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Mandalay Resources Corp (2)
Symbol C : MND
Shares Issued 451,595,877
Close 2019-03-14 C$ 0.135
Recent Sedar Documents

Mandalay Resources loses $63.71-million (U.S.) in 2018

2019-03-14 18:52 ET - News Release

Mr. Dominic Duffy reports

MANDALAY RESOURCES CORPORATION ANNOUNCES FOURTH QUARTER AND FULL-YEAR 2018 FINANCIAL RESULTS

Mandalay Resources Corp. has released its audited financial results for the year ended Dec. 31, 2018.

The company's consolidated financial results for the year ended Dec. 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 SEDAR and on the company's website. 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 (earnings before interest, taxes, depreciation and amortization) of negative $1.9-million and consolidated net loss of $31.3-million, or a seven-cent loss per share. Of this consolidated net loss, $21.2-million was related to non-cash writedowns of several of the company's non-core assets.

For 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 a 14-cent loss per share. Of this consolidated net loss, $39.7-million was related to non-cash writedowns of several of the company's non-core assets. These non-cash writedowns include $23.9-million at Challacollo due to its continuing sales process, $8.8-million at Cerro Bayo due to uncertainty surrounding permitting and restart time frames, $1.9-million at La Quebrada, and a $5.1-million writedown of Cerro Bayo consumables inventory.

Commenting on the results, Dominic Duffy, president and chief executive officer 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 Bjorkdal and the delayed start-up 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 to 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 $54-million (Canadian) financing in February (see Mandalay Feb. 20, 2019, press release), with the proceeds of an approximately $43-million (Canadian) 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 accompanying table summarizes the company's financial results for the three months and year ended Dec. 31, 2018, and 2017.

                                     Three months ended     Three months ended         Year ended        Year ended
(in thousands of dollars)                 Dec. 31, 2018          Dec. 31, 2017      Dec. 31, 2018     Dec. 31, 2017

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)

* Non-IFRS (international financial reporting standards) 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 per cent quarter over quarter, while the realized price of antimony declined by 10.6 per cent. 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 compared with the fourth quarter of 2017 was $500,000 higher at Costerfield and $1.2-million higher at Bjorkdal. Consolidated administrative costs decreased by $200,000 across the company.

Mandalay generated adjusted EBITDA of negative $1.9-million in the fourth quarter of 2018, compared with 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, compared with $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 accompanying table summarizes the company's capital expenditures and operational unit costs for the three months and year ended Dec. 31, 2018, and 2017.

(in thousands of dollars,            Three months ended     Three months ended         Year ended        Year ended
unless otherwise specified)               Dec. 31, 2018          Dec. 31, 2017      Dec. 31, 2018     Dec. 31, 2017

Bjorkdal
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. and 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. and 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. and 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. and 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

* Non-IFRS measures.

Bjorkdal gold mine, Sweden

Bjorkdal produced 10,482 ounces of gold in the fourth quarter of 2018, with cash and all-in costs of $1,497 per ounce and $1,794 per ounce, 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 grams per tonne 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 writedown of consumables at Cerro Bayo and an $800,000 insurance credit. The company expects that care-and-maintenance costs at Cerro Bayo will be approximately $3.0-million to $4.0-million per year from 2019 onward.

Challacollo, Chile

On Aug. 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 Ltda., a wholly owned subsidiary of the company which owns the Challacollo project, in exchange for total consideration of $11.6-million (Canadian) (see Mandalay's Aug. 1, 2018, press release for more detail).

In addition, the company signed on Nov. 28, 2018, a binding agreement with a third party for the acquisition of certain easement properties that make up 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 $100,000 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 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 Dec. 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 $3.2-million (Canadian). On Jan. 28, 2019, this recommendation was approved by the Minister of Indigenous and Northern Affairs. After this approval, the total bond outstanding is $26.1-million (Canadian). Mandalay has successfully received bond reductions of approximately $8-million (Canadian) 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, 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 Feb. 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, a copy of which is available under the company's profile on SEDAR.

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 Ltd., a company controlled by Mr. Mills. Assuming that 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 12 Canadian cents per share, or a total purchase of approximately $3.4-million (Canadian). 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 a.m. (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 p.m. (Toronto time) on 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

About Mandalay Resources Corp.

Mandalay 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.

We seek Safe Harbor.

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