Mandalay Resources' mines "profitable and sustainable" at current prices

Lower gold and silver prices took their toll on Mandalay Resources’ (TSE:MND) second quarter but the group said its mines are still profitable and generating cash at current price levels.

Mandalay’s key operations are the Costerfield gold and antimony mine in Australia and the Cerra Bayo gold and silver mine in Chile.

Both mines operated at or near record levels over the three months to June but the slide in the price of gold and silver meant revenues declined by US$10.6mln to US$35.9mln, while net income fell to US$3.1mln from US$19.2mln. The dividend for the quarter is 0.66c per share.

Brad Mills, Mandalay’s chief executive said realised metal prices for the quarter were even lower than average prices because prices fell steadily throughout the quarter.

This led to downward price revisions on open concentrate sales contracts that had not yet been finally settled at quarter end, knocking US$2.8mln from revenues.

“Despite the negative impact of lower metal prices and the contract price adjustments, Mandalay's low cost operations helped the company remain profitable and generate significant cash flow," he said.

Cash cost of production at Costerfield in the quarter was US$934 per gold equivalent ounce produced and the all-in cost was US$1,178 per ounce gold equivalent produced.

The cash cost of silver production at Cerro Bayo was US$6.12 per ounce silver produced net of gold credits and the all-in cost was US$11.54 per ounce silver net of gold credits.

Mills added that these cost benchmarks show “both operations are profitable and sustainable at current metal prices."

In addition to its dividend, Mandalay spent $1.1 million to repurchase 1.38mln shares, which Mills said represented the company’s strong view that the shares represent excellent value at current prices.

"Going forward, we expect to release the results of the Preliminary Economic Analysis of the Cuffley development project at Costerfield in the third quarter, together with interim exploration results at both mines."

Production guidance for 2013 remains 18,000 - 21,000 ounces gold and 2.8 - 3.1mln ounces silver from Cerro Bayo and 2,800 - 3,000 tonnes antimony and 20,000 - 25,000 ounces of gold from Costerfield.