Mandalay Resources Corporation ("Mandalay" or the "Company") (TSX:
MND, OTCQB: MNDJF) is pleased to announce its financial results for
the quarter ended September 30, 2020.
The Company’s unaudited condensed and
consolidated interim financial results for the quarter ended
September 30, 2020, 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.
Third Quarter 2020
Highlights:
- Quarterly revenue
of $49.8 million, highest since Q2 2016;
- Adjusted EBITDA of
$26.7 million, the second highest in Company history;
- Free cash flow of
$17.0 million and net cash flows from operating activities of $28.9
million; and
- Adjusted net income
of $9.8 million, or $0.11 per share and consolidated net income of
$0.6 million, or $0.01 per share.
Dominic Duffy, President and CEO of Mandalay,
made the following comments:
“Mandalay Resources’ performance in the third
quarter of 2020 was outstanding. We generated our highest quarterly
revenue since the second quarter of 2016 and our quarterly adjusted
EBITDA was the second highest on record – results not seen since
the fourth quarter of 2012. The Company’s stellar financial
performance was driven by another all-time record in quarterly
adjusted EBITDA at Costerfield of $18.8 million, surpassing the
$15.4 million record set last quarter. As a result, we generated a
$26.7 million in adjusted EBITDA on a consolidated basis during the
quarter, bringing the year-to-date total to $68.9 million – more
than 400% higher than the $14.9 million amount in the same period
last year. Our consolidated cash costs for the quarter were $826
per saleable gold equivalent ounce produced as compared to the
$1,186 in the same period last year.”
Mr. Duffy continued, “The Company leveraged its
third consecutive quarter of improved operational performance,
coupled with high metal prices and consistent costs, to deliver
strong free cash flow of $17.0 million. We increased our cash
balance since the previous quarter by 57%, ending the third quarter
of 2020 with a cash balance of $32.9 million, and are
well-positioned to meet our target of becoming net debt neutral in
2021.”
Mr. Duffy added, “At Costerfield, the third
quarter of 2020 was another quarter of high-quality production,
with average processed grades of 11.5 g/t gold and 4.1% antimony.
Costerfield recorded quarterly revenue of $27.9 million, a 22%
improvement over last quarter, and an adjusted quarterly EBITDA
margin of 67%. We anticipate further improvement during the fourth
quarter and that Costerfield’s 2021 production will exceed
2020.”
Mr. Duffy continued, “Björkdal delivered another
steady quarter of stable, profitable gold production with 11,044
ounces, which led to $21.9 million in revenue and $9.6 million in
adjusted EBITDA. We expect Björkdal to improve operationally and
financially in the coming quarters as we develop further into the
higher-grade, lower levels of the Aurora zone.”
Mr. Duffy concluded, “Over the past nine months,
Mandalay has demonstrated that it has turned the corner, both
operationally and financially. With our operational turnaround
complete at Costerfield, and three straight quarters of improved
financial performance and cash generation, I am pleased with the
Company’s current trajectory – we expect this trend to continue and
are excited to finish 2020 strong.”
Third Quarter
2020 Financial
Summary
The following table summarizes the Company’s
financial results for the three months and nine months ended
September 30, 2020 and 2019:
|
Three
monthsendedSept
30,2020 |
Three
monthsendedSept
30,2019 |
Nine
monthsendedSept
30,2020(3) |
Nine
monthsendedSept
30,2019 |
|
$’000 |
$’000 |
$’000 |
$’000 |
Revenue |
49,753 |
|
28,798 |
|
133,654 |
|
85,058 |
|
Cost of sales |
21,418 |
|
21,610 |
|
59,984 |
|
65,755 |
|
Adjusted EBITDA (1) |
26,727 |
|
5,555 |
|
68,901 |
|
14,906 |
|
Income from mine ops before depreciation, depletion |
28,335 |
|
7,188 |
|
73,670 |
|
19,303 |
|
Adjusted net income (loss) (1) |
9,823 |
|
(961 |
) |
22,639 |
|
(5,346 |
) |
Consolidated net income (loss) |
635 |
|
(1,403 |
) |
(5,413 |
) |
(12,487 |
) |
Capital expenditure |
(12,083 |
) |
(10,094 |
) |
(32,684 |
) |
(27,744 |
) |
Total assets |
283,379 |
|
252,042 |
|
283,379 |
|
252,042 |
|
Total liabilities |
173,281 |
|
139,494 |
|
173,281 |
|
139,494 |
|
Adjusted net income (loss) per share (1) |
0.11 |
|
(0.01 |
) |
0.25 |
|
(0.07 |
) |
Consolidated net income (loss) per share (2) |
0.01 |
|
(0.02 |
) |
(0.06 |
) |
(0.16 |
) |
1Adjusted EBITDA, adjusted net income (loss) and
adjusted net income (loss) per share are non-IFRS measures, defined
at the end of this press release “Non-IFRS Measures”.2As 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.3Includes restated figures for the three months
ended March 31, 2020 and June 30, 2020 related to a reduction of
loss on financial instruments amounting to $1.5 million.
In the third quarter of 2020, Mandalay generated
consolidated revenue of $49.8 million, 73% higher than in the third
quarter of 2019. This increase is attributable to Mandalay selling
8,188 more gold equivalent ounces in the third quarter of 2020
compared to the third quarter of 2019. The Company’s realized gold
price in the third quarter of 2020 also increased by 16% compared
to the third quarter of 2019, and the realized price of antimony
was flat year-over-year. Consolidated cash cost per
ounce of $826 decreased by 30% in the third quarter of 2020
compared to the third quarter of 2019, mainly due to higher
production and slightly lower cost of sales. Cost of sales during
the third quarter of 2020 versus the third quarter of 2019 were
$0.5 million higher at Costerfield, offset by a $0.7 million
reduction at Björkdal. Consolidated general and administrative
costs were $0.03 million lower as compared to the prior year
quarter.
Mandalay generated adjusted EBITDA of $26.7
million in the third quarter of 2020, 377% higher compared to the
Company’s adjusted EBITDA of $5.6 million in the year ago quarter.
Adjusted net income was $9.8 million in the third quarter of 2020,
which excludes the $8.7 million fair value loss related to the gold
hedges associated with the Syndicated Facility, and $0.5 million in
care and maintenance costs, compared to an adjusted net loss of
$1.0 million in the third quarter of 2019. Consolidated net income
was $0.6 million for the third quarter of 2020, versus a net loss
of $1.4 million in the third quarter of 2019. Mandalay ended the
third quarter of 2020 with $32.9 million in cash and cash
equivalents.
Third Quarter
2020 Operational
Summary
The table below summarizes the Company’s capital
expenditures and operational unit costs for the three and nine
months ended September 30, 2020 and 2019:
|
|
Three monthsended
Sept 30,
2020 |
Three monthsended
Sept 30,
2019 |
Nine monthsended
Sept 30,
2020 |
Nine monthsended
Sept 30,
2019 |
$’000 |
$’000 |
$’000 |
$’000 |
Björkdal |
|
|
|
|
|
|
Gold produced (oz) |
11,044 |
11,880 |
33,044 |
40,508 |
|
Cash cost (1) per oz gold produced ($) |
1,051 |
941 |
1,061 |
891 |
|
All-in sustaining cost (1) per oz gold produced ($) |
1,505 |
1,332 |
1,495 |
1,195 |
|
Capital development |
2,525 |
1,660 |
7,004 |
5,498 |
|
Property, plant and equipment purchases |
2,414 |
2,965 |
7,193 |
6,754 |
|
Capitalized exploration |
359 |
412 |
1,343 |
704 |
Costerfield |
|
|
|
|
|
|
Gold produced (oz) |
11,749 |
3,103 |
32,722 |
10,509 |
|
Antimony produced (t) |
991 |
402 |
3,045 |
1,348 |
|
Gold equivalent produced (oz) |
14,620 |
4,745 |
43,049 |
17,557 |
|
Cash cost (1) per oz gold eq. produced ($) |
657 |
1,800 |
622 |
1,413 |
|
All-in sustaining cost (1) per oz gold eq. produced ($) |
1,088 |
2,714 |
987 |
2,190 |
|
Capital development |
3,956 |
3,736 |
10,632 |
10,191 |
|
Property, plant and equipment purchases |
1,568 |
521 |
3,065 |
3,073 |
|
Capitalized exploration |
1,241 |
783 |
3,308 |
1,315 |
Consolidated |
|
|
|
|
|
|
Gold equivalent produced (oz) |
25,664 |
16,625 |
76,093 |
58,065 |
|
Cash cost (1) per oz gold eq. produced ($) |
826 |
1,186 |
812 |
1,049 |
|
All-in sustaining cost (1) per oz gold eq. produced ($) |
1,355 |
1,858 |
1,295 |
1,612 |
|
Capital development |
6,481 |
5,396 |
17,636 |
15,689 |
|
Property, plant and equipment purchases |
3,982 |
3,486 |
10,258 |
9,827 |
|
Capitalized exploration (2) |
1,620 |
1,212 |
4,790 |
2,228 |
1Cash cost and all-in sustaining cost are non-IFRS
measures. See “Non-IFRS Measures” at the end of this press
release.2Includes capitalized exploration relating to other
non-core assets.
Björkdal gold mine, Skellefteå, Sweden
Björkdal produced 11,044 ounces of gold in the
third quarter of 2020 with cash and all-in sustaining costs of
$1,051/oz and $1,505/oz, respectively, compared to cash and all-in
sustaining costs of $941/oz and $1,332/oz, respectively, in the
third quarter of 2019.
Costerfield gold-antimony mine, Victoria, Australia
Costerfield produced 11,749 ounces of gold and
991 tonnes of antimony for 14,620 gold equivalent ounces in the
third quarter of 2020. Due to the higher gold equivalent ounces
produced, cash and all-in sustaining costs at Costerfield decreased
to $657/oz and $1,088/oz, respectively, compared to cash and all-in
sustaining costs of $1,800/oz and $2,714/oz, respectively, in the
third quarter of 2019.
Cerro Bayo silver-gold mine, Patagonia,
Chile
In the third quarter of 2020, the Company spent
$0.5 million on care and maintenance expenses at Cerro Bayo
compared to $0.4 million in the third quarter of 2019. Cerro Bayo
is currently subject to a binding option agreement between the
Company and Equus Mining (“Equus”) pursuant to which Equus has an
option to acquire Cerro Bayo. For further information see the
Company’s October 8, 2019 press release.
Lupin, Nunavut, Canada
Care and maintenance spending at Lupin was $0.1
million during the third quarter of 2020, which was the same as in
the third quarter of 2019. Reclamation spending at Lupin was $0.5
million during the third quarter of 2020 as compared to $0.8
million in the third quarter of 2019.
Challacollo, Chile
No key developments occurred during the third
quarter of 2020. Further information regarding the definitive
agreement signed with Aftermath Silver for the sale of Challacollo
can be found in the Company’s November 12, 2019 press release.
La Quebrada, Chile
The La Quebrada copper-silver project in Chile
remained held for sale throughout the period.
COVID-19
The coronavirus (“COVID-19”) pandemic is present
in all countries in which the Company operates, with cases being
reported in Canada, Australia, Sweden and Chile. At this time, the
Company has activated business continuity practices across all
sites. Management will continue to monitor developments across all
jurisdictions and will adjust its planning as necessary. More
details are included in the Company’s press release dated March 20,
2020.
The Company currently expects this strong
operating performance seen in the third quarter of 2020 to
continue, however, the COVID-19 pandemic creates uncertainties. At
this time, the Company is maintaining its existing 2020 production
guidance but will continue to closely monitor the situation in both
Australia and Sweden and will make adjustments, if necessary.
Conference Call
Mandalay’s management will be hosting a conference
call for investors and analysts on November 12, 2020 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: |
13713074 |
|
A replay of the conference call will be
available until 11:59
PM (Toronto time), November 26, 2020 and can be
accessed using the following dial-in number:
Encore Toll Free Dial-in Number: |
(877) 660-6853 |
|
Encore ID: |
13713074 |
|
About Mandalay Resources Corporation:
Mandalay Resources is a Canadian-based natural
resource company with producing assets in Australia and Sweden,
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 the Company’s anticipated
performance over the balance of 2020 and into 2021. 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 30, 2020, a copy of which is 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, free cash flow, cash cost per
saleable ounce of gold equivalent produced, cash cost per saleable
ounce of silver produced net of gold credits and all-in sustaining
cost 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 and free cash
flow as measures 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. The Company defines adjusted net income as net
income before special items. Special items are items of income and
expense that are presented separately due to their nature and, in
some cases, expected infrequency of the events giving rise to them.
A reconciliation between adjusted EBITDA and adjusted net income,
on the one hand, and consolidated net income, on the other hand, is
included in the MD&A.
The Company defines free cash flow as a measure
of the Corporation’s ability to generate and manage liquidity. It
is calculated starting with the net cash flows from operating
activities (as per IFRS) and then subtracting capital expenditures
and lease payments. Refer to Section 1.2 of MD&A for a
reconciliation between free cash flow and net cash flows from
operating activities.
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
sustaining costs include total cash operating costs, sustaining
mining capital, royalty expense, accretion and depletion.
Sustaining capital reflects the capital required to maintain each
site’s current level of operations. The sites the all-in sustaining
cost per ounce of saleable gold equivalent in a period equals the
all-in sustaining cost divided by the saleable equivalent gold
ounces produced in the period.
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. Site all-in sustaining costs include
total cash operating costs, sustaining mining capital, royalty
expense, accretion and depletion. Sustaining capital reflects the
capital required to maintain each site’s current level of
operations. The sites the all-in sustaining cost per ounce of
saleable gold equivalent in a period equals the all-in sustaining
cost divided by the saleable equivalent gold ounces produced in the
period.
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. Consolidated cash
cost excludes royalty and corporate level general and
administrative expenses. This definition was updated this quarter
to exclude corporate general and administrative expenses to better
align with industry standard. All-in sustaining cost per saleable
ounce gold equivalent in the period equals the sum of cash costs
associated with the production of gold equivalent ounces at all
operating sites in the period plus corporate overhead expense in
the period plus sustaining mining capital, royalty expense,
accretion, depletion, depreciation and amortization, divided by the
total saleable gold equivalent ounces produced in the period. A
reconciliation between cost of sales and cash costs, and also cash
cost to all-in sustaining costs are included in the MD&A.
For Further Information:
Dominic Duffy President and Chief Executive
OfficerEdison NguyenManager, Analytics and Investor
RelationsContact: (647) 260-1566
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