Two producing mines with organic growth potential
Rationalizing portfolio; monetizing non-core assets
Operating in mining-friendly jurisdictions
What Mandalay Resources does:
Mandalay Resources Corp (TSE:MND) is a metals miner, producing gold, silver, and antimony and is now focused on operating and optimizing its mines in Sweden (Björkdal) and Australia (Costerfield).
Production at its Cerro Bayo mine on Chile was suspended following a flooding in 2017 and last month Mandalay said it had struck a binding option agreement with Equus Mining to potentially buy the asset.
Equus now has an option to explore at the 29,495 hectare Cerro Bayo mine district in Region XI, Southern Chile for 36 months and can exercise its option to acquire all the issued share capital of Mandalay subsidiary CMBC, including mine infrastructure at Cerro Bayo, as well as the 1,500 tonnes per day (tpd) processing plant.
Similarly, on November 12 this year, Mandalay said it had reached a definitive agreement with junior Aftermath Silver Ltd (CVE:AAG) on the sale of another of its asset in Chile - the Challacollo silver-gold project.
Aftermath is to acquire 100% of Minera Mandalay Challacollo Limitada (MMC) for a total of up to C$10 million, comprising C$7 million in non-contingent consideration. Mandalay retains a 3% net smelter returns royalty on production from Challacollo, capped at C$3 million
Mandalay said it is tied in with its strategy of creating value from non-operating assets and is "now well-positioned to focus on improving operations at Björkdal and Costerfield with these projects in Chile resolved".
How is it doing:
The last couple of years have not been without bumps for Mandalay, not least due to the Cerro Bayo flood, but the focus has continued to be strengthening finances and improve operations, and it is optimistic about the future.
In the early part of 2019, the company unveiled a C$43 million share offering as well as a US$8 million convertible bridge loan, to be used for capital development work at its Costerfield mine and tailings upgrade and development at Bjorkdal.
Its Swedish mine is a workhorse, and in its third-quarter results to end September, the mine was described as 'dependable'. The asset generated 11,880 ounces of gold in the third quarter compared to 8,504 ounces in the same quarter a year earlier.
"The site generated US$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," the company said.
Mandalay said the improvement at Bjorkdal was driven by consistent tonnage from the underground mine, effective cost controls and a strong gold price. Moreover, it said that by pausing operations at the open pit earlier in the quarter, the company expects profit margins to further increase in the upcoming quarters.
The third quarter also saw the firm generate its highest adjusted EBITDA (US$5.55 million) since the first quarter of 2018. The consolidated net loss was reduced to US$1.4 million from a loss of US$7.4 million in the same period of 2018.
Meanwhile, down under at Costerfield, third quarter performance continued to be hit by excessive dilution and poor gold recoveries from the Brunswick lode, the miner told investors.
Similar to the first two quarters for 2019, Costerfield generated US$7.1 million of revenue with Brunswick ore being the primary feed to the mill.
Mandalay expects grades to continue to grow at Costerfield in the coming quarters, in line with the ramp-up of the Youle lode production.
The firm now expects overall output for the year to be between 72,000 and 84,000 gold equivalent ounces at average cash costs of US$975-US$1,125 per ounce. Previous estimates were 85,000 ounces to 101,000 ounces at an average cash cost per gold equivalent ounce of US$850-US$980 per ounce.
For 2021, the group estimates gold equivalent production to be between 131,000 ounces and 162,000 ounces.
- Production improvements
- Exploration success
- Financing news
What the boss says:
In the third quarter financial statement this month, Mandalay chief executive and president Dominic Duffy, told investors: "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."
He added that to assure adequate liquidity and provide financial flexibility, Mandalay was looking into long-term debt repositioning options and was in talks with a syndicate of lenders including HSBC Canada over a potential new senior credit facility.