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 <unk> 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 quest.
And the answer session, if you'd like to ask the 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 the truckload.
Our financial results from the strong Q2 of the 2021.
Continued.
Strong the gold production performance.
And we are on track to meet or exceed the upper end of our annual production guidance range, which sits between 970000 ounces.
The goal to 1.030.
Million ounces of gold.
I'm just kind of give a couple of remarks on the front of the Mexican or walk us through the key financial results, we put out a pretty.
Extensive news release talking about the results of the quarter and also where we sit financially overall, but also updating you on the left.
On a few other issues for the 3 months continue to produce well I think as we've signaled the very.
Very early and very often that the second quarter of this year was the first half of the year was going to be lower production and the production of weighted to the second half of the year in the second quarter. This year, we knew was going to be the.
The weaker quarter.
The extra dose basis, which hopefully be signaled that very well to the market.
No.
We're seeing the reality of that of we're also seeing the positive start to the second half of the year in terms of the overview here of the 3 months continue to operate very well.
We've worked very hard and diligently 3 of the Covid experience with all of the communities our employees and the governments in the areas. We work with very proud of the contributions from every 1 of them I think the.
The really short off the the amount of of social license and 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 remind that the only if we can do it safely. So I'm proud of the contribution from all of our all of.
Of our employees from.
People. So in terms of looking forward a little bit of 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 to meet the the year, but that does not include a couple of upside potentials as well we have the Cardinal zone, which is adjacent to the for call. It the <unk>.
Most of the we're looking to we've already done the bulk testing where that can start moving ore from cardinal to.
Some good grade material from Cardinal true the Tacoma Mill, which was not included in any of our projections show that could bump of production there and then looking a little bit further out we are looking at.
The Anaconda area, which consists of anecdotal and the Taco.
As we all know were and are currently in the dispute with the government over the ownership of the amount of quote of license. We continued discussions with the government looking to our solutions.
<unk> solutions, we believe we have of legal rights from the extension to the other exploration license, where we've spent.
Just from $27 million and identify the significant resource.
It has the potential to get larger and can be trucked down potentially too difficult of mill, but importantly, the mechanical or other areas, where these 2 licenses and of the tackle north just immediately north of the Makoto has a significant amount of saprolite, whether the material at the surface, where the good grades that's actually where we would start mining downturn.
1 of the area.
And that's the license so theres not an dispute so we're looking potentially at least subject to of SUNS.
Subject to the front of mine plan and the permit to be working with the government as a partner there as S and from coal as well, we'll be looking to start shifting more of potentially the saprolite ore down to the pool of mill.
And the as early as the second half of starting in the second half early second half of next year. The from Cola Mill, We've talked about of the initially spent we had spectacular performance from the mill from it's from when we first constructed and then through the 2 expansions of the mill and we've we're getting some very good tonnage throughput. So that's another upside given the projections, we made for tonnage throughput of 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 the split of nature of material from running through the mill.
On top of the of the normal capacity for 4 of the mill.
So there's some upside scenarios there of the overall picture of the Anaconda area, we think there's tremendous exploration upside.
And of course, the women's impactful and continued drilling of the tanker while we resolve.
Hopefully positively resolved and get on with business and then a total in terms of that scenario and I just want to climb of the Mali has been a very good place to do business and for bromine from many years as Randgold Barrick can attest to in other companies, including ourselves. So we expect to resolve this current situation and get back to exploring the amount of cold weather.
Half of it.
Part of the government out of the people of the Maui and creating jumps in the short term, but in the in the meantime, we'll go ahead with the tackle as we would've started there anyway, but we think knowledge the good place to be in the Gulf of any business, we still believe that and we believe that the government will continue to honor the losses of house for decades, making it an attractive place for foreign investment.
The other than that the game of 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 exchange of essentially the looks a lot of of the capital cost. It looks like we're getting some traction there from some of the early indications from the engineers.
So we're doing additional drilling.
The granularity of switch itself, but also on the.
The 2 other areas, Trinidad Morehouse west and getting some interesting early results from Trinidad which has been a low grade <unk>.
So it might have out of my life back in the day and now we're seeing some potentially moving 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 are optimistic the gram of electric and we can prove the projects through some of the initiatives, we have going on and we'll be able to talk about that.
Early in the field in the.
The second quarter other than that of we've got all of them from a very active exploration program going around.
Many targets around the world things, we've been working on in some cases for years to get opportunities like Rebecca stand where were drilling.
Exciting targets in Finland and of course of all of our various brownfield exploration program surround the minds when we've had great success over the years.
Meaning to add ounces and therefore, our mine life to.
2 our operating mines registration will continue to be an important part of our gross profile the kina.
I could predict the beginning of Faisel, we're not.
Updating the feasibility of stay 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 the things that would be really love out there that we think are fair value.
We'll continue to look kind of look for opportunities, but first of 2 M&A. It's more of like you will find some different situations, where some of our bringing our expertise to bear with the opportunity that may suit us that may not have since the 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 of general overview I'll pass it over the mic and he'll tell you about.
That's the position we find ourselves in continuing to pay a very robust dividend 1 of the.
Most of it in yields in the gold sector and talk about our strong cash position and our lack of debt and continued financial strength looking into the future.
So with that I'll pass it over the Mike's sentiments, who give us.
An update we also have the extending 1 of them.
The entire Beecher go the executive team.
Excuse me on the line available to answer.
That's the question chapter of Mexican in his presentation. So okay.
Thanks, Cliff and good morning, everybody.
It's going to run through the quarterly results a quick comment on the year to date, and then sort of where we are cash the way from balance sheet wise. So firstly on the on the quarter for the second quarter.
With 300 of $63 million in revenue from the sale of 200000 ounces at an average price of <unk>.
$114 per ounce.
Gold still holding its own as everyone's seen in the quarter, it's kind of at the bit range bound around about 1800 dollar mark, but certainly holding its own and when we gave guidance on cash flow for the year et cetera ready to start of the year, we exited $2800 gold so right in that ballpark of where we thought when we were budgeting and giving guidance to everyone.
Sales were 12.12.
<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 included in our share of caliber production was 212000 ounces, which is basically 10000 ounces higher than budget and that came really from outperformance from each of our sites. The Cola a same kind of story as the first quarter. The mill just the throughput at the mill.
<unk> continues to outperform even our expectations, we did budget of 775 million tonnes annualized throughput.
For the newly expanded for colon, Mel but you know even in Q1, we did $2.2 9 million tonnes, so well in excess of what we budgeted at the combination of a few things.
Favorable over of fragmentation of the hardness and optimizing the grinding circuit.
The it's all very promising what we did see a in.
In the Q, whether the the feed some of the excess production of 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 call of 114000 ounces of 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 as we saw in Q1 mill recoveries continued to outperform our model and the process grade from our from the art.
Transitional ore and the main thing we're working right now with the above budget. We did actually have time in the queue to run a couple of metallurgical test campaigns.
Just to try and help us optimize our recoveries as we move forward into the harder ore later in the mills are in the minds of 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, the fatty running very well and still beating the model on on recoveries and grades.
In North Dakota, the 27000 ounces not the 2009 sort of ahead of budget and and really as you know and 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 code or the majority of it was coming from stockpiles.
In the first half of nano or would you quoted once we get into the the.
The.
The mining the higher grade and both will check in or Dakota of pet in the second half of the year, we're gonna see of real upturn I think in the production from them.
From that mine.
But in Q2, even when we mine from the.
The sort of medium grade stockpiles that the.
The.
The grade that we actually got was actually part of the model. So we saw the beat overall on the numbers for what Chicago from.
Can you translate that into.
Cash costs for and this is on a per ounce produced basis overall.
Across all our sites and include nursery of Calvert, We're basically right on budget $664, an ounce against the budget of 662, but there were some offsetting factors in there and the offsetting sites. So.
For coal it was $617 an ounce net that was the boats just over $70 an ounce of higher than budget, but that's primarily a function of a couple of things the.
First 1 of the main 1 is that we were running that lower grade material through the mill to feed the exits throughput so lowered rate.
At least the higher costs overall, our per ounce and then we did see some.
Higher costs 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 from all of mining operations.
But even even with that we still manage the overall and consolidate basis to come in right on budget. So offsetting the for colon, 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.
<unk> generally online.
Budgeted operating cost of low again fuel was higher in the study site.
And then how would your code of $854, an ounce again, just over $80, an ounce of lower than budget and.
The same kind of story of higher iron the budgeted production slightly higher if you are higher fuel cost and the stronger Namibian dollar.
That was also offset by higher than budgeted pre strip. So we saw some more cost capitalized as part of the pre strip.
So overall right on budget for the Q.
Consolidated for cash cost of.
All in we were overall, a consolidate basis $30 an ounce lower that's a function as always of the what happened with the cash cost in the Q and also.
Lower than budget of sustaining capex of the primary reason that the.
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 of Koala, North Dakota, and we do expect to see that reverse in the second half of the year.
But overall $30 per ounce.
Other than budget on a consolidated basis.
And then just quick commentary and year to date, so year to date on production.
29000 ounces ahead of budget, so really reflecting the very good versus the second quarter that we had and as clay mentioned I think you gave a good outline of some of what we don't have in our guidance right now relates to what we can get from Cardinal as we move into Q3, and we expect it to come online at some point in Q3 and later in the.
And also of the higher production, that's going through the from colon mill right. Now. So I think the engineers are working on those numbers. So we can try and fact of the men. So right now we haven't and they werent included in the guidance that we put out for the year the budget of guidance.
We do think that there's definitely chance that we could beat the high end of of production range of and 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 costs for the year. So on the cash cost basis for the 6 months were $26 of 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.
The all in sustaining costs were $88 below 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 costs fuel costs in the period, but we've been how the hedging program for Quaker.
A few years now where we hedged 50% of the first the next 12 months of the 25% of the subsequent 12 months 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 benefit of those hedging gains.
When you look at the all in sustaining costs, because they're factored in there.
So the guidance wise like we say the 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 costs. So expecting to meet our R. R. R be within the range is for our costs of our overall and you know.
Again once we see the updated production numbers for Q3 will have the better idea of how that may impact any of the cost per ounce parameters.
A couple of other comments, maybe on the operations themselves Clive mentioned for colon and what's going on there and cardinal for cash.
<unk> solar plant also came fully online in the queue at the the construction of the plant is complete.
And we're still working on a few commissioning things, but really its there and it is expected to reduce the Kohl's H F O consumption by over 13 million leaders of each of 4 per.
At year.
And we've already seen solar would be very successful in Namibia and now we're seeing the benefit of it the caller.
And then of quota I think culturally of giving you an overview on that and then just a comment on Chicago.
The volatile will shake the underground mine continues.
We've got the portal development is completed and now we're working on the the underground primary underground ramp do we get and we hope to get into the stope ore production sometime in early 2022 as forecast.
Maybe just a couple of comments on some P&L.
P&L items that don't fall automatically out of some of the production stats that we talked about our G&A is up a little bit in the Q and that's really primarily its a function of.
2 things the increase the insurance cost of the whole industry has seen insurance costs go up. Unfortunately, that's just the fact of life and part of that comes with higher gold prices because of higher.
Values of numbers to deal with and then some of it is just the ongoing higher COVID-19 costs as you manage the sort of COVID-19 protocols and sites.
At this point of the gains in the derivative instruments of the $9 million for the the Q and 17 for the year that's.
That's that's fuel that's almost all of that is fuel and that's just the positive gains on some of the hedges that we have in place.
As the.
The $50 million for the cute.
Yes.
What's holding you know, we're going to see higher taxes Maui from profitable at all sites. 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 for withholding taxes, mostly for the Cola and mostly related.
The dividends as we pull money out from the sites the loans at all sites have been repaid some time ago and now monies that are pulled out from sites repatriated by of dividends. So again, it's a function of being profitable and successful, but youre going to see some higher taxes, there because of the withholding from dividend.
Overall earnings.
For the period of the earnings per share.
<unk>.
On the adjusted 7 adjusted EPS of <unk>, and then for the 6 months EPS.
EPS 15.
Per share and adjusted 14 cents per share of the adjustments are primarily 2 to remove unrealized derivative gains in the I T charges.
And credits.
Okay and then just finally just wanted dimension.
Our comments on a few items from the cash flow.
We've spent a lot of time of certainly trying to guide over the last.
A 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 the boat $630 million, that's what we guided at $800 gold and we expect certainly to come in.
That are close to that as of 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 that.
Really relates mainly to working capital changes and the biggest component of that is payment of last year's tax obligations, most of which relate to Mali.
So of paying off of the Malian tax obligations and.
The government dividend, which is due in the June following the next year. So 2020 government dividend ordinary dividend from Ali was paid in the second quarter of 2021. So so so that's significant of pull there, but right as planned.
I think when we look at what we guided at the end of Q1 of them.
We couldn't really be any closer for the Q I think than how we turned out. So so we're feeling very positive about the second half of the year and once now that the sites are getting into the battery grade or both.
And then maybe yet.
And for cooler.
Expect to see a significant upturn in that operating cash flow as we go through the next few quarters.
Couple of other comments, maybe the dividend paid we paid Clark mentioned, we paid the <unk> per share gain in the Q or dividend, you'll somewhere just under 4%. So it's still right up there in terms of the flow of business and we feel very comfortable maintaining that level of dividend.
Distributions to non controlling interest you've seen the cash flow of 7 million outflow for the Q 9 millions of the year lots of gain of function of profitability. So we have minority.
Those are related to payments to the minority interest partners both.
Molly where the government has the 10% dividend.
And then in Namibia of where we are of 10%.
The minority interest partner approach of coder.
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 the both 5 million, though that really.
Weighted to sustaining capex, so mostly stripping that will see rollover into next year and then non sustaining the.
About $20.24 million behind the non sustaining right now 9 million of that relates to Grandma I think thats just the timing thing. We're certainly doing a lot of work there now and I think well catch up those cost very quickly and in fact, we were just in the process of finalizing.
Graham of lot Ts revised budget for 2021 with our partners a J. We just have to have better formerly of proven out 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 from.
The for the for the year and then we also expect to.
Agree on on an update of the amount for the early part of next year right. Now it's estimate would be about $17 million to get us right through the final completion of the feasibility study for Gram of lots of it.
That revised look at that feasibility study and how we think we want to approach it there.
So we think now of the Grandma the 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 that Capex side, the that $30 million of where under for year to date, we do expect to see that reverse flow through second half of the year or sorry, I should mention the other the other thing on the non sustaining capex of with under the <unk>. That's about 11 million for exploration that that hasn't been signed yet, but we've definitely got the plan from the teams the sound.
Holden and working now at various stages of we expect the catch that exploration of understand up and the <unk>.
Second part of the year.
And that leaves us at the end of the queue with $382 million in the bank and like I say weighted for that the.
The big cash flow part of the year to come now in the second half of the year approximately half of 1 billion from cash flow from operations to the 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're 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 operate of open 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 of a 3 Tom prompt acknowledging of request and your questions will be pulled in the order of the 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.
But from your first question.
Okay. Your first question comes from Tyler Langton from Jpmorgan Tyler. Please go ahead.
Good afternoon, Thanks for taking my questions.
You mean, maybe just to start with Cardinal I think you'd pay the talked about.
It maybe being able to contribute around I think 20 to 25000 ounces.
Is that still the case and then I guess the start production of any sort of I guess the permits are approvals that you need from the government.
Sure, Yes section of the 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 of we talked about remember that it is still.
Yes of resource and inferred resource so we're still working through that but with that being said the certainly the 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 of 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.
I'm, sorry, I'm glad to other okay. Thanks.
The second question just.
I think we've sort of seeing some inflationary pressures I guess could you just.
And Andy you mentioned in the release of new pressures from fuel and other items, but can you just provide a little bit more details on what you're seeing whether it's materials consumables fuel and if you sort of any supply contracts or fuel headwinds the 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.
Other views in inflation and what we're doing to mitigate the impact.
Yeah, well certainly.
We are seeing some inflationary pressures for share in particular on the shipping side.
As the everybody comes out of Covid the shipping costs are up.
What we're doing as far as trying to mitigate it as you know.
In the last couple of years, we've become a major.
Producer as opposed to of a junior and that's allowed us really to get global pricing everywhere. So when we go out the prices on reagents and that type of stuff. Then then we're able to kind of get the.
What all of the Big boys are getting the best price as possible. So.
I would say that certainly there is the pressure on inflation, but we're managing it well.
Best we can for share and fuel I think Mike was kind of talk about.
On the on.
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 in nature of old needs for the next 12 months and then 25% for the subsequent 12 months so.
But right now that's that's that's on the book.
It has the mark to market value of about $18 million, let's say 2 million of the positive and then the you know the other the other hedges that we've talked about historically, it's kind of like of permanent hedge as we put the the solar plants. The firstly in the maybe it will.
We view that as part of the overall hygiene approach to fuel and then obviously with the for call of coming online as well.
That reduces the overall operating costs some of that 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 from 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 we can even beyond that with Gram of 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.
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 of 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 of gold price of that was 1 of the reasons for Sutton.
We did.
We are you know we're trying to balance.
Cash flow generation with also and returning capital to shareholders.
The growth company as well as still a growth company. So I think 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 buybacks.
We don't want of any plans for any kind of special dividend of right now for any increase in dividend.
Yes, we will continue as it makes sense to look at the at the end of the day, we're going to have as we get into the later this year and into next year, we're gonna hasn't been the idea of what we think the grammar lots of it in terms of potential capital and the idea of I think most of our of our shows get it we're paying a very healthy dividend, but we are of growth company and we want to continue.
The opportunities for growth whether it be in the.
Currently we've talked about whether it be chairman of Archie or other opportunities.
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 sense of it moves in the mine.
The change 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 with the great. If we could think of the bio okay.
Bill you want to tackle that 1 of them.
Yes, I'm just looking I'm just looking at what's the 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 of the first half obviously, we had a very.
Not a very high output, but the second half we're going to see it come up in.
In Q3 and Q4.
Okay, and how long is that sequence gulfport like physical past year end 2021.
Well, we haven't done the 2022 budgets, yet so I'm a bit low to say exactly exactly what it's going to be.
Okay.
Thats It from me thank you very much.
Okay. Thanks, John.
Your next question comes from Obs Habib from Scotiabank. Please go ahead.
Thanks, Operator, Hi, Glen.
And then B to Tim.
Questions have been answered, but I did have a follow up question on Cardinal.
In regards to Bill 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 from it.
Yeah. They are proceeding very well like I said, we submitted the bulk sample now the just coming out to see basically to see where it's all of that into and not even I don't even think we need an official written approval, but to just kind of make sure that we implemented it correctly within our mine plan. So we see mining areas eminent.
Okay and in terms of mining on the Cardinal side as well.
Once you get the official I guess.
8 of whatever.
Can you start with garden, the right away. It was the 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 up that had moved to the material ought to get some represented the material.
The 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 the Anaconda side.
You had mentioned that men in total is non 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 bank of gone down.
Would you look to do a bulk sample similar to what you did the cardinal or how should we look at.
And the content.
Yeah. That's that's a real interesting question of Ace because originally we did talk about doing a big bulk sample there with.
With the saprolite material certainly the saprolite material that we have done some metallurgy on it and we think that that it fits quite well, but I guess you know.
I guess, that's not off the table, we would consider doing a bulk sample.
The Ben Taco area in Q4 this year potentially.
Okay perfect. That's it from 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 My first question is for Bill.
Bill there's a lot of moving parts of the Cola, we got the low grade stockpile of 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 your question is what is the grade for Q3.
The Cola, Yeah, well I mean, obviously direction of it'll 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 there's anything you can kind of the.
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.
Daryl just continuing on.
You confirm Cardinal is gonna be filling that range of 20 to 25 came from 2021, but 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.
So of 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 that is still yet to be factored in the.
The interesting really the.
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 got Cardinal you've got some cardinal saprolite, you've got potentially been Taco saprolite. So all of 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 is going to be carrying on in Q1 Q2 of next year.
And I just wanted to come back to the to the previous question. You asked me because I didn't I actually saw the the mining.
The the grade the grade in Q3 is going to be 2.73 and in Q4.2 points 1.
Okay, and obviously cardinal is gonna be making that a lot but.
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 its all going out of it in with the Taco in Anaconda zone.
The answer is there is as you know of the resources quite big there.
Okay, great and on the and tackle.
Is there any concern that the mining license in that area north of the Mac hotel could be retracted.
Are you feeling pretty confident that I mean honestly, we hope to have the 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 probability of the reality is is that still sitting under a very early exploration licenses. So theres still another I think another 7 years of 6 years of of exploration of potential there.
The fact that we're already willing to put it into production now and of course of the government is in the.
The need for cash.
Certainly the 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.
So.
That's an important point of the medical does the very different situation, where we had we believe we have the legal right to an extension to allow us to them to be.
Get going on it and filed for an exploitation of license and weak the under we believe undermine the value of all we have the right team.
That's sort of very different stage once again I mentioned, we're discussing with the government. We also are in arbitration in Paris, which.
It's the big stuff that we didn't do the lightly because we believe we still have assuming the rates here. So.
But medical is a very different situation from the tackle and.
We work with the government of all indications are the very keen to see us get going in that area of initially with the tackle and ultimately I think the sort of willing to see us of the appropriate place to take or from <unk>.
The Taco is of course, the so called the mill and that sort of lost a lot of people, including the 1 of the <unk>.
People I would suggest we would see in government and the Maui.
Okay guys. Good luck with the rebound in starting in Q3.
Thank you. Thanks. Thank you.
Your next question comes from Carey <unk> from Canaccord. Please go ahead.
Hey, good morning, everyone. Maybe a question from Mike on the operating cash flow guidance $500 million in the second quarter.
Is that lining up with the mid point of view of production and cost guidance I E. A few non so you know at the top end of the production guidance now, but if you do better on cost can we see upsides of that number.
Oh on the operating cash flow side, yeah, Yeah, I mean, obviously the more production you have.
Arguably the best it depends what the cost profile is I would I would balance out on the other side, what we have seen some cost inflation. So our view overall is I think we can meet our cost guidance, but.
The.
The cost per ounce, obviously can be benefited from more lower cost production say from the 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 add.
The little color on potentially what that could translate into for you guys.
Yeah, I mean, John Mahalo as on this call. He is 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 the design capacity was going to be.
John if you want to add anything to that.
Alright, I think thats.
The summary, bill during the second quarter of the solar provided the 16, 8% of the total power production, but that was the only but the 78% of of the panels installed so.
It did really well for us.
Number of panel installation, which is now completed and we're doing testing and the.
We've gone up as high as the 30 megawatt hour production, which is the rate of capacity of the plant. So its all looking good.
So high level, you mentioned the savings of 30 million liters of <unk>, which we can do the math, but what is it like I assume the operating costs of the solar plant now that the trend is pretty pretty minimal.
Yes, the competitive model so.
It's going to contribute to a roughly 2 and a half cents per kilowatt hour savings as I think of is what we are projecting so.
We may have potentially even the <unk>.
Exceed that.
Yeah.
Okay.
Remind me I think I mentioned it in the remarks, we think overall when you look out of 1 bell at <unk>.
Uses of 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 of please go ahead.
Alright, Thanks for taking my call good morning, or afternoon, Clive and team.
Most of the questions have been answered, but can you just clarify again, 1 more time.
And the long night.
The.
Just the cycle last year and I think the may.
The components of how we're getting to sort of.
The higher production in the second half of the year. So I was a little confused because I thought you said that you know.
In the press release of says Cardinal of not part of the of what.
<unk> factored in to the grades and that could be of additional upside that thought Mike you had said that.
And just now that the Cardinal was factored in.
So I'm just could you clarify that for me and then also secondly on the throughput levels and it seems like you're hitting above the throughput level at Nicola and you've guided to.
A slightly lower level on throughput for the for.
The next year as the run rate is there something that we should be thinking about in terms of like additional bottlenecks or the mine maybe a bit constrained. So you cant run at that full flow level I think it was $88.3.
Per day that you did this quarter for 1 month.
Well I'll start with the initial question of both Cardinal whether it's factored in it is not factored into the budgeted numbers thats not factored in.
Sort of current guidance.
What I was saying earlier remarks was when we get more clarity on exactly how we see that slowing in Q3 and Q4.
We'll have a look at our guidance expenses.
Theres any guidance.
We would update that.
And the.
And then my other comments on it just more recently, where it was in.
The question was do we see cardinals potentially benefiting cash costs.
I would say no I mean in theory of kit for sure because of more production hopefully lower cost, but we are not changing our guidance range. Even once right now we havent changed your cash cost range, when we see what cardinal looks like in <unk>.
The more flavor towards Q3 than we.
I will come back to you if we think of changes anything.
Okay.
No, yeah, and when I'm talking about mill throughput or bill genre, Yeah, Yeah, I do for sure in the I also of the second half of that question.
I was asked if if cardinal there was we did a 5 year guidance was cardinal included in that 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 are were run at 7.5.
I'm, sorry, $7.75 million tons per annum, where currently we're currently running up there you know much closer to 9% and we're thinking and once again. This is the we're always kind of coy about this but.
Were basically thinking if if we can get 1 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 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 the huge extra capacity.
What's in the budget versus.
What obviously generates the ounce profile versus what we're actually running so you could have ounce profile from Cardinal you could certainly have of from stockpile and as someone mentioned earlier, if it were real slick about it we could actually pull the bulk sample from from bad Taco and bring it down so a bunch of different options.
Alright. Thank you the answers my questions.
Excellent.
There are no further questions at this time I'll turn it back the Clive Johnson for closing remarks.
Okay, well thanks for the.
Your participation in the good questions and.
We look forward to a very strong second half of the of the year and will continue to drift from great proportion of the mines and are excited about.
Proceeding with dozens of both looking at all the development projects exploration and the.
She was the other opportunities come our way in the <unk>.
We look forward to talking with you again soon thanks everybody.
Thanks Robert.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Yeah.