Costerfield high-grade gold mine drives turnaround

It is located in the same district as the prolific Fosterville mine at Kirkland Lake Gold, and like Fosterville, it has an extremely high gold grade at its Youle mine, at approximately 15.3 grams per tonne of gold. , as well as 3.3% antimony. Exploration is aimed at increasing the mine’s reserve base to the extent that the Company can consider future expansion of the processing plant.

“We have a very similar geology to Fosterville and although Costerfield is younger, mineralization has occurred during the same time period,” said Dominic Duffy, President, CEO and Director

“We think the grade in our veins is higher, but the veins in Fosterville are larger and so our grade is diluted in mining. We have upside potential at depth and high grade, and we are finding grades even higher than our current production grade in the recently discovered Shepherd Zone, which is below the Youle deposit. “

It wasn’t too long ago that the company’s future was a business, however, with $ 42 million in backing from its top five investors, the bailout funding gave the CEO the time needed. time, Dominic Duffy, and his team to implement planned operational improvements. to both assets.

“I became CEO three years ago at a time when the company was only focused on operations and we were keeping exploration to a minimum,” said Duffy. Mining log.

Duffy, a mining engineer, worked on the turnaround of Cerro Bayo and was subsequently promoted to COO before becoming President and CEO.

“We got the funding of US $ 42 million based on a turnaround story and we executed it at a T. Now we’re in a much more stable financial position where we can invest more in the business. exploration, ”he said.

Mandalay makes record exploration investments in 2021 as it seeks to expand beyond being a gold equivalent producer of 100,000 ounces per year. Mandalay has earmarked US $ 7 million for exploration in Australia this year and US $ 4 million in Sweden; each producing about 50,000 ounces per year as Duffy aims to grow mine life and take the company out of the depletion replacement cycle.

At Costerfield, the Shepherd zone returned results such as an actual width of 6.27 m grading 23.6 g / t.

Costerfield currently has reserves of approximately 255,000 ounces of gold grading 12.8 g / t and 21,700 tonnes of 3.5% antimony, within a resource of over 380,000 ounces of gold and 39,000 t of antimony.

If the company manages to increase Costerfield’s reserves to around seven years of production over the next three years, it could trigger an investment of $ 20 to 25 million to upgrade the plant from 450 tonnes per day to 650 tpd. To do this, we must intensify the exploration campaigns to build deep drilling platforms, because the company is targeting deeper resources, because it has reached the limit of what it can do with its platforms. current forms.

At Björkdal in Sweden, it is also targeting new resources at depth, where it successfully finds new mineralization. It is also drilling the extension of a mineralized corridor to the south where Boliden Mining has been operating successfully for many years.

“These structures from the Boliden mines run from west to east and continue through our property, so we are starting a new exploration project there,” said Duffy.

Successful exploration in both operations could allow the company to increase production by 20% to around 120,000 AuEq oz / year within two years and set the stage for future growth to the 200 level. 000 AuEq oz / y, where gold producers attract more investor interest.

In addition to increasing its exploration budgets, the company expects to be net debt free by the end of this year and debt free by 2023, which will further open its horizons for growth.

The company is repaying approximately $ 3.8 million per quarter with approximately $ 51 million in arrears and a final lump sum payment of $ 29 million due in early 2023. The completion of a large elevator storage facility from tailings at Björkdal in early 2022 will also free up cash.

“People see that we have debt on our balance sheet and maybe we could look to pay it off faster. Once we run out of net debt, we have more flexibility to invest in other projects.” , said Duffy.

“We will seek to further intensify our exploration and hire more geologists. We’ll also be looking at other uses of capital, including reinstating a dividend, which Mandalay was paying until 2017, although it may be more interesting to look outside. for non-organic growth opportunities by 2022.

“Unless we have a significant discovery, we can only increase production of the assets within certain limits, so we’ll look at other options,” Duffy said.

Duffy sees an opportunity in the form of acquiring undervalued assets and improving them. “We have proven that we can do it, so we are actively looking for undervalued assets to turn around and make a profit,” he said.

Mandalay has a successful history of doing this, including: Costerfield, Björkdal and Cerro Bayo in Chile, which was optioned to Equus Mining.

By 2021, the company aims to produce over 110,000 consolidated AuEq oz, an improvement over the 103,000 AuEq oz in 2020 at an all-in sustaining cost of $ 1,254 / AuEq oz and continue to regain market confidence. .

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