Brad Mills - Chief Executive Officer

Chris Thompson - Raymond James

Thank you, operator. Good morning, everybody.

And welcome to the Q2 Mandalay earnings conference call. I'll just make some brief comments and then we'll turn it over to questions.

I hope everybody had a chance to read the press release and any of the backup documents to support that. So generally in the second quarter we had good operational performance, especially highlighted by Costerfield, a very strong performance, which we'll touch on a little bit later.

And a couple of negatives, we obviously were impacted towards the end of the quarter by the strike at Cerro Bayo which impacted production at Cerro Bayo towards the end of the quarter. Not so much to sales -- sales and volumes were already pretty much set, but they will be an impact to some degree on sales going into the third quarter from Cerro Bayo.

Looking forward at the various different projects over the next quarter and towards the end of the year, we will start production developments of ore from the Delia southeast portion, the vein system at Cerro Bayo in latter part of Q3 and we'll get more significant benefit from it in Q4. The Björkdal operations were very stable during the Q2 period and we will start to migrate the mine plan and specifically in [indiscernible] mine in Q3 and Q4, so we will look to see better grade performance particularly towards the latter half of Q3 and Q4.

From Björkdal, Costerfield as mentioned earlier had very good results from Cuffley, it's experiencing significantly better grades and tonnages from Cuffley lode and the block mile design and so that's obviously helping our performance and helping our cost structure which has benefited us significantly and we would expect that to pretty much continue through the balance of this year at least, so that's in very good shape. Looking at capital spending, we expect capital spending to slow in the second half, we have completed all of the major projects at Costerfield and some of the assured payments for those will happen in Q3, but all of the major projects are finished with the life of mine.

And at Cerro Bayo we are approaching the end of the primary development for Delia Southeast vein, and we'll started development on the Coyita northwest in the next quarter. So we will see capital spending decline particularly as we get into Q4 this year.

So that's kind of the capital spending picture. Other things that impacted results, we had very favorable exchange rates during the quarter compared to prior period.

The Australian dollar was down 17%, the Chilean peso down 11% and the Swedish krona was down 27% compared to the prior year and field costs were down 43%. So those all internally impacted our cost structure, particularly at Cerro Bayo where diesel fuel was a big component of our costs where we self generated.

On the exploration side, we are on track and to replace reserves by year-end and we have some significant high priority projects that will be tested in the second half, these include Costerfield, King Cobra, portion of the Cuffley lode and also the large Costerfield west [indiscernible] surface and our target which we will do the initial testing on the second half. At Cerro Bayo we have started testing and drilling to the east of Coyita and we are hopeful that, that will be a productive part of the system and that we can see or make some discoveries equal to the Coeur pre discovery out of [indiscernible].

And at Björkdal we have started the first round of regional drilling and we are testing about six kilometers of strike wins as we speak, and so we will have the first results before year-end and that will give us a good sense of the overall endowment of the system and a better understanding of the wall picture at Björkdal. So, let me go ahead and stop there, and open the call to questions at this time.

Good morning, guys. Congratulations on a good quarter.

Two questions really; just the first at Cerro Bayo, as far as Coyita is concerned Brad, what are the timelines to put action there?

So we will see our production fairly rapidly from the northwest portion on vein -- it's shallow and easy to access. So we should start to see development of ore from Coyita in the first quarter of 2016.

And that's can part of the transition plan out of the Fabiola and Dagny mines to Delia southeast and Coyita.

And then what's the sort of -- what are the components of mill feed I guess next year, Brad?

So it'll be Delia, the Delia main section, we'll be mainly stoping ore. We'll start to have a mix of stoping and development ore from Delia southeast.

And you'll have some random mining in Yasna, you'll still have some production from Dalila and you'll start to have the first development ore than later in the year stoping ore coming out of Coyita.

Okay great, thanks. And just as far as Björkdal is concerned, obviously you're guarding for high-grade in the back half of this year, can you give us some idea of what sort of grade you're looking at to the mill?

I think it's a little early to get too prescriptive about it. We're seeing a lot of things that we think will make a big difference with the very detailed work we've done in the first six months of this year.

Particularly looking at vein orientations and how we mine those veins, we really desperately need to get the assay lab turned around or operating so we can get 24 hour turnaround and sample for the underground. That will have a huge impact I think on overall grade performance.

I think we're really targeting to get the underground up to around 2 grams by the middle of next year and we'll around 1 gram so giving an overall grade, maybe next year 1.5 grams, we're at 1.3 that we're at today.

Great. Alright, thanks Brad.

Thank you. Okay just a few comments to close the call, obviously the current metal price environment is challenging.

I think that Mandalay is excellently positioned with the low cost structure to manage through this period. We've been able to maintain our dividend up to this point in time and so that certainly stands out against anybody in the sector.

And hopefully we will be able to continue to do that going forward. We do expect production sales to achieve the published guidance for the year, so that all remains on target and then looking forward into 2016 we do see that we should see improvements coming through in Björkdal as our improvement plan starts to take over there which will boost the volumes and lower cost.

We also expect better performance in Cerro Bayo as we see the cloud lift with the development of new range in Cerro Bayo as well, and hopefully we'll steer the performance of Costerfield. So looking forward to 2016 we are optimistic and we'll now will be able to maintain the current cost structure but we'll plan through it as we go into the new year.

And then finally we are willing or staying very active in animated stage at this point in time, and we're seeing a lot of things and obviously there's a lot of distress so that's mainly that we're active in. So should be, hopefully a more fairly productive second half of the year and we'll weather current metal price environment successfully.

So thanks everybody for being on the call today and look forward catching up with you later. Thank you very much operator.