FEBRUARY 2015 Adding value through geology and exploration The story behind Mandalay’s December 31, 2014, Mineral Resources and Reserves update.
Forward-looking Statements This presentation contains "forward-looking statements" within the meaning of applicable securities laws, including statements relating to life of mine production plans and exploration plans and the growth and strategy of Mandalay. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, that exploration results at Cerro Bayo, Costerfield, Challacollo and Bjorkdal may not meet management ’ s expectations, that Cerro Bayo, Costerfield and Bjorkdal capital, production and operating cost results may not meet 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. 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. Quality Control and Assurance Quality control and assurance programs are implemented in line with the standards of National Instrument 43-101. The exploration programs at Costerfield and Bjorkdal are supervised by Chris Gregory (Member, Australian Institute of Geoscientists accredited Chartered Professional (Mining)) a Qualified Person as defined under National Instrument 43-101. Mr. Gregory regularly visits Costerfield and Bjorkdal and supervises the collection and interpretation of scientific and technical information contained in this presentation. He has read and approved the sections of this presentation on Costerfield and Bjorkdal. The exploration program on the Cerro Bayo project is supervised by Scott Manske ( an Oregon registered Professional Geologist, a “Qualified Person” as defined by NI 43-101). Mr. Manske visits the Cerro Bayo project often and supervises the collection and interpretation of scientific and technical information contained in this presentation. He has read and approved the section of this presentation on Cerro Bayo contained in this release. The exploration program on the Challacollo project is supervised by Ronald Luethe (Member: American Institute of Professional Geologists and an Idaho Registered Professional Geologist), and a Qualified Person as defined under National Instrument 43-101. Mr. Luethe visits the Challacollo project often, supervises the collection and interpretation of scientific and technical information contained in this presentation. He has read and approved the section of this presentation on Challacollo. Dr. Mark Sander (Member: AusIMM), President of Mandalay, has visited the Costerfield, Cerro Bayo, Bjorkdal, and Challocollo projects several times during the period 2009-2015 and has supervised the preparation of this presentation. 2
Mandalay vision To create exceptional shareholder value through the acquisition of undervalued assets that can rapidly become cash generative, self-fund exploration , establish and maintain high operating margins and return cash to shareholders within a planned period of time. Mandalay is committed to operating safely and in an environmentally responsible manner, while developing a high level of community and employee engagement. This presentation: How we add value through geology & exploration 3
Some reasons for undervalued mines – what we look for in an acquisition – Non-existent or non-compliant resource & reserve estimations – Poor reconciliations between reserves and production – Poor communications between geologists and engineers – Short mine lives or poor capacity utilization based on existing reserves – Inadequate geologic understanding to support effective exploration – Unsupported geologic hypotheses – “myths”– that could be misleading – Underinvestment in exploration – The more of these we see, the greater the potential upside if we can propose improvement hypotheses • These are reasons that mines fail “normal” DD; reduce competition • We complete due diligence on our improvement hypotheses – If none or few of these exist, likely to be little upside in the way of geology/exploration/reserves • Will widely “pass” due diligence– lots of competitors • Unless we see reasons for undervaluation in other areas (e.g. metallurgy, costs, financial structure), we will walk 4
Mandalay approach – Secure the base case with an independent, Ni 43-101-compliant resource and reserve estimation • Reduce risk with annual independent updates • Regular and rigorous reconciliations – Invest in basic geology & ore-forming hypotheses to support exploration • Radical reinterpretations frequently reveal new targets – Organize exploration- Portfolio of stage-gated, hypothesis-testing projects – Infill and conversion projects to reach & maintain >4-5 yr mine life – Extension and bounding projects to enlarge positive target tests and upgrade to Inferred Resource – New target testing projects demonstrate target potential – Fund exploration from site cash flow – limits risk of overspending • Fund dividends first • Fund sustaining capex second • Then exploration spending if sufficient cash flow 5
Three producing mines and a feasibility project, with two non-core projects in the process of sale X Lupin, Canada Bjorkdal, Sweden X Past Au Producer; Producing Au sale in process X Challacollo, Chile Feasibility Ag-Au La Quebrada, Chile Costerfield, Australia X Cu-Ag resource; X Producing Au-Sb sale in process Cerro Bayo, Chile X Producing Ag-Au 6
Resources and reserves grew faster than production Resources 1 2014 2013 Au Ag Sb Au Ag Sb Cu (1) The end-of-year 2014 Mineral Resources summarized here refer to the Mandalay press release dated February (cont.� oz) (cont.� oz) (cont.� t) (cont.� oz) (cont.� oz) (cont.� t) (cont.� lb) 17, 2015, based on independent estimates by Roscoe Postle Associates (for Cerro Bayo and Bjorkdal), SRK (for Costerfield) and Mining Plus (for Challacollo). Full NI 43- Measured 96,000 3,143,000 9,600 99,000 5,596,000 8,000 - 101 Technical Reports will be filed on www.sedar.com within 45 days of February 17, 2015. Details of tonnes and grade of material in each category at each property Indicated 1,039,000 47,622,000 26,300 367,000 35,372,000 22,000 459,000,000 are given in later slides of this presentation. Measured� +� 1,135,000 50,765,000 35,900 466,000 40,968,000 30,000 459,000,000 Indicated Inferred 221,000 11,003,000 13,700 221,000 30,280,000 22,000 13,000,000 Reserves 2 2014 2013 Au Ag Sb Au Ag Sb (2) The end-of-year 2014 Mineral Reserves summarized here refer to the Mandalay press release dated February (cont. oz) (cont. oz) (cont. t) (cont. oz) (cont. oz) (cont. t) 17, 2015, based on independent estimates by Roscoe Postle Associates (for Cerro Bayo and Bjorkdal), SRK (for Proven 53,000 2,513,000 4,400 61,000 4,705,000 3,000 Costerfield) and Mining Plus (for Challacollo). Full NI 43- 101 Technical Reports will be filed on www.sedar.com within 45 days of February 17, 2015. Details of tonnes Probable 656,000 14,549,000 11,200 240,000 13,197,000 12,000 and grade of material in each category at each property are given in later slides of this presentation. Proven + 709,000 17,062,000 15,600 301,000 17,902,000 15,000 Probable Significant 1,123,367 300,000 1,200,000 Oz Au Eq. Annual 167,000 – Oz Au Eq. Year-End Reserves 4 increase in 250,000 1,000,000 771,500 185,000 E Production Production 5 average mine life; 633,000 200,000 800,000 Reserves 520,175 150,000 600,000 over 1 Moz AuEq 253,796 100,000 400,000 154,810 in Reserves 126,908 107,941 50,000 200,000 15,854 63,351 0 0 2010 2011 2012 2013 2014 2015 (4) Price assumptions for calculating gold eq.oz reserves were based on each year’s metal price documented in the Technical Reports.; 2014 price assumptions were $1,200 Au, $ 20 Ag 7 and $10,000 Sb (5) Price assumptions for calculating gold eq.oz production were based on each period’s average spot metal price.
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