Mandalay Resources Corp strengthens its balance sheet in 2Q; finalizes the sale of the Challacollo Silver-Gold project in Chile


Mandalay Resources Corp. (TSX:MND, OTCQB:MNDJF) released its financial results for the second quarter ended June 30, 2022, showing consolidated quarterly revenue of $50.1 million and a strengthened balance sheet.

“Mandalay is pleased with another stable financial quarter in which we generated $7.5 million of free cash flow, allowing the company to further strengthen its balance sheet with an improved net cash position compared to the first quarter of 2022,” Dominic Duffy, President and CEO of Mandalay said in a statement.

“We did this in a quarter that saw several operational issues resulting in lower-than-expected production, which shows the stability of our financial performance. Production is expected to improve over the rest of the year, leading to an even stronger cash position by early 2023, he said.

READ: Mandalay sees 2Q gold production of 19,395 ounces and 523 tons of antimony for a total of 23,305 ounces of gold equivalent

“Achieving a net debt-free position was one of the company’s primary goals when we started our turnaround over three years ago and I’m pleased we met and exceeded that goal this year,” Duffy added.

In the second quarter of 2022, Mandalay generated consolidated revenues of $50.1 million, 2% lower than in the second quarter of 2021, mainly due to lower ounces sold to production at Bjorkdal and Cerro Bayo during of the quarter last year, said the Canadian natural resources company.

The company’s realized price of gold in the second quarter of 2022 increased by 6% compared to the second quarter of 2021, and the realized price of antimony increased by 13%. In the second quarter of 2022, Mandalay sold 1,334 less gold equivalent ounces than in the second quarter of 2021.

Consolidated cash cost per ounce of $1,020 was higher in the second quarter of 2022 compared to $960 in the second quarter of 2021. Cost of sales in the second quarter of 2022 compared to the second quarter of 2021 was 5 $.7 million higher than Costerfield and $700,000 lower than Bjorkdal. Consolidated general and administrative expenses increased by $200,000 compared to the prior year quarter.

The company generated adjusted EBITDA of $20.3 million in the second quarter of 2022, down 12% from $23.1 million in the year-ago quarter. Adjusted net income was $5.4 million in the second quarter of 2022, excluding the unrealized gain of $4.4 million on financial instruments and the $7.1 million revision to the liability of reclamation, compared to adjusted net income of $11.5 million in the second quarter of 2021. revenue was $2.7 million for the second quarter of 2022, compared to $4.8 million in the second quarter of 2021. Mandalay ended the second quarter of 2022 with $47.9 million in cash and cash equivalents.

“Costerfield continued its remarkable performance with revenue of $32.4 million and adjusted EBITDA of $19.2 million. This continued operating margin performance reflects the continued high-grade feed and the relatively fixed cost nature of the operation. During the second quarter of 2022, Costerfield processed grades of 11.0 g/t (grams per tonne) gold and 2.6% antimony and also improved its gold recovery rate by 93, 0% compared to 92.6% achieved in the first quarter of 2021,” said CEO Duffy.

“Bjorkdal generated stable production and sales with revenue and adjusted EBITDA of $17.7 million and $2.4 million, respectively, in the second quarter of 2022. For the third quarter of 2022, mining activities will focus on areas of high confidence as we look to raise the grade in the second half of the year.

“The first half of the year has demonstrated the continued strength of our operations and how the business is well positioned to build on its sound financial position. Mandalay maintains its 2022 production and cost guidance and looks forward to sustainably generate value for all of our stakeholders,” concluded Duffy.

Mandalay said its management will host a conference call for investors and analysts on August 11, 2022, at 8:00 a.m. Toronto time. Interested analysts and investors are invited to participate using the following numbers: participant number (toll-free) 877-407-8289; Conference ID 13731674

A replay of the conference call will be available until 11:59 p.m. Toronto time on August 25, 2022 and can be accessed using the following dial-in number: Encore toll-free 877-660-6853 ; Still ID 13731674

Mandalay Completes Sale of Challacollo Silver-Gold Project

Separately, Mandalay said it entered into the agreement with Aftermath Silver Ltd on August 10, 2022, in which Aftermath will acquire Minera Mandalay Challacollo Limitada (MMC), which currently owns the Challacollo silver-gold project located in Region I (Tarapaca) of the Chile.

Under the terms of the agreement signed on November 12, 2019, Aftermath will purchase 100% of MMC in exchange for a total consideration consisting of C$8.0 million in unconditional consideration plus a 3% net revenue royalty of smelter (NSR) on production at Challacollo, capped at US$3.0 million.

The unconditional consideration is payable as follows:

  • C$1.0 million in cash payable no later than December 30, 2019 (received Q4 2019);
  • C$1.0 million in cash payable no later than December 30, 2020 (received in the fourth quarter of 2020);
  • C$3.0 million in cash or stock payable no later than April 30, 2021 (received Q2 2021);
  • C$1.5 million in shares and C$1.0 million in cash payable at closing on August 10, 2022; and
  • CAD$0.5 million plus cash interest by December 31, 2022.

Mandalay’s CEO commented, “Mandalay is delighted to have successfully completed the sale of Challacollo to Aftermath. This transaction aligns with Mandalay’s goal of creating value from its non-core assets. We wish Aftermath further success in restarting exploration in the region and look forward to a strong and mutually beneficial relationship with Aftermath.”

Mandalay is a Canadian-based natural resources company with producing assets in Australia (Costerfield gold-antimony mine) and Sweden (Bjorkdal gold mine). The company is focused on growing production and reducing costs to generate strong positive cash flow.

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