B2Gold Corp. (BTO) Earnings Call Transcript & Summary

Thank you for standing by. This is the conference operator. Welcome to B2Gold Corporation's Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mike Cinnamond, President and CEO of BT Gold. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for B2Gold's Second Quarter 2026 Conference Call. I think first business, before we begin our discussion of the quarter, I want to address the trading hold that was implemented earlier this morning. shortly before this call, we received confirmation that the government of Mali has granted the Menankoto exploitation permit. And given the significance of this development and our obligation to ensure that all our investors receive material information at the same time, we requested a temporary trading halt, pending with the examination of the news release, which I believe will go out shortly. . This permit represents a very important milestone for the Fekola Complex, providing the framework to commence mine activities within the Menankoto permit area and supporting the continued development of the Fekola regional deposit -- and we appreciate the efforts of the government of Mali and all stakeholders involved in advancing this permitting process forward. So that was the reason for the trading halt. And while we're very pleased to receive this approval, today's call will remain focused primarily on our second quarter results and operating performance, but we will, of course, provide additional comments on the Menankoto permit during the call and take questions following our formal remarks. And with that, I'd now like to pass the call over to Kelvin, our Chairman, for some opening remarks.

Thanks, Mike, and good morning. While you've now heard the great news of Mali. And before Mike and the team reviewed that in the quarter in detail, I'd like to take a few minutes to provide a broader perspective on the principles that continue to guide our business. Before doing so, I'd like to acknowledge 3 important leadership milestones. First, on behalf of the Board, I want to thank Clive Johnson for his extraordinary contribution to B2Gold, from founding the company to building it into international gold producer is today, Clive's leadership and determination have been instrumental. And while he stepped down as Chief Executive Officer, we're very pleased that he will continue to support the company as Chair Emeritus, and we look forward to benefiting from his experience and insight. I also want to speak to Mike Cinnamond's appointment as Chief Executive Officer. The Board and I have tremendous confidence in my and the leadership team. This transition represents continuity more than a change in direction. Mike has been deeply involved in the execution of our strategy and the development of our business over many years. We believe the company is in very capable hands, and we're excited about the leadership he will provide in the next chapter 2 Gold's evolution. And this is also like we are pleased that Michael McDonald has accepted the role as Chief Financial Officer. Michael has consistently stood out for his performance and acumen and have already begun the transition in the finance team with a view to succeeding like. From the Board's perspective, we couldn't be more comfortable with Michael in the role and his ability to continue to collaborate closely with Mike, who understands the B2Gold CFO function better than anyone from his many years in a role. Our approach remains straightforward. We focused on delivering on 1 bank. Our strategy has never been about chasing short-term opportunities or reacting to market cycles. Remind part, I look very forward to working even more closely with Mike and the management team with a focus on disciplined execution and delivering value. In that respect, it's important to acknowledge that our recent share price performance has not met the standards we set for ourselves or the expectations of our shareholders. While we believe very strongly in the quality of our assets and deep, this is a great team. We understand that shareholders are focused on results and they have every right to. The board and management are fully focused on the work required to deliver the forms expected on us. Our operational culture remains the foundation of how we up there. Over the years, we've established credibility with our shareholders, most countries, employees and local communities by setting clear objectives and working diligently to achieve them. We are operators first with a disciplined focus on safety, execution, continuous improvement and creating value to the assets we own and operate. We also believe in reinvesting in our business to create long-term value. whether it's sustaining our existing operations, investing in exploration or advancing high-quality development projects. At the same time, we recognize that strong cash generation must translate into meaningful returns. -- maintaining a balanced approach between investing in future growth and returning capital to shareholders. We recognize that our success is closely tied to the countries and communities where we offer, being a preferred partner means more than operating safely and responsibly. I mean is working alongside our host governments and communities to create lasting benefits. I think today's announcement formally underscores this point. Looking across our portfolio, we continue to see the benefits of this consistent approach. Our focus is on executing lively, delivering on our commitments and generating the confidence that has always been earned through hard work and performance. And with that, I'll turn the call over to Mike and the management team to discuss the second quarter results. Thank you.

Thank you, Kelvin. In the second quarter, it was an important one for B2Gold. We delivered consolidated gold production of approximately 204,000 ounces, in line with expectations and in particular, with strong operating performances from Fekola, [indiscernible] mines. And while Goose production was impacted by the pressure fire in April, as previously announced, -- the team there responded exceptionally well, and repairs continue to progress now according to plan. Our other key area of execution focus for 2026 is bringing Fekola Regional online. And we had recent meetings in Bamako with Mali state officials, and they had confirmed that there were no remaining obstacles to the approval of the Menankoto exploitation permit as all the required steps in the approval process has been completed and validated by their different ministries. And now as you've heard, the permit has been granted by the Council of Ministers in Mali. So the issuance of this permit Menankoto expectation permit by the state. The moly allows us to move forward on one of B2Gold's most important near-term growth opportunities. Mining pre-stripping activities can now commence Fekola Regional is expected to ramp up operations through the end of 2027 and to produce somewhere in excess of 150,000 ounces a year from 2028 onwards through the mid-2030s. Then beyond Mali, we continue to strengthen our portfolio and balance sheet during the quarter. We completed the sale of our 70% interest in Fingold TgnicoEagle for $325 million. We repurchased 19 million shares under our renewed NCIB for $92 million and completed the final deliveries into our gold prepaid contracts, which Mike will talk about a little more in a minute. So while the second quarter reflected some temporary pressures free cash flow from taxes, prepaid deliveries and novated production costs, those headwinds are definitely expected to moderate. And with the goal of prepaid deliveries now behind us and all remaining gold sales now exposed to spot prices, we expect a meaningful improvement in free cash flow generation as we go forward. So with that, I'll turn the call over to Michael MacDonald for a discussion on our financial results for the second quarter.

Thank you, Mike. Second quarter financial results on a consolidated basis finished in line with our expectations for the quarter. Our performance at Fekola, Masbate and Otjikoto offset a tougher quarter for the goose mine as it ramped up milling operations following the previously reported fire in certain areas of the crushing circuit in April 2026. The net income attributable to shareholders was $417 million in the second quarter or $0.31 per share, benefiting from the gain on the sale of our Finland properties combined with unrealized gains on derivatives. After backing those gains and other nonrecurring adjustments out, our adjusted net income attributable to shareholders was $41 million or $0.03 per share. It's important to note that our adjusted net income figures included approximately $71 million of realized losses related to our gold collar contracts during the quarter. Without that impact, adjusted net income per share would have been just over $0.08 per share. The gold collar contracts concluded in December of this year. and B2Gold will go into 2027 completely unencumbered from gold prepayment and gold collar contracts. Operating cash flow before working capital adjustments was $94 million during the second quarter. Assuming current gold prices remain, operating cash flow is anticipated to rise significantly into the second half of 2026 when compared to the second quarter, primarily due to the completion of the gold prepaid contracts that finished in June 2026. Free cash flow was negative $258 million during the quarter, in line with expectations when we released our guidance at the start of 2026. Free cash flow was impacted primarily due to elevated cash tax payments, including the priority dividend payment to the state of Mali related to their 20% ownership of Fekola plus the impact of the gold prepaid contracts which affected just over 30% of ounces sold during the quarter. On cash tax payments, the amount we paid in the second quarter of 2026 was just under 45% of what we anticipate paying for cash tax in all of 2026. So you will see the cash tax number moderate in the third and fourth quarters when compared to the second quarter. The negative free cash flow number also does not include the $325 million of cash proceeds received from the sale of our Finnish properties during the quarter. Despite that, our balance sheet remains very strong. At quarter end, we held $287 million in cash and cash equivalents and had working capital of $405 million. We are in a very strong financial position that will only get stronger over the coming quarters at these gold prices. Finally, we also continued to return capital to shareholders through our normal course issuer bid and common share dividends. Year-to-date in 2026, we have now repurchased approximately 35 million shares for a total of $172 million. On top of that, in the first half of the year, we paid out $52 million in dividends. Combined, that brings total shareholder returns in the first 2 quarters of 2026 to $224 million, which is over 4% of our current market cap. Those numbers are in spite of the impact of the gold prepayment contracts and the gold color contracts. As we finish out 2026 and enter 2027 completely unencumbered by those 2 financial instruments, we anticipate free cash flow to rise dramatically at current gold prices and should allow for increased shareholder returns as well. With that, I'll turn the call over to Bill for an operational update.

Thank you, Michael. From an operating perspective, the quarter was largely in line with expectations. Consolidated production totaled approximately 204,000 ounces. Fekola, Masbate and Otjikoto all exceeded expectations and demonstrated the consistency and reliability that investors come to expect from those assets. At Fekola, operations continue to perform well, and our focus remain on the efficient operations of the Fekola and Cardinal pits, while preparing for the commencement of mining at the Fekola regional. . With the issuance of the Menankoto exploitation permit, we now have a clear path forward for the development of the cocoa Regional. And just to think about that. Remember, we had previously received approval and constructed and prepared all the site infrastructure and all the roads started the pre-stripping and have hired all the necessary staff to begin mining. At Goose, the crusher fire in April affected production during the quarter. Safety remains our highest priority, and I'm pleased with the team to post the event. Repair work and remediation activities are progressing as planned, with remediation and Phase 1 of the crusher upgrades expected to be completed by the end of third quarter. In the interim, an additional mobile crusher that is sourced and was delivered to the site in July, -- we expect it to be operational in early August. The crushing capacity of the new mobile crusher in combination with existing crushers already on site is anticipated to be in excess of 3,000 tonnes per day. [indiscernible] and Otjikoto bulk delivered another strong quarter of operations, exceeding expectations, with solid operating performance at both sites expecting to continue throughout the remainder of the year. The company has increased the production guidance for these operations. As a result of year-to-date operating performance and our updated outlook for remainder of the year, we have narrowed our guidance range across the portfolio. We now expect consolidated gold production of between 820,000 and 920,000 ounces in 2026. The largest change relates to Fekola Regional based on the delays and issuance of the Menankoto exploitation permit as well as narrowing of the production range at the Goose mine as a result of the fire, which occurred in certain areas of the crushing circuit in April this year. These changes are partially offset by the previously mentioned guidance increase in both Masbate and Otjikoto. Importantly, on our consolidated cash operating cost guidance remains unchanged between 1,155 and $1,280 per ounce produced. We have also lowered our all-in sustaining cost guidance range to between $2,370 and $2,550 per ounce sold and currently expect full year results to be at or below the low end of that range. Overall, we remain confident in our operating outlook and are focused on delivering a strong second half of the year. With that, I'll now turn the call back over to Mike Cinnamond.

Thank you, Bill. Thanks, everyone, for the overview of the quarter. We're obviously pleased with the results and pleased with how we look as we look forward for the balance of this year. And obviously, receipt of the Menankoto permit this morning is a great step forward for us. We said there were 2 key things we were going to execute on this year. One was to move Fekola Regional [indiscernible]. So now we're well positioned to do that. start moving ahead there. And then the second piece that we said was key was for us to get our remediation, fire damage repair work done and remediation worked done on Goose on the crushing plant so that we can bring ourselves up to steady state down about 300,000 ounces a year by mid 27. So I think you've seen in the materials we've released that we've got a good plan for that now and that plan is well underway. . So with that, those comments, I would open it for questions.

[Operator Instructions] The first question comes from Wayne Lam with TD Securities.

Congratulations on a momentous milestone. Maybe at Fekola, would you be able to just provide a bit more detail on kind of what changed with the most recent discussions in country? And has anything kind of changed the relationship in country that prompted the issuance of the permits now?

I can comment on that. I mean we've had several visits in the last few months. to see the ministries. And I think the message was very consistent. Over the piece, they put the new mining code in place, and they the agreements with each of the operating mining companies were negotiated. And then they would put some new layers of governance over how they oversee the whole mining activity in the country, and that included most recently creating the new mining commission that we talked about earlier this year. And so those lots of government, they've also created a state mining companies, Sofferman that oversees the intra stakeholds. So I think the consistent message to us over the last couple of visits, certainly this year was that the state has been working hard just to harmonize how each of these ministries interact who is responsible for which pieces of the 23 mining code as it relates to the operating companies and then obviously, the mining commission that oversees on an overall basis. So I think the message we got most recently when we traveled there was they now harmonized all that, they're comfortable with that we've got the right structures set up and they're ready to move forward. And so we were, in some ways, beginning picked the first major new permit to be granted under the 2023 mining code. And so it took some patients on both sides or sales in the state to get there. But as you can see, we're now there. So that's how I characterize it.

Okay. That's great. And then maybe just what's the time line from here in terms of stripping and mobilizing and getting into or at regional -- the guidance at the start of the year was about 8-ounce contribution given the permits at end of Q1 and stripping through Q2. So should we just take that guidance and shift that forward? Just wondering how to think about the coming months and the ramp up to the 150,000 ounce run rate.

Yes. I think we'll give some guidance for '27 when we do the budget, how we see it ramping up. But I think the way to look at this year is we'll get in there now in fairly short order, and we can start pre-stripping, and that will take us a few months. So really will take us to basically the end of this year. I think to get up and running. I mean there's potential for some production near the end of the year, but I think to look at in a balance sheet, just I think we'll assume that we this year and then we'll ramp up next year through '27. With the goal of being ready by the end of '27 to be produced another area of 150,000 ounces a year from regional. .

Okay. Great. And then maybe just last 1 at Back River. Can you just walk us through some of the challenges with the mold crushers and what the break-up in tonnage looks like through the year, particularly through Q3 -- should we still expect relatively low tonnage until you're able to bring the newest mobile crusher online this month? And then I guess on the mining front, are we expecting a step change in grades as well through the balance of the year?

I'll pass this 1 over to Bill. .

Okay. A few questions there. So on the crusher ramp up, what we're really talking about through Q3 and Q4 is in excess of 3,000 tonnes per day. And then on the grade, I don't think you're going to continue to see the increased ramp increase in grade. I think you'll see it drop back to kind of what we had forecasted before, primarily because we're in the process right now of creating stockpiles basically going into 2027. .

The next question comes from Fahad Tariq with Jefferies. .

Just on the Fekola revised guidance for 2026, did that factor in getting the permit, I guess, today? I mean -- or is there upside to the guidance, I guess that's what I'm asking. .

Do you want to take that one, Michael. .

Yes. No, I think the best way to think about it is that we're comfortable with there is some minor production at the end of the year or if that officially starts in 2027. We're comfortable with the range that we've put out of 390 to 420. So I would say, just think about it as the complex will fall within that range and whether or not we get a small amount or the end of the year, it won't affect the numbers materially either way. .

Okay. Great. And then just switching gears to Goose. The new mobile crushers said that would be operational, I guess, now in early August. Can you just -- just tell us if that's been -- it is operational and -- just remind us like what is the difference between this mobile crusher and the previous 1 in terms of any different technical specifications.

Over to you, Bill. .

Yes. So the first part is we are commissioning even as we speak, there is a site on team commissioning. So we think a very short order will be up to our nameplate run rate. The difference is really -- this is just a bigger Metso mobile crusher but very similar to what we had on site before. So basically, we've kind of twinned what we've got going on there. We just have more horsepower.

Okay. Got it. And then going into '27, is there an expectation that these mobile crushers would still be used? Or would they just be redundant? .

Good operational question. So the answer is certainly in the first half of the year. The mobile pressures are going to be necessary as we ramp up Phase 2 of the repairs for the goose site and then after that, there is some discussion on whether or not you would use it as backup, but would we, in fact, then supercharge some of our regional civil work that we have ongoing. .

The next question comes from Ovais Habib with Scotiabank.

Thanks, operator. Michael and B2Gold team. Yes, absolutely. -- congratulating the Pakola permit. This is a huge achievement. So congrats to the entire team. A lot of my questions have been answered. -- specifically to the Fekola, kind of Fekola ramp-up as well as the goose structure. But just on the Fekola side and the regional side, Obviously, there's some decent mineralization that was already delineated on the 6 areas, is there other more or more potential in terms of looking at additional satellite pits around the area? Is there a plan now that you have the permit at some sort of an exploration program in that area as well? Any sort of color on that, that would be great. .

So I can -- a couple of initial comments. We do have some exploration work planned on regional for this year. You'll see us -- we're just commenced at now actually just because rainy season is just finished. So we will be doing some additional -- I mean I think there's definitely potential for more work to be done there, right? But we have developed plans based on what we know is there already. So in terms of any additional pits, I think we'll be able to give some more guidance later this year as to how we see regional rolling out over the next year. .

Okay. And just in terms of looking at Goose again, just in terms of more towards the underground bill? And how are things progressing on the underground side in terms of mining rates in terms of just equipment that's already in place. Are you comfortable with how things are progressing? What more do we need to see in terms of ramping that up?

No. Ovais, that's a great question. We are comfortable for sure in what we're seeing. We had projected that we had to get up to 12 meters per day of development. We're currently at just over 11. So we don't see any real issues that things are coming along very well. .

The next question comes from Lawson Winder with Bank of America. .

Mike, Michael and Bill. Thank you for today's update and absolute congratulations on getting the permits sorted out in Mali. Just looking into 2027 and thinking about gold production that year with the moving parts around grades and volumes from Fekola and Cardinal open pits from the Fekola underground and now regional ramping up. I mean directionally versus 2026, it would seem we would be going higher from the current range of 390 to 420 million. But could you maybe talk around some of the moving parts? And just give us a sense of directionally where we should be thinking about Fekola production for 2027?

Michael, do you want to give a sort of overview .

Yes. Yes, I can take that one. So I think for Fekola complex, as you can imagine, with the point in time here now where we've got the permit for the past few years, when you look at our guidance for the Fekola complex in '24 and '25, we performed very well in spite of at the start of each year, thinking that there would be some contribution from regional. Now we've obviously got the permit and we'll be getting activities there. But Fekola still needs to go through the Phase 8 stripping campaign, which it currently is in right now, and that really unlocks what's a very robust and productive few years for the Fekola Main pit, and then you'll have regional ramped up and underground going as well. But I think it's probably premature to speculate on '27 yet. The team will work through in the budget process, exactly what contribution we think we can get from each of the components. But I wouldn't think that '27 will be higher than '26 just because we do need to get through Phase 8 stripping at Fekola. I think the other moving parts as you think about '27 though, is Goose will have a significant ramp-up into '27. So on a consolidated basis, we absolutely think that there's every chance as they go through the budget process that will be higher in '27 than '26 as a company. But Fekola, we still have some work to do, and we'll come out with more clarity on that with our guidance next year.

Yes. And just thinking about the permits, over the next, call it, 3 years, are there any other additional permits needed in order to operate any of the -- or to mine any of the deposits at Fekola. And then in that same thought, maybe you could just address whether you would think going forward now, there's an understanding in the permitting process should be much more streamlined now at this point.

Maybe I'll pass this one over to Randall, I think.

Yes. I think the 1 permit that you would recognize that we're going to need to obtain would be the [indiscernible] permit, and that's a process that will start on the expectations probably later next year for 28. But yes, agreed that the establishment of the governance in Mali now. We have full confidence that the process will be much smoother going forward.

Okay. And then if I could just ask another on the sustaining CapEx. So if we could just talk about the sustaining CapEx guidance in terms of millions. The original guidance from February was about $540 million between deferred stripping, underground development and maintenance. -- put there was about $27 million of sustaining exploration. So given that our all-in sustaining cost guidance is expected now to be lower than the original guide. -- what level of absolute sustaining CapEx would you advise we'd be modeling versus that original $540 million? And was there any change to the $27 million of sustaining expiration?

Yes. I can take that one. So you've seen with some of our disclosure that basically all the sites outside of goose are under where we expected they would be from a sustaining capital perspective, they need to get through the year and sometimes the phenomenon that you see is that sites end up but catching up, which we have disclosed, we anticipate for their sustaining capital balance. But it's been a good trend in the first 6 months of the year. So there is a chance we could come in a bit lower on Fekola, Masbate and Ojikoto for goose, as you can appreciate with the impacts of the fire sustaining capital will probably be higher than what we would have anticipated at the start of the year. So it should overall net out to close to what we thought within your numbers at the start of the year.

The next question comes from Josh Wolfson with RBC.

I recognize you had maybe an hour to go through a lot of the questions that we're asking on the numbers in 2027. And I'll ask it in maybe some different way. the grades for Fekola based on the updated guidance, sort of look at maybe the low ones. When we think about 2027 in that Phase 8 stripping campaign that was discussed, should we expect the growth next year versus the back half of this year to be flat? Or will they decline during that stripping campaign?