mandalay resources - reversion to mean metal …...the information given in this presentation and...
TRANSCRIPT
The information given in this presentation and during Mandalay Resources Corporation’s September 12, 2016 Investor Day contain "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 30, 2016 and in its final prospectus dated
July 18, 2016, copies of which are available under Mandalay's profile at www.sedar.com. 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.
Qualified Persons
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 43-101, Mr. Gregory regularly visits Costerfield
and Björkdal and has reviewed and approved the scientific and technical information related to these projects 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 43-101, he has reviewed and approved the
technical and scientific information related to these projects contained in the presentation.
Non-IFRS MeasuresThe presentations given during Mandalay Resources Corporation’s September 12, 2016 Investor Day Presentations include non-IFRS
performance measures including Adjusted EBITDA, cash costs and site all-in costs. These measures are included in these presentations
because the Company believes these are useful indicators to discuss and understand performance of the Company and its operations. These
performance measures do not have a meaning within IFRS and, therefore, amounts presented may not be comparable to similar data presented
by other mining companies. These non-IFRS performance measures should not be considered in isolation as a substitute for measures of
performance in accordance with IFRS. For a more detailed discussion of how the Company calculates non-IFRS performance measures and
reconciliations (where applicable) to the nearest IFRS measure please refer to the Company’s management discussion and analysis for the
quarter ended June 30, 2016. All currency references in US$ unless otherwise indicated
Forward-looking Statements
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Financial discipline: assumptions behind valuations, planning & decisions
Reversion to mean metal pricing from current spot
• Mean is $1,400/oz for Au, $22/oz for Ag, $10,000/t for Sb
• Reversion from spot to mean over 3 years
• Reinforces countercyclical instincts
Reversion to mean exchange rates counter to metal price reversion
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Q2 2016 performance year-to-date
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Operational Performance
(1) Non-IFRS Measure. See “Non-IFRS Measures” in introductory slide.
(2) Cash position is as at end of Q2-2016, plus the C$36.9 million net proceeds raised on bought deal that closed July 26, 2016
Q2, 2016 Q2, 2015 1H 2016 1H 2015
Total Au Eq. Produced (oz) 39,653 40,717 79,618 82,993
Cash cost/Au oz Eq. Produced ($)(1) 811 771 781 761
All-in cost/Au oz Eq. Produced ($)(1) 1,095 1,044 1,069 1,031
Financial Performance
Q2, 2016 Q2, 2015 1H 2016 1H 2015
Revenue ($ Million) 54.2 50.8 104.6 107.6
Adjusted EBITDA ($ Million)(1) 22.1 18.2 39.4 42.5
Cash Capex 11.5 14.3 24.5 27.3
Net Income ($ Million) 3.6 4.4 4.8 16.2
Dividends paid 3.0 3.3 5.7 7.3
Cash generation after dividend 4.9 0.3 (3.5) 3.3
Cash and Cash Equiv. 73.7(2) 52.3 73.7(2) 52.3
Financial discipline: balance sheet
Modest leverage -- C$60 million debt, 28% leveraged to
shareholder’s equity at the end of Q2 2016.
Debt at 5.875% coupon, investor gets upside if gold gets above
$1,556/oz. Industry leading terms – at current gold prices, we should
see more of these type of deals.
Net cash generation after dividend-- $0.2 million in FY 15.
$4.9 million Q2 2016
Comfortable H1 Adjusted EBITDA/Interest = 14.3
Judicious deployment of equity
• $33 million raised in two tranches to buy/restart Costerfield &
Cerro Bayo (2009-10)
• $28 million raised at near all-time high in July, 2016 to become
net cash positive
Market Capitalization = $386.7 million(1)
51. Based on closing price on September 1, 2016 and exchange rate of 0.78 CAD:USD (September 7, 2016)
Process discipline for planning and execution
Annual strategic life of mine planning
• One week, this group all together (end of Q3)
• Combine separate site operational plans into corporate plan
• Review and stress test performance at current, mean, and bottom of cycle prices
• Capital allocation -- debate
− Identify and minimize LOM sustaining capital
− Everything else is discretionary – improvement, exploration, growth
− Single discretionary priority list.
• Identify cash flow available after debt service, dividends, sustaining capital
• Allocate cash to top priority discretionary projects
− LOM + Discretionary project funded year 1 = budget
− All other discretionary projects postponed out of budget year
− If financial performance better than plan, can fund postponed projects later
First year of plan = budget
Operational KPI’s monitored with weekly calls
Monthly financials follow without surprises from weekly calls
Year-end results forecast quarterly, feed back to discretionary projects
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Capital Expenditure Efficiency
Multi-layered controls to ensure efficiency
Initial approval during strategic planning discussions (this is after
each businesses paying 6% dividend on their revenue)
Then specific projects approved on standalone efficiency/ROI basis
in the form of Approval for Expenditure (AfE) process
These projects are then monitored on weekly basis on the weekly
call as discussed earlier
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Weekly operational calls: 15 min. to 1 hour
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Mining @ Costerfield
Periodic monitoring
of actual results
against budget
Table for illustrative purposes only
Monthly performance monitoring
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2016F
ton
nes
Björkdal cumulative open pit mined ore
2015 Actual Budget$
/to
nn
e
Björkdal open pit mining cost
2015 Actual Budget YTD Actual YTD Budget
Graphs for illustrative purposes only
Mandalay’s multi-disciplinary approach to create success
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Operations
Human Resources
Process
GovernanceFinancial Discipline
Technology
1. Human Resources: best talent from
all round the world.
2. Technology and process:
investments and improvements made
immediately after acquisition.
Continuous improvement in all the
three mines. Culture of Do-Learn-Do.
3. Governance: transparent – what we
say in public is what we practice. Flat
structure. Responsive. Decisions
made on weekly basis.
4. Financial Discipline: We make the
mines self funding and should be able
to pay for their own exploration,
development and dividend as soon as
possible. Cashflow monitored on
weekly basis.
Other key processes
Team-based compensation system based on value-add
Risk assessment and mitigation; task tracking
Near-miss, incident investigation and feedback
Annual third party review of reserves & resources
Periodic third party reviews of key risk areas – dams, ground
conditions, inundation risks
Preventative maintenance
Internal process audits
Monthly ore reserve reconciliations
Exploration stage-gating pipeline
Community surveys and issue resolution
Employee surveys and issue resolution
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Team-based compensation based on value-add– STIP
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Executive Team
Annual Incentive
Plan
Tracking &
Communication
2016F$ '0
00
MND cumulative EBITDA
2015 Actual
Budget EIB target
Table and graph for illustrative purposes only
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Residual Risk Profile –
Mandalay Corporate Risks
Rare
Possible
Unlikely
AlmostCertain
Likely
Likelihood
Slight Minor Moderate Major Massive
Consequence
1819
20
9
3
12
16
2
17
14
4
7
13
15
No Risk description
1 Mine inundation
2 Price and currency volatility
3 Major equipment and/or plant failure
4 Failure to deliver Björkdal transformation programme
5Community action or disruptions/impacts on social license to
operate
6 Government fiscal reforms
7 Tailings dam wall failure
8 Failure to obtain or maintain regulatory titles and permits to operate
9 Significant safety incident / fatality
10 Customer concentration / customer action
11 Political / country risk
12 Major business interruption (external factors)
13 IT security
14Misallocation of capital to unviable/uncommercial projects/ capital
investment
15 Portfolio: Acquisition of the wrong asset/s
16Failure to achieve strategic objectives (capital outcomes) due to cost
escalation or budget over-runs
17 Inaccurate mineral resource and reserve estimates
18 Ineffective management of unionised employee
19Non-compliance with Anti-Bribery and Corruption related
legislation, fraud and theft
20Failure to achieve strategic plan due to inadequate corporate
infrastructure and standards
21 Non-compliance with Ontario Securities Commission regulations
Very High
High
Medium
Low
3
1
21
5
10
6
8
11
Inherent
Risks
Risk management: assessment
Monthly reconciliations to model, budget & forecast
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e.g. Costerfield
Graph for illustrative purposes only
It is not luck!
It is repeatable, predictable, and improvable
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