Mr. Bradford Mills reports

MANDALAY RESOURCES CORPORATION EXTENDS MINERALIZED ZONES IN FIVE VEINS AT ITS CERRO BAYO SILVER-GOLD MINE, CHILE

Mandalay Resources Corp. has provided an update on drilling results generated by the continuing exploration program at its 100-per-cent-owned Cerro Bayo silver-gold mine in Aysen, Chile. Results presented here were acquired between the cutoff date for the Company's July 9, 2012 exploration update for Cerro Bayo and December 31, 2012. Highlights of these results include:

During the period, Mandalay continued extensional and infill drilling on five targets and drilled eight new targets.

Extensional drilling on the Delia SE, Dagny, Coyita, Trinidad and Marcela veins successfully extended the known mineralized zones by a collective 800 metres ("m") along strike. By the end of the year, only the Dagny vein extension had been fully delineated by drilling. Mineralization remains open, either at depth or along strike, on the other targets.

Of the eight new targets tested, all contained either scattered intercepts of potentially economic grades and widths, as yet without demonstrated continuity (Coigues Este and Central, Gabriela, Gabriela Este, Josefina, Josefina Este) or no significant results (Caiquenes and Guanaco 1).

In 2013, the Company plans to drill approximately 60,000 m at Cerro Bayo, continuing to test extensions of known mineralized zones at Coyita, Marcela, Delia SE veins, Fabiola, Trinidad and Yasna veins and testing several new targets in the district.

Brad Mills, CEO of Mandalay, commented, "In the second half of 2012, we continued to delineate mineralization in extensions of existing veins and to test new targets. We expect a new, independent NI 43-101 reserve and resource report for Cerro Bayo based on this work to be completed in the first quarter of 2013. We have developed an extensive inventory of new targets at Cerro Bayo that are ready for drilling and expect to test a significant portion of these in 2013."

Cerro Bayo drilling and assaying

During the reporting period, Mandalay drilled 28,627 m of core in 107 holes. Diamond core was logged and sampled by Mandalay geologists. Core samples, including blanks, standards, and duplicates, were assayed on-site at the CompaAplus or minusia Minera Cerro Bayo laboratory. The Cerro Bayo laboratory, which was audited in 2011 by SGS Lakefield Research Ltd., routinely sends check samples to ALS Laboratory (an ISO 9001:2008 and ISO/IEC 17025:2005 certified laboratory) in La Serena, Chile, following QA/QC practices established by Mandalay. See the March 18, 2012 technical report entitled "Technical Report on the Cerro Bayo Project, Chile", available on SEDAR (www.sedar.com), for a full description of the drilling, logging, assaying, and estimation processes.

Significant exploration results

Dagny vein

Twenty-five holes (7,915 m) tested approximately 300 m of the Dagny vein extension strike length under Laguna Verde to the point where it intersects the Delia SE vein (see Table 1; click here for Figure 2: Dagny Long Section). Drill results indicate that potentially economic mineralization (minimum 2.4 m width of >120 g/t AgEqA Superscript one) exists in an area measuring about 200 m horizontally by 70 m vertically. Evaluation of this mineralization will be included in the Company's year-end resource and reserve update.