MANDALAY RESOURCES BUILDING VALUE ACROSS THE CYCLE MARCH 2017 TSX // MND

Transcription

1 MANDALAY RESOURCES BUILDING VALUE ACROSS THE CYCLE MARCH 217 TSX // MND

2 Forward-looking Statements This presentation contains "forward-looking statements" within the meaning of applicable securities laws, including statements relating to life of mine production plans, exploration plans and the growth and strategy of Mandalay. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things: exploration results or production results not meeting management s expectations; capital, production and operating cost results not meeting current plans; and 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 3, 216 and in its final prospectus dated July 18, 216, copies of which are available under Mandalay's profile at Although Mandalay has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forwardlooking 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. Quality Control and Assurance Quality control and assurance programs are implemented in line with the standards of National Instrument The exploration programs at Costerfield and Björkdal are supervised by Chris Gregory (Member, Australian Institute of Geoscientists, VP of Operational Geology for Mandalay and a Qualified Person as defined under National Instrument Mr. Gregory regularly visits Costerfield and Björkdal, and supervises the collection and interpretation of scientific and technical information contained in this presentation. The exploration programs at the Cerro Bayo and Challacollo projects are supervised by Scott Manske, Chief Cordilleran Geologist of Mandalay Resources, and an Oregon registered Professional Geologist. A Qualified Person as defined by NI 43-11, he has reviewed and approved the technical and scientific information on these projects contained in the presentation. Dr. Mark Sander (Member: AusIMM), President and CEO of Mandalay, has visited the Costerfield, Cerro Bayo, Challacollo, and Björkdal and has supervised the preparation of this presentation. All currency references in US$ unless otherwise indicated 2

3 A Values-Based and Value-Focused Company Profitable and Dividend-Paying: (5.6% yield)* WE ARE SUCCESSFUL WHEN: Our employees live and work safely and experience the personal satisfaction that comes with high performance and recognition The communities in which we operate value our presence Our environmental impact is minimized and causes no permanent harm We have a large, diversified set of customers who are delighted with and compete for our products Our shareholders realize a superior total return on their investment and support our corporate values Our values are visibly demonstrated by strong local management, at the point of impact with our stakeholders, and coordinated across the Company for maximum effect *Trailing 12 months dividends divided by current market capitalization (Mar. 2, 217) 3

4 Designed for Value: How We are Different Acquire only when we see possibility of 3-5X value uplift in 3-5 years Target cash cost of production: 5% of reversion to mean metal price 1% ownership; no private royalties, no streams PEOPLE MINE Cerro Bayo Björkdal Flat, virtual, low-cost organizational structure; local GM accountability Direct relationships and sales contracts with customers Dividend-paying: 6% of trailing quarterly revenue No hedging of metal prices Lightly levered with low-interest, gold-convertible bonds Stingy with equity Disciplined management processes operated with integrity Costerfield 4

5 Results: Consistent Performance Across the Price Cycle TIMELINE Costerfield, Australia Gold & Antimony Cerro Bayo, Chile Silver & Gold No acquisition Optimize operations Pay down debt Exchange warrants Begin dividends Challacollo, Chile Silver & Gold Björkdal, Sweden Gold Mandalay Financial Performance US$ MM ,67 1,57 1, , ,16 1,248 1, ,8 1,6 1,4 1,2 1, Gold Price (US$) -5 Revenue EBITDA Cash from Operations Gold Price 1. The Company defines EBITDA as earnings before interest, taxes and non cash charges/ (income). EBITDA should not be considered by an investor as an alternative to net income or cash flow as determined in accordance with IFRS EBITDA figures reflect adjusted EBITDA, please see the Company s Management s Discussion and Analysis. 5

6 Based on Matched Production and Reserves Oz Au Eq. Annual Production 3, 25, 2, 15, 1, 5, 254, 52, 15,854 63, , 17, , 126,98 1,123, 154,81 1,54, 1,24, 166, , , 163, (1) E 1,2, 1,, 8, 6, 4, 2, Oz Au Eq. Year-End Reserves With Continuing Capital and Overhead Spending Discipline Capex spending per oz Au Eq. $/oz Mandalay capital spending at operating mines (excluding exploration) Assumes full-year 217 prices: Au $1,185/oz, Ag $16.72/oz, Sb $7,71/t Capex spending ($ m) 6 Overhead spending per Au Eq. $/oz Mandalay corporate overhead spending Acquisition Overhead spending ($ m)

7 And Adding Reserves Cost-effectively US$/oz Au Eq. P&P Added Cerro Bayo Mandalay cost of acquiring and discovering reserves Median for all Au sector acquisitions = $254/oz Au Eq. (1) Björkdal Acquisition + Exploration adds at cumulative average $79/oz Au Eq. (for developed & producing reserves) Cumulative Cost per oz Au Eq. Acquired or Discovered Cost Per oz Au Eq. Discovered in yr Cost Per oz Au Eq. Acquired in yr 216 metal price assumptions: $1,22/oz Au, $16.87/oz Ag and $6,82/t Sb 1. Source: BMO 7

8 Creating Superior Value for Shareholders 35% 3% 25% 2% 15% 1% 5% 11.5% Cumulative Total Return (% Value Change)* Mandalay Cumulative Returns 11.5% Annual Compounded Rate of Return Gold Silver Total Return vs. Peers and Seniors $14,, $12,, $1,, $8,, $6,, $4,, $2,, $ Dividends Paid (USD)** % of revenues (dividend contribution) Record Dividends $1, Mandalay (1) Peer Index (2) Gold Senior (3) 25. Investment Value $8, $6, $4, $2, Volume (millions) A $1, investment on September 24, 29 would be worth today (4): Mandalay: $54,71 Peer Index: $14,125 Gold Seniors: $7,59 $ Sep-9 Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16. *Q3 21 to Q4 216, includes all dividends paid. Source: MetalPrices.com for metal spot prices Index: September 3, 29 = 1. Mandalay share price: $.8. Graph updated quarterly, prices as at the last trading day of each respective quarter. **Annual cash dividend paid quarterly, based on 6% of the Company s trailing quarter s gross revenue and the future cash requirements of the Company (1) Adjusted for reinvested dividends. Assumes investment in Mandalay made as part of private placement announced on 24-Sep-9 to fund acquisition of Costerfield and accounts for warrant exchange offer of.47 shares per warrant. (2) Peer Index: Alacer, Argonaut, Dundee PM, Klondex, Perseus, Primero, Richmont. (3) Gold Seniors: Agnico Eagle, AngloGold, Barrick, Goldcorp, Gold Fields, Kinross, Newcrest, Newmont, Polyus, Randgold. (4) End date as at February 13, 217.

9 Approximately Replaced Depletion in 216 RESERVES Au (koz) Contained Ag (koz) Contained Sb (kt) Contained Au (koz) Contained Ag (koz) Contained Sb (kt) Contained Proven Probable 72 7, , Proven + Probable 774 8, , RESOURCES Au (koz) Contained Ag (koz) Contained Sb (kt) Contained Au (koz) Contained Ag (koz) Contained Sb (kt) Contained Measured 96 1, , Indicated 1,19 4, ,13 47, Measured + 1,286 41, ,119 48, Indicated Inferred 47 1, , Source: Cerro Bayo - Roscoe Postle Associates, Effective December 31, 216, documented in an independent NI Technical Report to be filed within 45 days of Feb. 23, Source: Costerfield - SRK Consulting (Australia), Effective December 31, 216, documented 9 in an independent NI Technical Report to be filed within 45 days of Feb. 23, Source: Challacollo Mining Plus, Effective December 31, 215, documented in an independent NI Technical Report filed Mar. 31, Source: Björkdal Roscoe Postle Associates, Effective September 3, 216, documented in an independent NI Technical Report filed Jan. 27, 217

10 Mandalay 217 Production Guidance Total Cerro Bayo Costerfield Björkdal Challacollo Saleable Au Produced oz ( ) Saleable Ag Produced oz (MM) Saleable Sb Produced t ( ) Total Saleable Au Eq. Produced* oz ( ) Total Cash Cost per Au Eq. oz* $/oz , Capital Expenditure USD MM Exploration USD MM Major capital items support production Björkdal Capital devel. & stripping $12.1 million Flotation circuit upgrade- $2.6 million Pump station 34 level $6, Tailings lift $1.1 million Fibrecrete station $4, Costerfield Capital development $1.9 million Water storage & evap. $3. million Power equipment $1.3 million Tailings facility $1. million Cerro Bayo Capital development $15.2 million Tailings Dam $2.5 million *Assumes full-year 217 prices: Au $1,185/oz, Ag $16.72/oz, Sb $7,71/t 1

11 Broader Ownership and Higher Liquidity Over Time Volume 3-day Average Daily Volume 933,114 1-day Average Daily Volume 1,256,682 Major Shareholders (1) Holders Shares (Million) Shares (Percentage) GMT Capital 65. Ruffer LLP 42. Plinian + Management + Directors % 9.3% 6.9% 6.7% 4.8% Sentry Investments 3.2 AzValor 21.6 Large Holders (Top-5) 19. Other Holders % TOTAL Analyst Coverage Firm Analyst BMO Brian Quast Desjardins Mike Parkin Raymond James Chris Thompson Scotia Craig Johnston Average Daily Volume across all trading platforms (as of Feb 14, 217) 1. Known ownership positions are estimates - as at January 16, Ownerships and percentages rounded to one decimal place. 11

12 Strong Balance Sheet As at Mar 2, 217 Share price (Mar 2, close) (C$) Millions (Except Share Price Info) $.62/shr Shares Outstanding Stock Options (1) 19.2 Fully Diluted Shares Outstanding 47.4 Market Capitalization (C$) $279.7 Cash and Cash Equivalents (US$) (3) $66.9 Total Interest-Bearing Debt (US$) (3) $59. Total Enterprise Value (US$) (2,3) $ Exercise Price: C$.83 C$.91 expiry dates ranging from Mar 9, 217 Mar 23, Market Capitalization converted to US$ using exchange rate of 1 CAD =.75 USD (Mar. 2, 217) 3. Cash and Cash Equivalents and Interest-Bearing Debt as at end of Q4-216 (Dec 31, 216) 12

13 Björkdal Gold Mine: Investment Thesis Demonstrated Land package 12,949 hectares Ownership 1% P&P Reserves (1) 1,6, 1.68 g/t Au 216 Production 48,143 oz Au Key for 217: Expected improvements in production and cash cost with continuously improving grade control Phase 1 (crushing and screening) of low-grade ore sorting program implemented with 5% grade upgrade Construction of the flotation expansion project to be commissioned later this year Continued exploration success (1) Source: Roscoe Postle Associates, Effective September 3, 216, documented in an independent NI Technical Report filed Jan. 27,

14 Björkdal Operating Performance and Improvements Tonnes Per Quarter Tonnes Per Quarter Ounces Gold Per Quarter 4, 3, 2, 1, Mining Rate and Unit Cost Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 t Mined Cost/ t Mined Processing Rate and Unit Cost 4, 3, 2, 1, Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 t Processed Cost/ t Processed 15, 1, 5, Saleable Gold Produced and Unit Cost Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 $3 $25 $2 $15 $1 $5 $ $1 $8 $6 $4 $2 $ $5 $ $/ Tonne $/ Tonne $1,5 $1, $/ oz Au Björkdal Operational Improvements: Record High Rate Record Low Cost Introduced best practice mapping, drilling, sampling, and modelling of high nuggeteffect gold deposits Produced a more refined resource model to support more selective underground & open pit mining techniques Establishing a local assay lab for faster grade control turnaround Increasing grade of mill feed through more selective underground and open pit mining at an increasing rate (making up for discarding waste) Pilot optical ore sorting Implemented crushing and screening of lowgrade ore for 5% grade improvement Committed flotation expansion in construction Au oz Cost/ oz Au 14

15 Björkdal Grade Improvements Now Do it Faster Highest grade underground A ore since 21 Onsite assay lab for 24-hour turnaround for improved grade control Highest grade open pit A ore since 26 Low-grade ore screening implemented for 5% grade improvement 15

16 Björkdal Processing Improvements Completed: Sampling survey on milling and gravity gold circuits to identify improvement opportunities Laboratory flotation recovery study on effect of fineness of grind, % solids, and residence Pilot on-site testing of coarse and ultra fine gold flotation Flotation circuit and ancillary equipment expansion study to determine OPEX and CAPEX for a flotation circuit expansion. Goal: improve flotation recovery and concentrate grade Low-grade ore screening for 5% grade improvement for no capital 217 Planned Improvements: Commissioning the flotation expansion (Q3 217) for 1.8% recovery improvement Milling/Flotation material flow stability survey to identify areas where automation can be implemented to improve recovery Introduction of high chrome grinding media for increased wear resistance, grinding media cost saving and improved pulp chemistry for improved flotation recovery 16

17 Björkdal: Just Getting Started on Resource Expansion Source: Roscoe Postle Associates, Effective September 3, 216, documented in an independent NI Technical Report filed Jan. 27,

18 Drilled Since Cutoff Date for Sept. 3 Reserves In the box and ready for next update Underground Ronnberget Nylunds and E Pit 18

19 Costerfield Gold-Antimony Mine: Turnaround Complete; Dependable Performance Land package 1,293 hectares Ownership 1% P&P Reserves (1) 619, 6.5 g/t Au; 2.8% Sb 216 Production 41,31 oz Au, 3,598 t Sb Key for 217: Restarting capital development to access near-mine shoots and support next few years of production Tailings lift construction for current LOM tailings Potential reserve increases at Brunswick and further exploration upside (1) Source: SRK Consulting (Australia), Effective December 31, 216, documented in an independent NI Technical Report to be filed within 45 days of Feb. 23,

20 Costerfield: Continuous Improvement Tonnes Per Quarter Tonnes Per Quarter Ounces Per Quarter 5, 4, 3, 2, 1, 5, Mining Rate and Unit Cost $ Q4 9 Q4 1 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 (Dec. only) t Mined Cost/ t Mined Processing Rate and Unit Cost $4 $3 $2 $1 $15 4, $1 3, Cont. Impr. 2, $5 1, Start-up $ Q4 9 Q4 1 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 (Dec. only) t Processed Cost/ t Processed 2, 15, 1, 5, Start-up Q4 9 (Dec. only) Au Equivalent Production and Unit Cost $ Q4 1 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Oz Au Eq. Transformation Cont. Impr. Cost/ Au Eq. Oz $3, $2, $1, USD/ Tonne USD/ Tonne USD/ Oz Au Eq. 2 Costerfield Operational Improvements: Record High Rate Record Low Cost Improved mine output/mill throughput from 17 tpd to 45 tpd (capped by grid power and site grinding capacity) Changed mining method from cut-and-fill to blast-hole stoping with cemented rock fill (greater production, lower unit costs) Introduced contract capital development for faster and lower cost results Increased sub-level spacing from 5 1 m Replaced mechanized mining fleet Introduced mobile crusher to decrease particle size of mill feed (better recoveries, higher throughput) Grew mine life from zero reserves to roughly 4 years while mining continuously for 7 years Cuffley and N-lode

21 Costerfield Exploration Outcomes reserves at purchase; Mined continuously for 7 years; 4 years P&P remaining, plus further upside Source: SRK Consulting (Australia), Effective December 31, 216, documented in an independent NI Technical Report to be filed within 45 days of Feb. 23,

22 Brunswick Lode is Current Target to Convert to Reserves Penguin-Moa panel of Indicated not quite sufficient size for financially attractive development Infilling Penguin-Kiwi panel to Indicated may create acceptable base case project Confirming and infilling Kiwi-Adder panel provides upside Penguin-Moa panel infilled to indicated Penguin-Kiwi panel infilled to inferred Kiwi-Adder panel mineralized, not filled in 22

23 Cerro Bayo Silver-Gold Mine: Optimizing the Future Land package 23,16 hectares Ownership 1% P&P Reserves (1) 979, 282 g/t Ag; 2.29 g/t Au 216 Production 13,792 oz Au, 1,731,31 oz Ag Key for 217: Matched 95-1, tpd mining/processing rate Accelerated development rate at Coyita to reach high-grade ore Beginning drilling under the middle of Laguna Verde in late 217 for potential reserve increases in Coyita, high-grade Branca vein, and Yasna Inflection zone Target MARCELA VEIN (1 KM BEHIND VIEWPOINT) BRANCA 23 Emerging Vein (1) Source: Roscoe Postle Associates, Effective December 31, 216, documented in an independent NI Technical Report to be filed within 45 days of Feb. 23, 217

24 Cerro Bayo Operating Performance and Improvements Tonnes Per Quarter Tonnes Per Quarter Oz Ag/Quarter Mining Rate and Unit Cost 15, $1 1, 5, Q4 1 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 t Mined Cost/ t Mined 15, 1, 5, $5 $ Processing Rate and Unit Cost $5 Q4 1 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 t Processed Cost/ t Processed 1,5, Saleable Silver Produced & Unit Cost 1,, 5, Q4 1 Q2 11 Q4 11 Q2 12 Q4 12 Q2 13 Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 $ $5 $ $/ Tonne $/ Tonne $2 $15 $1 $/ oz Ag Net Byproduct Cerro Bayo Operational Improvements: Record High Rate Record Low Cost Shifted the mining method from shrinkage stoping to completely mechanized blast hole open stoping; Ramped up throughput from tpd 1,4 tpd from three mines Installed flotation automation system to maximize silver and gold recoveries Extended mine life from 3 years at 1,2 tpd to 4 years at 1,4 tpd while mining continuously for 6 years Ongoing improvements to increase pace of development mining Ag oz Cost/ oz Ag net Au 24

25 Cerro Bayo 3 years of reserves at purchase (for 2X worst case value add) Have mined continuously for 6 years 4 years remaining, plus some upside Cerro Bayo Cumulative M+I Resource Additions & Depletion (Ag Ozs) 45,, 4,, 35,, 3,, OZS Ag 25,, 2,, 15,, 1,, 5,, END OF YEAR MEASURED PLUS INDICATED RESOURCES CUMULATIVE DEPLETION Dagny Fabiola Delia NW Delia SE Marcela Sur Yasna Coyita Dalila Bianca Trinidad Raul Kasia Branca Source: Roscoe Postle Associates, Effective December 31, 216, documented in an independent NI Technical Report to be filed within 45 days of Feb. 23,

26 Challacollo Silver-Gold Project 217 Land package 2,378 hectares Ownership 1% Location 13 km SE of Iquique, Chile Mineralization Elevation Epithermal, oxidized Ag-Au Approx. 1,5 ASL Key for 217: Water exploration and water rights transfer Exploration and optimization 26

27 Invest With Us: How We Will Deploy Your Capital 1. Acquire new assets counter-cyclically only at deep discount to value Deliver base case returns at least 2x the investment Upside case 3-5x over 3-5 years based on specific testable hypotheses Keep portfolio evergreen exit assets that do not fit 2. Execute focused operational improvement projects at each site Exploration project portfolio targeted on discovery of near-term reserves Mining projects focused on safer, more mechanised mining with higher extraction, lower dilution and reduced cost Metallurgical projects focused on higher recovery, higher availability, higher quality products with higher payables and reduced costs Commercial more diverse customers paying better terms 3. Apply relentless, disciplined financial management Low cash cost and overheads for high EBITDA margins Low DD&A for high P&L margins low acquisition cost, focused CAPEX & exploration Prudent, low-cost leverage to fund growth when needed Minimize shareholder dilution Return cash to shareholders: dividend = 6% trailing qtr. revenues 4. Engage all stakeholders in a values-based and value-focused organization 27

28 MANDALAY RESOURCES BUILDING VALUE ACROSS THE CYCLE For more information, please contact: Greg DiTomaso Director, Investor Relations Tel: Company Website: