Mandalay Resources Corp. (TSX:MND, OTCQB:MNDJF) has reported 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 steady financial quarter in which we generated $7.5 million in free cash flow allowing the company to further strengthen its balance sheet with an improved net cash position as compared to Q1 2022,” Dominic Duffy, president and chief executive officer of Mandalay said in a statement.
“We did this in a quarter that had several operational issues resulting in lower than expected production, exhibiting 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 the start of 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
“Reaching a net debt-free position was one of the major goals of the company at the onset of our turnaround over three years ago and I am pleased that we have achieved and exceeded that this year," Duffy added.
In Q2 2022, Mandalay generated consolidated revenue of $50.1 million, 2% lower than in the second quarter of 2021, mainly due to lower ounces sold at Bjorkdal and Cerro Bayo's production in last year's quarter, the Canada-based natural resources company said.
The company's realized gold price in the second quarter of 2022 increased by 6% compared with the second quarter of 2021, and the realized price of antimony increased by 13%. In Q2 2022, Mandalay sold 1,334 fewer gold equivalent ounces than in Q2 2021.
Consolidated cash cost per ounce of $1,020 was higher in the second quarter of 2022 compared with $960 in the second quarter of 2021. Cost of sales during the second quarter of 2022 versus the second quarter of 2021 were $5.7 million higher at Costerfield and $700,000 lower at Bjorkdal. Consolidated general and administrative costs were $200,000 higher compared with the prior-year quarter.
The company generated adjusted EBITDA of $20.3 million in the second quarter of 2022, 12% lower compared with $23.1 million in the year-ago quarter. Adjusted net income was $5.4 million in the second quarter of 2022, excluding the $4.4 million of unrealized gain on financial instruments and $7.1 million of revision of reclamation liability, compared with an adjusted net income of $11.5 million in the second quarter of 2021. Consolidated net income was $2.7 million for the second quarter of 2022, versus $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 $32.4 million in revenue and $19.2 million in adjusted EBITDA. This ongoing operating margin performance reflects the continuous high-grade feed and the relatively fixed cost nature of the operation. During Q2 2022, Costerfield processed grades of 11.0 g/t (grams per ton) gold and 2.6% antimony and also improved its gold recovery rate of 93.0% against the 92.6% achieved during Q1 2021,” said CEO Duffy.
"Bjorkdal generated stable production and sales with $17.7 million and $2.4 million in revenue and adjusted EBITDA, respectively, in Q2 2022. The underground ramp-up continued as we mined approximately 276,000 tonnes; on pace to exceed our 2021 result of 1.1 million tonnes from the underground. For Q3 2022, mining activities will focus on areas of high confidence as we look to lift the grade during the second half of the year.
"The first half of year demonstrated the ongoing strength of our operations and how the company is well positioned to build upon its sound financial state. Mandalay is maintaining its 2022 production and cost guidance and looks forward to sustainably generating value for all of our stakeholders," Duffy concluded.
Mandalay said its management will be hosting a conference call for investors and analysts on August 11, 2022, at 8.00am Toronto time. Analysts and interested investors are invited to participate using the following dial-in numbers: Participant number (toll-free) 877-407-8289; Conference ID 13731674
A replay of the conference call will be available until 11.59pm Toronto time, August 25, 2022, and can be accessed using the following dial-in number: Encore toll-free dial-in number 877-660-6853; Encore ID 13731674
Mandalay completes sale of Challacollo Silver-Gold Project
Separately, Mandalay said it completed 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 Chile.
Under the terms of the agreement, signed on November 12. 2019, Aftermath will purchase 100% of MMC in exchange for total consideration consisting of C$8.0 million in non-contingent consideration plus a 3% net smelter returns royalty(NSR) on production at Challacollo, capped at US$3.0 million.
The Non-Contingent Consideration is payable as follows:
- C$1.0 million in cash payable on or before December 30, 2019 (received in Q4 2019);
- C$1.0 million in cash payable on or before December 30, 2020 (received in Q4 2020);
- C$3.0 million in cash or shares payable on or before April 30, 2021 (received in Q2 2021);
- C$1.5 million in shares and $1.0 million in cash payable on closing, August 10, 2022; and
- C$0.5 million plus interest in cash on or before December 31, 2022.
Mandalay's CEO commented: "Mandalay is pleased to have successfully closed the sale of Challacollo to Aftermath. This transaction aligns with Mandalay's objective with creating value from its non-core assets. We wish Aftermath further success on the restart of exploration in the region and look forward to a strong and mutually beneficial relationship with Aftermath."
Mandalay is a Canadian-based natural resource company with producing assets in Australia (Costerfield gold-antimony mine) and Sweden (Bjorkdal gold mine). The company is focused on growing its production and reducing costs to generate significant positive cash flow.
Contact the author at jon.hopkins@proactiveinvestors.com