Mandalay Resources Corporation (MND) Earnings Call Transcript & Summary

Good morning, and welcome to the Mandalay Resources Corporation Q3 2023 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference to Frazer Bourchier, President and CEO of Mandalay Resource. Please go ahead.

Thank you, operator, and welcome. Joining me on the third quarter 2023 financial results conference call today is Ryan Austerberry, our Chief Operating Officer; Nicholas 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&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. Cash cost per ounce of gold equivalent produced was $1,084, all-in sustaining costs per ounce of gold equivalent produced was USD 1,436. Consolidated quarterly revenue was $40.9 million, consolidated quarterly adjusted EBITDA was $15.4 million and cash on hand at the end of Q3 2023 was $21.7 million. My team will provide further details about the third quarter 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 stopes in our yield deposits as well as mostly resolving the mill throughput challenge arising from ore hardness of the transition Shepherd ore body below yield, which temporarily restricted throughput by about 14%. At Björkdal, 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 tonne per annum mill upgrade commissioning planned for later this year. And as for site organic exploration, where continues and the top priority for Mandalay is maintaining and building our ore streams at both operations, discovering equivalent profitable ounces from both near mine and regional drill targets. I would now like to hand the call over to Ryan, our Chief Operating Officer. Ryan?

Thanks, Frazer. Notably, Björkdal continued to show improvement and achieved its highest quarterly rate since quarter 1 2022, with 11,224 saleable gold ounces produced. It is encouraging to see stable stoping tonnes 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 grades 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. Over the last quarter of 2023 and into 2024, we are anticipating higher grades due to the steady feeds 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 tonnes per annum of ore feed by the end of quarter 1 2024. Costerfield produced 10,808 salable gold equivalent ounces in quarter 3 2023, as it encountered a few challenges leading to deficits in both milled tonnes and underground gold grades. The main reason for lower milled tonnes was due to the transition from yield to Shepherd material and the increase in the ore hardness. The bore mill was under charged with Grinding Media and experienced increased pebble scaling, 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 Youle 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. We continue to focus on our ongoing operational turnaround of some remnant issues that Costerfield, maintaining focus on improved Björkdal 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?

Thanks, Ryan. So as a reminder, the numbers I noted in USD. So for Q3 2023, Mandalay generated approximately $41 million in revenue and $15 million 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, Costerfield contributed $19 million towards revenue and $8 million to adjusted EBITDA, with Björkdal making up the remaining $22 million and $9 million in revenue and adjusted EBITDA, respectively. 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 salable gold equivalent ounce during Q3 2023 were $1,084 and $1,436, 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 $22 million in cash on hand and $24 million in total interest-bearing debt. This resulted in a $2 million 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 $5.5 million shipment at Björkdal 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 $3.5 million. Adding to this, we also made a final tax payment of $5 million, which related to 2022 profits and at Costerfield. I would now like to turn the call to Chris, our VP of Operational Geology and Exploration. Thanks, Chris.

Thanks, Nick. At Costerfield, near-mine exploration was focused on continued infill and extension drilling of Shepherd and the Brunswick dips program targeting mineralization below the recently producing Björkdal mine. Earlier this week, Mandalay provided an update on these 2 programs, highlighting a new southern high-grade domain along Shepherd and the encouraging discovery of significant mineralization below the Björkdal mine. Highlights from this release include the definition of a new high-grade domain in the south of the Shepherd area, including intercepts of 26 grams per tonne gold and 40% antimony over 1.4 meters and 4.9 grams per tonne gold and 10% antimony over 2.8 meters. Additionally, production optimization drilling continued to highlight the strength of Shepherd, with 797 grams per tonne gold over 0.52 of 1 meter and 122 grams per tonne gold over 0.55 of 1 meter. We have also had some excitement in new mine testing with preliminary drilling underneath the Brunswick deposit, intercepting 2 parallel veins with highlighted intercepts of 17.8 grams per tonne gold over 1.9 meters and 16.4 grams per tonne gold over 1.5 -- and 1.5% antimony over 1.4 meters. In Q4, drilling is expected to continue on Shepherd as well as the commencement of 2 other areas in the new mine targets, 1 testing the Youle structure, proximal to Brunswick, and the other testing the continuation of high-grade mineralization below Costerfield. Regional exploration at Costerfield progressed in 2 areas during Q3. Firstly, True Blue testing program continued to build context around the exciting results released in February 2023. And secondly, the West Costerfield gap program was commenced, targeting the expected northern continuation of the Brunswick vein 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 True Blue mineralization. Updates will be provided as available during 2024. At the Björkdal, near-mine 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. A third program is concentrated on the definition of the Boreal Zone that was discovered and reported on in Q2 2023. During Q4, the current new 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 depths into the north below Aurora will commence. On surface, the 2023 drill program was completed, with the depth testing of the still hidden mineralization, approximately 1 kilometer in the northeast of Björkdal and extension testing of [indiscernible] resource, which is 5 kilometers to the east. Logging and ethane 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, Frazer Bourchier. Frazer?

Thank you for that, Chris. Look, in summary, Björkdal 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, and additional focus has been placed to ensure maintained milled ore tonnes throughput. Revised 2023 guidance remains unchanged, and we are now also in the midst of preparing next year's budget. The company's balance sheet remains healthy. And despite a temporary dip into a minor debt -- 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 first full quarter in a while where we are fully unhedged. Look, in my first 2 quarters as CEO of this company, I now have a much better understanding of our operations, and the solid platform and building blocks upon which they both will remain critical to further growth of the company. We continue to place focus on monitoring key operational metrics to better manage mine site challenges, risks and opportunities, while establishing a sustainable track record of operational results. We will continue to invest strongly in exploration, with the objective remaining both the replacement of mine depletion and an extension of mine life, both in known mineralized areas and potential new near-mine discoveries. Finally, with respect to our executive team, I wish to make a few comments. We announced that Nick Dwyer will be moving on as Mandalay's CFO, but he will continue to serve in a full-time capacity as CFO until filing of the company's 2023 year-end statement in Q1 2024, thus allowing for a smooth transition of duties. Nick has been a key part of Mandalay's management team for over 8 years, including as CFO since 2018. He played a significant role in Mandalay's 2019 financing transaction that was crucial to the company's and turnaround as follows. So on behalf of Mandalay's Board, management and shareholders, I'd like to thank Nick for his invaluable contributions, and Nick, I wish you every success in your future endeavors. And secondly, as announced at the 1st of this month, I would like to welcome to Mandalay, Scott Trebilcock as the Executive Vice President and Chief Development Officer. Scott and I have worked closely together in the past, including at Nevsun Resources, where he was involved in its eventual sale to Zijin Mining for $1.9 billion in 2018. Scott's appointment signals Mandalay's transition to a new phase of growth and its vision to become a critical player within a consolidated gold sector. He brings both extensive industry technical expertise and business transactional acumen, which will serve Mandalay well, as we now actively pursue growth opportunities, for which I believe we are well positioned. So thank you, everyone. And this concludes this portion of the call. And I would like to open up the lines for questions now, turn it back to the operator. Thank you.

[Operator Instructions] It appears there are no current questions right now. I'll now turn it over to management for any webcast questions.

Yes. Thank you, again, for that operator. And I want to thank everyone for their time dialing in. We trust everyone was able to hear the call okay. We had 1 comment that someone may have lost audio, but I'm trusting everyone was able to hear it. This will be posted on our website. For those that would like to review the webcast. And thanks again for your time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.