Mandalay Resources to purchase Minera Cerro Bayo from Coeur d'Alene Mines

TORONTO, May 4 /CNW/ - Mandalay Resources Corporation ("Mandalay") (TSX-V: MND) is pleased to announce that it has signed a definitive purchase agreement (the "Purchase Agreement") with Coeur d'Alene Mines Corporation ("Coeur") (NYSE: CDE, TSX: CDM, ASX: CXC) pursuant to which it will purchase 100% of Coeur's wholly-owned subsidiary Compania Minera Cerro Bayo Ltda. ("Minera Cerro Bayo"). The principal asset of Minera Cerro Bayo is the Cerro Bayo silver-gold mine in Patagonia, Chile, currently on care and maintenance.

Brad Mills, CEO of Mandalay commented, "The Cerro Bayo mine is an excellent addition to Mandalay's portfolio of assets. It offers near-term gold and silver production and exciting exploration potential in one of the best mining jurisdictions in the world. We expect Cerro Bayo to complete its restart plan by mid-2011 adding substantial production, reserves and resources to Mandalay. The acquisition of the Cerro Bayo mine represents the second milestone in Mandalay's strategy of aggregating a critical mass of producing mines. We acquired our first mine, the Costerfield mine located in Australia, on December 1, 2009. Costerfield is currently producing approximately 15,000 ounces of gold and 1,500 tonnes of antimony per year. With the current high price of antimony, and with recent approvals for a new, highly-productive mechanised drill fleet and aggressive drilling beneath the current workings on the Augusta lode, we believe that Costerfield is on a self-funded growth trajectory. Together, we expect that Costerfield and Cerro Bayo will provide significant funding for the next stage of our growth strategy. In addition, we are very pleased to welcome Coeur as a significant shareholder of Mandalay."

    The Transaction:

    The Purchase Agreement provides that Mandalay will acquire all of the
issued and outstanding shares of Minera Cerro Bayo, together with the benefit
of a US$3.5 million receivable owed by Minera Cerro Bayo to Coeur (which Coeur
will assign to Mandalay on closing) in exchange for the following

    -   US$6,000,000 in cash, subject to adjustment, based on the amount of
        Minera Cerro Bayo's closing working capital;
    -   common shares of Mandalay worth C$5,000,000 based on the price at
        which Mandalay sells securities in an anticipated financing prior to
    -   future cash payments in an aggregate amount equal to the US dollar
        equivalent of 125,000 ounces of silver, to be paid in six instalments
        commencing in Q3, 2011; and
    -   a 2.0% Net Smelter Royalty on production from Cerro Bayo in excess of
        50,000 ounces of gold and 5,000,000 ounces of silver.

Pursuant to the Purchase Agreement, Mandalay will also be obligated to pay all reclamation costs associated with Minera Cerro Bayo's nearby Furioso property up to a maximum of US$6,000,000. Any reclamation costs above that amount will be shared equally by Mandalay and Coeur.

Completion of the transaction is subject to certain conditions, including the receipt of applicable stock exchange approvals and completion of a financing by Mandalay to fund the cash portion of the purchase price, restart costs and working capital.

Mandalay's advisors for the transaction include Deloitte & Touche LLP (Finance), Goodmans LLP and Baker & McKenzie LLP (Legal), SRK Consulting (Technical, Operating, and Environmental), and John Hetrick (Human Resources). Mandalay also completed its own internal geology and exploration review. As part of its engagement, SRK has produced a National Instrument 43-101 compliant technical report on the Cerro Bayo property, which will be filed on shortly.

    About the Cerro Bayo Property:

Ore deposits of the Cerro Bayo district consist largely of sub-horizontal ore shoots contained in steeply-dipping epithermal silver-gold veins hosted by Jurassic ash-flow tuffs. With over 100 veins discovered to date, Coeur's most recent historical production has been by blast-hole stoping from multiple underground mines. Coeur maintained continuous operations from 2002 until October 2008, when the mine was put on care and maintenance due to a combination of low silver prices and depletion of readily available reserves. Operating data for the last three years of production as reported in the Coeur 2008 Annual Report includes:

    Operating Data

                                       2008 (to 31-Oct)     2007        2006
    Tonnes ore milled........................236,403     387,378     428,346
    Ore grade silver (oz/tonne).................5.54        4.68        5.76
    Ore grade gold (oz/tonne)..................0.102       0.105       0.103
    Recovery silver (%).........................93.4        94.4        94.5
    Recovery gold (%)...........................90.2        92.2        93.0
    Silver produced (oz)...................1,224,083   1,709,830   2,331,060
    Gold produced (oz)........................21,761      37,479      40,923

The Cerro Bayo concentrator, which has a design capacity of 1,500 tonnes per day, and much of the mobile equipment needed for the restart, are on-site and in good working condition. The principal environmental permit needed for a restart (for a new lift on the tailings dam) is in-hand.

Subsequent to its closure in 2008, Minera Cerro Bayo has defined significant new reserves and resources at higher grades than those mined in recent years. The resources have been estimated by Coeur and SRK as described in the NI 43-101 report. Probable reserves stated in the NI 43-101 are based on an operational restart plan extracting those indicated resources judged to be profitable by SRK at metal prices of US$900/ounce Au and US$15/ounce Ag. For comparison, the March 2010 monthly average London Brokers price for gold was US$1,113/ounce and for silver was US$17.11/ounce.

The SRK report identifies the following indicated and inferred resources and probable reserves contained in seven of the largest veins on the property.

                          Tonnes     Ag g/t     Au g/t      Ag oz      Au oz
    Measured                   -          -          -          -          -

    Indicated            615,269        471       3.55  9,321,361     70,305

    Meas. & Ind.         615,269        471       3.55  9,321,361     70,305

    Inferred             475,163        359       2.69  5,484,894     41,077

    (1) Resources are reported on an undiluted, in situ basis using a 4.5 g/t
        Au equivalent cutoff grade. Au equivalent grade calculated using US
        $900/oz Au price and US$15/oz Ag price. Resources are reported
        inclusive of economically minable reserves.

                          Tonnes     Ag g/t     Au g/t      Ag oz      Au oz
    Proven                     -          -          -          -          -

    Probable             692,175        300       2.61  6,684,905     58,098

    Prov. & Prob.        692,175        300       2.61  6,684,905     58,098

    (2) Reserves are estimated using US$900/oz Au price and US$15/oz Ag
        price. Reserves are reported on a mined and diluted basis at a 4.75
        g/t Au equivalent mine design cutoff grade that supports capital
        development, mining, processing, and overhead costs, with a 2.72 g/t
        Au equivalent internal cutoff grade that supports only incremental
        mining and processing costs from already-developed stopes. Probable
        reserves are calculated at a minimum mining width of 2 meters,
        including both planned and unplanned dilution at zero grade. %
        dilution varies among the veins based on vein and mining geometries.

    Cerro Bayo Restart Plan:

The SRK feasibility-stage restart plan targets the processing of 254,000 tonnes of ore in 2011, 360,000 tonnes of ore in 2012 and 78,000 tonnes of ore in 2013, based on existing reserves only, producing a total of 52,545 ounces of gold and 6,061,550 ounces of silver. The plan sequences underground blast-hole stoping production from four veins, the Delia (NW and SE), Dagny, Fabiola, and Marcela. Each vein is designed with its own infrastructure and ramp access from the surface. Three of the veins are already partially to completely developed and make possible rapid access to ore. Under the restart plan, capital development will begin as soon after closing as possible, with the mill starting up in early 2011. The capital costs to restart operations are estimated at approximately US$11 million in 2010 and approximately US$10 million in 2011 with working capital requirements estimated at between US$5 and US$10 million.

Financial outcomes of the SRK restart plan, using US$1,000/oz gold price and US$17.00/oz silver price and not including the Mandalay purchase price, yield an after-tax IRR of 82% and an NPV of US$19.8 million using and 8% discount rate.

SRK considers the Cerro Bayo re-start project to be at the Feasibility Level of Evaluation and Design. SRK recommends that the following work be undertaking as part of detail engineering and optimization prior to implementation.

    -   Trade-off studies between different mining methods
    -   More detailed UG Mine Design (stope definition, ventilation raises
        and shaft locations)
    -   Ongoing exploration to delineate and upgrade further resources

Brad Mills, CEO of Mandalay commented, "The NPV of the base case SRK restart plan is significantly higher than the purchase price of the property-this is a value-creating acquisition for Mandalay. In addition, we are highly confident that exploration at Cerro Bayo will generate significant additional mine life beyond that identified in the restart plan. In addition to the probable reserves in the SRK base case mine plan, there are significant inferred resources in the four planned restart veins plus the Coyita, Dalila and Yazna veins. We believe that indicated resource in the Dalila vein, currently not included in the restart plan, requires only a modest amount of work to convert to reserves. Our initial mine exploration program, recommended by SRK, will focus on the near term potential for extensions of known ore shoots in all seven veins and converting this material into additional reserves and resources by the end of 2010. Success in these areas could increase the mine life significantly. Beyond these near term targets, there are many outcropping veins and blind targets, as yet untested by drilling, with geology and geochemistry that resemble outcrops above known ore shoots. The most prospective of these will be drilled in 2010 with the goal of increasing the total inferred resources in the district at year-end 2010.

    Qualified Person:

Dr. Neal Rigby, Global Group Chairman, Corporate Consultant Mining with SRK and a Qualified Person as defined by NI 43-101, has reviewed and approved the technical and scientific information pertaining to the Cerro Bayo project contained in this release.

    About Mandalay Resources Corporation:

Mandalay Resources is a Canadian-based natural resource company with producing assets in Australia 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.

    About Coeur d'Alene Mines Corporation:

Coeur d'Alene Mines Corporation is one of the world's leading silver companies and also a significant gold producer. The Company's three new long-life mines include the San Bartolomé silver mine in Bolivia which began operations in 2008, the Palmarejo silver/gold mine in Mexico, which began operations in 2009, and the Kensington gold mine in Alaska, which begins operations in the third quarter 2010. The Company also owns underground mines in southern Chile and Argentina and one surface mine in Nevada, and owns a non-operating interest in a low-cost mine in Australia. The Company conducts exploration activities in Alaska, Argentina, Chile and Mexico. Coeur common shares are traded on the New York Stock Exchange under the symbol CDE, the Toronto Stock Exchange under the symbol CDM, and its CHESS Depositary Interests are traded on the Australian Securities Exchange under symbol CXC.

    Forward-Looking Statements:

This news release contains "forward-looking statements" within the meaning of applicable securities laws, including statements relating to the proposed transaction and its terms, the Cerro Bayo restart plan and the growth and strategy of Mandalay following completion of the transaction. 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, risks that the parties will not proceed with the proposed transaction, that the ultimate terms of the proposed transaction will differ from those that currently are contemplated, that the proposed transaction will not be successfully completed for any reason (including the failure to obtain the required financing or stock exchange approval), that exploration results at Cerro Bayo may not meet management's current expectations, that capital costs or working capital required to restart and operate the Cerro Bayo mine may exceed current estimates, that reclamation costs associated with Mandalay's Furioso property may exceed current estimates, Mandalay's ability to secure additional financing, 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. 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.


For further information: For further information: Bradford Mills, Chief Executive Officer; Greg DiTomaso, Investor Relations, Contact: (647) 260-1566, Email:

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