Good morning and afternoon. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to B2Gold third quarter 2021 financial results conference call. Note that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then one on your telephone keypad. If you would like to withdraw your question, please press star then two, t hank you. Mr. Johnson, you may begin the conference.
Thank you, operator. Well, welcome everyone to our third quarter financial results call. I'm just gonna say a few opening remarks, and then pass it over to Mike Cinnamond to walk you through the financials, and then we're going to open it up to any questions. As you can see from the release, we had another strong quarter in the third quarter, and that despite, once again, the challenges of COVID, and some inflationary pressures on the cost side. We're pleased with the results of what we're seeing in the third quarter. We've seen, as you'll hear from Mike, a very strong financial position now and going forward, being strong in cash and debt-free, looking to generate some $650 million over the year from cash from operations.
Mike will give you all the details on that. The focus for the company going forward will be to continue to optimize responsible, profitable gold production. Mike will talk more about our new guidance for a couple of the mines for Fekola and Masbate. In other things, we're gonna continue to advance our development projects. Obviously, Gramalote, we're looking now at feasibility study over the second half of next year. We've had some positive results from some of our engineering reviews so far, and looking at the capability to reduce capital costs. Also we're drilling away, looking to turn some more inferred into indicated, so we can divide the capital potentially over time by more ounces. We think that's heading in a positive direction for Gramalote.
I think the other thing that's got us pretty excited is the potential that we're seeing from the Tako in the Anaconda area, 20 km north of Fekola. The excitement there is the ability initially be able to haul, to start hauling satellite weathered material the 20 km from the Tako down to the Fekola Mill. The Fekola Mill has been running extremely well. It can definitely handle satellite material because it's softer material on top of the hard rock. We see the potential there by the second half of next year to start trucking ore. Also, of course, the other big excitement has been the Cardinal discovery 500 meters from Fekola on the same license as Fekola.
We've received the permit from the government to start mining there and are mining there, and that can add to production as well. Positive developments there in the short term. In the longer term, the Menankoto license, we continue to have very productive, successful conversations with the government of Mali to resolve that situation. We hope in the next few months, we will see our license extended or renewed for the Menankoto. That'll be an important part. When Mike mentioned several times, the Bantako is a separate license, so we can start trucking from there. Obviously, we'd like to be drilling both of them. Extensive drilling continuing on Bantako, some very good results.
The ultimate target there is to see if we have in the sulfides below the satellite the potential for Fekola-type sulfide mineralization. We're starting to see that now in some of the recent drill. In addition to that, we have a very substantial aggressive but high-quality exploration budget, some $65 million. That is obviously continuing a lot of that, about 65% to do what we've done well for a long time, which is grassroots drilling around existing mines. We've seen some good results come basically from everywhere there, from the three mines in terms of additional success from the drill bit. We have a significant $25 million budget for grassroots this year. We've always been driven by, tried to be driven by geology more than geography.
We've ended up now with some targets we've been chasing for years in some cases, and some exciting opportunities in places like Uzbekistan. I think recently you've seen our partner, Aurion, release some good exciting results from Finland and think there's great potential there for another discovery. We are looking at M&A opportunities. We always are looking, but I would say that you know, we're looking at a few different opportunities that might increase our production through an accretive deal or could add another development project to what we're doing. We feel pretty good about the pipeline. If you include the Anaconda potential and, of course, you look at Gramalote, those are two projects we like in the pipeline.
We did announce recently a sale to West African Resources of the Kiaka Project in Burkina Faso, and we felt that was a good thing to do. Corporately, we've got other things we're focusing on, plus they are established in Burkina Faso. We're happy to be a shareholder of the company and wish them well the way forward on you know a sizeable deposit in Burkina Faso. We are happy to be shareholders of West African Resources. It's not the same, but there are similarities to the deal we did with Calibre in Nicaragua, in the sense that we take these assets and we're focused on other things we're doing, but we like them, so we want to be involved.
In the same case as Calibre's done a very good job in Nicaragua with the Nicaraguan assets, we're happy for shareholders there as well. There's sort of a pattern here of the way we deal with these situations where we wanna 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're developed going forward. Once again, just as in the case of Nicaragua, all of our employees at Burkina Faso will now be under the employment of West African Resources. That's a really nice way to do these deals where you're concentrating people, their jobs are secure, sure, and the project gets advanced.
The government of Burkina Faso, I don't blame them, like every government, if there's a project that can be economically developed, they expect it to be developed and built. Our staff has got a good program going forward on that. Now, one thing too to mention is we just recently got a three-year extension of the Tako license, which is really quite significant in the sense that it shows our relationship with the government of Mali is very good. That's the license we need to the north of Menankoto , as many of you know. We received that very rapidly and quickly working with the government, the three-year extension that we had the right to apply for. That's a good sign also.
Of course, we got the Cardinal mining permit from the government as well. The government relations continue to be very positive and, of course, the government's a 20% partner in everything that we do. As I said, we look forward to, you know, the Menankoto resolution in the very near term. I think that's all I have to say for now. I'll pass it over to Mike, and he can run you through the financials, and then we'll open it up for any questions.
Okay, thanks, Clive. I'll start, I'll walk us through the Q3 results for the quarter with some commentary on year-to-date, and then just how we see the year panning out. Firstly, on the quarter, revenue is at $511 million. That was based on the sale of 287,000 oz at an average realized price in the quarter of $1,782. Year-to-date, our average realized price for our sales was $1,794 per oz. Very close to that $1,800 price that we've used just to put out our cash flow guidance. Really reinforces that we're still on track there. On the production side, good production quarter.
We were on a consolidated basis, including our share of Calibre. As a result, total production was 310,000 oz, which is 21,000 oz ahead of budget where we thought we'd be. The reasons for that are really the same as we've talked about in the earlier quarters in the year. Fekola is still a production machine. There's higher throughput going through there, closer to the 8,400,000 tons annualized so far this year versus the 7,750,000 tons that we assumed in the budget. Now that Fekola is pulling some low-grade material from the stockpiles into fill that additional production mill feed. We did see slightly lower grade overall going through the mill, but production is up.
For the quarter, Fekola, 166,000 oz. It beat budget by 10,000 oz. Masbate, 61,000 oz in the Q, 8,000 oz better than budget. Again, Masbate just continues to outperform the model with better grades and better recovery than the model shows. That's a good positive difference. To highlight, we did mention it in the MD&A and the news release. We did mine slightly out of sequencing at Masbate for this quarter. Some of the higher grade maintenance material that was originally scheduled for Q4 was mined and produced in the third quarter. You will see some of that clawed back in the fourth quarter as we go forward.
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. In Otjikoto, 69,000 oz, 2,000 oz ahead of budget. It's just everything slightly better than budget. Just very solid production all around from Otjikoto. If you translate that and look at how we've done the cost side, very positive. Consolidated, including our share of Calibre, $445 an ounce, almost exactly on budget. Good results there. If you look at that high-level big picture, what we're seeing is that there is cost inflation across the sites, just because of the environment they're in. Fuel costs are up.
Some shipping costs are up. Some reagent costs are up. At the same time, we had stronger production, better production, and that really helped to offset those additional higher costs. We really came out pretty neutral and right on budget. You know, for your models, 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. Remember, we also have a fuel hedging program in place, so derivative gains have offset at least 50% of that, we think, as we go through the year. We're pretty solid on fuel, I think. Then the other thing that did impact Otjikoto's results in the quarter was a stronger Namibian dollar.
We budgeted at $16.5 to the U.S. dollar. It's come in somewhere around $14.5. Probably had an impact of, like, $45 an ounce year-to-date on those costs. Like I say, the benefit of higher production really has managed to offset most of the cost increases. When we look at all-in sustaining costs year-to-date consolidated, again including our share of Calibre, at $795 an ounce, which is just $14 over budget, so really right on budget in the scheme of things. The story there is sort of the same. We have cash costs that are on budget.
We do have higher royalties in the quarter and year-to-date because we originally budgeted at $1,700 gold and we've come in, as I mentioned, very close to $1,800 gold 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. 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. For the nine months, just very brief commentary on the nine months results.
Production year-to-date, 699 oz, including our share of Calibre, 743,000 oz. 49,000 oz ahead of budget. I'll comment where we're gonna be for the year in a second, but very solid and for the same reasons I described for the quarter. Then on the cost side for that production, cash cost per ounce produced, $556 an ounce consolidated including share of Calibre, which is $14 less than budget, so right on budget for the same reasons as the quarter. Then all-in sustaining costs, $900 consolidated per ounce sold, including our share of Calibre, and that's $45 lower than budget. The reason for that $45 lower than budget really is mainly just the timing of CapEx.
Where are we for the year? We did put out some provided production guidance for the year based on where we are to date. Our original consolidated guidance, including share of Calibre, was 970,000-1,030,000 oz. We've bumped that up now to between 1,015,000 oz and 1,055,000 oz. The bumps came with Fekola. The low range of the guidance was previously 530,000 oz. We've now bumped it up to between 560,000 oz and 570,000 oz just because Fekola's performed so well. Then Masbate also, because we've outperformed in the year. Originally 200,000-210,000 oz, we bumped that up to 215,000-225,000 oz.
Now remember though, that part of that big outperforming Q3 was some of that mining out of sequence, so we will see a little bit of that clawed back in the year, in the fourth quarter. That's why we end up with a guidance range for Masbate, 215,000-225,000 oz. When we looked at the cost side of things, we looked at our overall guidance range and 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 costs, we're gonna come in within our overall guidance range for the year of $500-$540 per ounce.
You know, if you look at the individual sites, there, Fekola 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. The other two sites we think will be certainly right in the middle of their ranges. Then on the all-in sustaining cost side, again, our original guidance was $870-$910 per ounce, and these are including our share of Calibre. We still think we'll be in that range, but we think we'll be on a consolidated basis at the upper end of the guidance. That has some offsetting factors in it.
For Fekola, we've got it, we think we'll be at the upper end of the all-in guidance range that we gave, again, because of the nature of the low-grade material going through. At Masbate, we think we may be at or below the low end of the range just because of the production peak we have to date. At Otjikoto, 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. Overall, for all-in sustaining costs, we think we'll be at the upper end of the range.
We think that's a pretty good testament, I think too, or not pretty good, a very good testament and reflection of how well the sites have performed because we are in an inflationary cost environment, and I think you're seeing that across the reporting that's going out across the industry right now. Even in spite of that and because of the production that we've managed to pull forward and beating against budget, we think we're gonna meet those ranges. I think I have a few other thoughts just on where we are. It's just general comments on some of the operations as well, just as we go through. Fekola, just to remind you that the mill really is performing so well now.
You know, we've said that we expect it to be somewhere in the 8,300,000 -8,400,000 tons range, annualized for 2021. As we go over our life of mine long term, including feeding some saprolite material through the mill, we might think we may be able to manage 9 ,000,000 tons per annum for Fekola. Reminder too that, we've now started pulling Cardinal into the mine plan. We started developing that Q3, and then we've got some production now coming from Cardinal. We did get permitted to do that as part of the overall Fekola permit, but we got our environmental assessment done and approved by the authorities.
We think Cardinal, over the longer term, can benefit the overall production at Fekola somewhere around 60,000 oz a year for the next six to eight years based on the resource that we've drilled there, the inferred resources that we've drilled there already. Fekola Solar Plant, just to remind you too that that's now complete, up and running, and really the overall benefit of that is that it allows us to hold back some of the spinning reserve that we have with our gensets there. The net impact on costs overall is probably managed to reduce Fekola's total overall cash cost by about 3% because it reduces the amount, the cost of our milling, our power cost for milling.
Otjikoto, the underground Wolfshag Underground continues and still scheduled to get in and get some ore from that Underground development by the end of Q1 next year. Work in Gramalote continues. The work continues on the feasibility both to drill out some of the remaining infers at the site and also to update the engineering and look at the third party permitting required to move that project forward. We're still expecting to have a update on new feasibility study sometime around the middle of next year. Then for Burkina Faso, as Clive alluded to that, some in the period, we sold our 81% interest in the Kiaka Project. We've signed the deal, and that deal is expected to close around about the end of November.
In conjunction with that, we also updated the previous deal that we had to sell West Africa our interest in the Toega Project. For Kiaka, the consideration for that deal is that we expect to get $45 million in half cash, half shares in West Africa on closing, which is, as I said, expected by the end of November. Another $45 million cash or shares at our option sometime next year, certainly no later than a year from when we close the deal. Then we retain our interest as well as any shares that we might take by retaining a royalty in the project.
2.7% royalty on the first 2,500,000 oz produced from Kiaka, and then 0.45% royalty for the next 1,500,000 oz produced. Just to remind you, too, that in conjunction with revising that Toega deal, with the closing of that deal, there is another $9 million tranche or original option payment that will be due now, with closing the deal at the end of November when the deal closes as well, so we can expect to see that in Q3. Maybe just on the earnings side, the GAAP, our share, GAAP earnings, $0.12 per share. Our share adjusted for the quarter, $0.12 per share as well.
Year- to- date, our share of GAAP earnings, $0.27 per share, and our share of adjusted EPS, $0.26 per share. A couple of comments on the cash flow statement. We had an excellent quarter for generating operating cash flow in the period. $320 million, which would certainly be our expectations. That translates to $0.30 per share operating cash flow. You know, that beat is in part due to the fact that we produced and sold more ounces than we'd originally forecast, which was great. Gold price behaved 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 cash flows.
In the end, $320 million for the quarter. Now, we had guided before this 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, we're now saying somewhere around $510 million for the half year. You could expect somewhere between $190 million-$200 million operating cash flow there for Q4 as we claw back some of those working capital changes that we benefited from in Q3, and we make some year-end tax payments that are required. Our total cash tax guidance $380 million for the full year remains unchanged, so just remind you that.
On the investing side, for the quarter, we were only probably about $6 million under budget with some, you know, pluses and minuses across the sites. I will say that 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 costs, we are behind in some of the sustaining CapEx to date. We also haven't spent as much as originally budgeted yet on some areas like Exploration. But we do expect that we're gonna catch up those CapEx costs by the end of the year. What we've guided overall for CapEx, if you look in the MD&A, we give you some guidance there.
For sustaining CapEx, we're probably gonna be about $10 million over all in for the year, which is fractional based on the total sustaining CapEx that we have. Then for non-sustaining, probably also about $10 million over budget overall for the year. The main component of that being just some costs for Cardinal, some development and fleet costs for Cardinal which weren't originally budgeted because we didn't have Cardinal in the original budget. We paid dividend in the quarter of the $0.04 per share USD, and annualized $0.16 per share, which still puts us up somewhere, you know, 3.7%-4% over the peer dividend yield, which is still one of the highest in the industry.
You know, we still are maintaining the line there, and our intent is to keep paying at that level. Then 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's drawn right now. I think those are the highlights, just what I wanted to emphasize. Just as a reminder, too, the operating cash flow for the year, we think we're gonna come in around $650 million.
We had originally guided $630 million, but with the better beat that we have so far on the production and revenues offset by some higher costs as we see inflationary costs through the year, we think overall we're gonna come in somewhere in $650 million for operating cash flow, with approximately $190 million-$200 million of that in Q4. That's my update.
You mentioned the dividend, Mike?
I did.
I was listening intently.
Yeah, that's no problem.
Okay, thanks, Mike. I'm gonna open up to questions soon. Just a comment, I guess. You know, we were very pleased with the third quarter results, as I think many of our shareholders will be as well. You know, for the analysts, you know, 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 know, you get it right and do a good job. The one thing that's disappointing is to see when you have a $0.01 miss on earnings per share, to see headlines that say, "Q3 miss." I think you might wanna consider a better way. I think you're doing a disservice to your, to our shareholders, your clients, and the companies when you do that with a blaring headline.
How about the cash flow? How about all the other positive things? Just a suggestion. It can trigger the algorithms. It can cause selling. It can cause the investor that reads only headlines to sell shares, et cetera. I just think it's a little bit. There's a better way to do it. That's just my comment for the day, bit of advice.
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 are an analyst and you wanna go into great detail about the strip ratio three years from now at Fekola or other such things, I would ask you to reach out through Ian, or you can actually contact Bill Lytle directly at blytle, L-Y-T-L-E, @b2gold.com. There you go, Bill. But maybe detailed questions. We do respect the fact that you've got models and you want detail, but this is not the time to ask too many, I think, questions of that nature with a lot of people on the line. With that, let's open up for questions.
Thank you. Ladies and gentlemen, as stated, if you would like to ask a question, please press star followed by one on your touchtone phone. Once you do, you will hear a three-tone prompt acknowledging your request. If you would like to withdraw your question, simply press star followed by two. If you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Thank you. Your first question will be from Tyler Langton at J.P. Morgan. Please go ahead.
Good afternoon, and thanks for taking my question. I guess maybe just starting, you know, with cost, you mentioned that sort of costs are a little bit higher than budget levels in Q3, but offset by the strong production. Could you just give a little color about, you know, sort of how you see costs sort of trending in sort of Q4 and heading into 2022, kind of just, you know, sort of general prices sort of remain at current levels?
I can give you very high-level thoughts on it. Bill, maybe pass it over to Bill afterwards, 'cause some of the detail. Production-wise, we are seeing fuel price inflation. So we're, you know, year-to-date, it's probably close to 10%, I would say. Like I say, we have fuel derivatives in place that offset probably half of that cost right now. We're 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 5% or 6% for the year. That's probably in the ballpark. You're looking at production increase against budget somewhere in that 4% range, right?
You can see that, you know, that managed to eat up quite a bit of that cost overrun offset.
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 we'll see those carry into 2022. Of course, labor, as various economies are seeing inflation, inflationary pressure, of course, the employees are also seeing that, so they're asking for a pay raise. We did a really nice thing actually this year. We locked in our Fekola, increases for the employees, basically about 5% per year over the next three years, basically guaranteeing that can be stabilized. Of course, we typically at Otjikoto do the same thing where we have a two or three-year agreement, which will be up for discussion this year.
That's already started for 2022. We would see that also in that kind of 5%-7% range is probably where we'll end up. I would say shipping, fuel, spare parts are also up. We had a good discussion with Caterpillar here in September. Caterpillar has awarded B2Gold global pricing. Basically, we get the same price for everything. They have announced that because of production costs and shipping costs, they will be passing along some increases as well in that regard. Those are the main things.
Perfect t hat's helpful. This is Fekola and production. I know you've sort of given sort of formal guidance for the next several years, but could you just talk about, I guess, directionally, how you kind of view production with, you know, Cardinal sort of coming in, maybe Bantako North a little bit later, just sort of the moving parts that could affect production there over the next several years?
We're still obviously working on that. Cardinal, what I think basically we've talked about, it's an inferred resource of, you know, north of 600,000 oz. 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 we come in line with the guidance is we are drilling off the 2022 production into reserves. That'll be out by the end of the year. We'll do the same thing in 2022, at least for 2023. We're gonna try and be a year ahead. I think what we've been saying is we're kind of in that, you know, 60,000 ± oz range for Cardinal coming in.
Of course, you've also got what could be Anaconda, Bantako. We have a mine plan on that right now. Depending on what happens with Menankoto is how we'll decide to go forward. Certainly, we could see a couple 100,00 oz over the next couple years if we so chose, coming instead being trucked in from Bantako. 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 in production when we did our original life of mine. We pulled that dip out of there through some of the work we've done at Cardinal and potentially in Anaconda. We see 2022 not finalized yet, but it's gonna be a really good year as far as the production.
I think, you know, I'm not gonna say it's got a six in front of it, but I'm saying we're gonna get up near that number for sure.
Perfect t hanks so much.
Thank you. Next question will be from Josh Wilson at RBC, p lease go ahead.
Thanks, f irst question is on Cardinal. Earlier in the year when the opportunity was discussed, there was some guidance about grade for the initial feed being about three grams. I know the resource when that was issued was lower, but the initial stockpile that's been built up is also kind of more along that overall resource grade of about 1.5 grams. You know, what was sort of the difference between the initial guidance and what the stockpile looks like now?
I'm sorry, I don't understand the question.
You mean the grade or?
Yeah, for the grade. Yeah, so the grade, I think initially. I know the overall mill feed was or the resource about 1.5, but I think there was some guidance earlier this year that it was gonna be significantly higher initially, unless I'm mistaken, and the grade is 1.5 today. Was there a variance versus expectations there or?
No, no. I think certainly we've seen really what everything that was in the inferred is kind of played itself out so far. What I will tell you is that, like in 2022, we're gonna see the grade from Cardinal increase a little bit. I think it's gonna be above 2 grams per ton for sure in 2022. You know, as we bring that into reserve, of course, we'll report that.
Okay. As it relates to, you know, looking at the overall split in terms of processing, you know, the guidance for 9 ,000,000 tons of feed going forward is pretty similar to what the asset's doing now. Should we assume a similar kind of split between the sulfides and the oxides, you know, that the asset's processing today is kind of continuing going forward?
Well, that once again is kind of a I think John's on the call, so he can correct me if I'm wrong here. What we've always said is that we don't think that really the mill can handle more than that 10%-15% of saprolite material. You know, it all depends on what the mine plan has for Fekola and the saprolite that's available at Cardinal and whether or not we can bring Bantako in. What I'll tell you is that if we can get 50% saprolite, we feel pretty good at that 9 ,000,000 tons per annum. Once again, that also assumes that the material doesn't get significantly harder as we go to depth at Fekola.
You know, that's kind of what we're projecting at this point. I know, John, if you wanna add anything to that.
Well, that's right, Bill. I think everything you said there is accurate.
Thank you.
Sure.
All right, and then m aybe final question as it relates to Gramalote. You know, with a bit of work that's sort of been done since the last update, is there any kind of additional insight into the, I guess, the extent of the changes and what the permitting modifications that would be required for that would be, o r is it still a work in progress?
I'll kind of update you on where we're at. If you remember, there's a bunch of things going on here. Number one, there's the engineering work where we're basically trying to simplify the process and take out some of the confusion 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 resource drilling is ongoing. They actually have a very significant program there, which I don't think is even gonna be done drilling until, I think, the end of November or December. Of course, we'll have to wait for the re-resource to see where that ends up.
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 phased resettlement. The long answer to your question is 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 gonna approach them with some modifications to our existing operational permit in EIA. We're assuming that those will 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.
Once that is approved, we would then do some major changes, which include adjusting, looking at the tunnel and turning it into a diversion ditch, which we think would take us into 2023 before that would be approved. The short story long is we believe in end of Q1, we'll approach the government with a request for a modified permit, and then kind of six to eight months later, submit a second half or a second version of a modification, which would take us into 2023.
Great t hank you very much.
Thank you. Your next question will be from Ovais Habib at Scotiabank, p lease go ahead.
Thanks, operator. Hi, Bill and B2 team. A couple of my questions have already been answered. Just don't wanna harp on too much on the Cardinal side. Bill, can you just tell us exactly kind of, you know, essentially how much of the revised guidance on Fekola is due to Cardinal? And also in terms of the guidance provided on Cardinal, that the deposit has, you know, potential to add about 60,000 oz of gold per year. You know, again, can you just give us a little bit more clarity on the constraints on that 60,000 oz a year, especially the fact that the mill's running at 9,000,000 tons per annum?
If I understand your question, you're asking for what is the ounce profile from Cardinal over the next couple of years?
Yeah t hat, Bill, just trying to understand, is there any sort of constraint on that 60,000 oz of gold a year that you've laid out in terms of, you know, just, I guess, soft guidance?
Or not more, I guess you're saying?
The constraint really revolves around looking at what the Fekola permit or what the Fekola pit grade is versus what Cardinal is versus the mining sequence. All that is being taken into account. Remember, Cardinal is a little bit further haul, and we're obviously taking the higher grade first. Of course, you've got to include stockpiles in that. What I'll tell you is that in 2022 right now, we're estimating about 650,000 tons coming from the Cardinal deposit. That actually adds up to about 50,000 oz for 2022. As you get deeper into some of the higher grade zones, you'll pick that up in some of the later years.
Got it. Just in terms of, you know, obviously, you've been drilling into the inferred ounces as well. Also, maybe this is a question for Tom. Have you been doing any sort of step-out drilling as well? Is there any extent to this in terms of strike potential?
I'll say first, basically, we've divided it up where the operational group is bringing the inferred to indicated. The geologists are right next to us because it is open for sure, and maybe either Tom or Brian can discuss that. It is wide open, and we see this thing continue to grow, so much so that we've actually included in the 2022 budget some more work on the social side to make sure that the communities are not kind of land restricted as we make this pit bigger.
Tom, do you want to comment on exploration and permits?
Yeah, Ovais, just to answer your question, Cardinal is still open. It's open both at depth and on strike. Then we have an adjacent deposit called FMZ, which is on the sort of west, northwest side of Cardinal, which also butts against us. Our exploration is not only extending Cardinal, but it's extending FMZ, and it remains open. We'll continue with that exploration again next year. That's within the budget for next year.
Okay, sounds good.
So-
Sorry, go ahead.
No, I just said, "Thanks, Tom.
Oh, sorry about that, o kay. Just Clive, just over to you now. Just, you know, you mentioned the beginning of the call that you've started or B2 started looking at some M&A opportunities as well. Any color you can provide on whether you're looking at kind of development projects or this is operating mines, JV opportunities? Any additional color you can provide?
Yeah, I think I said we continue to look as we always have. You know, as I mentioned, we like what we see in our pipeline and some of these great exploration projects that we have and Gramalote and the potential of Anaconda, et cetera. I would say that, you know, with our shares underperforming the sector, hopefully starting to catch up recently, we hope that continues along. Obviously, we wouldn't wanna go and dilute our shareholders in any significant way.
Finding an accretive deal with our discipline around acquisitions for the last 10 or 30-odd years about not paying prices that might be there and not overpaying for projects, it's gonna be hard to go out and win a bidding war with other companies that didn't do what we did in the last 10 years and build mines when it was unpopular and don't have as good a pipeline as we have. I think having said all that, though, there's some special opportunity where we can bring our strength of building mines, financing them or improving mines as we did, don't forget, in Masbate some years ago. We're looking at those types of things, keeping an eye on a number of things.
I must say, though, I think one of the really positive aspects in that regard is the opportunity to do M&A using a combination potentially of cash and our shares to minimize dilution. You know, we have a tremendous amount of cash, and we also have access, as Mike said, to $600 million from the banks, including another $200 million. You know, $800 million is available for us for potentially part of an acquisition. That changes it a little bit for me in the sense of I can't imagine finding something accretive today that we would win a bid on. Also, I can't imagine doing something today using just our shares, unless it was a very special situation where something was grossly undervalued.
You know, we're looking, and we will continue to look in interesting places, sometimes where others fear to tread, for opportunities. If we do a deal, I'm pretty confident that you guys and our shareholders and our board of directors would agree it's accretive, because otherwise we wouldn't be doing it.
Sounds good, Clive. Thanks, everyone, t hat's it for me.
Thanks, Ovais.
Thank you. Next question will be from Anita Soni at CIBC World Markets.
Hi. My first question is with respect to the Bantako permit. I think you mentioned in the MD&A that you know bringing it into production would be subject to the mine plan, also getting all necessary permits. Could you just elaborate on what remaining permits the group would need for that?
Bantako is in a separate license area, right?
Yeah.
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, and we're now fully permitted on that site. Bantako is once you submit a feasibility study, then you have to go through the full situation of getting an EIA approved. Then there's the shareholders agreement, what percentage the government would wanna take on it. We assume it'd be very similar to Fekola. Then you've got the convention, which basically lists out your fiscal stability and everything else. There's a whole long process which will be required for sure.
That's why, you know, the reality is we actually have already, just for Bantako, we have a study ready to go that we, tomorrow, if we wanted, we could submit it. But the issue really relates to how then are all these legal steps which have to occur, how long does it take that? That's why you often hear Clive talk about the second half of 2022. We randomly put in six months, because we think that's how long it'll take, but maybe it'll go faster than that.
Okay, a ll right, yeah, I was wondering about how it would come in in 2022 if there were still permits. Since you have a study ready to go, that's good. Then just getting an idea of the tailings dam. I think you said that because of the Cardinal and the higher throughput levels that you're going through currently now, you know, great that the mill is performing. The tailings facility, could you just give an idea of like what kind of a lift would be required and how often you would have these additional lifts and sort of the capital associated around that?
Okay, w ell, I don't know that I have the capital numbers right at hand, but certainly, from a lift perspective, remember we were always kind of telegraphing that we had this kind of 6,000,000 tons going to 7,500,000 tons per annum. Based on that's what our tailings expansion schedule was. Now given the fact that we're operating at 9,000,000 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. The reality is we've started already putting the next lift on it. It's gonna be a double lift, basically getting us up to the final elevation of what that facility could do.
That's gonna take us, I think, into 2025 or 2026. It's somewhere around there. Basically we're gonna 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. We can construct in late 2022, 2023, which puts us into production in 2025.
Okay, and t hen my final question. Sorry, were you continuing on that?
No, I just wanna say I don't have the costs for that.
Mm-hmm.
Obviously in front of me, but you know, it's the operating costs or the construction costs typically, you know, I think I remember seeing something that's around $10 million, somewhere in that range for the next lift.
All righ, and y ou said a double lift, so maybe you can talk about that.
Yes.
Okay, and then l astly, on Gramalote, you know, your decision to kind of defer Gramalote seems pretty wise in retrospect, given the inflationary environment that everyone's hitting. As you know, you're obviously seeing costs escalating in your current operations, you're doing things to mitigate that. As you think about Gramalote and further, you know, progressing that forward, could you give us some parameters around how you think about cost escalation in light of capital build? We've seen a lot of your competitors, you know, really facing some headwinds, and they're all bidding for the same one part to get something rolling.
Could you give us some, I guess, color on your thought process on whether or not you could defer Gramalote further or, you know, would you go full steam ahead on that?
Well, from the corporate point of view, I mean, obviously we're building in some inflationary factors in terms of this potential looking at Gramalote on, you know, how long those factors are gonna be in place. It's obviously a great debate in how long the inflation trend will continue. I would say that if we have a strong economic case, you know, we had a 15% IRR before, but decided the project could get better. We've seen signs of that is happening by significant changes that are reducing the capital potentially quite significantly. Inflation may chew into that a little bit, but we'll be looking at that closely.
I must say that I think that, you know, as a company, historically, if we've got something that's got good economics, we're gonna wanna build. The government of Colombia, like all governments these days, if there's an economic project they're gonna wanna build. We have a very supportive government there. We're in the right place in Colombia and Mali, and the local people really want this to happen. There's also an issue there where, you know, if it's economic, we're gonna wanna move forward, if we're satisfied we build this inflation. The government of Colombia and the local people really want us to move forward with this. AGA has signaled that they're on the same page as us, obviously awaiting the results of the final feasibility study.
Yeah, and m aybe just to add just a couple things to that. I mean, clearly we just updated the cost for our study, which was done in 2021. We'll update those again. We—as we go into additional detail on the mill and stuff, those costs are obviously being very tightly refined. But then the other thing is remember that the Colombian exchange rate, the Colombian peso was weakened a little bit. What we're gonna see there is that these things like that you buy onshore will actually be cheaper to us. That'll be some offsetting for sure.
Good point.
All right, t hank you. That's it for my questions.
Thanks.
Thanks, Soni.
Thank you. Your next question will be from Don DeMarco at National Bank Financial.
Thank you operator, and congratulations on a strong free cash flow quarter, guys. Many of my questions have been answered, but maybe I'll ask one on ESG. I think I heard Mike say that the Fekola cash costs have been reduced by about 3% from the Solar Plant. I'm hearing across the board that electricity and fuel are drivers of inflation. Is the cost to generate solar power at Fekola subject to less inflationary pressures than the cost to generate genset generated power? Secondly, company-wide, what are some of your next ESG initiatives?
Okay. Well, certainly I'll let, a ctually the answer is yes, of course. I mean, it's much less subjected to inflationary pressures doing solar. I'll let John maybe talk. John Rajala is kind of our king of power, and I'll let him talk about what solar costs are and you know, what that all means for our operations.
Okay, t hanks, Bill . Yeas so, as far as the cost of generating solar power, it's just a fractional cost. Whereas generated power with HFO is much higher. We are expecting good costs. We had a very good quarter in Q3 for our costs. Our generation costs were $0.152 per kWh versus the budget of $0.156.
That resulted in an overall savings of about $0.60 per ton of ore processed. Going forward, we're getting into the higher solar irradiance months now, and we're expecting even better cost performance from the solar. Does that answer your question?
Do you have any plans to maybe expand that solar facility at Fekola or build other ones at your other mines?
Well, possibly.
Yes.
Go ahead, Bill.
Hi, John, you go first.
I was just gonna say, yeah, we've been thinking about that, but no immediate plans to expand. It may possibly happen in the future, there as well at other sites, if it's warranted.
Yeah, w e actually had a very interesting discussion at our board meeting yesterday where we talked specifically about that. If you look at something like, let's say Bantako, right, or Menankoto, we get it back, and we want to wheel power, you know, out to that site, then certainly you could do it there. But because now, you know, remember, this. We've got a 7.5 MW facility at Otjikoto, and now this facility at Fekola, we consider ourselves to be kind of on the cutting edge and on the front, the leading front of that. So now we're looking at, Dennis Stansbury is actually looking at things like, you know, is for Gramalote, does it make sense? Obviously, that's kind of land restricted, but can we do it there?
Can we do it in Masbate? You know, there's some technologies out there, and I know that both John and Dennis have been studying this, you know, that you could put it on the tailings facility, or could you put it on the face of the dam. We're looking at all that stuff and, you know, we're pretty high on it for sure. Then the second half of your question related to other ESG initiatives, you'll 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 gonna see is our climate change initiatives that we've got ongoing.
We're looking at, you know, doing a full inventory of our emissions and of course, our water conservation. You know, we work in some places that 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.
Of course, as you remember, we put up some of the very first solar plants in mining in Otjikoto some years ago. We were ahead of the curve on that. It's a big commitment for us to look at increasing it and also to look at where else is built that we can use it.
Okay, y eah, thanks for that color. My final question, this is an extension of a question asked by a previous caller, it goes back to Clive. In your Preamble, you mentioned you'd consider accretive M&A opportunities. Did you mean accretive in terms of production? I mean, that is, would B2 consider an operating asset if justified, or is your focus on M&A still primarily on development projects?
No, I think, you know, there could be special situations where, let's say, you know, a mine has had a problem through some poor management or other issues that we think we can make it better. Now, a lot of people in this industry do deals and promise that, and then sometimes it doesn't materialize, although I like the fact that the industry seems to be getting better technically overall. If you think back to Masbate in 2013, I think it was, when we acquired CGA Mining as a single mine company, they did, you know, a pretty good job. When we acquired them, their operating costs were $890 an ounce.
I remember some of the guys brought it forward, and I was just saying, "Well, why are we talking about this? It's $890 an ounce." And they said, "Well, there's a lot of things we would change." Last year, they get a couple of quarters under $500 an ounce for operating costs. Not only are we very good at building mines, with our great construction team, and we'll continue with that, but there is that opportunity. Also, sometimes in, you know, these days it's harder and harder for a single asset company to convince investors and banks, et cetera, sometimes that they can, you know, that they can build it. Do they have the team to build it?
Do they have the owners team if they're gonna do some kind of a contract build, which I think is always a bit dangerous, but do they have a strong owners team? Can they finance it on reasonable terms? I think some of those situations. There is competition, as I mentioned earlier, so we might be in a situation where in a location where others fear to tread, which we've done successfully before, or we may find that the right fit, as I said, is something we can make better. Clearly, we'd like to find. We found a good developable opportunity we could argue to shareholders successfully that it was an accretive opportunity. We are keen to do that as well.
As of now, we were pretty optimistic that Gramalote could very well be the next construction build for us. We also have the potentials we talked about, you know, is there one, 'cause one day, is there possibly another mill at Fekola? It's too early to say now, but there's a possibility for that going across.
Okay, thanks for that. Good luck in Q4.
Thanks.
As a reminder, ladies and gentlemen, if you do have a question, please press star one on your touchtone phone. Your next question will be from Geordie Mark at Haywood Securities, p lease go ahead.
Yeah, g ood day, guys. Just a couple questions, extensions on a few, and some new ones. Maybe on Fekola, given the multiple source origins you could have in the near to midterm, Bantako and Cardinal stock pile with Fekola and Fekola primary hypogene, and the upgrade, I guess, to 9,000,000 tons per annum on a blended source. Are you comfortable with 9,000,000 tons per annum capacity? Or is there some functional sort of capacity to go beyond 9,000,000 tons per annum over the midterm given the success from the drill bit.
I can just hear John screaming, "When is it enough?" The long answer is, Geordie, we, if you remember, we did way back in the day when we kind of expanded. Remember, we went from 4 ,000,000 tons per annum to 5 ,000,000 tons per annum. Then we looked at optimizing, and we actually had a step function. We looked at +1,500,000 tons, which was basically increasing the existing circuit. Then the second study that was looked at was a 10 ,000,000 ton per annum. It was very quickly ignored because the step function to 7,500,000 tons, which is now 9,000,000 tons, was so much more cheaper, $50 million.
There is the capacity to grow bigger. It's a big step function and would require a lot of additional work. Is there ability to put it there? I think John would say yes. You know, you'd have to start weighing this whole concept of wouldn't it be cheaper potentially to put something up at Menankoto, right? Would you have a whole complex where you'd have maybe two mills running up there, you know, so you wouldn't be trucking all that ore all that distance? I think if you found enough ore that you would ultimately want to build something separate, but those studies would have to be done.
Yeah that's it.
Okay, 9 ,000,000 tons through it for now. Maybe over to Masbate, some nice positive sort of recovery percentages there. Given the history, you know, positive percentage of recovery versus the model, are you looking to revise the model or are you gonna continue, I guess, a sort of more conservative stance on that? How should we look at that going forward?
For the 2022 budget, we actually did up the recoveries 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 results that we've already received as opposed to doing additional drilling or additional testing of the metallurgy. At this point, we're still a little conservative, but we're moving towards, just based on experience, a higher recovery. I don't know that there's any science behind it. It's just this is what we see, and so this is what we're saying.
Yeah, I'll just add to that, Bill. We've been doing some ore campaigns through the mill there at Masbate with the major ore types to get a good estimate on recovery on a plant scale. That's being built into the model as well for 2022.
Okay, thank you. In terms of, maybe last one, for Otjikoto and Wolfshag Underground, what are the steps to ultimately get to, you know, first ore production underground now? It's obviously not too far away from first production, so what are you looking at there?
What's the question?
First production underground.
Just what's left? Yeah.
Yeah, no, I mean.
Development activities.
Randy's literally at Otjikoto now, so maybe I'll let him answer. What I will tell you is that, you know, we just continue the development of the down plunge, and the plan is to start producing ore in Q1, or at least getting some ore out of there in Q1. Randy, you wanna talk about what are the final steps we have left to do?
Yeah, that's pretty well it, Bill. The development contractor is working on the main decline right now as we speak. We've made a couple little tweaks there to the development plan. When we get into ore, we'll be starting to take out some development ore in the first quarter. Then, we've selected a production contractor that's gonna be gearing up and coming in towards middle to end of Q1 and getting started there.
All right. The development ore and then coming into the very proportion of stoping, I guess, from there on.
Yep, correct.
Okay, thank you.
Any further questions, Geordie?
That's all good. 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. At this time, I would like to turn the call back over to Mr. Johnson.
Okay, t hanks, operator. Thanks everyone for your questions. If there's any other questions that come up, don't forget to reach out to us. We look forward to planning on reporting another great quarter now in this end of the year, so t hanks for your time.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.