Brad Mills – Chief Executive Officer and Director

Benjamin Asuncion – Haywood Securities Mike Parkin – Desjardins Capital Markets Chris Thompson – Raymond James

Thank you, operator. Good morning everybody and welcome to the fourth quarter and full year conference call.

I will make some brief remarks and then open the call up for question in a few minutes. Just for context Mandalay achieved its record revenue year in 2015, with $194.5 million revenue, it also achieved its second best ever year in terms of EBITDA generated at $68 million.

We also delivered and paid record dividends of $12.9 million during the year. So from a financial perspective the company performed well during the quarter and that’s something that we’re quite proud of.

Looking at the fourth quarter itself, there were few swings roundabout that I want to touch on. So revenue during the fourth quarter was $43.6 million was impacted by one shipment being missed from Cerro Bayo that was scheduled to go out in the 31 of December.

We don’t why it didn’t make it. That put it into the first quarter.

And EBITDA came in just at $14 million. On the earning side, there were three abnormal or special items that we took in the fourth quarter.

I think in common with probably every mining company on the planet the auditors did a complete review of all of the carrying value of all of the assets and as a consequence of that we ended up taking a small write-down on the La Quebrada Exploration Project, which we’re currently holding for sale. That was a $2.3 million adjustment.

We also in the same way they asked us to be more aggressive in our depreciation in the quartile. Purchase price against current reserves as opposed to getting to hold as much money on the inferred and future exploration potential.

That impacted depreciation during the year $1.5 million which we took in the fourth quarter. And then finally, there was a tax adjustment that occurred in Australia.

And had to do with what I would describe as a relative arcane [ph] as it really impacts all as it relates to the capture from past tax losses and that was resulted in an adjustment of $1.4 million in the quarter. So with all of those in place the company ended reporting net loss of $3 million and our $0.01 a share and before that we would have been about $3 million, earnings at about $0.01 a share, income for the quarter in all of those are not involved.

So the company traded, I think in pretty good shape given the overall metal price performance during both the year and the quarter. A couple of statistics that are probably coupled to [ph] hear about is that we look at the change in year-on-year prices, we saw for the full-year that gold was down by 6.1%, silver by 13% and NY by 27%.

So that was the price impacts that we experienced during the course of the year across the operations. At the same time, we benefited significantly from lower exchange rates versus U.S.

dollar with the Australian dollar appreciated by 17%, Chilean peso by 15%, and the Swedish krona – sorry Chilean peso by 17%, and the Swedish krona by 15%. Petroleum prices also came in at 40% lower than the prior year and also have a material impact on cost during the year in the quarter.

If we look at the individual operations themselves starting with Costerfield, Costerfield has been one of our really strong performers during the year and continued to be a very strong performer in the quarter, and delivered solid on budget, unit volumes with record low cost at $540 per ounce of gold equivalent produced and $760 on all-in basis. We expect Costerfield to continue to perform at about that level for most of the coming year.

We will – guys have done just a really good job there, so we see that as being potentially stable at this point in time. There by we started to deliver the first development ore coming from the Delia Southeast mine to transition away from the older mines at Dagny and Fabiola and that had a favorable impact on grade in the quarter had brought cost down back into the sub-$5 per ounce range silver net of gold credit, which is more what we expect to see at Cerro Bayo over time.

Also at the end of, or actually I think in just the last few weeks we received the mining permits to commence commercial production in the Coyita mine, so that will allow us to start development ore coming from the Coyita mines well and much of this year will be the transition in both development ore and eventually stoping ore in Coyita South East and the Coyita mine while will – should improve the grades throughout the course of this year. If we look at Björkdal, Björkdal is the one of our projects that is in kind of its major improvement phase after the acquisition in the fall of 2014.

We spent a lot of time last year building a base for fundamental improvement and changes in Björkdal and those started to get some traction towards the end of the fourth quarter. We finally got – we also got for working out on time scale that gave us the ability to start to be real time grade control of the underground line.

We ran two large 10,000 tonne grade control tests, particularly on development ore, in mine. And those both proved very successful and demonstrated that we can reject between 30% and 50% of the on-vein material that was being mined and historically have been put through the mill.

So it tells us that not only can we improve the grade, we can also reject a significant amount of [indiscernible] materials that is below economic grades process. The challenge now is to implement those practices on a day-to-day basis and also incorporate them in the stoping practices in the mine.

And that does requires a fairly significant amount of change in the way the mine operates and so the challenge over the next 12 months is to implement those changes. It also requires a chain of development schedule.

So that will be a major focus of the work in 2016. But we expect all of that to sort of gradually take hold over the course of this year.

And so we should see hopefully quarter-on-quarter improvement in ounces and grade performance in Björkdal. The plant continues to perform well there.

So we’re pleased with what we see at the plant performance. One of the side effects of the grade control test that we did in December is we had multiple days where we were pushing the grade into the mill up to 2 grams to 2.5 grams.

And we did see when it happened that the mill cannot handle the very higher grade material in terms of the recovery. We started to see the losses increase.

And while the recovery in absolute sense is increasing there’s an obvious opportunity to improve the concentrated performance in terms of absolute recovery. And so that will also be a significant focus this year to come to conclusion about how to move the overall recovery in the Cortile plant from sort of the 88%, 89% level up into sort of a 90%, 90%-plus maybe 93%, 94%lower.

So that will be another part of the focus at Cortile. We did complete significant exploration in all three projects during 2015 and we will – while we have reported the raw results, we will report the reserve impacts and resource impacts of those.

I think probably before the end of next week, kind of a target is this point in time with the one exception a new underground resources in the Cortile mine, where we are continuing to work on redefining how we calculate those reserves based on the largest test, mine test that we did in December. And that will take probably another couple of months to complete that work because of the fair change in methodology that we didn’t anticipate when we started our year-end reserve calculation.

So those were kind of major highlights for the year and for the fourth quarter. Looking forward we expect 2016 to be a similar kind of operating year in terms of volumes that we had in 2015 with stable performance at Costerfield and maintaining its volumes at low cost, improving performance at Cerro Bayo with cost hopefully continuing to draw throughout the course of the year and same sort of story at Cortile, with improving performance and getting to the kind of volume raise that we like to see by year-end in the 55,000 ounce to 60,000 ounce per year running rate by the end of 2016.

So we as a group, we reviewed all of the cash flow forecasts, given current pricing at the Board of Directors meeting yesterday and reaffirmed and confirmed the dividend for the first quarter of this year. You can see if we look at the full year we ended with the cash balance essential that equals to the prior year.

And that’s after paying out $12.9 million of dividends and about $4 million of interest costs related to debt. And we see it being able to maintain that in the current pricing environment throughout 2016 as well.

So with those comments, let me go ahead and pause and turn the conference call over to the analysts for questions. Thank you very much.

Good morning guys, congratulations on a soft quarter here. I’ve just got a few questions.

May be just covering off on operations, at Cerro Bayo the MD&A was talking about some additional development requirements at Coyita. Do you see this impacting unit cost there as well in terms of having to do more, more strength to development for supports?

Not at this time, I think we are – one of the things we’re looking at is the development rates that we’re able to achieve and in the new mines and Coyita and Delia Southeast. We do see that Delia Southeast requires more ground support than we have traditionally needed and buyer three mines that we’ve have operated.

And the current plan is to probably bring in some additional contracting help particularly with the ground support issues. We don’t think that will materially impact operating cost during the year.

I didn’t touch on it, but you – but I think it might have been mentioned in the press release we had, we’re experiencing very good operating cost at Cerro Bayo on the mining side $150 a tonne mined. And so we have a bit of flexibility in terms of our cost structure, there.

And I don’t think we’ll see any real impact in the over all cost per ounce, when we kind of look at it in a overall perspective over the course of the year.

Okay. And you’re talking about commencement of stoping at Delia Southeast in Q1.

What’s the timing of when you would start to see actual production ore coming from Coyita?

Probably we should see development ore starting to come out from Coyita in the next month. So we had developed basically through the vein but we didn’t have permission to access the mine.

So we’re kind of sitting there like, we can see the vein going to camp mine. So that will pretty much straightaway allow us to get to on-vein development.

And that will immediately produce development ore. And it will take probably about three months, maybe a bit longer to build up sufficient on-vein development inventory to start stoping.

But I would expect that we would see stoping ore coming from Coyita starting probably at the second half of this year and probably in the third quarter. We will see the first stoping ore probably commencing in March in Delia Southeast.

Okay. And then in regards to CapEx the distribution is it going to be weighted along those timelines as well?

Yes, pretty much. I mean I think Cerro Bayo is pretty sort of stable CapEx profile throughout the course of the year because it’s just, it’s all meters of development.

And we will be developing both primary development in the two mines and on-vein developments at pretty constant rate throughout this year to build-up the required inventory of develop ore to support the mining rates. So it should be virtually constant throughout the year.

Perfect. And just moving on to Björkdal [ph] in regards to the recovery, can you just touch on what you're looking at on the parts so they’ll be able to list recoveries kind of from that 83% to 93%-plus that you mentioned?

Yes, we’ve done a lot of metallurgical work in Björkdal on the last year trying to understand where the losses are and the principal losses are in coarse [ph] particles that are not captured in gravity circuit and are too big to plug the flotation circuit. And so we're looking at one or two alternatives to capture that coarse [ph] one is such a very large column flotation cell that is designed to float a large particle size.

Regarding a test of that starting in about a month and the second alternative is basically to fine grind the feed to the flotation cells and reduce their particle size, so you can get the flotation that you're looking for. There’s fair difference in capital between those two, increasing the flotation capacity and particular adding very large column cells, is about $3 million cost if you have to go to fine grind it's about a 1,000 tonnes a day of fine grand that we would need to put in place.

And that’s a bit more expensive. That’s probably closer to the $10 million cost.

So if one of those two will work. The question is what's the most effective way to do it cost effective and achieve our desired results

Okay. Already these considerations in the capital guidance, it’s been outlined previously.

They are not in the capital at this point in time because we don't have a firm plan as to which way we want to go. We will know by sort of mid-year where you’re going to go with large consultation or we’re going to take a hard look at the regrind circuit.

If we go to the large column cells those could be ordered and probably installed, may be by year-end this year. So it might be a little bit extra capital this year to effect that solution if it’s putting in a new find grid circuit that will not happen this year that would be into next year’s project.

Okay, perfect. And just touching on the ore sorting you’re talking about the ability to reject ore.

And let’s take the high grades, what was the implementation of that [indiscernible] sort of intense that you did last year?

So what we’re doing on ore sorting this year is we’re doing on a large scale test, a 60,000 tonne test. We’ve actually started crushing the large low grade stockpile that will be the first target for ore sorting starting about two weeks.

And then in April/May, we will do about a 60,000 ton test of material going through ore sorting team, and I will give us all those sort of definitive answers just in terms of great uplift, great enhancements, splits, rejects, all of those come to fruition [ph]. And if we make the assumption that that worked successful, then we would need to order, probably for the full tonnage that we would consider probably three machines, the lead timeline is about six months.

And so we would probably look at making that order in the second half of this year and installation early in 2017.

Okay, perfect. So if I understand it correctly then the quarter-on-quarter improvements we’re going to see great in 2016, it’s just going to driven by the orientation [ph] of development.

And we should start to see some further improvements, either in grade and ore recoveries, which we’ll really more manifest in 2017, is that correct?

That’s correct. That’s a good shorthanded version of it.

There’s a bit more to it, which also has to do with the design of the ore reserves, and the extraction sequencing and development sequence, factors or reserves, but that’s probably too much detail, so your general assessment is correct. And it’ll take six to nine months to reorient the development to support the great control program that’s been put in place.

Okay, perfect. Then just lastly, just to touch on Costerfield, can you give us a sense of kind of what gives you excitement in terms of opportunities for growth will be on what we’ve seen in the last sort of exploration update.

Sure. So I think the work that’s been done at Costerfield continues to yield significant results and we are continuing to see very encouraging results below looking [indiscernible].

I would expect like sort of mid-year this year we’ll have a very good view as to whether we have a significant additional economic ore buy [ph] that sits below the King Cobra Fault. We just started that drilling program in the last couple of weeks.

But the early drilling looks quite encouraging. So as that all pans out and it’s really about adding significant new life to Costerfield project.

And that’s an area I think we’re quite encouraged by. And we’re also starting the broader exploration program at Cerro Bayo looking at three very significant greenfield targets that again we have a material impact on the life of that operation and many of those were successful this year.

And Björkdal as shown in the exploration update we were very successful in the drilling program in terms of defining gold mineralization in structures in just about everywhere we drill and the challenge is now converting those into reserves and resources and to continue to extend that work. So we would expect to see probably a fair bit of news coming out of Björkdal during the course of this year.

We’ll not be – we’ll be updating the open pit and depletion of the underground resource in the upcoming ore reserve statement for this – for 2015. But the full underground impact of the drilling will not be included in that and that will probably take another probably three months, may be in May, before that’s available that could be significant.

So that’s something to look forward to. But we see that as very much an interesting part of that story as it unfolds over the course of this year.

We continue to work on Challacollo main focus there is really around us carrying water resources. But we’re also doing a fair bit of additional field geology to identify kind of the next generation of resource expansion targets.

And we should have a better view of that again toward probably in middle of this year.

Perfect. Thank you very much guys.

And congratulations for another solid finish of the year. Thanks, guys.

Hi, guys. Most of my questions were answered but just a couple of things, any thoughts towards hedging the Chilean peso, diesel price on the past you guys have been kind of looking at that.

So if I understood the question correctly Mike it’s just what do we think about the Chilean peso kind of directionally?

Yes, you are looking to put any currency hedges on to lock it in or…

Yes I got it. So its Chilean peso creates very much link to the copper market.

And so kind of our – kind of your view of the Chilean peso is very much tied to your view of copper price. I think the big question probably for everybody is, have there sufficient supply side cuts between Freeport and Glencore, which are about 600,000 tons to offset the onset of mainly held Las Bambas project which is about 500,000 tons that are coming out right now.

And how is the market going to manage absorbing that changing in supply. And then the final is on the demand side, what happens with China growth in the second half of this year?

So it’s a bit of all the [indiscernible] at this point in time, where we’ve obviously seen the impact across the metals group slow in China growth and hope variety of different commodity prices. Copper is probably best positioned to any of those with low starting inventories, more aggressive supply side cuts.

If that takes hold then we would see a rebound in copper towards the second half of this year and that would probably strengthen the Chilean peso. Our view is we would probably not hedge that, we would probably let that ride.

We’re pretty bullish on gold silver prices over the balance of this year for variety of reasons. And I think our focus is really going to be on operational delivery and cost control against that.

So that’s probably our view, but probably no hedges at this time.

Okay. That’s it from me.

Thanks guys.

Hi, good morning guys. Congratulations on a good year.

So couple of questions very quickly, booked office well, can give us an idea of the underground and open pit grades that account you’ve been targeted for this year?

So I think Chris I think the average grade target for the year is about 1.4 grams-ish, I think is what the average budget is. And I don’t know the split its top of my head between underground and open pit.

I think follow-up with you later on that, but it’s probably roughly two grams of the underground and maybe a little bit 1.2 grams in the open pit, something like that. That’s probably close enough for this call.

All right, perfect thanks. And just Brad a quick comment on I guess reserve replacement reserves growth at Cerro Bayo?

So what we’ll see, we’ll see this in detail by the end of next week. Foreshadowing, we did a lot of infill drilling during the course of the year that was really designed to gain confidence on the Coyita Southeast portion of the system.

And we also spent quite a lot of time trying to build resources out underneath the middle of the lake. And that turned out to be fairly frustrating because of the very long distance drill holes and targeting those veins wasn’t particularly successful in the sense of being able to get enough intercepts to build volume.

So the short answer is we're probably going to fall a little short of our reserve replacement target this year at Cerro Bayo. All set by, it’s actually much better reserve replacement of our properties.

So what do you think of that?

Okay. Thanks for that.

And just to color, the economics obviously at current metal prices what sort of metal price will give you the confidence to go ahead with that project. And I guess this lays into another question I have as far as the M&A strategy at the moment.

Sorry, which project, Chris.

Challacollo.

Challacollo?

Yes.

Yes, so I think Challacollo, there are two issues at Challacollo that impact that question. That the first is it's really around what the ultimate capital cost is.

When we did the original feasibility study we were kind of catching the back end of the boom and capital cost looked fairly steep. We will, I think you would re-estimate that in the next six months.

In our sense as capital cost will come down by 25%. That was a material impact on the economics of the project.

And that brings kind of the probably the silver target price that you’d like to see to commit to that project below $20 an ounce so down to maybe $17, $15, or $18 an ounce kind of number. The second issue there is really the resolution of the water resources.

At Challacollo and that’s critical to the ultimate bill decision on that property. We will resolve the water one way or the other since we need to actually have a solution in hand to be able to advance the permitting on the project.

And commit to a particular solution and we're probably still four months away from having that finalized at this point in time. So those are kind of the two key things.

Let me stop there, yes.

So just quickly, a quick comment I guess on M&A, you’re seeing anything obviously you can’t names but what’s your sense as far as opportunity in the market at the current time?

We see a lot of stuff. We’ve actually been quite – working quite hard on a number of things.

There are more processes going on now for assets and mine for sales and I think I’ve never seen before in my career. unfortunately most of those are not all that is fate [ph], I think from a value creation perspective.

And so we’ve been frustrated trying to find something that we were comfortable with and in terms of its ability to deliver pad results that we’re looking for. And it kind of feels like anything that is producing with any kind of cash flow is pretty highly valued by the market let’s put it that way so that is particularly in the geopolitical jurisdictions that we look at, so looking Canada, Mexico, Chile, Northern Europe.

The big discounts in terms of valuations are mainly in the African gold, but we’re not prepared to take [indiscernible] into the African gold seen at this point time. So we continue to work on it.

We see lots of development projects and exploration projects that are hugely undervalued, but again they’re just too far away from cash flow perspectives to want to take those on at this point in time. So we will continue to do chip away at this space and see if we can find something that we could commit to and in terms of being able to add to the portfolio and deliver significant value to shareholders.

It’s been probably frustrating six months in that regard, but patience is important.

Okay, great. Thanks guys.

Thanks.

Thank you very much. So just in conclusion, I think the company is performing well in the current price environment and has been delivering on its financial objectives, being able to drive costs down toward that $700 all in [ph] cost or cash cost for the company and $900 all in cost [ph] from P&L perspective.

And that’s allowed us to continue to maintain very strong financial ratios and deliver solid dividend payments to the shareholders. We anticipate being able to continue to do that during the course of 2016 and onward.

And the key thing that really is impacting us at this point in time in terms of the ability is really the price of the commodities. The growing [ph] commodity that’s been the weakest of all of ours has been the NY price which we also have seen to start to turn the quarter.

So very significant price leverage in the current portfolio mix and good solid operating performance to underpin the ability to deliver value to the shareholders. So that’s really the message and we will continue to look at M&A with the same discipline that we have in the past.

So thanks everybody for being on call. And we appreciate all you support.