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.
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 you 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.
To begin the conference.
Thank you operator.
Welcome everyone to our.
Third quarter financial results call I'm, just going to see a few opening remarks and industrial gas makes sentiments walking through the financials and then your point too.
Open it up to any questions.
As you can see from the release, we had another strong quarter in the third quarter and 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 this quarter and as you'll hear from Mike with very strong financial position now and going forward.
Strong cash and debt free.
Looking to generate some $650 million for the year cash from operations quite a few of the details on that.
The focus for the company going forward will be to continue to optimize responsible profitable gold production.
And.
Mike will talk more about.
Hello.
Our new guidance for a couple of the mindset.
Yes.
As Bonnie.
And other things, we're going to continue to advance our development projects. Obviously your Grandma I'll tell you. We're looking now to feasibility study by the second half of next year and we've had some positive results from some of our engineering review, so far looking at capability to produce.
Capital costs and also we're drilling the way you are looking to address more inferred into indicated so we can devise a capital potentially over time about warehouses. So we think thats heading in a positive direction.
Programmable logic I think the other thing is discussed pretty excited as the potential overseeing.
The jackups and the Anaconda area.
Sure.
For color and the excitement there is the ability initially digital hall to start hauling saprolite material.
<unk> 20 kilometers from the chocolate down.
Two difficult Bill the Nikola mill has been running extremely well.
And it can definitely have a satellite material because it's softer material I will talk with you.
Top of it the 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 segment has been the Cardinal.
Discovery 500 meters from the call out of the same.
Licenses for cohort. So we received a permit from the government to start mining there at our mining there and that can add to production as well so positive developments there in the short term.
Long term.
The medical license, we continue to have a very.
Productive successful conversations with the government of Mali.
Resolve that situation, where we will see we hope in the next few months, we will see that our license.
Extended or renewed for sure mechanic totals and that'll be an important part when I mentioned, we mentioned several times a bit jackups a separate license. So we can start tracking some there, but obviously you'd like to.
The drilling both of them so extensive drilling continuing to tackle with 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 sulfide mineralization, we're starting to see that now.
Some of that some of the recent Georgia. In addition to that we have.
Barry.
Substantial addressed.
Dresses, but high quality exploration budget.
$65 million in that.
That is obviously continuing a lot of that about 65% to do will be done well for a long time, which is drop just joking around existing mines and you are seeing some good results come.
Sickly 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 year, we've been we've always been driven by <unk>.
<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.
Opportunities in places like.
<unk> recently seen our partner Orion really some good 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 and if you include the Anaconda potential and of course, you look at Kearl.
<unk> those are two projects you'd like in the pipeline, we did the announced Sydney.
Recently, a sale the west African mining of the Jackup.
<unk> project.
So.
We felt that was it.
Good thing to do Corporately, we've got other things, we're focusing on plus they are established in Makena vessel.
Happy to be a shareholder of the company and wish the whole way forward.
Sizable deposit.
And Bettina vessel.
We happen to be shareholders.
West Africa, it's not.
But it's there are similarities to the deal we just the caliber of Nicaragua. The S&P, we take lease these assets.
Some of the things, we're doing but we like them still going to be involved and in the same cases caliber is a pretty good job in Nicaragua with the Nicaraguan assets, we're happy shareholders. There as well so just sort of a pattern here of the way we deal with the 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 going forward. So.
Once again, just as in the case of that rock with all of our employees.
So we will now begin the employee of West Africa. So that's a really nice way to do these deals we get continuity people. The jobs are secure and approach it gets advanced in the vessel.
Hey, Joe.
If there's a project.
It could be economic to develop they expect it to be developed and built.
So.
This effort has got a good program going going forward on that one thing to mention.
Could you give us just recently got a three year extension of the been tackled license, which is really quite significant in a sense that it shows our relationship with the government Valley is very good.
So thats the Thats the license in each of the North Dakota as many of you know we received that very rapidly equipment working with the government. The three year extension to 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 governor relationships continue to be a pause.
Positive and of course, the governments of 20% partner in everything that we do so as I said, we look forward to.
The Nikola resolution.
The return.
I think thats, all I have to say, but I'll pass it over to Mike and he can run through the financials and then we'll open it up for any questions.
Okay. Thanks, Glenn.
I'll start I'll walk us through the three.
Results for 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 that was based on the sale of 297000 ounces.
At an average realized price in the quarter of seven.
<unk> hundred $82.
Year to date, our average realized price for sales in $2794 per ounce. So very close to that 1800 dollar price that we've been that we used just to put out our cash flow guidance. So.
It really reinforces that we are still on track there.
On the production side good production quarter, we were on a consolidated basis, including our share of calendar results 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.
Coal is still a production machine.
There's higher mill throughput going through they're closer to the $8 4 million tonnes annualized so far this year versus the 775 million tons that we assumed in the budget.
Now that <unk> is using.
Im pulling some low grade material from the stockpile them to fill that additional production mill feed so are 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.
10000 ounces.
Body 61000 ounces in the Q 8000 ounces.
It's better than budget gain.
Paddy just continues to outperform the model with better.
Better grades and better recoveries than the model shows. So that's a good positive difference now there was the highlight and we did mention it in the MD&A 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 was was mined 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 from the mill in the quarter, we did take the opportunity just to accelerate some 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 Chicago.
And if you translate that and look at how we did in the cost side.
Very positive so consolidated input next year caliber $445, an ounce almost exactly on budget. So good good.
Good result.
There 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 on right on budget.
For your models.
If you wanted to on the fuel side.
Probably up about $25, an ounce year to date I would say on fuel.
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 we're pretty solid on fuel I think.
And then the other thing that did impact what your photos results in the quarter was the stronger Namibian dollar we budgeted at 16 five to the U S. Dollar it's coming in somewhere around 14, and a half so probably had an impact of 45 Bucks announced 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 in sustaining costs year to date consolidated again, including axial caliber at $795, an ounce which is.
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.
Cash costs that are on budget.
We do have higher royalties.
In the quarter and year to date, because we buy originally budgeted $700 gold and we've come in as I mentioned very close to $800 goal. So far so royalties are higher.
But.
That is offset by higher production and it's also offset by the fact that some of our Capex has been.
Pushed forward into the fourth quarter.
So we did have lower sustaining capital in the quarter and year to date.
<unk>.
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.
Commentary in the nine months was also production year to date 699.
<unk> share of caliber 743000 ounces so.
49000 ounces added budget.
So.
Comment, where we are going to be for the year in a second but very solid and for the same reasons I described for the quarter.
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.
David per ounce sold including our share of caliber and thats $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 did put out some provide production guidance for the year based on where we are today. So our original consolidated guidance, including share caliber was 970000 to $1 million and 30000 ounces.
We bumped that up now to $1 million to 15000 ounces between $1 million to 15000 ounces in the millions at 55000 ounces.
The box came in for call. It the low range of the guidance was previously $5 30, we now bumped it up to between $5 60, and 570000 ounces just a physical has performed so well and then <unk> 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 outperforming Q3 with them that might need out of sequence. So we will see a little bit of that caught back in the year in the fourth quarter.
So thats why we ended up with a guidance range for the entirety of $2 52.
<unk>.
And when we looked at the cost side of things.
We looked at our overall guidance range.
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 were 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 therefore 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.
Of the two sites, we think we'll be certainly.
Right in the middle of the ranges and then on the all in sustaining cost side again, our original guidance was 870 to $910 per ounce. These are including our share of calibre.
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.
Colette.
Got it we think it will be at the upper end of the guidance range that we gave again because of the nature of the low grade material going through.
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 it will be at the upper end of the range, We think thats pretty good Testament.
Two they are pretty good at very good assessment reflects that level of sites have performed because we are an inflationary cost environment.
I think you've seen that across 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 think we're going to 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 well just as we go through so for Colette just to remind you that the mill.
Really as performance for a while 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 90 million tonnes per annum perfect color.
Reminder to that.
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 is.
As part of the overall for bullet permit, but we got we got our environmental.
Assessment done and approved by the authority. So we think cardinal over the longer term can benefit.
The overall 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 and the inferred resources that we've drilled there already.
Our proposal to plant just remind you too that that is now complete up and running and really the overall benefit of that is it allows us to have.
Pull back some of the spinning reserve that we have with our Gen sets there and the net impact on costs overall is probably probably manage to reduce for coal is totally overall cash cost by about 3%.
Because it reduces the amount of the comp.
R R.
Our prior customer meli.
<unk>.
We will 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 grammar logic continues to work continues on the feasibility both to drill out.
Some of 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 study sometime around the middle of next year.
And then became our fastest clive 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 Brian about the end of November and in conjunction with that we also updated.
The previous deal that we had to sell West Africa, our interest in the wake of project.
So for the.
Consideration for.
That deal is that we expected $45 million in half cash half shares.
In West Africa on closing, which is expected.
Expected by the end of November and an order of another $45 million in cash or shares at our option.
Some some time 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 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 5 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 then 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 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.
Our share adjusted for the quarter.
<unk> 12 per share as well.
And year to date, our share of GAAP earnings.
<unk> 27 per share and our share of adjusted EPS <unk> 26 per share.
And a couple of comments on the on the cash flow statements. So we didnt excellent.
Quarter generating operating cash flow in the period.
$320 million, which certainly be our expectation.
And that was.
Translated to <unk> 30 per share.
Operating cash flow.
And that's.
In part due to the fact that we produced and sold more ounces than we'd originally forecast which was great.
Oil 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 and the $320 million.
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.
As we claw back 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.
Just remind you that.
On the investing side for the quarter, we were only probably about $6 million under budget, but some.
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.
Through the piece and we're also 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 FX 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.
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 Werent originally budgeted as we did in the Cardinal in the original budget.
We ended the quarter I'm, sorry, we paid dividend in the quarter.
<unk> per share in U S and annualized <unk> per share, which still puts us up somewhere.
Three 7% and 4% over the peace dividend yield, which is still one of the highest in the industry.
And we still are maintaining a line there and our intent is to keep paying at that level.
And then 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.
None of that has drawn right now.
So I think I think those are the highlights just what I wanted to tap the side. 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 better beat that we have so far on the production and revenues offset by some higher costs that we see inflationary.
Through 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 the 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 the.
The one thing thats 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. Your clients companies when you do that with acquiring headlines about.
How about the cash flow covered all the other positive thing so just a suggestion.
The contributor of the algorithms that can cost selling it can cost the investors the region's only headlines to sell shares et cetera, I, just think it's sort of debt.
This has got a way to do it. So that's just my comments for the day.
Thanks.
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 would if you arent analyst and you want to go to create detailed about the strip ratio three years from now it's a caller or other such things I would ask you to to reach out to Ian or you can actually contract.
<unk> directly at B lateral <unk> at <unk> Dot com.
Bill.
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 with a lot of people on the line so with that let's open it up for questions.
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 you mentioned that sort of costs are a little bit higher than budgeted levels in Q3, but offset by the strong production that could I guess could you just give a little color.
About sort of how you see costs that are 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.
When youre looking at production.
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.
Yes, maybe just to add to that certainly shipping costs are a big one right.
The cost of shipping has gone up significantly this year and.
And we will see those carry into 2022, and then of course labor.
Various economies are seeing inflation.
Larry pressure of course, the employees are also seeing that so they are asking for a pay raise.
Did a really nice thing actually this year, we locked in.
All of our key asset we locked in.
Increases for the for the employees basically about 5% per year over the next three years basically guaranteeing that can be stabilized and of course, we typically had at Chicago.
Do the same thing, where we have a two or three year agreement, which will be up for discussion. This year. So that's already started for 2022, what we would see that also in that kind of five five years to 7% range.
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.
Has awarded <unk> global pricing, so basically we get the same price for everything, but they have announced that because of <unk>.
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 that's helpful.
And this is the call and production I know you had sort of given sort of formal guidance for the next several years, but could you just talk about I guess.
Directionally, how you're kind of your production.
Carnival sort of coming in maybe you could talk north.
But later to sort of the.
The moving parts that could affect production there over the next several years.
Oh.
We're still obviously working on that so cardinal.
Basically we've talked about it as an inferred resource of.
North of 600000 ounces.
We would see that over the next kind of four 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.
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 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 total.
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 Taco. So those all those things are in play right now what I will say is that if you remember there was a dip actually in 2022 and production when we did our original life of mine, but.
We 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 im not going to say, it's got a six in front of me, but I'm, saying, we're going to get up near that number for sure.
Perfect. Thanks, so much.
Thank you.
Our next question will be from Josh Wolfson 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 grade for the initial feed being about three grants and other resource when that was issued with lower but 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 and what the stockpile looks like now.
Okay.
Im sorry, I don't understand the question medium grade ore.
Yes for the great. Yeah. So the great I think initially I know the overall cardinal feed was out or the resource 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 in EMEA and the greatest.
One five.
Was 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 any reserve of course, we'll report that.
Okay.
And as it relates to looking at the overall split in terms of processing and the <unk>.
<unk> for 9 million tons of feed going forward, it's pretty similar to what the assets, giving 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.
Yes.
Once again it is kind of I think John's on the call. So you can you 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 colon and the saprolite, that's available at Cardinal and whether or not we've been bring been taco in but what I will tell you is that it.
If we can get 15% saprolite, we feel pretty good at that 9 million ton per annum and once again that also.
<unk> assumes that the material doesn't get significantly harder as we go to depth that the caller.
That's kind of what we're projecting at this point I know John if you want to add anything to that.
Well that's right Bill.
I think everything we said there is accurate.
Thank you.
Yes.
Alright, and then.
Final question as it relates to <unk>.
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.
Yes.
Bet you on where we're at so you remember there is 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 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 <unk> settlement, which is really one of the key drivers trying to do a phase <unk> settlement. So the long answer to your question.
As 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 at 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 once that is approved we would then do some major changes which would include adjusting.
Adjusting looking at the tunnel and turning it into a diverse niche, which we think will take us into 2023 before that would be approved so the short story long is.
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 version of a modification, which would take us into 2023.
Yes.
Great. Thank you very much.
Thank you. Your next question will be from <unk> Habib Scotiabank. Please go ahead.
Thanks, operator.
<unk>.
My question.
Already been answered.
But just don't want to harp on too much on the Cardinal side, but bill.
Can you 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 that deposit has potential to add about 6000 ounces of gold for you again can you just give us a little more clarity on the constraints on that 50000 ounces a year.
Especially with the fact that the mill is running at.
Manganese tonnes Brian.
So if I understand your question you are asking for what what is the what is the ounce profile from Cardinal over the next couple of years.
Yes.
And Bill just trying to understand is there any sort of constraint on that 60000 ounces of gold per year.
Lead out.
In terms of.
Soft guidance.
We're not where I guess so.
The constraint really really revolves around looking at what the for coal or permitting or what the <unk> grade is versus what cardinal is versus the mining sequence.
So all of that is being taken into account remember.
Cardinal is a little bit further haul and so we're obviously taken the higher grade first and then of course, 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 carnal deposit and that actually adds up to about 50000 ounces for 2022, and then as you get.
Deeper 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 as any.
<unk> in terms of strike.
Potentially.
Yeah, So I'll say first as far as basically we've divided it up the operational group is bringing the inferred to indicated but the 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 2022 budget. Some more work on a social side to make sure that the communities are not kind of bland restricted as we as we make this bigger.
Tom you want to comment on exploration.
Yes.
To answer your question.
Cardinal is still open it's open both the depth and on strike and then we have an adjacent.
Deposit called <unk> <unk>.
Z.
Which.
It is on the sort of west northwest side of cargo, which.
Almost a <unk> against this or exploration is not only extending cardinal that's extending.
And it remains open and we will continue with that exploration again next year, that's within the budget for next year.
Yeah.
Okay sounds good.
Sorry go ahead.
Thanks, Tom.
Sorry about that okay. So just Clive just overview, Rhode Island.
You mentioned the beginning of.
On the call 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 great exploration.
Projects that we have.
<unk> and the potential of an economy et cetera.
I would say that our shares underperforming.
This sector hopefully starting to catch up recently.
Hope that continues along obviously, we wouldnt want to dilute our shareholders in any significant way finding an accretive deal with our discipline around acquisitions for the last 30 odd years.
Not paying prices that might be there and not overpaying.
Projects, 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.
I don't have as good a pipeline is we have so I think I think having settled that though if there is some some special opportunity where we can bring our strength of building mines financing them of our improving lives as we did not forget in mass body. 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.
Cash and our shares to minimize solution, we have a tremendous amount of cash and.
And we also have access as Mike said, the $600 million from the banks, including another $200 million.
So 800 million is available threats for us for potentially part of the acquisition so that changes a little bit for me in the sense of.
I can't imagine finding somebody accretive today that we have been also I cant imagine doing something they are using just our shares unless it was a very special situation, where something was grossly undervalued. So.
But we're looking and we will continue to look at interesting places sometimes registry to trend for.
For opportunities so.
<unk>.
But if we do a deal I'm pretty confident that you guys and our shareholders and our board of directors.
Because otherwise we wouldn't be doing it.
Yes.
Sounds good Guy Ben Thanks, everyone. That's it for me.
Thanks, so much thank you.
Next question will be from Anita Soni of CIBC World markets.
Hi, So my first question is with respect to that and Taco.
So I think you mentioned in the MD&A.
Okay.
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.
Yes, so Ben Taco.
Licensed 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 side Ben Taco 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 is the shareholders' agreement what percentage of the government would want to take on it we assume it would be very similar to the color and then you've got that you've got the convention, which basically lift 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 study ready to go.
We want them to be submitted the issue really relates to how then are all of these legal steps, which have to occur how long does it take that we put it we put in and Thats 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.
Okay, Alright, yes, I was wondering about how it would come in in 2014.
Thank you have a plenty ready to go that's alright, great and then just.
Getting an idea.
Tailings dam I think he said that because of the cardinal and the higher throughput levels.
True.
Currently now.
Great economic performing 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 have these additional lift in sort of 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. So based on that that's what our tailings expansion schedule was.
Now that 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.
<unk>.
Going to take US I think I think that's going to take us into 2025 or 2026% somewhere around there.
Basically we're going to have to start doing the design work and the engineering on a new structure, which we've already identified a location for and getting that permitted in 2022. So we can construct in 'twenty late 2022, 2023, which puts us into production in 2025.
Okay and then my final question.
Brian did you want to continue.
I just wanted to say.
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 think I remember seeing something that's around $10 million somewhere in that range for the for the next lift.
And you said a double lift.
Jonathan Okay.
Then lastly.
Grandma Latte.
So yes.
Your decision to kind of defer.
Grammar Lockheed is pretty wide in retrospect, given the inflationary environment that everyone's hitting.
Thank you.
Youre.
Obviously seen costs escalating in.
In your current operations that you are doing things to mitigate that but as you think about grammar lumpy and further.
Could you give us some parameters around how you think about cost escalation in light of capital build you've seen a lot of your competitors are really facing some headwinds.
Lindsay neuro bidding for the same one part.
Got something to get something rolling So could you give us some color on your thought process on whether or not we could.
Differ.
Gameloft he further or would you go full steam ahead.
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 as it is obviously a great debate in Colorado, the inflation trend will continue but I would say that.
If we haven't we have a.
Strong economic case, we had a few.
10%, IRR before but decided that project could get better.
And we've seen signs of that.
It's happening by significant changes 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.
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 there is 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, 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.
Suddenly builds inflation and the government of Colombia, the local people really want us to move forward with this.
<unk> has signaled that they are on the same page as us obviously awaiting the results of the final feasibility study and maybe 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.
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 the exchange rate.
The Colombian peso has weakened a little bit so what we're going to see there is that things like that you buy onshore actually be cheaper to us and so that will 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 mainly.
Many of my questions have been answered, but maybe I'll ask one on on ESG.
I heard Mike say that difficult a cash costs have been reduced by about 3%.
From a 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 Cola 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 is.
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 what that all means for our operations.
Yeah, Okay. Thanks, Phil Yeah, so as far as the cost of.
Generating solar power and it's just a fractional costs.
And.
Whereas generated power with.
With a careful is.
It was much higher.
And.
We are expecting.
Good thoughts.
Had a very good quarter.
And.
For our costs.
Power generation costs were $15.02 per kilowatt hour versus a budget of $15 six.
That resulted in a in an overall savings of about 60 per tonne of ore process. So.
And then going forward, we're getting we're getting into the <unk>.
Hi.
Solar.
<unk> months.
We're expecting even.
Better cost performance from the solar.
Does that answer your question, Yes, and do you have any plans to maybe expand that solar facility at the coal or other ones that other at your other mines.
Well, possibly go ahead go ahead.
You go first.
Just going to say, yes, yes, we've been.
Thinking about that.
But.
No immediate plans to expand that.
It may possibly happen in the future.
There is well it at other sites.
It's warranted.
Yes, 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.
Let's say, let's say, Ben Taco right 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 remember this we've got a seven five megawatt facility in North Dakota and now this facility.
We consider ourselves to be kind of on the cutting edge and on the front and 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 debt.
But 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 of 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 I would say in 2021, a couple of the key things you're going to see is our is our.
Our climate change initiatives that we've got that we've got ongoing we're looking at.
Doing that doing a full inventory of our emissions and of course, our water conservation. We're working some places they 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 we put up.
So 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 my final question and this is an extension of a question asked by previous previous caller and it goes that declines 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 that could be special but 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 then sometimes it doesn't materialize, although I'd like to talk to 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.
I missed a single mine company. They did they did a pretty good job, but we acquired the other operating costs were $890, an ounce and I remember just wondering guys product forward, obviously, they're saying well why are we talking about participants 890 analysis and they said well here's out theres a lot of things we would change so last year I think you had a couple of quarters under.
$500 an ounce.
Operating costs, so not only are we very good at building mines.
With our great construction team will continue with that but there is that 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 find us in a reasonable terms so I.