B2Gold Corp. (AMEX:BTG) Q1 2023 Earnings Call Transcript May 10, 2023

B2Gold Corp. beats earnings expectations. Reported EPS is $0.1, expectations were $0.07.

Operator: Good day and thank you for standing by. Welcome to the B2Gold First Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Clive Johnson, President, CEO and director. Please go ahead.

Clive Johnson: Good morning and good afternoon, wherever we are everyone. And thanks for joining us. We are here today of course to talk about the B2Gold Q1 2023 operational and financial results, we had another strong quarter of operating performance which led to some very positive financial results. Mike Cinnamond, or CFO is going to walk you through that, and then Bill Lytle, our COO is going to update us on the Back River project the status of apps, and talk a bit about the Fekola Complex expansion projects looking on, and then Victor King, Senior VP of Exploration will talk to us a little bit about exploration plans for backward route just approves a large exploration budget. And we will also update the progress in terms of exploration in the Fekola Complex. And then we will open up for questions after that. So with that, I will hand it over to Mike Cinnamond.

Michael Cinnamond: Thanks Clive. So I will walk you through the operating results first and the cash flows. On the revenue side, we sold 4,000 ounces more than we budgeted so a total of 249,000 ounces from our operating mines. And good news is we had an average price of just over $1,900 for the Q. When we budgeted we had 1,700, so we are very happy to see that 200 bucks plus announced and obviously gold prices continue to increase as you know today. On a production site from all the operations including our share of Calibre 267,000 ounces, and from our three operating mines 251,000 ounces, both of which were 5,000 ounces over ahead of budget. And most of the 5,000 ounces just spread pretty evenly across the three operations.

So Fekola had 166,000 ounces, production was higher we expected it to be higher because we had that favorable higher grade material coming from Phase 6 of what Fekola did and the grade was 2.47 grams per tonne, which is right on budget. Then Masbate, Masbate was pretty much as planned at the grade this year is lower than it was in the comparable quarter last year as we know is the peak grade was 0.95 grams per tonne. And then Otjikoto 38,000 ounces slightly ahead of budget. Again, we expect the, we were in some of the higher grade portions. We will check underground mine, but reminder to Fekola as we look to the bounce of the year, it is more weighted to the second half of the year, as we get into more high grade material and Phase 4 Otjikoto pit plus continued high grade from Wolfshag.

But overall good results production pretty much on target like they had a budget. Cash costs, we actually did considerably better than budget. So from all on a consolidated basis from all operations total cash costs are $600 an ounce, which is $85 ahead of budget. And if we take our three operating mines $576 an ounce which was $88 lower than budget. And so looking at the individual operations Fekola. There were two main reasons why it was significantly it was $60 lower than budget. One was that we mine less materials in the period due to some of the tighter working conditions in Phase 6, including only having one ramp available for haulage which has now been resolved in April of this year. And then we also had lower fuel costs. The mining tonnage shortfall is expected to be caught up over the balance of 2023.

Masbate again we were $176 an ounce below budgets that was a function of slightly higher than budgeted gold production and quite significantly lower than budgeted diesel and heavy fuel oil costs. We haven’t revisited any of the lower fuel costs for the balance of the year, we have assumed that it will stay where we budgeted for that. But certainly, current indicators are definitely the prices have dropped a bit. And while the forward curve is a forward curve in backwardation anymore for fuel, it is pretty flat. So we may see some benefit, as we roll through the balance of the year and the cost side. The all-in sustaining costs, total all in including our share Caliber $1,060, which is $146 lower than budget and same story from our three standalone operating mines and it is really a function of the lower cash operating costs, as I mentioned.

And then timing of CapEx, we have seen CapEx for Q1 was below budgets, sustaining CapEx is both 10 million below what was budgeted just for the timing of things like the completion of the TSF rates at – and then some of the other fleet equipment rebuilds. And that is just timing, we expect to see all of that reverse as we go through the balance of the year. Few comments, maybe in the operations of buildings, I was going to talk to polar complex, generally, but we are continuing with the polar regional developments through the period. And as we have announced in our news release, we are now because we have done so much drilling on that for polar regional area, since we did the original Anaconda area. We sourced that we wanted to take those results and put them into a new resource for Anaconda.

What so that results can take a bit longer to produce was a result of that for Cola, regional Phase 2 mill study is now expected in the fourth quarter of 2023. On the Otjikoto side, we continue to develop, we will check underground, we continue to need to explore there. Otjikoto pet itself is scheduled to ramp down in 2024, and wind up in 2025, based on our current plans that we have disclosed that. On the Gramalote Project, that as announced, we have we are undertaking a joint sales process with our partner Hga. That process is moving along, it seems to be good. And trust on Phase 1, we are still in Phase 1 of the process, we expect to wrap that part of what then probably next month or two-months, with a goal that will wrap up this whole process before year end.

And on Sabine I think Bill is going to give an update, but we have some disclosures in there about the acquisition of the VA, and we haven’t put in the purchase price allocation yet. We will do that in Q2, when we publish the results that we are going to talk about, currently what we are doing there. But one thing I will mention is that subsequent to the completion of the transaction, we did revisit a fair amount of the financing obligations that the financing plan and Sabinas put in place. And so we bought out the off take agreement, well over 100% of it. So that is gone, we have also cancelled that that facility that they had, and the Gulf rebates that they set up. And in addition, as we were permitted to under the terms of the agreement, we bought out 1/3 of the streaming arrangement that was there with Wheaton precious metal.

So that is total cost of 111 million cash, just that which you will see come through in Q2, but it does. Let us really focus on financing with the facilities and the financing capacity that we have available through our own cash flows on our debt facilities. And also allows us to benefit more from future upside which as we have mentioned many times when we discuss back wherever we see a lot of upside. On the earning side when you translate all those operating results such trivial earnings to shareholders just unraised six million are $0.08 per share. Adjusted earnings attributable to shareholders was $106 million or $0.10 per share. And a couple of comments on the cash flow. So cash flow, net cash flow from operating activity of $203 million, or $0.19 per share or as we have also disclosed in the news release, cash flow before working capital $223 million or $0.21 per share.

So very solid cash flow quarter, of course, the gold price helped as well as some of those lower costs that I mentioned. On the financing side, we continue to pay dividend at the same rate $0.04 U.S. per share. It wasn’t annualized $170 plus million per year pre Sabina, but now with the additional Sabina shares that have been issued for Sabina an acquisition, you think we will see that jump up to somewhere around two times plus, $210 million. On the CapEx side, like $131 million spent in the Q. In total, we were about $42 million under, $10 million of that was lower sustaining capital as I mentioned already and then $32 million was just lower non-sustaining capital, which is all related to the timing of the underground development for Fekola Regional.

Again, these are all timing, I think we think they are all going to reverse in the queue, also what they are in full-year. Another thing I would highlight there is that, as we disclosed, we are excited to get going on the exploration site, at Black River. So we have just approved an actual $20 million that wasn’t in the original exploration budget. That budget in total is now $84 million for the year with $20 million really focused on additional drilling that we plan to do at Black River. And I think Clive can give you an update on that in a second. Overall, we finished the period $673 million in the bank and not been drawn on the revolver and really minimal debt on the balance sheet other than a few leases. And I think – anything, if I may also touch on there.

I think that is the highlights.

William Lytle: Yes. So thanks. Mike covered the operational stuff quite in-depth, so I’m not going to talk about any of that. But just quickly talking on the Anaconda Phase I study. So I think everyone is aware originally we talked about potentially putting out a PA in Q2 that is been moved to Q4. And it is based on some of the exploration success we have been seeing. But I would like to expand upon that a little bit. I don’t think it is just the exploration success. As you know, the Anaconda Phase 1 or Phase 2 Study is really about the oxides, but they are also having success on the sulfides. So what we are talking about doing now is, more of an integrated kind of regional complex, where we look at everything and we give you an update not only for what will be happening at the oxide plant, but also what will be happening as far as sulfides and where they would go.

So all that has to come into play and we are talking about putting that out in Q4 this year. Related to what is currently going on there, the Phase 1, and our Phase I is a trucking study or trucking program, which basically takes us between 80,000 and 100,000 ounces a year, down to Fekola while we are finishing the study in building Phase 2, if that is what we so chose to do. That project remains on-track. So basically all of the roads are in now. We are just finishing up the final culverts. The infrastructure is being built. We have received our ESIA for the Phase 1 study. We are currently waiting for them to finalize their feasibility review and issue the exploitation license. And so what I can say is that, really I’m going to say right at the end of Q3 beginning of Q4, you are going to start seeing ounces come out of there.

And what I will tell you is that always remember what we have said is just because that is what the study says, that is not necessarily what we are going to do, we are going to take me out to the highest grade ounce with the highest NPV ounces, and process those first. So what I can say is that right now there is about 18,000 ounces we are talking about in 2023, which would come out of the Anaconda Phase 1. Anything else on it?

William Lytle: Okay. So, Sabina, everyone is aware that Sabina closed, kind of in the third week of April. Since then, we have been extremely busy. Some of the questions that we got early on, when people were asking about the deal as we think that we could keep, that we could bring the B2Gold construction team back together to build this one. And I will say, with pleasure that almost to a person, everybody jumped at the opportunity to come back. So we do have all of the necessary people in place to include Karen Lofgren and Tom Carter, who’ve been with us really, for the last 20 years of building all of our projects in Far East, Russia, and Africa and Nicaragua. They are busy assembling the rest of the team. And I will say that we have had very few people turn us down, they want to come back.

But on top of that, I think it is really important to highlight that the people that were at Sabina, the people that were running the site and kind of managing these contractors on site have also agreed to come across and work with our team together. So now what we have got is we have got a very good historical knowledge of the site. Certainly, the people that were in charge of logistics have been critical in both last year, and this year, they are with us. And we have got our build team to add on to that. So I feel very strongly that we have the right team that can certainly execute this project. And we are still calling for it to be on time. So we are still talking about a Q1 2025 commissioning. As far as the logistics, I think everyone’s where this is the logistics project even more than the mining project.

The winter road this year was a success, that while they were saying that they needed, that they had 1,200 containers, they had 600, which were on the critical path. They brought in more than 800 containers this year. So we have all of the necessary equipment and supplies to do all the key things that need to be done in order to keep us on the schedule. So really the intent of this year is to get the camp up, which they are already doing. I can say with confidence. This morning, I talked to him, the kitchen is already up, and they are getting ready to rent power into the kitchen. So then the wings would come up next. And so we are seeing kind of a July one day for the opening up of the kitchen or of the first Phase of the camp. And then over the next couple of weeks after that they will finish it up and down into August.

We have to pour concrete this year that is concrete for the warehouse, the mill building and potentially the powerhouse. All that concrete is on site. All the steel for those facilities are on site. And we are just currently scheduling in which order we want to do them. As far as orders for 2023, 2024 sea lift last winter road. That all remains on schedule, we have done a very good job of integrating the former Sabina team with the B2Gold construction team. They were in the office last week, finalizing orders. Everything has to be on the sea lift and heading up towards the marine lay down area in kind of August, September. So by July, everything has to be at the point where they consolidate. All of that remains on schedule at this point. And then we are actually shooting for an earlier opening date of the wind road next year.

We have as many as 2,000 containers we want to drag up the road next year. So we are talking about an early February date and we have worked with the Sabina team, the former Sabina team to make that happen. And what we have done is we brought in more trucks, we brought in more equipment to operate to open up the road from two directions, actually three directions from the middle and from both ends. And we are hoping that that it will get open, as I said earlier, like the first week of February. What else can I say on that as far as the as far as additional logistics, we have extended the airstrip. So we are able to bring stuff on directly on the site with something as big as the 727. And overall, that project remains on schedule, I will tell you that before the end of June, it is our intent to update the budget based on what we have put forth and come up with what our final class is going to be.

So we continue, as far as things that are happening off site, we continue to maintain very good real relationships with the Inuit community that can tick me at Association and none of it. We just attended a conference up there. I don’t know if I wants to talk about a little bit more. But in general, because we have maintained all of the Sabina key personnel to include Matthew Picard and Andrew Moore. Those people have really continued to bridge that relationship and we maintain very strong relationships with Inuit community.

Michael Cinnamond: Sure, yes, I will just touch on we, we went to the symposium in Nunavut, the mining symposium, the time was really good, because we just close the Sabina deal. So we were able to introduce everyone there to be to gold and talk about the fact that, some of our experiences of the Russia days, as Bill mentioned in construction, for some of us, go back to that in terms of knowledge about knowledge about a logistical challenge in the north. So we that was very well received. And I also talked to them a bit of a personal homecoming for me having 20 some years-ago, but I like to claim season an expediter in the Yukon. So I’m sort of back to the north as well. But I think the most important message that we brought to them was continuity.

As Bill mentioned, for some of the great work that we have been doing with philatelists Categoria group, continue on with some very good CSR projects that will be able to increase the budget on that speech and also financial strength. But the main message was that we were, as Bill said, maintaining the schedule, that is Sabina afford. That was a great relief to many people, because unfortunately, technically eagle to think over T Max, run the mind for a while, obey and then decided to shut it down, and come back to join. So I think they are very concerned whether another big company might come in bigger company might come in and do the same thing. When we did the acquisition, when we started looking at Sabina, I made it very clear to bill that it was up to him and his team to decide the schedule that we could live with.

And I did say to bill, that if we thought we needed more time that is not our show. Some understand that to get it right. But the good news is with the quality of work done by Sabina very good work and Bruce McLeod and his entire team, we were able to, after lots of scrutiny and a tremendous amount of due diligence, conclude that we could in fact, maintain the schedule as Bill has said, so, Greta, supposing that we went to and, frankly, it is nice to nice to be investing in Canada. We are not a foreign investor on this one. And I think as long as we can do what we have done for a long time, deliver on the promises we made in the north, I think we will have a great success in relationships with the local communities, so it was very positive.

Typically also talking potentially, with a nickel Eagle. Are there some things we can combine as two companies do the bid to do some sub projects together. Maybe be some CSR2 projects, et cetera. So I think it is a real positive view of our, from our perspective of going north and also of the community and the industry. We felt very welcome. The key is to deliver as always on the promises that we have made. I think with that, I will get Vic King to talk a bit about this new budget and maybe you can talk a little bit about the team that is not only inherited some great people and whether it be the indigenous relationships, but also in terms of construction, et cetera. But obviously, you can tell me what you think of us joining forces with the existing team approach to being on the exploration side.

Victor King: Yes, absolutely. The quality of the work that is been done by the Sabina team is top class. And I’m very happy to say that, we have virtually retained almost the entire team. So we will be hitting the ground running for sure and supplemented by people from our existing B2Gold team as well. The budget has increased by – our global budget, as Mike mentioned, has increased by US$20 million. That is to put it into context, I think Sabina had in the order of around CAD$5 million, I think on average, as an exploration budget. So this US$20 million, CAD$27 million is a five times increase to be spent in six-months. It is a ten times increase. So we intend to hit the ground really hard. So bringing in additional rigs we plan to complete at least 25,000 meters of diamond drilling.

The allocation of that drilling will be on the Goose project, which comprises a number of deposits, but a lot of that will be on the – deposit which is the highest grade and also the biggest contributor to the resource. Some of that drilling will be in full to improve the density of drilling to optimize the underground planning, underground mining planning. But also to extend what is clearly open-ended mineralization on each of the four deposits on the Goose project itself. That is going to be about $15 million of the budget. There is another $5 million that we intend to spend on what are clearly top class projects, gold opportunities in this standardized formation, hosted pathologies. George, which is about 50 kilometers to the Northwest of Goose is where there has been – there is a resource there already.

And over 40 targets on that license alone on those claim blocks. Sabina had been drilling this year, completed drilling, I think 2 weeks ago, the current program. We will get back in there and drill it, George. And just to highlight, I’ve just mentioned two projects there. Within this 80 kilometer belt, this Gold district, we also have another three project areas Bolder, Dell and Boot that have had economic intersections of mineralization, which we will certainly be following up on as well overtime. That covers a Back River. Just to get back to Mali, Mali have the lion’s share of the budget this year, over $34.5 million. And that really is the record of Mali for sure. We have more rigs turning there more people busy in exploration than we have ever had.

We have already completed over 100,000 meters of drilling in Mali. A lot of that, as Bill mentioned earlier, has been focused on infill drilling in the saprolite to moving more material into the indicated category to support the studies that are going into the face to mold options that we are looking at in the area. That is infill drilling is complete and we are back, we are currently updating the resource, I hope to complete that certainly before the end of this quarter, and it will feed into the timeline both Bill and Mike mentioned earlier. We haven’t only been doing info as you would have seen in the press release, earlier press release I think earlier this month. We have had some significant success in sulfide. On the Anaconda properties and Mamba we hit actually our highest, highest biggest intersection we have ever had across in West Mari, 8.6 grams over 46 meters.

The supports another hit in the same zone, Mamba main zone of over eight grams of nearly 16 meters. So the south side potentially areas certainly not over yet for sure. And there are plenty of more intersections that would tend to support the potential for underground and certainly extension of the sulfide. A lot of depends into the sulfide sets that at the Anaconda project. Additionally, you recall that we acquired the Bakolobi license, which is essentially the piece of the jigsaw sitting between the Anaconda properties and Medinandi grow to further mine is located. We have extended the drilling on to the Bakolobi license, particularly one of the specs Cobra has shown to be exempt significant force over 2.5 kilometers of additional strike on the Bakolobi side of the fence that is within the other side, so that will certainly contribute as well.

In the last press release we also named or indicated a new zone, which is further to the south, but slow on Bakolobi, which we call Taipan and we have had some pretty good intersections there as well. For instance 28 meters at 1.8, 23 at over 4 grams and that is really just getting started. So I think a lot more work plan for Mali keeping those rigs and those people busy. I guess those are the highlights.

William Lytle: I forgot something and I jumped back in. One of the things that we have been asked to do, as we have taken on this project, as you know B2 does things a little bit different than then the schedule that they are the way they were going to do it. So we have been asked to generate kind of a new capital schedule and a new offer operating costs profile, it is our intent to have those done in Q2. So internally by the end of this month, but I think by the end of Q2 we ready to talk about. That also includes, as Sabina was talking about, they were talking about bringing some ounces forward. From the underground, we are currently revisiting the underground, both the methodology and the schedule, and we will include that in our next update on how far we think we can push this thing as it comes up out of the ground.

Victor King: One of the studies that will be Sabina started will pick up is the study of potential for wind power. Obviously, we are a leader in the industry and solar power, what we have done in Namibia and Mali, but we are having a hard luck, there is no assumptions for anything. Currently, we are waiting for a study to be done. But there especially for it in the north of Canada, that can be an interesting opportunity in terms of reducing emissions, but also can have a positive effect on non cost up there, as well. In terms of strategy going forward, we are very happy with the growth profile we have right now, in terms of looking at the two stages of expansion, difficult to complex. And also, of course, the exciting project.

And a lot of that is because of our one of the reasons we did the acquisition, confident about our ability to accomplish these things subject to a study on this another second, we will call this of course, externally strong financial position. And if you look back at our history, the strategy really abused put it quite simply as that our strong operational and therefore financial performance for years, has fueled growth, by our ability to do creative acquisitions, to build mines ourselves, and also do a lot of exploration work. So I think that is one of the keys to our success. But we are also very focused group. So we have heard us talk about the sequencing of the expansion of the cohort if we go forward to the second bill, how that works within doing the first expansion, which is tricky, which is happening now.

And for cohort, then Goose construction, and then potentially building the second mill. So we are not going to we are not going to build two mines at mills. At the same time, we have always said that. But also we are not going to be looking now as current at M&A, development, project M&A for that same reason we are going to stay very focused on the growth profile we have now in the company, we will continue to look at exploration opportunities, something we have been very good at. And that will include not only entry into, into deals with landowners are, but also smaller companies, we have started to invest in some junior companies with exciting projects like snow line up in the Yukon and Matador in Eastern Canada. So that is a pretty exciting strategy.

We think also offering to these groups did take special teams offering if there is any assistance we can provide in terms of looking at their plan expiration plans, etc. So why don’t you, we should companies, unfortunately, they are struggling these days even with going higher. So for a lot of these companies, I think it is quite attractive to have a friendly shareholder, not trying to beg anybody but a friendly shareholder like beach ago. So we are going to be exploring those kinds of alternatives as well as we before. But the thing we are going to continue to do as we have done for many years, is be very focused on what we are now on the acquisition to be done on the opportunities we have to grow the company. Okay, well, I think with that, we will open it up for questions.

Q&A Session

Operator: Thank you. [Operator Instructions]. Our first question comes from the line of Ovais Habib from Scotiabank.

Operator: Thank you. Our next question comes from the line of Ralph Profiti from Eight Capital.

Operator: Thank you. Our next question comes from the line of Justin Stevens from PI financial.

Operator: Thank you. [Operator Instructions]. Our next question comes from the line of Don DeMarco from Nation Bank Financial.

Operator: Thank our. Our next question comes from the line of Stephen Green from TD Cowan.

Operator: Thank you. Our next question comes from the line of [indiscernible] From CIBC World Markets, Inc.

Operator: Thank you. [Operator Instructions]. Our next question comes from the line of Harmen Puri from Bank of America Securities.

Operator: Thank you. At this time, I would now like to turn the conference back over to Clive Johnson for closing remarks.

Clive Johnson: Okay. Well thanks everyone for taking the time to present Q1 results and talk about our plans going forward. So thank you all very much. Have a good day.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.