Mandalay’s coffers suffered from Cerro Bayo’s downtime
The President and CEO of Canada’s Mandalay Resources (TSX:MND), Mark Sander, dubbed 2017 as a challenging year for his company.
In a press release outlining Mandalay’s unaudited 2017 fourth quarter and full-year financial results, Sander said that the company generated 12 per cent lower revenue last year compared to 2016. Suspension of production at its Cerro Bayo underground silver-gold complex in Chile, following a flooding that took place on June 9 and killed two workers, was the main cause behind the reduced earnings.
“As expected, Cerro Bayo remained on care and maintenance through the entire fourth quarter. Staffing has been reduced to approximately 50, focused on: care and maintenance activities, investigating the cause of the inundation last June, and obtaining all permits necessary to restart and complete the life of mine plan. The company has decided that, given the range of expectations about timing of the restart permitting process, it is appropriate to impair the carrying value of the asset by $19.8 million,” the executive said.
Mandalay had to spend $12.8 million in the search and recovery efforts after the inundation, as well as in the follow-on redundancy and care and maintenance costs. From 2018 on, the Toronto-based firm expects that care and maintenance costs at Cerro Bayo will be about $6 million per year.
According to Sander, however, 2017 also saw some positive outcomes. “Lack of production from Cerro Bayo was offset by record production at Björkdal, which continues to demonstrate operational improvements. Mandalay cost of sales decreased by 15% year-on-year as relatively high-cost Cerro Bayo left the mix and Björkdal unit costs declined significantly. With the impact of lower revenue, the company generated only 4% less adjusted EBITDA and follow-on reduced net income before special items in the current quarter,” he said.
For the year ended on December 31, Mandalay generated revenue of $163 million, adjusted EBITDA (underlying earnings) of 48.6 million and adjusted net loss before special items of $10.1 million.
In other words, the effects of having to put Cerro Bayo in care and maintenance were less than expected given the breakthrough performance at Bjorkdal in Sweden, which helped the company sell 1% more ounces of gold equivalent in the fourth quarter of 2017 than in the fourth quarter of 2016.
Also in the last term of the year, the Costerfield gold-antimony mine in Australia produced 12,360 gold equivalent ounces at a "very sound" cash cost of $707 per ounce, and at an all-in cost of $902 per ounce. "We expect continued performance at these levels for the upcoming year as development of the new Brunswick lode is completed and production transitions from Cuffley to Brunswick,” Sander wrote in the statement.