B2Gold Corp. (AMEX:BTG) Q1 2024 Earnings Call Transcript

B2Gold Corp. (AMEX:BTG) Q1 2024 Earnings Call Transcript May 8, 2024

B2Gold Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by. This is the conference operator. Welcome to B2Gold Corporation’s First Quarter 2024 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. [Operator Instructions] I would now like to turn the conference over to Clive Johnson, President and CEO of B2Gold. Please go ahead.

Clive Johnson: Thank you, operator. Good morning, ladies and gentlemen. Welcome to our call to discuss our first quarter 2024 operating financial results and to give you a corporate update as well. Many of you or all of you will seen the news, which just come out, that gives quite a lot of detail. We’re off to a solid start for 2024. We produced over 225,000 ounces of the production, of course, it’s on the basis in line with what we expected with all three B2Gold operating lines performing well. Importantly, cash operating costs and all sustaining costs in the first quarter both came in well-below our annual guidance ranges, and Michael will you a lot more insight, he will be talking in short and give you a little more detail, but a very strong quarter, excellent financial position going forward, the mines are all operating very well.

Through 2024 and what we have described as a transitional year for B2Gold, we have made strong progress on two of our most important items for the year. Firstly, we’ve had some encouraging discussions with the Mali government throughout the start of 2024, it’s really important to stress, got to expect some rumors out and irresponsible journalists about their facts of the matters as backed recently, there’s been absolutely zero indications and the government of Mali is considering nationalized western gold mines. On the contrary, we have had productive dialogue with the government on how our opportunity in regional is considered in the long-term future of the Fekola complex, and the government has expressed a desire to fast-acting with exploration program once the decision is agreed in the mid-2023 mining code is finalized.

We believe over the next few months, potentially Mali government to look forward and starting to truck, following from what we call [indiscernible] area, which is the north town the Fekola, we’re ready to go. We need to do exploration, we need to do that. As I said, we’re hoping to secure shortly. It’s definitely in mutual interest we have with the government, we want to increase production by potentially 100,000 ounces a year by tracking this good grade material down the Fekola mill and the government wants more revenue from those mines [indiscernible] after a legal or too slow mining are the two best opportunities from the government of Mali to increase revenue from the mining, we’ll see the process as we move forward, hopefully shortly moving forward with the board from Fekola region.

The other most important business, we are focused on is the restructuring progress [indiscernible] update on how we’re progressing, very encouraging in the sense that we just closed the ICE the extraordinarily successful this year and getting everything up we need, 160 kilometers everything up to complete disruption. So it’s a major year of getting equipment in for construction and of course, running the operations as well. That was a great success, and that’s what we attribute to our logistical team. Our experience factor of building nice roads, and it’s just a great team offsite to make all of that happen about as significantly derisk the project by doing that. We did announce today, a slight delay or last night, I like to lay on the estimate of the first quarter at the cost project to Q1 2025 to Q2 2025.

We will give you detail on that, but I think it’s really important to point out that the construction team has delivered to each go construction team is delivered despite picking up a project that was partly some equipment have been ordered the always things have been done in terms of the previous owner looking to move the mine through construction. So we inherited some good things and we enter challenges. We will talk a bit about what we’ve done to turn this project into a B2Gold projects. The main reason for the shift from the quarter is the fact that the mill could be boon schedule at the end of the first quarter of 2025. But because of some delays in the pit mine life underground mining schedule, we won’t have more feed through the mill.

So that’s the driving force by moving to second quarter, the construction is actually on track. We expect it to remain on track. Still we do details on that. I think it’s really important to underline the fact one of the things that we benefited from the acquisition of Spin [ph] they did a very good job in exploration in permitting and an excellent job in relationships with new population and also the covenant. So that part of the team that was involved in the project has remained with the project, and they are a very important successful approach. We were just always just in to the capital a couple of weeks ago for the detaining some podium, so an excellent coverage, very upbeat. We are in the right place at the right time. And the population, the government at every level is very excited about B2Gold medium please mine and looking forward to great success there.

Obviously, exploration is a big part of what we do historically and there’s a reason why half of our large exploration budget for this year is $73 billion — $63 million. Over half of that as being budget is focused on back for a reason we see extraordinary potential there and they’ve had some very good facing results so far in our drilling count it can answer questions about that. Just in terms of catalysts going forward, and I’ll pass on the Mike. I tee the Calis going forward, obviously, as I mentioned, to see resolution of Valley and being able to move forward with Trentino, looking forward to a very good expression season this year, some opportunity to update. Also, I think another exciting potential is looking at rate as everyone is probably or remember we had a joint venture with Angelica and looking to build a big mine to justify that for 2 companies.

Now it’s owned by — just by B2Gold. And we’ve been looking at a number of different cases we will come out with results of a new study for the AGM. And what they’re targeting now is something around a 6 million ton your case and that could produce 200,000 ounces move year. Ion relationships with the economics, we’re not quite there yet, but we’re having some forging signals from the engineers that we can reduce our footprint and reestablish our permit, but I’ll actually be looking at quite a potentially interesting economic opportunity. So get it all together, if you look at the capital and the future of loan production potential for this company, we have the potential for foods year to come from trucking or Fekola, as I mentioned. Over 300,000 ounces a year is expected from us with the coal practstarting in the middle of 2025, as I mentioned.

And then if we wrap a little bit, will know soon if Gramalote economic that can add another 200,000 ounces of gold production potentially to the company subject to our study coming out and being positive. So there’s 600,000 ounces of growth from existing assets. In addition to that, robust exploration programs, also our investments in junior companies will continue. So when we look to the future, it’s very bright. We’re in an extraordinarily strong financial position, paying that industry-leading dividend on a yield basis. So we’re excited about where we’re going. This is a transitional year, and yes, there’s been some challenges in the first quarter. We’ve met them, but it seems to get lost in the shuffle here, but we’ve performed yet again another quarter of the financial zones.

This will be on track for our ninth year delivered on our tax production or about costs. So with that, I’m going to hand it over to Mike Cinnamond, who will give you an overview of the quarters and financial point of view. Mike?

Mike Cinnamond: Thanks, Todd. So I’ll just jump into the operations. First late Fekola, we produced just under 120,000 ounces of gold, which is in line with our guidance. Cash operating costs were well below our annual guidance range, and all-in-sustaining costs of $1,436 per ounce of gold sold. It was at the low end of our guidance range. So, also as a reminder, I think Fekola, 2024, Fekola is a transitional year where we estimated that gold production would be lower than prior years, and we have a lot of capital programs ongoing. This year, the research was complete in the year. And for 2025, this trend should reverse, and 2025 gold production should increase, and all-in-sustaining cost drop as capital programs get completed.

Moving to Masbate, we have another excellent quarter of Masbate with mine producing almost 48,000 ounces of gold. Cash operating costs and all-in-sustaining costs were both well below our annual guidance ranges. Fuel, lower fuel prices definitely contributed to our overall operations at Otjikoto. So Masbate has led a very strong operating cash flow, and we anticipate continuing to review here at baseball prices. Finally, last but not least, at Otjikoto, we continued our momentum from a very strong fourth quarter in 2023. In the first quarter of 2024, Otjikoto produced just over 45,000 ounces of coal. And like Masbate, both cash operating costs and all-in-sustaining costs were well below our annual guidance rates. I’d say for Otjikoto, we also benefited from a weaker Namibian dollar as well as higher production, lower fuel prices, we also had a weaker Namibian dollar, which helps our costs due at dollar terms.

And also, excitingly, we look forward to continue to advance the envelope discovery, which we think has the potential to expand underground mining in Otjikoto perhaps into the 2030s. And we remain, as of the end Q1, we remain in a very strong financial position. Current gold prices, of course, are only helping that and enhancing that. And, I can see those going forward. And as we know, in January, we completed a $500 million prepayment of gold with some of our bank syndicate members, which includes fortified our balance sheet for the growth projects. We want to accomplish in the near-term and the medium term. And at the end of March, we had cash balance of $568 million and nothing drawn on our revolver, so we got a $700 million consolidated available in that revolver.

And we do anticipate refreshing that facility a bit later in the year. Based on our existing Goose budget, which we announced in January, we have just over US$400 million left to bring goose into production. And now that the winter ice road campaign has finished successfully, we did hear more about that from Bill, and we brought materials to site. We have announced our decision to push back the Goose schedule as a client said by three months. We’ve undertaken as well as updated our cost to complete- estimates for Goose by the end of June, I think, the end of the second quarter. We’ll come out with those. But I can say the basement we are today, we’re very confident that we have the resources to not only complete goods, but we also have the liquidity for potential organic growth projects in Namibia and Colombia, as well as continue to pay an industry-leading dividend.

So not only are we very comfortable with the financial situation, but it’s also expected to be further strengthened in 2025 when the goods capital is completed, consolidated gold production is expected to increase, and all-in sustaining costs and growth capital is expected to decrease. So, high level summary, Q1, it was a good quarter, I would say, operating wise. And so with that, I think I’ll pass the call over to Bill for a discussion on the Goose construction programs.

Bill Lytle: Yes. Thanks Mike. So, I’ll quickly touch on the Goose construction progress. I think we’ve signaled very clearly that this was on a critical path to have success. And I’ll tell you that I think the team did a phenomenal job bringing everything down. Despite high snow year an El Niño year, which was a bit of an anomaly, we were able to bring everything down from the marine landing area. This significantly derisk the remaining construction schedule. And now we have everything that we need basically to build out the Goose project on site. And just to remind everybody out of what we brought down, some of the key things we brought down almost 19 million liters of fuel, all of the modular units necessary to expand the camp to 500, which will allow us to get through construction.

All of the stuff necessary to build the mill steel and rebar. All those cement necessary, more than 3,000 bags — more 4,000 bags actually. And all the — one of the key things is all the reagents necessary to commission and operate the mill starting in 2025. So, at the end of the day, as Mike said and Clive alluded to, the mill itself is ready — would be ready to go in Q1 2025. The construction team has done a great job of coming in and grabbing hold this project and making a B2 type construction. The mill construction does remain on schedule. We had previously told the market that we are, in fact, ahead in some areas, installation of the ball mill is progressing ahead of schedule. All the shale sections are in, the discharge heads, [indiscernible] and bearings have all been completed.

What really is slightly behind schedule is the open pit and underground. That really relates to the commissioning of the equipment and getting some of the people in during some of these heavy snow days. The current schedule indicates that approximately three months must be added, and that really is to allow us to mine out some of the open pit and underground to allow us to get the appropriate amount of material on the stockpile to start the mill. So, with that, we’re talking about first full quarter in Q2 2025 and that, of course, does reduce what we’re going to produce in 2025, but I do want to indicate that it’s not like those ounces are lost, they have just been pushed into 2026. So, instead of having the first five years at plus 300,000, now we’re talking in the first five years at 310,000 plus.

So, overall, I guess, I’d say I remain very confident in the path forward for Goose and this is absolutely a world-class operation that moving in production in Q2 2025. With that, I will turn it back to you, Clive, for questions.

Clive Johnson: Can you talk a little bit about the trade-offs going forward about capital?

Bill Lytle: Yes. There were some questions on whether or not we were going to be on budget given the new schedule. And I’d say we’re working through that right now, but just because the road just closed, I can’t tell you exactly where we’re at. There’s going to be some over, there are going to be some unders. But remember, right now, the 2024-2025 when our ice roads season is opening. So, what we’re seeing is we’re actually anything which would be kind of in that critical spares for 2024, 2025, we’re ordering right now. So, we’ll be able to give you actual costs for what our carrying costs are going to be but also, we’ve done a good job kind of looking at what a B2Gold design would look like. Certainly, John Rajala has looked at reagent consumption.

Can we bring those down? The answer is yes. We’ve talked about the actual fuel cost, Mike alluded to already that some of the other operations are under cost. So we’re seeing how that impacts the Goose Projects. We’re working with vendors to see if they can carry stock as opposed to us ordering it and that’s putting it into our critical spare inventory. And probably one of the big ones is the labor. So the labor obviously, is a function of what has to be done. Given the fact that we’re actually ahead of construction in some areas, we feel like we can certainly flat most cost a little bit to make sure that we remain material that budget.

Clive Johnson: Okay. Thanks, Bill. I think analysts questions. I think the operator will now move to Q&A.

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Q&A Session

Operator: Certainly. We will now begin the analyst question-and-answer session. [Operator Instructions] The first question comes from Ovais Habib with Scotiabank. Please go ahead.

Ovais Habib: Hi, guys and B2Gold team. Congrats on completing a successful ice road season at Goose. Just a couple of questions from me, Clive. Number one, starting off with Mali. In regards to the 2023 Mali mining code, obviously, B2 is having discussions with Mali. Barrick is having their own discussions with Mali on Fekola and resolutives like you’re having discussions as well. So the question is, are you all asking for the same terms? Or are the terms specific to each of your projects? I’m just trying to figure out how is Mali looking to form a new kind of set of terms for the 2023 mining co?

Clive Johnson: Sure, a good question, Ovais. Everyone is in a slightly different situation because of the time frame in terms of some of the mining ventures that were signed with the government, so we are — as you know, the government’s acknowledged sometime again that Fekola is perhaps followed by law over the 2012 mining coal that we sell that mining license to 2014 – 2024. So that’s very positive from our point of view. And now the conversations with the government are really around the implementation of the [indiscernible], which, of course, the regional opportunity, they’re all under an exploration license still they need to move to an expectation license. So the region will be subject to the 2023 planning code, yes, we feel confident that we’ve got some pretty robust economics there, and I’m looking forward to realize final agreement.

I can’t speak for Barrick or anybody else, but everyone has a difference – everyone has their own particular license and issues and Barrick and others are going to be down there as we will be over the next while to try and finalize the government. But we are in a different situation. So we’re the only company in Mali that I know that has something that can quickly turn into more revenue for the company and for our partner. They cover Mali by trucking the ore and that could be a significant amount of revenue. When you look at what we’re projecting now, if you look at that numbers, the regional production is very – to be very important to the future of Fekola. Of course, trucking the ore down, the roads are built we’re ready to go. So we’re in a different situation.

It’s up to Barrick and Mercer, let us speak for themselves, but we’re confident with where we sit and we definitely have a good relationship with the government. We’re concerned about the 23 code, I guess, in terms of future production for Mali. Mali has been — despite some of the issues and rumors and stuff that we see out there, Mali has been a very good country to invest in gold mining when you look at Randgold and Barrick and ourselves and others. So the issue there is that the government wants to take too big a piece of the pie in 2023. The big question is who’s going to go explore for the next Fekola in Mali, if the economic terms are much less attractive than they have been. Just a reminder, we built Fekola mine for over US$500 million, 100% of our risk.

To date, the government of Mali has realized a little over 50% of the economic benefit of the Fekola mine, with no risk. I think that’s a deal anybody would take all day, every day. If someone wants to spend all the risk capital, we get 50% plus of the upside. So I’m worried that the new code is going to change those economics. So it doesn’t speak to what we’re doing, but it speaks to — because of our very robust economics and the trucking opportunity, but it does speak to the future of gold mining in Mali. And I hope the government over time will consider whether they want to become one of the less attractive countries to invest in gold mining, as opposed to being one of the ones that’s been attractive. But our discussions are ongoing and they’ve been positive because I think we’re on the same page with the government, which is the support Fekola going forward and also the regional opportunity.

Ovais Habib: And just a follow-up on that in terms of assuming the negotiations goes well, and all the terms are agreed upon, how fast can you get the exploitation permit once everything is set in motion?

Clive Johnson: Well, if we reach agreement in the near term, which we’re hoping to do, then the exploitation license, apparently the government’s interested in fast-tracking that. So that could be hopefully a few months potentially, and then we’ve got some prestripping to do. But we’re pretty much ready to go. We derisked the project in the sense that we have built the facilities, we built the roads, and we’re ready to go. So that could be a very quick opportunity. Bill, how many stripping we do for?

William Lytle: Three months.

Clive Johnson: Three months stripping and then we’ll be over.

Ovais Habib: And then just switching gears to the Goose project, as you mentioned, B2 is currently in the midst of an infill drill program in the underground component of Goose. I just wanted to understand, and maybe this is a question for Bill or Vic as well, is the purpose of the drill program to increase confidence in the ore body, to include it into the mine plan going into 2025? Or is there a worry about the geological model that was built by the previous owners? Maybe some color on that, please.

Victor King: Not at all. The infill that we’ve done to date, we did quite a bit last year, has certainly corroborated or supported the Sabina model. The infill is merely to get the indicated resources to our standard. And that also improves or helps improve the design that the engineers need to do. But there’s no question about the model. It’s solid. We understand what the controls are and the results we’ve got have pretty much concerned our model.

Ovais Habib: And in terms of, has the drilling commenced and what are the results have been so far? Any color on that?

Clive Johnson: We started drilling in April. We have 4 rigs turning. No results yet from the drilling this year, but we expect them to be pretty much in line with what we saw last year.

Ovais Habib: Okay. Thanks for that. And just on remaining at Goose, my last question would be regarding the CapEx update expected in June, Bill, what are you worried about that with the CapEx higher? Or any opportunities to maintain or even reduce the current CapEx estimate?