In an April 14 research note, BMO Capital Markets analyst Brian Quast reported that Mandalay Resources Corp. (MND:TSX) achieved a production beat in Q1/20.
Quast reviewed and commented on the production numbers from each of Mandalay's operations.
Total production in Q1/20 amounted to 25,700 ounces (25.7 Koz) of gold equivalent (Au eq), which exceeded BMO's forecast of 20.5 Koz Au eq. The production beat was due to outperformance at Costerfield.
That gold-antimony mine in Australia had a "strong first quarter with the ramp-up of the high-grade Youle zone," wrote Quast. "These results bode well for the company and demonstrate management's ability to execute on Costerfield's life of mine plan."
In Q1/20, Costerfield produced 25.7 Koz Au eq versus BMO's estimate of 20.5 Koz. That equated to 10.6 Koz gold (Au) and 1,100 tons of antimony (Sb) during Q1, up 124% and 62%, respectively, over the previous quarter, Q4/19.
Head grades drove Costerfield production, Quast indicated. They reportedly were 12.6 grams per ton Au and 5.4% Sb, higher than those in Q4/19, which were 6.8 grams per ton Au and 3.6% Sb.
Higher-than-expected production at Costerfield more than made up for the muted performance of Mandalay's Björkdal gold mine in Sweden. Q1/20 production there came in at 10.8 Koz Au eq, lower than BMO's projection of 13.6 Koz but in line with Q4/19. The dampened production resulted from a change in the haulage contractor.
Looking forward, though, the outlook for production at Björkdal is positive. "The ramp-up for the high-grade Aurora zone is expected to lift the company's production through full-year 2020, with the first production stope having gone online in Q1/20," Quast commented.
Quast also noted that the COVID-19 pandemic has not affected operations at either Costerfield or Björkdal, and thus, Mandalay maintains its 2020 production guidance. However, the Toronto-headquartered company has "implemented controls to prevent the spread of COVID-19 at its operations and is continually monitoring the situation," the analyst relayed.
BMO has an Outperform rating and a CA$1.50 per share target price on Mandalay Resources. The company's stock is currently trading at about CA$1.03 per share. "We expect grade optimization efforts at Björkdal, as well as the development of the Youle lode at Costerfield, to act as positive catalysts for the stock," Quast highlighted.
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Disclosures from BMO Capital Markets, Mandalay Resources, April 14, 2020
IMPORTANT DISCLOSURES
Analyst's Certification
I, Brian Quast, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Mandalay Resources.
Disclosure 6C: Mandalay Resources is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
