Mandalay Resources Q3 2024 Earnings Call Transcript

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November 7, 2024

There are 4 speakers on the call.

Operator

Morning, ladies and gentlemen, and welcome to the Mandalay Resources Corporation Third Quarter 20 24 Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 7th November, 2024. Today's call contains forward looking statements which reflect the current expectations or beliefs of the company, based on information currently available to the company.

Operator

Forward looking statements are subject to a number of risks and uncertainties that may cause 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 hedging risk factors and elsewhere in the company's annual information form dated March 28, 2024, available on SEDAR and at the company's website. I would now like to turn the conference over to Fraser Boucher, President and CEO.

Speaker 1

Please go ahead.

Speaker 2

Thank you, operator, and welcome, everyone. Joining us on the call today are Hashim Ahmed, our Chief Financial Officer Brian Ossaberry, our Chief Operating Officer and Chris Davis, our VP of Exploration. Yesterday, Mandalay Resources disclosed its 3rd quarter financial results at MarketPlace. You can access our consolidated financial statements and MD and A on either the Company's website or through our profile on SEDAR. Q1, we're pleased to report strong financial performance, driven by revenue growth and free cash flow generation, underpinned by ongoing cost control and effective capital management and supported by favorable metal prices.

Speaker 2

Our cash position has strengthened significantly, now standing at US55 $1,000,000 as of the quarter end, more than doubling since December 2023. In addition, we repaid the remaining $20,000,000 of our revolving credit facility during the quarter, meaning we now have 0 debt. This positions Mandalay well to continue its pursuit of various strategic growth initiatives, while balancing operational investments, including organic exploration and debt management. Operationally, we faced some challenges in Q3. Our team remained focused, however, on minimizing impacts by building increased operational capacity throughout the last 12 months to allow for flexibility to accommodate these temporary disruptions.

Speaker 2

In Costerfield, we managed a slight production decline due to what tends to be typical quarterly metal grade variations in the Sheppard deposit. And at Bjartdal, we experienced a wet weather event in July, leading to controlled or prolonged underground flooding in certain production areas, prompting adjustments to our production schedule. Strategically, we continue to prioritize operational efficiency, the continuous improvement, leadership accountability and capital optimization. We remain on track to achieve our annual production guidance of 90,000 to 100,000 golden equivalent ounces, maintaining our long term commitment to increasing profitability, cash flow and shareholder value. I would now like to hand the call over to different members of my executive team to recap the Q3 results for Mandalay Resources.

Speaker 2

First, Ryan Ocimerdi, our Chief Operating Officer. Thanks, Fraser. Quarter 3 brought a mix of operational challenges and successes at Costa Field and Bjorkdal. At Costerfield, the mine produced 8,218 ounces of gold and 252 tonnes of antimony in Q3 of 2024. Gold production remained stable year over year despite increased mine tonnage, which was partly influenced by low grade stopover break.

Speaker 2

There remains a focus on mine design, including ground control improvements, shepherds and vertical stopes to minimize dilution. Antimony production declined by 36% from Q3 of 2023, attributed to increased speed from previously planned Lal Antimony grade deposit. Processing, however, has benefited from recent upgrades, including the replacement of the primary ball mill from N in the permanent use of our 2 stage crushing circuit, improving throughput. Moving into quarter 4, we anticipate increased ounce production as we leverage these investments and return to higher grade mining areas. Turning to Bjorkdal, quarter 3 gold production was 9,626 ounces of gold, a 14% decrease from quarter 3 of 2023, mainly due to flooding in the eastern zone from an unseasonal rainfall event, which temporarily restricted access to the higher margin area.

Speaker 2

In terms of this, we predominantly relied on lower grade underground production areas and low grade historic surface stockpiles to maintain mill capacity, impacting the overall blended plant feed grade. To improve underground water management, we are investing in further water infrastructure, including pipeline and pumping to better manage water ingress. The completed mill conversion boosted throughput by 10% relative to the period 12 months earlier, reaching over 352,000 tonnes this quarter. This enhancement is demonstrating benefits by increasing our incremental ounces. Moving forward, our focus on the oil sale will be on improving mine access in the Eastern zone and ensuring stable production in the higher margin zones as conditions allow.

Speaker 2

The site will continue to concentrate on process and optimizing technology to bottleneck underground mining constraints facilitated with the assistance from a recent third party group subject matter experts working with management for past 6 months at site. This should improve operational productivity while positively influencing unit cost reductions. Comparing a mining contract to undertake additional specific mining development tasks in quarter 4 will also aid our flexibility endeavors. I would like to now pass the call to Hashim, our Executive Vice President and Chief Financial Officer, who will highlight Mandalay's financials.

Speaker 1

Thank you, Ryan. In Q3, 2024, we delivered another quarter of strong financial performance, supported by our commitment to cost discipline and revenue growth. Here are the key highlights. Revenue increased to $55,000,000 up from $41,000,000 in Q3 2023, driven largely by the increased metal prices. Operating costs rose by 7% year over year due to increased cost for tailings and water management at cost of feed and increased throughput at the October.

Speaker 1

Net income for the quarter was 5,000,000 dollars up from $4,000,000 in Q3 2023. The increase in revenue and the stable cash flow enabled us to offset these increased operating costs. Operating cash flow in Q3 2024 was substantially to $21,000,000 and free cash flow rose noticeably to $13,000,000 compared to $4,000,000 and negative $6,000,000 last year, respectively. This improvement in cash flow underscores our efficient use of resources, which benefited from strong metal prices. All in sustaining cost per ounce sold on a consolidated basis was $17.90 for Q3, up 25% year over year, mainly driven by increased operating costs and a reduction in ounces produced.

Speaker 1

As of September 30, 2024, our cash balance stood at approximately $55,000,000 compared to $27,000,000 at the end of Q3 last year. We fully repaid our revolving credit facility during the quarter, which leaves us with $35,000,000 in undrawn facility. Working capital grew by 13% year over year to $54,000,000 dollars providing us the flexibility to support operational and growth initiatives. I would like to now pass the call to our VP of Exploration and Operational Geology, Chris Davis.

Speaker 2

Chris? Thanks, Tim.

Speaker 3

Exploration continues at a steady pace in Q3 with a focus on building high confidence resources at both Kosterfield and Doorkel. At Costerfield, we continue to focus on mean line growth, particularly within Shepherd and Kendra veins. Those include 2 91 grams per tonne of gold over 1.26 meters and 752 grams per tonne gold and 1.8 percent antimony over 22¢ meters, both of which underscore the ongoing high grade potential of these deposits. Selling below and to the south of Kaffee also yielded positive results with 1 interceptor of 5 50 grams per ton gold over 15 centimeters, suggesting to the existing resource in the area. Looking ahead to Q4 and beyond, we are now very much focused on deep drilling in the Kapolei area to assess resource continuity at depth.

Speaker 3

We are also advancing regional programs to develop high potential zones, especially within the Ku Blue area. At Puretel, we concentrated on infill drilling targeting the eastern extension of main zones, whilst building Aurora, Down Tund and North Tund below Marble. Additionally, we continued on surface drilling at the Sohuiden deposit, an underground mine potential 800 meters northeast of York Mill and the open pit potential at North Harriot. Both areas have been identified as highly prospective earlier this year. We remain on track to complete the Aurora depth extension program and initiate drilling again within the Eastern Extension area focused on Lake Zone in Q4.

Speaker 3

Yorktown's exploration initiatives are focused on validating high grade resources and our drilling results to date affirm the potential for sustained resource growth across key zones as has been our past experience. I look forward to sharing further results with you in the near future. I would like to now to return the call to our President and CEO, Faiza Boussair.

Speaker 2

Thanks, Chris. In summary, although Q3 presented some challenges, our year to date performance reflects solid revenue growth, cash flow and a strengthened balance sheet. We continue to position the Company well in becoming a mid tier contributor in the gold sector over the next 3 to 5 years. We will continue to focus on operational discipline, efficient capital allocation and self funded exploration growth to replace and to grow our mineral reserve base, targeting both near mine and regional opportunities. In addition, as for the past 6 to 8 months, we continue to assess inorganic growth opportunities to also drive long term value for our shareholders.

Speaker 2

Thank you everyone and this concludes this portion of the call. I would like to open the lines for questions

Operator

Ladies and gentlemen, we will now begin the question and answer session.

Speaker 2

We can hear you now. There was some feedback. Is this Kevin? Yes. Thank you for taking my questions, Jayshir.

Speaker 2

I have a couple more on antimony. Prices have moved up a lot. Unfortunately, the grade Mandalay has been mining since antimony has fallen quite a bit. I understand that's kind of expected as the new stuff is shuffled. But is there any scope for improvement there?

Speaker 2

I suppose if

Operator

I look back at the

Speaker 2

last reserve report, average trade antimony in the reserve report was 1.9% and the average mine trade in the first quarter was 1.1%. So, I'd just be curious if you could comment on that. And then, secondly, I don't really understand how the anti money market works. But, I'm curious, any chance you could sign longer term contracts to try and lock ins to these higher prices or is it totally a stock market? Yes.

Speaker 2

Thanks for that, Kevin. I'm going to on your first question with respect to the antimony grade, which is I realize that you said a good news, bad news. But, The bad news is we knew the grades were going to get lower as we went down and they are underperforming a little bit. Good news is the price doubled to offset that, not ideal timing. But, I will actually hand that question over to our Chief Operating Officer to answer in terms of the grades of antimony.

Speaker 2

And then, when he's done, our CFO will speak to your question on metal prices for antimony and concentrate. So, Ryan, if you're available, could you answer that first question, Kevin, please? Yes. Hi, Kevin. Antimony grades in the reserves would be showing that a higher grade.

Speaker 2

Is there higher pillars of antimony left up in all areas of Okhotskah, which is to be remnants of coal mining. It's not it's more coming in at the end of the mine life currently. There are some areas in shipment that does have some high grade testimony as you know when we mine through that area and some of those close out fields looking will be mining over the next couple of years. It's also to come through the FEED. So there will be some high grades coming, but

Speaker 1

it won't be consistently there.

Speaker 2

Thanks, Brian. This is Hashim. So Kevin, to answer your second question, the Antimony market is pricing is pretty vague and we have already checked in this past quarter, especially if there were instruments, financial instruments available to lock in the prices of ATTC's prices. Unfortunately, due to the way, I would say market as well as the market is much smaller in that area as well. There's no financial instruments, which would help us lock in long term prices.

Speaker 2

So, we've looked at it. That being said, we will continue to see if there's anything that surfaces in that realm in the future. Okay. And then, on the business development effort, previously the focus seems to have been on merger of equal type transactions. I'm wondering the improvement in the cash balance and the balance sheet good outlook for free cash flow and so on.

Speaker 2

Has that shifted at all? Are you more interested in looking at individual asset purchases for cash? If you can comment on that. Yes. Kevin, I'm always hesitant to be too explicit on M and A, but it's a fair question and the reality is two things.

Speaker 2

One is for asset purchases as opposed to let's call it combination of equal type companies. In this metal price environment, the expectations are actually quite high, let's put it that way. Good on people wanting to sell extremely high, believing this metal price, but it becomes actually too dilutive. And I've been very focused on ensuring whatever we do is not dilutive to shareholders. So, while we look at it, ironically, I would say it's become more difficult on asset purchases in the last 6, 7 months.

Speaker 2

As to the at market ideas, I mean, I think you know our approach is one that's very prudent, probably a little bit conservative and risk averse because we're very wary of diluting our shareholders. But, there's still some potential there of other players that are in the same situation and that dialogue always continues to progress. Okay. And then just one, finishing up here. On the CapEx guidance, you seem to be tracking to the low end of your $41,000,000 to $49,000,000 range.

Speaker 2

Could you comment on that? And is that range a reasonable starting point as we look ahead to 2020 product? Yes. I can answer that, Kevin. Our CapEx guidance was

Speaker 1

of course a bit light in

Speaker 2

the front half of the year. As we started the year, we started to pick up some of those projects which were budgeted for this year. And the primary one was tailings at Gloucester Field. That was back ended in the year anyway. So, there is a much higher activity in CapEx in Q4 as opposed to the 1st 3 quarters.

Speaker 2

Now, once again, that is primarily attributable to the tailings work that's going to be taking place at Ross Street. So although we expect that Q4 is going to pick up in CapEx, We might be slightly lower than our expected budgeted spend, but within the guidance range. Okay. And it's not a reasonable range to expect for 20 20 plus? Probably, although I want to caveat that by saying we don't really give guidance for 2025 until early January.

Speaker 2

But, I would say the only reason I'm comfortable saying that plus or minus is pretty consistent over the last 2, 3 years. That does include exploration spend as well. That's not a CapEx number. Okay. Thank you.

Operator

There are no further questions at this time. I would now like to turn the call over back to Fraser Boussaint for closing remarks. Please go ahead.

Speaker 2

Thank you, operator. And again, thank you everyone for dialing in, taking the time to listen to our Q3 results. Hopefully, it was concise and clear. And we will be in touch with our next update at the right time. Thank you.

Operator

This concludes today's conference call. Thank you very much for your participation.

Speaker 1

You may now disconnect.

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Earnings Conference Call
Mandalay Resources Q3 2024
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