Earnings Call Transcript - BTG Q2 2022

Operator, Operator

Good afternoon. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the B2Gold Second Quarter 2022 Financial Results Conference Call. All lines have been placed on mute to provide any background noise. After the speakers' remarks, there will be a question-and-answer session.

Clive Johnson, CEO

Thank you, operator. Welcome, everyone, to the B2Gold conference call to discuss the results of the second quarter of 2022. As you can see from the news release we put out, we had another very strong quarter. We beat our budgets in a number of areas. And very importantly, we're able to maintain our guidance for 2022 even in this current environment of inflation and what we're seeing in the world. So a very good first half. We have guided that we're going to see some higher costs due to inflation, primarily in the second half of the year. But because of the strong performance in the first half of the year, we remain on track with our guidance for 2022. Then Mike is going to talk a little bit about the details of the quarter's financial results, but I just want to give a little summary for that. So as we said, very happy with the results. The other significant announcement we made today was that we are not going to proceed with the development of the Gramalote project at this time. Our joint venture partner, Gold Fields, has agreed that it does not meet our economic thresholds to go ahead and develop the project. We are in the process of completing an updated feasibility study, which will be finished in the third quarter of the year. We had some hopes that we could improve the economics of Gramalote from what we had in the previous study, which indicated a $1,500 gold price leading to about a 15% internal rate of return. However, inflation is impacting the project more than anticipated. The good news is that projected operating and all-in sustaining costs for Gramalote remain low, but the capital cost remains high. We are now looking at alternatives regarding Gramalote, including a potentially smaller project or even selling the Gramalote project. Both companies are reviewing their options moving forward. We continue to maintain our permit and continue with some of our resettlement planning. We've done a lot of work there and continue with that work while we evaluate our options. We will also focus on increasing drilling at the Fekola complex. We continue to receive very good drill results that suggest we're significantly increasing the 3 million-ounce resource released previously for the Atacama area in the Fekola complex. We have several targets to explore further. Additionally, our drill programs are actively focused on several areas including Anaconda. We expect to Truck ore from various sources to improve production, and we're very excited about our significant projects, including the potential for a second mill in the Anaconda area. In Finland, we are beginning to see encouraging drill results and will have news to come from that. Beyond that, we are looking at M&A opportunities; we have a strong cash position and have made the decision to pause the Gramalote project. We're open to the right opportunities that make sense for our shareholders. We had a very positive first half, and I'm excited to pass it over to Mike for further details.

Mike Cinnamond, CFO

Thanks. So let's start with the second quarter results. Firstly, on the revenue side, we had a good revenue quarter. We sold 205,000 ounces at an average realized price of $1,861 per ounce for revenues of $382 million, which is slightly higher than we expected due to positive production. Total production from our operating mines was 209,000 ounces for the quarter. Fekola had another strong quarter, producing 123,000 ounces, in line with budget, with record quarterly throughput of 2.42 million tonnes. However, this was offset by lower-than-forecasted mill feed grade. We anticipate that Fekola's production will be significantly weighted to the second half of the year as we reach higher-grade portions of Phase 6 in the pit. Overall, we have adjusted our production guidance down to between 165,000 and 175,000 ounces for the year due to various factors, but Masbate has exceeded its budget expectations. We are currently shape adverse to some external factors like fuel prices, but our overall costs remain under budget, mainly driven by solid performance from Fekola. Overall, very positive first-half results, and we anticipate maintaining our guidance overall despite challenges.

Clive Johnson, CEO

Thanks, Mike. I want to mention a couple of positive developments in Mali, where an agreement was reached regarding democratic elections scheduled for 2024. This is crucial for the economy, including the gold production sector, which remains a significant part of our operations. We maintain strong relationships with the government. Regarding Colombian politics, our decision on Gramalote wasn't influenced by the new government; it was purely an economic decision based on the capital utilization study. We're still open to M&A opportunities to add value for our shareholders.

Ovais Habib, Analyst

Thanks, operator. Clive and the B2Gold team, congrats on a strong first half and great to see full year production guidance and costs unchanged. I have a couple of questions. You mentioned you would now focus on exploration and M&A. Can you provide clarity on the type of M&A you're considering?

Clive Johnson, CEO

Yes, we are looking across the spectrum for potential acquisitions, including joint ventures or friendly mergers. We’re open to various stages of development with a focus on jurisdictions where we have proven capabilities. One area of significant interest is Finland, where we're seeing some exciting developments.

Anita Soni, Analyst

I wanted to clarify your openness to friendly mergers with producing companies. Additionally, have you considered specific assets related to IAMGOLD?

Clive Johnson, CEO

Absolutely. We're focused on growth opportunities that add shareholder value. We are looking for near-term acquisition opportunities that make sense financially.

Don DeMarco, Analyst

Congratulations on another strong quarter. Can you elaborate on the Aqua acquisition and the near-term opportunities presented by this acquisition?

Clive Johnson, CEO

The Aqua acquisition is exciting due to the potential for high-grade material close to the surface. They have done a good job on permitting, which simplifies the process for us. We believe it's a viable addition to our resources. I want to thank everyone for their attention, and we are looking forward to your questions.

Operator, Operator

Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Ovais Habib with Scotiabank.