Earnings call transcript: Mandalay Resources beats Q1 2025 forecasts

Mandalay Resources Corp (MND), a mining company with a market capitalization of $1.04 billion and an impressive "GREAT" financial health rating according to InvestingPro, reported a strong financial performance for the first quarter of 2025, surpassing Wall Street expectations with an earnings per share (EPS) of $0.21 against a forecast of $0.17. Revenue reached $78.06 million, significantly higher than the anticipated $58.5 million. Despite this, the stock experienced a slight decline of 1.2% in after-hours trading, closing at $5.42. The company’s robust financial position is highlighted by two key InvestingPro metrics: it holds more cash than debt on its balance sheet and maintains strong cash flows to cover interest payments.

Key Takeaways

• Mandalay Resources reported a 41% year-over-year increase in revenue.
• The company achieved a 152% increase in net income compared to the previous year.
• Cash position remains robust at $88.3 million, with no debt.
• Production challenges at the Costerfield mine led to reduced output.
• The stock price dropped by 1.2% despite the earnings beat.

Company Performance

Mandalay Resources showcased impressive growth in the first quarter of 2025, driven by favorable metal prices and strategic operational improvements. The company reported a substantial increase in both revenue and net income, reflecting its ability to capitalize on higher gold and antimony prices. With a return on equity of 16% and return on invested capital of 12% over the last twelve months, the company demonstrates strong operational efficiency. However, production challenges at the Costerfield mine resulted in decreased output, which may have tempered investor enthusiasm. Detailed analysis of these metrics and 10+ additional ProTips are available through InvestingPro’s comprehensive research reports.

Financial Highlights

• Revenue: $78.06 million, up 41% year-over-year.
• Net Income: Nearly $15 million, a 152% increase from the previous year.
• Cash Position: $88.3 million with no debt.
• Free Cash Flow: $11.2 million.
• Cash Operating Cost per Ounce: $13.48, a 30% increase.
• All-in Sustaining Costs: $2,004 per ounce, a 40% increase.

Earnings vs. Forecast

Mandalay Resources exceeded expectations with an EPS of $0.21, compared to the forecasted $0.17, marking a 23.5% positive surprise. The revenue of $78.06 million also surpassed the expected $58.5 million by 33.4%. This performance highlights the company’s effective cost management and operational efficiency despite increased operating costs.

Market Reaction

The stock’s 1.2% decline to $5.42 in after-hours trading suggests a cautious market response. While the earnings beat was substantial, concerns over rising operating costs and production challenges at the Costerfield mine may have contributed to the muted stock reaction. The stock has shown strong momentum with a 20% year-to-date return and trades near its 52-week high of $10.78, indicating underlying investor confidence. According to InvestingPro’s Fair Value analysis, the stock is currently trading at fair value, with an Altman Z-Score of 8.24 suggesting strong financial stability.

Outlook & Guidance

Looking ahead, Mandalay Resources anticipates stronger production in the second quarter but expects higher capital and tax payments. The company plans to focus on exploration at the TrueBlue, Sub KC, and Brunswick South deposits. Additionally, a proposed merger with Alkane Resources is expected to enhance market capitalization and production capabilities.

Executive Commentary

CEO Fraser Boucher emphasized the company’s strategic growth initiatives, stating, "Transformation through disciplined execution, prudent capital allocation, and continued exploration investment." Boucher also expressed excitement about the exploration potential, particularly at True Blue, and confirmed that the merger aligns with the company’s growth strategy.

Risks and Challenges

• Rising operating and sustaining costs could impact profitability.
• Production declines at key mines may affect future earnings.
• Higher capital and tax payments are anticipated in the coming quarters.
• The success of the proposed merger with Alkane Resources remains uncertain.
• Market volatility and metal price fluctuations could affect financial performance.

Q&A

During the earnings call, analysts inquired about the rationale behind the proposed merger with Alkane Resources, which management described as a strategic fit to increase liquidity and market scale. Questions also focused on the timeline for the merger, with shareholder materials expected by early June and a vote planned for June or July.

Full transcript - Mandalay Resources Corp (MND) Q1 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to Mandalay Resources Corporation’s Q1 twenty twenty five conference call. Today’s call contains forward looking statements, which reflect the current expectations or beliefs of the company based on information currently available to the company. Forward looking statements are subject to a number of risks and uncertainties that may cause actual results of the company to differ materially from those discussed in the forward looking statements. Factors that could cause actual results or events to differ materially from the current expectations are disclosed under the heading risk factors and elsewhere elsewhere in the company’s annual information form dated 03/28/2025, available on SEDAR and at the company’s website.

Mandalay Resources disclosed its financial results at market close. You can access their consolidated financial statements and MD and A on either either the company’s website or through our profile on SEDAR. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. Joining us today on Mandalay’s call are Fraser Boucher, president and CEO Hashim Ahmed, executive vice president and CFO, Ryan Osterberry, chief operating officer, and Chris Davis, our VP, operational geology and exploration. I would like to turn the call to mister Fraser Boucher.

Fraser Boucher, President and CEO, Mandalay Resources: Thanks, operator, and for everyone joining the call today. This morning, we’ll primarily review Mandalay’s first quarter performance with some commentary on the proposed merger of equals with Helicane Resources. Please note all dollar references made in this conference call are in US dollars. Mandalay started 2025 on a good note. The theme this past quarter was clear, transformation through disciplined execution, prudent capital allocation, and continued exploration investment.

In the first quarter, we delivered a 41% year over year revenue increase to $78,000,000 supported by strong metal prices. We also achieved a 152% year over year increase in net income to nearly $15,000,000 Importantly, we ended the quarter with over $88,000,000 in cash and no debt, a testament to our operational consistency and financial discipline. Free cash flow generation over the next quarter at similar gold prices to this past quarter will not quite replicate Q1 due to planned increased capital investment and taxes owing. Subsequent to the quarter, we announced a transformative transaction for Mandalay with a proposed merger of equals with Elkane Resources of Australia. The combined company will have three well established cash flowing mining operations in tier one jurisdictions, a pro form a production base of approximately 180,000 ounces by 2026, and enhanced scale to pursue a rerating opportunity.

That rerating opportunity is based upon increased free float, share trading liquidity, indices inclusion, and dual listing on both the Australian Stock Exchange and Toronto Stock Exchange. We’re confident this is the right strategic move to unlock long term value for both Mandalay and Alkane Resources shareholders. I would now like to hand the call over to different members of my executive team to recap the solid quarter results, which have followed on from the exceptional year we had in 2024. First, Ryan Ostaberry, our Chief Operating Officer. Ryan?

Ryan Osterberry, Chief Operating Officer, Mandalay Resources: Thanks, Fraser. From an operational standpoint, quarter one of twenty twenty five was a mixed but expected quarter. Our consolidated gold equivalent production was 22,342 ounces, down 10% from quarter one last year, but in line with guidance. Starting with Costerfield. As planned, quarter one of twenty twenty five was a transitional quarter for the site.

We produced just over 9,005 ounces of gold and 161 tonnes of antimony. This 20% year over year reduction in gold output and 60% reduction in antimony was due to lower head grades as we mined scheduled areas of the Shepherd And Yule Veins, which were at the lower end of our grade distribution. Gold head grade averaged 0.96 gram per tonne, down from 12.4 gram per tonne, and antimony dropped to just below 1% from 2.2%. Mining volumes decreased 18% year over year to just over 25,500 tonnes. This was a reflection on the production being mined from the extremities of the deposit, hence the mucking and backfilling cycle times were substantially increased.

Coupled with a dedicated safety drive, which slowed production, that was adopted for quarter one this year after a poor performance in this discipline at the end of twenty twenty four. Capital development was focused on establishing a new exploration drill drive. On the processing side, we delivered a 5% increase in throughput to just over 34,400 tonnes. The improved two stage crushing circuit is performing well, feeding a finer and more consistent product to the mill, which contributed to more stable plant performance despite lower grades. Looking ahead, once the new tailings storage facility comes online in quarter two of twenty twenty five, we expect to see a notable reduction in tailings related costs.

The facility will provide approximately six years of additional capacity and remove the need for necessary pay fill operations that have inflated our unit costs in recent quarters. As for Bjorkdale, the quarter showed some encouraging signs. We produced 10,827 ounces of gold, a 4% increase from quarter one of twenty twenty four, driven by improved underground mine grade from the main zone and enhanced mill throughput and recoveries. Underground ore mine decreased 9% to just over 225,000 tonnes due to restricted access to one of our production fronts in February as well as temporary equipment constraints, specifically a shortage of loader availability impacting backfilling activities. That said, we saw a strong rebound in ore development advancing nearly 1,100 meters, a 29% increase from quarter one of last year, aided by the mobilization of a dedicated contractor to bridge the gap on delayed 2024 development.

Processing volumes were just over 355,000 tonnes, up 3%, thanks to operational improvements and finer screen trials that increased plant reliability and efficiency. We also made strategic equipment investments, including a new cable bolter and advanced our equipment replacement program, which is essential to sustain productivity and improve operating consistency in the quarters ahead. To summarize, both sites executed to plan, and we are now better positioned for stronger production and improved cost performance in the second half of the year. Now over to Hashem.

Hashim Ahmed, Executive Vice President and CFO, Mandalay Resources: Thank you, Ryan. Q1 twenty twenty five was a solid financial quarter for Mandalay. We delivered strong revenue and profitability despite lower production and higher cost pressures. Revenue increased 41 percent year over year to 78,000,000, up from 56,000,000 supported by higher realized prices, as gold average $3,046 per ounce, and antimony average nearly $35,000 per ton, more than double last year’s price. Net income rose 152 to 15,000,000, up from 6,000,000 a year ago, reflecting that price leverage, even as we faced inflationary and operational cost pressures.

That said, cash operating cost per ounce increased 30% to $13.48 dollars, and all in sustaining costs rose 40% to $2,004 per ounce, mainly due to lower consolidated gold equivalent production down 10%, increased sustaining capital, particularly infill drilling at Costerfield, and accelerated development at Bjorkdal. Capital expenditures totaled 16,700,000.0, up from $13,100,000 last year. These investments were front loaded and in line with our 2025 plan, with key allocations including completion of the new TELEX facility at Costerfield, ramp up in mine development and strategic underground equipment replacement at Beocto. Despite this higher spend, we generated 11,200,000.0 in free cash flow, maintaining a healthy financial position. We ended the quarter with 88,300,000.0 in cash and no debt after fully repaying our 20,000,000 revolving credit facility in 2024.

We also have $35,000,000 in undrawn credit facility. We remain well capitalized and focused on disciplined capital allocation that supports long term value creation for our shareholders. I would like to now pass the call to our VP exploration and operational geology, Chris Davis. Chris?

Chris Davis, VP Operational Geology and Exploration, Mandalay Resources: Thanks, Exploration continues to be a strategic pillar of value creation for Mandalay. At Costerfield, drilling is in a ramp up stage for TrueBlue with three drill rigs turning and a fourth scheduled to commence soon. Efforts are focused on delivering extension and greater context around the exciting results obtained late last year. As a reminder of our February resource and reserve update, TrueBlue showed impressive growth, quadrupling its inferred gold equivalent ounces to 96,000 at an exceptional grade of 22.6 grams per tonne. This is a compelling pipeline target that may become our next minable zone.

As for near mine, we drilled aggressively across Cuffley Deeps, Sub KC and Kendall zones. We’re investing in infill drilling to convert inferred resources into indicated and to extend high grade mineralization. In Q2, drilling will commence on the Sub KC conversion program as the underground platform is completed. Drilling will also test the depth extension of the Brunswick South deposit. Meanwhile at Bjorkdal, drilling has been focused on North Zone and the Eastern Extension area, building on the encouraging results of 2024.

We also plan to recommence work at the Storheden target, roughly 800 meters northeast of the current mine. The expanded resource base helped increase reserves by more than double the depletion of 2024, extending the mine life to over ten years. As of our February 2025 update, Mandalay’s combined reserves grew 9% year over year to 815,000 gold equivalent ounces, while a combined measured and indicated resources increased 14% to almost 2,000,000 ounces. I would now like to return the call to Fraser.

Fraser Boucher, President and CEO, Mandalay Resources: Thank you, Chris. To summarize, Q1 twenty twenty five was a solid start to the year, highlighting disciplined capital deployment, high metal prices, and strong financial performance despite temporary in situ metal grade headwinds. We will enter q two with momentum and expect stronger production, although it will be coupled with higher capital plus tax payments. But there will be lower capital spending expected in the second half of the year. We are also excited by the exploration potential, most notably at True Blue, our cost of field operation in Australia, reflecting exciting gold and antimony drill intercepts, and where three drills are turning and a fourth will be mobilized soon.

Exploration remains a key strategic pillar, delivering value for shareholders, and we are committed to investing in this part of our business. Let me conclude by taking a few moments to discuss the combination of Mandalay Resources with Elkane Resources. As noted previously, we see this as a true merger of equals. In fact, based on the exchange ratio, Mandalay shareholders will own 55% of the pro form a company and will have three of their current Mandalay directors, including myself, sitting on a six board seat. And of those six directors on that board, there will be a new chair who is independent of both Mandalay and LKing.

The shares of the combined company will be dual listed on the TSX and ASX. This will give Mandalay shareholders easy access to trading liquidity while providing exposure to the potential for a rerating driven in part, as I stated earlier, by indices inclusion. Most notably, the ASX three hundred, but also the JDXJ, and this should drive incremental demand for the shares. Since announcing the transaction, we have seen an increase in the share price of both Mandalay and Elkane, in addition to price outperformance relative to our peers. More importantly, I have seen and heard firsthand how excited both Mandalay and Alcane shareholders are about the potential of this transaction.

I spent a week in Australia marketing in support of the transaction and will soon spend another week and a half marketing in North America and Europe. The reaction in key financial centers such as Sydney and Melbourne was very encouraging. Investors in Australia, Asia, North America and Europe see the powerful platform this combination presents with enhanced scale of over $650,000,000 US in market cap, that’s about 900,000,000 Canadian in market cap and just over 1,000,000,000 Australian in market cap, all pre re rate. Also diversified operations in exceptional jurisdictions and with exciting organic exploration potential across the portfolio. All

Fraser Boucher, President and CEO, Mandalay Resources: of

Fraser Boucher, President and CEO, Mandalay Resources: this is underpinned by a robust balance sheet that pro form a will be significantly net cash positive at close and which provides a platform for future growth with notable free cash flow generation and healthy operating margins. At this point, I will be pleased to open up this conference call for any questions. Operator, if you could please provide instructions to everyone participating if they have any questions they would like to ask. Thank you very much.

Conference Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q and A roster.

Fraser Boucher, President and CEO, Mandalay Resources: Just tell her to. Yeah.

Conference Operator: I’m showing no questions at this time. I would now like to turn it back to Fraser for closing remarks.

Webcast Moderator: Hi, Fraser. There’s actually a couple of questions that came across the webcast. The first one is, given your financial results during the quarter were excellent, revenue and earnings were both up significantly. Based on a strong performance and momentum in your business, why merge with Alkane now?

Fraser Boucher, President and CEO, Mandalay Resources: Yeah. Look. Thanks for that. Again, to emphasize, we strongly believe that this is a great strategic fit for all the reasons I’ve shared really since I joined the company two years ago in terms of a desire to grow, to get increased trading liquidity, increased capital market scale, diversification, remain in tier one jurisdictions, index listing, so all of this lines up exceptionally with LCAME, where we started discussions seven or eight months ago. So we think it’s a great fit both strategically and operationally, and it’s met all our stated criteria.

So irrespective of both our and their recent strong performance, to us that does not change the overall thesis and conclusions that we’ve drawn in terms of this merger. So we’ve done a lot of due diligence inside, and the respective boards of each company have strongly recommended this transaction.

Webcast Moderator: There’s another one. What is your outlook for antimony? Man sorry. Was mandolins antimony production an important factor in this transaction?

Fraser Boucher, President and CEO, Mandalay Resources: Mandalay, well, look, I don’t usually try to predict what the the price of antimony is going to be, although we do believe it will continue. There’ll be continued strong demand for antimony, and it certainly has helped with our overall financial performance. It was certainly a nice side benefit, but this was not a leading driver in terms of why the deal was done by either side in terms of our antimony production. It is a strategic mineral. We as a pro form a company will remain the largest producer from a single company in the Western world of antimony, and it’s rightfully attracted more investor attention lately and certainly has contributed to valuation.

So Alkane’s excited about that as well. But, yeah, I can’t really give a prediction on what the cost or the price of antimony is going to be going forward.

Webcast Moderator: Thanks, Sergei. Last one. As a Mandalay shareholder, what do you expect the transaction to close, and what do I need to do?

Fraser Boucher, President and CEO, Mandalay Resources: Look. Both sides, of course, are gonna require, shareholder meetings, and we’re working on the materials now for the Mandalay shareholders, the circular information. We expect that those materials, which will include information on Alkane’s assets converted to 40 three-one hundred 1 from JORC as well as pro form a financials. We hope to have that filed by early June at the latest, shareholder vote targeted about twenty five business days, let’s say one month after that, by the June or early July latest. So those materials will be going out, expect close after that vote to be three or four weeks later at most, we would hope in July.

It’s subject to Australian Foreign Investment Review Board and Swedish Foreign Direct Investment approvals, although we feel that’s a very low risk that that’s not going to be supported, it’s more a timing issue, that might take an extra two or three weeks, but we will certainly keep everyone informed, but really the takeaway for now is the Mandalay shareholder, you don’t have to do anything and I do emphasize, this will be dual listed, there will be no delisting going on here, the Mandalay shares that close will convert to an LK share, but they will still trade on the Toronto Stock Exchange where we expect healthy liquidity on both exchanges. We’ll keep everyone posted and remember, the Mandalay board has unanimously recommended that Mandalay shareholders support this transaction by voting in favour, so we hope that we’ll see success there and we’ll keep the market informed.

Webcast Moderator: Yeah, there are no further questions.

Fraser Boucher, President and CEO, Mandalay Resources: Okay. Look,

Fraser Boucher, President and CEO, Mandalay Resources: thank you everyone for joining. And look, as we advance the Alkane transaction, our focus does remain on maximizing shareholder value through both continued operational execution, ongoing exploration work, as you’ve heard about TrueBlue and Sub KC at Costerfield, as well as North Zone and Storheeden at Bjorkdal, as well as starting to work on ensuring there’s a smooth integration with the two companies on successful close. Again, this transaction is fully aligned with our growth strategy that was set and established. Two years ago when I joined of a vision to become a mid tier gold producer, and it certainly establishes a platform for enhanced cash flow generation and greater market visibility and what we strongly believe will be a significant rerating. So thank you, everyone, for your time.

Operator, thanks for hosting the call.

Conference Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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