Mandalay Resources provides half-year exploration updates for its Costerfield, Björkdal and Cerro Bayo mines and its Challacollo feasibility project

2015-07-29

TSXV - TSX Venture Exchange · Copper · Gold · Silver · Zinc · Canada

TORONTO, July 29, 2015/CNW/ - Mandalay Resources Corporation ("Mandalay" or the "Company") (TSX: MND) is pleased to provide half-year exploration updates for all its sites.

Brad Mills, CEO of Mandalay, commented, "Our exploration programs across the Company continued on track to replace reserves and identify new potential areas for future growth. At Costerfield, infill and extensional drilling of the Cuffley lode above the King Cobra fault has delivered mineralized intercepts that are expected to support additional reserves at the end-of-year estimation. More exciting, we are confirming the extension of the Cuffley lode below the King Cobra fault in new intercepts and believe the shoot continues strongly at depth."

Mr. Mills continued, "At Cerro Bayo, drilling under Laguna Verde is revealing the southeast and depth limits of the Coyita vein, with a large gap between the northwest and southeastern zones (already estimated as Proven and Probable Mineral Reserves) still to be filled in during the second half of the year. The newly discovered Camila vein to the northeast of Coyita is also emerging as a target for infill drilling. Drilling to further define the Yasna vein under the lake will continue in the second half, as will widely spaced holes to develop an initial understanding of additional vein potential under the rest of Laguna Verde."

"At Björkdal, we are focused on rebuilding the fundamental geological understanding of the mineralizing system, which increasingly appears to be contact metasomatic in origin, with multiple newly-recognized vein orientations. Abundant gold-bearing intercepts in open pit and underground extensional drilling as well as in initial drilling at the Rönnberget target (some 5 km to the east of the mine) demonstrates not only that the known mineralized zones are open to extension but that that gold is widely distributed in the district. Drilling for the rest of the year aims to grow the resource base available to open pit mining in the shortest term, to expand the limits of the underground resource to support application for expanding the mining concession and to test regional targets."

"Finally, at Challacollo, our feasibility study is nearly complete, with identification of a suitable water source for the proposed operation being the significant remaining factor. We have decided to postpone submitting our EIS application until the water source can be specified, giving us a period of time to optimize the project with further exploration, as well as plant, capital cost and operating cost refinements."

Costerfield

Drilling, Sampling, and Assaying

During the first half of 2015, Mandalay drilled 4,515 m of diamond core in 19 holes. In addition, the Company completed 1,721 m of on-vein operating development and associated sampling of the N- and Cuffley lodes. Drill core was logged and sampled by Costerfield geologists, who also mapped and sampled the development advances. All samples were sent to Onsite Laboratory in Bendigo, Victoria, Australia, 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. Standard reference materials have been certified by Geostats Pty Ltd. Please see the Company's previously filed technical report, "Costerfield Operation, Victoria, Australia, NI 43-101" dated March 31, 2015and available on SEDAR (www.sedar.com), for a full description of the drilling, logging, assaying and estimation processes, including data verification procedures.

Drill Results

Assay results are summarized in Tables 1, 2 and 3 below; they are displayed in geologic context in Figures 1, 2, and 3.

Cuffley Main (Table 1; Figures 1, 2 and 3)

Four new intercepts were generated, one high-grade (AD119), one medium-grade (AD127), and two low-grade (AD118, AD126). These intercepts were generated incidental to reaching the primary target in the Cuffley Deeps zone below the Tiger Fault and are not expected to significantly change the estimated resources in the Cuffley Main Zone as they penetrated the Main Zone within the boundaries of already-Indicated Resource. However, they do increase the level of confidence for mine planning in the area.

Table 1: Significant new drill intercepts on Cuffley Main

| * True width is preliminary estimate only and may not reflect final true width used in resource estimate | | | | | | AuEq(g/t) = Au(g) + Sb(%) x | Price per 10 Sb(kg) x Sb Recovery (%) | | Price per 1 Au(g) x Au recovery (%) | |

Cuffley Deeps (Table 2; Figures 1 and 3)

High- and medium-grade mineralization is proved to continue downward into the currently Inferred Resource in Cuffley Deeps in AD114, AD116, AD118, AD121W1, AD123, and AD124W1. These intercepts suggest a zone of high-grade mineralization just below the Tiger fault at the top and just above the King Cobra fault at the bottom of the fault block, with the intervening material inadequately drilled. Mandalay believes the upper high-grade zone below the Tiger fault will support mining development and convert to reserves at year-end. The lower zone just above the King Cobra may not, but it could significantly enhance the viability of potential deeper development to reach emerging mineralization under the King Cobra fault (see below). There is a significantly mineralized splay emerging in the Deeps block, intercepted in AD118, AD121W1 and AD129W1.

Cuffley below the King Cobra fault (Table 3, Figure 3)

Hole CSK001intercepted a 28 m wide zone of quartz-stibnite-gold veins and veinlets, with the best (559 m elevation) containing 39.7 g/t Au and 1.4% Sb over 0.13 m. This intercept is believed to be correlative with AD107, drilled and announced in 2014, which contained similarly high gold/low antimony values. If this is true, then the two intercepts represent a zone with a strike length of at least 200 m and a depth extent of at least 100 m. CSK001is the first of 8 holes planned to test below the King Cobra fault during the balance of 2015.

Table 2: Significant new drill intercepts on Cuffley Deeps

| Hole ID | Hole completion Date | Intercept Easting (Mine Grid, m) | Intercept Northing (Mine Grid, m) | Elevation (m) | True Width* (m) | Gold Grade (g/t) | Antimony Grade (%) | AuEq (g/t) over 1.8m | Total Hole Depth (m) | | AD113 | 1/12/2014 | 15195 | 5041 | 851 | 0.16 | 11.6 | 8.8 | 2.6 | 180.3 | | AD114 | 25/11/2014 | 15177 | 5128 | 846 | 2.03 | 11.2 | 11.9 | 35.2 | 234.2 | | AD115 | 12/12/2014 | 15166 | 5204 | 843 | 0.71 | 0.8 | 0.3 | 0.6 | 247.9 | | AD116 | 4/12/2014 | 15170 | 5164 | 846 | 1.97 | 5.4 | 3.1 | 11.7 | 218.9 | | AD117 | 9/12/2014 | 15179 | 5084 | 798 | 0.10 | 27.0 | 8.0 | 2.4 | 209.5 | | AD118 | 13/01/2015 | 15177 | 4923 | 825 | 0.52 | 39.7 | 26.9 | 27.2 | 240.3 | | AD118* | 13/01/2015 | 15172 | 4915 | 819 | 0.17 | 116.5 | 8.8 | 12.9 | 240.3 | | AD119 | 23/01/2015 | 15154 | 4830 | 798 | 0.14 | 2.6 | 0.6 | 0.3 | 330.3 | | AD120 | 2/02/2015 | 15171 | 4964 | 813 | 0.33 | 1.1 | 0.1 | 0.3 | 207.7 | | AD121W1* | 13/02/2015 | 15177 | 4981 | 697 | 1.41 | 2.8 | 1.2 | 4.1 | 270.2 | | AD121W1 | 13/02/2015 | 15172 | 4979 | 688 | 1.28 | 4.5 | 4.5 | 9.7 | 270.2 | | AD122 | 23/02/2015 | 15173 | 4991 | 740 | 1.83 | 1.5 | 0.2 | 1.9 | 240.5 | | AD123* | 1/04/2015 | 15158 | 4883 | 784 | 0.05 | 133.4 | 6.1 | 3.8 | 297.4 | | AD123 | 1/04/2015 | 15136 | 4858 | 763 | 0.21 | 34.3 | 20.8 | 8.7 | 297.4 | | AD124W1 | 18/03/2015 | 15162 | 5112 | 677 | 0.10 | 367.3 | 3.0 | 21.4 | 308.0 | | AD125W1 | 17/04/2015 | 15172 | 4960 | 725 | 0.07 | 19.5 | 5.8 | 1.2 | 245.3 | | AD126 | 5/05/2015 | 15111 | 4748 | 788 | 1.41 | 1.8 | 0.2 | 1.8 | 250.3 | | AD127 | 25/05/2015 | 15177 | 5009 | 827 | 0.18 | 1.1 | 0.2 | 0.1 | 198.7 | | AD128 | 19/05/2015 | 15129 | 4815 | 687 | 0.05 | 14.9 | 3.8 | 0.6 | 317.8 | | AD129W1 | 5/03/2015 | 15168 | 4933 | 689 | 1.30 | 2.9 | 0.9 | 3.4 | 320.4 | | AD129W1* | 5/03/2015 | 15157 | 4925 | 674 | 0.05 | 17.7 | 11.6 | 1.2 | 320.4 |

Table 3: Significant new drill intercepts on Cuffley lode from below the King Cobra fault

| * True width is preliminary estimate only and may not reflect final true width used in resource | | | | | | AuEq(g/t) = Au(g) + Sb(%) x | Price per 10 Sb(kg) x Sb Recovery (%) | | Price per 1 Au(g) x Au recovery (%) | |

Cerro Bayo

Drilling, Sampling and Assaying

A total of 11,076 m of NX and BX diamond core were drilled in 27 holes at Cerro Bayo during the first six months of 2015, including three holes still in progress on June 30. All of these holes were drilled from surface platforms on the margins of Laguna Verde, except for DLV15-022, collared in an underground station on the Dagny vein 70 m level. All drill holes were directionally surveyed except for DLV15-002, in which a twisted-off drill pipe precluded measurements by the downhole instrument. In addition, a total of 3,191 m of on-vein development drifts were completed during the period.

Drill core was logged and sampled by staff geologists, who also performed mine mapping and sampling. All core and face samples (including blanks, standards and duplicates) were submitted to the on-site assay laboratory of Compañia Minera Cerro Bayo. The Cerro Bayo assay laboratory was audited in 2011 by SGS Lakefield Research Ltd. And routinely sends check samples to the ALS laboratory (ISO 9001:2008 and ISO/IEC 176025:2005 certified) in La Serena, Chile, following QA/QC practices established by the parent Company Mandalay Resources. Please see the Company's previously filed technical report, "Technical report on the Cerro Bayo project, Region XI (Aysèn) Chile", dated March 31, 2015and available on SEDAR (www.sedar.com), for a full description of the drilling, logging, assaying and estimation processes, including data verification procedures.

Drill Results

Coyita vein

Eighteen new drill holes completed during the first six months of 2015 infilled and modestly extended the Coyita SE segment under Laguna Verde and the peninsula (Table 4, Figures 4, 5aand 5b). The Coyita SE segment largely has been closed off at depth north of the Falla Peninsula, but still remains open at depth to the south. Complex fault relations and postmineral dikes south of the Falla Peninsular create some uncertainty in correlations of the Coyita vein in this block that will be resolved with additional drilling. More step-out drilling also is planned for the Coyita NW segment, to test for the extension of the vein beneath a postmineral andesite sill that currently bounds an ore block. Drilling from the end of the peninsula indicates that mineralized, subordinate splays or branches of the Coyita system extend into altered rocks on the hanging wall of the main vein to the northeast, with the most prominent of these being the Camila vein (Table 5, Figure 6). This sector will be tested in future exploration efforts.

Table 4: Significant new drill intercepts tentatively correlated with the Coyita vein

| Hole_ID | Hole Compl. Date | Total Hole Depth (m) | Intercept UTM_E | Intercept UTM_N | Intercept Elevation (m) | From (m) | To (m) | Intercept Length (m) | Intercept True Width (m) | Gold Grade (g/t) | Silver Grade (g/t) | | DLV15-001 | 1/14/15 | 318.2 | 272297.29 | 4840678.98 | 10.09 | 288.15 | 289.95 | 1.8 | 1.18 | 5.07 | 270 | | DLV15-002 | 3/02/15 | 345.7 | 272287.05 | 4840664.6 | 53.06 | 260.46 | 260.78 | 0.32 | 0.23 | 0.33 | 72 | | DLV15-003 | 3/16/2015 | 442.95 | 272157.98 | 4840944.63 | -18.51 | 401.43 | 403.73 | 2.3 | 1.49 | 0.05 | 2 | | DLV15-004 | 2/13/2015 | 377.15 | 272120.63 | 4840918.4 | 120.83 | 324.8 | 327.94 | 3.14 | 1.88 | 1.8 | 151 | | DLV15-005 | 3/13/2015 | 298 | 272197.55 | 4840786.34 | 94.9 | 233.85 | 235.2 | 1.35 | 1.13 | 9.46 | 1014 | | DLV15-007 | 3/24/2015 | 293.6 | 272193.04 | 4840834.039 | 49.3 | 267.05 | 268.67 | 1.62 | 1.12 | 5.81 | 2279 | | DLV15-008 | 3/23/2015 | 418.35 | 272199.12 | 4840884.35 | -61.25 | 398.65 | 400.3 | 1.65 | 1.09 | 2.57 | 13 | | DLV15-010 | 10/09/15 | 326.65 | 272223.05 | 4840809.1 | -7.06 | 297.25 | 304.86 | 7.61 | 4.78 | 0.65 | 30 | | DLV15-011 | 4/15/2015 | 507.9 | 272137.26 | 4840998.69 | -72.66 | 467.05 | 468.5 | 1.45 | 0.79 | 1.24 | 57 | | DLV15-014 | 4/21/2015 | 412.25 | 272297.79 | 4840621.2 | -2.75 | 311.43 | 311.89 | 0.46 | 0.32 | 1.33 | 150 | | DLV15-015 | 4/28/2015 | 433.95 | 272373.65 | 4840532.66 | -74.88 | 418.86 | 420.86 | 2.28 | 1.21 | 2.58 | 60 | | DLV15-016 | 5/02/15 | 287.55 | 272259 | 4840653.97 | 81.65 | 222.29 | 224.04 | 1.75 | 1.31 | 0.44 | 91 | | DLV15-019 | 5/04/15 | 422.6 | 272318.9 | 4840665.76 | -28.73 | 314.45 | 316.7 | 2.25 | 1.28 | 9.36 | 229 | | DLV15-019-C1 | 5/11/15 | 329.3 | 272318.6 | 4840665.96 | -29.57 | 315.38 | 317.41 | 2.03 | 1.16 | 11.88 | 303 | | DLV15-021 | 5/15/2015 | 362.9 | 272244.21 | 4840825 | -37.35 | 331.7 | 332.95 | 1.25 | 0.71 | 1.38 | 44 | | DLV15-023 | 5/28/2015 | 512.2 | 272287 | 4840757 | -137.13 | 414.45 | 418.68 | 4.23 | 2.13 | 1.14 | 17 | | DLV15-024 | 6/06/15 | 388.5 | 272185.33 | 4840880.1 | 2.76 | 314.82 | 316.77 | 1.95 | 1.15 | 2.2 | 117 | | DLV15-025 | 6/06/15 | 427.1 | NO VEIN INTERCEPTED (diked out) | | | | | | | | |

Camila vein

Table 5: Significant new drill intercepts tentatively correlated with the Camila vein

Yasna vein

Eight new step-out or infill drill holes on the Yasna vein have only modestly extended the previously defined mineralized zone (Table 6; Figure 7). The mineralized zone currently stands at about 200 m long by 70 m high, down-dip. The latest structural data indicate that the Yasna vein turns and merges with the Kasia vein along strike and probably does not extend all the way south to the Falla Peninsula as an independent fissure.

Table 6: Significant new drill Intercepts tentatively correlated with the Yasna vein

| Hole_ID | Hole Compl. Date | Hole Total Depth(m) | Intercept UTM_E | Intercept UTM_N | Intercept Elevation (m) | From (m) | To (m) | Intercept Length (m) | Intercept True Width (m) | Gold Grade (g/t) | Silver Grade (g/t) | | DLV15-006 | 30/03/15 | 431.60 | 271751 | 4840964.9 | 108.33 | 421.7 | 424.92 | 3.22 | 2.82 | 1.61 | 434 | | DLV15-009 | 2/04/15 | 428.95 | 272028 | 4840641 | 27.47 | 369.7 | 370.07 | 0.37 | 0.17 | 1.42 | 144 | | DLV15-012 | 22/04/15 | 488.60 | 271778 | 4840921.3 | 104.58 | 443.5 | 443.75 | 0.3 | 0.23 | 0.3 | 38 | | DLV15-013 | 11/04/15 | 389.75 | 272025 | 4840624.3 | 36.66 | 369 | 369.33 | 0.3 | 0.14 | 3.16 | 1134 | | DLV15-018 | 14/05/15 | 446.45 | 271772 | 4840966.8 | 150.44 | 431.8 | 432.49 | 0.67 | 0.54 | 0.22 | 81 | | DLV15-018-C1 | 21/05/15 | 51.15 | 271774 | 4840968.7 | 146.41 | 433.9 | 434.86 | 0.92 | 0.75 | 0.56 | 161 | | DLV15-006-C1 | 29/05/15 | 251.00 | 271752 | 4840948.3 | 115.17 | 418.4 | 420.32 | 1.93 | 1.5 | 0.81 | 262 |

Irene vein and other

One new intercept was obtained on the Irene vein and one on a nearby subordinate fissure, confirming that some Ag-Au mineralization persists into the hanging wall of the Falla Laguna Verde between the Delia and the Yasna vein systems (Table 7, Figure 8).

Table 7: Significant new drill intercepts tentatively correlated with the Irene vein.

| Hole_ID | Hole Compl. Date | Hole Total Depth(m) | Intercept UTM_E | Intercept UTM_N | Intercept Elevation (m) | From (m) | To (m) | Intercept Length (m) | Intercept True Width (m) | Gold Grade (g/t) | Silver Grade (g/t) | | DLV15-022 | - | 501.00 | 271770.7 | 4840684.1 | 37.7 | 279.93 | 280.65 | 0.72 | 0.608 | 1.72 | 178.5 | | OTHERS INTERCEPTS | | | | | | | | | | | | | DLV15-022 | - | 501.00 | 271793.7 | 4840679.6 | 44.561 | 298.5 | 300.2 | 1.7 | 1.43 | 2.19 | 184 |

Björkdal

Drilling, Sampling and Assaying

All the surface, and the majority of the underground diamond drilling has been conducted by third party contractors, producing WL66-sized core (50.5 mm diameter core). During the period from July 31, 2014, to June 30, 2015, 8 diamond core drill holes totaling 935 m were drilled to infill and extend open pit resources; 18 core holes for 4,636 m were drilled to infill and extend underground resources; and 6 core holes totaling 757 m were drilled to test the Rönnberget target. All all diamond drill hole collars are surveyed. Downhole surveys are also carried out to record hole azimuth and dip. Starting in 2013, infill underground diamond drilling programs using WL46-size drill strings (28.8 mm diameter core) were implemented utilizing an in-house drill rig. Due to the nature of the deposit, the core recovery is generally excellent, averaging greater than 90%.

Reverse circulation ("RC") drilling is conducted for infill drilling of open pit resources and is performed as much as possible in the summer months in order to reduce any possible build-up or contamination in the cyclone due to frigid winter conditions. Drilling is performed by contractors utilizing five inch (12.7 cm) diameter drill bits. During the period from July 31, 2014, to June 30, 2015, 30 RC drill holes totaling 886 m were completed. Drill cuttings are sampled every one metre via a cyclone. All RC drill hole collars are surveyed. No downhole surveys are taken because they are not necessary due to the shallow depth of the holes (mostly 32 m).

Diamond core and RC chips are logged by Mandalay personnel on-site. Assaying of Björkdal's samples was completed at ALS Minerals, an independent, ISO accredited laboratory in Piteå, Sweden, CRS Minlab Oy (CRS) in Kempele, Finland, and at the Svartliden gold mine in Sweden. Whole core samples were sent directly to the independent laboratories for sample preparation and assaying. Reverse circulation samples were prepared at the on-site sample preparation facility and then shipped for assaying. Assaying was conducted utilizing the LeachWELL process. QA/QC included the use of standard reference samples, blanks, duplicates, repeats, and internal laboratory quality assurance procedures. More details on the drilling, logging, sampling, and assaying procedures are contained in the Technical Report "Mandalay Resources Corporation Technical Report on the Björkdal Gold Mine, Sweden" filed March 31, 2015.

Mandalay Resources provides half-year exploration updates for its Costerfield, Björkdal and Cerro Bayo mines and its Challacollo feasibility project

Costerfield

Drilling, Sampling, and Assaying

Drill Results

Cerro Bayo

Drilling, Sampling and Assaying

Drill Results

Drilling, Sampling and Assaying

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