2015 BUILDING VALUE ACROSS THE CYCLE Efficiency Gains at Mandalay - - PowerPoint PPT Presentation

Efficiency Gains at Mandalay Resources Costerfield Operations through a focus on People and Culture

BUILDING VALUE ACROSS THE CYCLE

IMARC: NOV 2015

Andre Booyzen, General Manager – Australian Operations, Mandalay Resources

This presentation contains "forward-looking statements" within the meaning of applicable securities laws, including statements relating to life of mine production plans, exploration plans and the growth and strategy of Mandalay. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things: exploration results or production results not meeting management’s expectations; capital, production and operating cost results not meeting current plans; and changes in commodity prices and general market and economic conditions. The factors identified above are not intended to represent a complete list of the factors that could affect Mandalay. A description of additional risks that could result in actual results and developments differing from those contemplated by forward looking statements in this news release can be found under the heading “Risk Factors” in Mandalay’s annual information form dated March 31, 2015 and in its final prospectus dated September 2, 2014, copies of which are available under Mandalay's profile at www.sedar.com. Although Mandalay has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward- looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Quality Control and Assurance

Quality control and assurance programs are implemented in line with the standards of National Instrument 43-101. The exploration programs at Costerfield and Bjorkdal are supervised by Chris Gregory (Member, Australian Institute of Geoscientists, VP of Operational Geology for Mandalay and a “Qualified Person” as defined under National Instrument 43-101. Mr. Gregory regularly visits Costerfield and Bjorkdal, and supervises the collection and interpretation of scientific and technical information contained in this presentation. The exploration programs at the Cerro Bayo and Challacollo projects are supervised by Scott Manske, Chief Cordilleran Geologist of Mandalay Resources, and an Oregon registered Professional Geologist. A “Qualified Person” as defined by NI 43-101, he has reviewed and approved the technical and scientific information on these projects contained in the presentation.

• Dr. Mark Sander (Member: AusIMM), President of Mandalay, has visited the Costerfield, Cerro Bayo, Challacollo, and Björkdal and has

supervised the preparation of this presentation. All currency references in US$ unless otherwise indicated

Forward-looking Statements

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1. Mandalay Resources 2. What Were The Challenges 3. Options Available To Us 4. What We Achieved 5. How We Achieved Transformation

People and Culture

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A Values-Based and Value-Focused Company

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We create exceptional shareholder value through the acquisition of undervalued assets that can rapidly become cash generative, self-fund exploration, establish and maintain high operating margins and return cash to shareholders within a planned period of time. Mandalay is committed to operating safely and in an environmentally responsible manner, while developing a high level of community and employee engagement WE ARE SUCCESSFUL WHEN:

Our employees live and work safely and experience the personal satisfaction that comes with high performance and recognition The communities in which we operate value our presence Our environmental impact is minimized and causes no permanent harm We have a large, diversified set of customers who are delighted with and compete for our products Our shareholders realize a superior total return on their investment and support our corporate values. Our values are visibly demonstrated by strong local management, at the point of impact with or stakeholders, and co-ordinated across the Company for maximum effect

Profitable and Dividend-Paying (5.3% yield)*

*Trailing 12 months dividends divided by current market capitalization

2009

• Costerfield, Australia
• Gold & Antimony

2010

• Cerro Bayo, Chile
• Silver & Gold

2013

• Challacollo, Chile
• Silver & Gold

2014

• Björkdal, Sweden
• Gold

Delivering Value at Mandalay

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1. The Company defines EBITDA as earnings before interest, taxes and non cash charges/ (income). EBITDA should not be considered by an investor as an alternative to net income or cash flow as determined in accordance with IFRS. 2. Annual cash dividend paid quarterly, based on 6% of the Company’s trailing quarter’s gross revenue and the future cash requirements of the Company

TIMELINE

2015 Quarterly Financial Measures Revenue, EBITDA(1) & Dividends(2)

Revenue EBITDA Dividends

$4.0 $3.4 $3.0 $2.6 $24.3 $18.2 $11.5 $56.8 $50.2 $43.3

50 100

Q1- 2015 Q2 -2015 Q3 - 2015 Q4 - 2015 US$ MM

50% 100% 150% 200% 250% 300% Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Cumulative % Value Change Since Q3 2009

Mandalay Cumulative Returns 11% Annual Compounded Rate of Return Gold Silver

Delivering Shareholder Value at Mandalay

21% Compounded Cumulative Total Return to Common Shareholders over past 5-years(1)

MND LAG MND OUTPERFORM

CEO Appointed Costerfield Acquired Single mine ramp-up Cerro Bayo Acquired Two mine ramp-up SIB Warrant Redemption Dividend Initiated Challacollo Acquired $60 Million Gold Loan Björkdal Acquired West Face Secondary Offering

1. Q3 2010 to Q3 2015, includes all dividends paid Source: MetalPrices.com for metal spot prices Index: September 30, 2009 = 100. Mandalay share price: $0.42 Graph updated quarterly, prices as at the last trading day of each respective quarter

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2 4 6 8 10 12 14 16 18 20 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Volume (millions) Investment Value Mandalay(1)

Mandalay Volume

Peer Index(2) Gold Senior(3)

1. Adjusted for reinvested dividends. Assumes investment in Mandalay made as part of private placement announced on 24-Sep-09 to fund acquisition of Costerfield and accounts for warrant exchange offer of 0.47 shares per warrant. End date as at August 27, 2015. 2. Peer Index: Argonaut, Dundee PM, Kirkland, Lake Shore, OceanaGold, Perseus, Primero, Timmins. 3. Gold Seniors: Agnico Eagle, AngloGold, Barrick, Goldcorp, Gold Fields, Kinross, Newcrest, Newmont, Polyus, Yamana.

A $10,000 investment on September 24, 2009 would be worth:

• Mandalay: $53,677
• Peer Index: $7,874
• Gold Seniors: $2,746

Mandalay has Delivered an Outstanding Total Return To Original Equity Investors(1)

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Growing Value – Reserves Increasing Faster Than Production Adding Reserves Cost Effectively

• Acquiring built-out assets for about $160/oz Au Eq. in Proven & Probable
• Discovering mine-site reserves for $10-$50/oz Au Eq. in Proven & Probable

15,854 63,351 107,941 126,908 154,810 253,796 520,175 633,000 771,500 1,123,367

200,000 400,000 600,000 800,000 1,000,000 1,200,000 50,000 100,000 150,000 200,000 250,000 300,000

2010 2011 2012 2013 2014 2015E Oz Au Eq. Year-End Reserves Oz Au Eq. Annual Production

~165,000E

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• 20

40 60 80 100 120 140 160 180

2010 2011 2012 2013 2014

USD/oz P&P Added

MANDALAY COST OF ACQUIRING AND EXPLORING FOR RESERVES

Cumulative Cost per

• z Au Eq. Acquired or

Discovered Cost Per oz Au Eq. Discovered in yr Cost Per oz Au Eq. Acquired in yr

About Mandalay Resources

• Became a producing mining company at end-2009
• Three operating assets – Costerfield Sb/Au, Cerro Bayo Ag/Au and Björkdal Au
• Challacollo development project in Chile
• Market capitalization of over C$300 million
• Share price of C$0.78 (was C$0.18 six years ago)
• Annual turnover of $185m in 2014
• Experienced and focused executives and managers
• Low debt
• Cash in bank
• Positive growth and currently looking at acquisitions

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Operational Locations

Mining friendly operational jurisdictions

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2015 Planned Exploration Budget $1 million + Land package 1,293 hectares Ownership 100% 2014 gold production (payable) 35,751 oz 2014 antimony production (payable) 3,639 t 2015E gold production (payable) 32,000 – 37,000 oz 2015E antimony production (payable) 3,200 – 3,500 t P&P Reserves(1) 430,000 tonnes @ 8.1 g/t Au; 3.6% Sb Current throughput 400+ tpd Plant recoveries (YTD 2015) Au: 89.6%, Sb: 95.11% 2015E Cash cost/oz Au Eq. / 2014A $625 - $750 / $771

Costerfield Mine Overview

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Mineral Reserves for Costerfield: SRK Consulting (Australia), Effective December 31, 2014, documented in an independent NI 43-101 Technical Report Filed on March 31, 2015

Costerfield Operations

• Area first mined in mid-1800’s with Augusta Mine operating since 2005
• Employ over 200 people – mostly from local area
• Have seen growth and prosperity in Heathcote over last 3 years
• Strong Exploration & Capital program – planed spend up to $18 – $20m in 2015
• Gold & Antimony focus: Ore widths average 300mm. Gold grades range from

8-20g/t and 3-5% Sb. 1 tonne of ore is worth +/- $3,200

• High confidence mine life of 3 years plus with upside
• Currently processing over 13kt per month, exceeding design rate
• One major ore discovery near mine already
• Metal production is increasing with higher grades
• Stable workforce close to major centres – attractive

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Augusta Mine Site

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Antimony

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• Its symbol, Sb, comes from the Latin name for this element, stibium
• Antimony is a lustrous grey metalloid.
• The most common source for antimony is the sulphurous mineral, stibnite

(Sb2S3).

• Acid resistant (substantial), does not oxidise easily, non-conductive
• Exhaustible and non-recyclable (90%)
• Major use is as a fire retardant

1. Mandalay Resources 2. What Were The Challenges 3. Options Available To Us 4. What We Achieved 5. How We Achieved Transformation

People and Culture

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Operational Challenges

• Land acquisition – infrastructure and water disposal
• Lack of cash – not making money
• Political and regulatory support – only MCA provides real support
• High and rising costs
• Skills shortage in many areas – staff retention
• Ground conditions
• Specialised narrow vein mine – labour intensive
• Operating restrictions – noise and zero discharge
• Proximity to local population – mostly supportive (at a cost)
• Power for growth
• Inefficient operations

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Challenges

The bottom line and staff morale told a different story……

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• Toxic negativity
• Buy in from all levels of staff and executives
• Culture of back-stabbing, disinterest and gossip – from the top!
• People intimidated by and afraid of formal programmes
• Accountability – No link to performance measures
• Ownership – people hesitant to own processes and projects
• People felt pressured into running projects
• Staff resisting change – threatened and WIIFM
• People did not see value of improvements
• Some staff seen as chosen few favourites
• Autocratic management

We quickly learnt it was not about the tools or methodologies!

People and Improvement Challenges

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1. Mandalay Resources 2. What Were The Challenges 3. Options Available To Us 4. What We Achieved 5. How We Achieved Transformation

People and Culture

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• Lean – Lean tools
• Six Sigma – Traditional Six Sigma DMAIC
• Kaizen – Quick
• Just do it – traditional methods
• Traditional staff training and development
• Traditional management styles and approaches
• Throw money at problems – which we didn’t have
• DFSS – DFSS is complicated and still not widely used
• Theory of Constraints – Reducing bottlenecks – The Goal (Eliyah Goldratt)
• Change strategies - Leading Change (John Kotter) & Influencing
• Leadership and Ontology – Ontology – about who you are being

WITHOUT INTEGRITY NOTHING WORKS – Leadership – HPLT

• Mission Directed Work Teams – Empowering employees to lead themselves

Traditional Improvements Available

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1. Mandalay Resources 2. What Were The Challenges 3. Options Available To Us 4. What We Achieved 5. How We Achieved Transformation

People and Culture

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Costerfield Operating Performance and Improvements

$0 $100 $200 $300 $400 10,000 20,000 30,000 40,000 50,000 Q4-09 (Dec. only) Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 USD/ Tonne Tonnes Per Quarter

Mining Rate and Unit Cost

t Mined Cost/ t Mined $0 $50 $100 $150 10,000 20,000 30,000 40,000 50,000 Q4-09 (Dec. only) Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 USD/ Tonne Tonnes Per Quarter

Processing Rate and Unit Cost

t Processed Cost/ t Processed $0 $1,000 $2,000 $3,000 5,000 10,000 15,000 20,000

Q4-09 (Dec.

• nly)

Q4-10 Q4-11 Q4-12 Q4-13 Q4-14

USD/ Oz Au Eq. Ounces Per Quarter

Au Equivalent Production and Cost

Oz Au Eq. Cost/ Au Eq. Oz

Costerfield Operational Improvements:

• Improved mill throughput from 170 tpd

(end-2009) to 420 tpd (mid-2015)

• Changed mining method from cut-and-fill to

blast-hole stoping with cemented rock fill (greater production, lower unit costs)

• Switched mining development team with

contractors

• Increased sub-level spacing from 5 – 10 m
• Replaced mechanized mining fleet
• Introduced mobile crusher to decrease particle

size of mill feed (better recoveries, higher throughput)

• Grew mine life from zero reserves to roughly 4

years while mining continuously for 6 years

• Continue target testing

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Financial Highlights

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• From 2010 to 2015 – Increases in:
• Saleable Sb tonnes produced from 1,106 to 3,860
• Saleable Au oz. produced from 7,661 to 34,208
• Revenue from $22m to $86m
• EBITDA from $5.4m to $36m
• Capital spend from $2.8m to $7.8m
• Opex spend from $16.5m to $51m
• Favourable sales terms with major customer – building relationships
• Effective purchasing disciplines
• Savings through tender process for projects and major suppliers

Mining Highlights

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• Implemented continuous roster system (7 days on 7 days off) – previously no

mining on weekends

• Commissioned new mining and new stoping method – Cemented Rock fill with

almost 100% recovery – continual improvements (move from 5m - 10m levels)

• Purchase of partial new mining fleet, to run with existing fleet
• Increased equipment availability (75% increase) and reliability and workshop

standards

• Added technical expertise to team (production engineer, geotechnical, stope

production foreman)

Mining Highlights

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• Restructured mining leadership teams
• Changed and reduced ground support – based on data
• Significantly reduced mining cost per tonne
• Working with equipment manufacturers to create narrow width development

and production drill rigs

• Testing new narrow underground vehicles – tractors and transport
• Teleremote loader fleet
• Underground infrastructure – crib, workshops, stores
• Improved blasts per development miner from average .75/shift to 2/shift
• Went to contractor capital development

Processing Highlights

• Flotation capacity increase and concentrate handling upgrade
• Plant throughput increase from 150 t/day to 450 t/day
• Gold room construction – gravity gold recovery
• Further flotation changes to improve gold recovery - reagents
• New mobile crushing circuit
• Improved Gold recovery from 75% to ~90% +
• Improved Antimony recovery from 85% to ~95% +
• Reduced processing cost per tonne from $95/t to $57/t
• Reduced unplanned downtime from 21% to 3.5%

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Resource Achievements

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• Extended Mine Life from 6 months to 8 years including 5 years of production to

December 31st 2014

• Increased Reserves from 70 k/t to 434k/t @ 8.1 g/t Au & 3.6% Sb not including

5 years of production (515k/t) – 600%

• Increased Resource (M&I) from 250k/t to 999k/t @ 7.5 g/t Au & 3.6% Sb –

400%

• Increased Inferred resource from 160k/t to 519k/t – 300%
• Major Discovery – Cuffley orebody and significant mineralisation below this at

depth (King Cobra fault)

• Extensive Exploration – Brownfields and resource extension

Mineral Resources and Reserves for Costerfield: SRK Consulting (Australia), Effective December 31, 2014, documented in an independent NI 43-101 Technical Report Filed on March 31, 2015

Sustainability And People Achievements

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• Safety – 80% improvement in safety – LTI and MTI
• Ownership of Company values – value driven Company
• Everyone buys into environmental values
• Reduced community complaints
• Staff health and wellness programmes – site nurse
• Very low union membership – less than 5%
• Low staff turnover – from 72% per annum to <10%
• Sick days reduced by over 50%
• Zero discharge
• Created new engagement model with regulators

We have become an employer of choice in the area and are valued by majority of the community

1. Mandalay Resources 2. What Were The Challenges 3. Options Available To Us 4. What We Achieved 5. How We Achieved Transformation

People and Culture

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Our Philosophy

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People build a business, so we concentrate on building the people! 1. Everyone is accountable 2. Managers create high performing teams 3. Leaders create culture and drive improvements 4. Everyone should treat the mine like a business – their own business 5. Targets are there to be achieved 6. Zero Harm in everything we do (our next big thing)

Ontology (Be, Do, Have) DuPont and IIF Incident and Injury Free) Lean and Six Sigma (future) Management Development (all levels) Leadership Development High Performance Leadership Teams Behavioural Formal and business skills Company specific Labour Senior management and executives Middle management Supervisors

Our Model – People Focused

Our greatest fear should not be of failure but of succeeding at things that don't really matter (Francis Chan) 31

Our Approach

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1. Have a big dream/vision

• Successful and profitable mining operation in Victoria

2. Have a plan/roadmap

• Accept detours as part of life

3. Be curious and try new things

• Innovate and experiment

4. Be a little cocky and confident

• Celebrate success

5. Failures are setbacks

• Plan for and deal with them. Accept failures and don’t punish

6. Adjust the vision and plan as required

• Don’t be afraid to change direction

7. Have fun

We adapted this to suit us and it will always be a work in progress

Some details

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• Use metrics and data – cannot manage what you cannot measure
• Qualitative is OK
• Improved staff selection – formalised and also psych testing done
• Staff training and development – vocational and leadership
• Staff development programmes – ownership by individuals
• Disciplined approach ensured correct problem and root causes identified
• Staff KPI’s – aligned to Company KPI’s
• Encourage staff building relationships
• Care for families – EAP
• Reward systems
• Health programmes

Some details

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• People allowed to make decisions and mistakes
• Let people get on with their work – don’t interfere too much
• Managers there to clear obstacles in people’s paths
• All managers have open doors
• Complain to people who can do something about it
• Sustainable improvement (Control plan and Change plan)
• Don’t ignore impacts of change
• Don’t easily give up on people
• Quarterly state of the business feedback
• Overseas opportunities at our other mines
• DuPont safety and JMJ – world leaders – behavioural based

A person who feels appreciated will always do more than what is expected….

Questions?

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a.booyzen@mandalayresources.com.au