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

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 Corporation. 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 Corporation.  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.