Brad Mills – CEO

Benjamin Asuncion – Haywood Securities Christopher Thompson – Raymond James Ross Carden – Polygon

Thank you very much. Good morning to everybody and welcome to the Mandalay third quarter results conference call.

I will just lead off with a set of remarks and some comments and pre-clarification issued and then we will open up the call for questions in a few minutes. So we had a very solid quarter from production perspective and cost perspective, both the events and operations at Cerro Bayo and Costerfield performed well in the quarter and particular going into the second-half of the quarter we had very, very strong production from all operation which is continuing on into the fourth quarter.

So we expect to finish the year very, very strongly. We were very pleased with the first 20 days of the Björkdal performance with – considering the fact that we [inaudible] anticipated and so that’s off to a very good start and again that performance appears to be continuing about that pace.

So we look to have a pretty solid fourth quarter with Björkdal as well. So operationally the business is doing well and we are very comfortable with where we are operationally and with the cost structure of the business, even given the lower metal prices.

In terms of the financial results the only slight tick-up in the quarter was the miss of the shipment at the end of quarter from Cerro Bayo, where we had actually two large shipments that we missed in the last week of the month due to weather problem at the port of Chacabuco in Chile. That cost us about 400,000 ounce silver sales and about 3,000 ounces of gold sales and that had an impact of about $12 million on revenue and about $5 million on EBITDA.

We’ll catch all that up in the fourth quarter, so it’s basically we just deferred from a quarter, so just clarifying that issues. There were a couple of one-off cost incurred during the [inaudible].

The expenses portion of the quarters negatively impacted mark-to-market in prior sales contract due to the additional purchases incurred in the quarters. One note, on the balance sheet for review that [inaudible] reading you will see that the demand laid five years gold convertible note has been attributed by the auditors and cost on your balance sheet at the current liability.

This is technical argument that is happening with auditor on that treatment but due – in terms of convertibility feature is into cash at the bonds holder selection at any time as of now, they will have to treat it current liability. The reality is that if they convert now the company would experience about a $10 million gain on that conversation and we currently believe that less of a possibility that anyone will convert those bonds prior to their maturity date in 2019.

That will be in ongoing discussion with our auditors and their interpretation of accounting standards. They are very, very sympathetic to our view and [inaudible] but believe that the technical requirements are that the firm requires to report that way and so to draw that your attention so there is no doubt about that particular item on the balance sheet.

In terms of the guidance we published guidance in the [inaudible] for next year we are perform on as we expect at slightly lower grades next year from Cerro Bayo, we are going through a transition with the depletion of the value of the mine and it’s been replaced by year end with the Delia Southeast mine. So we expect about 215 grams of lower grade during the course of the year.

It’s a bit of a lower reserve grade and that will come back considerably in 2016 when the Delia Southeast mine comes in which is our highest grade current mine and we’ll take it back up over 260 grams in 2016. That’s the source of the slightly lower silver production that you see in Cerro Bayo in the guidance.

We are also right now the Björkdal guidance is very much really a continuation of the 2014 performance and with no real uptick at this stage, but we are very pleased about the RPA ore reserve and mine plan redesign work which is due at the end of the year and at that time you may have a better clarity on what we can expect from that operational, really the basis but we haven’t really moved that guidance at this time. It’s kind of just rolling over current performance.

So that’s hopefully fairly conservative at this stage. Those are my major comments on guidance.

We do expect a very strong year next year at Costerfield antimony mine considering [inaudible] and that’s reflected in lower cash operating cost. We did [inaudible] cost in September and we expect similar kinds of cost like that throughout the course of this next year.

So we are quite comfortable with what’s emerging in the Costerfield, and the performance going forward there. Again on Challacollo it’s on track.

We have completed all of the resource input drilling results lower essentially as we [inaudible] that we expected they would from the prior work done by [inaudible]. So we expect virtually the complete reversion of the current indicated inferred resource to indicated and measured resource and then that will that then convert into PEP reserves.

That is still scheduled to be completed before the end of the first quarter next year and talking to Mark about it he felt that we should be able to release the reserves in time to meet all of our reserve updates in early February next year. So that’s all are on track at this point in time.

So those are our comments before the open up the conference call for questions and so be happy to call out [inaudible] on the line.

Good morning, guys. Congratulations on a good quarter here.

I just had a couple of question, Brad just as a housekeeping thing I missed your comments there in regards to what your grade expectation at Cerro Bayo would be? Will you be able to reiterate that.

Yes next year it’s around 215 grams silver and right at 2 grams or greater, just [inaudible] gold So it’s a little bit lower than this year, little bit below the reserve grade as we complete the value online and transition over to Delia Southeast.

Okay. And just looking at Costerfield, for guidance as well too, I mean I believe we are looking at the PA the introduction of the – pushing back gold grades to well above 10 gram per ton.

Looks like based on the guidance here you are probably closer to around 10 or around what did in the current quarter. And is that a fair statement?

Yes I think that’s probably right. I think we are – in Costerfield sales as you know it’s a really difficulty mine to predict in any particular months in terms of the exact outcome because you have the high grade pass and if you have in a quarter then you get really very high grade and if you don’t have one than grades become more normal.

We’re experiencing exactly that phenomenon in Costerfield but I accept that – we expect 10 plus grades that are all of that for this year all of next year whether it’s [inaudible] that’s a bit of a hard call. We have been conservative in our forecast and the guidance at this stage but we do expect over 10 on this year.

Okay, and just turning to the actual results for the third quarter, looking at Yorkdale, I mean it looks like you attained sort of the $28 sort of onsite operating cost per ton which was quite impressive considering that this was already a lower cost mine and the history of costs here. Is this level sort of sustainable or can you give us some color as to what drove these lower costs is it a favorable production mix from open pit underground and stockpile or just any color.

Yeah, I think the costs is with – don’t get to exposure that the 20-day cost at this stage, it may be a little bit hard to factor what that posted in the first 10 days and what that posted in the second. So I am not particularly excited about the movement and we do think that there are useful opportunities to preserve the full year at lower cost than have historically been the case.

We are making kind of a systematic change in the operations by excluding and improving operations and I can certainly talk and touch some of those, but let’s see what looks like [inaudible] and perhaps just a little bit market is low in that and that’s [inaudible].

Okay maybe if we can kind of touch on that I know you mentioned a few things that you’re looking at in terms of optimizations or improvements sort of over the coming 12 to 24 months and just one of those things being sort of the permit for the concentrator to be expanded whether or not that’s undertaken. Can you give us a sense of kind of where do you see the lowest hanging fruit for improvement at Yorkdale?

So just quickly the concentrator permits to go through 1.5 million tons per annum is approved and we are looking at what it would take to actually make that expansion. It’s primarily a concentrator that’s not kind of a core focused at the moment to actually raise the throughput in the concentrator.

The most important thing that we’re working on right now is making sure that all of the feed that goes into concentrator comes from either the open pit mine or the underground mines. So we’re taking advantage putting the best ore available through the concentrator and not buying any stockpiles over there.

That won’t change as the potential for quite [inaudible] impact in the full year performance and so with all the project is building an appropriate stockpile of good quality ore, in terms of the concentrator and the way – is that the operating mines has been bottlenecked in total, and so the way that they dealt with shortfall is with low grade stockpile ore sort of [inaudible] in the concentrator but that obviously reduces your gold production and purity if you do that. So we have been working very hard to make sure that they have good quality ore in that, the concentrator they don’t have to use stockpile and so we plan to eliminate all stockpile production until end of – we would expect.

And so that will be falling under that open pit ore. We are also accelerating the performance in the open pit which lagged, it’s a bit behind in the coming months, leading to the acquisition so we’ve accelerated that and again that helps if we have concentrator ore, very high grade ore.

So those are kind of some very early things that we’re doing. We also have a major project under – that getting underway that has all everything to do with control and abolition of the management the mine grade that’s tied very much into the RPA stuff but the most immediate thing in the mine is introducing proper grade control on the levels and we are bringing an [inaudible] that can provide one day turnarounds through the mine so there is active control in the mine on a real time basis and all of that’s having quite a material effect on producing good quality ore in the mill.

So those are the very immediate short term things that we are doing that are making the difference and they should add up to a useful increase in gold throughout 2015.

Okay great and the last thing just on that RPA reports timing on when we would see that, would that be by year end or is that going to be sort of following when we see that corporate reserve resource update?

Yeah it should be right around year end. It’s – I don’t have an absolute firm date from RPA, they year-ending they were more than 300 – so it’s a bit labor intensive to get this first iteration done properly and but that would be really important exercise because it will give us the first real look at the economic reserve and resources on the property and the extractions sequence that goes with that.

So timing is still year end but exact timing I can’t give you at the moment.

Perfect thanks a lot I’ll hop back in the queue thanks..

Thank you.

Good morning guys congratulations on a solid quarter. Two real questions, obviously in light of obviously the pretty low – silver price at the moment, Brad can you just comment on current potential for cost improvement in the operations, do you anything that can be benefited or bought down by way of cuts there?

So there are a couple things that are helping that, that’s all of the operations. Most obvious think is that not so much of our doing but actually it’s drill material, the exchanged rates.

So we have about a 10% relief in Chilean cost with the peso drifting down towards 600 peso to the dollar and sort of the 550 traditional and that is reflected in what are obviously are our all-in country cost and you could see that in the lower mine cost. Other thing that will have a big impact for a while was lower fuel prices.

About 20-25% of our overall cost are diesel fuel for power generation and with the big drop of oil price that again has an interesting material impact on overall cost. We are looking at potentially locking in the full year sort of $75 type numbers so we may hear more or less about the next month or two.

So those are just external things. We have also renegotiated all of our sales contracts for next year and have had useful material decreases in our smelting charges and buying charges for customers.

Again we’ve outlined on the overall – operation, the full year at 1,400 tons a day is also fairly helpful and then a final point on Cerro Bayo is we have very solid performance in the last two months, we have released over 93% of silver and about 91% in gold which is about 1% silver and about 2% higher in gold than our historical performance has been and so that impacts volumes and hence lower cost and that’s a real function of the kind – process at Cerro Bayo. So all of things individually are $1 million, $3 million, but they do add up in terms of lower cost of raw material.

We should keep that reflected in the fourth quarter all-in cost numbers. At Costerfield similar kind of story.

We are finally having traction on the – company mines now almost are fully converted in the 10 meter shelves, that’s materially reducing our mine cost at Costerfield and so we expect sub $700 cost for the next year and that is quite useful. We have outsourced the mine development as well to contractors to complete mine development and that’s also got the contractor cost down significantly across the board.

And I touched on couple of the projects, that are mainly focused on quality which again have the costs we will have how to use it and so those are the main things that we are focusing on at this point in time.

Great and that’s good to hear. Finally I guess development plans at [Tricolor] in light of the kind of silver price, what are we looking for here, as what’s sort of silver price do you need to get the confidence to move forward with the development of the assets?

No that’s a good question. I think what we’re really interested in is what do the operating cost look like as we complete the feasibility study.

We had very good results on [inaudible] so we are seeing very good numbers on metallurgy and we just need to understand what all that transfers to the expected operating cost. Given having said that we expect that feasibility study to be completed at the end of first quarter next year.

We’ll then go get to the EIS permitting process and [inaudible] that’s certainly going to be the EIS and so that probably pushes us in something like 18 months carrying cost and all that translates to in short, probably we don’t need to make a decision in terms of the – decision on track roughly for months till the process is finished. So I don’t think it’s something we are going to need to make an immediate decision or commit our capital and but we have a very good understanding of what we would need to do to make that work.

Great, thank you congratulations Brad.

Thank you.

Hi Brad congrats on the results. Just a follow up on the cost side of things.

So you talked about first currencies in Sweden also a potential move since the second half and I just wonder did you get any benefit there curious how much is local versus dollar. And then on the oil side of things I guess can you give us a bit of more color on the benefits from lower oil as you might lock 75 oil or thereabouts?

Yeah in Sweden when we did the acquisition it was about 7.1 to the U.S. dollar that has subsequently weakened.

It’s about 7.4 so we had 5% unanticipated decline in costs in light of the movement of currency. In Björkdal obviously all labor is Swedish, all power is either Swedish, don’t think we can get much lower than currently as the – anyway.

So really all content of the mine operations in Björkdal are Swedish content all men, the overall maintenance and we are not really, we have pretty lower exposure to things like oil prices at Björkdal, it’s mainly the hydro power cost. So there’s a little of U.S.

– energy cost that’s probably about 10% of total costs. We are exposed to Euro on refining charges and smelting charges for the concentrate at Björkdal.

That’s been somewhat of a dark cloud with our [inaudible] smelting friends over the couple of last couple of weeks, still not completely resolved, but we’re shaking things up there they are trying to – and so that’s kind of the picture I guess right now in Sweden. And then are the biggest consumer of petroleum productions and particularly diesel fuel and so that’s the one that we’re looking to maybe lock to take advantage of the lower cost and to capture that cost structure for the next 12 months.

And does the guidance that you gave today – is that what sort of oil price is that based on?

It is based on when we did the budget which was about two to three months now. So it would be around probably about $100 I think.

Okay and I’m not fully satisfied on what percentage of cash cost would be energy or oil related?

It’s mostly in 20 to 25% range of our total cost are oil and energy it’s all of our power for the concentrator, at all of our mines, and so it’s about $10 million to $12 million bill annually for petroleum products and we are looking to maybe knock off any remaining – from that oil.

Okay and then Costerfield is small percentage some 20% to 25%.

Yeah, it’s main grids power there so that we don’t have a – we don’t generate for the concentrator and the only diesel fuel consumption is for the hoist. So it’s only 5% on the cost at Costerfield are tied to oil price related stuff.

Okay, that’s fine. That’s all the questions I had, thank you.

Yeah, guys. Just sort of following on that theme of potentially lower metal prices and are you concerned, I know in the past you looked at hedging just in so far as covering capital cost at Cerro Bayo.

Is that something that’s under consideration now?

No, I think again our view and I think the Board’s view, quiet strong view is that our primary defense against lower metal prices is lower operating cost being quiet low cost producer that’s really the best thing that we can do in terms of protecting ourselves and hedging as you know it’s seriously expensive. So what we really are focus on and what we can do for cash flow, the most important thing that we can do is accelerate the ramp up at Björkdal mines and drive more ounces out of that.

Essentially all of these operations are fixed cost operations. So if you can get more volume out of them that translates into direct model on cash flow that’s the primary focus in terms of our sort of unbudgeted variable opportunity is really and in terms of volumes it is one time and then there are number of other things that help cash during the year.

We have [inaudible] going on for the Cerro Bayo project in Chile for the copper and silver project that’s quite advanced and so we hope to be able to announce something on that before year-end. And hopefully we’ll also have completed sale of the asset before year end.

So both of us reduced cost otherwise we hope for Challacollo to contribute the cash balance and so they can help…

Okay, perfect and just talking about cost I guess looking at Costerfield in the third quarter here you are at [350] ton, there is some commentary there is some additional cost being incurred and therefore Associated does control and that we would sort of see the improvements on the operating cost. Can you give us a sense of kind of where that would trend long-term?

I think for 2015 we should see significant improvement in a number of cost areas. We have slated to the primary develop the mine [inaudible] stoping and ore patches, next year, so we should see cost, mine cost somewhere at the delta of a few hundred dollars a ton on the mining pad.

Concentrator [inaudible] we’ve pretty maxed at [inaudible] tons a day on the concentrator. And so they will [inaudible] in the year.

We have also made some adjustment to the administrative products at – for that, further and [inaudible] where we really expect cost going forward here.

Okay, and then just last thing I guess, just looking at Cerro Bayo in the quarter, I guess was the plant shut down, was that the primary difference between what we saw with tons mined and then tons processed and then kind of what would you think is that something that can be caught up in terms of processing over what time period?

Yeah, so we had a bearing failure at Cerro Bayo in August, that took the plant out for a couple of weeks. We…[Call Ends Abruptly]