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Message: very interesting information on DNG

I was recently in Peru. I had an opportunity to tour the Dynacor head office in Lima and visit the Acari mill 9 hrs south of the capital. I met the senior management and was able to engage in several informative meetings with the head geologist Alonso Sanchez and President/CEO Jean Martineau. These guys are very excited about the prospects of Tumipampa and the future expansion plans for the mill and company.

Peru is buzzing with economic excitement and you can see signs of the mining industry everywhere. No wonder, considering 50% of the country's industry comes from mining. The government just recently announced it is almost doubling its mining budget, which would increase their portfolio of mining from $24 billion to $42 billion. More than 200 junior mining companies, the majority of which are Canadian, are currently exploring for resources throughout the country.

Tumipampa is Dynacor's flagship property located close to Las Bambas; Xstrata is currently investing $4.2 billion into their property. The money is flowing into this area right now and I am told that Tumipampa is being watched closely by the industry and the Chinese. China is now Peru's number one trading partner.

Currently at the Tumipampa skarn, zone two of the four zones currently targeted for the first drill campaign has been drilled (drill hole two & three are in the lab). The geologist made it very clear that zone four and three (in order of most probable) are the targets he is most excited about (these zones had the largest outcroppings and the most significant anomalous samples). Zone 4 is next to be drilled (drill rig is there now) and then followed up with zone three and zone one. He expects to be drilling with one rig for now; after the rainy season, perhaps as many as four more rigs will be brought to the project.

Sanchez feels there is a minimum of 200mt to a maximum of 1bt of ore at the Tumipampa skarn, which include both significant gold and copper mineralization at grades of 0.30 - 1.4 g/t gold and 0.40 - 1.2% copper. I crunched the numbers for the skarn range predicted, using Hudbay's latest acquisition of Norsemont's Constancia's
.10/lb as a comparable for copper and 7% of gold spot price for gold and I got $368M to $7.1B.

He felt he should have a good understanding of how many tones Tumipampa has by the summer/fall. By this time they will have all the diamond drill results of all four zones complete. We should be looking for drill results that are higher than 0.30% copper, which seems to be the cut off for other copper skarn mines in the area. If the drill results are higher than .3% then it's economic. As for gold anything over 0.05% g/t would be realistic for a large bulk minable deposit.

Now you are most likely wondering....well how good is the geologist? I did some research on Alonso Sanchez and found that he is not only a geologist, but actually a sought after economic geologist. Sanchez has 10 years of experience with NYSE listed Buenaventura where he worked in both the exploration and mining division of the firm. This may explain his strategy of wanting to crosscut into Tumipampa's fifteen veins for immediate production, cash flow and additional intercepts through the development of the adit. Buenaventura is known for this method of production and exploration throughout the country.

I found out that the geologists in the area compare notes and was glad to hear that Sanchez went to Norsemont (recently bought out by Hudbay Minerals for $520 million - 277mt at .43% cu), Las Chances (Southern Copper) and Las Bambas (Xstrata) with his findings and samples and discovered that what he found at Tumipampa was identical to what they had discovered on their properties, except Tumipampa is indicating more gold. Sanchez stopped at Bonaventura to confirm his findings where he worked previously for 10 years and maintains an ongoing relationship with their team.

It was interesting to find out Tumipampa has disseminated mineralization on the property showing same characteristics as Barrick's Laguna Norte deposit that still needs to be explored with possibly one or two drill holes this fall. There are also fifteen gold veins discovered now and I was told these veins alone have 1-1.5 million ounces of gold. Martineau explained that it would not take much to set up a mill like the one they have at Acari and start producing their own gold out of the Tumipampa veins within 18 months. I felt he was seriously thinking of this, but had a better sense that this property could be sold before they could get this done if it reaps the rewards they expect. While sitting down for coffee, he mentioned he would like to retain the 100% ownership of the veins, disseminated, milling business and Casaden by way of spinning out a new company after selling the skarn separately. The original shareholders of DNG would of course be rewarded with new shares of the new co.

As for the trip to Acari...it was a long, very dusty, cliff hanging rugged road through the mountains to the mill. The mill was under tight security. Once inside, I got a full tour of the operations. Prior to my visit, I questioned the availability of ore to the mill. The last thing you want to do is run out of ore. No ore means no gold which means no cash flow. To my satisfaction, they had over 3000 tones of ore sitting waiting to be processed and the trucks just kept arriving with more ore over the two hours I was there. I was told 9-12 trucks arrive on a daily basis. It was confirmed that there is never a shortage of ore due to the hundreds of thousands of producers throughout the country that do not have the ability to process their own ore.

I often wondered about mill maintenance. With all the moving parts in a mill, it's would be easy for mechanical breakdowns...no mill means no gold which means no cash flow again. I was quick to learn there is a full mechanical staff at the site. It also seemed like every 2nd shop in every town along the route from Lima to Acari had a machine repair shop of some sort. While at the mill, I was told that one of the 3 ball crushers was failing and that another larger ball mill was already on order from Lima. It pays to have a mill in a country in which 50% of the industry is mining because everything is right there when you need it. Out of all the South American countries, the Peruvians have the best work ethic. They work hard; their priorities in life are to own their own home and educate their children. This says a lot about the future of Peru.

I also found out that permits have been submitted for a new mill. Apparently DNG owns property that is very close to the fully paved Pan American highway. The plan is to move the existing mill to the highway property within the next 18 months. This new location will allow access by large semi 18 wheel trucks therefore increasing the amount of ore that can be delivered to the property. This new mill will be built to process over 300tpd.

I don't think there are any companies out there currently cash flowing 10M and having a market cap of 55M, with a drilling campaign currently on that could have similar potential to Norsmont (recently taken over by Hudbay Minerals for $520M), Antares Minerals (recently taken over by First Quantum late 2010 for $460M). Additionally, consider Las Bambas mine, owned by Xstrada, being very close to their property in which $4.2B is being invested.

With 70% of this stock being held mostly by institutions such as Sprott, AGF, Trapeze and Sabretooth Master Fund from NY (they have been insider buying recently). There are definitely strong supporters behind this company.

2010 annual report and Q1 are looking like they will be positive news releases for Dynacor.

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