B2Gold Corp.

Ladies and gentlemen, please stand by. Your conference will begin momentarily. Thank you. Good afternoon. My name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to the B2 Gold second quarter 2022 financial results conference call. 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'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Mr. Johnson, you may begin your conference.

Thank you, operators. Welcome, everyone, to the B2 Gold conference call to discuss the results of the second quarter of 2022. As you can see from the news release we put out, we had another very strong quarter. We beat our budgets in a number of areas. And very importantly, we were able to maintain our guidance for 2022, even in this current environment of inflation, what we're seeing in the world. So a very good first half. We have guided that we're going to see some higher costs due to inflation, primarily in the second half of the year. Because of the start of the first half of the year, we remain on our guidance for 2022. I'm going to talk a little bit about the details of the quarter financial results, but I just want to give a little summary before that. So as we said, very happy with the results. The other significant announcement we made today was that we are not going to proceed at this time with the development of the Gramalate project, our joint venture, 50-50 joint venture with Angle Gold Shanty. Both parties have agreed at this time that it does not meet our economic thresholds to go ahead and develop the project. We are in the process of doing an updated feasibility study, which will be completed in the third quarter of the year. We had some hopes that we could improve the economics of Gramelage from what we had in the previous study, which indicated that $1,500 gold divided by 15% IRR. But we thought there was potential to improve the economics in two ways. One was to look at some of the different engineering approaches and design approaches to try and bring that capital cost down through some high-quality engineering work. Some good work was done to actually reduce the footprint of the project as well. So the goodness was that we knocked well over $100 million off the original projected capital cost, which was over $900 million. We actually managed, by doing this different approach to the project technically, to bring that cost down, as I said, by over $100 million. But inflation really bit us at this time, not surprisingly, looking at So most of the gains from the reduction of capital were wiped out by the effect of inflation. The second thing that happened was we were hoping that with some additional infill drilling, we could perhaps improve on the resource in the sense of increasing the number of ounces so we could divide the capital cost by more ounces, which made sense. Unfortunately, drilling is hard to predict, so we didn't get the additional ounces we hoped for, and we had a bit of a drop in grade with infill drilling. For now, the good news about the Gramalati project is the projected operating and all its sustaining costs have always been low, and they remain quite low. The biggest issue is that big capital cost up front. So we're going to now look at our alternatives. AGA and ourselves have signaled that. We're each going to look at alternatives going forward. And clearly, they would be to go on a maintain our permit and continue with some of our resettlement planning and things that we've been doing there. We've done a lot of the work there, continue with that work while we evaluate the alternatives going forward. And clearly the alternatives would be, is there a smaller project? We've played around with that a bit before in the past. Is there a smaller project that makes sense from the large scale we were approaching it with? Or does it make sense to look to sell the Gravel Latte project? So both companies, or each company has to make its determination, and we're reviewing all the various alternatives. But we do have a permit in place, and this decision was based on really using our capital, our very strong financial position, and how we want to utilize that capital. So part of that focus going forward now in terms of use of capital will be to consider even increasing the amount of drilling that we're doing, what we now call the Ficola Complex, as the engineers like to call it, which includes the Ficola by itself and then this vast stretch of land that goes all the way up to Anaconda North and many, many targets in between. We continue to get really good drill results that suggest we're significantly increasing the 3 million ounce resource that we had released before for the Anaconda area in the farther north area of the Focola complex. We continue to get good results and most importantly, not only in the lead and sap late material down to 50 meters, but below that, we continue to get some very good intercepts, good grade, good winds in the sulfide below. So we do believe that there's tremendous exploration potential here. We've seen some of it, but we're very much at the early stages of the Focola complex with the drilling we've done when we look at the multiple targets. The Mamba zone itself in Anaconda It's really getting our attention in terms of, in the short term, it shows the potential that the drilling has done so far to be another Focola-type deposit and maybe have that sort of size implication and potential. In addition to that, the drill programs can be a lot of rigs focused on Manoa to see how big that gets, but also drilling of many other targets and other deposits that we now have in this belt. So we're very focused on that because we can, in the short term, we're planning, as we said before, Stage one in exploiting the Anaconda area is to truck the ore from Anaconda, also from Cardinal, and potentially other sources like the recent project we acquired through Aqual Resources. So we have almost an embarrassment of riches and opportunities to truck ore from various sites down to the Pecola Mill. We're going to be moving some of that material later on this year from some of these sources of mineralization or deposits, and we'll be able to increase production simply by trucking good-grade material by 8,200 ounces a year for FECOLA. So it's a real positive. It really improves the life of mine, which will be coming out soon with new life of mines, but that significantly improves what was already a strong life of mine for FECOLA. So lots of news to come out. We'll be coming out soon with additional drills from this area. I'll let you know why we're very excited about it as a significant project, not only the first stage of trucking sapling material, but the second stage. involved building a second mill somewhere in the Anaconda area. So that's something we're having a hard look at right now. Obviously, it's subject to further successful drilling results, but what we're seeing, we're very confident that there's going to be a stage two here, which would entail subject to further drilling and feasibility, et cetera, building a second mill. So the Foucault complex, in our mind, from what we're seeing so far, clearly has the potential to significantly increase coal production in phase stage one, but also in stage could the Ficola complex one day produce a million ounces over the year. We think that's the kind of potential that we're seeing. So we'll be really focused on that. In terms of other things, we've been getting some very encouraging results in Finland as well in our project there that is adjacent to Rupert Resources' exciting new discovery in Finland. So more news to come from that. And beyond that, we are, I think as everyone knows and everyone in our sector is looking at M&A alternatives or opportunities. So we're looking at a few things right now. We're in an enviable position because we've a very strong cash position. We've decided not to go ahead with Gramalate, so we're in an extremely strong cash position with no debt and are able to continue to pay one of the leading dividends on a yield basis in our sector, but also have significant amount of money to devote to exploration of potentially the next development projects, but also if we find something we like. We also can use our strong cash position when we look at M&A without the need to significantly dilute our shareholders. So we're looking for opportunities. There aren't many projects we're in love with out there. There's a few, and sometimes it's hard to find a dance partner, a willing dance partner, in terms of looking to grow in our sector these days. But we continue to look, and if we do a deal, it won't be because we view ourselves as needing it. It's because we will have found something that we like and we think is secretive for our shareholders. And then we'll do what we've always done, which is bring our great technical team to bear, not only to build these projects, but also our exploration team, which has had tremendous success in every acquisition we've done in the last 15 years. at finding additional gold, which we don't pay for in acquisition, but we've had a great track record of doing that. So that's where we sit. We're very happy with the quarter, as Mike's going to tell you why, and we think we're very well positioned for continued growth from our existing assets and also looking at the potential for responsible, sensible, accretive M&A. With that, I'll pass it over to Mike, and then we'll open it up after Mike for questions.

Thanks, Blake. So let's start, I'll just run us quickly through the second quarter, some of the main results. So firstly, in the revenue side, we had a good revenue quarter. We sold 205,000 ounces at an average realized price of $1,861 per ounce for revenues of $382 million. That's a bit higher than we thought we were going to have. Obviously, we sold a bit more than we thought with positive production, and also revenue was higher than we forecasted. On the production side, total from our operating mines, 209,000 ounces from our three mines for the quarter. If we include our share of calibers results, the total production reported was 224,000 ounces. So both of those totals are probably in line with budget. FACOLA had another strong quarter, 123,000 ounces, in line with budget. And FACOLA's processing facilities actually achieved record quarterly throughput of 2.42 million tons in the QE. which is very impressive. The higher-than-budgeted throughput was offset by lower-than-budgeted mill feed grade as we used to gain low-grade stockpiles to feed that additional budgeted feed. Reminder, too, that Focola's production is expected to be significantly weighted the second half of 2022 when mining reaches the higher-grade portions of Phase VI in the Focola pit. I should also comment The recoveries in the quarter were slightly lower, 92.4% in the budget of 1994, and that's mainly because we had lower availability of lime because of some of the sanctions that were placed in Mali, so that led us to rejig some of what we were doing and reduce recoveries in the quarter. However, with the sanctions now lifted, all reagents are now available, so that shouldn't be an issue going forward. Ms. Batty, production in the queue, 54,000 ounces, slightly above budget, but about 1,000 ounces. And with process times, which is about 6% above budget, but was offset by lower than budgeted process grade. The higher than budgeted throughput really came from continuous optimization of the grinding circuit, and the lower than budgeted process grade came mainly from lower-than-budgeted mine grades at the bottom of the Montana pit, which is now effectively mined out. And for Ojikoto, 31,000 ounces, slightly below budget, 2,000 ounces below budget. And that was really due to a slower-than-plan ramp-up in development at the Wolfshag underground mine. We did replace the underground mining contractor, and those development rates at Wolfshag underground have improved. We now expect it will hit development order in the third quarter, the third quarter, and then still for production sometime in the fourth quarter. So it's basically, we've pushed that out one quarter from where we thought we'd be before. And we did see lower grades as well because we're not getting into that WOSHAG higher grade as quickly as we thought. So when we take all that into account, we did re-guide production in WOSHAG when we put our production release a little early in the month. It was 175,000 to 185,000 ounces. We re-guided down by 10 to between 165,000 and 175,000 ounces for the year. But we did have an offset at Ms. Batty because Ms. Batty was already year-to-date at 7,000 ounces ahead of budget, so we re-guided Ms. Batty upwards by 10,000 ounces. And so overall, total production guidance for the full year remains unchanged. And Clem alluded to or mentioned the positive cost results for the period. So we definitely saw some good results. On the cash cost side, including all our operations, including our share of Calibre, total cash costs were $781 per ounce compared to budget $795. So we're actually under budget or broadly on budget, I guess we could say. And when you look at that, it's really as a result, we did have lower than budget money in tuttage. at some operations, but this was offset at all operations by higher than budgeted realized fuel prices. So when we took those two main factors into account, we ended up broadly on budget for the quarter. Coca-Cola, as always, led the way, $639 per ounce. That was $64 under budget, and it was a result of lower than budgeted total mining, processing, and site general costs. Total mining costs were lower due to lower overall tons, being mined, and that was partially offset by higher than budgeted fuel prices, as I mentioned. And the mine funds were lower than budget due to, it's a temporary change of mine sequencing, and again, relates back to those ECOWAS sanctions, the availability of some reagents and other supplies meant that we temporarily changed our mine sequencing. We're expected to regain that and put it back on track for the full year. And Ojukoto, Ojukoto was $1,136 per ounce, which is $24 under budget. and in total under budget as a result of a weaker Namibian dollar and delays in incurring the Wolfshag underground mining costs, but again partially offset by higher fuel prices. Mizbati was maybe the outlier for the Q in the sense that its cash cost for the quarter was $840 per ounce, which was actually more than $100 over budget, and that's almost exclusively due to higher than budgeted diesel and fuel costs in the Philippines. And in the oil and sustaining cost side, we really saw that mirrored again, that the consolidated oil and sustaining costs, including our share of Caliber, were $1,111, which was $78 under budget. And that beat against budget was mirrored at all sites apart from Ms. Batty. And really, it's a function of, again, lower than budgeted cash costs, higher gains in fuel derivatives, and lower sustaining capex. And the lower sustained capex, as we've seen quarter to quarter, is just a function of timing. We think that the full capex that we expect to incur for the year will be incurred later in 2022, and we will catch up. And then, Ms. Batty, it was $1,082 per ounce, or $28 over budget, and that really mirrors the fact that we were over budget on the cash cost side, partially offset by lower budgeted capex in the queue. But again, we think those will be thought of. Then year-to-date, just a couple of comments on year-to-date where we are for the six months. So we're 12,000 ounces ahead of budget overall, total including all operations, our share of Caliber. So that's positive. And like I said, we've retained our overall budgeted production guidance for the year. On the cash cost side, including all operations and our share of Caliber, we were $52 under budget on the cash cost side and $193 under budget year-to-date on the all and sustaining cost side. As I mentioned, the cash cost side, we've just seen some gains there in Q1, offset by some fuel price increases that we've seen coming in mainly in Q2. The all-end sustaining cost side, we're well under budget, and that is a function, as you mentioned, of those lower cash cost timing of CapEx, all of which we expect to see reversed later in the year, and also some higher derivative gains. But overall, very positive first half of the year performance. And so what we've seen overall is that we did see fuel prices increase through the queue. And as we look forward and re-forecast for the year, we did forecast higher than budgeted fuel prices across our operations. So that led us to revise the second half cost guidance for each operation. We revised that upwards. But because we had such a positive first half, when you put it all together, We've still guided on an overall consolidated basis that our cost guidance is maintained. For cash costs, we think we'll come in at the upper end of our consolidated range of $600 to $640 per ounce. And on the all-in sustaining cost side, we still think we'll be in that overall consolidated range of $1,000 to $1,040 per ounce. So very positive, I think, on the overall operating results as they are. In terms of other things that are happening in the operation, I think, Clive, can mention most of them. Obviously, Focola and Mali regional development is a big thing for us, and Clive touched on all of those things. We do expect to see Oclo, that deal, close sometime mid-September. And then as part of that, and part of what we disclosed in the releases, we are looking at how best to optimize that Focola complex regional development. We've got Four licenses there now, including Medinandi, Bacalobi, Manicoto, and Bintaco. And now we've got Apo coming on expected mid-September. And so we're really, we've just been looking at those, just trying to decide what's the optimal way to feed Ficola mill with higher-grade saprolate in the short term. And then also looking at that bigger picture of what we want to do maybe longer term with potentially a second mill at Manicoto. So that's a big focus for us. Studies are underway. I think we expect to have them by year-end. And then I think we now see that Saprolate track would maybe start sometime in the second quarter of 2023. And, Clive, I think the other main thing we focused on in the quarterly results was looking at Gramalati and evaluating their options. There's something Clive already touched on that. A couple of things to highlight on the earnings side. We did see some volatility on foreign exchange. So we saw some foreign exchange gains and losses. They're mainly due to cash holding that we hold in each country and some of the payables that we have locally. And then on the tax side, we did see higher taxes than we expected in the second quarter, and we tried to highlight that in the release. And those are really related to two things. One was, again, fluctuations in foreign exchange led us to some hits on the future income tax side due to that. And then also on the withholding tax side, we had... Approximately $22 million of withholding taxes that we had to pay in the second quarter related to dividends, intercompany dividends that we declared in Mali, which are a little higher than we thought they were. So we had to pay the taxes up front, and that impacted the overall tax charge. One other item to note, on the derivative side, we are still seeing the gains and the benefits of our fuel hedging program. We had just under $8 million of gains on fuel hedges in the queue. And year-to-date, we've seen $27 million. And we took a look back at how that's done since really the inception of COVID, March 20, when it came on and we really started seeing fuel prices start to fluctuate. And since March 20, we've either realized or recorded gains of approximately $50 million since that started. So we've got about $20 million of that still in the books that we expect to online over the course of the next year, year and a half. I will say also on the fuel side that we had a rolling program where we were trying to put on 50% of one year's needs and 25% of the next year's needs. As we've seen fuel peak and become so high, we've stepped back from putting on new hedges because it's very hard to tell exactly what the volatility of that is, but we still have 30% of our needs hedged for the balance of 2022 and 18% in 2022. And a couple of comments on the earnings side. So earnings, EPS, GAAP EPS, $0.04 per share, and adjusted EPS, also $0.04 per share. Year-to-date, EPS was $0.11 per share, and adjusted EPS was $0.10 per share. And maybe just a couple of comments on the cash flow side. So cash provided by operating activities for the quarter, and this is after changes in market cap, $125 million, or approximately $0.12 per share on a non-GAAP basis. And then year-to-date operating cash flows after working cap changes were $232 million, approximately $0.22 per share. Remind everyone as well, just like we guided on the production side, production is definitely weighted to the second half. It's approximately 40% half one, 60% half two, and cash flow is also weighted much more significantly the second half of the year. We had guided operating cash flow initially at $625 million for the year, but I assume an $1,800 gold price for fiscal 2022. We've re-guided now slightly downwards to $575 million for the year, and that reflects the fact that we're now using $1,700 for the second half of the year. And like we showed in our cost guidance, we do expect there to be some higher costs due to inflation, mainly fuel, in the second half, and also just to time some working capital items. So Operating cash flow for the year currently forecast, assuming $1,700 gold for the balance of 2022 to be $575 million. We ended the period, though, with $587 million in the bank, $600 million undrawn on the line and in great shape with Pertity Weiss. And we continue to pay that, as Clive mentioned, to one of the highest dividends in the sector, $0.04 U.S. a share per quarter, approximately $170 million annualized for the year. So very good shape there. And that rounds out, I think, what I was going to mention on the financial results.