Mandalay Resources Corporation (MND) Earnings Call Transcript & Summary

Good morning. My name is Melissa, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Mandalay Resources Corporation's Year-end Financial Results Conference Call. Joining us on the call today is Dominic Duffy, President, Chief Executive Officer and Director of Mandalay Resources. [Operator Instructions] As a reminder, this call is being recorded. This call contains forward-looking statements which reflect the current expectations or beliefs of the company based on information currently available to the company. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the company to differ materially from those discussed in the forward-looking statements. Factors that could cause actual results or events to differ materially from the current expectations are disclosed under the heading Risk Factors and elsewhere in the company's annual information form dated March 28, 2019, available on SEDAR and the company's website. At this time, I'll turn the call over to Dominic Duffy. Please go ahead, sir.

Thank you, Melissa, and thank you, everybody, for joining us today for our Fourth Quarter and Full Year 2019 Financial Results Call. Today, I'm joined by Nick Dwyer, Mandalay's CFO. So 2019 for Mandalay had positives and negatives, you could say. At Björkdal, we have a stable year of production, producing 51,000 ounces of salable gold while also lowering the cost by stopping the open-pit operations. We were able to lift the underground production rate to over 800,000 tonnes last year, and we plan to increase that even further in 2020, aiming for 1 million tonnes of underground ore produced this year. We also have better defined the large Aurora zone at Björkdal. The combination of these positive factors point to an increased production and cash flow generation for the operation for the years to come. As a reminder, for 2020, we are guiding Björkdal to produce between 51,000 and 57,000 ounces of salable gold at an approximate cost of $750 to $950 per ounce. At Costerfield, the yearly results were not as positive. However, we accomplished a main objective of reaching the Youle vein and began production there by year-end. The main production issues at Costerfield out of 2019 were all related to the Brunswick vein as the poor ground conditions slowed production and increased dilution significantly. The processing recoveries of the Brunswick vein were also lower than we expected. All of this resulted in a significant underperformance on production, with operating -- operation producing 15,000 ounces of salable gold and 2,000 tonnes of salable antimony. The impact of Youle was seen in December's processing results, with gold grades reaching 8.5 grams per tonne. This is opposed to our yearly average of 5.1 grams per tonne. We do expect to see continued step changes, increases in gold grade at Costerfield over the course of -- in 2020, setting the site up for an excellent year in 2020, with production guidance set at 44,000 to 52,000 ounces of equivalent gold production and a cash cost per ounce between $725 and $875. Over the course of 2019, the company was also able to advance the divestment and closure of noncore assets. The company was able to sign an option agreement for the Cerro Bayo and Challacollo projects in Chile. In Canada, the sale of the Ulu property was completed in the fourth quarter of 2019. And the path to the foreclosure of the Lupin property remains on track over the following years, funded by the existing reclamation security. I also wanted to mention that this morning, we published our year-end resources and reserves estimate for the company. We are pleased to have more than replaced depletion at Costerfield, maintaining a minimum 3-year life, which we have been able to do for the last 8 years of operation. At Björkdal, we've replaced depletion in the underground mine, which was a focus of our drilling over the course of 2019. Moving on to our earnings. For the fourth quarter 2019, the company generated revenue of $23 million. We had adjusted EBITDA of $55 million and an adjusted net loss of $4 million or $0.05 per share. For the full year 2019, Mandalay generated revenue of $100 million and adjusted EBITDA of $19 million. The company reported a consolidated net loss for the year of $18.6 million or $0.23 per share. Of this consolidated net loss, $5 million was related to the noncash write-down of several of the company's noncore assets. The company completed the year with a cash balance of $24.5 million, and we are actively working towards a long-term debt restructuring in order to alleviate the short-term repayment obligations on its current facilities. Whilst I cannot give too much detail on this at the moment, we're expecting to have an announcement to the market in due course. In summary, even though the company's 2019 financial results were underwhelming due to the issues encountered in the Brunswick vein at Costerfield, we were able to obtain stable production and cash generation from the Björkdal mine, with upside over the years to come as the Aurora zone ramps production up and we mine more tonnes from the underground mine. At Costerfield, the production results were lower than we forecast. However, we initiated production in the high-grade Youle vein, which is forecast to double the gold grades against our 2019 results, putting the operation in a very good position to be a sustainable cash generator for the company. That's all I have today. Thank you, Melissa.

[Operator Instructions] Thank you. Ladies and gentlemen, this concludes our question-and-answer session and thus concludes our call today. We thank you for your participation and interest in our company. Have a good day.