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spk01: Ladies and gentlemen, thank you for your patience. Please do not disconnect. B2 Gold conference call will begin momentarily. Once again, please continue to stand by. Do not disconnect. The conference call will begin momentarily. Good morning and afternoon. My name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to B2Gold third quarter 2021 financial results conference call. Note that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. And if you would like to withdraw your question, please press star then number two. Thank you. Mr. Johnson, you may begin the conference.
spk05: Thank you, operator. Welcome everyone to our third quarter financial results call. I'm just going to see if you open your marks and pass it over to Mike Cinnamon to walk you through the financials, and then we're going to open it up to any questions. As you can see from the release, we had another strong quarter in the third quarter, and despite, once again, the challenges of COVID and some inflationary pressures on the cost side, so we're pretty... We're pleased with the results of what we're seeing with third quarter. Leaves in, as you'll hear from Mike, a very strong financial position now and going forward, being strong in cash and debt-free and looking to generate some $650 million over the year from cash operations. Mike will give you all the details on that. The focus for the company going forward will be to continue to optimize responsible, profitable gold production. And Mike will talk more about about our new guidance for a couple of the mines for Pecola and Aspati. And other things, we're going to continue to advance our development projects. Obviously, Gramalate, we're looking now at a feasibility study for the second half of next year. We've had some positive results from some of our engineering reviews so far, and we're looking at the capability to reduce capital costs, and also we're drilling away, looking to turn some more inferred into indicated so we can divide the capital potentially over time by more ounces. So we're We think that's heading in a positive direction for Gramma Latte. I think the other thing that's got us pretty excited is the potential that we're seeing from Bentaco in the Anaconda area, 20 kilometers north of Focola. And the excitement there is the ability, initially, to start hauling satellite weather material 20 kilometers from Bentaco down to the Focola Mill. The Focola Mill has been running extremely well. and it can definitely handle saccharine material because it's softer material on top of the hard rock. So we see the potential there by the second half of next year to start trucking ore. And also, of course, the other big excitement has been the cardinal discovery 500 meters from Focola on the same license as Focola. So we received a permit from the government to start mining there and are mining there, and that can add to production as well. So positive developments there in the short term. In the longer term, The Manicoto license, we continue to have very productive, successful conversations with the government of Maui to resolve that situation where we'll see, we hope in the next few months, we will see our license extended or renewed for Manicoto. And that will be an important part. We've mentioned several times that Bentaco is a separate license, so we can start tracking from there, but obviously we'd like to be drilling both of them. So extensive drilling, continuing on Bentaco with some very, very good results. And the ultimate target there is to see if we have in the sulphides below the satellite is the potential for fecola-type sulphide mineralization. We're starting to see that now in some of the recent drawing. In addition to that, we have a very substantial, aggressive but high-quality exploration budget, some $65 million. mines and you've seen some good results come basically from everywhere there from the three mines in terms of additional success from the drill bit. But we have a significant $25 million budget for grassroots this year. We've always been driven by, trying to be driven by geology more than geography, so we've ended up now with some targets we've been chasing for years in some cases and some exciting opportunities in places like Uzbekistan. We've recently seen our partner Orion release some pretty exciting results from Finland And I think there's great potential there for another discovery. We are looking at M&A opportunities. We always are looking, but I would say that we're looking at a few different opportunities that might increase our production through an accretive deal or could add another development project to what we're doing. But we feel pretty good about the pipeline if you include the anaconda potential. And, of course, you look at Gran Vellante. Those are two projects we like in the pipeline. We did announce recently a sale to West African Mining of the Kiaka project in Burkina Faso, and we thought that was a good thing to do. Corporately, we've got other things we're focusing on, plus they are established in Burkina Faso. We're happy to be a shareholder of the company and wish them all the way forward on a sizable deposit in Burkina Faso. We are happy to be shareholders of West Africa. It's not the same, but there are similarities to the deal we did with Caliber in Nicaragua in the sense that we take these assets and want to focus on other things we're doing, but we like them, so we want to be involved. And in the same case, Caliber's done a very good job in Nicaragua with the Nicaraguan assets, so we're happy shoulders there as well. So there's sort of a pattern here of the way we deal with these situations where we want to focus on what we're doing, but we want to get value back for the projects that we have and continue to give value as they're developing forward. So Once again, just as in the case of Nicaragua, all of our employees from Burkina Faso will now be among the employees of West Africa. So that's a really nice way to do these deals where you have continuity of people, their jobs are secure, and the project gets advanced. And the government of Burkina Faso, I don't blame them like every government, if there's a project that can be economically developed, they expect it to be developmentally built. And so West Africa's got a good program going forward on that. One thing to mention is is we did get a, just recently got a three-year extension on the Bentaco license, which is really quite significant in the sense that it shows our relationship with the government of Maui is very good. So that's the license immediate to the north of Minn Kota, as many of you know. But we received that very rapidly and quickly working with the government, the three-year extension that we had the right to apply for. So that's a good sign. Also, of course, we got the cardinal mining permit from the government as well. So the government relations continued very positive, and of course the government's a 20% partner in everything that we do, so as I said, we look forward to the code resolution in the very near term. I think that's all I have to say for now. I'll pass it over to Mike, and he can run you through the financials, and then we'll open it up for any questions.
spk09: Okay, thanks, Clive. So I'll start, I'll walk us through the three, the results for the quarter, some commentary on year-to-date, and then just how we see the year panning out. Firstly, on the quarter, revenues of $511 million. So that was based on the sale of 287,000 ounces at an average realized price in the quarter of $1,782. So year-to-date, our average realized price for our sales is $1,794 per ounce. So very close to that $1,800 price that we used just to put out our cash flow guidance. So that really reinforces that we're still on track there. On the production side, good production quarter. We were on a consolidated basis, including our share of Caliber. As a result, total production was 310,000 ounces, which is 21,000 ounces ahead of budget, where we thought we'd be. And the reasons for that are really the same as we've talked about in the earlier quarters in the year. Focola is still a production machine. There's higher melt going through there, closer to the 8.4 million tons annualized. so far this year versus the 7.75 million tons that we assumed in the budget. And now that FACOLA is pulling some low-grade material from the stockpiles in to fill that additional production mill feed. So we did see slightly lower grade overall going through the mill, but production is up. So for the quarter, FACOLA, 166,000 ounces. The feed budget by 10,000 ounces. Ms. Batty, 61,000 ounces in the queue, 8,000 ounces better than budget. Ms. Batty just continues to outperform the model with better grades and better recoveries than the model shows. So that's a good positive difference. Now there was, but to highlight, and we did mention it in the MD&A and the news release, we did mine slightly out of sequence at Ms. Batty for this quarter. Some of the higher grade main vein material that was originally scheduled for Q4 was mined and produced in the third quarter. So you will see some of that clawed back in the fourth quarter as we go forward. But we did, because we had that additional production and better output from the mill in the quarter, we did take the opportunity just to accelerate some mill maintenance in the queue. And Ochicoto, 69,000 ounces, 2,000 ounces ahead of budget, and it's just everything slightly better than budget. So just very solid production all around from Ochicoto. And if you translate that, look at how we did in the cost side, very positive. So consolidated, including our shearer caliber, $445 an ounce, almost exactly on budget. And so good results there. If you look at that high-level big picture, what we're seeing is that there is cost inflation across the sites just because of the environment they're in. Fuel costs are up. Some shipping costs are up. Some reagent costs are up. But at the same time, we had stronger production, better production, and that really helped to offset those additional higher costs. So we really came out pretty neutral and right on budget. For your models, if you want to know on the fuel side, it's probably up about $25 an ounce year-to-date, I would say, on fuel. But remember, we also have a fuel hedging program in place, so derivative gains have offset at least half of that, we think, as we go through the year. So we're pretty solid on fuel, I think. And then the other thing that did impact Ojikodo's results in the quarter was stronger Namibian dollar. We budgeted at $16.50 to the U.S. dollar. It's coming in somewhere around $14.50, so probably had an impact of like $45 an ounce year-to-date on those costs. But like I say, the benefit of higher production really has managed to offset most of the cost increases. So when we look at all-in sustaining costs, year-to-date consolidated again, including our share caliber, at $795 an ounce, which is just $14 over budget, so really right on budget in the scheme of things. And the story there is sort of the same. So we have cash costs that are on budget. We do have higher royalties in the quarter and year-to-date because we originally budgeted $1,700 gold, and we've come in, as I mentioned, very close to $1,800 gold so far. So royalties are higher. But that is offset by higher production, and it's also offset by the fact that some of our CAMPEX has been pushed forward into the fourth quarter. So we did have lower sustaining capital in the quarter and year-to-date, and those expenditures are really mostly as a result of timing, and we do expect them to be caught up in the fourth quarter. We're forecasting that will happen. And for the nine months, just very briefly, Commenting on the nine-month results, so production year-to-date, 699, including our share of Caliber, 743,000 ounces, so 49,000 ounces ahead of budget. And I'll comment where we're going to be for the year in a second, but very solid and for the same reasons I described for the quarter. And then on the cost side for that production, so cash cost per ounce produced, $556 an ounce, consolidated, including share of calibre, which is $14 less than budget, so right on budget for the same reasons as the quarter. And then all in sustaining costs, $900 consolidated per ounce sold, including our share of calibre, and that's $45 lower than budget. And the reason for that $45 lower than budget really is mainly just the timing of CapEx. So where are we for the year? We did put out some revised production guidance for the year based on where we are today. So our original consolidated dated guidance, including share caliber, was 970,000 to a million and 30,000 ounces. We've bumped that up now to a million and 15,000 ounces, between a million and 15,000 ounces and a million and 55,000 ounces. And the bumps came with Focola. The low range of the guidance was previously 530. We've now bumped it up to between 560 and 570,000 ounces, just because Focola's performed so well. And then Mizbati also, because we had we've outperformed in the year. Originally 200,000 to 210,000 ounces, we bumped that up to 215,000 to 225,000. Now remember, though, that part of that big outperform in Q3 was some of that mining out of sequence, so we will see a little bit of that clawed back in the year, in the fourth quarter. And so that's why we end up with a guidance range for this value, 215,000 to 225,000. Then when we looked at the cost side of things, we looked at our overall guidance ranges and what we see based on what I mentioned about some cost inflation but offset by higher production and the benefit of some derivative gains, is that we think for cash costs, we're going to come in within our overall guidance range for the year of $500 to $540 per ounce. If you look at the individual sites in there, FACOA will probably come in at the upper end of that just because it's putting lower grade material through higher volumes of low grade material. But the other two sites we think will be certainly just right in the middle of their ranges. And then on the all-in sustaining cost side, again, our original guidance was $870 to $910 per ounce. These are including our share of caliber. We still think we'll be in that range, but we think we'll be on a consolidated basis at the upper end of the guidance. And that has some offsetting factors in it. For FACOLA, we think we'll be at the upper end of the all-in guidance range that we gave, again, because of the nature of the low-grade material going through. At Miss Batty, we think we may be at or below the low end of the range just because of the production beat we have to date. And Ojikoto, just depending on the timing of sales as we go through the end of the year, we may be at or slightly above the upper end of the guidance range. But overall, for all unsustaining costs, we think we'll be at the upper end of the range. We think that's a pretty good testament, I think, to a very good testament reflection of how well the sites have performed because we are in an inflationary cost environment. And I think you've seen that across the reporting that's going out across the industry right now. But even despite of that, and because of the production that we've managed to pull forward and be against budget, we think we're going to meet those ranges. Maybe give a few other thoughts just on where we are. Just general comments on some of the operations as well, just as we go through. So for COLA, just to remind you that the mill really is performing so well now. And we've said that we expect it to be somewhere in the $8.3 million, maybe $8.4 million. million tons range annualized for 2021. And as we go over a life of mine long term, including feeding some separately material through the mill, we might think we may be able to manage 9 million tons per annum for Focola. Reminder to you that we now started pulling Cardinal into the mine plan. We started developing that Q3 and we've got some production now coming from Cardinal. We did get permitted to do that as part of the overall Well, it's really as part of the overall FACOLA permit, but we got our environmental assessment done and approved by the authority. So we think Cardinal, over the longer term, can benefit the overall production of FACOLA somewhere around 60,000 ounces a year for the next six to eight years, based on the resource that we've built, the inferred resources that we've built there already. FACOLA solar plant, just to remind you too, that that is now complete, up and running, and really the overall benefit of that is that it allows us to to hold back some of the spending reserves that we have with our gen sets there. And the net impact on costs overall has probably managed to reduce Focola's overall cash cost by about 3%, because it reduces the cost of our power cost for milling. From Ochicoto, the Wolf's Shag Underground continues and is still scheduled to get in and get some ore from that underground development by the end of Q1 next year. Work in Gramalati continues. Work continues on the feasibility both to drill out some of the remaining inferreds at the site and also to update the engineering and look at the revised permitting required to move that project forward. We're still expecting to have an update on new feasibility studies sometime around the middle of next year. And then Burkina Faso, as Clive alluded to, that's In the period, we sold our 81% interest in the Kayaka project, so we've signed a deal, and that deal is expected to close right about the end of November. And in conjunction with that, we also updated the previous deal that we had to sell West Africa our interest in the Tuega project. So for Kayaka, the consideration for that deal is that we expect to get $45 million in half-cash, half-shares. in West Africa on closing, which is, as I said, expected by the end of November. Then another $45 million cash or shares at our option sometime next year, certainly no later than a year from when we close the deal. And then we retain our interest as well as any shares that we might take by retaining our royalty in the project. So our share, 2.7% royalty on the first 2.5 million ounces produced from Kiaka and then 0.45% royalty for the next 1.5 million ounces produced. And then just to remind you, too, that in conjunction with revising that Toowega deal, with the closing of that deal, then there is another $9 million tranche, original option payment that will be due now, with closing the deal at the end of November when the deal closes as well. So we can expect to see that in Q3. And maybe just on the earnings side, Gap earnings, $0.12 per share. Our share adjusted for the quarter, $0.12 per share as well. And year-to-date, our share gap earnings, $0.27 per share, and our share adjusted EPS, $0.26 per share. And a couple of comments on the cash flow statement. So we had an excellent quarter for generating operating cash flow in the period, $320 million, which would certainly be our expectations. And that translated to $0.30 per share operating cash flow. And that beat is in part due to the fact that we produced and sold more ounces than we'd originally forecast, which was great. Gold price behaved itself for us during the quarter. And we also had the benefit of some working capital movement changes that went through there that actually benefited cash flow. So in the end, $320 million for the quarter. Now, we had guided before that for the half year. For 2021, the second half, we do somewhere around $500 million. We bumped that slightly in our guidance that we put out there. At the end of this quarter, we're now seeing somewhere around $510 million for the half year. So you can expect somewhere between $190 million, $200 million operating cash flow, therefore, for Q4. As we claw back some of those working capital changes that we benefited from in Q3, and we make some year-end tax payments that are required. Our total cash tax guidance, $380 million for the full year, remains unchanged. So I'll just remind you of that. On the investing side, for the quarter, we were only probably about $6 million under budget, with some pluses and minuses across the sites. I will say that for the year to date, on the investing side, just over $200 million. We're probably about $35 million under budget. As I mentioned in discussing the all-in costs, we are behind in some of the sustaining CAMPECs. through the piece, and we haven't spent as much as originally budgeted yet on summaries like expiration. But we do expect that we're going to catch up those CapEx costs by the end of the year. So what we've guided overall for CapEx, if you look in the MD&A, we've given you some guidance there. For sustaining CapEx, we're probably going to be about $10 million over all in for the year, which is fractional based on the total sustaining CapEx that we have. And then for non-sustaining, probably also about $10 million over budget overall for the year. But the main component of that being just some cost for Cardinal, some development and fleet cost for Cardinal, which weren't originally budgeted because we didn't have Cardinal in the original budget. We paid dividend in the quarter of the $0.04 per share U.S. and annualized $0.16 per share, which still puts us up somewhere, you know, 3.7 to 4%. Over the piece dividend yield, which is still one of the highest in the industry. And we still are maintaining the line there and our intent is to keep paying at that level. And then the quarter, we ended the quarter with $546 million in the bank. So very solid. And we've still got $600 million available on the revolver. And none of that's drawn right now. So I think those are the highlights, just what I wanted to emphasize. So just as a reminder, too, the operating cash flow for the year, we think we're going to come in around $650 million. We had originally guided $630 million, but with the better beat that we have so far on the production and revenues, offset by some higher costs, at least the inflationary costs through the year, we think overall we're going to come in somewhere around $650 million for operating cash flow, with approximately $190 to $200 million of IMQ for it. And that's my update.
spk05: Did you mention the dividend, Mike? I did. I was listening intently, but I... Okay, thanks, Mike. We're going to open up to questions soon. Just a comment, I guess. We were very pleased with the third quarter results, as I think many of our shareholders will be as well. And for the analysts, we know you guys have a tough job and lots of companies to cover, lots to do, and I think for the most part, you get it right and do a good job. The one thing that's disappointing is to see when you have a one-cent miss earnings per share to see headlines that say Q3 miss. I think you might want to consider a better way. I think you're doing a disservice to our shareholders, your clients, and the companies when you do that with a blaring headline. How about the cash flow? How about all the other positive things? So just a suggestion. It can trigger the algorithms. It can cause selling. It can cause the investor that reads only headlines to sell shares, etc. I just think it's a little bit... there's a better way to do it. So that's just my comment for the day, a bit of advice. So with that, I think we'll open it up for questions. We have the entire executive team available here, so we can pretty much answer any questions. If you are an analyst and you want to go into great detail about the strip ratio three years from now at FACOLA or other such things, I would ask you to reach out through Ian, or you can actually contact Bill Lytle directly at blytle, L-Y-T-L-E, at b2gold.com. There you go, Bill. with any detailed questions. We do respect the fact that you've got models and you want detail, but this is not the time to ask too many, I think, questions of that nature with a lot of people on the line. So with that, let's open up for questions.
spk01: Thank you. Ladies and gentlemen, as stated, if you would like to ask a question, please press star followed by 1 on your touch-tone phone. Once you do, you will hear a three-tone prompt acknowledging your request. And if you would like to withdraw your question, simply press star followed by 2. And if you're using your speakerphone, we do ask that you please lift the handset before pressing any keys. Thank you. And your first question will be from Tyler Langton at JP Morgan. Please go ahead.
spk04: Good afternoon, and thanks for taking my question. I guess maybe just starting with cost. You mentioned that costs are a little bit higher than budget levels in Q3, but offset by the strong production. Could you just give a little color about sort of how you see costs are trending in sort of Q4 and heading into 2022, kind of just sort of general prices sort of remain at current levels?
spk09: I can give you very high-level thoughts on it. I mean, and Bill, maybe pass it over to Bill afterwards because some of the detail, but production-wise, we are seeing fuel price inflation. Some are, you know, year-to-date, it's probably close to 10%, I would say. But like I say, we have fuel derivatives in place that offset probably half of that cost right now. RC and some other input costs that are higher, certainly in transportation, some of the input costs. I mean, overall, if I had to guesstimate cost inflation, you're probably looking at 5% or 6% for the year. That's probably in the ballpark. And then you're looking at production increase against budget somewhere in that 4% range. right, so you can see that, you know, that managed to eat up quite a bit of that cost overrun.
spk02: Yeah, and maybe just to add to that, certainly shipping costs are a big one, right? The cost of shipping has gone up significantly this year, and we'll see those carry into 2022. And then, of course, labor, as various economies are seeing inflationary pressure, of course, the employees are also seeing that, so they're asking for a pay raise. We did a really nice thing actually this year. We locked in At Focola, our key asset, we locked in increases for the employees, basically about 5% per year over the next three years, basically guaranteeing that can be stabilized. And, of course, we typically at Ochicoto do the same thing, where we have a two- or three-year agreement, which will be up for discussion this year. So that's already started for 2022. But we would see that also in that kind of 5% to 7% range is probably where we'll end up. And so I would say shipping, fuel up. Spare parts are also up. We had a good discussion with Caterpillar here in September. Caterpillar has awarded B2Gold global pricing, so basically we get the same price for everything, but they have announced that because of production costs and shipping costs that they will be passing along some increases as well in that regard. So those are the main things.
spk04: Perfect. That's helpful. And then just with the COLA and production, I know you've been sort of given – sort of formal guidance for the next several years, but could you just talk about, I guess, directionally how you kind of view production with, you know, Cardinal sort of coming in, maybe if you talk north a little bit later, just sort of the moving parts that could affect production there over the next several years?
spk02: Well, we're still obviously working on that. So Cardinal, what I think basically we've talked about, it's an inferred resource of, you know, north of 600,000 ounces. We would see that over the next, kind of four to six years putting that into production. One of the things we are doing to make sure that we come in line with guidance is we are drilling off the 2022 production into reserves. That'll be out by the end of the year. Then we'll do the same thing in 2022, at least for 2023. So we're going to try and be a year ahead. I think what we've been saying is we're kind of in that 60,000 ounce plus minus range for Cardinal coming in. But then of course, you've also got what could be Anaconda, Bentaco. We have a mine plan on that right now. Depending on what happens with Menincoto is how we'll decide to go forward. But certainly we could see a couple hundred thousand ounces over the next couple of years if we so chose coming instead being trucked in from Bentaco. So all those things are in play right now. What I'll say is that if you remember, there was a dip actually in 2022 in production when we did our original life of mine But we pulled that dip out of there through some of the work we've done at Cardinal and potentially in Anaconda. We see 2022 not finalized yet, but it's going to be a really good year as far as the production. I think, you know, I'm not going to say it's got a six in front of it, but I'm saying we're going to get up near that number for sure.
spk04: Perfect. Thanks so much.
spk01: Thank you. Next question will be from Josh Wilson at RBC. Please go ahead.
spk06: Thanks. First question is on Cardinal. Earlier in the year when the opportunity was discussed, there was some guidance about grade for the initial feed being about three grams. I know the resource when that was issued was lower, but the initial stockpile that's been built up is also kind of more along that overall resource grade of about one and a half grams. you know, what was sort of the difference between the initial guidance and what the stockpile looks like now?
spk02: I'm sorry, I don't understand the question. You mean the grade?
spk06: Yeah, for the grade. Yeah, so the grade, I think initially, I know the overall cardinal feed was, or the resource, about one and a half, but I think there was some guidance earlier this year that it was going to be significantly higher initially unless I'm mistaken, and the grade is 1.5 today. Was there a variance versus expectations there?
spk02: No, I think certainly we've seen really what everything that was in the inferred has kind of played itself out so far. What I will tell you is that like in 2022, we're going to see the grade from Cardinal increase a little bit. I think it's above 2 grams per ton for sure in 2022. And as we bring that into reserve, of course, we'll report that.
spk06: Okay. And as it relates to looking at the overall split in terms of processing, the guidance for 9 million tons of feed going forward is pretty similar to what the asset's doing now. Should we assume a similar kind of split between the sulfides and the oxides, you know, that the assets processing today is kind of continuing going forward?
spk02: Yeah, well, that once again is kind of a, I think John's on the call, so he can correct me if I'm wrong here. But what we've always said is that we don't think that really that the mill can handle more than that 10 to 15 percent of saprolyte material. And so, you know, it all depends on what the mine plan has for for Pecola and the saprolite that's available at Cardinal and whether or not we bring Bentaco in. But what I'll tell you is that if we can get 15% saprolite, we feel pretty good at that 9 million ton per annum. And once again, that also assumes that the material doesn't get significantly harder as we go to depth at Pecola. But that's kind of what we're projecting at this point. I don't know, John, if you want to add anything to that.
spk12: Well, that's right, Bill. I think everything you said there is accurate. Thank you.
spk06: All right. And then maybe final question as it relates to Gramalote. You know, with a bit of work that's sort of been done since the last update, is there any kind of additional insight into the, I guess, the extent of the changes and what the permitting modifications that would be required for that would be, or is it still a work in progress?
spk02: Yeah, I'll kind of update you on where we're at. So you remember there's a bunch of things going on here. Number one, there's the engineering work where we're basically trying to simplify the process and take out some of the confusion which has happened over 10 years of design. That work has been very successful and we've certainly seen some uplift in the IRR related to infrastructure. The resource drilling is ongoing. They actually had a They have a very significant program there, which I don't think is even going to be done drilling until I think the end of November or December. And so then, of course, we'll have to wait for the resource to see where that ends up. And then, of course, there's things like the social issues, which include the resettlement, which is really one of the key drivers trying to do a phased resettlement. So the long answer to your question is we have seen some improvements. What we've done is we've approached the government about a phased approach as far as permitting We would see kind of in Q2, maybe the end of even Q1, we're going to approach them with some modifications to our existing operational permit and EIA. We're assuming that those will be kind of minor changes, which will allow us in the second half of the year, if it's positive, to do some work on the ground. And once that is approved, we would then do some major changes, which would include adjusting, looking at the tunnel and turning it into a diversion ditch, which we think would take us into 2023 before that would be approved. So the short story long is we believe in end of Q1, we'll approach the government with a request for a modified permit, and then kind of six to eight months later, submit a second half or a second version of a modification, which will take us into 2023.
spk06: Great. Thank you very much.
spk01: Thank you. Your next question will be from Oves Habib at Scotiabank. Please go ahead.
spk08: Thanks, Operator. Hi, Clyde and B2 team. A couple of my questions have already been answered, but just don't want to harp on too much on the Cardinal side, but Bill, you can just tell us exactly, kind of, you know, essentially how much of the revised guidance on PICOLA is due to Cardinal, and also in terms of the guidance provided on Cardinal that the deposit has potential to add about 60,000 ounces a go per year. Again, can you just give us a little bit more clarity on the constraints on that 60,000 ounces a year, especially with the fact that the mill is running at 9 million tons per annum?
spk02: So if I understand your question, you're asking for what is the ounce profile from Cardinal over the next couple of years?
spk08: That, and Bill, just trying to understand, is there any sort of constraint on that 60,000 ounces of gold per year that you've laid out in terms of, you know, just, I guess, soft guidance?
spk02: One or more, I guess you'd say. Yeah, so the constraint really revolves around looking at what the FACOLA permit or what the FACOLA pit grade is versus what Cardinal is versus the mining sequence. And so all that is being taken into account, remember, Cardinal is a little bit further haul, and so we're obviously taking the higher grade first. And then, of course, you've got to include stockpiles in that. What I'll tell you is that in 2022 right now, we're estimating about 650,000 ton coming from the Cardinal deposit, and that actually adds up to about 50,000 ounces for 2022. And then as you get deeper into some of the higher grade zones, you'll pick that up in some of the later years.
spk08: Got it. And just in terms of, you know, obviously you've been drilling into the inferred ounces as well. Have you been doing, also maybe this is a question for Tom, but have you been doing any sort of step-out drilling as well? Is there any extent to this in terms of strike potential?
spk02: Yeah, so I'll say first, as far as basically we've divided it up. The operational group is bringing the inferred to indicate it, but the the geologists are right next to us because it is open for sure. And maybe either Tom or Brian can discuss that, but it is wide open and we see this thing continue to grow so much so that we've actually included in 2022 budget, some more work on the social side to make sure that the communities are not kind of land restricted as we, as we make this pit bigger.
spk05: Tom, you want to comment on exploration?
spk10: Yeah, just to answer your question, Cardinal is still open. It's open both at depth and on strike. And then we have an adjacent, deposit called FMZ which is on the sort of west northwest side of Cardinal which almost abuts against us so our expiration is not only extending Cardinal but it's extending FMZ and it remains open and we'll continue with that expiration again next year that's within the budget for next year okay sounds good sorry go ahead no I just said thanks Tom
spk08: Sorry about that. Okay. So just Clive, just over to you now. And just, you know, you mentioned the beginning of the call that you've started or B2 started looking at some M&A opportunities as well. Any color you can provide on whether you're looking at kind of development projects or this is operating mines, JV opportunities, any additional color you can provide?
spk05: Yeah, I think as we continue to look, as we always have, you know, as I mentioned, we're We like what we see in our pipeline and some of these great exploration projects that we have and Gramalate and the potential of Anaconda, etc. But I would say that with our shares underperforming the sector and hopefully starting to catch up recently, we hope that continues along. Obviously, we wouldn't want to go and dilute our shareholders in any significant way. Finding an accretive deal with our discipline around acquisitions for the last 30-odd years about not paying for houses that might be there and not overpaying for projects. It's going to be hard to go out and win a bidding war with other companies that didn't do what we did in the last 10 years and build mines when it was unpopular and don't have as good a pipeline as we have. So I think, having said all that, though, if there's some sort of special opportunity where we can bring our strength of building mines, financing them, or approving mines, as we did, don't forget, in Masbati some years ago, We're looking at those types of things, keeping an eye on a number of things. But I must say, though, I think one of the really positive aspects in that regard is the opportunity to do M&A using a combination potentially of cash in our shares to minimize dilution. You know, we have a tremendous amount of cash, and we also have access, as Mike said, to $600 million from the banks, including another $200 million. So, you know, $800 million is available for us for potentially part of an acquisition. So that changes it a little bit for me in the sense of I can't imagine finding something accreted today that we would win a bid on. Also, I can't imagine doing something today using just our shares unless it was a very special situation where something was grossly undervalued. So, you know, but we're looking and we'll continue to look in interesting places. Sometimes we're out of sphere to tread for opportunities. So, yeah. But if we do a deal, I'm pretty confident that you guys and our shareholder center board of directors would agree that it's secretive because otherwise we wouldn't be doing it.
spk08: Sounds good, Clive, and thanks, everyone. That's it for me.
spk01: Thanks, Dave. Thank you. Next question will be from Anita Soni at CIBC World Markets.
spk07: Hi. So my first question is with respect to the Bentaco permit. So I think you mentioned in the MD&A that bringing it into production would be subject to the mine plan and also getting all necessary permits. Could you just elaborate on what remaining permits would be for that?
spk02: Yeah, so Bentaco is a separate license area, right? So it's not like Cardinal was easy where we just basically had to update the EIA and then show them how it fit into the mine plan and then it was approved for production, which we're now fully permitted on that side. Bentaco is, you know, once you submit a feasibility study, then you have to go through the full situation of getting an EIA approved. Then, of course, then there's the shareholders agreement, what percentage the government would want to take on it. We assume it would be very similar to PCOLA. And then you've got the convention, which basically lists out your fiscal stability and everything else. So there's a whole long process, which will be required for sure. And that's why... You know, the reality is we actually have already, just for Bentaco, we have a study ready to go tomorrow if you want and we can submit it. The issue really relates to how then are all these legal steps which have to occur, how long does it take that? We put in, that's why you often hear Clive talk about the second half of 2022. We randomly put in six months because we think that's how long it will take, but maybe it will go faster than that.
spk07: Okay. Okay. All right, yeah, I was wondering about how it would come in in 2022. There were still permits, but since you have a study ready to go, that's good. And then just getting an idea of the tailings dam. I think you said that because of the cardinal and the higher throughput levels that you're going through currently now, you know, great that the mill is performing. But the tailings facility, could you just give an idea of, like, like what kind of a lift would be required and how often you would have these additional lifts and sort of the capital associated around that?
spk02: Okay. Well, I don't know that I have the capital numbers right at hand, but certainly from a lift perspective, remember we were always kind of telegraphing that we had this kind of 6 million going to 7.5 million tons per annum. And so based on that, that's what our tailings expansion schedule was. Now, given the fact that we're operating at 9 million tons per annum, I mean, that has a knock-on effect on a lot of things across the site, but the one you mentioned was tailings facilities. So the reality is we've started already putting the next lift on it, and it's going to be a double lift, basically getting us up to the final elevation of what that facility could do. That's going to take us, I think that's going to take us into 2025 or 2026. It's somewhere around there. So basically we're going to have to start doing the design work and the engineering on a new structure, which we've already identified a location for, and getting that permitted in 2022 so we can construct in late 2022, 2023, which puts us into production in 2025. Okay.
spk07: And then my final question, sorry, did you want to, were you continuing there, Mike?
spk02: No, I just wanted to say I didn't have, I don't have the costs for that. obviously in front of me, but the operating costs or the construction costs typically, I think I remember seeing something that's around $10 million, somewhere in that range, for the next lift.
spk07: All right. And you said a double lift, so maybe double that. Okay. And then lastly, on Gramma Latte, so your decision to kind of defer Gramalate seems pretty wise in retrospect, given the inflationary environment that everyone's hitting. As you're obviously seeing costs escalating in your current operations, you're doing things to mitigate that, but as you think about Gramalate and further progressing that forward, could you give us some parameters around how you think about cost escalation in light of capital build? We've seen a lot of your competitors really facing some headwinds, and they're all bidding for the same one part to get something rolling. So could you give us some, I guess, color on your thought process on whether or not you could defer Gramma Latte further, or would you go full steam ahead on that?
spk05: Well, from the corporate point of view, I mean, obviously we're building in some inflationary factors in terms of the things we're looking at at Gramma Latte now. debate and how long the inflation trend will continue. But I would say that if we have a strong account case, you know, we had a 15% IRR before, but decided that the project could get better. And we've seen signs that that is happening by significant changes that are reducing the capital, potentially quite significantly. So inflation may chew into that a little bit, but we'll be looking at that closely. But I must say that I think that, you know, As a company, historically, if we've got something that's got good economics, we're going to want to go. And the government of Colombia, like all governments these days, if there's an economic project, they're going to want to build. And we have a very supportive government there. We're in the right place in Colombia and Antioquia. And the local people really want this to happen. So there's also an issue there where, you know, if it's economic, we're going to want to move forward. If we're satisfied, we build some inflation. And the government of Colombia and the local people really want us to move forward with this. And EGA has signaled that they're on the same page as us. Obviously, awaiting the results of the final feasibility study.
spk02: And maybe just add just a couple things to that. I mean, clearly, we just updated the cost for our study, which was done in 2021. We'll update those again. And as we go into additional detail on the mill and stuff, those costs are obviously being very tightly refined. But then the other thing is, remember, the Columbia exchange rate, the Colombian peso was weakened a little bit. So what we're going to see there is is that things like that you buy onshore will actually be cheaper to us. And so that will be some offsetting for sure.
spk07: All right. Thank you.
spk01: That's it for my question.
spk02: Thanks.
spk01: Thank you. Your next question will be from Don DeMarco at National Bank Financial.
spk03: Thank you, Operator, and congratulations on a strong free cash flow quarter, guys. Many of my questions have been answered, but maybe I'll ask one on ESG. I think I heard Mike say that the FACOLA cash costs have been reduced by about 3% from the solar plant. And I'm hearing across the board that electricity and fuel are drivers of inflation. Is the cost to generate solar power at FACOLA subject to less inflationary pressures than the cost to generate genset generated power? And secondly, company-wide, what are some of your next ESG initiatives?
spk02: Okay, well, certainly, I'll let, actually, the answer is yes, of course, it I mean, it's much less subjected to inflationary pressures doing solar, but I'll let John maybe talk. John Rahala is kind of our king of power, and I'll let him talk about what solar costs are and, you know, what that all means for our operations.
spk12: Yeah, okay, thanks, Phil. Yeah, so as far as the cost of generating solar power, it's just a fractional cost, and it's whereas generated power with HFO is much higher. And we are expecting good costs. We had a very good quarter in Q3 for our generation costs for $0.152 per kilowatt-hour versus the budget of $0.156. That resulted in an overall savings of about $0.60 per ton of ore costs. And then going forward, we're getting into the higher solar irradiance months now, and we're expecting even better cost performance from the solar. So does that answer your question?
spk03: Yeah, and do you have any plans to maybe expand that solar facility at Focola or build other ones at your other mines?
spk12: Well, possibly – go ahead, Bill. Go ahead, John. You go first. I was just going to say, yeah, we've been thinking about that, but no immediate plans to expand. But it may possibly happen in the future there as well as at other sites if it's warranted.
spk02: Yeah, we actually had a very interesting discussion at our board meeting yesterday where we talked specifically about that If you look at something like, let's say, Bentaco, right, or Menincoto, we get it back, and we want to wheel power, you know, out to that site, then certainly you could do it there. But because now, you know, remember, we've got a 7.5-megawatt facility at Ochocoto and now this facility at Ficola. We consider ourselves to be kind of on the cutting edge and on the leading front of that. So now we're looking at Dennis Stansbury is actually looking at things like You know, for Gramalote, does it make sense? Obviously, that's kind of land restricted, but can we do it there? Can we do it in Masbati? And, you know, there's some technologies out there, and I know that both John and Dennis have been studying this, you know, that you could put it on the tailings facility or could you put it on the face of the dam? We're looking at all that stuff, and, you know, we're pretty high on it for sure. And then the second half of your question related to other ESG initiatives, you'll see And once again, I would argue that we're kind of on the cutting edge or the leading front of ESG, and we've always been very successful at it. I would say in 2021, a couple of the key things you're going to see is our climate change initiatives that we've got ongoing. We're looking at doing a full inventory of our emissions and, of course, our water conservation. We work in some places that have desert environments, and so we're really focused on How do we reduce water consumption? And once again, at the leading edge of ESG on those topics.
spk05: And of course, as you remember, we put out one of the very first solar plants in mining in Ojikoto some years ago. So it's a big commitment for us to look at increasing it and also to look at where else this bill said we can use it.
spk03: Okay, thanks for that, caller. And my final question, and this is an extension of a question asked by a previous caller, And it goes back to, Clive, in your preamble, you mentioned you'd consider creative M&A opportunities. Did you mean a creative in terms of production? I mean, that would be to consider an operating asset, if justified? Or is your focus on M&A still primarily on development projects?
spk05: No, I think, you know, there could be special situations where, let's say, you know, a mine has set a problem through some poor management or other issues that we think we can... can make it better now. A lot of people in this industry do deal some promise to that, and then sometimes it doesn't materialize, although I like the fact that the industry seems to be getting better technically overall. If you think back to Masvati in 2013, I think it was, when we acquired CGA Mining as a single mine company, they did a pretty good job, but when we acquired them, their operating costs were $890 an ounce. And I remember when the guys brought it forward, and I was saying, well, why are we talking about this if it's 890 an ounce? And they said, well, here's a lot of things we would change. So last year, I think we had a couple of quarters under $500 an ounce for operating costs. So not only are we very good at building mines with our great construction team, and we'll continue with that, but there is that opportunity. Also, sometimes, you know, these days, it's harder and harder for a single asset company to convince investors and banks, et cetera, sometimes that they can... you know, that they can build it. Do they have the team to build it? Do they have the owner's team if they're going to do some kind of a contract build, which I think is always a bit dangerous, but do they have a strong owner's team, and can they finance it on reasonable terms? So I think there's some of those situations. There is competition, as I mentioned earlier, so we might be in a situation where we're in a location where others fear to tread, which we've done successfully before, or we may find that the right fit, as I said, is something we can make better. Clearly, we'd like to find a good development opportunity that was We could argue to our show successfully that it was a creative opportunity. We were keen to do that as well. As of now, we were pretty optimistic that Gramalate could very well be the next construction build for us. Then again, we also have the potentials we talked about. One day, is there possibly another mill at Focola? It's too early to say now, but is there a possibility for that for Anaconda?
spk03: Okay. Thanks for that. Good luck in Q4. Thanks.
spk01: As a reminder, ladies and gentlemen, if you do have a question, please press star 1 on your touch-tone phone. And your next question will be from Jordy Mark at Haywood Securities. Please go ahead.
spk11: Yeah, good day, guys. Just a couple of questions. Extensions on a few, and some new ones. Maybe on tricolor, given the multiple source origins you could have in the near to mid-term, bantam, selenium, cardinal, top piles of tricolor and tricolor primary hypergene, and the uprate, I guess, to 9 million tonne per annum on a blended source, are you comfortable with 9 million tonne per annum capacity, or is there some functional... capacity to go beyond 9 million tons per annum over the mid-term, given the success from the drill bit?
spk02: I can just hear John screaming, when is it enough? So the long answer is, Jordy, if you remember, we did, way back in the day when we kind of expanded, remember we went from 4 million tons per annum to 5 million tons per annum, and then We looked at optimizing, and we actually had a step function in it. We looked at plus 1.5, which was basically increasing the existing circuit. And then the second study that was looked at was a 10 million ton per annum. And it was very quickly ignored because the step function to 7.5, which is now 9, was so much more cheaper, 50 million bucks. So there is the capacity to grow bigger. That's a big step function. and would require a lot of additional work. Is there ability to put it there? I think John would say yes, but then, you know, then you'd have to start weighing this whole concept of wouldn't it be cheaper potentially to put something up at Menincoto, right? Would you have a whole complex where you'd have maybe two mills running up there, you know, so you wouldn't be trucking all that ore all that distance? So I think if you found enough ore that you would ultimately want to build something separate, but those studies would have to be done. We've got a final
spk11: Okay, so $9 million for now. Okay. Maybe over to Masbate, some nice positive recovery percentages there. Given the history of positive percent of recovery versus the model, are you looking to revive the model or are you going to continue, I guess, a sort of more conservative stance on that or how should we look at that going forward?
spk02: Yeah, so for the 2022 budget, we actually did up the recoveries just a little bit based on the ore type and how it fit in or where it was coming from. Remember, it's all kind of anecdotally, right? It's all from results that we've already received as opposed to doing additional drilling or additional testing of the metallurgy. So at this point, I think we're still a little conservative, but we're moving towards just based on experience, a higher recovery rate. And I don't know that there's any science behind it. It's just, this is what we see and this is what we're saying.
spk12: I'll just add to that, Bill. We've been doing some ore campaigns through the mill there at Mossbody with the major ore types to get a good estimate on recovery on a plant scale. And that's being built into the model as well for 2022.
spk11: Okay, thank you. And in terms of maybe the last one for OG Coty and Wilkshag Underground, what are the steps to ultimately get to, you know, first oil production underground now? It's obviously not too far away from first production. So what are you looking at there?
spk02: What's the question?
spk11: Just what's left.
spk02: Yeah, no, I mean, I know the brands, Randy's literally at Ochicota now, so maybe I'll let him answer. What I will tell you is that we just continued the development of the down plunge, and the plan is to start producing ore in Q1, or at least getting some ore out of there in Q1. Randy, you want to talk about what are the final steps we have left to do?
spk13: Yeah, that's pretty well it, Bill. The final Development contractor is working on the main decline right now as we speak. We've made a couple little tweaks there to the development plan. And when we get into ore, we'll be starting to take out some development ore in the first quarter. And then we've selected a production contractor that's going to be gearing up and coming in towards middle to end of Q1 and getting started there.
spk11: Right, the development and then coming into the great proportion of stoking and just from there on.
spk13: Yep, correct.
spk11: Okay, thank you.
spk01: Any further questions, Jordi?
spk11: That's all good, thank you.
spk01: Thank you. Once again, ladies and gentlemen, as a reminder, if you have any questions, it is star one on your touchtone phone. At this time, I would like to turn the call back over to Mr. Johnson.
spk05: Okay, thanks, operator. Thanks, everyone, for good questions. And if there's any other questions that come up, don't forget to reach out to us. And we look forward to reporting another great quarter at the end of the year. So thank you for your time.
spk01: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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