Average gold market price ($/ounce) Cash gross operating margin per AuEq ounce sold Average selling price Average cash cost of sales(3) Cash gross operating margin(4)	For the three-month periods ended March 31, 2021 2020
	ounces Ounces
	21,580 13,324 21,975 13,542 22,870 19,475
	($‘000) ($‘000)
	40,909 30,869 (35,036) (25,351)
	5,873 5,518 570 569
	5,303 4,949 232 254 1,798 1,583 $/ounce (*) $/ounce (*) 1,789 1,585 (1,532) (1,302)
	257 283

(*) per AuEq ounce sold

The cash gross operating margin amounted to $257/oz in Q1-2021 vs. $283/oz in Q1-2020. The variance is mostly due to the timing of sales and to the negative trend in gold market price during the period. Q1-2020 sales had benefited from the increase of gold price during that period, which was finally applied to the December 2019 exports which had been postponed into 2020.

(1) Cash cost of sales is the cost of sales and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. See the “non-IFRS Measures” section 15 of this MD&A.

(2) Cash gross operating margin is calculated by deducting to the sales the cash cost of sales and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another corporation. See the “non-IFRS Measures” section 15 of this MD&A.

(3) Average cash cost of sales is calculated by dividing the cash cost of sales by sales volume in ounces and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another company. See the “non-IFRS Measures” section 15 of this MD&A.

(4) Cash gross operating margin per AuEq ounce is calculated by subtracting the average cash cost of sale per equivalent ounces of Au from the average selling price per equivalent ounces of Au and is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another company. See the “non-IFRS Measures” section 15 of this MD&A.

These non-IFRS measures are used by management as indicators of the gross amount of cash which could be generated from the production of one unit (ounce) of gold.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Net income and comprehensive income variance analysis

The variance in the net income and comprehensive income between Q1-2020 and Q1-2021 is as follows:

(in million $) (unaudited) Net income Q1-2020 Increase in gross operating margin Increase in general administrative expenses Increase in current income tax expenses Increase in deferred income tax expenses Total variances Net income Q1-2021	Q1-2020 vs. Q1-2021 2.4 0.4 (0.1) (0.3) (0.3)
	(0.3)
	2.1

The gross operating margin variance and the income tax expenses which represents the main variance in net income were explained in the previous pages.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Reconciliation of non-IFRS measures

Reconciliation of non-IFRS measures
(in $’000) (unaudited) Reconciliation of net income and comprehensive income to EBITDA(1) Net income and comprehensive income Income taxes expense (current and deferred) Financial expenses Depreciation EBITDA(1) Reconciliation of net cash flow from operating activities before change in working capital items per share(2) Net cash flow from operating activities before change in working capital items (in $'000) Basic weighted average number of common shares outstanding (‘000) Net cash flow from operating activities before change in working capital items per share(2)	For the three-month periods ended March 31, 2021 2020
	2,106 2,385 1,821 1,262 51 18 643 640
	4,621 4,305
	3,077 3,222 38,856 38,787
	$0.08 $0.08

(1) EBITDA: “Earnings before interest, taxes and depreciation” is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. The Corporation uses this non-IFRS measure as an indicator of the cash generated by the operations and allows investor to compare the profitability of the Corporation with others by canceling effects of different assets bases, effects due to different tax structures as well as the effects of different capital structures. See the “Non-IFRS Measures” section 15 of this MD&A.

(2) Net cash-flow from operating activities before change in working capital per share is a non-IFRS financial performance measure with no standard definition under IFRS. It is therefore possible that this measure could not be comparable with a similar measure of another Corporation. See the “Non-IFRS Measures” section 15 of this MD&A. The Corporation uses this non-IFRS measure which can also be helpful to investors as it provides a result which can be compared with the Corporation market share price.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Ore processing production statistics and financial summary

Below is the table explaining the variances between the three-month periods ended March 31, 2021 and 2020.

and 2020.
Ore processing production statistics summary	Q1- 2021	Comments and explanations over variances	Q1- 2020	Variance in %
Tonnes processed	29,327	Increase due to higher ore purchases combined with higher mill efficiency.	22,901	+28.1%
Average daily tonnes processed (1)	326	Consistent with variances in tonnes processed.	252	+29.4%
Average daily tonnes processed excluding Covid-19 plant shut-down(2)	326	Increase explained by a higher tonnage of ore processed.	297	+9.8%
Ounces produced (Au)	21,580	Increase explained by a higher tonnage of ore processed at a higher average grade and a higher gold recovery.	13,324	+62.0%
Ounces produced (AuEq ounce)	21,975	In line with the increase in ounces produced.	13,542	+62.3%
Ounces sold (AuEq ounce)	22,870	Consistent with the production level. Also 2020 sales volume benefited from the December 2019 postponed shipments into 2020.	19,475	+17.4%
Financial summary
Sales (millions $)	40.9	Increase due to higher gold volume sold ($5.4 million) at a higher average gold price ($4.6 million).	30.9	+32.4%
Average selling price per AuEq ounce sold ($)	1,789	Consistent with the average gold market price and the timing of exports.	1,585	+12.9%
Gross operating margin (millions $)	5.3	Increase attributable to the higher average sales and negatively impacted by the decreasing gold market price during the quarter.	4.9	+8.2%
Gross operating margin (% of sales)	13.0%	Decrease mainly due to the unfavorable trend of gold market price compared to 2020.	16.0%	(18.8%)
Gross operating margin per AuEq ounce sold ($)	232	Consistent with the increase in average selling prices and the decrease in gross operating margin as a % of sales.	254	(8.7%)
Cash gross operating margin per AuEq ounce sold ($)	257	Consistent with the increase in average selling prices and the decrease in gross operating margin as a % of sales.	283	(9.2%)
EBITDA (millions $)	4.6	Increase attributable to higher cash gross operating margin.	4.3	+7.0%
Cash flows before changes in working capital items (millions $)	3.1	In line with last year.	3.2	(3.1%)
Net cash flow from operating activities before change in working capital items per share ($)	0.08	No variance vs. last year.	0.08	-
Net income (millions $)	2.1	Main variance coming from the net increase in gross operating margin ($0.4 million) offset by the higher income tax charge ($0.6 million).	2.4	(12.5%)
Earnings per share ($)	0.05	In line with changes in net income.	0.06	(16.7%)

( Variance % are calculated based on these rounded figures)

(1) Considering 90 days in 2021 and 91 days in 2020.

• (2) Considering 77 potential working days in 2020 (considering Covid-19 restrictions forcing plant shut-down between 16 March and 5 June 2020).

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

5-CONSOLIDATED CASH FLOW AND LIQUIDITY

The impacts of all the activities on the Corporation’s cash flow are summarized below:

(in $'000) (unaudited) Operating activities Net income, adjusted for non-cash items Change in working capital items Net cash from operating activities Investing activities Acquisition of property, plant and equipment, net of proceeds of disposition Additions to exploration and evaluation assets Net cash used in investing activities Financing activities Bank loan Payment on asset retirement obligations Repayment of lease liabilities and interest’s payments Repurchase of common shares Dividends paid Net cash from (used in) financing activities Change in cash during the period Effect of exchange rate changes on cash Cash, beginning of the period Cash, end of the period	Three-month periods ended March 31, 2021 2020 3,077 3,222 3,750 9,848
	6,827 13,070
	(483) 58 2 (28)
	(481) 30
	- (3,015) (55) (76) (188) (77) - (767) (448)
	(975) (3,651)
	5,371 9,449 0 (85) 11,868 6,743
	17,239 16,107

Operating activities

For the three-month period ended March 31, 2021, the cash flow from operations, before changes in working capital items, amounted to $3.1 million, similar to last year. Net cash from operating activities amounted to $6.8 million compared to $13.1 million for the three-month period ended March 31, 2020. Changes in working capital items amounted to $3.7 million compared to $9.8 million in Q1-2020.

Investing activities

During the three-month period ended March 31, 2021, the Corporation invested $0.5 million (very limited investments in the comparative period). This amount is mainly comprised of investments at the plant notably in relation to the increase in capacity and improvements in production processes and to new vehicles.

Financing activities

In Q1-2021, with the change in dividend policy, three dividends totaling CA$0.025 per share were disbursed for a total consideration of $0.8 million (CA$ 1.0 million). In Q1-2020, a quarterly dividend was disbursed for a total consideration of $0.4 million (CA$ 0.6 million).

During the period, 51,225 common shares were repurchased under the Corporation normal course issuer bid share buyback program for a total cash consideration of $0.08 million or CA$ 0.1 million (none in Q1-2020).

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Working capital and liquidity

As at March 31, 2021, the Corporation’s working capital amounted to $27.4 million, including $17.2 million in cash ($25.4 million, including $11.9 million in cash as at December 31, 2020).

6-CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(in $'000) (unaudited) Cash Accounts receivable Inventories Property, plant and equipment Right-of-use assets Exploration and evaluation assets Other assets Total assets Trade and other payables Asset retirement obligations Current tax liabilities Deferred tax liabilities Lease liabilities Shareholders' equity Total liabilities and equity Share price at closing	As at March 31, As at December 31, 2021 2020
	17,239 11,868 7,177 8,434 11,433 13,401 19,707 19,677 654 834 18,508 18,510 3,729 3,572
	78,447 76,296
	7,031 7,082 3,567 3,604 1,537 1,124 1,304 1,036 631 706 64,377 62,744
	78,447 76,296
	CA$2.06 CA$1.79

Assets and short-term liabilities

As at March 31, 2021, total assets amounted to $78,4 million ($76,3 million as at December 31, 2020). Major variances since last year-end come from the significant increase in cash, the decrease in inventories mainly due to the decrease in gold in process and the impact of the additional deferred tax liability recorded in Q1-2021.

Included in the finished goods-Gold dore bars are 2,650 ounces of gold related to the December 2019 shipment which were and are still retained by the Peruvian authorities for control and investigation procedures which have been slowed down due to the Covid-19 situation. We cannot predict at this time when this shipment will be released by the authorities and therefore, we have classified them under other non-current assets.

Accounts receivable amount to $7.2 million ($8.4 million as at December 31, 2020) and are mainly comprised of trade receivable that were collected in early April ($2.6 million), two months of current sales taxes (IGV) ($4.0 million) of which $1.9 million were collected after period-end and net advances to suppliers for ore purchases ($0.5 million).

Property, plant and equipment amount to $19.7 million (same amount as at December 31, 2020) and are mainly comprised of the Veta Dorada Plant and capitalized rehabilitation costs.

Total exploration and evaluation assets amounted to $18.5 million (same amount as at December 31, 2020) and are mainly comprised of accumulated capitalized exploration work performed at Tumipampa.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Long-term liabilities and contractual commitments

Payment due by period (in $’000)
	Within 1	1 to 2	2 to 5	Beyond
Contractual commitments	year	years	years	5 years	Total
Trade and other payables	5,862	-	-	-	5,862
Other commitments with suppliers	300	130	40	-	470
Leases liabilities(1)	236	209	105	203	753
Short-term leases	40	-	-	-	40
Asset retirement obligation(2)	222	-	-	4,592	4,814
Total	6,660	339	145	4,795	11,939

(1) The amount is different from the amount disclosed in the Financial Statements as it includes overall interest calculated to the term of the related agreement.

(2) The amount is different from the amount disclosed in the Financial Statements as it represents the undiscounted value of the remaining proposed work program as per the supporting valuation report.

During the period, the Corporation met all its obligations. The Corporation’s operations are governed by regulations regarding the protection of the environment. Subject to these regulations, the Corporation must implement progressive measures for rehabilitation work as part of its operations. Management reviews its asset retirement obligation (“ARO”) on a regular basis.

asset retirement obligation (“ARO”) on a regular basis.
(in million $) Veta Dorada Plant Tumipampa Total future asset retirement obligation	As at March 31, As at December 31, 2021 2020
	3.4 3.3 0.2 0.3
	3.6 3.6

This estimate is subject to change following developments on each site, modifications to laws and regulations or as new information becomes available. As at March 31, 2021 and December 31, 2020, the Corporation has constituted letters of credit in favor of the Ministry of Energy and Mines (MEM) for $1.8 million to secure closure plans of its facilities and exploration projects.

As at March 31, 2021, the future value of the provision for closure of facilities and exploration projects is $4.8 million ($4.9 million as at December 31, 2020), which is estimated to be disbursed in periods up to 18 years.

Shareholders’ equity

In Q1-2021, 51,225 shares were repurchased, resulting in a $0.03 million share capital decrease.

Other than results from operations and capital increases, transactions affecting the shareholders’ equity are reflected in the financing activities section.

Capital resources and capital management

The Corporation generates cash flow from its ore processing activities. This positive cash flow is re-invested in the commercial operations, capital investments and exploration activities. The Corporation has access to the capital market and may eventually need from time to time to turn to the financial market in order to fund any exploration program, capital requirement and project or investment opportunities. As at March 31, 2021, the Corporation has enough resources to meet its commitments for the upcoming year, however management is always looking at financing or investment opportunities which could benefit to the growth of the Corporation.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Capital resources and capital management (suite)

The Corporation’s capital structure consists of common shares, stock options and deferred share units (“DSUs”). The Corporation manages its capital structure and makes changes pursuant to economic conditions and conditions related to its assets. The Corporation has the ability to raise capital when it is necessary to meet its requirements and therefore, it does not have a specific target debt to capital ratio. The Corporation also possesses the ability to raise debt to maintain a balance between debt and shareholders’ equity.

The Corporation is not subject to any externally imposed capital. The Corporation’s objectives in managing capital are the following:

• i. to preserve the capacity to continue its operations in order to maximize the return to its shareholders and maintain an optimal capital structure in order to increase the shareholders’ equity in the long term.

• ii. to ensure the Corporation has sufficient capital to meet its short-term needs and ensure the development of its projects and mining activities.

• iii. to satisfy the external requirements with regards to capital needed in respect of any lending agreements.

• iv. to maintain an optimal capital structure in order to minimize the cost of debt financing.

The Corporation is not subject to any externally imposed capital requirements. However, for the Corporation’s Peruvian subsidiary, the General Corporate Law (Peru) establishes that a minimum of 10% of the distributable profit of each year must be allocated to a legal reserve account, until this account reaches 20% of its capital ($2.6 million as at March 31, 2021 and December 31, 2020). Dynacor may transfer the funds from this legal reserve account, but the Corporation will be obliged to replace these funds in the subsequent year.

Off-balance sheet transactions

The Corporation did not enter any significant off-balance sheet transactions in 2021.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

7-QUARTERLY REVIEW

(Unaudited, in accordance with IAS 34)

	2021		2020	2020			2018
Financials (in $'000) Sales Cost of sales Depreciation General and administrative expenses Loss (gain) on foreign exchange Income tax expenses Net income (loss) Acquisition of property, plant and equipment Additional exploration and evaluation Gross operating margin (%) Earnings per share ($) Basic Diluted	Q1 40,909 35,606 643 1,208 100 1,821 2,106 494 (2) 13.0% 0.05 0.05	Q4 38,568 33,198 642 1,192 35 2,658 1,385 521 (13) 13.9% 0.04 0.04	Q3 24,089 20,834 633 915 18 774 1,249 313 12 13.5% 0.03 0.03	Q2 8,007 7,975 599 747 (3) (70) (685) 12 - 0.4% (-0.02) (-0.02)	Q1 30,869 25,920 640 1,090 65 1,262 2,385 7 28 16.0% 0.06 0.06	Q4 23,216 20,210 652 1,416 (6) 584 949 309 44 12.9% 0.02 0.02	Q3 33,667 29,053 638 974 71 1,180 2,301 112 (13) 13.7% 0.06 0.06	Q2 22,697 20,139 616 1,150 20 568 757 823 86 11.3% 0.02 0.02

First quarter results (refer to page 13 for variance analysis).

8-INFORMATION ON OUTSTANDING SHARES

Data concerning outstanding shares (as at May 13, 2021)

Number Common shares 38,864,341 DSUs 404,399 Share purchase options 1,402,500

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

9-TRANSACTIONS WITH RELATED PARTIES

Key management personnel

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Corporation as a whole. The Corporation has determined that key management personnel consists of members of the Board of directors, corporate officers, including the Corporation’s Chief Executive Officer, Chief Financial Officer and Vice President Operations.

Remuneration attributed to key management personnel can be summarized as follows:

(in $) Salaries, benefits and directors’ fees Share-based payments(1)	Three-month periods ended March 31, 2021 2020 341,310 237,587 13,632 - 354,942 237,587	Three-month periods ended March 31, 2021 2020 341,310 237,587 13,632 - 354,942 237,587
		237,587 -
		237,587

• (1) Represents the share-based compensation costs charged to the consolidated statement of comprehensive income during the period. During 2020, there was no bonus payment due to the uncertain situation with the Covid-19 pandemic.

Subsequent to quarter end, directors of the Corporation exercised 167,500 share purchase options for a total consideration of CA$296,300 (Note 13 b)).

Other related parties

In the normal course of operations and at fair value, being the amount of consideration determined and agreed to by the related parties:

A firm of which an officer of the Corporation is a partner, charged legal fees amounting to $15,007 for the three-month period ended March 31, 2021 ($18,718 for the three-month period ended March 31, 2020).

A Director charged consulting fees relating to the revision of health, safety and environmental procedures and amounting to $13,229 for the for the three-month period ended March 31, 2021 (nil for the three-month period ended March 31, 2020).

The Corporation’s gold sales, at market price in effect at the time of delivery, were done with one sole customer of which its president is a director of the Corporation since August 12, 2020.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

10-MINING EXPLORATION PROPERTIES

Tumipampa

Location and Geological Context

Tumipampa is located 500 km from Lima, Peru, in the Circa district, Province of Abancay, Department of Apurimac. Tumipampa’s concessions cover an area of 7,027 hectares and are located geographically on the eastern slopes of the Andes Mountain Range between 4,200 and 4,800 metres above sea level. The northern part of Tumipampa straddles the limestones of the host Ferrobamba deposit ‘Tintaya’ skarn-type (copper-gold), which is recognized as a major world class deposit of this type with more than 139 million tonnes at 1.23% Cu and 0.23g/t Au. The Tintaya mine is located 197 km northeast of Tumipampa. Moreover, major deposits have been recently unearthed at Los Chancas (355 million tons at 0.62% Cu, 0.05%Mo and 0.039g/t Au) (Southern Copper), Las Bambas (1.13 billion tonnes of 0.77% Cu,0.05 – 0.068 g/t Au and 0.01% Mo) (MMG Limited) and Constancia-which just began production (Hudbay), which are located on either side and near Tumipampa, respectively. All these major deposits are part of a belt of porphyry type deposits Cu-Au Skarn-related batholiths Andahuaylas-Yauri, an intrusive that is 300 km long and 150 km wide.

Currently, all of the land surrounding Tumipampa is claimed by major mining companies such as Southern Copper, MMG Limited, Buenaventura, Golden Ideal Gold Mining (China), Super Strong Mining (China) and Bear Creek Mining.

11- FOLLOW-UP OUTLOOK-2021

Ore processing

Contrary to previous years and despite the annual rainy season, the Corporation was able to even increase its ore inventory during Q1-2021. With this inventory level and current strong ore purchases, the Corporation has initiated in March ahead of its initial planned schedule the expansion project of its Veta Dorada processing plant which will increase the throughput level from its actual 345 tpd to 430 tpd, an increase of 25.0%. The expansion is scheduled to be completed on time and on budget.

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Illustration of the expansion project.
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For 2021, the Corporation issued financial and capital expenditure guidance[(1)] , forecasting $150.0 million in sales and a net income of $6.9 million (US$0.18 per share). As at March 31, 2021, the Corporation is slightly ahead of its 2021 financial guidance.

On May 13, the Corporation released its April 2021 monthly sales figure which amounted to $12.5 million (unaudited).

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

12-RISKS AND UNCERTAINTIES

The Corporation operates in the mining industry which is subject to numerous significant risks that can influence the profitability of a company. Please refer the Corporation’s annual information form or it’s MD&A for the year ended December 31, 2020, filed electronically on SEDAR www.sedar.com for more details.

13-JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of consolidated financial statements (refer to note 5 of the Annual Financial Statements) requires management to make judgments, estimates and assumptions on the reported amounts of assets and liabilities, and revenues and expenses. The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may be substantially different.

The significant accounting estimates are those that require assumptions on matters that are substantially uncertain at the time of the estimate, that should the assumptions be modified, it would have a material impact on the reported earnings or the financial position of the Corporation. A description of the Corporation’s main accounting policies can be found in the Annual Financial Statements, filed electronically on SEDAR at www.sedar.com.

14-ACCOUNTING POLICIES AND MODIFICATIONS

Changes in accounting policies and policies issued but not yet effective

There were no changes in accounting policies during the year.

15-NON-IFRS MEASURES

Throughout this document, the Corporation has provided measures prepared according to IFRS as well as some non-IFRS financial performance measures. Because the non-IFRS performance measures do not have any standardized definition prescribed by IFRS, they may not be comparable to similar measures presented by other companies. The Corporation provides these non-IFRS financial performance measures as they may be used by some investors to evaluate our financial performance. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial performance measures were reconciled to reported IFRS measures within the document. (Refer to sections 1 and 4 for description and reconciliation of those non-IFRS measures).

16-DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Disclosure controls and procedures (“DC&P”)

The CEO and the CFO of the Corporation are responsible for establishing and maintaining the Corporation’s DC&P, including adherence to the Disclosure Policy adopted by the Corporation. The Disclosure Policy requires all staff to keep senior management fully apprised of all material information affecting the Corporation so that they may evaluate and discuss this information and determine the appropriateness and timing for public release. The CEO and CFO evaluated the effectiveness of the Corporation’s DC&P as required by Multilateral Instrument 52-109 issued by the Canadian Securities Administrators. They concluded that as of March 31, 2021, the Corporation’s DC&P were effective. Since the March 31, 2021 evaluation, there have been no adverse changes to the Corporation’s DC&P and they continue to remain effective.

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

Internal control over financial reporting (“ICFR”)

Management has developed a system for ICFR in order to provide reasonable assurance with regards to the reliability of the financial information published and the preparation of the consolidated financial statements in accordance with IFRS. The CEO and the CFO evaluated the effectiveness of the ICFR as at March 31, 2021, based on the framework and criteria established in Internal Control – Integrated Framework as issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, and based on their evaluation, management has concluded that the Corporation’s ICFR were effective.

Limitations of controls and procedures

The Corporation’s management, including the CEO and CFO, believe that any DC&P or ICFR, no matter how well conceived and operated, can provide only reasonable and not absolute assurance that the objectives of the control system are met. Further, the design of a control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the controls. The design of any systems of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a costeffective control system, misstatements due to error or fraud may occur and not be detected.

Changes to ICFR

No changes were made to our ICFR during the three-month period ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our ICFR.

17-CAUTION REGARDING FORWARD LOOKING STATEMENTS

Statements contained in this document that are not historical facts are regarded as forward-looking statements. These statements may involve risk, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Many factors could cause such differences, including: volatility in market metal prices; changes in foreign currency exchange rates and interest rates; unexpected variations in geological conditions of a property of erroneous geological data; environmental risks including increased regulatory constraints; unexpected adverse mining conditions; adverse political conditions, and changes in government regulations and policies. Although the Corporation believes that the assumptions inherent in the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this document. The Corporation has not committed to maintaining this forward-looking information unless so required by law.

(s) Jean Martineau Jean Martineau President and Chief Executive Officer

(s) Leonard Teoli CPA, CA Leonard Teoli Vice-President and Chief Financial Officer

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Dynacor Gold Mines Inc. March 31, 2021

Management Discussion and Analysis

18-CORPORATE INFORMATION

Dynacor Gold Mines Inc. Corporate Office 625 René Lévesque Ouest Suite 1200 Montreal, Québec, Canada H3B 1R2 Tel.: (514) 393-9000 Fax: (514) 393-9002 Website:http://www.dynacor.com Twitter:http://twitter.com/DynacorGold

Directors and Officers

Pierre Lépine, CPA, CA - Chairman of the Board Jean Martineau- President and CEO Roger Demers, FCPA, FCA, ASC- Director Eddy Canova, Geo- Director Réjean Gourde, Ing- Director Isabel Rocha, B.Eng. MSc. MBA- Director Philippe Chave, Ing- Director Rocio Rodriguez-Perrot, LLB- Director Leonard Teoli, CPA, CA- VP Finance and CFO Jorge Luis Cardenas, Ing- VP Operations René Branchaud, LLB- Corporate Secretary

Legal Counsel Lavery, de Billy LLP

Auditors

Raymond Chabot Grant Thornton LLP

Transfer Agent

AST Trust Company (Canada)

Exchange listings

Toronto Stock Exchange – DNG OTC - DNGDF

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