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2016-05-12

Mandalay Resources Corporation Announces First Quarter 2016 Financial Results and Quarterly Dividend

Mandalay Resources Corporation
Press release

Mandalay Resources Corporation Announces First Quarter 2016 Financial Results
and Quarterly Dividend

TORONTO, 2016-05-12 01:11 CEST (GLOBE NEWSWIRE) -- Mandalay Resources
Corporation ("Mandalay" or the "Company") (TSX:MND) today announced revenue of
$50.4 million, adjusted EBITDA of $17.3 million and consolidated net income
before special items of $1.1 million or $0.00 per share for the first quarter
of 2016. The Company’s unaudited consolidated interim financial results for
the three months ended March 31, 2016, together with its Management’s
Discussion and Analysis (“MD&A”) for the corresponding period can be accessed
under the Company’s profile on www.sedar.com and on the Company’s website at
www.mandalayresources.com. All currency references in this press release are in
U.S. dollars except as otherwise indicated.

In accordance with the Company’s dividend policy, Mandalay’s Board of Directors
declared a quarterly dividend of $3.0 million (6% of the trailing quarter’s
gross revenue), or $0.0073 per share (CDN$0.0094 per share), payable on June 3,
2016, to shareholders of record as of May 24, 2016.

The Company’s consolidated net income for the quarter of $1.1 million ($0.00
per share) has been adjusted for special items to an adjusted net income of
$1.0 million ($0.00 per share). Special items excluded from adjusted net income
are: tax expense adjustment at Costerfield of $1.4 million; write-off of $3.4
million of residual mining interest at Fabiola and Yasna veins at Cerro Bayo
and the associated tax savings of $0.8 million; and tax savings of $1.4 million
upon cancellation of the royalty rights at Cerro Bayo purchased from Coeur
Mining during the quarter. For a full reconciliation of the adjustments, please
refer to the Adjusted EBITDA Reconciliation to Net Income table found on page
14 of the Company’s MD&A for the first quarter of 2016.

Commenting on first quarter 2016 financial results, Dr. Mark Sander, President
and CEO of Mandalay, noted, “Mandalay generated strong revenue and EBITDA in
the first quarter of 2016, on an annualized pace exceeding last year’s revenue
and EBITDA, despite lower metal prices relative to the first quarter of 2015.
As a result of our continuing low average cash production cost per saleable
gold equivalent ounce (oz Au Eq.”) of $751, we generated 34% EBITDA margins in
the quarter. We ended the quarter with $40.7 million in cash and cash
equivalents, down from $49.2 million at the beginning of the quarter, due to
the $4.0 million cash portion of the Cerro Bayo royalty acquisition and
increases in accounts receivables of $6.0 million mainly due to unsettled
shipments sold late in the quarter. Having repurchased the Cerro Bayo royalty
from Coeur Mining, the Company has no remaining private royalties on any of its
current operations and our shareholders can expect to realize the full benefit
of increasing production and metal prices going forward.”

Dr. Sander continued, “During the first quarter of 2016, Costerfield continued
its excellent operational and financial performance, producing its second
highest ever quarterly total of 16,966 oz Au Eq., at a record low cash cost of
$512/oz Au Eq. and all-in cost of $724/oz Au Eq. Since achieving its maximum
daily design throughput rate of 450 tonnes (“t”) per day in 2014, the
Costerfield team has consistently delivered continuous operational
improvements, which in the current quarter include mining record tonnes at
record low cost/t and processing record tonnes at record low cost/t. Having
completed all major capital items for the current life of mine plan at
Costerfield, we receive substantial free cash flow each quarter from the
operation. We are working to extend the mine life through drilling lodes below
the King Cobra fault, approximately 100 metres deeper than the current Cuffley
workings, and by applying recent, sustainably lower operating costs to
evaluation of resources already drilled in the Brunswick lode adjacent to the
plant.”

Dr. Sander added, “Our underground grade control program at Björkdal started to
demonstrate success in the first quarter for the first time since our
acquisition of the project. We were able to deliver on-vein development grades
in excess of 2.5 grams of gold per tonne (“g/t Au”) and stoping grades in
excess of 1.75 g/t Au for the last two months of the quarter. As a result, the
mine produced its second highest amount of gold (12,185 oz) at its second
lowest cash cost ($821/oz Au) under Mandalay ownership. Key to further
improvement is accelerating the rate of underground development so that we can
consistently deliver 2 g/t Au reserve grade to the plant. This acceleration
process is well underway. The Company also initiated a grab sample program for
grade control in the open pit with the aim of better delineating the
mineralization within blasts and improving the overall production grade from
the open pit. The grade improvement from this procedural change is expected to
be seen for the remainder of the year. We also expect to start our large scale
(60,000 t) optical ore sorting test in the second quarter to assess our ability
to upgrade lower-grade development ore that is currently being transported to
the low-grade stockpile.

“Cerro Bayo continued its transition from the depleted Yasna and Fabiola veins
to the new Delia SE and Coyita mines during the first quarter of 2016. At Delia
SE, we commenced stoping, a few months delayed due to slower on-vein and
capital development than planned arising from poorer ground conditions than
anticipated. The Company received governmental permission during the first
quarter to begin extracting and processing ore from Coyita and on-vein
development of ore blocks has now started. We plan to mobilize a contractor
late in the second quarter to accelerate capital and on-vein development,
increasing the developed state of the mines and allowing a return to mining and
processing average reserve grades at our plant design rate of 1,400 t/day.
Despite the development bottleneck, the mine and plant have been producing and
processing high rates of ore at the lowest unit costs to date over the last few
quarters. We anticipate a return to our historical strong financial performance
at Cerro Bayo when the mine reaches its target state of development and head
grades return to historical averages.

“We continued advancing our Challacollo development project during the quarter,
applying for new water rights to support our preferred processing alternative.
We also expect to recommence exploration on the property later in the year.”

Dr. Sander concluded, “Given our strong overall performance in the quarter, we
are maintaining our guidance for corporate consolidated 2016 production,
average cash production costs, and capital spending as set out in our January
13, 2016 press release.”

First Quarter 2016 Financial Highlights

The following table summarizes the Company’s financial results for the three
months ended March 31, 2016 and 2015:

Particulars Three Three
months months
Ended March Ended March
31, 2016 31, 2015
$’000 $’000
Revenue 50,442 56,779
Adjusted EBITDA 17,262 24,267
Income from mine operations before depreciation and 19,016 25,785
depletion
Adjusted net income before special items 1,020 12,484
Consolidated net income 1,149 11,762
Cash capex 9,057 13,001
Total assets 357,117 357,202
Total liabilities 142,190 138,603
Adjusted net income per share 0.00 0.03
Consolidated net income per share 0.00 0.03

The declines in revenue and adjusted EBITDA during the first quarter of 2016
relative to the first quarter of 2015 were principally due to lower realized
metal prices. (2.3% lower for Au, 10.8% lower for silver (“Ag”), and 35.0%
lower for antimony (“Sb”). Factors affecting sales volumes include lower Ag and
Au production at Cerro Bayo. Year-on-year operational country exchange rates
declines of 8% for the Australian dollar, 12% for the Chilean peso and 1% for
the Swedish krona as well as 29% lower petroleum prices partly helped offset
the impact of lower metal prices.

During the first quarter of 2016, cash capex was approximately $4.0 million
lower than in the same quarter of 2015. Virtually all of this decrease was due
to completion of the life of mine capital program at Costerfield, where
spending was $1.3 million in 2016 versus $5.0 million in the first quarter of
2015.

During the three months ended March 31, 2016, the Company paid out a total of
$2.7 million in dividends and $4.0 million for the cancellation of the Coeur
Mining royalty at Cerro Bayo.

First Quarter 2016 Operational Highlights

The table below summarizes the Company’s capital expenditures and operational
unit costs for the first quarter of 2016.

Three Three
months months
ended March ended March
31, 2016 31, 2015
$’000 $’000
Capital development 9,896 6,891
Capital purchases 2,790 4,259
Capital exploration 2,565 2,000
Cerro Bayo: Cash cost per oz Ag produced net of Au $ 9.76 $ 10.09
byproduct credit
Cerro Bayo: Site all-in cost per oz Ag produced net of Au $ 18.78 $ 17.61
byproduct credit
Costerfield: Cash cost per oz Au Eq. produced $ 512 $ 566
Costerfield: Site all-in cost per oz Au Eq. produced $ 724 $ 774
Björkdal: Cash cost per oz Au produced $ 821 $ 797
Björkdal: Site all-in cost per oz Au produced $ 1,059 $ 1,016
Company average Cash Cost per oz Au Eq. $ 751 $ 742
...

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