Mandalay Resources Corporation Increases Mineral Resources and Reserves at Its Björkdal Gold Mine

TORONTO, Dec. 15, 2016 - Mandalay Resources Corp. ("Mandalay" or the "Company") (TSX:MND) is pleased to announce its exploration efforts in 2015 and the first three quarters of 2016 have resulted in substantially increased Mineral Resources and Mineral Reserves at its Björkdal open pit and underground gold mine in Sweden. In the Measured and Indicated Resource categories (Table 1) after mining depletion, contained gold increased from 598,000 ounces as of December 31, 2015, to 911,000 ounces as of September 30, 2016 (approximately a 52% increase). In the Proven and Probable Reserve categories (Table 2), contained gold increased from 418,000 to 586,000 ounces (approximately a 40% increase) in the same period. These increases are after depletion of 44,000 ounces produced from December 31, 2015 to September 30, 2016. Before depletion, the absolute increase of Measured and Indicated Resources was 357,000 ounces and Proven and the increase of Probable Reserves was 212,000 ounces.

The effective date of the new Mineral Resource and Mineral Reserve estimate is September 30, 2016, and the estimate was independently compiled and verified by Roscoe Postle Associates Inc. ("RPA").  The new estimate will be fully documented in an updated NI 43-101 Technical Report, which will be filed on www.sedar.com and the Mandalay website (www.mandalayresources.com) within 45 days of this press release. All dollar amounts in this press release are in U.S. dollars unless otherwise noted.

Mark Sander, CEO of Mandalay, commented, "Mandalay's Mineral Resource and Reserve position at Björkdal has significantly increased due to our increased rate of exploration drilling since our acquisition of the mine in September, 2014. This investment is based on a continuing evolution of our understanding of the fundamental geology of the deposit, made possible by the careful factual observations and insightful interpretations of our team. As well, the methodology for conversion of Mineral Resources to Mineral Reserves has improved to more closely match the actual mining practices we are implementing. We believe that the Mineral Resources and Reserves will continue to grow significantly with future exploration efforts."

"Our spending on underground exploration drilling since the previous underground estimate of year-end 2014 (see Mandalay February 17, 2015 press release) as well as our open pit exploration drilling since the previous open pit estimate of year-end 2015 (see Mandalay February 29, 2015 press release), totals $5.94 million. Dividing this amount by the 212,000 gold ounces added to reserves yields a discovery and conversion cost of new Proven and Probable Reserves of just $28 per ounce of contained gold."

Dr. Sander concluded, "Finally, dividing the new reserves by the 2017 guidance for gold production from Björkdal (50-55,000 saleable ounces of gold; see Mandalay November 2, 2016 press release) yields a forward-looking mine life of over 10 years, up from the previous 8 years (including 2016). This extension of the beneficial economic, employment, and community impacts of the mine is most gratifying and we look forward to continued extensions."

Table 1: Mineral Resources at Björkdal, Inclusive of Mineral Reserves, as of September 30, 2016

Category	Area	Tonnage (kt)	Au Grade (g/t)	Contained Au (koz)
Indicated Resources
	Open Pit	4,258	1.99	273
	Underground	5,643	3.29	597
	Sub-total	9,900	2.73	870
	Stockpile	1,929	0.65	40
Total Indicated		11,829	2.39	911
Inferred Resources
	Open Pit	2,643	1.19	101
	Underground	920	3.20	95
Total Inferred		3,564	1.71	196

Notes:

1. Mineral Resources are estimated as of September 30th, 2016. 
2. CIM definitions were followed for Mineral Resources.
3. Mineral Resources are inclusive of Mineral Reserves.
4. Mineral Resources are estimated using an average Au price of $1,400/oz, and an exchange rate of 8.4 SEK/US$.
5. Bulk density is 2.74 t/m3.
6. High gold assays were capped to 30 g/t Au for open pit.
7. High gold assays underground were capped at 60 g/t Au for the first search pass and 40 g/t Au for subsequent passes.
8. Interpolation was by inverse distance cubed utilizing diamond drill, reverse circulation and chip channel samples.
9. Open pit Mineral Resources are estimated at a cut-off grade of 0.35 g/t Au, constrained by the resource pit design and the 30th September 2016 open pit digital terrain model.
10. Underground Mineral Resources are estimated at a cut-off grade of 0.90 g/t Au. 
11. A nominal two metres minimum mining width was used to interpret veins using diamond drill, reverse circulation, and underground chip sampling.
12. Reported Mineral Resources are exclusive of previously mined underground development and stopes. 
13. Stockpile Mineral Resources are estimated at a cut-off grade of 0.40 g/t Au and are based upon surveyed volumes supplemented by production data.
14. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
15. Numbers may not add due to rounding.
16. The Independent Qualified Person for the Björkdal Mineral Resource estimate is Reno Pressacco, P.Geo., RPA, who is a Qualified Person as defined by NI 43-101.

Table 2: Mineral Reserves at Björkdal, as of September 30, 2016

Category	Area	Tonnage  (kt)	Au Grade  (g/t)	Contained  Au (koz)
Probable
	Open Pit	4,592	1.36	201
	Underground	4,256	2.52	345
	Stockpile	1,929	0.65	40
Total Probable		10,778	1.69	586

Notes:

1. Mineral Reserves are estimated as of September 30th, 2016, and depleted for production through to September 30th, 2016.
2. CIM definitions were followed for Mineral Reserves.
3. Open Pit Mineral Reserves are based on mine designs carried out on an updated resource model, applying a block dilution of 75% at 0.2 g/t Au.  A cut-off grade of 0.4 g/t Au was applied.
4. Underground Mineral Reserves are based on mine designs carried out on updated resource model. Minimum mining widths of 3.5 m for stopes (after dilution) and 3.8 m for development were used.  Dilution was applied by adding 0.5 m on each side of stopes and adding 10% to development. Extraction was assessed at 95% for stopes and 100% for development. A cut-off grade of 1.00 g/t Au was applied. An incremental cut-off grade of 0.4 g/t Au was used for development material.
5. Stockpile Mineral Resources are estimated at a cut-off grade of 0.40 g/t Au and are based upon surveyed volumes supplemented by production data.
6. Mineral Reserves are estimated using an average long-term gold price of $1,200/oz, and an exchange rate of 8.4 SEK/US$.
7. Tonnes and contained gold are rounded to the nearest thousand.
8. Totals may appear different from the sum of their components due to rounding.
9. The Independent Qualified Persons for the Björkdal Mineral Reserve estimate are Ian Weir, P.Eng., RPA, (for open pit reserves) and David Robson, P.Eng., RPA, (for underground reserves), who are Qualified Persons as defined by NI 43-101.

Björkdal 2016 Exploration and Updated Mineral Resources and Reserves

Björkdal has drilled 38,709 m of diamond core and reverse circulation exploration holes since the previous resource estimation (December 31, 2014 for underground targets, and December 31, 2015 for open pit targets). As well, through September 30, 2016, the effective date of the new estimate, 8,263 m of underground on-vein development has occurred. A total of 2,000 chip samples along this on-vein development and from the open pit were assayed to provide short-range confidence in the model.

Mandalay personnel performed all core and reverse circulation drill logging and sampling, as well as all underground and open pit mapping and chip sampling. Drill and chip samples were sent to CRS Research, Ltd. for assay by the pulverise-and-leach process. The exploration drill samples were assayed at offsite commercial CRS Research facilities, whereas chip samples were assayed either at CRS commercial offsite facilities or at the on-site assay laboratory at Björkdal that CRS Research has operated for Mandalay since mid-2016. Mandalay geologists conduct a QA/QC procedure in which blanks, standards and sample duplicates are inserted in sample batches submitted to the assay lab.

In the underground, the Company generated substantial exploration success in all principal production areas drilled - Main Zone, Central Zone, South Zone and Lake Zone. The Company expects that the underground Resources and Reserves will continue to increase in 2017 as further definition drilling is carried out along the known extensions of the underground orebody.

In the open pit, the Company conducted infill and extension drilling of the currently operating East Pit, West Pit, and Quartz Mountain areas. As well, it continued to infill and extend the Nylunds Open Pit deposit, yet to be mined, to the southeast of the operating mine. The Company expects further increases in Resources and Reserves in the Nylunds Pit area over the course of 2017 as it continues drilling in the area.

Mandalay geologists interpreted approximately 600 individual vein wireframe models which were reconciled in three dimensions and were used to constrain grade estimation. The Mineral Resource estimate was carried out using Geovia Surpac software and utilized an inverse distance cubed interpolation within wireframes. Gold assays were capped at 30 g/t Au in the open pit, whereas a two stage capping strategy was used for underground, 60 g/t Au for the first search pass and 40 g/t Au for subsequent search passes. The estimates were based on intercepts from diamond core, reverse circulation drilling, and chip-channel sampling in both the open pit and underground domains.  

Mineral Resources are reported inclusive of Mineral Reserves.

Underground Mineral Resources are estimated at a cut-off grade of 0.90 g/t Au over a nominal minimum two meter mining width utilizing a $1,400/oz gold price.

Open pit Mineral Resources are estimated at a cut-off grade of 0.35 g/t Au as constrained by the September 30, 2016, open pit digital terrain model, and by a Whittle pit shell designed on Indicated and Inferred Resources at a $1,400/oz gold price.

Underground Mineral Reserves are based on mine designs generated from the updated resource mode utilising the auto-stope function within Deswik software. Mineable stope shapes were designed based on the distribution of Indicated Resources at a minimum mining width of 2.5 metres with a 0.5 m dilution applied to both the hanging wall and footwall. Development was then designed and scheduled to access these stopes. Mining recoveries used were 95% for stopes and 100% for development. Underground Reserves were estimated using a $1,200/oz price.

Open pit Mineral Reserves were estimated using Whittle software to produce a pit shell based on Indicated Mineral Resources at a gold price of $1,200/oz. This shell was imported into Deswik software, where mineable designs were produced using the Whittle pit shell as a guide. The open pit Mineral Reserves are reported at an in-situ cut-off grade of 0.40 g/t Au from within the mineable designs produced in Deswik. The reported Mineral Reserves have 75% dilution at a dilution grade of 0.20 g/t Au and a mining extraction factor of 100% applied to them. The dilution and mining extraction factors are based on a reconciliation between mine production and the block model.

Complete details of the drilling, sampling, assaying, resource estimation and reserve estimation methodologies will be published in the Technical Report to be filed within 45 days of this press release.

Qualified Persons:

All Qualified Persons listed below have read and approved the contents of this news release as it pertains to the Mineral Resource and Mineral Reserve estimates disclosed in this news release.

The Mineral Resource Estimate was carried out under the supervision of Reno Pressacco, M.Sc.(A)., P.Geo., an employee of RPA and independent of Mandalay Resources Corp.. He is a "Qualified Person" for the purpose of National Instrument 43-101. The Mineral Reserve Estimate was carried out under the supervision of David Robson, P.Eng. and Ian Weir, P. Eng., both employees of RPA and independent of Mandalay Resources Corp..  Both are Qualified Persons for the purpose of NI 43-101.

About Mandalay Resources Corporation:

Mandalay Resources is a Canadian-based natural resource company with producing assets in Australia, Chile and Sweden, and a development project 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, the Americas, and Europe 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 guidance as to anticipated gold, silver, and antimony production and production costs in the future. 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 30, 2016 a copy of which is available under Mandalay's profile at www.sedar.com. 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.