Q3 2021 B2Gold Corp Earnings Call
[music].
Good morning, and afternoon. My name is Sylvia and I will be a conference operator today at this time I would like to welcome everyone to be two golds third quarter 2021 financial results Conference call note that all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
If she would like to ask a question. During this time simply press Star then the number one on your telephone keypad and if you would like to withdraw your question. Please press Star then number two thank you. Mr. Johnson you may begin the conference.
Thank you operator.
Ultimately the ones who are.
Third quarter financial results call I'm, just going to see a few opening remarks and hospital Mike's sentiments walk into the naturals.
Okay.
Any questions.
As you can see from the release.
Another strong quarter in the third quarter. Despite once again the challenges of Covid.
Some inflationary pressures on the cost side, so we're pretty.
We're pleased with the results, we're seeing with third quarter.
As you'll hear from Mike the very strong financial position.
And going forward.
Strong cash and debt free.
Looking to generate some $650 million for the year cash from operations.
All the details on that.
The focus of the company going forward will be to continue to optimize responsible profitable gold production.
And.
Horrible.
Hello.
Our new guidance.
The mindset.
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As Bonnie.
And those are things, we're going to continue to advance our development projects. Obviously your Grandma I'll tell you. We're looking out a feasibility study by the second half of next year and we've had some positive results from some of our engineering reviews. So far.
We need to produce.
Capital costs and also we're drilling the way you're looking to turn some of our inferred into indicated so we can divide the capital potentially.
But warehouses, so where do you think thats heading in a positive direction.
Programmable logic I think the other thing is discussed pretty excited as to potential overseas.
The chocolate and the Anaconda area one kilometers.
Yes.
Cola and the excitement there is the ability initially due to the hall to start hauling saprolite material the 20 kilometers from the chocolate out.
Too difficult of a bill that the cold mill has been running at.
Screening well.
And it can definitely have a satellite material because it's soft material on top of it.
On top of it would be hard rock. So we see the potential there about the second half of next year to start tracking work and also of course, the other big savings has been the Cardinal.
<unk> 500 meters from the coal out of the same amount of licenses for cohort. So we received the permits from the government to start mining there at our mining there and that could add to production as well so positive developments there in the short term and the longer term.
The medical license, we continue to have a very.
Productive successful conversations with the government of Mali.
Resolve that situation, where I'll see we hope in the next few months, we will see that our license.
Extended or renewed for sure mechanic hurdles and that'll be an important part when mentioned we've mentioned several times a bit jackups a separate license. So we can start tracking some there, but obviously you'd like to be.
B drilling both of them so extensive drilling continuing on to tack on some very very good results and the ultimate target. There is to see if we have in the sulfides below the saprolite is the potential for call. It type of sulfide mineralization, we're starting to see that now and some of that some of the recent Georgia. In addition to that we have.
Very good.
Substantial hot addresses but high quality exploration budget.
$65 million and that that is obviously continuing a lot of that about 65% to do what we done well for a long time, which is scrap just joking around existing mines and you've seen some good results come basically from everywhere from the three mines in terms of additional success from the drill bit, but we have a significant $25 million budget for grassroots this.
Here, we've been we've always been driven by.
<unk> tried to be driven by geology geography. So we've ended up now with some targets we've been chasing for years in some cases and deaths.
Opportunities in places like respect status, we've recently seen our partner arrived at least some pretty exciting results from Finland.
I think there's great potential there for another discovery.
We are looking at.
We are looking at.
M&A opportunities, we always are looking but I would say that.
We're looking at a few different opportunities that might increase our production through an accretive deal or could add enough development project to what we're doing but we feel pretty good about the pipeline. If you include the Anaconda potential and of course, you look at gravel.
I will watch a those are two projects you'd like in the pipeline, we tend to announce Sydney.
Recently, a sale the west African lining up.
Jack project fossil and we felt that was it.
Good thing to do Corporately, we bought other things, we're focusing on them because they are established faisel.
We're happy to be a shareholder of the company and we're still moving forward.
Sizable deposit.
And Bettina Faisel.
Do you happen to be shareholders.
West Africa, and it is not the same but its there are similarities to the.
Caliber of Nicaragua, the S&P, we take these assets.
The focus on the things, we're doing but we like them so that would be involved and in the same pieces calories aren't very good job in Nicaragua within the broadband assets, we're happy shareholders. There as well so there's sort of a pattern here of the way we deal with these situations, where we want to focus on what we're doing but we want to get value back for the projects that we have and continue to get value as they are developed.
So once again just as in the case of that rock with all of our employees. The heater fossil will now be a at the employer.
So that's it really.
We do these deals we have continuity of people the jobs are secure and approach it gets attached in the government you know vessel.
Everyday.
There is a project that.
Can be economic developed they expect it to be developed and built.
So that's my SAP has got a good program going forward on that one thing to that you mentioned.
As we do get US just recently got a three year extension on the been tackled license, which is really quite significant in the sense that it shows our relationship with the government Valley is very good.
So that's the that's the license in each of the north.
As many of you know we didn't we received that very very rapidly and could be working with the government. The three year extension.
That we had the right to apply for so that's a good sign also of course, we've got the Cardinal mining permits from the government as well. So a couple of relationships continue to be very positive and of course, the governance of 20% partner in everything that we do so as I said, we look forward to.
And of course, a resolution in the very near term.
I think that's all I have to say, but I'll pass it over to Mike and he can ready to the financials and then we'll open it up for any questions.
Okay. Thanks Clive.
I'll start I'll walk us through the three the results of the quarter for some commentary and year to date and then just how we see the year panning out.
So firstly on the quarter.
Revenues of 511 million so that was I was.
Based on the sale of 297000 ounces.
At an average realized price in the quarter of seven.
<unk> hundred $82, though.
Year to date, our average realized price for sales of 1700 and $94 per ounce. So very close to about 1800 dollar price that we'd been that'd be used just to put out our cash flow guidance. So.
It really reinforces that we're still on track there.
And then on the production side good production quarter, we were on a consolidated basis, including our share of caliber as a result of that total production was 310000 ounces.
Which is 21000 ounces.
Budget.
Where we thought we'd be and the reasons for that are really the same as we've talked about in the earlier quarters in the year.
For coal is still a production machine.
Higher mill throughput going through there closer to the $8 4 million tonnes annualized so far this year versus the 775 million tons that we assumed in the budget and now that <unk> is using are pulling some low grade material from the stockpile going to fill that additional production mill feed so we.
We did see slightly lower grade overall going through the mill, but production is up so for the quarter for call. It 166000 ounces at budget by 10000 ounces.
The baddie 61000 ounces in the Q 8000 ounces better than budget.
Is bad it just continues to.
Outperform the model with the better grades and better recoveries than the model shows and so that's that's a good positive difference now there with book, but to highlight and we did mention it in the MD&A and in the news release, we didn't mind slightly out of sequence.
It's batting for this quarter some of the higher grade maintain material that was originally scheduled for Q4. It was was a mind and.
Produced in the third quarter. So you will you will see some of that clawed back in the fourth quarter as we go forward.
But we did because we had that additional production and better output.
I'll put from the melanin quarter, we did take opportunity just accelerates and mill maintenance.
In the Q and what you go to 69000 ounces 2000 ounces ahead of budget and everything is slightly better than budget. So just very solid production all around from one Chicago.
And if you translate that and look at how we did in the cost side.
Positive so consolidated input not sure caliber $445, an ounce almost exactly on budget and so good.
Good.
There and if you look at that high level Big picture, what we're seeing is that there is there is cost inflation.
Across the sites just because of the environment and fuel costs are up some shipping costs are up.
Some reagent costs are up.
But at the same time, we had stronger production.
Better production and that really helped to offset those additional.
Higher costs that we really came out pretty neutral and right on budget.
For your models. If you if you want to know on the fuel side.
It's probably up about $25, an ounce year to date I would say on fuel.
But remember we also have a fuel hedging program in place those derivative gains have offset at least half of that we think as we as we go through the year. So.
Pretty solid and she will I think.
And then the other thing that did impact what your photos results in the quarter was a stronger Namibian dollar we budgeted at 16 and a half to the U S. Dollar it's coming in somewhere around 14, and a half so probably had an impact of 45 Bucks an ounce year to date on those costs.
But like I say the benefit of.
Higher production and really manage to offset most of the cost increases.
So when we look at all.
All in sustaining costs year to date consolidated again, including axial caliber at $795, an ounce, which is just just $14 over budget. So really right on budget in the scheme of things.
And the story there.
Is sort of the same so.
We have.
Cash costs that are on budget.
We do have higher royalties in the quarter and year to date, because we we buy originally budgeted $700 gold and we've come in as I mentioned very close to 1800 dollar goes so far so royalties are higher.
But we that.
That is offset by higher production and it's also offset by the fact that suffer a capex has been.
Pushed forward into the fourth quarter.
So we did have lower sustaining capital in the quarter and year to date.
Those expenditures are really mostly as a result of timing and we do expect them to be caught up in the fourth quarter, we're forecasting that will happen.
And for the nine months, just very brief commentary and the nine months was also production year to date 699 or <unk>.
Our share of caliber 743000 ounces so.
49000 ounces at a budget at all.
Kind of where we were going to be for the year in a second but very solid and for the same reasons I described for the quarter and then on the on the cost side for that production. So cash cost per ounce produced $556, an ounce consolidated including share caliber, which is $14 less than budget. So right on budget for the same reasons as reported and then.
All in sustaining cost of $900 consolidated David per ounce sold including our share of caliber and that's $45 lower than budget and the reason for that $45 lower than budget really is mainly just the timing of capex.
So where are we for the year we.
We did put out some provided production guidance for the year based on where we are today. So our original consolidated guidance, including share caliber was 917000 to a million and 30000 ounces, we bumped that up now to a million a 15000 ounces between $1 million of 15000 ounces in the millions at 55000 ounces.
And the bumps came into call. It the low range of the guidance was previously $5 30.
Now bumped it up to between $5 65, 70000 ounces physicals performed so well and then mid body also because we had we've outperformed in the year. Originally 200 to 210000 ounces, we bumped that up to $2 15 to 25.
Now remember, though that part of that big outperform in Q3 with some of that money out of sequence. So we will see a little bit of that caught back in the year in the fourth quarter.
And so that's why we end up with a guidance range of $32 55.
Fine.
Then when we looked at the cost side.
Side of things.
We looked at our overall guidance range.
What we what we see based on what I mentioned about some cost inflation, but offset by.
Higher production and the benefit of some derivative gains is that we think for cash cost.
Going to come in within our overall guidance range for the year of 500 to $540 per ounce.
If you look at the individual sites.
And in there for coal will probably come in at the upper end of that just because it's putting more high grade or lower grade material through higher volumes of low grade material.
But the other two sites, we think it will be certainly.
Just right in the middle of the ranges.
Then on the all in sustaining cost side again, our original guidance was 879 $110 per ounce and these are including our share of caliber.
We still think it will be in that range, but we think it will be on a consolidated basis at the upper end of the guidance and that has some offsetting factors in it.
For for Cola.
We've got it we think we'll be at the upper end of the guidance range that we gave again because of the nature of the low grade material going through.
I Miss body, we think we may be at or below the low end of the range just because of the production beat we have to date.
I know in Chicago, just depending on the timing of sales as we go through the end of the year, we may be at or slightly above the upper end of the guidance range, but overall for all in sustaining costs. We think will be at the upper end of the range. We think that's pretty good Testament I think to a pretty good a very good assessment reflects the pebbles sites have performed because we are an inflation.
And the cost environment, and I think you've seen that trust the reporting that's going out across the industry right now, but even despite of that and because of the production that we've managed to pull forward and be against budget.
We're gonna be dose ranges.
Let me give a few other thoughts just on where we are with just general comments on some of the operations as offices as we go through so for Colette just to remind you that that's the melt.
It really is performance of well now and.
We've said that we expect it to be somewhere in the $8 3 million, maybe 4 million ton range annualized for 2021.
And as we go over life of mine long term, including feeding some separately material through the mill, we might think we may be able to manage 9 million tonnes per annum perfect color.
A reminder to you that now.
Now we started pulling cardinal into the mine plan, we started developing that.
Q3.
We've got some production not coming from Cardinal.
Did get permanent to do that as part of the overall well, it's really it's part of the overall for coal it permit but we got we got our environmental.
Assessment done and approved by the authorities. So we think cardinal over the longer term can benefit them.
<unk> production and for Kohl's somewhere around 60000 ounce a year for the next six to eight years based on the resource that we build at the inferred resources that we drilled there already.
Our proposal to plant just remind you too that that that is now complete up and running and really the overall benefit of that is it allows us to to hold back some of the spinning reserve that we have with our gen sets there and the net impact on cost overall is probably probably mastered reduced because total cash overall cash cost by about 3%.
Because it reduces the amount of the costs.
Of our mailing a PARP part customer meli.
Grandma or.
Would you go to the <unk>.
Chug underground continues still.
Still scheduled to get in and get some ore from the underground.
Development by the end of Q1 next year.
From a lot of work in Gram of logic continues to work continues on the feasibility both to drill out.
The remaining <unk> <unk> at the site and also to update the engineering in and look at the revised permitting required to move that project forward, we're still expecting to have an update.
New feasibility studies sometime around the middle of next year.
And then for Cam fastest claim alluded to that.
In the period, we saw about 81% interest in the projects that we signed the deal and that deal is expected to close around about the end of November and in conjunction with that we also updated.
The previous deal that we had to sell West Africa are interested in its wake of project.
So for <unk>.
Consideration.
That deal is that we expected $45 million in half cash half shares.
In West Africa on closing, which as I said is expected by the end of November and in order to another 45 million in cash or shares at our option.
Sometime next year, certainly no later than than a year from when we close the deal.
And then we retain our interest as well as any shares that we might take by retaining a royalty in the project. So two points of our share of $2 7, million% to 7% royalty on the first $2 5 million ounces produced from jacket and endpoint for a 5% royalty for the next one and a half million ounces produced.
And then just to remind you to that.
In conjunction with revising that to make a deal.
With the closing of that deal and there is another $9 million tranche.
Our original option payment that will be due now and with closing the deal at the end of November when the deal closes as well so that we can expect to see that in Q3.
And let me just on the earnings side.
That gap are shared.
GAAP earnings 12 cents per share or our share adjusted for the quarter 12.
12 cents per share as well.
And year to date, our share of GAAP earnings.
27 cents per share and our adjusted EPS <unk> 26 per share.
And a couple of comments on that on the cash flow statement. So we didnt excellent.
Quarter generating operating cash flow in the period.
$320 million, which certainly be our expectation.
And that was.
Translates to <unk> 30 per share.
Operating cash flow.
And you know that that would be in part due to the fact that we produced and sold more emphasis than we'd originally forecast which was great.
Full price behaves itself for us during the quarter.
And we also had the benefit of some working capital.
Movement changes that went through there that actually benefited cashless when the $320 million for the for the quarter now we had guided before that for the half year for 2021, the second half, we do somewhere around 500 million, we bumped that slightly in our guidance that we put out there.
At the end of this quarter and we're now seeing somewhere around $510 million for the half year. So you could expect somewhere between $190 million $200 million operating cash flow therefore for Q4.
As we.
Clawback some of those working capital changes that we benefit from in Q3, and we make some year end tax payments that are required.
Our total tax cash tax guidance $380 million for the full year remains unchanged, though just remind you that.
On the investing side for the quarter, we were only probably about 6 million under budget.
Pluses and minuses across the sites I will say that for the for the year to date on the investing side just over 200 million, we're probably about $35 million under budget as I mentioned in discussing the all in cost we are behind in some of the sustaining capex.
Through the piece and we're also we have we haven't spent as much as originally budgeted yet on submarines like exploration, but we do expect that we're going to catch up those cap.
<unk> costs by the end of the year. So what we've guided overall for Capex. If you look in the MD&A would give you some guidance here.
For sustaining Capex, we're probably going to be about $10 million over all in for the year, which is <unk>.
Fractional based on the total sustaining capex that we have.
And then for non sustaining probably also about $10 million over budget overall for the year, but the main component of that being just some some costs for Cardinal some development in fleet cost for Cardinal which weren't originally budgeted as we didn't have cardinal in the original budget.
We ended the quarter I'm, sorry, we paid dividend in the quarter of <unk>.
The four cents per share in U S and annualized <unk> per share, which still puts us up somewhere.
$3 seven 4% over the peace dividend yield, which is still one of the highest in the industry.
And we just.
Our maintaining a line there and our intent is to keep paying at that level.
And in the quarter, we ended the quarter with $546 million in the bank so very solid.
We've still got $600 million available on the revolver and none of that strong right now.
So I think I think those are the highlights just what I wanted to tap the size. So just as a reminder to the operating cash flow for the year. We think we're going to come in around $650 million. We had originally guided 630, but with the with the better beat that we have so far on the production and revenues offset by some higher costs that we see inflationary.
For the year, we think overall, we're going to come in somewhere in the 650 million property cash with.
With approximately $190 million to $200 million of that in Q4.
And that's my update.
That dividend.
I was listening intently, but yes.
Sure.
Okay. Thanks, Mike.
Two questions just to comment I guess.
We were very pleased with our third quarter results as I think many of our shareholders will be as well.
And for the analyst.
We know you guys have a tough job and lots of companies to cover lots to do and I think for the most part.
You get it right and do the job, but one thing that's disappointing as to see.
When you have a one cent miss on earnings per share see headlines that say Q3 Miss.
I think you might want to consider a better way I think you're doing a disservice to year to our shareholders for your clients and the companies when you do that.
Hearing headlines about how.
The cash flow covered all the other positive thing so just a suggestion there.
It can trigger the algorithms that can cross selling it can cost.
The investor the region's only headlines to sell shares et cetera, I just stick it to them.
There's a better way to do it. So that's just my comments for the day because of advice.
So with that I think we'll open it up for questions. We have the entire executive team available here. So we can pretty much answer any questions. If you. If you arent analysts and you want to go into great detail about the strip ratio three years from now it's a cohort or other such things that I would ask you to reach out to Ian or you can actually contact a lot the allowed to directly be liable.
L E <unk> dot com.
So bill with any detailed questions. We do respect the fact that you've got models. If you want detail, but this is not the time to ask too many questions of that nature, but a lot of people on the line so with that let's open up for questions. Thank.
Thank you, ladies and gentlemen ask David if he would like to ask a question. Please press star followed by one on your Touchtone phone. Once you do you will hear as friedhelm prompt acknowledging your request and if you would like to withdraw your question simply press Star followed by two and if you're using a speaker phone. We do ask that you. Please lift the handset before pressing any keith.
Thank you.
And your first question will be from Tyler Langton Jpmorgan. Please go ahead.
Yes, good afternoon, and thanks for taking my question.
I guess, maybe just starting with cost mentioned that sort of costs are a little bit higher than budget levels in Q3, but offset by the strong production.
Could I guess could you just give a little color.
About sort of how you see cost trending in sort of Q4 and heading heading into 2022 kind of just sort of general prices.
We remain at current levels.
I can give you a very high level thoughts on it.
And Bill let me pass over to Bill afterwards, because some of the detail, but production wise, we are seeing fuel price inflation summer.
Year to date is probably close to 10% I would say.
But like I say, we have fuel derivatives in place to offset probably half of that cost right now.
Are seeing some other input costs that are higher certainly in transportation some of the input costs I mean overall, if I had to guesstimate cost inflation, you're probably looking at five or 6%.
That's probably in the ballpark.
And then Youre looking at production.
The increase against budget somewhere in that 4% range right. So you can see that that manage to eat up quite a bit of that cost overruns.
Yeah, and maybe just to add to that certainly it's shipping costs are a big one right.
The cost of shipping has gone up significantly this year.
And we will see those carry into 2022, and then of course labor has.
Various economies are seeing inflation.
The inflationary pressure of course the employees are also seeing that so they are asking for a pay raise we did or we did a really nice thing actually this year, we locked in.
It's a KOL or key asset we locked in.
Increases for the for the employees basically about 5% per year over the next three years basically guarantee that can be stabilized and of course, we typically don't Chicago do the same thing where we have a two or three year agreement, which is where it will be up for discussion. This year. So that's already started for 2022, what we would see that also in that kind of 5% to 7%.
That range.
It's probably where we'll end up and so I would say shipping fuel.
Spare parts. There are also up we had a good discussion with caterpillar here in September Caterpillar.
As awarded <unk> global pricing, so basically we get the same price for everything, but they have announced that because of.
Production costs and shipping costs that they will be passing along some increases as well in that regard. So those are the main things.
Okay perfect Thats helpful.
This is the call. The production I know you did sort of given formal guidance for the next several years, but could you just talk about I guess <unk>.
Directionally, how you're kind of your production.
Arnold sort of coming in maybe at the top of North.
A little bit later to sort of the moving parts that could affect production in there over the next several years.
Oh.
We're still obviously working on that one so cardinal.
What that basically we've talked about it as an inferred resource of <unk>.
North of 600000 ounces.
We would see that over the next kind of 4% to six years.
Putting that into production one of the things we are doing to make sure that make sure that we come in line with our guidance as we are drilling off.
The 2022 production into reserves, so that'll be out by the end of the year and we'll do the same thing in 2022 at least for 2023. So we're going to try to try and be a year ahead I think what we've been saying is we're kind of in that 60000 ounce plus minus range for Cardinal coming in but then of course, you've also got.
What could be Anaconda had been taco.
We have we have a mine plan on that right now.
Depending on what happens with men in Colorado.
How will decide to go forward, but certainly we can see a couple of hundred thousand ounces over the next couple of years. If we so chose coming instead being trucked in from Ben Tycho. So those are all those things are in play right now what I'll say is that if you remember there was a dip actually in 2022 are in production. When we did our original life of mine, but.
We've pulled that dip out of there through some of the work we've done at Cardinal and potentially an anaconda, we see 2022, not finalized yet, but it's going to be a really good year as far as the production I think you know I'm not going to say, it's got a six in front of it but I'm, saying, we're going to get up near that number for sure.
Perfect. Thanks, so much.
Thank you.
Next question will be from Josh Wilson at RBC. Please go ahead.
Thanks first question is on Cardinal earlier in the year when the opportunity was discussed.
There were some guidance about it's great for the initial feed being about three grams and other resource when that was issued with lower <unk>.
The initial stockpile that's been built up is also kind of more along that overall resource grade of about one five grams.
What was sort of the difference between the initial guidance.
Pat looks like now.
Okay.
I'm, sorry, I don't understand the question medium grade ore yes.
Yeah for the great. Yeah. So the great I think initially I know the overall cardinal feed with that or the resource of about $1 five but I think there was some guidance earlier this year that it was it was going to be significantly higher initially.
Unless I'm mistaken and the yen and the greatest is one and a half today.
So is there a variance versus expectations there.
No no I think certainly we've seen really what.
Everything that.
Everything that was in the inferred has kind of played itself out so far what I will tell you is that like in 2022, we're going to see the grade from Cardinal increase a little bit I think it's getting it's above two grams per tonne for sure in 2022 and.
As we bring that in reserve of course, we'll report that.
Okay.
<unk>.
And as it relates to looking at the overall split in terms of processing.
<unk> for 9 million tons of feed going forward, it's pretty similar to what the assets doing now.
Should we assume a similar kind of split between the sulfides and the oxides.
The assets processing today is kind of continuing going forward.
Yeah well.
Once again it is kind of a I think john's on the call. So he can he can correct me if I'm wrong here, but what we've always said is that we don't think that really the mill can handle more than that 10% to 15% of saprolite material and so.
It all depends on what the mine plan has for for for colon and the saprolite, that's available at Cardinal and whether or not we've been bringing taco in but what I will tell you is that if if we can get 15% saprolite, we feel pretty good at that 9 million ton per annum and once again that also.
It assumes that the material doesn't get significantly harder as we go into depth that Nicola.
That's kind of what we're projecting at this point I know John if you want to add anything to that.
Oh, that's right Bill.
I think everything we said there is accurate.
Thank you.
Alright, and then.
Final question as it relates to two gram of low K.
With a bit of work that's been done since the last update is there any kind of additional insight into the I guess the extent of the changes in what the permitting modifications that would be required for that would be or is it still a work in progress.
Yeah kind of.
Update you on where we're at so you remember theres a bunch of things going on here number one there is theres the engineering work, where we're basically trying to simplify the process and take out some of the <unk>.
Fusion, which has happened over 10 years of design.
That work has been very successful and we've certainly seen some uplift in the IRR related to infrastructure the.
The resource drilling is ongoing and they actually had.
A very significant program, there, which I don't think is even going to be done drilling until I think the end of November or December and so then of course, we'll have to wait for the resource to see where that ends up and then of course, there's things like the social issues, which include the resettlement, which is really one of the key drivers trying to do a phase II settlement. So the long answer to your question is.
We have we have seen some improvements what we've done is we've approached the government about a phased approach as far as permitting we would see kind of in Q2, maybe the end of even Q1, we're going to approach them with some modifications to our to our existing operational permit an EIA.
We're assuming that those would be kind of minor changes, which will allow us in the second half of the year. If it's positive to do some work on the ground and that's and once that is approved we would then do some major changes which would include adjusting.
Adjusting looking at the title and turning it into a diversion ditch, which we think will take us into 2023 before that would be approved so the short story long as we believe in end of Q1, we'll approach the government with a modified our request for a modified permit and then kind of six to eight six to eight months later submit a second half our second marriage.
Or a modification, which would take us into 2023.
Yes.
Great. Thank you very much.
Thank you. Your next question will be from <unk> Habib Scotia Bank. Please go ahead.
Thanks, operator.
BT team.
Couple of my questions.
Already been answered.
But just don't want to harp on too much on Cardinal side, but bell.
You can just tell us exactly kind of.
How much of the revised guidance on the Cola is due to cardinal.
And also in terms of the guidance provided on Cardinal.
Plus it has.
Potentially bad about 60000 ounces of gold per year again can you just give us a little bit more clarity on the constraints on that 50000 ounces a year.
Especially with the fact that the mill is running at.
Thanks, Brian.
So if I understand your question you're asking for what what is the what is the ounce profile from Cardinal over the next couple of years.
Yes.
<unk>.
Bill just trying to understand is there any sort of constraint on that 60000 ounces of gold per year.
You laid out.
In terms of.
Soft guidance.
We're not where I guess, yeah. So.
The constraint really really revolves around looking at what the for Colette permitting or what the for coal or pet grade is versus what cardinal is versus the mining sequence and so.
So all of that is being taken into account remember.
<unk> is a little bit further haul and so we're obviously taking the higher grade first and then of course, so you've got to include stockpiles and that what I will tell you is that in 2022 right now we're estimating about 650000 ton coming from the Cardinal deposit and that actually adds up to about 50000 ounces for 2022, and then as you get.
Or into some of the higher grade zones, you'll pick that up and some of the later years.
Got it and just in terms of obviously, you've been drilling into the inferred ounces as well have you been doing also maybe this is a question for Tom but have you been doing any sort of step out drilling as well is there any.
<unk> in terms of strike.
Potential.
Yes, so I'll say first as far as basically we've divided it up or the operational group is bringing the inferred to indicated but the the geologists are right next to us because it is opened for sure and maybe either Tom or Brian can discuss that but it is wide open and we see this thing continue to grow so much so that we've actually included in 'twenty.
22 budget some more work on the social side to make sure that the communities are not kind of land restricted as we as we make this bigger.
You have a comment on exploration.
Yeah. So just to answer your question.
Cardinal is still open it's open both in depth and on strike and then we have an adjacent.
Deposit called <unk> Z.
E.
Which.
It was on the sort of west northwest side of cargo, which.
Almost no buts against this or exploration is not only extending cardinal that's extending at times and it remains open and we will continue with that exploration again next year, that's within the budget for next year.
Okay. Thanks, Doug.
Sorry go ahead.
Thanks, Tom.
About that okay.
Bob just one.
Over to you now and just.
You mentioned the beginning of it.
Recall that you've started or b to start looking at some M&A opportunities as well.
Any color you can provide on whether youre looking at kind of development projects or this is operating mines JV opportunities any any additional color you can provide.
Yes, I think I said, we continue to look as we always have.
As I mentioned, we're we like what we see in our pipeline and some of these green exploration.
<unk> that we have and.
<unk> and the potential Anaconda et cetera, but I would say that with our shares underperforming.
Yeah.
This sector.
It's starting to catch up recently.
Hope that continues along obviously, we wouldnt want to dilute our shareholders in a significant way.
Finding an accretive deal with our discipline around acquisitions for the last 30 odd years.
Are not paying for us as it might be there and not overpaying for.
For projects and it's going to be hard to go out to win a bidding war with other companies that didn't do what we did in the last 10 years and build minds when it was unpopular.
And don't have as good a pipeline is we have so I think I think having said all that though if there is some some special opportunity where we can bring our strength.
Building mines financing them, but all of our improving lives as we did not forget at Masbate. Some years ago were looking at those two or those types of things keeping an eye on a number of things.
I must be though I think one of the really positive aspects in that regard.
The opportunity to do M&A using combination potentially of our cash and our shares to minimize solution. We have a tremendous amount of cash and we also have access as Mike said, the $600 million from the banks, including another $200 million.
So 800 rooms available for us for us for potentially part of an acquisition so that changes it a little bit for me in the sense of.
I can't imagine finding something accretive today that we would would've been on also I cant imagine doing subtleties that you're using just our shares unless it was a very special situation, where somebody was grossly undervalued. So.
But we were looking and we will continue to look at interesting places, sometimes we're a speed of trust.
For opportunities so.
But if we do a deal I'm pretty confident that you guys and our shareholders and our board of directors would agree that it's accretive because otherwise we wouldn't be doing it.
Sounds good guide than that thank you everyone. That's it for me.
Thanks, Thank you.
You.
Next question will be from Anita Soni of CIBC World markets.
Hi.
My first question is with respect to that and Taco.
Perfect. So I think you mentioned in the MD&A.
Yes.
It would be.
Bringing energy production will be subject to the mine plan and all forgetting all necessary permits could you just elaborate on what remaining permits.
Lisa.
Yeah, So Ben Taco is SAP.
A separate license area right. So it's not like Cardinal was easy where we just basically had to update the EIA and then show them how it fit into the mine plan and then it was approved for production, which that is now fully we're now fully permitted on that site been Taco as is.
Once you submit a feasibility study.
You have to go through the full situation I'm getting an EIA approved then of course, then there's the shareholders' agreement what percentage of the government would want to take on it we assume it would be very similar to Nicola and then you've got to you've got the convention, which basically lists out your fiscal stability and everything else. So there's a whole long process, which will be required for sure.
And that's why the reality is is we actually have already just for Ben Taco, we have a steady ready to go.
Tomorrow, if you want to submit it the issue really relates to how they how then are all these legal steps, which have to occur how long does it take that we've put in we put in that's why you often hear <unk> talk about the second half of 2022, we randomly put in six months, because we think that's how long it will take but maybe it will go faster than that.
Alright, Yes, I was wondering about how how would come in in 2014.
So that concludes the money ready to go.
And then just.
Are you getting an idea.
The tailing dam I think he said that.
Cardinal and the higher throughput levels that you're going through.
Currently now.
You know, great Brooklyn, outperforming but.
The tailings facility can you just give an idea of like.
Like what kind of a lift would be required and how often you would not be conditional let's consider the capital associated around them.
Okay, well I don't know that I have the capital numbers right at hand, but certainly.
From a from a lift perspective remember we were always kind of Telegraphing that we had this kind of 6 million go into seven 5 million tonnes per annum and so based on that that's what our tailings expansion schedule was.
Now given the fact that we're operating at 9 million tons per annum. I mean that has a knock on effect on a lot of things across the site, but the one you mentioned was tailings facility. So the reality is as we've started already putting the next lift on it and it's going to be a double lift basically getting us up to the final elevation of what that facility could do.
That's going to take US I think I think that's going to take us into 2025 or 2026, it's somewhere around there. So basically we're going to have to start doing the design work and the engineering on a new structure, which we've already identified the location for and getting that permitted in 2022, So we can construct and <unk>.
Late 2022, 2023, which puts us into production in 2025.
Okay and then my final question I'm sorry.
Did you want to continue.
I wanted to say I didn't I didn't have I don't have the costs for that.
Pardon me, but.
The operating costs are the construction cost typically.
I think.
I remember seeing something that's around $10 million somewhere in that range for the year.
For the next lift.
Alright, and you said a double lift.
Okay, and then lastly on Gram a latte.
So.
Your decision to kind of defer.
Gram in Washington is pretty wide in retrospect.
And in an environment that everyone's hitting.
As you know as you know.
Youre, obviously seeing cost escalating in.
The current operation that you're doing things to mitigate that.
As you think about Gram, a lumpy and further.
Could you give us some parameters around how you think about cost escalation in light of capital build.
A lot of your competitors are really facing some headwinds and they're all bidding for the same one parts.
To get something to get something rolling So could you give us some color on your thought process on whether or not we could.
Differ.
Gram of Lockheed further or would you go full steam ahead.
Right.
Well from a corporate point of view I mean, obviously, we are building in some inflationary factors in terms of the things. We're looking at a Gram of Latino how long those factors are going to be in places is obviously, a great debates, Colorado inflation trend will continue but I would say that.
If we have a strong economic case, we had a.
15%, IRR before but decided that project could get better.
And we've seen signs of that.
It is happening by significant changes that can that are reducing the capital potentially quite significantly so inflation, they chew into that a little bit, but we'll be looking at that closely but I must say that I think that you know.
As a company historically, if you've got something that's got good economics, we're going to want to go and the government of Colombia like all governments. These days if theres, an economic project, they're going to want to build and we are very supportive government. There. We're in the right place in Colombia, that's yoga and the local people who really want this to happen. So there is also an issue there.
It's economic.
We're going to want to move forward.
Satisfied rebuilds inflation and the government of Colombia, and the local people really want us to move forward with this.
<unk> has signaled that they're almost engages us obviously awaiting the results of the final feasibility study and maybe just to add just.
Just a couple of things of that I mean, clearly we just updated the cost for our study which was done in 2021, we'll update those again and yes as we go into additional detail on the mill and stuff, where those costs are obviously being very tightly refined but then the other thing is you remember the Columbia and the exchange rate.
The Colombian peso has weakened a little bit so what we're going to see there.
There's things like that you buy onshore actually be cheaper to us and so that'll be some offsetting for sure.
Alright. Thank you that's it for my questions.
Thanks.
Thank you.
Question will be from Don Demarco of National Bank financial.
Thank you operator, and congratulations on a strong free cash flow quarter guys.
My questions have been answered, but maybe I'll ask one on on ESG I think I heard Mike say that difficult to cash costs have been reduced by about 3% from the solar plant and I'm hearing across the board in electricity and fuel our drivers and inflation.
Is the cost to generate solar power at the caller subject to less inflationary pressures than the cost to generate gen set generated power.
And secondly, companywide what are some of your next ESG initiatives.
Okay, well certainly I'll, let actually the answer is yes of course, it I mean, it's much less subjected to inflationary pressures doing solar but I'll, let John maybe talk a genre how is kind of our king of.
Power and I'll, let him talk about what solar costs are in and you know what that all means for our operations.
Yeah, Okay. Thanks, Phil Yeah, so as far as the cost of <unk>.
Generating solar power.
The fractional costs.
And.
Whereas generated power with.
With all of us.
It was much higher.
And.
We are expecting.
Oh good costs go we had a very good quarter.
And.
Q3 for our costs.
Power generation costs for fiscal two cents per kilowatt hour versus a budget of $15 six.
That resulted in a in an overall savings of about 60 per tonne of ore processed so.
And then going forward, we're getting we're getting into the <unk>.
Hi solar.
Radiance months, though.
We're expecting even.
Better cost performance from the solar.
Does that answer your question, Yeah, and do you have any plans to maybe expand that a solar facility at the coal or other ones that other at your other mines.
Well, possibly go ahead go ahead John.
First I was just going to say, yes, we've been.
Uh huh.
Thinking about that but.
No immediate plans to expand that.
It may possibly happen in the future.
Are there as well at at other sites.
If it's warranted.
Yeah, we actually had a very interesting discussion at our board meeting yesterday, when we talk to specifically about that if you look at something like Oh, Let's say, let's say, Ben Taco right, there or medical or do we get it back and we want to wheel power.
Out of that site and certainly you can do you can do with their but because now you know remember this we've got a seven five megawatt facility at Orchard coil and now this facility.
Ethical what we consider ourselves to be kind of on the cutting edge and on the front of the leading front of that so now we're looking at Dennis Stansbury is actually looking at things like.
As per Gram of loyalty does it makes sense, obviously, that's kind of land restricted but Ken can we do it there can we do it in masbate and yacht.
Some technologies out there.
I know that both John and Dennis have been studying this.
That you could put it on the on the tailings facility or could you put it on the face of the dam, we're looking at all that stuff and so we're pretty high on it for sure and then the second half of your question related to other ESG initiatives that Youll see and once again I would argue that we're kind of on the cutting edge or the leading front of ESG.
And we've always been very successful at I would say in 2021, a couple of the key things you're going to see is our is our our.
Our climate change initiatives that we've got we've got ongoing we're looking at.
Doing that doing a full inventory of our emissions and of course, our water conservation working some places to have desert environments and so we're really focused on how do we reduce water consumption and once again at the leading edge of ESG on those topics and of course as you remember.
But it's one of the very first solar plants in mining in the <unk> some years ago.
So it's a big commitment for us to look at increasing it and also to look at where else as Bill said, we can use it.
Okay. Thanks for that color and then my final question and this is an extension of a question asked by previous previous caller and it goes to that decline in your preamble you mentioned you'd consider accretive M&A opportunities did you did you mean accretive in terms of production.
That is would be to consider an operating asset if justified or is your focus on M&A is still primarily on development projects.
No I think there could be special loan that can be special situations, where let's say.
A minus set of problems through some poor management or other issues that we think we can can.
Can make it better no a lot of people as soon as you do deals to promise that and sometimes it doesn't materialize. Although we liked the fact that the industry seems to be getting better technically overall, even if you. If you think back to my body in 2013, I think it was when we acquired CGA mining.
This is a single mine company. They did it they did a pretty good job, but we when we acquired the other operating costs were $890, an ounce and I remember when you guys brought it forward obviously, you've seen what we've been talking about this if it's 890 analysis and they said well here's out there's a lot of things we would change so last year I think we had a couple of quarters under.
$500, an ounce for operating costs. So not only are we very good at building mines.
With our great construction team will continue with that but there is the opportunity also sometimes in these days, it's harder and harder for a single asset company.
To convince investors and banks et cetera, sometimes if they can.
So they can build it do they have the team to build it to the owners team that they're going to do some kind of a contract builds which I think most of the dangerous, but do they have a star wars team and can they financing on reasonable terms. So I think there's some of those situations out there is competition as I mentioned earlier, so we might be in a situation where in a location where other dispute a trend, which we've done successfully before.
They find the right fit as I said, there's something we can make it better clearly we'd like to find a good development opportunity that was we could argue towards shareholders successfully that it was an accretive opportunity we.
We are working to do that as well as of now we were pretty optimistic that <unk> could very well be the next construction build for US then again, we also have the potential as we talked about about.
What is one day is there possibly another mill.
Ethical is too early to say now but is there possibility for anaconda.
Okay. Thanks for that good luck in Q4.
Yes.
Okay.
As a reminder, ladies and gentlemen, if you do have a question. Please press star one on your Touchtone phone.
And your next question will be from Geordie, Mark Haywood Securities. Please go ahead.
Yeah.
Just a couple of questions extensions in the future.
Thanks Neil.
Maybe on her cola given given the multiple schools.
Oregon's you could have been a need mid 10 until June.
So Paul the coloring for sole primary hot Digi.
And the outbreak against two 9 million tonnes per annum on a blended thoughts.
Are you comfortable with no 1 million ton gram capacity or the.
Functional.
So the capacity to go beyond.
I mean 10 per annum.
The mid term.
Thank you Julie.
I can just I can just hear John's screaming when is it enough.
Yeah.
The long answer is geordie.
If you remember we did way back in the day when we when we kind of expanded member went from 4 million tonnes per annum to 5 million tonnes per annum and then we looked at optimizing and we actually had a step function in it we looked at.
Plus one five which was basically increasing the existing circuit and then a second study that was looked at was a 10 million tonne per annum.
It was very quickly.
Ignore it because the step function to seven and a half which is now nine with so much more cheaper 50 million Bucks.
So there is there is the capacity to grow bigger it is.
Big that's a big step function and would require a lot of additional work as is their ability to put it there I think John would say, yes, but then you know then you'd have to start weighing this whole concept of wouldn't it be cheaper potentially to put something up at Edmonton Cotto, Brian would you would you have a complex where you would have maybe two.
Mills running up there.
So you wouldn't be trucking all of that or all that just did so I.
If you found enough or that you would ultimately want to build something separate but those studies would have to be done.
Perfect.
Okay.
Okay.
Over to.
Masbate.
Hum.
The recovery.
Thank you Judy.
Given given the issues, causing the same.
Recovery. This is a model where you're looking to revise the model.
Yeah.
Our conservative stance on that.
If you look at that Guy.
Yeah, well, we sell for the 2022 budget, we actually did.
The recovery is just a little bit based on the ore type and how it fit in or where it was coming from remember, it's all kind of anecdotally right. It's all from our results that we've already received as opposed to doing additional drilling or additional testing of the metallurgy. So at this point, we're still I think we're still a little conservative, but we're moving.
Towards just based on experience a higher recovery and I don't know that there's any science behind it is just this is what we see and so what we're saying.
Yeah.
Yes.
Just add to that bill that we've been doing some or campaigns through the mill mass body.
With the major ore types too.
To get a good estimate on recovery on a plant scale, so and thats been built into the model as well for 2022.
Yes.
Okay. Thank you and in terms of maybe a last one.
How did you guys see and well.
Boucher underground.
What other steps to ultimately get to UNICEF dual production underground.
Not too far away.
From first production.
Looking at them.
What's the question first connections lift yeah.
Yeah, No I mean development right.
He's literally out of what you'd go to now so maybe I'll, let him answer but I will tell you is that we just continue the development of the.
Our.
Downfall engine and the plan is to start producing ore in Q1 or at least getting some more out of there in Q1, Randy you want to talk about what are the final steps we have left to do.
Yes, that's pretty old.
Sure.
Development contractors working on the main decline right now as we speak.
<unk> made a couple of little tweaks to the development plan and when we get into or.
We'll be staring to take out some development ore in the first quarter.
And then <unk>.
Selected at production contractor, that's going to be gearing up and coming in towards.
Middle Middle to end.
Q1, and getting started there.
Yeah.
Alright, the development on and then coming into.
Very good questions.
Yeah.
Yes, correct.
Okay. Thank you.
Any further questions Jordan.
Thank you.
Thank you.
Once again, ladies and gentlemen, as a reminder, if you have any questions. It is star one on your Touchtone phone.
Okay.
At this time I would like to turn the call back over to Mr. Johnson.
Okay. Thanks, operator, thanks, everyone for good questions in there.
Any other questions that come up next week.
Got to reach out to us and.
We look forward to reporting.
Playing reporting another great quarter.
Ended the year. So thank you for your time.
Thank you Sir.
Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
No.
Bill.
[music].
Hmm.