B2Gold Corp. (BTO) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to B2Gold Corporation's Goose Project Update Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Clive Johnson, President and CEO of B2Gold. Please go ahead.

Thank you, operator. Welcome, everyone, to our call today to discuss the update on the Goose construction and development and the revised budget. We're also a big week for us for news as we came out with the news about reaching an agreement with the Government of Mali. So since we're all together on the call, we'll go through Goose, and then we can also answer questions you have in terms of putting a little color on what we consider to be a very important development of Mali to moving forward. We're not going to be glitched into this release here. It's quite a detailed news release. And the idea is to indicate, obviously, there's been a increase with this revised budget of about 22% increase in the cost to complete construction and mine development work to enable us to be on track for First Gold production the second quarter of 2025. And Bill is going to give us a good update on construction. It's going very well. And we will talk about construction and mine development. I think that obviously, the numbers are a little higher than what they would have liked. But I think this -- the important thing to emphasize and Bill will give you some color is what we're doing here in terms of what the mine that we will start up. B2Gold and Bema have a history [indiscernible] that work really right away. And with the industry standards, very low ramp-up time to full-scale production. That's really what we're intending to do here. And a lot of the driving force behind the 23% increase in cost is the mine development schedule. We actually are on schedule on the construction and could have met that like because we met that first quarter of 2025 original estimated the date of first production. We pushed that back by 3 months, largely because of the mining -- the mining piece needing to catch up and Bill could talk about some of the reasons why. Unfortunately, we inherited some equipment -- mining equipment that was junk. So we had a lot of things to do, and we're pleased to get to them where we can meet the schedule. So I think with that, I'll pass it over to Bill, and then we'll open it up for any and all of the analysts questions. By the other way, with me I have William Lytle on the phone from site, we have Michael Cinnamond here, Michael McDonald and Randall Chatwin all here to answer any questions you have.

Yes. Thanks, Clive. How do you hear me all right?

Yes.

Okay. Yes. So as Clive said, I'm going to give a little bit of color. If you remember how B2 normally does is we take a project once it's got a feasibility study, and that's when we kind of inject ourselves. We look at everything that's been done. We spent some time turning it into a B2 project and then bringing our construction team. And this one was a little bit different in as much as they had already kind of ordered everything for that first sealift season when we got involved with it. So we were kind of stuck with what was in the containers when we took over. And so we've spent the last year kind of going through that with a fine-tooth comb. And Clive is right. We certainly have turned it into a B2 project as far as the additional material that we put on site to make sure that we're successful when we start up. The commissioning team is already here on site. They've just arrived. So they're going through the manuals, creating the manuals making sure that we have the appropriate consumables and critical spares and putting all those lists together. And as Clive indicated, the construction schedule for the mill itself does remain on schedule. We'd always talked about really kind of having to -- last year, we wanted to get the buildings put up, so we could get weathered in for the winter, which happened. This summer, we wanted to pour all the concrete, we're at -- for the outside concrete in excess of 90% of what we need, with we think about 30 days left. So we don't see any issues there. We also have started running the electrical cables and everything, all the e-houses are basically up and a lot of the internal steel is up. So we're at a very good phase as far as the mill. Talking about the sealift for 2024, 2025. Last time we talked, we were putting stuff together to get it on a boat. All of that made it to the boat on time, all of the boats, I think it was 11 boats have all been filled and are on their way, either already at Bathurst Inlet or soon to be there. So we've already offloaded 4 complete barges with cargo. We've got a big boat there right now, offloading all the cement. The first 2 loads of fuel have already arrived. Remember, we've expanded our fuel capacity both at the MLA and at the Goose site in excess of 80 million liters. So we are filling up all of the 5 tanks at the MLA right now. We anticipate all that will be done really by the end of this month. So by the end of September, all of the cargo will be offloaded at the MLA. And one of the things I can't remember we talked about it on the last call, but we talked about derisking the project. And one of the key risks we saw in the project was really the way that the marine laydown area was designed and set up. So what we've done is we have expanded that, and that's some of our cost expansions. We put in a bigger camp there. We put in a desalination plant, a water treatment plant. We also brought in an additional 50 trucks and trailers, basically to make sure that this next winter season when we have in excess of 3,000 loads coming down the road, that we'll be able to do it in very short order. So that's double what we had there last year when we were so successful. So the -- additionally, on site, we've spent a little bit of money extra bringing in on [ Herc flights, ] bringing in materials, which had been either redesigned or maybe not appropriately ordered by our predecessors. That now all of the piping is on site. We're in the process of bringing in all of the steel. That's all been designed to the B2 level of engineering. And so overall, we're looking really good as far as getting this project completed and in particular, the mill on time. The mine itself, Clive did indicate that we did struggle with the open pit area in particular, really related to running some of the Cat equipment that is certified for use in North America in extreme temperatures. They have rectified that. We are now running at full capacity. We don't see any issue really for getting the open pit ready for the tailings facility. The underground in the previous design by our predecessor, they had talked about leaving a big chunk of the crown pillar, which was very high grade. We've included that in our mine plan. We're currently almost right at the face of the crown pillar. So we're going to start mining that out here shortly. We see that really as a high probability of success. We believe there's no problem there. We have opened up 2 headings underground. We've got the one vent raise in. We're almost through with our second vent raise. We think that will be done by the end of the month. And so overall, things are going very well construction-wise. And just I'm not going to go into the details of the cost and where we add overs and unders simply because it's so well detailed in the press release. But I'll just tell you in big buckets, right? Obviously, we had that second -- Q2 of 2025. That obviously carried some construction costs, but it also carried all of the operations costs, which for the mining and milling, which had to be brought into the budget now. We also had probably 1/3 of it was logistics, and that related to flying stuff in, which either was not ordered by our predecessor or was the wrong order, maybe poor quality that is not to be too standard. And then, of course, I already talked about it, some of the what I would call derisking with the project, which includes additional critical infrastructure like warehouse facilities, some civil equipment and as I talked about, the equipment at the marine laydown area. So I think that's all I want to talk about on Goose. Maybe just quickly, I'm not going to give you a detailed update since we just talked about the other projects. But at Otjikoto, Masbate, Fekola, all 3 of those from an operational perspective are going very well. Everything remains within our release guidance at the end of Q2. And so I guess, Clive, I don't know if there's anything else you'd like me to talk about?

No, I think that's good, Bill. I think with that, we'll -- obviously, many of you are going to be up on site with us and not too long from now actually -- a week actually. So you'll get full opportunity there for presentations and you'll get a real opportunity to get on the site and see. I think it is pretty impressive how, where construction is today and a full opportunity to get together and answer your questions outside as well. But I think with that, for now, I will turn it over to questions on Goose. And as I said, we'll also answer some questions when we're done with Goose, anybody wants more detail on Mali and then I'll maybe give you a bit of a view of where I think we're heading out with these 2 core developments this week.

Thank you. And we will now begin the analyst question-and-answer session. [Operator Instructions]. Our first question today will come from Wayne Lam of RBC.

Maybe just wondering, given some of the challenges you've encountered with the construction, you guys have obviously had some prior success building in cold weather environments. Would you just attribute some of the challenges at Back River more so to just figure out the logistics and maybe some changes in design? Or just wondering if there are certain lessons that can be applied as we think ahead to the upcoming operations and maybe more specifically, if you might be able to provide some detail on how we should think about the mining unit costs given some of the things that you've seen as you've started getting through the development.

Bill?

Yes. So the first part of the question, really, I think we've been very open that this one was a bit unique in the way that we've approached this one simply because they'd already kind of designed in order to mill in kind of the infrastructure before we had a chance to look at it. So typically, our success has always been making sure on the front end that everything fits and everything works, double checking, triple checking. We didn't have the opportunity because a lot of the stuff was sitting in containers already on site. And so we don't see -- from an operational perspective, we don't see this any different than the successes we've had in Russia. I mean at the end of the day, it is in a first a Tier 1 jurisdiction. Canadian certainly know how to mine in the north, and we've got a very good crew here. So I don't see really as far as we go on that we're going to have an issue putting it into operations. It was more of what we had inherited. And quite frankly, what we were told here versus what was here when we got here. Yes. I guess, on the second part, I don't know, Clive, if you want to -- or Mike, do you want to talk to the cost as far as the operating cost. What I can tell you is because we're still waiting on a resource model, we're still working on those numbers, but we don't see them kind of different than what we've seen before.

Maybe I'll just give you a little from the corporate point of view, a little more color on good question Wayne about what's different this time and what have we learned from this experience? Well, as Bill talked about, the model, the B2Gold model, in many cases was to acquire a project that had, obviously, the exploration success of the feasibility study and then doing a deep dive in due diligence. And then if we decided it was an accretive deal. Do the deal and then redo a feasibility study to our standards and actually design the mill ourselves and all the introductory years and 8 mines in a row, whatever it is -- and that's one of the keys to success. So in this case, it was a tough scenario technically and corporately because we had a lot of time pressure obviously, the former order was a single-asset company, the shoestring budget and looking at things like construction contracts, et cetera, things that we would never do and never have done because we have to build our mine. So there was a real time crunch on this in the sense of we needed to get -- frankly, we needed to get the deal closed before the previous order drew down what we thought was a very, very challenging financing for this project, including private equity, up streams, offtake agreements, very low priced prepayment of gold sales, lots of things have made an extraordinary expense of financing. So if they draw down the $1 of that financing as they intended to do last year from private equity, we would have walked away from this project forever because of the cost of finance and what we saw the challenges being ahead. So a very good day for the Sabina shareholders and a good result for them, I would say. But at the end of the day, so that's what makes it different, and it was the timing issue and we believe in accountability. The one thing, I guess, we might have done a little bit better in the benefit of hindsight was recognized earlier on once the deal closed. You have to remember, we weren't getting a lot of information before the deal actually closed. So once we figured out things out -- started to realize where we were we might have responded a little more quickly to really make changes and making that B2Gold project a little bit earlier, but it's a bit of hindsight there. But at the end of the day, I would say that's true. So we have a bit of a situation where we are trying to figure out the fly and trying to maintain the schedule to get go into gold production in the first quarter of 2025 now in the second quarter of 2025. So I do think it's a testament to the construction team and the operating team and the whole team here to be able to have actually picked up the pieces and driven on and beyond the schedule. And keeping costs while higher, there are some of the reasons were laid out in the news very clearly about and Bill talked about the different buckets of where we are in terms of financing of what is higher and why it's higher. So from the corporate point of view, we view this as an excellent asset, good jurisdiction, long-term gold production, tremendous exploration upside. And we're on top of it now, and we think it's going to be a great project for B2Gold as we go forward.

Okay. Perfect. And then maybe just wondering what's the level of stockpile being targeted ahead of start-up? And given the increased development, has that budgeted stockpile level increase versus prior planning?

Yes. I don't have the numbers in front of me. It's something we can take offline maybe versus what was previous. I don't have the numbers, I'm sorry in front of me.

Okay. But it's -- would it be higher or about the same level as previously.

Yes. I would think it would be very similar to the previous levels.

Okay. And then maybe just last one. You guys appear to be pretty well funded between -- with the $700 million credit facility and having done the prepay last year. Just wondering with the working capital build, should we expect most of that increase to be incurred in Q3 for the currency lift? And then between the add CapEx now and the potential settlements for the Mali resolution. Are you guys thinking of any additional levers to pull to provide some increased flexibility? Or are you pretty comfortable with how the balance sheet sits.

I can certainly talk to the -- if you look at where we were and reported at the end of Q2, sort of cash position undrawn line. So yes, we're comfortable that we can manage whatever we need to do here with our existing capacity and what we have available. I think from a working capital point of view, yes, there's some pretty significant additions, I think, will come through this year. We will still -- you'll see a little bit next year, but you're right. This year, the sealift is the major component of it for sure.

A lot of the buildup of working capital is due to the seasonal aspects of this project and the challenges of logistics and the idea that you've got to order stuff so long before you need it on site that there is a significant working capital required because of that. And of course, it is working capital. This is not part of the [indiscernible] construction cost or mine development costs.

Our next question today will come from Don DeMarco of National Bank Financial.

So really putting B2 is best-in-class damp on the asset, and we look forward to potential operational outperformance in years to come. But first question, so there's been CapEx increases approximately every 6 months, yet there's still a year left before commercial production. So do you feel that you're at a point where -- or with the level of conservativeness in the recent update where the risk of additional CapEx increases is mitigated?

Bill, do you want to talk to that, please?

Yes. From an operational perspective, absolutely remember, the stuff that we need really to build the site is either sitting at the marine laydown area or it's currently on site now. There will be some stuff, some additional stuff that we're flying in, which is in the budget as far as additional design items, which we had fabricated. But in general, everything that we need to build a site we currently own, like I said, with the exception of some minor stuff that we're still getting designed. So I would say, when we presented this board, we felt pretty good about the number where we're at. Obviously, if there's some force majeure issue, we can talk about it. But if -- as it stands right now, we're feeling good about where we're at.

Okay. And Clive or Mike, do you expect to maintain continuity of the dividend in the home stretch of the build?

Sorry. Say again?

He's asking if you expect to maintain the dividend.

Yes. Well, we'll be obviously review going forward as we always do when we talk about dividend, and we'll talk about the quarter and talk about the future. So we'll look at all of the various alternatives going forward and what we need in terms of funding. So right now, we're steady state.

Okay. And Bill, you mentioned with regard to the crown pillar, you're seeing high probability success. Is the crown pillar in your forecast for year 1 or for the first 5 years? 4 years?

It is for the first 5 years, for sure.

Okay. And then maybe just last question, just shifting to the settlement with the Malian government. Congratulations on that. And has the time line for the repayment of the VAT credits been set yet? Or what do you think that might look like and when would it be finalized?

Yes, the time line was one of the items that was built into the agreement. So we've got it spread out over 5 years starting in '25 for the existing balances that were owned. And then obviously, this also an agreed time line for processing ongoing VAT just so that doesn't build up to significant levels. Again, that's all part of the agreement.

The next question today will come from Ovais Habib of Scotiabank.

Clive and the team, thanks for the update that you guys provided. Just a couple of questions from me. In terms of Goose and specifically Goose underground, you guys were doing some confirmatory drilling into the underground to make sure that it's up to your standards. Any kind of update on that? And how has the drilling results been according to your expectations.

Well, yes, I would say that the drilling -- talking to the exploration guys, we're very happy with the progress on the drilling, both in terms of some of the upgrading we wanted to do in terms of drilling, but also some of the step-out holes we've done to depth, et cetera. So I think there's a high degree of -- really high degree of confidence in what the reserve resource is going very well, and we will have an update out in March of next year with a full mine plan once we have that as well. But -- so no, all reports from the exploration guys are going well. Some really sexy results, as you would expect to get in a deposit of this nature, but it's going really well. Plus we're getting more and more now moving into some more explorations. So testing the down plunge. And you know what these systems are like. They can go on for great depths, but also additional targets that have been identified over the years, but have never been drilled. Surface targets at various levels or surface underground targets. So we're starting to be able to and have been hitting some of those targets as well. And we've had some excitement from the team up there for sure.

Thanks for the color on that, Clive, and looking forward to coming down to slide next week. Just moving on to Fekola then and Fekola Regional specifically. Just wanted to ask you just on the time line, specifically in terms of receiving the exploitation permit versus how well you are prepared for the 2025 guidance? And also, can additional work be done before you get the exploitation permits. So basically, we can remain on the 2025 guidance for -- specifically for the regional stock?

I think I'll let Bill answer part of that or ask Bill to answer a part of that in the sense of we're pretty much -- I mean, from a point of view of what -- with the roads, et cetera, we're pretty much ready to go. Bill, can you talk to that and then maybe Bill or someone else can talk to what needs -- it's just timing of the permit now.

Yes. So absolutely. So Habib, I think you remember, I think you remember, we got permission before all of this came to -- this audit occurred to actually put in all the infrastructure. So the roads are in, all of the regional structures are in the workshop, the facilities for office and everything. We were just literally waiting on a permit. So we had previously agreed with the government that we would complete the ESIA and we would complete the feasibility study, those documents will be done this month. So what we're talking about more than anything is something that they readily agreed upon the last time we talked to them was to really push through putting all the licenses together and getting that done and getting an exploitation permit. So we can't do anything more than -- other than kind of pre-commissioning of the facility, but we're ready and we're talking about a 3-month pre-strip and then right into ore. So we -- if the government holds their position, which we have every reason to believe that they will, we absolutely believe that we can hold our schedule and production for 2025.

One of the common denominators in the discussions with the government was the fact that mutual interest and the mutual interest of obviously, continue to see Fekola be successful operation and a lot of that's under the 12 code as we've detailed in the news release, but also they are very keen on seeing the expansion. They're looking for additional revenue for gold mining and one of the quickest sources moving to get this permit -- exploitation permit in potentially as we now produce 100,000 ounces a year from trucking the material down. The second source of revenue for gold was then for them to actually start getting some tax revenue from all the illegal gold mining, which is coming out of Mali, but that's a whole other issue. But we have a lot of common interest in getting that trucking done as fast as possible. The government made that very clear in our conversations. So we're looking for that to expedite that process, working closely with them.

Sorry, Habib, just to add on, as we talked the other day, there is actually a specific date in the agreement that we've settled for the combination of the 3 permits, which Bill was talking about the new feasibility study SIA that they've created -- and that is actually by the end of this month. So those documents are being submitted by us now as far as the combination of the permit. That's the first step. And then they've agreed to move on the next step, which is the actual exploitation permit as soon as reasonably possible thereafter.

At this time, I'm showing no questions in queue. I will turn the presentation back over to Clive Johnson.

Okay. Thanks, operator. Just maybe a final thought about where we go from here. Two very important announcements this week, obviously, on Mali. But I just want to emphasize that Mali has been a good place to be in the gold mining industry for a decade. You can talk about the Randgold success and [ Barrick ] and other companies that have been there and ourselves as a major player there, the second largest gold mine in the country and Fekola has now the ability to expand it. Mali, when people talk about political risk, et cetera, Mali's a little bit misunderstood sometimes because there has been a government. As I said, it's actually been recognized the importance of foreign investment in the gold mining space. And that's actually been a country that's honored the laws over the years pertaining to mining codes and mining conventions, et cetera. So this is an opportunity now to key to slate. It's taken a long time to negotiate the details of this. But now is the opportunity to move forward. And yes, we're seeing some higher taxes of loans so we have protection for -- some protection for Fekola, the Medinandi license because of being on the 2012 mining code still under that code. But at the end of the day, we expect the government now is and all through this piece, even though we've had some negotiations that have been by intense at times at the end of the day, trying to find that balance between making sure that all stakeholders can succeed in a binding operation. But all through this piece, we've worked extremely well. Fekola has continued to work well. We've continued great relationships with the government. This is not as if there's been a big falling out of the big problem. We continue to mine every day. We continue to be successful in the interest of all the stakeholders, including the government of Mali and people of Mali [Technical Difficulty] Fekola mine. So I do make sure people realize that this is -- we view this is an important step to understand going forward and get back to the business and continue to run the [Technical Difficulty] expansion and working very closely again or continuing to work very closely with the Government of Mali. And the bigger picture, I think this and then putting getting out the new Goose numbers and looking at how well construction is going at Goose, this now puts us on track to focus on growth. Growth with the expansion of Fekola. Obviously, the growth coming with Goose production in the middle of next year, and around 310,000 ounces a year annualized gold production. And then, of course, potentially down the road the Gramalote project, which is -- has an extensive PEA, I guess, a number of feasibilities done historically. Now with a single owner being B2Gold where we put us encouraging news in the recent PEA and about the economics of the project, we're getting quite keen on that. We see what the feasibility study says in the middle of next year. So we have a great pipeline of growth. If you look at the expansion of Fekola, bringing Goose on and then ultimately potentially bringing on Gramalote for another 240,000 ounces a year. These are ounces we own. We don't have to buy these ounces and this is a tremendous amount of total of potentially 650,000 ounces of additional gold production from existing assets. So we're not going to be out there charging around doing any M&A, especially given our share price. We see this as a chance to get back in the market and show people that were on top of -- we're on top of what we're doing on top of Goose. And let's get back to growing this company with all the assets that we have. That's the focus, that's the strategy going forward. And of course, exploration, very important part of what we do at B2Gold and historically, with great success, we're continuing the exploration programs throughout the company, throughout the assets of the company. It is important to note that one of the things that's happening in Mali, we had halted drilling while we waited for the expectation permits on the regional. Now with those permits coming, we're actually already starting now getting back to exploration drilling, both at [ landing ] but also at Fekola, but also look to the regional. So an aggressive, I think it's $10 million exploration budget there for the rest of the year to further -- to assess the ultimate potential value of the regional. We have numerous discoveries there as everyone knows, and numerous zones to be drilled and hopefully extended or new additional targets that we need to come. So that's how we see that this has been a very challenging year. Obviously, in many ways between Mali and between the Goose, et cetera. We feel like we're now coming into a stage of -- we always said this year would be a transition year 2024. We see a bright future now as we're moving along as discussed with the various projects and assets that we have. I think with that, we'll leave it there. Thank you all very much for your time. And I think we'll see a lot of you next week either at the Colorado Springs more on the trip up to a bit of it, which were to Goose, which we're looking forward. Thank you, and thank you, operator.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.