Mandalay Resources Corporation

Brad Mills - Chief Executive Officer

Filipe Martins - GMP Securities

Thank you very much. Good morning everybody; welcome to the Q4 and full year conference call.

I assume everybody has had a chance to look at the results and I'll go ahead and just make a few key points on the announcements that we made yesterday and today. So starting with the earnings release, obviously the excellent production and cash costs in the fourth quarter resulted in very solid earnings and cash flow for the quarter and for the full year.

You should note that the fourth quarter includes $2.5 million write-off of exploration costs at both Cerro Bayo and Costerfield. So just that’s not exclusively in the press release, but just something in the earnings.

Dividends increased significantly with the addition of Björkdal, the current yield is now in excess of 5%, we expect to pay out this year on the order of $13 million in dividends that we just announced yesterday. Cash balances were very healthy at year end at $49 million.

This includes spending about $750,000 in the fourth quarter to fix or to cap our fuel price exposure at $60.50 per barrel. This locks in around $6-7 million cost savings versus 2014.

Also worth noting, the impact on exchange rates at the current time on our operations. These are having significant impact on lowering costs and at current market their – currently, cost expectations would be an additional $5 million to $7 million lower than in 2014.

On the exploration release that we released yesterday, couple of things to note. First is the very significant difference in the P&P at [indiscernible] resource tonnes and grades at Björkdal versus prior owner’s announcements.

This is the result of drawing a very extensive wireframing on the ore body, 379 separate wireframes that were then compiled into a resource block model and modeled for open pit and underground mining. This allows us to set up a new dig plan for the operations, which will be implemented over the next several months as we convert to this new reserve block model.

We expect that to have a very positive impact on overall grade and ounce performances over the next coming two years. Additionally, at Cerro Bayo, we’ve had quite good success at Coyita underneath the lake.

Just to give you a little bit more detail on that, the Coyita ore body which was the fragmented focus on exploration P&P reserves, fully dilutive reserves were 321,000 tonnes at the grade of 2.83 grams per tonne silver and 291 grams – 291 grams of silver and 2.83 grams of gold. That ore body is opened both north-south and depth.

And in addition, there is kind of a hole right in the middle of it where the drill placement was a little bit too wide to convince our consultants to convert it from Inferred to Measured and Indicated. So we expect significant additions to this ore body as we drill out further in 2015.

At Challacollo program, we continue to make good progress towards the completion of the engineering, water development and environmental work which should lead to the filing of environmental permits towards the end – middle-end of the second quarter this year, hopefully about the May timeframe. So it makes very good progress towards completing the work there that will allow for a full development decision once we receive environmental permits.

Finally, today, we’re reiterating all of our guidance for 2015. I’m now very happy to take any questions that you have.

Thank you very much.

Just a quick one on the Björkdal reserves, I see underground you’re getting grades of about 3.3, how these grades could have looked when they go through the mill, should we expect a lot lower, big dilution on these or is this post-dilution, I’m guessing, because of that result. And the second question again on Björkdal is, where are you with ore sorting, now that you had the asset for a full quarter, just generally on dilution using smaller kit and pumping up the grade there?

The 3.3 ounce per tonne is a fully diluted ore grade from the extractable block model. So we don’t expect it should mine at that grade.

The approach to that ore body is radically different than what the prior owners did in terms of a broad global pre-style ore body. So this is detailed wireframing of each one of the veins and then establishing fully dilutive grades and mine extraction plans tied to those.

And we have good success doing this at our other properties in terms of really tightening up the reserves and resources that will allow us to achieve that. So we’re expecting over the coming months to change the approach to mining method, change the approach to how we develop this ore body and achieve those kinds of grades.

Keep in mind that the previous operator had no underground break, they did not have a real time any of their phase sampling and so have been essentially mining blind. And what we noticed in the Björkdal geology is that there are at least two generations of [core chains].

There’s large obvious white low grade core chains which have been the target of most of the mining and there are a less obvious high grade core chains that are in the bleak angles to those that contain most of the gold. And so the attempt to visually mine this ore body has been essentially unproductive and that you’re really following the wrong veins.

So that’s kind of the short answer to what we think is going on there and we’ll have to obviously demonstrate that over the next six to 12 months. But we think we’re confident with that story that’s going on there.

The second part of your question, I lost track of. What was that one?

Ore sorting, okay. So on ore sorting, we have completed the first round of test.

They have given us some very positive results, we need to go back and do another kind of more detailed round at a wider range of ore grades to get a little bit better handle on the overall recoveries that we can expect using ore sorting, but the preliminary work is highly positive. So let’s leave it at that at this time.

And just quickly on the expansion to 1.5 million tonnes, I’m guessing you just got to try and get the grade through changes the way your approach to mining the deposit, but I recall previous owners said that it’d be pretty run at the mill time to get it up to 1.5?

We have the permit for the 1.5 million tonnes, I think the reality is if we increase the ore grades and implement ore sorting, we are going to not need even the current mill capacity, we may well mine significantly in excess of 1.5 million tonnes, but lot more higher grade ounces through the concentrate as a result of both higher grade and ore sorting. So the permit which relates to how much tailings you can deliver, to the tailings down is the 1.5 million, so we have more than enough permit capacity we think to achieve the growth that we want to at Björkdal.

Okay, well, thanks guys [indiscernible] this morning, so we appreciate everybody. We’re obviously very pleased that Mandalay continues to deliver solid profits, earnings, cash flow and dividends and we look forward to a successful 2015 and hopefully we’ll see a bit better metal prices than we did in 2014.

So thanks very much for being on the call today.