Mandalay Resources Corp. (TSX: MND) is a Canadian-based natural resource Corporation with producing assets in Australia and Sweden, and care and maintenance and development projects in Chile and Canada.

Key highlights 

• Robust production figures for FY 2021: The Company produced a total of 98,292 ounces gold, 3,380 tonnes antimony and 266,596 ounces of silver, representing a total of 123,002 ounces of gold equivalent production, versus 90,254 ounces gold and 3,903 tonnes of antimony, representing a total of 103,444 ounces of gold equivalent in 2020.
  

• Solid Quarterly Performance: The company's financial performance during the third quarter of 2021 was excellent. The firm achieved USD 52.5 million in consolidated sales and USD 25.1 million in adjusted EBITDA, and adjusted net income of USD 9.2 million. Additionally, this was the company's seventh consecutive profitable quarter.

Source: Company Presentation

• Production and Cost Guidance for FY 2022: The company said it expects to produce 118,000 to 130,000 ounces of gold equivalent in FY2022 at a cash cost of USD 700 to USD 900 and an all-in sustaining cost of USD 1,100 to USD 1,300. Marking higher numbers in term of production compared to FY 2021, is a significant plus.

• Divested Cerro Bayo Mine to Equus Mining: Recently the company announced that it has completed the previously announced sale of its Cerro Bayo mine in Region XI, Southern Chile to Equus Mining Limited in exchange for 587,502,438 ordinary shares in the capital of Equus. Mandalay also retains a 2.25% net smelter royalty on production from the Cerro Bayo mining claims once the mine has produced at least 50,000 ounces of gold equivalent.
  

Risks associated with investment

The company’s business model is exposed to a variety of risks ranging from a sharp plunge in the underlying commodity prices, forex risks etc. The resurgence of COVID-19 cases could disrupt exploration and production, which would affect financial performance. 

Financial overview of Q3 2021 (Expressed in U.S. dollars)

Source: Company Filing 

• In Q3 2021, the company posted higher revenue at USD 52.5 million compared to USD 49.7 million in the previous corresponding period. An increase in revenue was the result of a 13% increase in gold equivalent ounces sold and the support from higher realized metal prices.
• Income from the mining operations decline to USD 16.5 million against USD 19.2 million in pcp, primarily due to higher cost of sales and higher depreciation cost.
• Adjusted EBITDA stood at USD 25.1 million compared to USD 26.7 million in Q3 2020.
• The firm lowered it finance cost to USD 2.1 million against USD 3.4 million in pcp.
• The company reported consolidated net income of USD 9.2 million against USD 0.6 million in pcp.
  

Valuation Methodology (Illustrative): EV to Sales

*1USD=1.27CAD

Analysis by Kalkine Group 

Stock recommendation

The company delivered another solid third quarter in 2021 – driven by strong adjusted EBITDA and profits. Furthermore, with the strong execution of its operational strategy, the company exceeded full-year 2021 production guidance with a consolidated saleable gold equivalent production of 123,002 ounces – highest total since 2017, which is appreciable. Moreover, the company expects to maintain this wining track and highlighted higher guidance for FY 2022. For the remainder of 2021, the group is expecting to witness its cash position growing significantly with the normalization in the payment obligations. Therefore, based on the above rationales and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 2.40 as on February 7, 2022.

One-Year Technical Price Chart (as on February 7, 2022). Source: REFINITIV, Analysis by Kalkine Group

 Technical Analysis Summary:

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.