Mark Sander - CEO

Mark Parkin - Desjardins Craig Johnson - Scotiabank Chris Thompson - Raymond James

Thank you, and good morning, everyone. We have a lot to talk about this morning, it’s a very long as usual third quarter release with not only third quarter results, but updated guidance for the year and initial guidance for next year.

The headlines to take away from this quarterly results, is that despites the suspension due to the fatality at Cerro Bayo, we had a decent quarter with higher revenue and EBITDA than last year, and slightly lower net income due to some special items. Obviously, the difference there because of the lower houses produced and slightly higher cost differences price, the metal prices were substantially higher than they were last year.

I would like to stress that Cerro Bayo is back up and running in whole respects has been since after lead it was October 9. And we expect a speedy recovery from the issue.

Costerfield gave us another strong quarter and you’ll note that the I guess I’ll call it the degree of over performance has reduced, but still the absolute performance is quite high, and they are still generating substantial cash flow and returning it to the corporation, for dividends and other purposes. And Björkdal continues on track again average grades, not quite as high as they were in the previous quarter, if we look at the head grades or at least when I look at the head grade and weekly reports I can predict just about the monthly and quarterly performance by looking at what the average mills grade was during the period.

And we find that essentially [indiscernible] production is directly related to grade and unit cost per ounce is inversely related. The Björkdal we continue our work on the capital programs as you know during the quarter we approved the floatation upgrade.

This is just a simple addition of a floatation tanks to the increase to [indiscernible] and we expect 1.5% to maybe 2% increase in recovery, when that is completed in the second half of 2017. That program was moving along and it’s one of the higher capital, for the new capital items in our 2017 guidance.

And meaning while that also at Björkdal we are optimizing the clients starting inspiration whereby we would plan to sort basically everything under a gram a ton feed rate and it would not go to the mill until it’s been sorted. We expect to approve that currently in the New Year, and construction will take most of the rest of year, if not a little bit longer as we refined inside.

We’ve updated our guidance with full year, obviously gone down a little bit in ounces, most of that or all of that is due to Cerro Bayo and we’ve been communicating the issues of Cerro Bayo all year, which included the develop state of the mine and then the fatality. Now the cash cost guidance is up a little bit, and that’s due to the cost incurred at Cerro Bayo despite their lower production and in fact during the curtailment, we essentially retained the work force and made sure they were doing well.

Capital expenditure forecast coming right on track, and as you all know we’ve communicated during the year and we basically doubled our exploration spending in response to first half exploration results. And we anticipate our traditional end of year exploration update as early in January.

I would just update a little bit and say we expect significant reserve expansions overall and increasing the per average mine life at Mandalay. Moving on into 2017, we are guiding toward higher production in this year as we continue the grade improvements of Europe dollar [ph] they are part of our plan as well as Cerro Bayo returning to its proper volumes.

The cash comes per ounce we expect to be lower than the one we are forecasting for 2016. Capital expenditures are quite a bit higher.

There is a detailed list of what we get for that in the third quarter point below the table on the press release. This includes two tailings dam which were actually postponed out of 2016, so that’s actually good news, but we do need them for the life of mine at Cerro Bayo and Costerfield.

We get restarted the capital development at Costerfield to access reserves and we planned to add the end of the results update. And we also planned to start preparing the infrastructure and removing water in the Brunswick pit so that we can actually start mining in Brunswick in 2018.

So you can read through that we expect to fully justify that as a reserve addition by the end of the year. At Cerro Bayo we are again doing a tailings dam lift which is actually sufficient now or will be sufficient when it's finished to store tailings from the currently understood life of mine.

And we are also spending a bit of capital about $10 million on rehabilitating, pumping out and capital development has been Marcela vein, which is an old core vein back up with the top of the mix Cerro Bayo part of the district, where most of the core production income, there is a substantial remainder was in there. And at Björkdal with the capital mostly includes the solicitation expense and the -- we are sorry plus some stripping to get on to what we will announce as our new life of mine open pit reserves next month in December.

And exploration we are following our usual strategy of budgeting actually budgeting for failure and as low growth spending $7 million and contingent aren’t success in the first half we may approve something that will take AFEs to follow up a month on expense. With this point I'll take a stop and open field's questions.

Hi Mark its Mark Parkin here, Desjardins. Coupel of question here first on Costerfield there is fairly good update there in terms of spending on CapEx can you just over a bit if you can or if you want to wait for the reserve committed in terms of what you’re seeing a potential in the underground?

I think -- we’re still madly drilling to complete the infill program before, the depth to cut off date for the reserve update and again we’re -- I guess this is a forward looking statement, we’re expecting to add reserves and [indiscernible] and, it’s actually more than engineering, than a geologic issue to convert Brunswick and there are inferred resources in the existing Brunswick resources stables that you can find on the web. Add to and convert those slightly lower grade tones to reserves based on the excellent cost performance, of the mining cost and the milling cost again that’s much a cost related conversion as it is find the ounces in the ground conversion.

No that’s good, going to continue from the success you been having with the drill bit there on the underground tube there. Switching over to Cerro Bayo, on terms of -- can you give any kind of color on how 2018 could potentially be going like 2017, it’s certainly significant improvement over 2016.

Or is that kind of trend that we should expect to kind to continue in the 2018 or would, where you add for 2017, from given number?

So 2017, the bulk of our higher grade material will be coming from Southeast [ph], which will continue into 2018. Meanwhile in 2017, we are in [indiscernible] drifting across like as fast as we can to the high grade part of -- the high grade [indiscernible] south east.

And we should be mining there sometime in 2018, I don’t have the schedule in front of me. And then as we prepare preoccupy the Marcella vein, actually Marcella is quite high grade as well.

So we expect great pick up significantly through 2017 and 2018.

2017 could you like a back half weighted year?

Excuse me.

2017 at Cerro Bayo would be, would it be fair to say the second half will be stronger then the first half?

Yes Probably, I mean there is still, the issue with this several weeks, well actually it was a month down in [indiscernible] is we got behind a month on developing the new levels in [indiscernible] North and we need those levels to supply sort of a volume, the volume of feed for the mill and so we’re kind of a month behind our plan for trying to getting back to the traditional ore volumes in [indiscernible].

And just as Mike asked a couple of good questions, so I'll just follow-up with the Björkdal. Cost guidance little bit higher than what I was looking for just wondering if you can talk to what you're seeing as your unit costs going into 2017 at Björkdal?

We actually don't guide on cost on mining in open pit and underground separately. It's all related to the -- and I know in this case it's mostly I think related to the amount of waste that we're moving; some of its capitalized and some of its not; we're anticipating -- see in a few weeks going to release the reserves, but we've said all along this year that we expect to have Björkdal to the open pit reserves, Southeast of the main pit and to expand the -- Southeast end of the main Björkdal pit and there is some waste removal in there if you get on the life of mine plan that includes that.

So the average cost per ton milled goes out because it includes more tons of waste in the open pit than it did this year.

So, fair to make the assumption then that albeit that number looks high to some people that arguably the read through would be it's actually a positive because your open pit is -- will be expanding fairly significantly?

It’s really getting on this new mine plan. The grade itself has continued to -- versus projected to continue to increase, as we get a higher portion of our material delivered from the new levels that didn't have the proprietary control.

And I would say really this year's plan for the first time is based on a block model. Though we’ve actually been reconciled against for the last 12 months; and we're very comfortable with the reconciliations.

When we bought the mine there wasn't such a block model and now we've got the second generation and we’ll be obviously releasing the third generation next month and they are getting quite helpful in making more accurate plans.

Are you willing -- and I guess you're willing to suggest an average milled grade at Björkdal for 2017 or what your target would be?

I don't have that in my head, in can -- it's, I would be guessing but it's got to be close to 1.5 [indiscernible], I’ll have to look that up.

Just a couple of questions, just reading in some details here, what's going on with Cerro Bayo. So just looking at your 2017 guidance, I do note that it’s lower than your 2016 guidance before you revised it.

I am just trying to get my mind around what's happening at the mine here, why are you basically stepping down by way of your production from what you initially guided for this year at Cerro Bayo?

That’s a good question and really what it boils down to is regional plan for restarting Cerro Bayo had a 1,200 ton a day plan and we later expanded that to 1,400 tons a day for a couple of years and that was supported by the fact the first vein [indiscernible] had twice as much ore as we thought they did and we could actually relax about capital development and just keep plowing ahead extending the levels our further than with all possible. And that period of time has ended and we are now constrained by the rate in which we can capital develop, and what you can read through that is 1,400 tons a day is actually not sustainable and we’re dialing it back to roughly 1,200.

We are now developing in Delia South East in the south Björkdal, Costerfield right across the central park and again later this year over it Marcela which is 18 kilometers away and that’s Cerro Bayo. And that’s scared operation and we were very hard seeing that we have -- in the old days [indiscernible] back in ’12, ’13, ’14, 600 meters a month of development rate was fine.

Going forward we need 900 meters a month hence the contractor.

Right. Okay so is it true to say that’s a [indiscernible] ore is really not going to hit plants next year.

You are looking at 2018 is that really?

We are producing right now and have them for months from [indiscernible], and that is strictly average grade material, they are really high grading comes from Delia southeast and yes it's basically another year to get there with the drift however long it across the lake and develop the ramps on the southeast side. We continue to get -- the other thing about how that links to exploration, is there -- it will go right by the gap in the middle of the lake, where we don’t have drill coverage, we can't get to it from the shore.

And we will be obviously going underground with our drills and drilling that gap in. We’ve long talked about the high grades that we have seen all around the gap and we just can't figure out the structure from a distance, with 600 meter drill holes, they don’t go quite -- they can’t be targeted exactly where we want them.

And some other structures that are mineralized are different orientations so what we understand about distance in general. So there is something different going on there and we'll that view up close again when we start drilling in 2018 based on completing the drive across the lake in 2017.

Okay, just moving on very quickly to cost of field. I did notice that your cost on a unit cost basis were little higher than what I was looking for I guess in the Q3, arguably a little higher than they were in the Q2.

Obviously it's been an impressive year for the mine but, looking forward is that something that are we modeling -- actually be modeling by way of cost, on the unit cost basis?

The unit cost per ton are still doing quite well. The unit cost in dollars per gold equivalent ounce this quarter are two things.

One is the block model had predicted declining grades for 2016 and it never happened and never happened, and never happened and it finally happened. It's still well above where we planned to be.

But it isn’t as high as it has been in the previous quarters. So then -- and the other digging so it’s a bit of a reversal of the favorable FX during the quarter.

Alright and then finally, Björkdal as well, again unit cost in the Q3 is this representative what we should be modeling on a forward looking basis?

I don’t think so. We expect them to be lower on a per ounce basis, as the grade picks up, this was not in our best quarter of head grades in the mill was the previous quarter, the second quarter.

This one wasn’t quite as good and we sort of didn’t expect it to be because quite few the miners are off for the summer, in fact everybody does, and they actually have trouble holding their budgets and we end up processing a lot of a lower grades to keep the mill flow running.

So the dollar per ton figure, you would expect it be a little lower or are you’re happy with the --?

Well the dollar per ton figure that we give in the MD&A, you got to realize that includes the weighted average of underground mining and open pit or an operating waste removal. And I think the biggest single, the unit cost for example on, but it costs us to line a ton in the open pit is absolutely rock steady, that is a contractor that does that and it’s -- I forget what it is per ton.

But the point is exactly the open pit, average mining cost includes the operating waster and varies with the stripping ratio in that quarter or that month. So you’re looking at variations in ore versus waste I think in the mining cost, that we did that sort of the total that we pretty average across or the other total open pit underground and in the mine.

The mill Coster absolutely steady as well.

Okay on the grade there, grade to the mill, I think you mentioned earlier, the goal is 1.5 gram per ton to the mill?

While this the goal, the long term goal is higher than that, it's about 1.7 and again I can't put my mind on the exact number we're planning for next year but it's got to be around 1.5.

And you still processing about 3,500 ton a day, through the --?

Absolutely and that is very dependable. Yes.

And once we've finished the floatation section upgrade, the throughput will not increase but the residence time will and that's what will improve our recovery.

90% realistic there Mark?

Excuse me.

90% recovery realistic?

Well, we're 88.5% or so. 88% something like that.

90% is about right.

And then finally you did mentioned you're going to be releasing the reserve update for Björkdal before the year end?

Yes.

Is that just for the one mine and we'll wait and see what happens with the other operations in the New Year?

Yes, the issue is the modeling there is so intricate with 100s of individually wire framed veins, that we couldn't get it done with consulting help. Because every consultant in the world was busy and first quarter of last year doing all the reserves for the world's mining industry.

And we found last year we just couldn't get with the available resources, so we decided to do Björkdal off cycle and do it basically in the fall after people come back from their summer breaks in Sweden [ph]. So we'll get it done, the effective day I think is September 30th, I’m just guessing and well obviously for the year end we will have depleted through December 31st into our overall company reserve statements.

And then just finally just one more quick question, on the M&A front, can you give us a tone on where Mandalay is sitting right now?

Excuse me I missed the first half.

Sorry, on M&A, I'm looking for -- what are your views in the marketplace right now, you're still looking -- can you give us a sense of --?

We are looking, we continue to see the advanced development projects are way overpriced. And we could not make our shareholder return targets with most of the undeveloped projects around, but we did make an offer on a producing line.

We're unable to complete that with [indiscernible] and we see better pricing on both production and volume -- on producing volumes and some of the less, I'll call the second tier jurisdictions and we've been talking about that for a couple of quarters. There's a risk we'll trade off that we would be willing to put one slightly higher risky asset in the portfolio against our three rock steady jurisdictions we have already.

If we could find the right project. We're looking intensely.

Okay. Thanks we are getting up early and attending this call.

I'll be available through Greg the IR person at Mandalay that’s listed on the bottom of all the press releases and to respond the questions over the next few days and few months. I look forward to finishing out this year in the way that we’ve outlined in the updated guidance.

And actually getting our operations on track for a significant investment in 2017 and extending life of mine in all three assets. Thanks very much.