Mandalay Resources Corporation Increases Mineral Resources and Replaces Reserves in Augusta East & West Lodes and Accelerates Drilling at its Costerfield Gold-Antimony Mine, Australia

TORONTO, April 18 /CNW/ - Mandalay Resources Corporation ("Mandalay" or the "Company") (TSX: MND, MND.WT) is pleased to announce that the 2010 Augusta Deeps drilling and capital development project has resulted in increased mineral resources and replaced reserves in the Augusta East and West lodes at its 100% owned Costerfield gold-antimony mine in Victoria, Australia.

Brad Mills, CEO of Mandalay, commented, "We have virtually replaced all of our depleted mining reserves at Costerfield since the last resource and reserve estimate on March 1, 2010, and are growing our resource base. These new mineral resource and reserve estimates serve to extend the reserve life of the Costerfield mine well into 2012.  Equally encouraging is that drilling continues to show that the ore shoot extends at depth, below the limits of the new resource estimate. Therefore, we anticipate being able to generate continued success with our accelerated 2011 drill program. With metal prices reaching recent highs of $1,469/ounce gold and $17,200/tonne antimony and the ramped-up mine proving its profitability as detailed in our 2010 financial results, we are pleased that we have been able to extend Costerfield's mine life for only incremental capital spending, thereby adding low-risk, near-term net present value to the Company."

Accelerated Exploration

The Company is accelerating drilling in 2011. Two diamond drill rigs are now performing infill and extensional drilling on the Augusta Deeps project. Underground development will be continued through 2011 to the 900 metre (m) level, approximately 100 m below the current deepest level in the mine. In addition, the Company has commenced its brownfield district exploration program in the search for new ore shoots with a third rig.

Resource Increase

The new resource estimate of the Augusta East and West lodes was performed by Dean Fredericksen, an independent qualified person under National Instrument 43-101 ("NI 43-101"). The new resources consists of a total of 236,000 tonnes containing 89,000 ounces of gold (+7.8%) and 16,700 tonnes of antimony (+16.1%) in the measured and indicated categories as of December 30, 2010, compared to 219,000 tonnes of measured and indicated resource containing 83,133 ounces of gold and 14,015 tonnes of antimony in the March 1, 2010, estimate. This increase has occurred in spite of the ten months of production that occurred in the period between the March 1, 2010 and December 30, 2010 estimates.

Reserve Replacement

The corresponding mining reserves for the Augusta East and West lodes as of December 30, 2010,  have been estimated by Costerfield mine staff (and independently validated by the Snowden Group), at 71,300 tonnes of proven and probable mineral reserves containing 10.7 grams per tonne gold (24,600 ounces) and 6.5% antimony (4,660 tonnes). This compares with the previous estimate in the SRK Technical Report as of March 1, 2010, of 65,565 tonnes of ore containing 13.1 grams per tonne gold (27,594 ounces) and 7.0% antimony (4,588 tonnes).  Reserves depleted by the ten months of production from March 1, 2010 to December 30, 2010 have essentially been replaced in terms of contained metal.

Table 1: Mineral Resources and Reserves in Augusta East & West Lodes at December 30, 2010.

             
  Tonnes (t) Au (g/t) Sb (%) Au (oz) Sb (t)
Resources          
  Measured 122,000 14.2 8.6 56,000 10,500
  Indicated 114,000 9.1 5.4 33,000    6,200
  Measured + Indicated 236,000 11.8 7.1 89,000 16,700
  Inferred   86,000 12.1 4.4 33,000    4,000
           
Reserves          
  Proven 41,800 10.3 6.1 13,800 2,560
  Probable 29,500 11.4 7.1 10,800 2,100
  Proven + Probable 71,300 10.7 6.5 24,600 4,660

Notes:

  1. Resources are declared inclusive of reserves.
  2. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
  3. Mineral resources are reported above a 4.6 grams per tonne gold equivalent (AuEq) cut-off, using the formula AuEq = Au + (Sb% x 2.36), and are diluted to a minimum width of 1.2 m assuming zero grade outside the vein.
  4. Mineral reserves are estimated using a cut-off grade of 4 grams per tonne gold equivalent and a minimum mining width of 1.8 m with planned and unplanned dilution at zero grade.
  5. Gold price of $1,100/oz and antimony price of $10,000/t used in financial evaluation of reserves.

For more details on the new resource and reserve estimations, refer to the section of this press release below, entitled "Augusta Lode Estimation Details". For more detail on the March 1st 2010 reserve estimate please see the technical report dated May 20, 2010 by SRK Consulting and filed on www.sedar.com, the "SRK Technical Report."

Augusta Lode Estimation Details

Drilling, logging, assaying, resource estimation, and reserve estimation were performed under the direction of Neil Schunke, a mining manager at Costerfield and a qualified person under NI 43-101.  Data validation and resource estimation was performed by Dean Fredericksen, an independent qualified person under NI 43-101.  The mineral resource and reserve estimates were audited by the Snowden Group, whose consultants Dr. Simon Dominy and Cindy-Lee Cox are independent qualified persons under NI 43-101.

Mandalay commenced drilling on the Augusta Deeps in June 2010, as the mine was ramping up. Drilling through December 30, 2010 generated 11 new intercepts.  These new intercepts, together with pertinent older ones drilled by a previous owner of the property, were summarized in a Mandalay press release dated January 13, 2011.  Also during 2010, development on mine levels down to the 1,000 m level continued, producing mine face samples.  New and old drill intercepts totaling 103 on the East lode and 89 on the West lode, plus 823 mine face samples on the East lode and 626 mine face samples on the West lode were used in the new resource and reserve estimation process.

The long section below shows the location of the new drill intercepts used in the estimation and the location of mine development levels, from which face samples have been taken.  It also shows limits of measured, indicated, and inferred mineral resources in the new estimation.  The accompanying table below lists all of the drill intercepts obtained from June 2010 to March 2011. Older drilling data is validated, summarized, and discussed in the SRK Technical Report. Those intercepts generated after the December 30, 2010, cut-off date were not used in the estimation, but do show that high-grade mineralization continues at depth.

To see the long section map, please click here: http://files.newswire.ca/895/LongSection.pdf

Mine samples and drill samples were taken by Costerfield geologists and sent to commercial labs for sample preparation and assay.  Site geological and metallurgical personnel have implemented a QA/QC process that includes the regular submission of standard reference materials and blanks with drill and face samples submitted for assay to Onsite Labs in Bendigo, Victoria, Australia.  Standard reference materials have been certified by Geostats. In his validation of the new data used this estimate, Fredericksen found that the results of the analysis of these samples and standards indicates acceptable quality.

Table 2: Costerfield Drill Intercepts: June 2010 to March 2011.

   
Hole ID   Intercept
Northing
(GDA94)
  Intercept
Easting
(GDA94)
Intercept
Depth
(m)
True
Width
(m)
Gold
Grade
(g/t)
Antimony
Grade
(%)
Used in 30-Dec-10 estimate
MH198   5914154.1   304139.2 213.7 0.34 81.0 53.5
MH199   5914237.8   304110.8 262.8 4.20 33.8 5.5
MH200   5914158.4   304119.8 278.9 0.23 4.9 2.8
MH203   5914271.7   304098.6 340.9 0.55 3.0 7.2
MH204   5914277.4   304099.4 308.4 0.92 9.7 4.9
MH205   5914276.6   304099.6 309.5 0.92 8.9 6.2
MH206   5914278.3   304105.3 226.5 0.10 13.2 2.4
MH207   5914314.3   304095.9 228.4 1.46 0.9 0.2
MH208   5914279.5   304114.7 197.0 1.21 4.8 0.4
MH209   5914230.6   304122.8 203.3 1.35 14.7 3.9
MH211   5914196.2   304127.9 201.2 0.65 44.2 20.7
Intercepts post 30-Dec-10 estimate 
MH214   5914237.5   304114.1 216.6 0.19 16.5 7.4
MH215   5914116.4   304141.8 202.2 0.09 12.7 8.1
MH218   5914139.5   304124.6 256.6 0.12 2.0 1.1
MH219   5914144.8   304127.8 235.8 0.61 7.1 33.0
MH221 Assays Not Yet Returned
MH224 Assays Not Yet Returned

Data was entered into Minesight software and composited to true vein width, with a top cut of 150 grams per tonne applied to the gold grade of face samples.  A two dimensional block model (2.5 x 5 m blocks) of the lodes was produced by ordinary kriging with anisotropic variograms.  Levels of certainty for each block estimate were defined as:

  • Measured — Within 30 m range of mine face samples (ie. developed).
  • Indicated — A minimum of 40 m by 40 m drill holes in areas of continuous and readily interpretable lode.
  • Inferred — Less than 40 m by 40 m drill spacing or in areas of uncertain interpretation.

Resources are reported above a 4.6 grams per tonne gold equivalent cut-off, using the formula AuEq = Au + (Sb% x 2.36), and are diluted to a minimum width of 1.2 m assuming zero grade outside the vein.

From the resource, a mine plan was designed based only on measured and indicated resource blocks using the same mix of mining methods as employed in the current operations.  A cut-off grade of 4 grams per tonne gold equivalent and a minimum mining width of 1.8 m were used, with planned and unplanned dilution at zero grade.  Financial viability of proven and probable mineral reserves was demonstrated by modeled generation of A$19.5 million positive cash flow using US$1,100/ounce gold and US$10,000/tonne antimony prices, operating costs as per the Company's 2011 budget, and sustaining capital necessary to produce the mineral reserves.  Mine life based on these reserves is through August 2012.

Qualified Person:

Neil Schunke, a manager at the Costerfield operation and a Member of the Australian Institute of Mining and Metallurgy ("MAusIMM"), supervised the activities leading to this estimation of resources and reserves; he is a Qualified Person under NI 43-101.

Dean Fredericksen, a Member of the Australian Institute of Mining and Metallurgy ("MAusIMM") and an independent qualified person under NI 43-101 performed the data validation and mineral resource estimate.

The Snowden Group, an independent consultant, has been retained to provide an independent audit and prepare a new independent NI 43-101 technical report for Costerfield, which will be filed on www.sedar.com within 45 days of this release.  Snowden's work is being performed by Dr. Simon Dominy, Executive Consultant and a Fellow of the Australasian Institute of Mining and Metallurgy ("FAusIMM") and a Chartered Professional ("CP"), and Cindy-Lee Cox, Senior Consultant and a MAusIMM, both qualified persons under NI 43-101.  Dr. Simon Dominy and Neil Schunke have reviewed and approved the technical information included in this press release.

About Mandalay Resources Corporation:

Mandalay Resources is a Canadian-based natural resource company with producing assets in Australia and producing and exploration projects in Chile. The Company is focused on executing a roll-up strategy, creating critical mass by aggregating advanced or in-production gold, copper, silver and antimony projects in Australia and the Americas to generate near-term cash flow and shareholder value.

Forward-Looking Statements:

This news release contains "forward-looking statements" within the meaning of applicable securities laws including statements regarding Mandalay's 2011 drilling program at its Costerfield mine. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, 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, 2011, a copy of which is available under Mandalay's profile at www.sedar.com. In addition, there can be no assurance that any inferred resources that are discovered as a result of additional drilling will ever be upgraded to proven or probable reserves. 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.

SOURCE Mandalay Resources Corporation

For further information:

Bradford Mills
Chief Executive Officer

Greg DiTomaso
Investor Relations

Contact:
647.260.1566

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Mandalay Resources Corporation

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