Q2 2021 B2Gold Corp Earnings Call

[music].

Good afternoon, My name is Colin and I'll be your conference operator today at this time I'd like to welcome everyone to the B 2 gold second quarter 2021 financial results Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question on.

The answer session, if you'd like to ask a question. During this time simply press Star then the number 1 on your telephone keypad, if you'd like to withdraw your question. Please press star followed by 2 thank you. Mr. Johnson you may begin your conference.

Thanks, operator, and thanks, everyone for joining us as the operator said, we're here today to truckload.

Financial results from the strong Q2 of 2021.

Continued strong gold production performance above budget, and we are on track to meet or exceed the upper end of our annual production guidance range, which is 50.970000 ounces.

Our goal to 1.030.

Million ounces of gold.

I'm just going to give a couple of remarks on the front of on Mexico or walk us through the key financial results, we put it on a pretty.

Extensive news release talking about the results of the quarter on also where we sit financially overall, but also updating you on a net.

On a few other issues for the 3 months continue to produce well I think as we've signaled a very early and very often if the second quarter of this year was the first half of the year was going to be lower production and the production weighted to the second half of the year in the second quarter. This year, we knew was going to be the.

Weaker quarter.

On extra dose basis, which hopefully be signaled that very well to the market.

No.

We're seeing the reality of that and we're also seeing on a positive start to.

Through the second half of the year in terms of overview, we'll hear the 3 months continue to operate very well.

Worked very hard and diligently through the Covid experience with a low communities are.

Toys, and the governance and the areas we work with very proud of the contributions from everyone on them I think the.

Really shut off the.

The amount of social.

And so on trust we have in the places that we work we were able to collaborate very early on in the mutual trust relationship to ensure that we can continue to mine, which is critical in the countries. We're in for the economy, but continue to mind that only if we can do it safely. So I'm proud of the contribution from all of our all of our employees on.

People. So in terms of looking forward a little bit I'm talking about some of the catalysts going forward and I'll touch on that now for those that don't make it through the whole call, but at the end of the day. We're as I said, we're on guidance low to meet for the year, but that does not include a couple of upside potentials as well we have the Cardinal zone, which is adjacent to that for call. It the <unk>.

Most of them are looking to <unk> already done a bulk testing, we're looking to start moving or from Cardinal to.

Some good grade material from Cardinal through Nikola Mill, which was not included in any of our projections show that could bump up production there and then looking a little bit further out we are looking at.

The Anaconda area, which let's just sort of anecdotal and Taco.

As we all know we're in are currently on a dispute with the government over the ownership of the medical on a license. We continued discussions with the government looking to our solutions.

<unk> solutions, we believe we have a legal rights to an extension on exploration license, where we spend.

We spent $27 million a day.

<unk> has significant resource that has potential to get larger and can be trucked down potentially too difficult to mill, but importantly, the mechanical on areas, where these 2 licenses in an attack on north just immediately north of Makoto has a significant amount of saprolite, whether material at surface, where with good grades.

Actually where we would start mining the Anaconda area.

And that's the license so theres not on dispute so we're looking potentially at least subjects with <unk>.

Subject to the front of mine plan and the permit working with the government as a partner there as S and for coal as well, we'll be looking to start shifting on potentially the saprolite ore down to the Nikola mill.

And as early as the second half starting in the second half early second half of next year. The Cola Mill, we've talked about on the initially spoke we had spectacular performance in the mill from it's from when we first constructed it on through the 2 expansions of the mill.

We're getting some very good tonnage throughput. So that's another upside given the projections, we made per tonnage throughput given the reality of what we're seeing if that continues through the year. That's another potential positive upside in the saprolite really because of its weighted nature of material can run through the mill.

On top of the normal capacity for the mill.

So there's some upside scenarios there the overall picture of the Anaconda area, we think there's tremendous exploration upside.

Michael on the women's and tack on continued drilling been tanker while we resolve.

Hopefully positively resolved and get on with business and then a total in terms of that scenario and I just Wanna comment that your mouth. He's been a very good place to do business and for gold mine for many years as Randgold Barrick can attest to another companies, including ourselves. So we expect to resolve this current situation and get back to exploring them in a corner on that.

Half of it.

Our partners the government on the people of Mali, and creating jumps in the short term, but on the Mi in the meantime, we'll go ahead and tackle as we would've started there anyway, but we think Marlin is a good place to be on the Gulf on any business, we still believe that and we believe that the government will continue to honor. The law says it has for decades, making it an attractive place for foreign investment in an old mine.

Other than that the grammar lots of projects you everyone knows we.

Decided to delay the feasibility study there to do some additional work on engineering looking at some different concepts there to lower the extreme essentially looks low the capital cost it looks like we're getting some traction there from some of the early indications from the engineers and also we're doing additional drilling.

Grandma on switch itself, but also on the 2 other areas Trinidad Morehouse West and getting some interesting early results from Trinidad which has been on a low grade zone.

It might Nevada mine life back in the day and now we're seeing some potentially higher grade there, we'll see how that pans out. So we're now looking at because of COVID-19 related delays and getting going on the drilling.

And adding some more additional drilling to the program for the grammar lots of area. We're looking at hopefully early in the second quarter now for the release of the new feasibility studies. So we're optimistic the grammar electric and we can prove the project through some of the initiatives we have going on we'll be able to talk about that.

As I said earlier, the hopefully early in the second quarter other than that would go on for a very active exploration program going around on.

Many targets around the world things, we've been working on in some cases for years to get opportunities like Rebecca stone on where we're drilling.

Exciting targets in Finland and of course, all of our various brownfield exploration programs surround the minds. When we've had great success over the years continuing to add ounces and therefore on mine life I'm.

2 our operating mines registration will continue to be an important part of our growth profile. The key anchor project in Burkina Faso, where not.

You're updating the feasibility study there and were considering various alternatives to unlock the value of that for our shareholders. M&A. We're looking definitely we're always looking at opportunities.

Where you know we don't see a ton of things that would be really love out there that we think are fair value.

We'll continue to look and look for opportunities, but for US just to M&A, it's more likely we'll find some different situations, where some of our bringing our expertise to bear with the opportunity that may suit us that may not have shipped to other companies, it's going to be pretty competitive environment for M&A and we will continue to look at that if I look at opportunities, but very selectively we're not gonna start overpaying for assets.

Now we never had before so with that I think all on general overview I'll pass it over to Mike and he'll tell you about.

Actual position, we find ourselves in continuing to pay a very robust dividend 1 of the.

Nice to have it in yields in the gold sector and talk about our strong cash position on our lack of debt and continued financial strength looking into the future.

So with that I'll pass it over to Mike sentiment to give us.

An update we also have each day.

The entire features on executive team.

Excuse me on the line available to them.

That's your question on chapter in Mikes presentation. So okay.

Thanks, Cliff and good morning, everybody.

So it's going to run through the quarterly results quick comment on the year to date, and then sort of where we are cash flow wise and balance sheet wise.

So firstly on the on the quarter for the second quarter.

With $363 million in revenue.

That's from the sale of 200000 ounces at an average price of.

$814 per ounce.

Gold still holding its own as everyone's seen in the quarter, it's kind of it it's a bit range bound around about $800, Mark, but certainly holding its own and when we gave guidance on cash flow for the year. It saturated started the year, we actually used $800 gold so right in that ballpark of where we thought when we were budgeting and giving guidance to everyone.

Sales were 12.12 odd.

<unk> thousand ounces higher than budget in the Q and that that's really a function of the overproduction at the sites.

So turning to that production for the quarter, So our consolidated and including our share of caliber production was 212000 ounces, which is basically 10000 ounces higher than budget and that came really from a performance from each of our sites for Cola a same.

Same kind of story as the first quarter the mill throughput at the mill continues to outperform even our expectations. We did budget 775 million tonnes annualized throughput.

The newly expanded for colon, Mel but you know even in Q1, we did too.

2.9 million tonnes, so well in excess of what we budgeted that's a combination of a few things.

Favorable over fragmentation and hardness and optimizing the grinding circuit, but it's all very promising what we did see a.

In the Q, whether that to feed some of that excess production more than we thought we'd have.

We did use some low grade stockpiles, which provided that sort of additional on budgeted mill feed and that did lead to slightly lower grade in the Q as a result.

But overall for coal on a 114000 ounces over 4000 ounces ahead of budget than MS. Baddie 57000 ounces of production for the quarter again 4000 ounces ahead of budget and same story for them as bad. If you saw on Q1 mill recoveries continued to outperform our model and our process great from our from the art.

Transitional ore and mainframe, where we're working right now was above budget. We did actually have time in the queue to run a couple of metallurgical test campaigns just.

Just to try and help us as well as optimize recoveries as we move forward into the harder ore later in the mills are in the mine's life.

And what we found from 1 of the 1 of the test campaigns and volt high grade ore from the main vein pit. So even though we had a bit of a downturn in throughput because of the campaign, we actually improved grade overall because of the some of the tests that we ran so overall battery running very well and still beating the model on on recoveries and grades.

In North Dakota, a 27000 ounces and that's 2000 assets ahead of budget and and really as you know on as we guided I think in the budget and on all the way through the year so far.

A lot of the production from what was your quote or a majority of it was coming from stockpiles.

In the first half and then what was your quota as we get into that.

The.

The mining the higher grade and both will check in on or Dakota pet in the second half of the year, we're going to see a real upturn I think in the production per month.

From that mine.

But in Q2, even when we mine from.

The sort of medium grade stockpiles that the.

On the <unk>.

The grade that we actually got was actually better than model. So we saw a beat overall on the numbers for what Chicago.

So when you translate that into.

Cash cost per and this is on a per ounce produced basis overall.

Across all our sites and include nuclear caliber, we're basically right on budget $664, an ounce against the budget of 662, but there were some offsetting factors in there and offsetting sites.

So for Colette was $617 an ounce net that was about just over $70 an ounce higher than budget, but that's primarily a function of a couple of things.

The first 1 the main 1 is that we were running that lower grade material through the mill to feed the excess throughput so lowered rate.

It leads to higher cost overall, our per ounce and then we did see some.

Higher cost in terms of higher than budgeted fuel prices and we've seen that across all operations and I think I think I'm sure you're hearing the same thing for them on mining operations.

But even even with that we still manage the overall on consolidated basis to come in right on budget. So offsetting the Cola Hi, Cosmos Batty with $616, an ounce produced which is 80 over $80 lower than budget, that's primarily a function of higher than budgeted production.

But generally online budgeted operating cost are low again fuel was higher in that study site.

And then how would you go to $854 an ounce again, just over $80, an ounce lower than budget and.

Same kind of story higher iron than budgeted production slightly higher if you are higher fuel cost and stronger Namibian dollar.

That was also offset by higher than budgeted pre strip. So we saw more cost capitalized as part of that pre strip.

So overall right on budget for the Q.

Consolidated free cash cost on.

All in we were overall, a consolidate basis $30 an ounce lower that's a function is always on the what happened with the cash cost in the Q and also.

Lower than budgeted sustaining capex is the primary reason that.

The beat on budget, there and most of that or all of that really is timing related.

The main part that wasn't incurred on the sustaining capital side relates to I guess fleet fleet rebuilds and stripping.

Mainly at Koala, North Dakota, and we do expect to see that reverse in the second half of the year.

But overall $30 per ounce are low.

And on budget on a consolidated basis.

And just a quick commentary on year to date, so year to date on production.

29000 ounces ahead of budget, so really reflecting the very good first and second quarter that we had and as Clay mentioned I think you gave a good outline of <unk>.

What we don't have on our guidance right now relates to what we can get from Cardinal as we move into Q3, and we expect it to come on line at some point in Q3 and later in the year and also the higher production that's going through the for colon mill right. Now. So I think that engineers are working on those numbers. So we can try in fact on the men. So right now we haven't and they weren't.

Included in the guidance that we put out for the year the budget or guidance.

We do think that Theres definitely chance that we could beat the high end of our production range. When that's factored in so we expect to be able to give you a bit more color.

Color on that as we move into Q3 as part of the Q3 reported.

And then just don't comment on the cash cost and the Orleans cost for the year. So on a cash cost basis for the 6 months were on $26 lower than budget that really reflects the you know, although we may have some cost inflation cost pressures across the sites are we we're beating it on the production side. So overall were below budget there and.

And all in sustaining cost for $88 low budget again, a function of those brought our cash cost and some of this deferred capex. We're also seeing on the all in sustaining cost side. We're also seeing the benefit of some fuel hedging that we've done so as I mentioned there were some higher cost fuel cost in the period, but we've been had a hedging program for Quaker.

A few years now where we hedged 50% of the first day.

Next 12 months and <unk> 25 per cent of the subsequent 12 months on on fuel basis, those hedges right now at the end of the quarter were about $18 million.

And the positive and we're seeing the balance of those hedging gains.

When you look at the all in sustaining cost because they're they're factored in there.

So guidance why is let me say that are at or above the high end of our production range of 97 to 10.30000 ounces for the year haven't really guided on the cost still expecting to meet our R. R. R. B within the ranges for our cost overall and.

And once we see the updated production numbers for Q3, we'll have a better idea of how that may impact any of the cost per ounce parameters.

Just a couple of other comments, maybe on the operations themselves Clive mentioned for colon on what's going on there and Cardinal.

<unk> solar plant also came fully online in the queue with the construction of the plant is complete theirs.

We're still working on a few commissioning things, but really its there and it is expected to reduce for Kohl's H F O consumption by over $13 million.

Oh per year.

And we you know we've already seen solar would be very successful in Namibia and now we're seeing the benefit of it cooler.

Anecdotally I think closer to giving you an overview on that and then just a comment on Chicago.

Development will shake the underground mine continues.

We've got the portal development is completed and now.

We're we're working on that with the underground primary underground ramp.

And we hope to get into.

Billboard production sometime in early 2022 as forecast.

Maybe just a couple of comments on some P&L items that don't fall automatically out of some of the production stats that we talked to boats. Our G&A is up a little bit in the Q and that's really primarily its a function of them too.

2 things the increase in insurance cost of the whole industry has seen insurance cost go up. Unfortunately, that's just a fact of life and part of that comes with higher gold prices because you have higher on.

Values in by numbers to deal with and then some of it is just ongoing higher COVID-19 cost as you manage the sort of COVID-19 protocols on sites.

At this point on the gains on derivative instruments, and the $9 million for the Q on 17 for the year that's on.

That's that's fuel.

All of that is fuel and that's just the positive gains on on some of the hedges that we have in place.

Taxes, you know.

$50 million per the cute.

C a T withholding.

See higher taxes mildly profitable volt side some of these higher oil prices.

And the 1 thing Thats in there that you know youre going to see on an ongoing basis now there was $18 million and there were for withholding taxes, mostly for Cola and mostly related.

To dividends as we pull money out from the sites the loans at all sites have been repaid some time ago on now monies that are pulled out from sites repatriated via dividends. So again, it's a function of being profitable and successful, but youre going to see some higher taxes, there isn't withholdings on dividend.

Overall earnings for.

For the period our earnings per share.

Yes.

On adjusted 7 adjusted EPS 5 cents and then for the 6 months EPS 15.

For sure and adjusted 14 cents per share the adjustments are primarily.

To remove unrealized derivative gains and D I T charges.

On credits.

Okay and then just finally, just wanted dimension our comments on a few items in the cash flow.

We've spent a lot of time and certainly trying to guide over the last.

Couple of periods or few quarters as to how we see cash flow unwind through this year.

So it is definitely a tale of 2 half this year.

Right about $140 million in Q1.

And we expect about half a billion dollars in Q2, so overall for the year, we expect about $630 million. That's what we guided at 1800 dollar gold and we expect certainly to come in on.

That are close to that and so that guidance is unchanged.

But what it did mean is that we had basically breakeven or just actually a slight cash outflow of $8 million for the quarter for operating activities for Q2 and as as guided frequently that debt.

Really relates mainly to working capital changes on the biggest component of that is payment of last year's tax obligations, most of which relate to Mali and so on paying off the malian tax obligations and.

The government dividend, which is due in the June following the next year. So 2020 government dividend ordinary dividend per moly was paid in the second quarter of 2021. So so so that's significant outflow there, but right as planned.

I think when we look at what we guided at the end of Q1 and moving.

We couldn't really be any closer for this Q I think than how we turned out. So so we're feeling very positive about the second half of the year on once now that the sites are I'm getting into the battery grade ore at both on.

And then maybe yet.

For color.

But to see a significant upturn on that operating cash flow as we go through the next few quarters.

Couple of other comments, maybe dividend paid we paid Clark mentioned, we paid a <unk> <unk> per share gain in the queue.

Dividend yield somewhere just under 4%. So it's still right up there in terms of the low business and we feel very comfortable maintaining that level of dividend.

Distributions to non controlling interest you see on the cash flow of 7 million outflow for the Q 9 million for the year. That's again a function of profitability. So we haven't been on those are those are related to payments to minority interest partners both.

Molly where the government has a 10 per cent dividend interest and then in Namibia, where we have a 10%.

Minority interest partner for <unk>.

And then finally just to comment on investing activities of 66 million Bucks for the quarter $125 million cash outflow year to date, we're about $30 million lower than budget.

For the year to date number and about 5 million out of that.

Weighted to sustaining capex, so mostly stripping that debt will see rollover into next year and then non sustaining this day.

About $20.24 million behind on non sustaining right now 9 million on that relates to Grandma I think that's just a timing thing. We've certainly done a lot of work there now and I think we'll catch up those cost very quickly and in fact, we were just in the process of finalizing them.

Grandma Ts revised budget for 2021 with our partners a J. We just have to have better formally approved now in the joint venture meeting that's going to happen next week. So the new budget. There is 69 million. That's an increase from the 52 that we had originally in the budget and our shares roughly $9 million of that additional.

For the for the year and then we also expect to.

Agree on on an update on an amount for the early part of next year, but right now its estimate would be about $17 million to get us right through to final completion on the feasibility study for Graham a lot too.

That revised look at dock feasibility study on how we think we want to approach it there.

So we think now the groundwater feasibility study will be done sometime in Q2 next year, it's pushed up slightly from Q1 as a result of more drilling that we've now agreed that we're going to do.

Trinidad and <unk> and also just ongoing COVID-19 restrictions in Colombia, which haven't stopped from doing work, but it just makes it a little slower than we had planned.

So like you said on on that Capex side that that 30 million that were under for year to date, we do expect to see that reverse flow through second half of the year or sorry, I should mention that the other thing on the non sustaining capex. It was under the <unk>. That's about 11 million for exploration that that hasn't been signed yet, but we've definitely got the plans on the teams it sound.

Hold on and working now at various sites that we expect to catch that exploration understand up.

Second part of the year.

So that leaves us at the end of the Q3 hundred $82 million in the bank and like I say waiting for that debt.

The big cash flow part of the year to come now in the second half of the year approximately half a billion from cash flow from operations to flow through and we've got the line Undrawn. We got 600 million line revolver sitting with our syndicate of banks. It's undrawn. So liquidity wise, we are in excellent shape.

And that concludes my remarks on the financial side of the quarter.

But do you play.

Okay.

Thanks, Mike I guess will operating opened up for any questions now.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session.

Should you have a question. Please press star followed by 1 on your Touchtone phone, you'll hear with 3 Tom prompt acknowledging your request and your questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by 2 if you're using a speaker phone. Please lift the handset before pressing any keys 1.

For your first question.

Okay. Your first question comes from Tyler Langton from Jpmorgan Tyler. Please go ahead.

Good afternoon, Thanks for taking my questions.

Yeah, maybe just to start with Cardinal I think you'd talked about.

It maybe being able to contributor on I think 20 to 25000 ounces.

Is that still the case and then I guess to start production are there any sort of I guess the permits are approvals that you need from the government.

Sure, Yes excellent question, Tyler I'll pass it over to build house flow.

Yeah.

So the answer is yes, you know kind of for the whole year that 2000.25000 is certainly within the range that we talked about remember that it is still.

Our resource an inferred resource so we're still working through that but with that being said that certainly the initial bulk sample that we completed in Q2 did represent quite quite well, what we thought was going to be there.

So that number still holds true and we have already we went through a full.

The update to our environmental impact assessment and that was approved and now we're just adding it to the mining plans. We actually have this next week diminished the ministry coming out to have a look at it and so certainly we see within Q3 will be ready to mine it fully.

Great. Thanks, and then just on them.

Yes.

Oh, sorry go ahead.

Okay. Thanks, and just as a second question just.

And Andy you mentioned in the release, some new pressures from fuel and other items, but can you just provide a little bit more detail on what you're seeing whether it's materials consumables fuel and if you sort of any supply contracts or fuel headwinds that kind of mitigate the impact this year.

Well I think Mike can speak to when you talked to you touched on in his remarks about the fuel hedging.

I don't know Bill do you want to talk about other than.

On abuse and inflation on what we're doing to mitigate the impact.

Yeah, well certainly.

We are seeing you know some some inflationary pressures for share in particular on the shipping side.

As everybody comes out of Covid, the shipping cost are up.

What we're doing as far as trying to mitigate it.

In the last couple of years, we've become a major.

Producer as opposed to a junior and that's allowed us really to get global pricing everywhere. So when we go out prices on reagents and that type of stuff. Then then we're able to kind of get there.

What all the Big boys are getting the best price as possible. So.

I would say that certainly there is a pressure on inflation, but we're managing it well.

Best we can for share and fuel I think Mike was going to talk about.

Right.

On the fuel side I don't have a lot to add.

I already talked about we are we have kept our fuel hedging programs up to date. So we're basically 50% hedged for diesel on H F O needs for the next 12 months and then 25 per cent for the subsequent 12 months so.

Right, but right now that's that's that's on the book.

It has a mark to market volume at $18 million, that's $80 million of positive and then you know the other the other hedge that we've talked about historically, it's kind of like a permanent hedge.

We put them on the solar plants on firstly in Namibia.

We view that as part of the overall hygiene approach to fuel and then obviously with Portola coming on line as well, we think that reduces our overall operating cost somewhere around 3% range. So that's kind of part of how we on a permanent basis or mitigating some of those cost risks.

Okay, great. Thanks, so much that's it for me.

Thanks, Doug.

Your next question comes from Josh Wolfson from RBC capital markets. Josh. Please go ahead.

Thanks, just.

Just a quick question maybe on capital allocation.

This quarter was not necessarily representative of what the what the go forward.

Cash expectations are going to be.

But with the second half of the year being positioned much better than you can even beyond that with grandma. Okay. What's the current thinking in terms of dividend policy and what the excess cash is going to be allocated towards.

Mike.

So on that front, so actually I think cut.

Couple of thoughts the first 1 is we're pretty comfortable like like I think we're saying that our current dividend rate. We've got 1 on the highest youll note. There we put ourselves up there pretty quickly.

And so we feel pretty comfortable in maintaining those rates.

Certainly you know for the long term.

Even given the significant fluctuations in oil price. So that was 1 of the reason for setting that at the rate we did.

Well, we are we're trying to balance.

Cash flow generation with also on returning capital to shareholders in a growth company as well as still a growth company. So.

I think youll see us run through.

And see where we get to by the end of the year and evaluated done, but I think I think right now we're pretty comfortable at the rate. We're at we don't have any plans for share buyback and we don't have any plans for any kind of special dividend right now for any increase in dividend.

Yes, we will continue as it makes sense to look at you know at the end of the day, we're going to have as we get into later this year and into next year. We can have an idea of what we think about grandma to in terms of potential capital and the idea that I think most of our our shows get it we're seeing a very healthy dividend, but we are on growth company and we want to continue.

The opportunities for growth whether it would be.

Finally, we've talked about whether it be criminal Archie or.

Other opportunities.

So we think we've got the right balance for the shareholders right now, but we will be looking at that is make sure by the end of the year now obviously, if gold were to make a switch and moving that.

<unk> changed our thinking there as well, but I think right now we feel we've got the right balance and let's see what we look like as we get towards the end of the year.

Got it. Thank you and then maybe if I can tack on 1 more just for Oh Jakarta.

With the sequencing in the second half of the year.

Is there any sort of a key difference between third and fourth quarter or is there going to be just a real step wise change now with the Mr. Greg If you could think about okay.

Bill you want to tackle that 1.

Yes, I'm just looking I'm just looking at what grade we're feeding into the mill here in the second half.

The answer is it's going to be pretty evenly broke out.

Okay.

So the first half the first half obviously, we had very low.

Not a very high output in the second half, we're going to see it come up in.

In Q3 and Q4.

Okay, and then how long is that sequence gulfport like physical past year end 2021.

Well, we haven't done the 'twenty 'twenty 2 budgets, yet so I'm a bit low to say exactly exactly what it's going to be.

Okay.

That's it for me thank you very much.

Okay. Thanks, John.

Your next question comes from obese Habib from Scotiabank. Please go ahead.

Thanks, Operator, Hi, Glen.

And then b to Jim.

Questions have been answered, but I did have a follow up question on Cardinal.

In regards to build you mentioned that you do have you have submitted the environmental and social impact assessment.

Any any kind of color that you can provide to us as to how those discussions are proceeding.

Regarding the permit.

Yeah. They are proceeding very well like I said, we submitted the bulk sample now they're just coming out to see basically to see where it's all at into and not even I don't even think we need an official written approval, but you just got to make sure that we implemented it correctly within our mine plan. So we see mining areas eminent.

Okay and in terms of mining on on Cardinal side as well.

Once you get that official I guess.

I made on whatever.

Can you start with garden on right away or is there any pre strip enquired any any sort of capex required on cardinal.

We can start right away as part of our bulk sample we had to move on that had move some material out to get some represented the material.

Kind of a twofer, we got the good metallurgical testing and we got some of the pre stripping done.

Okay, perfect and just a little bit more color on on the Anaconda side.

You had mentioned that men in total is not somewhere you want when you want to start off mining.

Mining in the first place.

But there was opportunity to start on other areas of Anaconda.

Would you look to do a bulk sample similar to what you did at Cardinal or how should we look at.

On the content.

Yeah. That's that's a real interesting question on the used because originally we did talk about doing a big bulk sample there.

You know with the saprolite material certainly the saprolite material that we have done some metallurgy on it and we think that debt it fits quite well, but I guess you know.

That's not off the table, we would consider doing a bulk sample in the Ben Taco area in Q4 this year potentially.

Okay perfect. That's it for me guys. Thanks, so much.

Excellent.

Your next question comes from.

Don Demarco from National Bank Financial Don Please go ahead.

Okay. Thank you operator, and thank you Clive and team on my first question is for Bill.

Bill there's a lot of moving parts that Nicola we got a low grade stockpile just on Q2 net the pet Cardinal and so on what should we be thinking about in terms of grade for Q3.

So you want on your question is what is the grade for Q3 net.

For color, yes, well.

Obviously direction would be higher than Q2, but we're just trying to get a sense of the balance of the 3 different components and so on and if theres anything you can kind of whatever you're calling people at this point.

Yeah. So so in the budget or grade kind of in Q3 were up around 2.8 to 8.3.

And then in Q4 were between 2.5 and $2.6.

Okay great.

They'll just continuing on you confirm Cardinal is gonna be still in that range of 20 to 25 day for 2021.

How much might we expect in 2022.

And you did release that 5 year guidance at the ATM is cardinal included in that guidance.

Any color here would be appreciated.

Yes. So cardinal is included in the original guidance that we released but none of the none of the bin Taco or men in total or any of that stuff is included and so that debt that is still yet to be factored in.

The interesting relative.

The thing that's really interesting about what was going on there is we're going to have some optionality, which you mentioned you know you talked about you've got the low grade stockpiles, you've got Cardinal you've got some cardinal saprolite, you've got potentially been Taco saprolite. So all these things are going to be put into play when we do the budget and so that's why I can't say, you really what's going to be carrying on in Q on Q2 of next year.

And I just wanted to come back to the previous question you asked me because I didn't I actually saw the mining.

The grade the grade in Q3 is going to be $2.7 3 and in Q4.2 points 1.

Okay, and obviously cardinal is going to be looking at a lot, but just to that second question on Cardinal 20 to 25 K for 2021, but that's probably a baseline for subsequent years I would imagine.

Well, yeah, I mean, once again, we havent really schedule it out because we don't know how it's all going to fit in with been talk on Anaconda zone.

The answer is there is as you know the resources quite big there.

Okay, great and on.

And then tack on.

Is there any concern that the mining license in that area north of <unk>.

Could be retracted.

Are you feeling pretty confident on that I mean honestly, we hope to have the portion that was taken away we restored but what about risks to the rest of the property.

Yeah, we see that as really low low price low.

Low probability the reality is is that still sitting under a very early exploration licenses. So theres still on the.

I think another 7 years or 6 years of exploration potential there.

On the fact that we're already willing to put it into production now and of course the government is in.

Need for cash.

Certainly other projects around which are getting their permits it as normal. So we see men in total is an anomaly and we see it business as usual everywhere else.

Okay. Thanks, guys. That's also on these.

That's an important point the medical is a very different situation, where we have we believe we have the legal right to an extension to allow us to get going on it and filed for an exploitation license under we believe under mounting on the Italian law, we have the right team.

That's been a very different stage once again I mentioned, we're discussing with the government. We also are in arbitration in Paris, which.

It was a big step that we didn't do that lightly because we believe we should have assumed between rates here so but.

But medical is a very different situations on the Taco and <unk>.

The government and all indications are theyre very keen to see us get going in that area on initially and tackle and ultimately I think so on a rule to see us the appropriate place to take or from <unk>.

Taco is of course, the so called on mill and that's not lost on a lot of people including on.

People come on it's just we were seeing in government and Raleigh.

Okay guys. Good luck with the rebound in starting in Q3.

Thank you.

Thank you.

Your next question comes from Kerry Mac Murray from Canaccord. Please go ahead.

Hey, good morning, everyone. Maybe a question for Mike on net operating cash flow guidance $500 million in the second quarter.

Is that lining up with the midpoint of your production and cost guidance I E. If you. Obviously you know at the top end of production guidance now, but if you do better on cost could we see upside to that number.

Oh on the operating cash flow side, yeah, Yeah, I mean, obviously the more production you have.

Arguably it depends what the cost profile is I would I would.

Balance out on the other side, but we have seen some cost inflation. So our view overall is I think we can meet our cost guidance, but you know the.

The cost per ounce, obviously can be benefited from more lower cost production say from cardinal in the period, but overall I think I would view us as coming in on the range.

That's where we sit right now.

Okay, Great and then maybe a question for Bill I noticed in the MD&A you guys talked about the solar plant being complete and it looks like it's going better than plan just wondering if you can.

Little color on potentially what that could translate into for you guys.

Yeah, I mean, John Rahal as on this call he's probably more more appropriate to answer it but what I will tell you is that we're definitely seeing design design plus and given the fact that we're in the rainy season now.

We certainly anticipate that we're gonna be above where we thought that design capacity. He was gonna be no. John if you want to add anything to that.

No I think that's.

Good.

Summary, bill during the second quarter or the solar provided 16, 8% of the total power production, but that was only but 78 per cent of the panels installed so.

It did really well with a number of panel installation, which is now completed and we're doing testing and.

We've gone up as high as 30 megawatt hour production, which is the rated capacity of the plant. So its all looking good.

So high level, you mentioned savings 13 million heaters on Snapchat poll, which we can do the math on but what is it like ice on the operating cost of debt solar plant now that demand is pretty pretty minimal.

Okay, Yeah, that's commodity model so.

It's going to contribute to a roughly 2 and a half cents per kilowatt hour savings as I think is what we are projecting so.

We may have potential to even.

Exceed that.

Yeah.

Okay.

Reminder, I think I mentioned it in the remarks, we think overall when you look at it on balance.

Reducing cash cost by about 3%.

But that's what we think the impact of solar as we see similar kind of contribution and then maybe as well.

Perfect. Thanks, guys.

Ladies and gentlemen.

Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by 1.

And your next question comes from Anita Soni from CIBC World market I need a please go ahead.

Alright, Thanks for taking my call good morning, or afternoon climate team on.

Most questions have been answered, but can you just clarify on again, 1 more time on.

And along right.

The.

Just difficult to meet.

The components of how we're getting to sort of on.

On the higher production in the second half of the year or so.

I was a little confused because I thought you said that.

In the press release, just on Cardinal is not part of the low point.

<unk> factored in to the grades and that could be on additional upside that thought Mike you had said that.

And just now that debt Cardinal was factored in.

So I'm just could you clarify that for me and then also secondly on the throughput levels.

It seems like you're hitting above the throughput level at Nicola in your guidance you.

On a slightly lower level on throughput for this.

For next year is our run rate is there something that we should be thinking about in terms of like additional bottlenecks or you know on the mine maybe a bit constrained. So you cant run at that full flow level I think with $88.3.

Per day that you did this quarter for 1 month.

Well I'll start with the initial question about Cardinal whether it's factored in it is not factored into the budgeted numbers thats not factored in.

So current guidance.

What I always say on an earlier remarks was when we get more clarity on exactly how we see that flowing in Q3 and Q4.

We'll have a look at our guidance.

Theres any guidance.

We would update that.

And the debt.

And then my other comments on it just more recently, where it was in.

The question was do we see cardinals potentially benefiting cash cost.

And I was saying you haven't been in.

Korea could for sure because more production hopefully lower cost, but we are not changed on our guidance range. Even once right now we havent changed your cash cost range, when we see what cardinal looks like.

A bit more flavor towards Q3 than.

We'll come back to you if we think it changes anything.

Okay.

No, yeah, and when I'm talking about mill throughput or build genre, yeah, Yeah I do for sure in the second half of that question.

I was asked if if cardinal there was we did a 5 year guidance was Cardinal included net and the answer is yes, starting in 'twenty 'twenty 2 so going forward.

That was already included in our assessment for the next 5 years for your guidance through 2025 as far as how do we see you know.

Getting getting the additional ounces this year, there's quite a few ways that could happen for sure..1 obviously is the throughput right our budgets.

For this year were run at 7.5.

I'm, sorry, 775 million tonnes per annum.

We're currently we're currently running up there you know much closer to 9 and we're thinking and once again this is where.

I was kind of coy about this but.

Were basically thinking if if we can get a million tons of saprolite down there or something like that or 15%. We think that we could actually be running up around 9 million tonnes per annum.

Going forward and so that's kind of what we're shooting for right now and that's what we'll be looking at for our budget. So what we have is we have this huge extra capacity.

What's in the budget vs.

What obviously generate sales profile versus what we're actually running so you could have on its profile from Cardinal certainly have it from stockpile and as someone mentioned earlier if it were real slick about it we can actually pull a bulk sample from from bad talk on bring it down so a bunch of different options.

Alright, Thank you that answers my questions.

Excellent.

There are no further questions at this time I'll turn it back to Clive Johnson for closing remarks.

Okay, well thanks for.

Your participation and your good questions and we look forward to low very strong second half of the year and we'll continue to have great performance on the minds are excited about per.

Proceeding, but it will be both looking at our development projects exploration and she.

She was on other opportunities come our way and we.

We look forward to talking with you again soon thanks everybody.

Thanks, operator.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.

Yeah.