Mark Sander - President and CEO

Chris Thompson - Raymond James

Thank you, Manny. Good morning, everyone, and thanks for getting up early to join our Q2 conference call.

There are lots of moving parts in Mandalay right now and I hope that by the end of this call, all your questions can be answered to provide some clarity. Just in summary, the headlines are revenue in Q2 was 44.1 million.

We had adjusted EBITDA of 12.1 million and a consolidated net loss of 10.1 million. And that net loss does include provisions for the anticipated ongoing impacts of the Cerro Bayo flooding incident and should those impacts be within our expectations, we’ve got the financial impacts accounted for as of these earnings.

Where obviously the Q2 performance was impacted by the curtailment of operations on June 9 at Cerro Bayo in relation to the flooding event, the mine remains closed pending completion of our risk assessment and investigation around the causes of the event. That project is contracted out to an independent third party and they are on track for completion of that within one to two months.

The issue that has arisen in the last few days is that a Chilean regulator is going to want to have a say in the adequacy of this risk assessment and we will have to apply for reopening of the mine if we deem that it is – we can do this for acceptable risk and that will add another month or two to the process of the opening. For that reason, we have revised our 2017 production guidance assuming no Cerro Bayo production or capital spending for the rest of the year, as we’ll talk about in a minute.

Things remain on track at Björkdal and Costerfield and there are no changes there. Looking at the other operations.

We are quite pleased with the performance of Björkdal in Q2. We delivered record gold production for the quarter under Mandalay ownership and at quite a low cash cost per ounce of about $824 an ounce.

We expect that to come down further as the good production performance continues. I would note that the annualized rate of production for the quarter was about 64,000 ounces a year, which approximates the target production rate that we had when we purchased the mine.

The grade control program continues to function well and the addition of haulage capacity underground and blast-hole drilling capacity in the open pit has performed exactly as planned to deliver a higher rate of gold in that higher grade ore to the plant. In addition, the plant has performed very well.

We have not only higher recoveries in relation to the higher head grades but we also have commissioned our flotation expansion project and preliminary results suggest that we will get at least the 1.7% of recovery increase that we planned. We are conducting the final test in August and we’ll have a post-completion review at the end of the quarter, Q3.

On the other side of the world, Costerfield continued to deliver dependable performance. We do have a very stable operation there where the production is dependent precisely on the head grades delivered through the period, which are varying as they should in our underground mine but they’re varying within our expectations.

And there are reconciliations to the block models are quite close. We expect that level of performance to continue for the rest of the year and into 2018 and have or are in the process of completing our assessment on the Brunswick vein extension to the mine life.

Also during the quarter, we completed a number of balance sheet activities. First of all, it’s old news that we repaid half of our exchangeable loan with the gold bonds and the remaining 30 million into the other half.

To replace the half that we repaid, we have instituted an up to $40 million revolving credit line with HSBC. We have not yet drawn on that but that should give us plenty of headroom and liquidity to complete what we have to do at Björkdal, bring online Brunswick should it prove to be the right thing to do and reopen Cerro Bayo when it becomes the right thing to do as well based on the risks and the economics.

We also have the ability to act on acquisition opportunities that may arise, although as you can imagine at our current share price we have to be very careful with these – are accretive to our current shareholders. So at this point, let me open it for questions.

Hi. Good morning, Mark.

Congratulations on a good quarter. Just I guess looking at the grades at Costerfield and Björkdal grades through the mill there.

Obviously you have a nice step up from both operations. I guess the obvious question is, are these sustainable at these levels?

Okay. So let’s take on Björkdal first.

Björkdal aside from the normal summer vacation staffing issues which are just about over for this summer in Sweden, we believe the rates of delivery of the higher grades are sustainable. We did get a boost in June from higher than planned grades in certain parts of the underground and open pit.

So those unexpected impacts come and go. But yes, the rates of delivery and the overall design of the process is matched now to be sustainable.

If it was, let’s hope and see. Perhaps not at the 64,000 ounce a year rate but certainly at the rate that we gave in the guidance.

So there is no impact of higher recoveries for the floating expansion, completion in the Q2 results. That installation was commissioned just after the start of Q3.

So there will be some net improvement to Q2 at that point.

Okay, great. And can you just give us a sense of the split between the open pit and underground?

Again in terms of tonnage, it’s about two-thirds underground and one-third open pit.

And any sense of grade.

We have an excellent sense of grade. We typically do not split that out in our public reporting.

We’ll call it the – we’ll just estimate that the grades of the underground are typically depending on the timeframe 1.5 to 2.5 grams a ton. And the open pit is 1 to say 1.5.

As for the net – so for the net for the year-to-date, average mill feed grade is – I believe it’s 1.53 grams a ton which is actually a little ahead of plan for the year-to-date which was 1.5.

Great. And Costerfield, obviously a nice little step up in grade there.

I guess the same question; sustainable at these levels?

Costerfield is a very low tonnage production. It’s about 425 tons a day from several different ore bodies.

And the grades will vary month-to-month, quarter-to-quarter, day-to-day. All I can say is without having the life of mine plan in front of me or even the budget plan that our monthly reconciliations to grade are quite close and the grade variations that you see retrospectively are entirely within our expected range.

So what happens next quarter – and again we have a forecast that told us we’re on track for our guided performance. And what the grade is for the next quarter, I actually don’t know.

I can find out but it’s not going to help you very much in detail.

Okay, great. And then the final question --

I will – just a second, will say for Costerfield the tons are absolutely delivered every week, every month, every quarter and the total spending for the site is very well controlled. And the only significant variable over time is the grade, which again we do expect to be very low and again in retrospect in average to reconcile us very well.

Okay, great. And then just finally just going back to I guess the costs at Björkdal.

If you do the simple calculation to work out a dollar per ton, slightly higher I guess in the quarter that you just quoted. Would that be what we should be anticipating on a forward-looking basis?

We’re always looking to reduce those. I would think – what I can say is that and we’re always looking for ways to improve the rate of delivery of the high grade ore.

And so far all the cost increases we’ve put in place, which are for things like grade control geologists and the onsite assay lab and the mapping and sampling to determine which parts of the veins to take and which parts to throw away, all those in net have cost us less than the amount of ounces that we’ve added to the production. And as long as we can find more of those, we’ll do them.

Our gold map – by gold map I mean our spreadsheet that we created to look at the metrics of production rates versus cash costs suggest that when we’re in the 60,000 to 70,000 ounce range, cost in $700 cash cost per ounce range. However, we would expect – so the cost per ounce for this last quarter was a little higher than we might expect given the 64,000 ounce a year production rate.

But they included the startup costs for the extra haulage and the transition to a new blast-hole drilling contractor. And I’d say we’re on track for – when we maintain these rates to deliver modestly lower cost that we did in Q2.

Thank you, Mark.

Thank you all for joining this call. As always, we remain committed to being transparent and clear with you all on the state of your company.

And again, we’ve realized there are many moving parts at the moment and there will be an occasion to communicate I’m sure quite often as to how thing are becoming clear. I would say that our strategy does remain intact and our ability to execute on it does.

The Cerro Bayo event was highly tragic and certainly established there a setback, but again I would encourage you all to look at what’s happening at the other operations and with our financial management and watch for our ability to continue to execute our acquisitions and turnaround strategy. Thank you very much.