B2Gold Corp.

Good afternoon. My name is Colin and I'll be your conference operator today. At this time, I'd like to welcome everyone to the B2 Gold second quarter 2021 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. Thank you. Mr. Johnson, you may begin your conference.

Thanks, operator. Thanks, everyone, for joining us. As the operator said, we're here today to talk about our financial results from a strong Q2 of 2021 and continued strong gold production performance above budget, and we are on track to meet or exceed the upper end of our annual production guidance range, which sits between 970,000 ounces per of gold to 1.030 million ounces of gold. I'm just going to give a couple of remarks in the front, and Mike's going to walk us through the key financial results. We put out a pretty extensive news release talking about the results of the quarter and also where we sit financially overall, but also updating you on a few other issues. The three mines continue to produce well. I think as we've signaled very early and very often, that the second quarter of this year was the first half of the year was going to be lower production and the production weighted to the second half of the year and the second quarter this year we knew was going to be the weaker quarter on the financial results basis which hopefully we signaled that very well to the market. That's all we're seeing the reality of that. We're also seeing a positive start to the second half of the year. In terms of overview, we'll hear that the three mines continue to operate very well. They've worked very hard and diligently through the COVID experience with our local communities, our employees, and the governments in the areas we work. We're very proud of the contribution from everyone, and I think that we really showed off the amount of social license and trust we have in the places that we work and that we were able to collaborate very early on in the mutual trust relationship to ensure that we could continue to mine, which is critical in the countries we're in for the economy, but continue to mine, but only if we could do it. So I'm proud of the contribution from all of our employees and people. So in terms of looking forward a little bit, I'm talking about some of the catalysts going forward. I'll touch on that now for those that don't make it through the whole call. But at the end of the day, as I said, we're on guidance to meet the year. But that does not include a couple of upside potentials as well. We have the Cardinal zone, which is adjacent to the FACOLA deposit. And we've already done a bulk test, and we're looking to start moving over from Cardinal to some good grade material from Cardinal through the Focola Mill, which is not included in any of our projections. So that could bump up production there. And then looking a little bit further out, we are looking at the Anaconda area, which consists of Minnokoto and Bentaco. As we all know, we're currently in a dispute with the government over the ownership of the Minnokoto license. We continue discussions with the government looking to solutions. We believe we have a legal right to an extension to that exploration license where we've spent $27 million and have identified a significant resource that has potential to get larger and can be tracked down potentially to the Focola Mill. But importantly, the Anaconda area is really these two licenses, and the Bataco North, just immediately north of Minnokoto, has a significant amount of saprolite weather material at surface with good grades. That's actually where we would start mining the Anaconda area, and that's the license that is not under dispute. So we're looking potentially subject to a Subject to the final mine plan and the permit working with the government is our partner there as in Ficola as well. We'll be looking to start shipping more potentially to separate it or down to the Ficola mill. And then as early as the second half of, starting in the second half, early second half of next year. The Ficola mill, we talked about in the news release, but we've had spectacular performance in the mill from when we first constructed it and through the two expansions of the mill and we're getting some very good tonnage throughput. So that's another upside. given the projections we've made for tonnage throughput, given the reality of what we're seeing. If that continues through the year, that's another potential positive upside. And the Sapper Lake, really because of its weathered nature material, can run through the mill on top of the normal capacity for the mill. So there's some upside scenarios there. The overall picture of the Anaconda area, we think there's tremendous exploration upside in Minnetonka and in Bentanco and continue to in Bentanco while we resolve, hopefully positively resolve and get on with business in Minnetonka. In terms of that scenario, I just want to comment that Mali's been a very good place to do business for GoMoney for many years, as Rango, now Barrick, and Atestu, and other companies, including ourselves. So we expect to resolve this current situation and get back to exploring the Minn Kota on behalf of our partners, the government, and the people of Mali, and creating jobs in the short term. But in the meantime, we'll go ahead with Bintaco, as we would have started there anyway. But we think Mali's a good place to be in the GoMoney business. We still believe that, and we believe that the government will continue to honor the laws as it has for decades, making it an attractive place for foreign investment in gold mining. Other than that, the Gramalati project, everyone knows we decided to delay the feasibility study there to do some additional work on engineering, looking at some different concepts there to lower the, ostensibly to look to lower the capital cost. Looks like we're getting some traction there from some of the early indications from the engineers. And also we're doing additional drilling on the Gramalati switch itself, but also on the two other areas, Trinidad and Mohas West, and getting some interesting early results from Trinidad, which has been a low-grade zone that might have added my life back in the day. Now we're seeing some potentially a bit higher grade there. We'll see how that pans out. So we're now looking at, because of COVID-related delays, and getting going on the drilling and adding some more additional drilling to the program for the Gramalate area, we're looking at hopefully early in the second quarter now for the release of the new feasibility study. So we're optimistic that Gramalate can we can improve the project through some of the initiatives we have going on, and we'll be able to talk about that as I said earlier in the second quarter. Other than that, we've got a very active exploration program going around. Many targets around the world, things we've been working on, in some cases for years, to get opportunities like Uzbekistan where we're drilling, exciting targets in Finland, and of course all of our various brownfield exploration programs around the mines where we've had great success over the years, continuing to add ounces, and therefore mine life to our operating minds. So exploration will continue to be an important part of our growth profile. The Ikeaka project in Burkina Faso, we are updating the feasibility study there and we're considering various alternatives to unlock the value of that for our shareholders. M&A, we're looking, definitely we're always looking at opportunities. We don't see a ton of things that we really love out there that we think are fair value. We'll continue to look and look for opportunities. But for instance, to M&A, it's more likely we'll find some different situation where somehow bringing our expertise to bear with the opportunity that may suit us that may not suit other companies. It's going to be a pretty competitive environment for M&A. And we'll continue to look at that and look at opportunities, but very selectively. We're not going to start overpaying for assets now we never have before. So with that, I think I'll general overview, pass it over to Mike, and he'll tell you about the financial position we find ourselves in, continuing to pay a very robust dividend, one of the highest dividend yields in the gold sector. and talk about our strong cash position and our lack of debt and continued financial strength looking into the future. So with that, I'll pass it over to Mike Cinnamon to give us an update. We also have the entire B2Gold executive team on the line available to answer questions after Mike's given his presentation. So over to you, Mike.

Thanks, Clive. And good morning, everybody. So I'm just going to run through the quarterly results, quick comment on the year to date, and then sort of where we are cash flow-wise and balance sheet-wise. So firstly, on the quarter, for the second quarter, we had $363 million in revenues. That's from the sale of 200,000 ounces at an average price of $1,814 per ounce. So gold still holding its own, as everyone's seen in the quarter. It's a bit range-bound around that $1,800 mark, but certainly holding its own. And when we gave guidance on cash flows for the year, set to right at the start of the year, we actually used $1,800 gold. So right in that ballpark of where we thought when we were budgeting and giving guidance to everyone. Sales were 12,000 ounces higher than budget in the queue, and that's really a function of the overproduction at the sites. So turning to that production for the quarter, so consolidated and including our share of Caliber, production was 212,000 ounces, which is basically 10,000 ounces higher than budget. And that came really from outperformance from each of our sites. Focola, same kind of story as the first quarter. The throughput of the mill continues to outperform even our expectations. We did budget 7.75 million tons annualized throughput for the newly expanded Focola mill, but even in Q1 we did 2.29 million tons, so well in excess of what we budgeted. That's a combination of a few things. favorable over fragmentation and hardness and optimizing the grinding circuit. But it's all very promising. What we did see in the queue was that to feed some of that excess production, more than we thought we'd have, we did use some low-grade stockpiles, which provided that sort of additional unbudgeted mill feed. And that did lead to a slightly lower grade in the queue as a result. But overall for COLA, 114,000 ounces, or 4,000 ounces ahead of budget. Then Ms. Batty, 57,000 ounces production for the quarter, again, 4,000 ounces ahead of budget. And same story for Ms. Batty as we saw in Q1. Mill recovery has continued to outperform our model and process great from our transitional ore and main vein where we're working right now was above budget. We did actually have time in the queue to run a couple of metallurgical test campaigns. just to try and help us optimize our recoveries as we move forward into the harder ore later in the mine's life. And what we found from one of the test campaigns involved high-grade ore from the main vein pit. So even though we had a bit of a downturn in throughput because of the campaign, we actually improved grade overall because of some of the tests that we ran. So overall, Ms. Batty running very well and still beating the model on recoveries and grade. And Ojikodo, 27,000 ounces, and that's 2,000 ounces ahead of budget. And really, as you know, and as we guided, I think, in the budget all the way through the year so far, a lot of the production from Ojikodo, or a majority of it, was coming from stockpiles in the first half. And then Ojikodo, as we get into the mining, the higher grade in both Woolshag and Ojikodo pit in the second half of the year, we're going to see a real upturn, I think, in the production from that mine. But in Q2, even when we mined from the sort of medium-grade stockpiles, the grade that we actually got was actually better than model, so we saw a beat overall in the numbers for Ochicota. So when you translate that into cash costs, and this is on a per-ounce produced basis, overall, across all our sites, and including our share caliber, we're basically right on budget, $664 an ounce. against the budget of 662. But there were some offsetting factors in there, offsetting sites. So Focola was $617 an ounce. Now that was just over $70 an ounce higher than budget, but that's primarily a function of a couple of things. The first one, the main one, is that we were running that lower grade material through the mill to feed the excess throughput. So lower grade leads to higher costs overall per ounce. And then we did see some... higher cost in terms of higher than budget fuel prices, and we've seen that across all operations, and I'm sure you're hearing the same thing from all mining operations. But even with that, we still managed to overall on a consolidated basis to come in right on budget. So offsetting the FACOLA, higher cost misbatty was $616 an ounce produced, which is over $80 lower than budget. That's primarily a function of higher than budgeted production with generally online budgeted operating costs, although again, fuel was higher at Mesbadi site. And then Ochocoto, $854 an ounce, again, just over $80 an ounce lower than budget, and same kind of story, higher than budgeted production, slightly higher fuel costs, and stronger than maybe a dollar, but that was also offset by higher than budgeted prescripts, so we saw some more costs capitalized as part of that prescript. So overall, right on budget for the Q, consolidated for cash costs, All ends, we were overall, a consolidated basis, $30 an ounce lower. That's a function, as always, of what happened with the cash cost in the queue, and also lower than budgeted sustaining capex is the primary reason that there's a beat on budget there. And most of that, or all of that, really is timing related. The main part that wasn't incurred on the sustaining capital side relates to, I guess, fleet, fleet rebuilds and stripping. mainly at Focola and Uchikoto, and we do expect to see that reverse in the second half of the year. But overall, $30 per ounce, lower than budget on a consolidated basis. And just quick commentary on year-to-date. So year-to-date on production, we're 29,000 ounce ahead of budget, so really reflecting a very good first and second quarter that we had. And as Clive mentioned, I think he gave a good outline of some of what we don't have in our guidance right now relates to what we can get from Cardinal as we move into Q3. We expect it to come online at some point in Q3 and later in the year, and also the higher production that's going through the Focola mill right now. So I think the engineers are working on those numbers so that we can try and factor them in. So right now, they weren't included in the guidance that we put out for the year, the budgeted guidance. We do think that there's definitely a chance that we could beat the high end of our production range when that's factored in, so we expect to be able to give you a bit more Color on that as we move into Q3 as part of the Q3 reporting. And then just a comment on the cash costs and the all-in costs for the year. So on a cash cost basis for the six months, we're $26 lower than budget. That really reflects the, you know, although we may have some cost inflation, cost pressures across the sites, we're beating it on the production side. So overall, we're below budget there. And all-in sustaining costs were $88 below budget. Again, a function of those better cash costs and some of this deferred capex. We're also seeing, on the all-in sustained cost side, we're also seeing the benefit of some fuel hedging that we've done. So as I mentioned, there were some higher fuel costs in the period, but we've had a hedging program for quite a few years now where we hedge 50% of the next 12 months and 25% of the subsequent 12 months on fuel basis. Those hedges right now at the end of the quarter were about $18 million. in the positives, and we're seeing the boundaries of those hedging gains when you look at the all-in sustaining costs because they're factored in there. So, guidance-wise, like we say, at or above the high-end overproduction range of 970,000 to 1030,000 ounces for the year. Haven't re-guided on the costs, still expecting to meet or be within the ranges for our costs overall. Again, once we see the updated production numbers for Q3, we'll have a better idea of how that may impact any of the cost per ounce parameters. Just a couple other comments maybe on the operations themselves. Clive mentioned FACOLA and what's going on there and Cardinal. FACOLA Solar Plant also came fully online in the queue. The construction of the plant is complete. We're still working on a few commissioning things, but really it's there. and it's expected to reduce FACOLA's HFO consumption by over 13 million liters of HFO per year. We've already seen solar be very successful in Namibia, and now we're seeing the benefit of it in FACOLA. Manicoto, I think Claire's already given you an overview on that. Then just to comment on Ochocoto, development of Wolfshag, the underground line continues. We've got the portal developments completed, and now We're working on the primary underground ramp and we hope to get into spillboard production sometime in early 2022 as was forecast. Maybe just a couple of comments on some P&L items that don't fall automatically out of some of the production stats that we talked about. G&A is up a little bit in the queue and that's really Primarily, it's a function of two things, the increase in insurance costs. The whole industry is seeing insurance costs go up, unfortunately. That's just a fact of life. And part of that comes with higher gold prices because you have higher values and BI numbers to deal with. And then some of it's just ongoing higher COVID costs as you manage the sort of COVID protocols at sites. Just pointing out, the gains in derivative instruments, the $9 million for the Q and $17 for the year, that's fuel. Almost all of that is fuel, and that's just the positive gains on some of the hedges that we have in place. Taxes, $50 million for the Q, CIT withholding. We're going to see higher taxes now as we're profitable at all sites and with these higher gold prices. The one thing that's in there that you're gonna see on an ongoing basis now, there was 18 million in there for withholding tax, mostly for FACOLA and mostly related to dividends as we pull money up from the sites. The loans at all sites have been repaid some time ago, and now monies that are pulled up from sites repatriated via dividends. So again, it's a function of being profitable and successful, but you're gonna see some higher taxes there because of withholdings on dividends. Overall earnings. For the period earnings per share, unadjusted $0.07, adjusted EPS $0.05, and then for the six months, EPS $0.15 per share and adjusted $0.14 per share. The adjustments are primarily to remove unrealized derivative gains and DIT charges and credits. Okay, and then just finally we just wanted to mention our comments on a few items in the cash flow. You know, we've spent a lot of time certainly trying to guide over the last couple of periods or few quarters as to how we see cash flow unwind through this year. So it is definitely a tale of two halves this year. You know, we had around about $140 million in Q1, and we expect about half a billion in Q2. So overall for the year, we expect about $630 million. That's what we guided at $1,800 gold, and we expect certainly to come in at that or close to that. So that guidance is unchanged. But what it did mean is that we had basically breakeven or just actually a slight cash outflow of $8 million for the quarter for operating activities for Q2. And as guided frequently, that really relates mainly to working capital changes. And the biggest component of that is payment of last year's tax obligations, most of which relate to Mali. So paying off the Mali tax obligations and the government dividend, which is due in the June following the next year. So 2020 government dividend, ordinary dividend for Mali was paid in the second quarter of 2021. So a significant outflow there, but right as planned. I think when we look at what we got at the end of Q1, we couldn't really be any closer for this queue, I think, how we turned out. So we're feeling very positive about the second half of the year, and now that the sites are getting into the battery grade ore, both Namibia and Focola, we expect to see a significant upturn in that operating cash flow as we go through the next few quarters. A couple other comments, maybe dividend paid. We paid, as Clive mentioned, we paid $0.04 per share again in the queue. Our dividend yield is somewhere just under 4%, so it's still right up there in terms and we feel very comfortable maintaining that level of dividend. Distributions to non-controlling interests, you'll see in the cash flow, $7 million outflow for the Q, $9 million for the year. That's, again, a function of profitability, so those are related payments to minority interest partners, both Mali, where the government has a 10% dividend interest, and then in Namibia, where we have a 10% minority interest partner for Ojikoto. And finally, just to comment on investing activity, so $66 million for the quarter, $125 million cash outflow year-to-date. We're about $30 million lower than budget for the year-to-date number, and about $5 million of that relates to sustaining CapEx, so mostly stripping that we'll see roll over into next year, and then non-sustaining There's about $24 million behind a non-sustaining right now. $9 million of that relates to Gramalati. That's just a timing thing. We're certainly doing a lot of work there now, and I think we'll catch up those costs very quickly. And in fact, we're just in the process of finalizing Gramalati's revised budget for 2021 with our partners, AGA. We just have to have that formally approved now in the joint venture meeting that's going to happen next week. So the new budget there, is $69 million. That's an increase from the $52 million that we had originally in the budget and our share is roughly $9 million of that additional for the year. And then we also expect to agree on an updated amount for the early part of next year. Right now it's estimated to be about $17 million to get us right through to final completion of the feasibility study for Gramalate. That revised look at that feasibility study and how we think we want to approach it there. So, we think now the groundwater feasibility study will be done sometime in Q2 next year. It's pushed out slightly from Q1 as a result of more drilling that we've now agreed with AGA that we're going to do at Trinidad and Monash and also just ongoing COVID restrictions in Columbia, which haven't stopped us from doing work, but just makes it a little slower than we had planned. So like I said, on that CapEx side, that $30 million that we're under for year-to-date, we do expect to see that reverse and flow through the second half of the year. Oh, sorry, I should mention, the other thing on the non-sustaining CapEx that was under, it's about $11 million for exploration that hasn't been spent yet, but we've definitely got the plans and the teams assembled and working now at various sites, so we expect to catch that exploration underspend up in the second part of the year. That leaves us at the end of the queue with $382 million in the bank. And like I say, waiting for the big cash flow part of the year to come now in the second half of the year, approximately half a billion from cash flow from operations to flow through. And we've got the line undrawn. We've got a $600 million line revolver sitting with our syndicated banks that's undrawn. So liquidity-wise, we're in excellent shape. And that concludes my remarks. on the financial side of the quarter. Back to you, Clay.

Thanks, Mike. I guess I'll open up for any questions now.

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You'll hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star, followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Okay, your first question comes from Tyler Langton from J.P. Morgan. Tyler, please go ahead.

Good afternoon. Thanks for taking my questions. Maybe just to start with Cardinal, I think you previously talked about it may be being able to contribute around, I think, 20,000 to 25,000 ounces this year. Is that still the case? And then, I guess, to start production, are there any sort of, I guess, permits or approvals that you need from the government?

Sure. Yeah, that's actually a question, Tyler. I'll pass it over to Bill to answer that.

Yeah, thanks. So the answer is yes. You know, kind of for the whole year, that 20,000, 25,000 is certainly within the range that we talked about. Remember that it is still a a resource, an inferred resource. So we're still working through that. But with that being said, certainly the initial bulk sample that we completed in Q2 did represent quite well what we thought was going to be there. So that number still holds true. And we have already, we went through a full update to our environmental impact assessment and that was approved. And now we're just adding it to the mining plans. We actually have this next week, the ministry coming out to have a look at it. And so certainly we see within Q3, we'll be ready to mine it fully.

Great, thanks. And then just... Oh, sorry. Go ahead, Peter. Okay, thanks. Yeah, just as a second question, just obviously we've started seeing some inflationary pressures. I guess, can you just... And you mentioned the release on new pressures, you know, from fuel and other items, but can you just, I guess, provide a little bit more details, you know, on what you're seeing, whether it's materials, consumables, fuel... And if you sort of have any supply contracts or fuel hedges that kind of mitigate the impact this year.

Well, I think Mike can speak to, he talked, he touched on it in his remarks about the fuel hedging. I don't know, Bill, do you want to talk about other, other views on inflation and what we're doing to, to mitigate the impact?

Yeah, well, certainly we are seeing, you know, some, some inflationary pressures for sure. In particular, on the shipping side, you know, as everybody comes out of COVID, the shipping costs are up. But what we're doing as far as trying to mitigate it, as you know, in the last couple of years, we've become a major producer as opposed to a junior. And that's allowed us really to get global pricing everywhere. So when we go out for prices on reagents and that type of stuff, then we're able to kind of get what all the big boys are getting, the best prices possible. So, you know, I would say that certainly there is a pressure. on inflation, but we're managing it as best we can for sure. And fuel, I think Mike was going to talk about.

Mike, on the fuel side, I don't have a lot to add that I already talked about. We have kept our fuel hedging programs up to date, so we're basically 50% hedged for diesel and HFO needs for the next 12 months, and then 25% for the subsequent 12 months. Great. And right now, that's on the book. It has a mark-to-market value of about $18 million, so it's $18 million in the positive. And then the other hedge that we've talked about historically, it's kind of like a permanent hedge, is we put the solar plants in, firstly in Namibia, where we viewed that as part of the overall hedging approach to fuel, and then obviously with Focola coming online as well. We think that reduces overall operating costs somewhere in that 3% range. So that's kind of part of how we, on a permanent basis, are medicating some of those cost risks.

Okay, great. Thanks so much. That's it for me. Next slide.

Your next question comes from Josh Wolfson from RBC Capital Markets. Josh, please go ahead.

Thanks. Just a quick question maybe on capital allocation. Obviously, this quarter was not necessarily representative of what the go-forward cash expectations are going to be. But with the second half of the year being positioned much better and even beyond that with Gramalote, what's the current thinking in terms of dividend policy and what the excess cash is going to be allocated towards?

Mike? So on that front, Jocelyne, I think a couple of thoughts. The first one is we're pretty comfortable, like I think we were saying, at our current dividend rate. We've got one of the highest yields out there. We put ourselves up there pretty quickly. And so we feel pretty comfortable maintaining those rates, certainly for the long term, even given significant fluctuations in gold price. So that was one of the reasons for setting. That is the rate we did. We are, you know, we're trying to balance cash flow generation with also and returning capital shareholders with being a growth company as well, still a growth company. So I think you'll see us run through and see where we get to by the end of the year and evaluate it then. But I think right now we're pretty comfortable at the rate we're at. We don't have any plans for share buybacks and we don't have any plans for any kind of special dividend right now for any increase in dividends.

Yeah, we'll continue, as Mike says, to look at that. You know, at the end of the day, we're going to have a, as we get into later this year and into next year, we're going to have a bit of an idea of what we think about Grandma Latte in terms of potential capital and the idea, you know, I think most of our shareholders get it. We're paying a very healthy dividend, but we are a growth company and we want to continue the opportunities for growth, whether it be, you know, the Anaconda we've talked about, whether it be Grandma Latte or other opportunities. So we think we've got the right balance for the shareholders right now. But we'll be looking at that, as Mike said, by the end of the year. Now, obviously, if gold were to make a significant move, then that might change our thinking there as well. But I think right now we've got the right balance, and let's see what we look like as we get towards the end of the year.

Got it. Thank you. And then maybe if I can tuck in one more just for Ojikodo with the sequencing in the second half of the year. Is there any sort of key difference between third and fourth quarter, or is there going to be just a real stepwise change now with the grade sequencing at the bottom of the pit?

Bill, you want to talk about them? Yeah, I'm just looking at what grade we're feeding into the mill here in the second half. The answer is it's going to be pretty evenly broke out. So the first half, obviously, we had a very – not a very – high output but the second half we're going to see it come up in q3 and q4 okay and that how long does that sequence go for like does it go past year end 2021 well we haven't done the 2022 budgets yet so i'm a bit low to say exactly exactly what it's going to be okay that's uh that's it for me thank you very much okay your next question comes from obeys habib

from Scotiabank. Please go ahead.

Thanks, operator. Hi, Clive and B2 team. A lot of my questions have been answered, but I did have a follow-up question on Cardinal. In regards to, Bill, you mentioned that you have submitted the environmental and social impact assessment. Any kind of color that you can provide to us as to how those discussions are proceeding regarding the permits?

Yeah, they're proceeding very well. Like I said, we submitted the bulk sample. Now they're just coming out basically to see where it's all at. I don't even think we need an official written approval, but they just got to make sure that we implemented it correctly within our mine plan. So we see mining there as imminent.

Perfect. And in terms of mining on Cardinal's side as well, once you get the official, I guess, permit or whatever, can you start in Cardinal right away or is there any pre-stripping required, any sort of capex required on Cardinal?

We can start right away. As part of our bulk sample, we had to move some material out to get some representative material. So it's been kind of a twofer. We got the good metallurgical testing and we got some of the pre-stripping done.

Okay, perfect. And just a little bit more color on the Anaconda side. You had mentioned that you know, Menin Koto is not somewhere you want, you want to start off, uh, mining in the first place. Um, but there was opportunity to start on other areas of Anaconda. Um, would you look to do a bulk sample similar to what you did at Cardinal or how should we look at, um, Anaconda?

Yeah, that's, that's a real interesting question of Ace because originally we did talk about doing a big bulk sample there. you know, with the saprolite material. Certainly the saprolite material, we have done some metallurgy on it, and we think that it feeds quite well, but I guess, you know, I guess that's not off the table. We would consider doing a bulk sample in the Bentaco area in Q4 this year, potentially.

Okay, perfect. Well, that's it from me, guys. Thanks so much. Thanks, Luis.

Your next question comes from Don. Don DeMarco from National Bank Financial. Don, please go ahead.

Okay, thank you, Operator. And thank you, Clive and team. My first question is for Bill. So, Bill, there's a lot of moving parts at FACOLA. We've got low-grade stockpiles we saw in Q2. You've got the pit, Cardinal, and so on. What should we be thinking about in terms of grade for Q3?

So, your question is, what is the grade for Q3...

Yeah, well, I mean, obviously direction would be higher than Q2, but we're just trying to get a sense of the balance of these three different components and so on. If there's anything you can kind of, whatever you're telling people at this point.

Yeah, so in the budget, you know, our grade kind of in Q3, we're up around 2.8, 2.83. And then in Q4, we're, you know, between 2.5 and 2.6. Okay, great.

Bill, just continuing on, you confirmed Cardinal is going to be still in that range of 20 to 25K for 2021. But how much might we expect in 2022? And you did release that five-year guidance at the AGM. Is Cardinal included in that guidance? Any caller here would be appreciated. Thank you.

Yeah, so Cardinal is included in the original guidance that we released, but none of the Bentaco or Menincoto or any of that stuff is included. And so that is still yet to be factored in. The thing that's really interesting about what we've going on there is we're going to have some optionality, which you mentioned. You talked about you've got the low-grade stockpiles. You've got Cardinal. You've got some Cardinal Saperlite. You've got potentially Bentaco Saperlite. So all these things are going to be put into play when we do the budget. And so that's why I can't say really what's going to be carrying on in Q1, Q2 of next year. And I just want to come back to the previous question you asked me because I actually saw the mining. The grade in Q3 is going to be 2.73 and in Q4, 2.71. Okay.

And obviously Cardinal is going to be lifting that a lot. But just to that second question I had, Cardinal 20 to 25K for 2021, but that's probably a baseline for subsequent years, I would imagine.

Well, yeah. I mean, once again, we haven't really scheduled it out because we don't know how it's all going to fit in with Mentaco and Anaconda. So the answer is there's, as you know, the resource is quite big there. Okay, great.

And on Mentaco, is there any concern that the mining license in that area north of Manicoto could be retracted? I mean, are you feeling pretty confident in that? I mean, obviously we hope to have the portion that was taken away restored, but what about risk to the rest of the property?

Yeah, we see that as really low probability. The reality is that's still sitting under a very early exploration license. So there's still another, I think another seven years or six years of exploration potential there. So the fact that we're already willing to put it into production now And, of course, the government is in a need for cash. There are certainly other projects around which are getting their permits as normal. So we see Manicoto as an anomaly, and we see it business as usual everywhere else. Okay.

Thanks, guys. That's an important point. Manicoto is a very different situation where we believe we have the legal right to an extension to allow us to get going on it and file for an exploitation license. We believe under Malian law we had the right for that. That's at a very different stage. Once again, I mentioned we're discussing with the government. We also are in arbitration in Paris, which is a big step, but we didn't do that lightly because we believe we still have a significant right here. But Menaco is a very different situation from Pentaco, and the government, in all indications, are very keen to see us get going in that area initially with Pentaco, and ultimately, I think, So we'll see as the appropriate place to take ore from Manicoro. And then tackle is, of course, the Ficola Mill. And that's not lost on a lot of people, including a lot of people I would suggest we would see in government in Maui.

Okay, guys. Good luck with the rebound and starting in Q3. Thank you.

Thanks.

Your next question comes from Carrie McRury from Canaccord. Please go ahead. Hey, good morning, everyone.

Maybe a question for Mike on the operating cash flow guidance, $500 million in the second quarter. Does that line up with the midpoint of your production and cost guidance, i.e. if you, you know, obviously you're at the top end of the production guidance now, but if you do better on cost, could we see upside to that number?

Oh, on the operating cash flow side, yep. Yeah, I mean, obviously the more production you have, arguably, it depends what the cost profile is. I would balance that on the other side, but we have seen some cost inflation. So our view overall is I think we can meet our cost guidance, but the cost per ounce obviously can be benefited from more lower cost production, say from Cardinal in the period. But overall, I think I would view us as coming in on the range. That's where we sit right now.

Okay, great. And then maybe a question for Bill. I noticed in the MD&A you guys talked about the solar plant being completed, and it looks like it's going better than planned. Just wondering if you can add a little color on potentially what that could translate into for you guys.

Yeah, I mean, John Rahal is on this call. He's probably more appropriate to answer, but what I'll tell you is that we're definitely seeing design plus, and given the fact that we're in the rainy season now, You know, we certainly anticipate that we're going to be above where we thought the design capacity was going to be. I don't know, John, if you want to add anything to that.

No, I think that's a good summary, Bill. During the second quarter, the solar provided 16.8 percent of the total power production, but that was only with 78 percent of the panels installed. It did really well for the number of panels installation, which is now completed, and we're doing testing. We've gone up as high as 30 megawatt power production, which is the rated capacity of the plant, so it's all looking good.

So high level, you mentioned saving 13 million liters of HFO, which we can do the math on, but what is it? I assume the operating cost of the solar plant now that it's in is pretty minimal.

Yeah, it's going to contribute to roughly two and a half cents per kilowatt hour savings, I think is what we were projecting. And we may have potential to even exceed that.

Kerry, just a reminder, I think I mentioned it in the remarks. We think overall, when you look at it on balance, it reduces cash costs by about 3%. But that's what we think the impact of solar is. We see a similar kind of contribution in Namibia as well.

Perfect. Thanks, guys. Ladies and gentlemen, as a reminder, should you have a question, please press star, followed by one. And your next question comes from Anita Soni from CIBC World Market. Anita, please go ahead.

Hi, thanks for taking my call. Good morning or afternoon, Clive and team. Most questions have been answered, but can you just clarify again one more time? It's been a long night. Just the FACOLA sort of the components of, you know, how we're getting to sort of the higher production the second half of the year. So I was a little confused because I thought you said that, you know, in the press release it says Cardinal is not part of the of what you factored into the grades, and that could be an additional upside. But I thought, Mike, that you had said that just now, that Cardinal was factored in. So I'm just – could you clarify that for me? And then also, secondly, on the throughput levels, it seems like you're hitting, you know, above the throughput level at FACOLA, and you've got it to a slightly lower level on throughput for next year as a run rate. Is there something that we should be thinking about in terms of, like, additional bottlenecks or the mine may be a bit constrained, so you can't run at that full level, I think with 88.3 K-10 per day that you did this quarter in one month?

Well, I'll start with the initial question about Cardinal, whether it's factored in. It's not factored into the budgeted numbers. It's not factored in to current guidance. What I was saying in earlier remarks was when we get more clarity on exactly how we see that flowing in Q3 and Q4. And we'll have a look at our guidance then to see if there's any guidance where we would update that. And then my other comments on it just more recently, the question was, do we see cardinals potentially benefiting cash costs? And I would say, yeah, I mean, in theory it could, for sure, because more production, hopefully lower cost. But we are not changing our guidance range, even once Right now, we haven't changed our cash cost range. When we see what Cardinal looks like and give a bit more flavor to it in Q3, then we'll come back to you if we think it changes anything.

Okay. Bill, you want to talk about Bill's throughput or Bill or John?

Yeah, yeah, I do for sure. So the second half of that question, I was asked if Cardinal, we did a five-year guidance, was Cardinal included in that? And the answer is yes, starting in 2022. So going forward, that was already included in our assessments. for the next five-year or four-year guidance through 2025. As far as, you know, how do we see, you know, getting the additional ounces this year, there's quite a few ways that could happen for sure. One, obviously, is the throughput, right? You know, our budgets for this year, we're running at 7.5, I don't know, sorry, 7.75 million tons per annum. We're currently running up there, you know, much closer to nine. And we're thinking, and once again, we're always kind of coy about this, But we're basically thinking if we can get a million tons of saprolite down there or something like that or 15%, we think that we could actually be running up around 9 million tons per annum going forward. And so that's kind of what we're shooting for right now, and that's what we'll be looking at for our budget. So what we have is we have this huge extra capacity versus what's in the budget, which is what obviously generates the ounce profile versus what we're actually running. So you could have ounce profile from Cardinal. You could certainly have it from Stockpile. And as someone mentioned earlier, if we're real slick about it, we could actually pull a bulk sample from Bentaco and bring it down. So a bunch of different options.

All right. Thank you. That answers my question.

Excellent. There are no further questions at this time. I'll turn it back to Clive Johnson for closing remarks.

Okay. Well, thanks for... your participation and your good questions. We look forward to a very strong second half of the year and continue to have great performance in the mines. We're excited about proceeding with looking at our development projects, exploration, and see what other opportunities come our way. We look forward to talking with you again soon. Thanks, everybody. Thanks, operator.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.