SEC Company Response from DYNARESOURCE, INC. (DYNR) (CIK 0001111741) (DYNR) — Jun 28, 2019
DYNARESOURCE, INC. (DYNR) (CIK 0001111741)
Date: June 28, 2019 · CIK: 0001111741 · Accession: 0001121781-19-000054
AI Filing Summary & Sentiment
File numbers found in text: 000-30371
Referenced dates: May 22, 2019
Letter
DynaResource, Inc.
W. Las Colinas Blvd
Suite 1910 North Tower
Irving, Texas 75039
June 28, 2019
Office of Beverages, Apparel, and Mining
U. S. Securities and Exchange Commission
Division of Corporate Finance
100 F. Street, NE
Washington, DC 20549
Re: DynaResource, Inc.
Form 10-K for Fiscal Year Ended December 31, 2018
Response Dated April 24, 2019
File No. 000-30371
Ladies and Gentlemen:
This letter is in response to comments on the above captured filing on May 22, 2019.
Form 10K for the Fiscal Year Ended December 31, 2018
Notes to Consolidated Financial Statements
Note 1. Nature of Activities and Significant Accounting Policies
Property
Design, Construction and Development Costs, page 57
Request:
1. We note you reference a mine plane throughout the document including page 29 in which you reference a formal mine plan. Please confirm whether or not you have a formal mine plan, including the period of time the plan covers.
2. If you do not have a current mine plan, please tell us, in detail, i) how you conduct your mining operation, II) how you make your capital investment decision.
Response:
Mine Plan:
The Company has a formal mine plan designed from the Block Model of Indicated and Inferred Resources at San Jose de Gracia (“SJG”) as described in the Mineral Resource Estimate for SJG which is included as Item 14 of the NI 43-101 Technical Report for SJG. The Mine Plan is designed at selected mining areas of SJG and covers approximately 250,000 mined tons through 2023. A copy of the Mine Plan is attached as Attachment 1. In response to oral comments made during our phone conference on June 27, 2019 we would like to specifically point to the following details contained in the Mine Plan:
A. Page 2: Mining tonnage according to selected mines;
B. Pages 3-6: Mining tonnage for each selected mine;
C. Page 7: Total mining tonnage per current Mine Plan;
D. Page 8: Mine Plan costs – 6 months:
(1) Development Cost and Production Cost - San Pablo Mine;
(2) Development Cost and Production Cost - Tres Amigos Mines;
6 Month Revenue Projection:
The Company is providing a short-term revenue projection for the next 6 months to include the opening of the Tres Amigos Mines, and to project the start of production from the Tres Amigos Mines; See Attachment 2.
Mining and Production Comparison to NI 43-101 Block Model (2015 – 2018):
The Company has compiled a Mining and Production Comparison spreadsheet in order to analyze the results of its realized mining and production operations versus the Mine Plan as designed by the Company. The Comparison of actual results to the Mine Plan is attached as Attachment 3.
In summary explanation contained in this response, the Comparison spreadsheet describes actual mining and production tonnage and gold oz produced from 2015 – 2018, as follows:
Mine Plan Tonnage: 114,761;
Actual Mined Tonnage: 151,602;
Mine Plan Au Oz.: 35,981;
Actual Mined Au Oz: 53,224;
Mill Ore Feed: 126,160 Tons / 50,263 Oz Au;
Mill Recovered Oz.: 42,159 Oz. Au;
Improvements / Non-Operation Costs - Investments
During January 1, 2017 to March 31, 2019, the Company has expended $8,401,106 in improvements / expansion / and non-operating costs related to DynaResource operations and the SJG Project. Of the $8,401,106 amount, $2,439,335 of these expenses were capitalized, and $3,634,979 were expensed under GAAP, due to the lack of proven reserves as described in the Mineral Resource Estimate for SJG (Item 14. of the SJG Technical Report). $2,326,792 were non-operating expenses not related to mine expansion. (See attached Spreadsheet – Improvements and Developments (Non-Operating Costs); (See Attachment 4; for the description of the Improvements / Developments / Non-Operating Costs.)
Mill Expansion:
Since commencing mining and milling operations in Fall 2015, we have undertaken an Improvement and Operations Expansion Plan in order to increase the mill processing capacity from 100 tons per day to 300 tons per day. The main component of the Mill improvement / expansion plans is the addition and installation of a third ball mill (8’ x 4’). The Total amount expended for the mill expansion and improvements to March 31, 2019 is $1,312,391. Beginning in Fall, 2019 we plan to operate the mill facility with three ball mills fully functional, which should increase the mill processing capacity to 300 tons a day. Attachment 4.)
Improvements / Mine Development:
Since commencing mining and milling Operations in Fall 2015; the Company has invested $3,649,979 in mining development and expansion costs in order to open access to additional mining areas and to increase mining tonnage. Beginning in Fall 2019, the Company expects to gain access to the Tres Amigos mine, and in doing so projects the increase in mining tonnage to 300 tons per day. The mining areas targeted for production are described in the Mine Plan.
NI 43-101 Technical Report and Description of Resources
The Mine Plan for the Company was designed from the Mineral Resource Estimate for San Jose de Gracia which is included as Item 14. of the NI 43-101 Technical Report for San Jose de Gracia. The Mineral Resource Estimate is Attached as Attachment 5.
Additional Reponses to Oral Comments made – June 27, 2019
Mining Concessions:
We do consider the need for impairment of our $4,132.678 mining concessions asset annually or as circumstances change that could warrant potential impairment. When considering impairment we first start with qualitative considerations and then quantitative analysis as needed. As noted above, the results of our mining operations have exceeded expectations from our initial plan when acquiring the mining concessions, commodity prices have been more than adequate in recent years to justify recovery of the mining concessions investment considering current and future production volumes and production costs, and even though the value of the mining concessions are justified by expected production in the near term we have reached less than 1% of expected future production based on our plan. The mining concessions will begin to be amortized along with other future mining costs that are capitalized in accordance with GAAP once we have reached appropriate proved reserves to establish the reserves for such depletion to occur. As noted in our 6 month projection included in attachment 2, expected profits in the next 6 months support the qualitative considerations that impairment of our mining concessions has not occurred. The Company has had minimal net income recently, but this is the result of our exploration and expansion costs primarily that are being expensed, but we believe such efforts will yield substantial new revenues and profits in the short and long term for the Company’s operations and will continue to increase our future net income.
Capitalized Items:
The following is from our Form 10-K for December 31, 2018 on page 57, and addresses capitalization policy related to our non-mining assets.As of December 31, 2018, none of the Company's properties contain resources that satisfy the definition of proven and probable reserves. The Company classifies the development of its properties, including the San Jose de Gracia Property, as exploration stage projects since no proven or probable reserves have been established under Industry Guide 7. In 2017 the Company entered the construction stage of the project. Under the construction stage non-mining assets are capitalized once recoverability has been established through generating a proven revenue stream from the mine. Consistent with our mining concessions we consider potential impairment of our other capitalized assets annually or as circumstances change that could warrant potential impairment. Consistent with mining concessions we have determined no impairment of such capitalized assets is warranted, and these assets are being depreciated over their expected lives.
The Company acknowledges that the Company and its management are responsible for the adequacy and accuracy of the disclosure in the filing, notwithstanding any review, comments, action or absence of action by the staff of the Commission.
Respectfully,
/s/ K.W. (“K.D.) Diepholz
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DynaResource, Inc.
222
W. Las Colinas Blvd
Suite 1910 North Tower
Irving, Texas 75039
June 28, 2019
Office of Beverages, Apparel, and Mining
U. S. Securities and Exchange Commission
Division of Corporate Finance
100 F. Street, NE
Washington, DC 20549
Re: DynaResource, Inc.
Form 10-K for Fiscal Year Ended December
31, 2018
Response Dated April 24, 2019
File No. 000-30371
Ladies and Gentlemen:
This letter is in response to comments
on the above captured filing on May 22, 2019.
Form 10K for the Fiscal Year Ended December
31, 2018
Notes to Consolidated Financial Statements
Note 1. Nature of Activities and Significant
Accounting Policies
Property
Design, Construction and Development
Costs, page 57
Request:
1. We note you reference a mine plane throughout the document including
page 29 in which you reference a formal mine plan. Please confirm whether or not you have a formal mine plan, including the period
of time the plan covers.
2. If you do not have a current mine plan, please tell us, in detail,
i) how you conduct your mining operation, II) how you make your capital investment decision.
Response:
Mine Plan:
The Company has a formal mine plan designed
from the Block Model of Indicated and Inferred Resources at San Jose de Gracia (“SJG”) as described in the Mineral
Resource Estimate for SJG which is included as Item 14 of the NI 43-101 Technical Report for SJG. The Mine Plan is designed at
selected mining areas of SJG and covers approximately 250,000 mined tons through 2023. A copy of the Mine Plan is attached as Attachment
1. In response to oral comments made during our phone conference on June 27, 2019 we would like to specifically point to the
following details contained in the Mine Plan:
A. Page 2: Mining tonnage according to selected mines;
B. Pages 3-6: Mining tonnage for each selected mine;
C. Page 7: Total mining tonnage per current Mine Plan;
D. Page 8: Mine Plan costs – 6 months:
(1) Development Cost and Production Cost - San Pablo Mine;
(2) Development Cost and Production Cost - Tres Amigos Mines;
6 Month Revenue Projection:
The Company is providing a short-term revenue
projection for the next 6 months to include the opening of the Tres Amigos Mines, and to project the start of production from the
Tres Amigos Mines; See Attachment 2.
Mining and Production Comparison to
NI 43-101 Block Model (2015 – 2018):
The Company has compiled a Mining and
Production Comparison spreadsheet in order to analyze the results of its realized mining and production operations versus the Mine
Plan as designed by the Company. The Comparison of actual results to the Mine Plan is attached as Attachment 3.
In summary explanation contained in this
response, the Comparison spreadsheet describes actual mining and production tonnage and gold oz produced from 2015 – 2018,
as follows:
Mine Plan Tonnage: 114,761;
Actual Mined Tonnage: 151,602;
Mine Plan Au Oz.: 35,981;
Actual Mined Au Oz: 53,224;
Mill Ore Feed: 126,160 Tons / 50,263
Oz Au;
Mill Recovered Oz.: 42,159 Oz.
Au;
Improvements / Non-Operation Costs
- Investments
During January 1, 2017 to March 31,
2019, the Company has expended $8,401,106 in improvements / expansion / and non-operating costs related to DynaResource
operations and the SJG Project. Of the $8,401,106 amount, $2,439,335 of these expenses were capitalized, and $3,634,979 were
expensed under GAAP, due to the lack of proven reserves as described in the Mineral Resource Estimate for SJG (Item 14. of
the SJG Technical Report). $2,326,792 were non-operating expenses not related to mine expansion. (See attached Spreadsheet
– Improvements and Developments (Non-Operating Costs); (See Attachment 4; for the description of the
Improvements / Developments / Non-Operating Costs.)
Mill Expansion:
Since commencing mining and
milling operations in Fall 2015, we have undertaken an Improvement and Operations Expansion Plan in order to increase the
mill processing capacity from 100 tons per day to 300 tons per day. The main component of the Mill improvement / expansion
plans is the addition and installation of a third ball mill (8’ x 4’). The Total amount expended for the mill
expansion and improvements to March 31, 2019 is $1,312,391. Beginning in Fall, 2019 we plan to operate the mill facility with
three ball mills fully functional, which should increase the mill processing capacity to 300 tons a day. Attachment 4.)
Improvements / Mine Development:
Since commencing mining and milling
Operations in Fall 2015; the Company has invested $3,649,979 in mining development and expansion costs in order to open
access to additional mining areas and to increase mining tonnage. Beginning in Fall 2019, the Company expects to gain access to
the Tres Amigos mine, and in doing so projects the increase in mining tonnage to 300 tons per day. The mining areas targeted for
production are described in the Mine Plan.
NI 43-101 Technical Report and Description
of Resources
The Mine Plan for the Company was designed
from the Mineral Resource Estimate for San Jose de Gracia which is included as Item 14. of the NI 43-101 Technical Report for San
Jose de Gracia. The Mineral Resource Estimate is Attached as Attachment 5.
Additional Reponses to Oral Comments
made – June 27, 2019
Mining Concessions:
We do consider the need for impairment of our $4,132.678 mining concessions asset annually or as circumstances
change that could warrant potential impairment. When considering impairment we first start with qualitative considerations and
then quantitative analysis as needed. As noted above, the results of our mining operations have exceeded expectations from our
initial plan when acquiring the mining concessions, commodity prices have been more than adequate in recent years to justify recovery
of the mining concessions investment considering current and future production volumes and production costs, and even though the
value of the mining concessions are justified by expected production in the near term we have reached less than 1% of expected
future production based on our plan. The mining concessions will begin to be amortized along with other future mining costs that
are capitalized in accordance with GAAP once we have reached appropriate proved reserves to establish the reserves for such depletion
to occur. As noted in our 6 month projection included in attachment 2, expected profits in the next 6 months support the qualitative
considerations that impairment of our mining concessions has not occurred. The Company has had minimal net income recently, but
this is the result of our exploration and expansion costs primarily that are being expensed, but we believe such efforts will yield
substantial new revenues and profits in the short and long term for the Company’s operations and will continue to increase
our future net income.
Capitalized Items:
The
following is from our Form 10-K for December 31, 2018 on page 57, and addresses capitalization policy related to our non-mining
assets.As of December 31, 2018, none of the Company's properties contain resources that satisfy the definition of proven
and probable reserves. The Company classifies the development of its properties, including the San Jose de Gracia Property, as
exploration stage projects since no proven or probable reserves have been established under Industry Guide 7. In 2017 the Company
entered the construction stage of the project. Under the construction stage non-mining assets are capitalized once recoverability
has been established through generating a proven revenue stream from the mine. Consistent with our mining concessions we consider
potential impairment of our other capitalized assets annually or as circumstances change that could warrant potential impairment.
Consistent with mining concessions we have determined no impairment of such capitalized assets is warranted, and these assets
are being depreciated over their expected lives.
The Company acknowledges that the Company
and its management are responsible for the adequacy and accuracy of the disclosure in the filing, notwithstanding any review, comments,
action or absence of action by the staff of the Commission.
Respectfully,
/s/ K.W. (“K.D.) Diepholz
Chairman / CEO
List of Attachments:
1. Mine Plan;
2. 6 Months Cost – Revenue Projection;
3. Comparison of Company Mine Plan to Actual Mining Results;
4. Improvements / Developments / Non-Operating Costs;
5. Mineral Resource Estimate for San Jose de Gracia (Item 14. of
the NI 43-101 Technical Report.
1 MINE PLAN High Grade Target and Designs June 2019 ATTACHMENT 1 (Mine Plan); To June 28, 2019 DynaResource Response Letter to SEC Comment Letter dated May 22, 2019;
San Pablo South (LU - 01) Tonnes Au g/t Ounces 39,033 11.60 14,557 Tres Amigos West Tonnes Au g/t Ounces 3,000 28.4 2,739 Tres Amigos Center Tonnes Au g/t Ounces 78,626 12.27 31,026 Tres Amigos East Tonnes Au g/t Ounces 75,355 16.12 39,050 San Pablo 01 Tonnes Au g/t Ounces 25,738 10.27 8,496 San Pablo 03 Tonnes Au g/t Ounces 17,700 9.57 5,446 San Pablo East Tonnes Au g/t Ounces 15,000 11.06 5,335 Total Current Designs Tonnes Au g/t Ounces 254,452 13.04 106,649 2
3 San Pablo Stope 01 Levels Tonnes g/t Ounces 545 - 560 1,789 10.00 575 530 - 545 3,578 9.50 1,093 515 - 530 2,981 11.20 1,073 500 - 515 7,453 10.35 2,480 485 - 500 9,938 10.25 3,275 Total Stope 01 25,738 10.27 8,496 San Pablo Stope 03 Levels Tonnes g/t Ounces 670 - 680 5,700 9.50 1,741 655 - 670 9,500 9.50 2,902 640 - 655 2,500 10.00 804 Total Stope 03 17,700 9.57 5,446 Total San Pablo 43,438 9.98 13,942 San Pablo Mine
4 San Pablo East Mine Levels Tonnes g/t Ounces 740-750 4,800 12 1,852 725-740 200 12 77 695-710 1,200 11 424 660-680 100 21 68 SPE 6,300 11.95 2,421 San Pablo East V1 Levels Tonnes g/t Ounces 710-725 4,200 9.90 1,337 695-710 4,500 10.90 1,577 SPE-V2 8,700 10.42 2,914 San Pablo East V2 Total San Pablo East Tonnes Au g/t Ounces 15,000 11.06 5,335
545 560 575 590 San Pablo South San Pablo South Levels Tonnes Au g/t Ounces 590 - 605 5,187 11.61 1,936 575 - 590 12,528 11.33 4,563 560 - 575 15,326 11.82 5,824 545 - 560 5,992 11.59 2,233 Total 39,033 11.60 14,556 5
6 Tres Amigos Tres Amigos West Tonnes Au g/t Ounces 3,000 28.4 2,739 Tres Amigos Center Tonnes Au g/t Ounces 78,626 12.27 31,026 Tres Amigos East Tonnes Au g/t Ounces 75,355 16.12 39,050 Ore Body Tonnes Au g/t Ounces Total Tres Amigos 156,981 14.43 72,815
High Grade Designs Area Tonnes g/t Ounces San Pablo 43,438 9.98 13,942 San Pablo East 15,000 11.06 5,335 Tres Amigos Center 78,626 12.27 31,026 Tres Amigos West 3,000 28.40 2,739 Tres Amigos East 75,355 16.12 39,050 San Pablo South 39,033 11.60 14,556 Total High grade 254,452 13.04 106,649 7
Mine Plan 2019 San Pablo Jul Aug Sep Oct Nov Dec Totals Main Access (ml) 0 0 0 0 0 0 0 Ramp (ml) 70 40 110 Access to levels (ml) 30 30 60 Drifting (ml) 70 70 100 100 340 Vent. Shaft (ml) 30 30 Total Developments 140 140 130 130 0 0 540Ore Ore Recessing ( tons ) 6,900 6,900 6,900 6,900 27,600 grade (g/t) 10.0 10.5 10.5 10.5 10.38 Development costo SP $150,884 $150,884 $140,106 $140,106 $581,980 Productiom Cost SP $345,000 $345,000 $345,000 $345,000 $1,380,000 Tres Amigos Center Main Access (ml) 160 100 100 100 0 0 460 Ramp (ml) 137 192 50 125 50 27 581 Access to levels (ml) 55 50 30 49 184 Drifting (ml) 95 95 100 290 Vent. Shaft (ml) 25 25 25 75 Total Developments 297 292 300 300 200 201 1,590 Ore Recessing ( tons ) 6,900 6,780 13,680 grade (g/t) 9.8 9.8 9.80 Development costo SP $320,089 $314,700 $323,322 $323,322 $215,548 $216,626 $1,713,607 Productiom Cost SP $0 $0 $0 $0 345000 339000 $684,000 TOTALS Total Developments (ml) 437 432 430 430 200 201 2,130 Total Ore (tonnes) 6900 6900 6900 6900 6900 6780 41,280 Grade (g/t) 10.0 10.5 10.5 10.5 9.8 9.8 10.18 Development Cost $470,973 $465,584 $463,428 $463,428 $215,548 $216,626 $2,295,587 Production Cost $345,000 $345,000 $345,000 $345,000 $345,000 $339,000 $2,064,000 Total Cost $815,973 $810,584 $808,428 $808,428 $560,548 $555,626 $4,359,587 8
ATTACHMENT 2; to June 28, 2019 DynaResource Response Letter to SEC Comment Letter dated May 22, 2019
San Jose de Gracia Gold Project
Monthly Projection (July 2019 - December 2019)
Jul-2019
Ago-2019
Sep-2019
Oct-2019
Nov-2019
Dec-2019
Total
Operating days
30
30
30
30
30
30
180
Mine
Ore tons mined/day
230
230
230
230
230
226
229
Ore tons/mined
6,900
6,900
6,900
6,900
6,900
6,780
41,280
Gold grade g/t
10.00
10.50
10.50
10.50
9.80
9.80
10.18
Gold Ounces
2,218
2,329
2,329
2,329
2,174
2,136
13,516
Developments (l.m.)
437
432
430
430
200
201
2,130
Plant
Feeding tons/day
200
200
220
240
240
250
225
Feeding tons/Month
6,000
6,000
6,600
7,200
7,200
7,500
40,500
Feeding grade (g/t)
10.00
10.50
10.50
10.50
9.80
9.80
10.17
Feeding Ounces/Month
1,929
2,025
2,228
2,431
2,269
2,363
13,245
Concentrates
Tons of Gravimetric
60
60
66
72
72
75
405
Tons of Flotation
540
540
594
648
648
675
3,645
Total Tons of Concentrates
600
600
660
720
720
750
4,050
Gold Contents
27%
Gravimetric Gold Ounces
521
547
602
656
613
638
3,576
58%
Flot