B2gold Corp Q4 FY2022 Earnings Call

I'd like to welcome everyone to the B2Gold Fourth Quarter and Full Year Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Clive Johnson, President, CEO and director. You may begin your conference, sir.

Thank you, Sherry. Well welcome everyone. As the operator said, we're here to discuss the year-end financial results for 2022. We had a very good year again and achieved our production and consolidated cost guidance and are in a very strong financial position for the year. We also declared another dividend of $0.04 per share for the third quarter. I'm going to pass it over to Mike Cinnamond now, the CFO, who's going to walk you through the highlights of the financial results. I think our news release is quite extensive regarding our disclosure and discussion material. Michael will highlight the key points, and then we can answer your questions. We've done a lot of marketing in the last couple of weeks since the announcement of the Sabina deal. So, with that, over to you Mike.

Thanks Clive. So, I'll start with the quarter and then comment a little bit on the full year results. For the quarter, I think the story for Q4 is that our operations came through and delivered on the forecast that we anticipated. By the end of Q3, we were close to budget, but there were some delays in production at both Fekola due to water in the pit, which was resolved at the start of the fourth quarter, and some delays in Otjikoto in accessing the Wolfshag underground. So that led to a big forecast for Q4 to catch up on some of the high grade that we weren't able to mine in Q3. The good news is we delivered on it. In terms of results, gold revenues were $592 million, based on the sale of 339,000 ounces, which was slightly higher than we'd budgeted. This was a direct result of the high production levels. If you look at production for the quarter, from our three operating mines, we achieved 353,000 ounces, which is 335,000 ounces higher than budget, marking a quarterly record for our operations. If we include our share of Calibre's results, we had 368,000 ounces, which is almost 40,000 ounces higher than budget. The leader in that outperformance was Fekola, which delivered 244,000 ounces in the quarter, 37,000 ounces higher than budget, and like I said, it came mainly from processing higher grade material out of Phase 6 at the Fekola pit that we were unable to process in Q3. Fekola performed exceedingly well overall. The processing facilities are handling more material than expected, and the mill feed grade was also higher, so we are positive on all aspects of gold production. Masbate produced 900,000 ounces, which was right on budget. There were slightly lower gold recoveries during the quarter due to a higher ratio of saprolite and transitional ore, but that was offset by higher than expected feed grade, so came in right on budget. Otjikoto delivered 60,000 ounces, slightly below budget due to the timing of entering the Wolfshag Underground. Overall, we successfully achieved our budgeted cash costs, with consolidated cash costs from all operations, including our share of Calibre, at $468 per ounce. Fekola was close to budget, with slightly higher costs but record production. Masbate was a bit higher at $872 versus a budget of $752, primarily driven by inflation, particularly from higher fuel costs. Otjikoto came in at $465 per ounce, which is $46 below budget due to lower underground mining costs. We pretty much came in line with budget for the quarter on cash costs. On the all-in sustaining costs side, the total AISC per ounce, including our share of Calibre, is $892, about $130 an ounce higher than budget due to aligned cash costs and higher royalty payments due to increased gold prices, as well as the catch-up of budgeted sustaining CapEx in Q4. Overall, we did catch up on this budget in the quarter. We came in at 1,028,000 ounces, slightly above the upper half of our guidance range of 990,000 to 1,050,000 ounces. Individually, Fekola came in at 599,000 ounces, just shy of the 600,000 target, very close to the top end of its annual guidance range. Masbate came in at 213,000 ounces, slightly below the revised guidance range of 215 to 225. Otjikoto came in at 162,000 ounces, slightly below the revised guidance range of 165 to 175. Overall, we are pleased that we were above the midpoint of our guidance range for the year. On the cash costs side, we came in for cash costs, consolidated from all operations, including Calibre, at $660 per ounce, at the upper end of our original guidance range. We didn't change our guidance despite the inflationary pressures, which highlights our performance under challenging conditions. Similarly, all-in sustaining costs came in at $1,033 an ounce, within the $1,010 to $1,050 per ounce range. We've performed well, maintaining our operational guidance across the board.

Great, thanks Mike. Obviously, we are very pleased with Goose results. Let’s talk a little bit about the Sabina acquisition. I think everyone's aware of it now. This was just a friendly all-share offer to Sabina, which represented a 45% premium to the Sabina share price at the time of signing the deal. We are pleased with the positive market response. Both sets of shareholders, B2Gold and Sabina, have responded well to this deal. We believe it is a win-win deal, reflecting our ability to bring our strengths to an excellent project. Sabina represents a very high-grade, fully permitted project with attractive economics and exploration upside, ready for construction with an excellent team. We are very impressed with the work that Sabina has done and their close relationship with the local landowner. We look forward to working with both Sabina and our new partners to advance this project. The deal itself is very accretive, and we were trading at a 1x asset value, while Sabina was at 0.4x. Thus, we had room to pay a significant premium and stay within our parameters for an accretive deal. It is important to focus on value rather than just premiums. The project valuation we offered was $1.1 billion Canadian in shares, representing a significant premium. Feedback suggests that the market understands our position, with good approval for the deal. I will now pass it over to Randall Chatwin to discuss the timing of the deal.

Thanks, Clive. As we signed the deal last week, both parties are working diligently on a schedule. Currently, it looks like we will hold the Sabina shareholder meeting in the middle of April, with the interim court hearing just prior to that. Working backwards from that timeline, we expect to send out a circular around mid-March, aiming for a completion date in the third week of April. We are committed to maintaining the current schedule and ensuring that Bruce and his team continue with the development work.

I just want to add that this project has tremendous potential in the Black River district, with excellent geology and drill results suggesting that not only is Goose opened down plunge, but there are additional nearby zones such as George, which is showing promise. Our geological team is excited about the potential within the district. Our strategy will involve ramping up exploration capabilities as soon as we can, to test the down plunge potential and to explore other targets within the area. With that, we’ll open up the questions.

Today's first question will come from the line of Ovais Habib with Scotia Bank. Your line is open.

Clive, just a couple of questions from me. Starting off with the Fekola complex. In the press release, and Mike Cinnamond has also talked about the Company's expectation regarding the construction timeline for a Fekola regional standalone oxide mill to allow for project completion by Q1 of 2025. So, am I thinking correctly that the Anaconda standalone mill construction would commence in early 2025? And does the Fekola complex still achieve 800,000 ounces in 2026?

Yes, I will pass it over to Bill to respond to that, but I want to emphasize that we are not going to try and build two significant mills at the same time. We have not done that in our history, and we are not going to start now. The idea is to schedule this properly so we can focus on both phases of expansion at Fekola, and in between those phases, we will be constructing at Goose. Bill, over to you.

Thanks, Clive. It's essential to understand where we stand in the permitting schedule for all this. The Anaconda Phase 1 has been permitted, and construction is expected to commence, aiming for online production in Q3 of this year. The Back River project is fully permitted, with a lot of foundational work already completed. When the ice road opens, we will start transporting materials and begin construction processes to ensure we meet our targets. If all goes according to plan, we expect the construction timelines to align with our desired goals.

And just on my second question, regarding the Fekola complex study expected in Q2. Will the study specifically look at the Anaconda standalone mill or will it include the Fekola underground and general optimization of the Fekola complex?

The Phase 2 study primarily looks at the Anaconda mill as part of the overall complex. It doesn't explicitly include the underground aspects of the Fekola complex, but we are weighing additional sources of saprolite and exploring options to integrate other resources from Dandoko and Bakolobi. Essentially, it is a broader regional assessment.

And just my last question; switching gears to Masbate. Masbate is expected to produce about 180,000 ounces this year. Bill, what should we expect from Masbate in the near and long term? Should we anticipate production to stay at current levels over the next three to five years? Can you also provide insights on exploration opportunities to enhance the current mine life?

Yes. I will address the first part, and then I will pass it to Vic for the second part. We've evaluated our capital costs in replacing the fleet, which led us to normalize output from around 200,000 ounces down to 175,000 to 185,000 ounces over the next few years. After that, we anticipate production from the low-grade stockpile, continuing around 100,000 ounces. Now, regarding exploration opportunities, Vic, do you want to touch on that?

The primary focus for exploration drilling at Masbate is beneath the existing pit. While the regional potential isn't as prolific as at Fekola or Back River, we are establishing a 100% owned exploration entity in the Philippines. We are actively looking for other opportunities leveraging our presence in the country.

We've seen a positive response from the Philippines government regarding mining, emphasizing responsible practices. With the recent elections, there is a keen interest in further foreign investment in the mining sector. We are excited about the potential to expand our operations in the Philippines, especially since we have successfully built a gold mine in the area already.

Thank you. One moment for our next question, and that will come from the line of Carey MacRury with Canaccord Genuity. Your line is open.

Just a couple of follow-ups on Anaconda. Can you remind me what's needed from a permitting standpoint for Anaconda Phase 2, and what timeline you have around it?

Certainly, I will answer from the operational side, and Mike can add on the financial side. We are currently preparing a feasibility document that will be submitted, and assuming the necessary steps are taken, we believe we will receive the construction permits. The government is eager to support this project and expedite its implementation.

From the agreements standpoint, there are a number of licenses requiring mining licenses, alongside associated conventions and agreements with the state. We are currently on that track for Bantako and just wrapping it up because once we can finalize Bantako, it will provide a template for the others in terms of license agreements. This time around, with more licenses, we expect the process will be smoother and quicker than when we did with Fekola.

Regarding Fekola, the government owns 20%. I believe Anaconda currently has 10% with the option for 10%. Are those discussions on the table as part of this feasibility process?

Yes, we plan to initiate those discussions alongside the feasibility process. The mining code lays out that a valuation will be conducted, subsequently leading to negotiations over the percentage, like we did for Fekola with the expectation that the state may take that second 10%. We anticipate that all licenses will end up being 80/20, aligning them with Fekola.

Lastly, regarding Sabina, can you talk about how much Sabina has funded of the CapEx to date, and what CapEx numbers should we be considering for the rest of this year?

I can't specify how much they have funded as we haven't seen their latest numbers, but we anticipate that this will change as events progress with the opening roads. At the time of our due diligence, we estimated the CapEx for the underground construction to be around CAD 800 million, with variations due to current work and other developments.

As Sabina progresses underground, some updates from their original feasibility study numbers will arise. We've done additional due diligence alongside them to arrive at an acceptable number.

Thank you. One moment for our next question, that will come from the line of Harmen Puri with Bank of America. Your line is open.

Some of my questions have been asked and answered already, but maybe one final one for me. Regarding Gramalote, could you provide some perspective on how advanced the sales process is and any highlights on the interest you've seen?

At a high level, we've assigned an advisor and are commencing phase one of the sales process. We're currently preparing everything for that. The timeline is expected around six months for completion. There is nothing in our cash forecast for Q4 that includes the sale of Masbate at this point.

Regarding your stake in Calibre, do you still view that as non-core and potentially divesting it over the next year or two?

We have no current plans to sell our stake in Calibre. We believe they are performing admirably, and this transaction has been beneficial for both parties, including our employees who transitioned over there. We are happy with our stake and see no necessity to divest at this time. As for our other assets, we are focused on growth and are committed to all our current projects, including ongoing efforts in Mali and the Philippines.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Clive Johnson for any closing remarks.

Thanks, operator. In summary, we are very pleased with the year-end results, which is a tribute to our team. We have around 5,000 employees at B2Gold, and we're proud of our strong ESG track record. We maintain a robust operational position, and we are a low-cost producer, debt-free with opportunities for dramatic growth over the next two to four years. We are excited about what lies ahead and look forward to our pursuits with the Sabina project. Thank you for your time, and we'll be updating you shortly.

Thank you all for participating. This concludes today's program. You may now disconnect.