Mandalay Resources Corporation ("Mandalay" or the "Company") (TSX:
MND, OTCQB: MNDJD) today announced its financial results for the
quarter ended June 30, 2019.
The Company’s condensed consolidated interim
financial results for the quarter ended June 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 second quarter of 2019, the Company
generated revenue of $26.3 million, adjusted EBITDA of $4.1 million
and an adjusted net loss before special items of $3.9 million, or
$0.04 loss per share.
Commenting on the results, Dominic Duffy,
President and CEO of Mandalay, noted, “Financial performance in the
second quarter of 2019 was solid, as Björkdal continued its
operational optimization and improvement, while Costerfield
maintained its operational focus on extending development to reach
Youle in order to bring the higher-grade ore online as soon as
possible.”
Mr. Duffy added, “At Björkdal, $19.1 million of
revenue was generated, in line with the amount in the first quarter
of 2019, and marks the second highest revenue achieved during the
past five quarters. Moreover, net income at Björkdal was the
highest since the fourth quarter of 2017. This improved performance
is due to the underground’s consistent delivery of tonnage to the
mill and also the mining of higher-grade skarn material. As a
direct result of these operational improvements and cost controls
over the quarter, cash costs were $818 per ounce, its second
successive quarterly decline and lowest in the past six quarters.
We expect to see further cost reductions over the remainder of 2019
as a result of the pause in open pit operations commencing from the
end of July.”
Mr. Duffy added, “At Costerfield, gold
equivalent production was lower than the previous quarter as the
grade mined in the current quarter was lower due to additional
dilution stemming from poor ground conditions in the Brunswick
lode. Measures are being put in place to minimize the amount of
additional dilution to improve grade through the plant and to
improve recoveries. We continue to expect an increase in production
later in 2019 once we are mining the higher-grade Youle lode.”
Mr. Duffy concluded, “With the Company expecting
to reach the Youle lode at Costerfield in the coming months, along
with $25.7 million in cash at the end of the second quarter, the
Company has the financial flexibility to continue with the exciting
exploration programs at each producing site, setting the Company up
for future profitability and growth.”
Second Quarter 2019 Financial Summary
The following table summarizes the Company’s
financial results for the three months and six ended June 30, 2019
and 2018:
|
Three monthsended June
30, 2019 |
Three monthsended June
30, 2018 |
Six monthsended June
30, 2019 |
Six monthsended June
30, 2018 |
|
$’000 |
$’000 |
$’000 |
$’000 |
Revenue |
26,344 |
|
27,944 |
|
56,260 |
|
67,692 |
|
Cost of sales |
20,751 |
|
22,348 |
|
44,145 |
|
48,168 |
|
Adjusted EBITDA* |
4,105 |
|
3,651 |
|
9,352 |
|
15,786 |
|
Income from mine ops before depreciation, depletion |
5,593 |
|
5,596 |
|
12,115 |
|
19,524 |
|
Adjusted net loss before special items* |
(3,926 |
) |
(3,743 |
) |
(4,385 |
) |
(2,806 |
) |
Consolidated net loss |
(9,750 |
) |
(23,711 |
) |
(11,085 |
) |
(24,950 |
) |
Capital expenditure |
(10,238 |
) |
(11,943 |
) |
(17,650 |
) |
(23,236 |
) |
Total assets |
255,505 |
|
259,461 |
|
255,505 |
|
259,461 |
|
Total liabilities |
135,609 |
|
124,309 |
|
135,609 |
|
124,309 |
|
Adjusted net loss per share* |
(0.04 |
) |
(0.08 |
) |
(0.06 |
) |
(0.06 |
) |
Consolidated net loss per share** |
(0.11 |
) |
(0.53 |
) |
(0.16 |
) |
(0.55 |
) |
*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 second quarter of 2019, Mandalay sold
2,057 fewer gold equivalent ounces than in the second quarter of
2018. The Company’s realized gold price increased by 3%
quarter-over-quarter, while the realized price of antimony declined
by 18%. The net effect is that Mandalay’s revenue of $26.3 million
in the second quarter of 2019 was $1.6 million lower than in the
second quarter of 2018.
Cash cost per ounce of $1,130 increased by 10%
in the second quarter of 2019 compared to the prior year quarter,
mainly due to lower production at Costerfield. Cost of sales during
the second quarter of 2019 versus the second quarter of 2018 were
$1.5 million lower at Costerfield and $0.1 million lower at
Björkdal. Consolidated general and administrative costs decreased
by $0.5 million across the Company.
Mandalay generated adjusted EBITDA of $4.1
million in the second quarter of 2019, versus adjusted EBITDA of
$3.7 million in the second quarter of 2018. This led to a
consolidated net loss of $9.8 million for the second quarter of
2019, versus a loss of $23.7 million in the second quarter of 2018.
The consolidated net loss in the current quarter includes a $5.0
million write down of the carrying value of the Lupin and Ulu
mines, detailed within the “Lupin and Ulu, Canada” section
below.
Mandalay ended the second quarter with $25.7
million in cash and cash equivalents (including $15.0 million of
restricted cash).
Second Quarter 2019 Operational Summary
The table below summarizes the Company’s capital
expenditures and operational unit costs for the three months ended
June 30, 2019 and 2018:
|
|
Three monthsended June 30,
2019 |
Three monthsended June 30,
2018 |
Six monthsended June 30,
2019 |
Six monthsended June 30,
2018 |
$’000 |
$’000 |
$’000 |
$’000 |
Björkdal |
|
|
|
|
|
|
Gold produced (oz) |
14,243 |
14,017 |
28,628 |
26,734 |
|
Cash cost* per oz gold produced |
818 |
876 |
870 |
980 |
|
All-in cost* per oz gold produced |
1,067 |
1,155 |
1,135 |
1,265 |
|
Capital development |
2,110 |
3,009 |
3,838 |
5,943 |
|
Property, plant and equipment purchases |
2,842 |
1,085 |
3,788 |
4,060 |
|
Capitalized exploration |
189 |
994 |
294 |
1,300 |
Costerfield |
|
|
|
|
|
|
Gold produced (oz) |
3,301 |
5,137 |
7,406 |
11,724 |
|
Antimony produced (t) |
371 |
503 |
946 |
1,108 |
|
Gold equivalent produced (oz) |
5,257 |
8,331 |
12,812 |
18,787 |
|
Cash cost* per oz gold eq. produced |
1,541 |
1,049 |
1,270 |
949 |
|
All-in cost* per oz gold eq. produced |
2,020 |
1,512 |
1,709 |
1,408 |
|
Capital development |
3,314 |
3,140 |
6,455 |
5,256 |
|
Property, plant and equipment purchases |
1,312 |
2,157 |
2,552 |
3,791 |
|
Capitalized exploration |
459 |
1,423 |
529 |
2,493 |
Consolidated |
|
|
|
|
|
|
Gold equivalent produced (oz) |
19,500 |
22,348 |
41,440 |
45,520 |
|
Cash cost* per oz gold eq. produced |
1,130 |
1,028 |
1,099 |
1,044 |
|
All-in cost* per oz gold eq. produced |
1,452 |
1,405 |
1,431 |
1,434 |
|
Capital development |
5,424 |
6,149 |
10,293 |
11,199 |
|
Property, plant and equipment purchases |
4,154 |
3,242 |
6,340 |
7,851 |
|
Capitalized exploration** |
660 |
2,552 |
1,016 |
4,186 |
*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, Sweden
Björkdal produced 14,243 ounces of gold in the
second quarter of 2019 with cash and all-in costs of $818/oz and
$1,067/oz, respectively, compared to cash and all-in costs of
$876/oz and $1,155/oz, respectively, in the second quarter of
2018.
Costerfield gold-antimony mine, Australia
Costerfield produced 3,301 ounces of gold and
371 tonnes of antimony for 5,257 gold equivalent ounces in the
second quarter of 2019. Due to the lower gold equivalent ounces
produced, cash and all-in costs at Costerfield rose to $1,541/oz
and $2,020/oz, respectively, compared to cash and all-in costs of
$1,049/oz and $1,512/oz, respectively, in the second quarter of
2018.
Cerro Bayo silver-gold mine, Chile
On June 26, 2019, the Company entered into a
non-binding heads of agreement with Equus Mining 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 June 30,
2019.
No production occurred at Cerro Bayo in the
second quarter of 2019 and it remained on care and maintenance
through the period. In second quarter of 2019, the Company spent
$0.8 million on care and maintenance expenses at Cerro Bayo
compared to $1.4 million in the second quarter of 2018.
Lupin and Ulu, Canada
Care and maintenance spending at Lupin and Ulu
was less than $0.1 million during both the three and six months
ending June 2019, approximately equivalent to the prior year
periods. Reclamation spending at Lupin and Ulu was $0.2 million
during the second quarter of 2019 compared to $0.9 million in
second quarter of 2018. For the six months ending June 30, 2019,
reclamation spending was $0.9 million compared to $1.2 million in
the prior year period.
The Company identified an indicator of
impairment for the Ulu property due to the signing of an amended
option agreement for the property. As a result of this amendment, a
write down of $1.0 million was recognized in the income statement
for the three months ended June 30, 2019.
Also related to this exercise, the Company
identified an indicator of impairment for the Lupin mine, which is
located near the Ulu property. The Company has valued the asset at
fair value less costs to dispose. As a result of this, a write down
of $4.0 million was recognized in the Company’s income statement
for the three months ended June 30, 2019.
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 and the Company received these
funds on April 18, 2019.
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 CAD$10.5 million from this
sale.
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 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 August 8, 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: |
13693286 |
A replay of the conference call will be
available until 11:59 PM (Toronto time), August
22, 2019 and can be accessed using the following dial-in
number:
Encore Toll Free Dial-in Number: |
(877) 660-6853 |
Encore ID: |
13693286 |
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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