FEB 2018 TSX:MND HIGH PERFORMERS = BREAKTHROUGH RESULTS 1

Transcription

1 FEB 2018 TSX:MND HIGH PERFORMERS = BREAKTHROUGH RESULTS 1

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 31, 2017 and in its short form base shelf prospectus dated February 12, 2018, 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 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. 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 , 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 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 3

4 Designed for Value: A Proven Strategy Mandalay acquires undervalued mines in accretive transactions; turns them around to crystallize increased value in the market; returns cash to shareholders 1. Acquire producing or near-term, cash-flowing mines at a discount to value we will create Remedy history of underinvestment in sustaining capital that limits current performance (e.g. underground development, stripping, maintenance) Introduce major improvements in mining methods Modernize plant and operating practices to increase throughput & recovery Institute operating cost reductions and productivity improvements Leverage commercial savvy and direct smelter relationships to improve treatment costs Identify and develop unrecognized or underinvested exploration potential to support expanded production and/or mine life extension 2. Reinvest near-term, growing cash flow to fund turnaround plan 3. Return cash to shareholders wherever possible 4. Divest mature, optimized mines to parties who can create more value than we see Mandalay has acquired three mines at discount and turned around all three in seven years; looking for more 4

5 Organized to Deliver Maximum Shareholder Value Acquire only when we see possibility of an accretive transaction with strong value uplift in 3-5 years Target cash cost of production: 50% of reversion to mean metal price Flat, virtual, low-cost organizational structure; local GM accountability Direct relationships and sales contracts with customers 100% ownership; no private royalties, no streams Return cash to shareholders when possible No hedging of metal prices Stingy with equity Reasonably levered 5

6 Results: Consistent Performance Across the Price Cycle Mandalay 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 Cerro Bayo Inundation, C&M & re-permitting Mandalay Financial Performance US$ MM ,670 1, , , ,160 1,248 1,251 1, ,800 1,600 1,400 1,200 1, Gold Price (US$) -50 Revenue EBITDA Cash from Operations Gold Price 0 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. 6

7 Mandalay s Strategy in Action: Matched Production and Reserves Oz Au Eq. Annual Production 300, , , , ,000 50, ,123,000 1,054,000 1,024,000 1,012, , , , , , , , , , , , ,000 15,854 63, E 1,200,000 1,000, , , , ,000 0 Oz Au Eq. Year-End Reserves With Continuing Capital and Overhead Spending Discipline Capex spending ( $/oz Au Eq.) Mandalay Capital Spending at Operating Mines (excl. Exploration) Capex spending ($M) Overhead spending ($/oz Au Eq.) Mandalay Corporate Overhead Spending Overhead spending ($M) 7

8 Adding Reserves Cost-effectively US$/oz Au Eq. P&P Added Mandalay cost of acquiring and discovering reserves Cerro Bayo Cumulative Cost per oz Au Eq. Acquired or Discovered Median for all Au sector acquisitions = $226/oz Au Eq. (1) Björkdal Acquisition + Exploration adds at cumulative average $75/oz Au Eq. (for developed & producing reserves) Cost Per oz Au Eq. Discovered in yr Cost Per oz Au Eq. Acquired in yr 2016 metal price assumptions: $1,202/oz Au, $16.87/oz Ag and $6,820/t Sb 1. Source: BMO 8

9 Creating & Delivering Superior Value for Shareholders Since 2009, Mandalay has returned cash to shareholders via: Warrant redemptions Share buybacks Dividends* A $10,000 investment on Sept. 24, 2009 would be worth on Feb. 21, 2018 (1-4): Mandalay: $17,791 Peer Index: $11,234 Gold Seniors: $7,192 Despite 2017 share price decline due to Cerro Bayo issues, Mandalay has delivered almost 1.5X value of Peers & almost 2.5X value of Gold Seniors since founding in 2009 *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-09 to fund acquisition of Costerfield and accounts for warrant exchange offer of 0.47 shares per warrant. (2) Peer Index: Alacer, Argonaut, Dundee PM, Kirkland Lake, 9Klondex, Perseus, Primero, Richmont. (3) Gold Seniors: Agnico Eagle, AngloGold, Barrick, Goldcorp, Gold Fields, Kinross, Newcrest, Newmont, Polyus, Randgold. (4) End date as Feb. 21, 2018.

10 The Mandalay Production and Development Portfolio Company-wide production of 131,186 oz AuEq in 2017 Björkdal: 2017 Breakthrough Year 2017 production: 62,028 oz gold 2017 cash costs: $816/oz Current mine life: 10 years Reserve replacement ratio: 12.9 Costerfield: 2017 Dependable Performance, Mine life extension at Brunswick lode 2017 production (AuEq): 52,137 oz 2017E cash costs: $701/oz Current mine life: 4 years Reserve replacement ratio (3-yr Avg): 1.39 Chilean Properties Cerro Bayo (production suspended) Restart currently in permitting Challacollo Feasibility-stage project Targeting production of approx. 4 Moz Ag for a 10-year mine life (PRODUCTION SUSPENDED) Björkdal targeting long-term production of 70+koz with a mine life of 15 $750/oz cash costs Costerfield self-funding to replace P&P Reserves and extend mine life 10

11 Strong Balance Sheet as of December 31, 2017 Mandalay is well-capitalized to fund its capital plans and growth Share price (Feb. 20, close) (C$) Millions (Except Share Price Info) $0.255/shr Shares Outstanding Stock Options (1) 20.9 RSUs 0.7 Fully Diluted Shares Outstanding Market Capitalization (C$) $115.1 Cash and Cash Equivalents (US$) (3) $16.9 Total Interest-Bearing Debt (US$) (3) $30.6 Total Enterprise Value (US$) (2,3) $104.7 Mandalay secured US$40 million revolving credit facility July 25, 2017 US$25 million undrawn as of December 31, Exercise Price: C$0.60 C$1.13 expiry dates ranging from Mar 18, 2018 Jun 30, Market Capitalization converted to US$ using exchange rate of 1 CAD = 0.79 USD (Feb. 20, 2018) 3. Cash and Cash Equivalents and Interest-Bearing Debt as at end of Q (Dec 31, 2017) 11

12 Broader Ownership Over Time Volume 30-day Average Daily Volume 694, day Average Daily Volume 481,056 Major Shareholders (1) Holders Shares (Million) Shares (Percentage) GMT Capital 73.5 Ruffer LLP 56.5 CI Cambridge % 12.5% 10.2% 7.5% AzValor 33.7 Plinian + Management + Directors % Large Holders (Top-5) Other Holders % TOTAL Analyst Coverage Firm Analyst BMO Brian Quast Scotia Trevor Turnbull Average Daily Volume across all trading platforms (as of Feb. 21, 2018) 1. Known ownership positions are estimates - as at Feb. 9, 2018 Ownerships and percentages rounded to one decimal place. 12

13 Key Objectives for 2018 Strong Operational & Financial Results Stable production from current assets, strong cost management and budget control expected to result in growing positive cash flow from operations Produce koz AuEq from Björkdal and Costerfield operations at consolidated cash costs between $835-$910/oz AuEq., and AISC between $1,155-$1,280/oz AuEq. Grow Reserves & Mine Life Build on continuing exploration success at Björkdal, with focus on increasing average grade and open pit life Continue building on encouraging highgrade results at Costerfield Deeps as potential next ore shoot Total exploration budget: $6.4 million Grow Portfolio through Acquisition Acquire significant producing asset: o With precious metals focus o At discount to value we see as achievable within 3 years o In an immediately accretive transaction o With optimum mix of debt and equity o With executable integration/turnaround plan Maximize Value of Current Assets Restart Cerro Bayo mine as soon as possible (currently expected Q1, 2019) o Permitting required (underway) o Expected net care and maintenance cost in 2018: ~$2.6 million Sell non-core assets Lupin, La Quebrada Explore options/partnerships Challacollo & Cerro Bayo 13

14 2018 Operational Guidance Mandalay expects to produce 101, ,000 ounces of gold equivalent in 2018 from Björkdal and Costerfield operations Gold Equivalent Ounces (000) Mandalay Production 2018E Bjorkdal Costerfield Consolidated Björkdal Costerfield Consolidated Oz Au Eq., 000* Cash cost, $/oz Au Eq** All-in Cost, $/oz Au Eq** 1,060-1,210 1,150-1,250 1,155-1,280 CAPEX, $/million** *2018E Au Eq assumes full-year 2018 metal prices: Au $1,306/oz and Sb $8.361/t 14 **CAPEX includes exploration at Björkdal and Costerfield, consolidated cost guidance includes $ million/yr expected for Corporate G&A

15 Björkdal: Self-generating anchor asset Land package 12,949 hectares Ownership 100% P&P Reserves (1) 11,403, g/t Au for 587,000 oz 2017 Production 62,028 oz $816/oz 2018E Production Key accomplishments in 2017: Grade control working properly; debottlenecking mine operations has increased rate of delivery of highgrade ore Flotation expansion project completed on time and on budget, performing as planned (1.7% recovery increase) 56,000 63,000 oz Au Phase 1 of low-grade ore sorting program (crushing and screening) implemented in January with 50% grade upgrade; design and detailed engineering for Phase 2 (optical sorting) complete Continued exploration success and mine life extension (1) Source: Roscoe Postle Associates, Effective December 31, 2017, documented in an independent NI Technical Report to be filed within 45 days of February 20,

16 Björkdal: Gaining Momentum Tonnes Per Quarter Tonnes Per Quarter Ounces Gold Per Quarter 400, , , , , , , ,000 25,000 20,000 15,000 10,000 5,000 0 Au oz Mining Rate and Unit Cost Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17 t Mined 0 Cost/ t Mined Processing Rate and Unit Cost Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17 t Processed Cost/ t Processed Saleable Gold Produced and Unit Cost $1,250 Q4 14 Q2 15 Q4 15 Q2 16 Q4 16 Q2 17 Q4 17 Cost/ oz Au $35 $30 $25 $20 $15 $10 $5 $0 $10 $8 $6 $4 $2 $0 $750 $250 $250 $/ Tonne $/ Tonne $/ oz Au Björkdal keys to turnaround: Record High Rate Record Low Cost Introduced best practice mapping, drilling, sampling, and modelling of high nugget-effect gold deposits Produced a more refined resource model to support more selective underground & open pit mining techniques Established a local assay lab for faster grade control turnaround Increased grade of mill feed through more selective underground and open pit mining at an increasing rate (making up for discarding waste) Implemented crushing and screening of lowgrade ore for 50% grade improvement Flotation expansion completed on time and on budget Pilot test and detailed engineering for optical ore sorting 16

17 Björkdal: M&I Plus Depletion Passes 1 Million Ounces in ,400,000 Björkdal Cumulative M+I Resource Additions & Depletion (Au Ozs) 1,200,000 1,000,000 Oz Au 800, , , , End of Year Measured Plus Indicated Resources Cumulative Depletion Underground M&I Open Pit M&I Stockpile M&I 17

18 Björkdal Operating Strategy: Roadmap to Value Growth Assay lab build Improve grade control Improve average grade through mill by +/- 0.5 g/t Flotation exp. study Build Float. exp. 1.7% rec. increase, further improvement with optimization Ore sorting study & design Crush & screen low-grade in practice upgrades 0.6 g/t to +0.9 g/t Sorting build: $11m Upgrades cs rej. Blending mill feed cost red. & >0.5% rec. improvement Bring online higher grade OP Norrberget Permit tailings, with water & throughput upside Build tailings Study coarse float. Exploration $3m/yr reserve increases Continued exploration Resume study coarse float Study throughput expansion Appropriate Next. Gen. Mine & Plant 18

19 Costerfield: Dependable Performance and Extended Life Land package 1,293 hectares Ownership 100% P&P Reserves (1) 622, g/t Au; 2.8% Sb for 122,000 oz Au and 17,200 t Sb 2017 Production 31,512 oz Au, 3,115 t Sb (52,137 oz Au $701 oz Au Eq.) 2018E Production 27,000 30,000 oz Au, 2,800 3,200 t Sb Key achievements in 2017: May 2017: Completed capital development to access near-mine shoots July 2017: Completed tailings lift construction for current LOM tailings September 2017: Positive initial results of low-cost aquifer injection test (reduced water handling costs) November 2017: Approved Brunswick development and mine life extension EOY 2017: End of year 2017 Mineral Resource and Reserves update reflecting new Brunswick reserves Drill intercepts in Costerfield Deeps & Kendall lodes reveal potential next high-grade shoots to be converted (1) Source: SRK Consulting (Australia), Effective December 31, 2017, documented in an independent NI Technical Report to be filed within 45 days of February 20,

20 Costerfield: Stable, with Continuous Improvement Tonnes Per Quarter Tonnes Per Quarter Ounces Per Quarter 60,000 40,000 20,000 60,000 40,000 20,000 Mining Rate and Unit Cost 0 $0 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 (Dec. only) t Mined Cost/ t Mined 0 20,000 15,000 10,000 5,000 Q4 09 (Dec. only) Processing Rate and Unit Cost $400 $300 $200 $100 $150 $100 $50 $0 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 t Processed Cost/ t Processed Au Equivalent Production and Unit Cost 0 $0 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 (Dec. only) Oz Au Eq. Cost/ Au Eq. Oz $3,000 $2,000 $1,000 USD/ Tonne USD/ Tonne USD/ Oz Au Eq. Costerfield keys to turnaround: Record High Rate Record Low Cost Improved mine output/mill throughput from 170 tpd to 450 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) Increased sub-level spacing from 5 to 10 m Introduced contract capital development for faster and lower cost results 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 discovered Cuffley and N-lode 20

21 Costerfield: M&I Plus Depletion Passes 1 Million Ounces in 2017 Au Eq. (Oz) Costerfield Cumulative M+I Additions & Depletion (Au Eq. oz) 1,100,000 1,000, , , , , , , , , , B,K,C,P Lodes Cuffley N Lode W Lode E Lode Brunswick Cumulative Depletion 21

22 Brunswick Development Committed and On-Track Progress thru : 455 m Brunswick Development and Mining Timeline Milestone Expected Completion Mobilize capital development contractor Completed November 2017 Begin on-vein development March 2018 Begin stoping June 2018 Complete capital development October 2018 End of currently approved life July

23 Costerfield Strategy: Emerging Kendall/Costerfield Deeps Lode: Next Multi-year Orebody? 23

24 Cerro Bayo Silver-Gold Mine: Optimizing the Future Land package 23,106 hectares Ownership 100% P&P Reserves(1) 856, g/t Ag; 2.34 g/t Au 2016 Production 13,792 oz Au, 1,731,031 oz Ag Project Status: Inundation at Delia NW mine on June 9, 2017 Production suspended pending risk assessment for restart Independent root cause investigation report ongoing Risk assessment on restart of Laguna Verde mines ongoing No significant loss of Reserves or LOM production in long-term Restart timing depends on receipt of multiple permits required for the LOM, some of which have been in progress for many months Target BRANCA MARCELA & RAUL VEINS (10 KM BEHIND VIEWPOINT) (1) Source: Current Mineral Reserves number depleted for 2017 production and Reserves sterilized by inundation at Delia NW. Depletion taken from Reserve position contained in NI Technical Report prepared by Roscoe Postle Associates, Effective December 31, 2016 filed on SEDAR March 31,

25 Challacollo Silver-Gold Project 2017 Land package 20,378 hectares Ownership 100% Location 130 km SE of Iquique, Chile Indicated Resource Elevation 4.7 MM 200 g/t Ag for 30 MM oz Ag Approx. 1,500 ASL Key for 2017: May 2017: Water sufficient to support eventual operation discovered Perfection of water rights and permitting for further exploration drilling in process Option to optimize project for lower CAPEX 25

26 Readjusting the portfolio in 2018 Completing sale of non-core assets Norrliden, Sweden Farmed out in Q3, 2017 DONE Ulu, Nunavut Definitive option agreement signed Q1, 2018 DONE Lupin, Nunavut Definitive option agreement anticipated Q1, 2018 La Quebrada, Chile Active process ongoing from Q4, 2017 Exploring options/partnering on development/restart assets Cerro Bayo Challacollo 26

27 Invest With Us: How We Will Deploy Your Capital 1. Acquire new assets counter-cyclically at discount to value Acquire only when we see possibility of an accretive transaction with strong value uplift in 3-5 years Keep portfolio evergreen exit assets that do not fit 2. Execute focused operational improvement projects at each site Maintain good Björkdal performance; further upside includes optical ore sorting, extended mine life with exploration, possibility of significant higher-grade plant feed, plant expansion Extend Costerfield life with Brunswick lode development and beyond with further exploration Restart Cerro Bayo with optimized, risk-assessed plan Optimize Challacollo feasibility with lower capital and operating costs and more resource Mining projects focused on safer, more mechanized 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 Reduce cash cost and overheads for higher 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 Compare all potential uses of cash to the benefits of returning cash to shareholders 4. Engage all stakeholders in a values-based and value-focused organization 27

28 TSX:MND For more information, please contact: Greg DiTomaso Director, Investor Relations Tel: Company Website: