Mandalay Resources Q3 2023 Earnings Call Transcript

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November 9, 2023

There are 5 speakers on the call.

Operator

Good morning, and welcome to the Mandalay Resources Corporation Q3 2023 Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the call over to Fraser Boucher, President and CEO of Mandalay Resources.

Operator

Please go ahead.

Speaker 1

Thank you, operator, and welcome. Joining me on the Q3 2023 Financial Results Conference Call today is Ryan Osterberry, our Chief Operating Officer Nick Dwyer, our Chief Financial Officer and Chris Davis, our VP of Operational Geology and Exploration. Mandalay Resources released its Q3 2023 financial results at market close yesterday. You can find our consolidated financial statements and MD and A on the Mandalay Resources website or under our profile on SEDAR. Reviewing our key deliverables and outcomes this past quarter, We produced 22,032 consolidated salable gold equivalent ounces, our highest production so far this year.

Speaker 1

Cash cost per ounce of gold equivalent produced was $10.84 all in sustaining costs per ounce of gold equivalent produced was $14.36. Consolidated quarterly revenue was $40,900,000 Consolidated quarterly adjusted EBITDA was 15 point $4,000,000 and cash on hand at the end of Q3 2023 was 21,700,000 My team will provide further details about the Q3 operating and exploration activities during this call. With the past quarter still slightly below our expectations in some regards, I am encouraged by the course correction reflected this leading to what should be our strongest year to date results next quarter to finish the year. We anticipate further improvements at Costerfield, predominantly underpinned by mining higher grade soaps in our Uhl deposit, as well as mostly resolving The mill throughput challenge arising from ore hardness of the transition Sheppard ore body below UL, which temporarily restricted throughput by about 14%. At Bjorkdal, the production profile should remain steady as the site continues to ramp up mining and development in the higher grade Eastern Extension zone, as well as commencing our 200,000 ton per annum mill upgrade commissioning planned for later this year.

Speaker 1

And as for site organic exploration, Work continues and the top priority for Mandalay is maintaining and building our ore streams at both operations, Discovering Equivalent Profitable Lounces From Both Near Mine and Regional Drill Targets. I would now like to hand the call over to Ryan, our Chief Operating Officer. Ryan?

Speaker 2

Thanks, Fraser. Notably, Beorthal continued to show improvements achieved its highest quarterly rate since quarter 1 2022 with 11,224 saleable gold ounces produced. It is encouraging to see stable sloping tons from the underground and improved grades as we start to process more material from the higher grade Eastern Extension Zone. In the month of August, process grade averaged 1.46 grams per tonne, the highest mill grade in a single month year to date despite the addition of some lower grade surface stockpile material. We are looking to build upon this as we mine less from areas that are of lower grade and focus on the ramp up in the Eastern Extension Zone.

Speaker 2

Over the last quarter of 2023 and into 2024, we are anticipating higher grades due to the steady feed from this Eastern extension zone to the mill. All major works with the mill conversion project are now complete. We will soon be in the commissioning phase and expect it to take the next few months to smooth everything out as we ramp up throughput and aim to achieve the annualized increase of 200,000 tonne per annum of ore feed by the end of quarter 1, 2024. Costa Field produced 10,808 salable gold equivalent ounces in quarter 3 2023 as it encountered a few challenges leading to deficits in both milled tons and underground gold grades. The main reason for lower milled tons was due to The transition from mule to shepherd material and the increase in the ore hardness.

Speaker 2

The ball mill was undercharged with grinding media and experienced increased pebble scatting, which has now been rectified. Also, the mill faced further downtime than planned from box shoots due to seasonal weather. A reduction in the size of the crusher screen is being used to overcome the problem with additional rectification works Being planned to further address the issue. As for the lower underground mine grades, these can be attributed primarily to a delay in the production of some high grade stopes in Newell due to some required additional ground monitoring and support from a few geotechnical challenges. The stopes however are not considered lost and are expected to be mined in the future.

Speaker 2

We continue to focus on our ongoing operational turnaround of Some remnant issues at Costerfield, maintaining focus on improved Bjorkdal stability and I remain very focused on both achieving our revised 2023 production guidance, while ensuring a good foundational platform for continued success into 2024. I would like to pass the call to Nick, our Chief Financial Officer, who will highlight Mandalay's financials. Nick?

Speaker 3

Thanks, Ryan. As a reminder, the numbers are noted in USD. So for Q3 2023, Mandalay generated approximately $41,000,000 in revenue and $15,000,000 in adjusted EBITDA. These amounts were improvements as compared to our previous quarter, Q2 2023, due to an increase in produced and sold ounces. Of those consolidated quarterly amounts, Costa Field contributed $19,000,000 towards revenue $8,000,000 to adjusted EBITDA with Bjorkdal making up the remaining $22,000,000 $9,000,000 in revenue and adjusted EBITDA respectively.

Speaker 3

Our realized gold price was $19.93 per ounce, a 15% increase compared to the same quarter last year, while the antimony price decreased 9% to $12,100 per tonne. Cash and all in sustaining costs per saleable gold equivalent ounce during Q3 2023 were $10.84 and $14.36 respectively, both approximately 28% higher as compared to Q3 2022. And these unit costs these high unit costs were a direct result from lower production. With the stronger anticipated finish to the year, we anticipate unit costs for both cash and all in sustaining costs to further decrease over Q4. Mandalay ended the quarter with 20 $2,000,000 in cash on hand and $24,000,000 in total interest bearing debt.

Speaker 3

This resulted in a $2,000,000 net debt position at the end of the quarter. The quarter end cash balance and temporary dip into a net debt position were negatively impacted by a delayed receipt of a $5,500,000 shipment at Biokdal that was received just after quarter end. Cash during the quarter was also impacted by an expected one off reclamation increase in cash bonding requirement at Costerfield for $3,500,000 Adding to this, we also made a final tax payment of $5,000,000 which related to 2022 profits earned at cost sealed. I would now like to turn the call to Chris, our VP of Operational Geology and Exploration. Thanks, Chris.

Speaker 4

Thanks, Nick. At Costerfield, near mine exploration was focused on continued infill and extension drilling of Sheppard and the Brunswick Deeps program targeting mineralization below the recently producing Brunswick mine. Earlier this week, Mandalay provided update on these 2 programs, highlighting a new southern high grade domain along Sheppard and the encouraging discovery of significant mineralization below the Brundook mine. Highlights from this release include the definition of a new high grade domain in the south of the Sheppard area, including intercepts of 26 grams per ton gold and 40% antimony over 1.4 meters and 4.9 grams to none gold and 10% antimony over 2.8 meters. Additionally, production optimization drilling continued to highlight the strength of Sheppard with 797 grams per ton gold over 0.52 of a meter and 122 grams per tonne gold over 0.55 of a meter.

Speaker 4

We have also had some excitement in near mine testing with preliminary drilling underneath the Brunswick deposit, intercepting 2 parallel veins with highlighted intercepts of 17.8 grams per ton gold over 1.9 meters and 16.4 grams per SunGold over 1.5 percent antimony over 1.4 meters. In Q4, drilling is expected to continue on Sheppard as well as the commencement of 2 other areas in the new mine targets. 1 testing the Yule Host structure proximal to Brunswick and the other testing continuation of high grade mineralization below Cuffley. Regional exploration at Costerfield progressed in 2 areas during Q3. Firstly, TrueBlue testing program continued to build context around the exciting results released in February 2023.

Speaker 4

And secondly, the West Coast Field Gap program was commenced, targeting the expected northern continuation of the Brunswick line highlighted through geophysical surveys carried out in 2022. Heading into Q4, all active surface drill rigs will be focused on the southern extension of the TrueBlue mineralization. Updates will be provided as available during 2024. At Bjorgdell, nearby drilling continued to focus on the eastern extension of Main and Central Zones as higher margin ounces remains our key focus. In addition, we are also drilling the Eastern depth extension of the Aurora ore body.

Speaker 4

A third program is concentrated on the definition of at Boreal Zone that was discovered and reported on in Q2 2023. During Q4, the current near mine programs investigating the eastern and depth extension of Aurora and Main Zone will continue and conclude, While a new program investigating mineralization at depth sorry, investigating new mineralization at depth into the north below Aurora will commence. On surface, the 2023 drill program was completed with the depth testing of the Storhiden mineralization approximately 1 kilometer to the Northeast of Bjorkdal and extension testing of Norbarias resource, which is 5 kilometers to the east. Logging and assaying of the core from the 2023 drilling program is currently underway. With that, I would like to turn the call back to our President and CEO, Fraser Bauschiere.

Speaker 1

Thank you for that, Chris. Look, in summary, Bjorgdale had a much better quarter. Costerfield had a few more hiccups, But finally, the expected higher mined grades from earlier in the year are now being realized. An additional focus has been placed to ensure maintained mill ore tons throughput. Revised 2023 guidance remains unchanged and we are now also in the midst of preparing next year's budget.

Speaker 1

The company's balance sheet remains healthy and despite a temporary dip into a minor debt situation net debt situation due mostly to concentrate timing deliveries as explained. We expect to end the year strongly back into a net cash position. Q4 will be our 1st full quarter in a while where we are fully unhedged. Look at my first two quarters as CEO of this company. I now have a much

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Key Takeaways

  • Mandalay delivered its highest Q3 production to date with 22,032 salable gold equivalent ounces, generating $40.9 million in revenue and $15.4 million in adjusted EBITDA.
  • At Björkdal, quarterly output rose to 11,224 ounces – the best since Q1 2022 – with mill grades improving in the Eastern Extension zone and commissioning of a 200 ktpa throughput upgrade on track for Q1 2024.
  • Costerfield encountered a ~14% mill throughput reduction and lower underground grades due to harder ore from the transition Sheppard body and geotechnical delays on high-grade stopes, prompting corrective works on the mill and stope support plans.
  • Cash costs and all-in-sustaining costs per ounce jumped ~28% year-over-year to $10.84 and $14.36 respectively, driven by decreased production but are forecast to decline as Q4 production ramps up.
  • The company ended Q3 with $21.7 million in cash and a temporary $2 million net debt position from a delayed shipment, higher reclamation bonding, and tax payments, yet expects to return to net cash by year-end.
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Earnings Conference Call
Mandalay Resources Q3 2023
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