B2gold Corp Q1 FY2024 Earnings Call

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. I would now like to turn the conference over to Clive Johnson, President and CEO of B2Gold. Please go ahead.

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 will have seen the news that just came out, which provides quite a lot of detail. We're off to a solid start for 2024. We produced over 225,000 ounces, of course, in line with what we expected, with all three B2Gold operating lines performing well. Importantly, cash operating costs and all-in sustaining costs in the first quarter both came in well below our annual guidance ranges. Michael will provide a lot more insight shortly, but this has been a very strong quarter with an excellent financial position looking forward, as our mines are all operating very well. During 2024, what we have described as a transitional year for B2Gold, we've 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 that there have been absolutely zero indications that the government of Mali is considering nationalizing Western gold mines. On the contrary, we have had productive dialogue with the government on how our opportunity in the region is considered in the long-term future of the Fekola complex. The government has expressed a desire to act quickly with the exploration program once the decision on the 2023 mining code is finalized. We believe that in the next few months, the Mali government will look forward to starting to truck from what we call the 'indiscernible' area, which is to the north of the Fekola. We're ready to go here. As I said, we need to do exploration, and we are hoping to secure that quickly. It's definitely in the mutual interest we have with the government; we want to increase production by potentially 100,000 ounces a year by getting this good-grade material down to the Fekola mill, and the government wants more revenue from those mines. Therefore, these are the two best opportunities to increase revenue from the mining sector, and we'll see how this process moves forward shortly. The other most important business focus area is the restructuring progress. I'll provide an update on how we're progressing with this, which is very encouraging. We just closed the ICE project, which has been extraordinarily successful this year, and we're getting everything we need to complete construction. There’s a major year ahead of getting the necessary equipment in for construction while continuing operations as well. We did announce a slight delay in the estimate for the first quarter at the cost project, moving it from Q1 2025 to Q2 2025. We will provide more details on that, but it's important to note that the construction team has been able to deliver despite taking on a project that was already partly developed by the previous owner. While we inherited some good aspects, we also faced some challenges. We will discuss what we've done to turn this project into a B2Gold project. The main reason for the delay is that the mill is not scheduled to be operational until the end of the first quarter of 2025. Due to some delays in the underground mining schedule, we won't have more feed through the mill until then. That’s the main driver for moving our estimate to the second quarter. The construction is still on track, and we expect it to remain that way. One of the advantages we've benefitted from in acquiring Spin is that they had done a very good job in exploration, permitting, and maintaining excellent relationships with the local population, as well as with the government. Thus, that part of the team that was involved in the project remains with us, and they play a critical role in our success. We're also currently in discussions about capital expenditures for the year, which is quite extensive. In total, we are budgeting over $63 million, with more than half of that going to exploration, reflecting the extraordinary potential we see there. We anticipate some exciting developments ahead, including a significant redesign opportunity for the Gramalote project, where we are evaluating options to improve the economic viability. To summarize, when looking forward, we have the chance for significant amount of growth from existing assets, a robust exploration program, and our investments in junior mining companies. Despite some challenges in the first quarter, we are performing well and are in a very strong financial position, all while paying an industry-leading dividend. We believe there is a bright future ahead for B2Gold. This transitional year has its challenges, but we've met them head-on. With that, I will hand it over to Mike Cinnamond, who will provide an overview of the quarters and our financial perspective.

Thanks, Clive. I'll jump into the operations. Starting with 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, with all-in sustaining costs of $1,436 per ounce of gold sold, which was at the low end of our guidance range. As a reminder, we view 2024 as a transitional year for Fekola, where we estimate that gold production will be lower than prior years due to ongoing capital programs. This year, completed research should see a positive trend in 2025 with production increasing and all-in sustaining costs decreasing as capital programs reach completion. Over at Masbate, we had another excellent quarter, with the mine producing almost 48,000 ounces of gold. Both cash operating costs and all-in sustaining costs were well below our guidance ranges, aided by lower fuel prices which benefitted Otjikoto as well. Finally, at Otjikoto, we continued the momentum from the very strong fourth quarter of 2023. In the first quarter of 2024, Otjikoto produced just over 45,000 ounces of gold, and both cash operating costs and all-in sustaining costs remained below our annual guidance. We also saw benefits from this quarter due to the weaker Namibian dollar and higher production levels. We're excited about continuing to advance exploration in Otjikoto, as it shows significant potential, expanding our underground mining capabilities potentially into the 2030s. Overall, we are in a strong financial position. Current gold prices are enhancing this position, and we made a $500 million prepayment of gold with some of our bank syndicate members in January, solidifying our balance sheet for upcoming growth projects. By the end of March, we held a cash balance of $568 million with nothing drawn on our revolver, preserving a consolidated $700 million available credit. We are looking forward to refreshing this facility later this year. Based on our budget announcement in January, we have over $400 million remaining to bring the Goose project into production, and with the successful completion of the winter ice road campaign, we are well positioned. We announced our decision to push back the Goose schedule by three months. We’re also updating our cost estimates for Goose by the end of June. Overall, we are confident that we have the resources needed to complete Goose and have the liquidity to support potential organic growth projects in Namibia and Colombia, while continuing to pay our industry-leading dividend. So in summary, Q1 was a good quarter operationally, and with that, I will pass it over to Bill for an update on the Goose construction progress.

Thanks, Mike. I’ll quickly touch on the Goose construction progress. We've signaled very clearly that success on this project is on a critical path. I have to say the team did a phenomenal job bringing everything down despite the high snow year and unusual weather. We were able to successfully bring all necessary materials down from the marine landing area, significantly derisking the remaining construction schedule. We have everything needed to build out the Goose project on site. This includes almost 19 million liters of fuel, all modular units necessary to expand the camp to a capacity of 500 people, all structural components required for the mill, over 4,000 bags of cement, and all the essential reagents required to commission and operate the mill starting in 2025. The mill is on track for completion in Q1 2025. The construction team has been doing a great job, and the installation of the ball mill is progressing ahead of schedule. All preliminary infrastructure is in place, and while we are slightly behind schedule on the open pit and underground mining components, this relates to equipment commissioning and personnel resources affected by heavy snowfall. The current schedule indicates that we will need to add approximately three months to the timeline, mainly to mine sufficient material to stockpile for the mill start-up. Thus, instead of producing at a rate of over 300,000 ounces in the first five years, we expect it to be in the range of 310,000 ounces or more. I remain very confident in Goose as a world-class operation that is expected to enter production in Q2 2025. With that, I will turn it back to you, Clive, for questions.

Can you talk a little bit about the trade-offs going forward regarding capital?

Yes, there were some questions on whether we would stay on budget given the new schedule. We're working through that right now, and while I can't give you exact numbers yet, there will be both over and unders in terms of costs. However, we are actively ordering essentials for 2024 and 2025. Managing costs and critical spares effectively while maintaining progress on the construction project is key to avoiding unnecessary overruns.

Certainly. We will now begin the analyst question-and-answer session.

Hi, guys, and the B2Gold team. Congrats on completing a successful ice road season at Goose. Just a couple of questions from me, Clive. Starting off with Mali. In regards to the 2023 Mali mining code, are you all asking for the same terms as Barrick, or are the terms specific to your project?

Good question, Ovais. Everyone is in a slightly different situation because of the timeframe regarding the mining ventures signed with the government. The government's acknowledged that Fekola is under the law established in the 2012 mining code, which we received when we sold our mining license in 2014. Our conversations with the government are mainly centered around the implementation of the regional opportunities, as we are keen to finalize agreements for the upcoming 2023 mining code. We feel confident that we have robust economics and are looking forward to a final agreement.

And just a follow-up on that, assuming the negotiations go well, how fast can you get the exploitation permit?

If all goes as planned, and we reach an agreement soon, the exploitation license could potentially be fast-tracked by the government, which would allow us to begin pre-stripping quickly.

In terms of the infill drill program at Goose, is it meant to increase confidence in the ore body for inclusion in the mine plan for 2025, or is there a concern about the previously built geological model?

Not at all. The infill drilling we’ve conducted has corroborated the previous geological model. The goal is to get those indicated resources up to our standards. We're confident in the model and the controls involved.

Has the drilling commenced and what initial results do you have?

We began drilling in April with four rigs currently active. We expect the results to align closely with what we achieved last year.

Regarding the upcoming CapEx update expected in June, do you foresee any concerns with potential increases or any opportunities to maintain or reduce the current estimate?

We are currently evaluating numerous cost factors for the project, and while I cannot say definitively whether there will be increases or reductions without more detail, I believe overall we are reasonably on budget.

Good morning, Clive. Maybe a question for Mike regarding Goose CapEx. By the time we get the June update, will all outstanding spending be committed?

We have spent about $840 million thus far, with another $60 million-plus pending. By June, most key aspects will be ordered and delivered.

Regarding Finland, can you discuss our approach as a jurisdiction, given the recent developments? We've been active in Finland for a while and have seen success in developing deposits. The deal with Rupert enhances our potential while allowing us to focus on other higher-priority projects.

Good morning, Clive, Mike, and Bill. Regarding the delay, what's the pinch point? Is it the tailings dam?

It’s a combination of factors, including delays in commissioning the truck fleet and the mining in both the Echo and Umwelt Pits. We are prioritizing getting the operation back on track.

So the Echo Pit is where the tailings will be deposited. What's the long-term plan for the tailing's capacity?

Correct. We plan to expand from there into additional facilities as needed. Managing this will be critical for our ongoing operations.

Good morning, Clive and team. Congrats on a strong start. Regarding Goose, do you plan to release updates on OpEx after production begins?

Yes, we aim to update the resource model as soon as possible, subsequently providing a comprehensive package of information on operational expenditures.

We plan to update the resource metrics as part of our annual updates next year.

This concludes the question-and-answer session. Thank you all for your time, and we look forward to continuing to update you on our progress.

Thank you all for your time, and we look forward to continuing to update you on our progress.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.