Mandalay Resources Corporation Announces Fourth Quarter and
Full-Year 2018 Financial Results
Mandalay Resources Corporation ("Mandalay" or the "Company") (TSX:
MND, OTCQB: MNDJF) today announced its audited financial results
for the year-ended December 31, 2018.
The Company’s consolidated financial results for
the year ended December 31, 2018, 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 fourth quarter of 2018, the Company
generated revenue of $22.7 million, adjusted EBITDA of negative
$1.9 million and consolidated net loss of $31.3 million, or $0.07
loss per share. Of this consolidated net loss, $21.2 million was
related to the non-cash write downs of several of the Company’s
non-core assets.
For the full-year 2018, Mandalay generated
revenue of $112.2 million and adjusted EBITDA of $13.3 million. The
Company reported a consolidated net loss for the year of $63.7
million, or $0.14 loss per share. Of this consolidated net loss,
$39.7 million was related to the non-cash write downs of several of
the Company’s non-core assets. These non-cash write downs include
$23.9 million at Challacollo due to its ongoing sales process, $8.8
million at Cerro Bayo due to uncertainty surrounding permitting and
restart timeframes, $1.9 million at La Quebrada, as well as a $5.1
million write down of Cerro Bayo consumables inventory.
Commenting on the results, Dominic Duffy,
President and CEO of Mandalay, noted, “Mandalay’s financial
performance for 2018 was heavily impacted by the operational
challenges we had to work through at our producing mines during the
second and third quarter of the year, in which production, sales,
and costs were adversely impacted by underground trucking issues at
Björkdal and the delayed startup of Brunswick on-vein development
at Costerfield. Both of these issues resulted in the Company
processing lower grades than expected. Even though performance in
the fourth quarter of 2018 was disappointing we have seen a
continual improvement in production as the quarter progressed.”
Mr. Duffy continued, “Although 2018 was a
challenging year for the Company, we believe that these disruptions
are firmly behind us and we expect to see our production and
operating costs improve through 2019. We expect to raise our
production levels from 81,568 ounces of gold equivalent in 2018 to
91,000-107,000 ounces of gold equivalent in 2019.”
Mr. Duffy concluded, “Subsequent to year-end
2018, it became clear that the Company required additional
capital. We therefore completed a C$54 million financing in
February (see Mandalay February 20, 2019 press release), with the
proceeds of an approximately C$43 million public offering of
subscription receipts held in escrow pending shareholder approval.
This financing provides us with not only the funds to address
near-term working capital requirements, but also injects growth
capital into the business that we intend to use to generate value
for our shareholders. We intend to use these funds to reach the
high-grade Youle vein at Costerfield which is vital to our
three-year plan of doubling production, and also to follow-up on
some extremely exciting exploration targets at both of our sites. I
believe that with this financing Mandalay is on solid financial
footing and will emerge as a significantly stronger Company.
Looking into 2019, I am confident that Mandalay is well positioned
to return to profitability and continued success.”
Fourth Quarter and Full-Year 2018 Financial
Summary
The following table summarizes the Company’s
financial results for the three months and year ended December 31,
2018 and 2017:
|
Three monthsEndedDecember
31,2018 |
Three monthsEndedDecember
31,2017 |
YearEndedDecember31, 2018 |
YearEndedDecember31, 2017 |
|
$’000 |
$’000 |
$’000 |
$’000 |
Revenue |
22,711 |
|
38,093 |
|
112,168 |
|
162,997 |
|
Cost of sales |
23,799 |
|
22,690 |
|
92,990 |
|
107,111 |
|
Adjusted EBITDA* |
(1,893 |
) |
14,405 |
|
13,311 |
|
48,597 |
|
Income from mine ops before depreciation, depletion |
(1,088 |
) |
15,403 |
|
19,178 |
|
55,886 |
|
Adjusted net loss before special items* |
(11,475 |
) |
839 |
|
(20,523 |
) |
(10,114 |
) |
Consolidated net loss |
(31,299 |
) |
(23,073 |
) |
(63,718 |
) |
(42,706 |
) |
Cash capex |
15,998 |
|
12,485 |
|
51,284 |
|
47,465 |
|
Total assets |
237,703 |
|
305,061 |
|
237,703 |
|
305,061 |
|
Total liabilities |
141,567 |
|
139,522 |
|
141,567 |
|
139,522 |
|
Adjusted net loss per share* |
(0.03 |
) |
0.00 |
|
(0.05 |
) |
(0.02 |
) |
Consolidated net loss per share |
(0.07 |
) |
(0.05 |
) |
(0.14 |
) |
(0.09 |
) |
*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”.
In the fourth quarter of 2018, Mandalay sold
11,148 fewer gold equivalent ounces than in the fourth quarter of
2017. In the same period the Company’s realized gold price declined
1.8% quarter-over-quarter, while the realized price of antimony
declined by 10.6%. The net effect is that Mandalay’s revenue of
$22.7 million in the fourth quarter of 2018 was $15.4 million lower
than in the fourth quarter of 2017.
Per ounce costs were higher in the fourth
quarter of 2018 largely as a result of production disruptions and
transitions. Cost of sales during the fourth quarter of 2018 versus
the fourth quarter of 2017 were $0.5 million higher at Costerfield
and $1.2 million higher at Björkdal. Consolidated administrative
costs decreased by $0.2 million across the Company.
Mandalay generated adjusted EBITDA of negative
$1.9 million in the fourth quarter of 2018, versus adjusted EBITDA
of $14.4 million in the fourth quarter of 2017. This led to a
consolidated net loss of $31.3 million for the fourth quarter of
2018, versus $23.1 million in the fourth quarter of 2017.
Mandalay ended the fourth quarter with $8.4
million in cash and cash equivalents and with $30.0 million drawn
(during 2017 and 2018) on its $40.0 million revolver facility,
although $5.0 million was drawn subsequent to year-end.
Fourth Quarter and Full-Year 2018 Operational
Summary
The table below summarizes the Company’s capital
expenditures and operational unit costs for the three months and
year ended December 31, 2018 and 2017:
|
|
ThreemonthsendedDecember31,
2018 |
ThreemonthsendedDecember31,
2017 |
YearendedDecember31, 2018 |
YearendedDecember31, 2017 |
$’000 |
$’000 |
$’000 |
$’000 |
Björkdal |
|
|
|
|
Gold produced (oz) |
|
10,482 |
|
22,035 |
|
45,719 |
|
62,028 |
|
Cash cost* per oz gold produced |
$1,497 |
$617 |
$1,159 |
$816 |
|
All-in cost* per oz gold produced |
$1,794 |
$848 |
$1,452 |
$1,083 |
|
Underground capital devel. & open pit prestrip |
|
2,229 |
|
4,502 |
|
10,199 |
|
14,499 |
|
Capital purchases |
|
7,906 |
|
3,902 |
|
15,844 |
|
9,699 |
|
Capital exploration |
|
266 |
|
140 |
|
1,823 |
|
1,823 |
Costerfield |
|
|
|
|
|
|
Gold produced (oz) |
|
4,948 |
|
7,222 |
|
21,609 |
|
31,512 |
|
Antimony produced (t) |
|
560 |
|
805 |
|
2,173 |
|
3,115 |
|
Gold equivalent produced (oz) |
|
8,691 |
|
12,360 |
|
35,849 |
|
52,137 |
|
Cash cost* per oz gold eq. produced |
$962 |
$707 |
$961 |
$701 |
|
All-in cost* per oz gold eq. produced |
$1,391 |
$902 |
$1,407 |
$991 |
|
Underground capital devel. & open pit prestrip |
|
2,478 |
|
553 |
|
10,243 |
|
2,437 |
|
Capital purchases |
|
1,498 |
|
954 |
|
6,959 |
|
4,492 |
|
Capital exploration |
|
1,141 |
|
787 |
|
5,242 |
|
4,020 |
Cerro Bayo |
|
|
|
|
Silver produced (oz) |
|
- |
|
- |
|
- |
|
794,533 |
|
Gold produced (oz) |
|
- |
|
- |
|
- |
|
5,909 |
|
Cash cost* per oz silver net byproduct credit |
|
- |
|
- |
|
- |
$14.10 |
|
All-in cost* per oz silver net byproduct credit |
|
- |
|
- |
|
- |
$27.05 |
|
Underground capital devel. & open pit prestrip |
|
- |
|
- |
|
- |
|
5,971 |
|
Capital purchases |
|
- |
|
741 |
|
- |
|
2,216 |
|
Capital exploration |
|
- |
|
529 |
|
- |
|
1,402 |
Consolidated |
|
|
|
|
Gold equivalent produced (oz) |
|
19,173 |
|
34,395 |
|
81,568 |
|
131,186 |
|
Average cash cost* per oz gold eq. |
$1,311 |
$680 |
$1,148 |
$851 |
|
Average all-in cost* per oz gold eq. |
$1,709 |
$945 |
$1,537 |
$1,175 |
|
Underground capital devel. & open pit prestrip |
|
4,708 |
|
5,055 |
|
20,442 |
|
22,907 |
|
Capital purchases |
|
9,404 |
|
5,597 |
|
22,803 |
|
16,407 |
|
Capital exploration |
|
1,886 |
|
1,778 |
|
8,039 |
|
8,093 |
*Cash cost and all-in cost are non-IFRS
measures. See “Non-IFRS Measures” at the end of this press
release.
Björkdal gold mine, Sweden
Björkdal produced 10,482 ounces of gold in the
fourth quarter of 2018 with cash and all-in costs of $1,497/oz and
$1,794/oz, respectively. As a result of the haulage bottlenecks of
higher-grade underground ore experienced at the start of the
quarter, mill head grade was lower in 2018, averaging approximately
1.30 g/t gold for the year, lower than the previous year’s 1.76 g/t
gold.
Costerfield gold-antimony mine, Victoria, Australia
Costerfield produced 8,691 gold equivalent
ounces in the fourth quarter of 2018. Fourth quarter production was
lower than in the previous year’s quarter due to a combination of
expected lower mining grades and available ore in the current
producing areas. Simultaneously, development to the high-grade
Youle continues and the Company expects to reach Youle in the
second half of 2019.
Cerro Bayo silver-gold mine, Patagonia,
Chile
No production occurred at Cerro Bayo in the
fourth quarter of 2018 and it remained on care and maintenance
through the period. In 2018, the Company had $10.5 million of care
and maintenance expenses related to Cerro Bayo. This number
includes the $5.1 million non-cash write down of consumables at
Cerro Bayo and a $0.8 million insurance credit. The Company expects
that care and maintenance costs at Cerro Bayo will be approximately
$3.0 to $4.0 million per year from 2019 onwards.
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, in exchange for
total consideration of CAD$11.6 million (see Mandalay August 1,
2018 press release for more detail).
In addition, the Company signed on November 28,
2018 a binding agreement with a third party for the acquisition of
certain easement properties which comprise part of the Challacollo
property. Total consideration is expected to be net $2.0 million
after payments due to the holders of royalties and other
encumbrances on these concessions.
La Quebrada
The La Quebrada copper-silver project in central
Chile remained held for sale throughout the period. Spending at La
Quebrada was less than $0.1 million during the fourth quarter of
2018.
Lupin and Ulu
The Company spent $1.4 million for reclamation
of the Lupin mine in the fourth quarter of 2018 and $4.3 million on
reclamation on the Ulu and Lupin sites for the full-year 2018,
which it expects will reduce the estimate of final closure costs
there and possibly be reimbursed through reduction of required
reclamation deposits. On December 21, 2018, the Nunavut Water Board
reached a decision to recommend that the Letter of Credit that has
been posted by Mandalay as security for its reclamation obligations
in respect of the Lupin mine be reduced by CAD$3.2 million. On
January 28, 2019, this recommendation was approved by the Minister
of Indigenous and Northern Affairs. After this approval, the total
bond outstanding is CAD$26.1 million. Mandalay has successfully
received bond reductions of approximately CAD$8 million since the
start of its final closure process.
Financing Transaction
The Company has called a special meeting of its
shareholders to be held on March 29, 2019 (the “Special Meeting”)
at which shareholders will be asked to approve the proposed
issuance of common shares of the Company under the financing
transaction that the Company completed on February 20, 2019. For
further information on the financing transaction and other matters
related to the Special Meeting, shareholders should refer to the
Company’s management information circular dated March 1, 2019 (the
“Circular”), a copy of which is available under the Company’s
profile on SEDAR (www.sedar.com).
As described in further detail in the Circular,
in order to facilitate the financing transaction, the Company
agreed to arrange for the sale of approximately 28.3 million common
shares of the Company currently held by Bradford A. Mills, the
Chairman of Mandalay’s board of directors, and Plinian Capital
Limited (“Plinian”), a company controlled by Mr. Mills. Assuming
the requisite shareholder approval is received at the Special
Meeting and all other conditions to the exchange of the
subscription receipts for common shares are satisfied, the Company
intends to satisfy its obligations with respect to the common
shares held by Mr. Mills and Plinian by repurchasing these common
shares for cancellation at a price of CAD$0.12 per share, or an
aggregate purchase of approximately CAD$3.4 million. The repurchase
is expected to be completed immediately following the exchange of
the subscription receipts and the release of the escrowed proceeds
from the issuance of the subscription receipts.
Conference Call
Mandalay’s management will be hosting a
conference call for investors and analysts on March 15, 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: |
13688639 |
A replay of the conference call will be
available until 11:59 pm (Toronto time), March
29, 2019 and can be accessed using the following dial-in
number:
Encore Toll Free Dial-in Number: |
(877) 660-6853 |
Encore ID: |
13688639 |
For Further Information:
Dominic Duffy President and Chief Executive
Officer
Greg DiTomasoDirector of Investor Relations
Contact: 1.647.260.1566
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 29, 2018 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, all-in costs and cash capex,
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.
The Company defines cash capex as cash spent on
mining interests, property, plant and equipment, and exploration as
set out in the cash flow statement of the financial statements.
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 Cerro Bayo, the cash cost per saleable
silver ounce produced net of gold byproduct credit is calculated by
deducting the gold credit (which equals saleable ounces gold
produced times the realized gold price in the period) from the cash
operating costs in the period and dividing the resultant number by
the saleable silver ounces produced in the period. The cash cost
excludes royalty expenses. The site all-in cost per saleable silver
ounce produced net of gold byproduct credit is calculated by adding
royalty expenses, accretion, depletion, depreciation, and
amortization to the cash cost net of gold byproduct credit,
dividing the resultant number by the saleable silver ounces
produced in the period.
Also, for Cerro Bayo, saleable equivalent gold
ounces produced is calculated by adding to saleable gold ounces
produced, the saleable silver ounces produced times the average
silver 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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