Mandalay Bjorkdal Acqusition Conference Call Notes
Listened to conference call today. Divvy equates to 4.2% yield post-tx at current metals prices.
- Friendly tx. Have been working on it for 6 months from due diligence standpoint.
- Elgin – 1M M&I, 1M Inferred oz. Expecting significant growth in resources, underexplored by modern mining methods, covered by 5m of glacial till so all drilling is blind
- 17% Divvy increase with acquisition as policy is 6% of revenues. New annual payment at current metals prices is $.037 equates to 4.2% yield at current SP
- Think they can easily increase production 50% which will decrease cash costs to $700 long term cash cost target (this sounds exactly like Costerfield FYI). At end of call Brad Mills (Mandalay CEO) said they would not do acquisition unless they thought they could get production up 50% over next couple years. This would be to 75k/year level.
- In October 2013 they switched to automated (high equipment usage instead of labour) and owner, instead of contract mining. Reduced underground cost from $40 to $25 since October. Contractor could have been paid by tonne so may have had high dilution before.
- Mine is highly leveraged to tonnage and grade
- New plan is to redo mine plan as planning team is quite young so can benefit from Mandalay experience.
- Two types of ore (quartz veins and black rocks) so Ore Sorting is big opportunity to reduce tonnage through mill. Checkmate can comment on ore sorting – pretty new technology I understand.
- Elgin has another property called Lupin near Yellowknife, NWT that Mandalay communicated they will put up for sale post-tx.
- Nothing with this acquisition effects Challacollo which has two drill rigs going on it right now.
- 1.3 to 1.5M tonnes through mill permit expansion to arise in November from Swedish Mining Authority. Increase will be all underground. Focus going forward will be underground. Open pit has 8 years of reserves left though. 60-70% will be underground over next few years.
- Sustaining capex has typically been $8M/year for 40-50k gold production rate per year. Very low.
- Underground veins are about 5g/t so it is all about minimizing dilution and good mine planning to increase grade and decrease cash costs.
- Produce concentrates that go to Germany and Sweden. Elgin CEO said that Mandalay brings very strong negotiating power with concentrates buyers so there is an opportunity to increase revenue/tonne here. “Could threaten to send to Aisa which will increase European offtake terms”.
- “No more acquisitions in this current gold price cycle” per CEO. Execution story from here on out.
- Plan is that once Challacollo is up and running they will be at 300k au-equivalent ounces in this first year of Challacollo production.
