Mandalay Resources Corporation ("Mandalay" or the "Company") (TSX:
MND, OTCQB: MNDJF) today announced its financial results for the
quarter ended September 30, 2019.
The Company’s condensed consolidated interim
financial results for the quarter ended September 30, 2019,
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.
For the third quarter of 2019, the Company
generated revenue of $28.8 million, adjusted EBITDA of $5.6 million
and an adjusted consolidated net loss of $1.4 million, or $0.02
loss per share.
Commenting on the results, Dominic Duffy,
President and CEO of Mandalay, noted, “Financial performance in the
third quarter of 2019 continues to show the growth of the company,
as we generated the highest adjusted EBITDA since the first quarter
of 2018.”
Mr. Duffy added, “The third quarter of 2019 was
supported by Björkdal’s steady performance. The site generated
$21.7 million of revenue; a significant 81% improvement as compared
to the same period last year. It also marks the strongest revenue
achieved since the first quarter of 2018 and our highest net income
after tax since acquiring Björkdal in 2014. This improvement in
performance was driven by consistent tonnage from the underground
mine, combined with effective cost controls and a strong gold
price. Moreover, by pausing the operations at the open pit earlier
in the quarter, we expect profit margins to further increase in the
upcoming quarters.”
Mr. Duffy added, “At Costerfield, financial
performance continues to be severely affected by the excessive
dilution and poor gold recoveries from the Brunswick lode. Similar
to the first two quarters for 2019, Costerfield generated $7.1
million of revenue with Brunswick ore being the primary feed to the
mill. Moving forward, we expect the grades to continue to grow in
the coming quarters, in line with the ramp up of Youle
production.”
Mr. Duffy added, “By accelerating the production
of the Youle lode at Costerfield, combined with targeting
higher-grade skarn zones at Björkdal in the fourth quarter, we are
well positioned to start delivering profits Company-wide.”
Mr. Duffy concluded, “To assure adequate
liquidity and provide financial flexibility for Mandalay, the
Company is looking into long-term debt repositioning options.
Currently, we are in discussions with a syndicate of lenders
including HSBC Canada in respect of a potential new senior credit
facility.”
Third Quarter 2019 Financial Summary
The following table summarizes the Company’s
financial results for the three months and nine ended September 30,
2019 and 2018:
|
Three monthsended
September 30, 2019 |
Three monthsended
September 30, 2018 |
Nine monthsended
September 30, 2019 |
Nine monthsended
September 30, 2018 |
|
$’000 |
$’000 |
$’000 |
$’000 |
Revenue |
28,798 |
|
21,765 |
|
85,058 |
|
89,457 |
|
Cost of sales |
21,610 |
|
21,023 |
|
65,755 |
|
69,191 |
|
Adjusted EBITDA* |
5,555 |
|
(582 |
) |
14,906 |
|
15,205 |
|
Income from mine ops before depreciation, depletion |
7,188 |
|
742 |
|
19,303 |
|
20,266 |
|
Adjusted net loss before special items* |
(961 |
) |
(6,242 |
) |
(5,346 |
) |
(9,048 |
) |
Consolidated net loss |
(1,403 |
) |
(7,468 |
) |
(12,487 |
) |
(32,418 |
) |
Capital expenditure |
(10,094 |
) |
(12,051 |
) |
(27,744 |
) |
(35,286 |
) |
Total assets |
252,042 |
|
266,493 |
|
252,042 |
|
266,493 |
|
Total liabilities |
139,494 |
|
139,488 |
|
139,494 |
|
139,488 |
|
Adjusted net loss per share* |
(0.01 |
) |
(0.14 |
) |
(0.07 |
) |
(0.20 |
) |
Consolidated net loss per share** |
(0.02 |
) |
(0.17 |
) |
(0.16 |
) |
(0.72 |
) |
*Adjusted EBITDA, adjusted net loss before
special items and adjusted net loss per share are non-IFRS
measures, defined at the end of this press release “Non-IFRS
Measures”.**As a result of share consolidation on July 2, 2019, the
Company has restated its number of common shares and the income
(loss) per share for all periods presented.
In the third quarter of 2019, Mandalay sold 636
fewer gold equivalent ounces than in the third quarter of 2018. The
Company’s realized gold price increased by 41% as compared to third
quarter of 2018, while the realized price of antimony declined by
34%. The net effect is that Mandalay’s revenue of $28.8 million in
the third quarter of 2019 was $7.0 million higher than in the third
quarter of 2018.
Cash cost per ounce of $1,277 increased by 3% in
the third quarter of 2019 compared to the prior year quarter,
mainly due to lower production at Costerfield. Cost of sales during
the third quarter of 2019 versus the third quarter of 2018 were
$0.3 million higher at Costerfield and $0.3 million higher at
Björkdal. Consolidated general and administrative costs increased
by $0.3 million across the Company.
Mandalay generated adjusted EBITDA of $5.6
million in the third quarter of 2019, versus negative adjusted
EBITDA of $0.6 million in the third quarter of 2018. This led to a
consolidated net loss of $1.4 million for the third quarter of
2019, versus a loss of $7.5 million in the third quarter of
2018.
Mandalay ended the third quarter with $23.2
million in cash and cash equivalents (including $15.0 million of
restricted cash). Third Quarter 2019 Operational
Summary
The table below summarizes the Company’s capital
expenditures and operational unit costs for the three months ended
September 30, 2019 and 2018:
|
|
Three monthsended September 30,
2019 |
Three monthsended September 30,
2018 |
Nine monthsended September 30,
2019 |
Nine monthsended September 30,
2018 |
$’000 |
$’000 |
$’000 |
$’000 |
Björkdal |
|
|
|
|
|
|
Gold produced (oz) |
11,880 |
8,504 |
40,508 |
35,237 |
|
Cash cost* per oz gold produced |
941 |
1,304 |
891 |
1,058 |
|
All-in cost* per oz gold produced |
1,205 |
1,615 |
1,155 |
1,350 |
|
Capital development |
1,660 |
2,027 |
5,498 |
7,970 |
|
Property, plant and equipment purchases |
2,965 |
3,878 |
6,754 |
7,938 |
|
Capitalized exploration |
412 |
257 |
704 |
1,557 |
Costerfield |
|
|
|
|
|
|
Gold produced (oz) |
3,103 |
4,938 |
10,509 |
16,662 |
|
Antimony produced (t) |
402 |
505 |
1,348 |
1,613 |
|
Gold equivalent produced (oz) |
4,745 |
8,370 |
17,557 |
27,158 |
|
Cash cost* per oz gold eq. produced |
1,800 |
988 |
1,413 |
961 |
|
All-in cost* per oz gold eq. produced |
2,290 |
1,420 |
1,866 |
1,412 |
|
Capital development |
3,736 |
2,509 |
10,191 |
7,765 |
|
Property, plant and equipment purchases |
521 |
1,670 |
3,073 |
5,461 |
|
Capitalized exploration |
783 |
1,609 |
1,315 |
4,102 |
Consolidated |
|
|
|
|
|
|
Gold equivalent produced (oz) |
16,625 |
16,874 |
58,065 |
62,395 |
|
Cash cost* per oz gold eq. produced |
1,277 |
1,239 |
1,121 |
1,097 |
|
All-in cost* per oz gold eq. produced |
1,629 |
1,631 |
1,458 |
1,478 |
|
Capital development |
5,396 |
4,536 |
15,689 |
15,735 |
|
Property, plant and equipment purchases |
3,486 |
5,548 |
9,827 |
13,399 |
|
Capitalized exploration** |
1,212 |
1,967 |
2,228 |
6,152 |
*Cash cost and all-in cost are non-IFRS
measures. See “Non-IFRS Measures” at the end of this press
release.**Includes capitalized exploration relating to other
non-core assets.
Björkdal gold mine, Skellefteå, Sweden
Björkdal produced 11,880 ounces of gold in the
third quarter of 2019 with cash and all-in costs of $941/oz and
$1,205/oz, respectively, compared to cash and all-in costs of
$1,304/oz and $1,615/oz, respectively, in the third quarter of
2018.
Costerfield gold-antimony mine, Victoria, Australia
Costerfield produced 3,104 ounces of gold and
402 tonnes of antimony for 4,745 gold equivalent ounces in the
third quarter of 2019. Due to the lower gold equivalent ounces
produced, cash and all-in costs at Costerfield rose to $1,800/oz
and $2,290/oz, respectively, compared to cash and all-in costs of
$988/oz and $1,420/oz, respectively, in the third quarter of
2018.
Cerro Bayo silver-gold mine, Patagonia,
Chile
On October 8, 2019, the Company entered into a
binding option agreement with Equus Mining (“Equus”) for the sale
of the Cerro Bayo mine in Chile. The signing of this agreement had
no impact on the carrying value of the Cerro Bayo mine as at
September 30, 2019.
No production occurred at Cerro Bayo during 2019
and it remained on care and maintenance through the period. In
third quarter of 2019, the Company spent $0.4 million on care and
maintenance expenses at Cerro Bayo compared to $1.2 million in the
third quarter of 2018.
Lupin and Ulu, Canada
Care and maintenance spending at Lupin and Ulu
was less than $0.1 million during the three and nine months ending
September 30, 2019, approximately equivalent to the prior year
periods. Reclamation spending at Lupin and care and maintenance at
Ulu was $0.8 million during the third quarter of 2019 compared to
$1.7 million in third quarter of 2018. For the nine months ending
September 30, 2019, reclamation spending was $1.7 million compared
to $2.8 million in the prior year period.
Challacollo, Chile
On August 1, 2018, the Company announced that it
had entered into a non-binding letter of intent with Aftermath
Silver Ltd., pursuant to which Aftermath Silver would acquire
Minera Mandalay Challacollo Limitada, a wholly-owned subsidiary of
the Company which owns the Challacollo project. The Company
currently expects total consideration of up to CAD$10.0 million
from this sale, including consideration of up to CAD$3.0 million
from a net smelter returns royalty to be granted to the Company
over production from the project.
In addition, on November 28, 2018 the Company
signed a binding agreement with a third party for the acquisition
of certain easement properties which comprise part of the
Challacollo property. This agreement was amended and signed on July
20, 2019. Total consideration is expected to be $2.0 million, which
is net of payments due to the holders of royalties and other
encumbrances on these concessions.
La Quebrada, Chile
The La Quebrada copper-silver project in central
Chile remained held for sale throughout the period.
Conference Call
Mandalay’s management will be hosting a
conference call for investors and analysts on November 5, 2019 at
8:00 AM (Toronto time).
Analysts and interested investors are invited to
participate using the following dial-in numbers:
Participant Number: |
(201) 689-8341 |
Participant Number (Toll free):
|
(877) 407-8289 |
Conference ID: |
13696066 |
A replay of the conference call will be
available until 11:59
PM (Toronto time), November 19, 2019 and can be
accessed using the following dial-in number:
Encore Toll Free Dial-in
Number: |
(877) 660-6853 |
Encore ID: |
13696066 |
For Further Information:
Dominic Duffy President and Chief Executive
Officer Edison NguyenManager, Analytics and Investor Relations
Contact: (647) 260-1566
About Mandalay Resources Corporation:
Mandalay Resources is a Canadian-based natural
resource company with producing assets in Australia and Sweden, and
care and maintenance and development projects in Chile. The Company
is focused on growing production at its gold and antimony operation
in Australia, and gold production from its operation in Sweden to
generate near-term cash flow.
Forward-Looking Statements
This news release contains "forward-looking
statements" within the meaning of applicable securities laws,
including statements regarding guidance as to anticipated gold, and
antimony production and production costs in the future. Readers are
cautioned not to place undue reliance on forward-looking
statements. Actual results and developments may differ materially
from those contemplated by these statements depending on, among
other things, changes in commodity prices and general market and
economic conditions. The factors identified above are not intended
to represent a complete list of the factors that could affect
Mandalay. A description of additional risks that could result in
actual results and developments differing from those contemplated
by forward-looking statements in this news release can be found
under the heading “Risk Factors” in Mandalay’s annual information
form dated March 28, 2019 and Mandalay’s prospectus supplement
dated February 12, 2019, copies of which are available under
Mandalay’s profile at www.sedar.com. In addition, there can be no
assurance that any inferred resources that are discovered as a
result of additional drilling will ever be upgraded to proven or
probable reserves. Although Mandalay has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking statements.
Non-IFRS Measures
This news release may contain references to
adjusted EBITDA, adjusted net income, cash cost per saleable ounce
of gold equivalent produced, cash cost per saleable ounce of silver
produced net of gold credits, site all-in cost per saleable ounce
of gold equivalent produced, site all-in cost per saleable ounce of
silver produced net of gold credits and, all-in costs, all of which
are non-IFRS measures and do not have standardized meanings under
IFRS. Therefore, these measures may not be comparable to similar
measures presented by other issuers.
Management uses adjusted EBITDA as a measure of
operating performance to assist in assessing the Company’s ability
to generate liquidity through operating cash flow to fund future
working capital needs and to fund future capital expenditures, as
well as to assist in comparing financial performance from period to
period on a consistent basis. Management uses adjusted net income
in order to facilitate an understanding of the Company’s financial
performance prior to the impact of non-recurring or special items.
The Company believes that these measures are used by and are useful
to investors and other users of the Company’s financial statements
in evaluating the Company’s operating and cash performance because
they allow for analysis of its financial results without regard to
special, non-cash and other non-core items, which can vary
substantially from company to company and over different
periods.
The Company defines adjusted EBITDA as income
from mine operations, net of administration costs, and before
interest, taxes, non-cash charges/(income), intercompany charges
and finance costs. A reconciliation between adjusted EBITDA and net
income will be included in the MD&A.
For Costerfield, saleable equivalent gold ounces
produced is calculated by adding to saleable gold ounces produced,
the saleable antimony tonnes produced times the average antimony
price in the period divided by the average gold price in the
period. The total cash operating cost associated with the
production of these saleable equivalent ounces produced in the
period is then divided by the saleable equivalent gold ounces
produced to yield the cash cost per saleable equivalent ounce
produced. The cash cost excludes royalty expenses. Site all-in
costs include total cash operating costs, royalty expense,
accretion, depletion, depreciation and amortization. The site
all-in cost is then divided by the saleable equivalent gold ounces
produced to yield the site all-in cost per saleable equivalent
ounce produced.
For Björkdal, the total cash operating cost
associated with the production of saleable gold ounces produced in
the period is then divided by the saleable gold ounces produced to
yield the cash cost per saleable gold ounce produced. The cash cost
excludes royalty expenses. Site all-in costs include total cash
operating costs, royalty expense, accretion, depletion,
depreciation and amortization. The site all-in cost is then divided
by the saleable gold ounces produced to yield the site all-in cost
per saleable gold ounce produced
For the Company as a whole, cash cost per
saleable gold equivalent ounce is calculated by summing the gold
equivalent ounces produced by each site and dividing the total by
the sum of cash operating costs at the sites plus corporate
overhead spending.
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