Good afternoon. My name is James, and I will be your conference operator today. At this time, I'd like to welcome everyone to the B2Gold Third Quarter 2020 Financial Results Conference Call. Thank you. Mr.
Clive Johnson, President and CEO, you may begin.
Thanks, operator. Welcome everyone to our conference call to discuss the third quarter of 2020. Financial results for B2Gold. Obviously, I think most of you've probably seen our news release that came out last night another very strong quarter, putting us on, putting us on target to the lower end of our guidance for 2020 for the year. I'm going to pass it on to Mike Cinnamon now.
Mike's going to talk, walk you through the highlights of the financial results. And then Bill Lydall, senior VP operations is going to give us an operational update. Talk really a little bit more about growth, and then we'll open up for questions. We had a very good session with an analyst session 10 days ago, so I'm pretty sure won't have that many questions, but if they do, that's fine. And this is an opportunity for our shareholders to ask some questions again.
So once again, very happy with the quarter, another strong quarter And with that, I'll pass it over to Mike, to give you some of the highlights.
Hey, thanks, Clive. So I'm going to start on the revenue side. So we'd quarterly record revenue of $487,000,000. We sold 253 ounces 1000 ounces at an average price of $19.24 an ounce. So included in those gold sales were something filled over $2000 an ounce.
So That's pretty fun to do. And obviously, we're all watching closely to see what happens to the gold price analysis. Hopefully, we'll see the results of the U. S. Election in short order or relatively short order Should also say that year to date, we had record revenues of $1,300,000,000.
So it's been an excellent year for B2 even in the midst of the COVID epidemic. Turning to the operating side. So production, We had total production of 264,000 ounces. That's made up of 249,000 ounces from our 3 mines and then 50,000 ounces. From our attributable share of Caliber's results.
On our production sites, Ladd is always by Fekola 153,000 ounces or 3000 ounces above budget. Fekola had excellent quarter again, process grade and recovery both higher than budget more than offset little bit of downtime on the throughput side as we took the mill down to do the Fekola Mill expansion high end and also to do a full side mill reline. So even with that tying in place, we still managed to beat budget by 3000 ounces at Fekola. As Barry's right on budget, 54,000 ounces, Mifati, the only thing different in the quarter for Mifati was that we had a magnitude 6.6, but our quake in early of mid August. And we had to take the mill down for about 6 days, while inspections were carried out by the Philippines.
Sciences Bureau, but those inspections confirm no damage and the study is running very well. Otjikoto 43,000 ounces, 1000 ounces above budget and, and basically, Otjikoto continues to move along nicely. Year to date, our consolidated production is 770,000 ounces, including our shared caliber, and that's about 20,000 ounces ahead of budget overall. I'll turn to the cost side of that equation. Our total cash costs for the period including our share caliber is $4.35 an ounce, which is $6 lower than budget.
Looking at our 3 operations, we're $411 an ounce against the budget of $4.28. So $17 an ounce. Less than budget for the 3 month period. And Fekola was $333,000,000, which is broadly in line with budget. And, That's really, in fact, made up of slightly higher gold production that I just described earlier, but generally in line, total mining costs.
We did see some costs that were marginally higher than budget due to changes in mining sequences and some COVID related costs. We've also seen it in Molly that fuel costs have been on or slightly above budget, which is sort of bucks the trend that we've seen elsewhere in the world. And just a reminder to everyone that in Mali, set 1 month in advance by the government and don't always follow-up with the underlying fuel NDCs. Mid Valley was $6.15 an ounce, which is $33 less than budget, and they continue a great run. Same story as we've seen in Q1 and Q2.
Mining and processing costs were lower than budget with lower diesel and HFO prices and lower waste stripping and lower haulage distances as we had a bit of a mine sequence change there to deal with COVID during the current year. And then Otjikoto, $4.35 announced $66 announced less than budget. So continued to totally outperform the budget, Darren, and again, same story as the 1st 2 quarters higher than budgeted gold production, lower fuel costs and a significantly weaker than budget in Namibia dollar. All added to the positive outcome for Otjikoto. On the all in sustaining cost side, our total all in sustaining cost per ounce for the, including caliber, were $7.85 an ounce to the quarter, that's $19 less than budget.
And when you take our 3 operations, it was $7.66 an ounce, which is $31 less than budget. And Again, it's not on the corporate record. Statements really the 1st 2 quarters, but we did see some CapEx catch up. In Q3. So, we've seen some CapEx moved around during the year.
And I'll comment a little bit more. We think CapEx is going to come out overall for the year, but We did see a little bit of lower CapEx earlier in the year and some of that caught up in the quarter and we do expect some of that to catch up in Q4. If you look at all ends for the year to date, on a consolidated basis, we're $7.40 an ounce, which is $75 less than budget. So you can see that we're still expecting to see some of that CapEx catch up in Q4. Okay.
Take all those results and where we think we're going to come out guidance wise. So firstly, on the production side, Cola mine, we guided by 90,000 to 620,000 ounces. We think we're going to come out, somewhere at the upper end or right at the upper end of that guidance range. The value was $200,000,000 to $210,000,000. We think we'll be in that range easily in the middle and Otjikoto $165,000,000 to $175,000,000 again, right in that middle of that range.
Overall, including our share of caliber, our total consolidated guidance for the year was $1,000,000 to $1,555,000 ounces. And we think we'll come in right in the middle of that consolidated range. On the cash cost and all in sustaining cost side, for Fekola. It was a range of $2.85 to $3.25. We think we'll be in the range of Masbate 6.65 to 7 0.5.
We think we'll be at or below the low end of that range. And Ojikoto 480s by 20. We think we'll be at or below the low end of that range. When you take in our consolidated position, including Calibert's $4.15 to $4.55, we think we'll be at or even slightly below the low end of that consolidated range. On the all in sustaining cost side, Fekola, the range was $5.55 to $5.95.
We think we'll be at the upper end of that range when all set and done for the year. At VADI 965 to 1005 per ounce, we think we'll be in the range of Otjikoto 10,1015 ounces think we'll be at our kind of cost dollars per ounce. We think we'll be at or below the low end of that range. Overall consolidated 7 80 to 8.20, we think we'll be at the lower end of the range. So as I mentioned, we do have some CapEx catch up in Q4.
We think it'll be somewhere in the range of $100,000,000 to $110,000,000 overall for the year. If you look at our total CapEx that we budgeted, will likely come in somewhere around $10,000,000 less than that total. So when you factor that in, you're looking at somewhere around $100,000,000 to 110,000,000 CapEx in Q4. So you will see, higher all in sustaining costs in Q4, but overall, as I said, think we're going to come in at the low end of that range 7 80 to 8 20 for the year consolidates. A couple other comments maybe on the operations generally.
The Fekola mine expansion, the mill expansion is now materially complete. The new mill came online and that's been commissioned in September. Should comment that these are the final construction costs of that plant expansion were a little higher than we budgeted. They were about $13,000,000 higher overall when all was said and done. And we the majority of those overruns related to COVID-nineteen costs delayed and increased labor and camp costs related to dealing with the pandemic and bringing the people in and out to get that expansion finished.
But overall crude salt performance and they came in basically, ahead of schedule. On the Fekola solar site, as we announced previously and disclosed, we did have some delays on that earlier in the year as we used as we were trying to manage bringing people in under the camp. We restarted the solar plant activity mid September, and we are expecting completion to be by the end of Q1, twenty twenty one, assuming that we're still able to bring people in, uninterrupted to get that done. And to remind everyone, so it doesn't impact 2020 guidance. At all the solar plants, but we do think we'll bring it online sort of earlier in 2021.
Maybe on a comment overall on the Malek situation, Mali and Fekola, Fekola's just run very well through the year considering everything we've had to deal with and the countries had to deal with in terms of the COVID pandemic in the acute and we still see in Fekola operating at record levels. Just to remind you too that in Moly, the state of Moly is a 20% partner in the Fekola mine. So they're a direct beneficiary of the results in the mine. And we did put in some highlights of the total amount that have been paid to the government and state since we started operations there. So in 2020, 2019, we paid $40,000,000 plus in wages and benefits.
And total payments for the government were around $276,000,000. So it is contributing it's a big contributor to the economy and Molly there. And that $276,000,000 includes priority dividends that the government gets for 10% of its share. In addition, as 2nd, 10% of owned are also eligible for ordinary dividends and we're just getting to the point where we're going to start paying those dividends. We've just reached a point where all our initial capital investment and the loans that we put into the country to get for co op and running have been repaid.
So we're now starting ordinary dividends to a gain and the stable benefit from that. And I'll also as a reminder, Fekola is governed by the 2012 mining code and we have a 2012 mining convention. And when the 2019, mining convention came in, it did include specific stabilization terms, just just confirming that, Coca Cola and the way Coca Cola operates is grandfathered under the 2012 code. All right. It's going to
move on. Just talk a little bit about some
of the other income statement items and then a couple of comments on the cash flow. So On the income statement, I have a few items just to raise your attention. One of the most significant ones for below the gross profit line relates to the reversal of of long lived assets. So we have a reversal layer of $174,000,000. Net of deferred income taxes, that reversal has an impact on the bottom line of 100 and 22,000,000 And that relates to Masbate.
We had booked an impairment, on the Masbate and carrying value years ago when gold prices really dipped. This adjustment here represents the final reversals of any final amounts. The remaining of that impairment charge that could be reversed And it was driven by a change in our forecast gold price assumption based on analyst consensus and other analysis we did, long term gold price from Now we're using an assumption of $1500 an ounce. So for accounting purposes, so that led to that impairment reversal. Then common share of income and associate caliber, we've got almost $11,000,000 there.
So Caliber is back up and running in Q3, and we picked up a net $11,000,000 share of their results for the period. Then the highlights of the taxes section, the taxes are significant. We're taxable in all jurisdictions. Mali, there were no accelerated reductions. There were some impacts inside of the gate.
Masbate and Otjikoto, we're also fully taxable there now. Any any residual tax loss carry forwards that we had there, accelerated investment deductions, etcetera, are all gone now. We're paying taxes everywhere, and that's really a function of the mines running well in the higher gold prices. While that translated into net income for the period $277,000,000 of that $262, attributable to shareholders of the company or $0.25 a share. If you adjust that for significant non Cash items, including that Masbate impairment reversal, you get to adjusted income $161,000,000 or $0.15 a share.
And then if you look at our results year to date, net income for the 9 months, almost 500,000,004 198,000,000 Of that, $460,000,000 attributable to shareholders of the company, $0.44 a share or adjusted net income, $368,000,000 or $0.35 a share. I'm going to talk about a few items in the cash flow. So first of all, operating cash flow, we had a great quarter, $300,000,000, just over $300,000,000 operating cash flow $0.31 a share or $755,000,000 operating cash of $0.73 a share year to date. So when you look at that, it looks like we're well positioned to get up to that $1,000,000,000 level, cash flow wise you prorated up. But we have been reminding you, we've given you some detail on the MD and A.
A part of our operating cash flow, it includes significant taxes that aren't yet paid in cash. We've accrued them in the financials, but they're not yet paid And so in Q4, in total for the years today, we paid cash taxes of about 94,000,000 For the year to date, where it's anticipated somewhere around $205,000,000. Tax is still some pretty hefty cash payments to come in Q4. So just remember that for your models. And also, there will be some true up of Molly and Texas in Q1, Q2 next year as is laid out.
Under the rules for payment of taxes in Mali. One of the items that we have highlighted in there that those cash numbers I gave you at $200,000,000 $205,000,000 for the year. That does include a vote. We're looking at up to maybe $50,000,000 of tax prepayments. For the year that aren't strictly due until Q1 or early Q2 next year, but we think that the taxes have already been incurred.
And we have the cash on hand. So we may prepay some of those taxes and a significant chunk of those would relate to Molly. On the financing side, I guess the story you can see there is that we have now repaid the revolver fully. So we in the quarter, we paid back down 4 $5,000,000, which was a total outstanding balance on our revolver. So we're now we have no amount drawn on revolver.
We have we just have a little bit of debt under the, finance leases related to mainly difficult of about $50,000,000, but other than that, there's no other debt. And the what we have left on the revolver is $600,000,000 undrawn capacity plus another $200,000,000 accordion. So we really have $800,000,000 of firepower there. With the revolvers of Stance. We will, in Q4, expect to see about USD 40,000,000 come in from cat loans, though, because we always use CAF to help finance part of our fleets around the world.
And as part of Fekola fleet expansion, just ties in with Fekola Mill expansion. We financed about $40,000,000 of that in cash. So you will see that come in, in Q4. Dividend wise, we paid $62,000,000 in the quarter. And $73,000,000 year to date.
We're paying dividends right now at the rate of $0.04 per share quarterly. That would be $0.16 annualized U. S. Which equates to about $170,000,000 a year. That's a yield right now about 2.4%, which I think puts us right up near the top of the dividend.
Paying full companies. And, maybe a comment on that from a capital allocation point of view. So We are continuing to generate strong cash. So you can see in the cash flow here that we ended the quarter with $365,000,000 and we'll continue to generate that cash over the course of the rest of the year. As we move into next year, we've got a couple of big capital allocation decisions, the most significant one being for Gramalote.
At Gramalote, we're expecting to get the feasibility study complete by the end of the first quarter next year. And that will put us in a position to make a build decision and discuss with our partner AGA. And so at that point, we will have a significant capital allocation decision to make. In addition to that, we're also looking at our options at Kiacit and Regina, how we might want to advance that project And then also just looking at, we've got a big drilling campaign on the exploration side and got good results, in Molly and elsewhere. Around the world.
And so we'll be looking at the results of that and just deciding what we want to do allocation and capital versus that. So once we have a look at all of those things in the site, what our capital needs are, then we can also revisit our dividend, allocation and see if we want to do anything about changing the dividend rate. And just final comment really on the Investing side of CapEx. As I mentioned, overall, we had budgeted about $390,000,000 for the year. Total CapEx.
We think we'll be about $10,000,000 or so forecast about $380,000,000. If you look at the cash Semic CapEx to date. It's about $265,000,000 cash outflow for CapEx. So we got somewhere in the region, you know, higher than $110,000,000 to $115,000,000 to go So that's what we expect to see somewhere around that mark in Q4. And Gramalote itself, haven't talked about that CapEx.
So as we are slightly behind for Q3, but overall for the year, our shared ground losses about $26,000,000, and we think we're going to be broadly in line I haven't spent most of that. And then expiration, we are a bit behind year to date, but our total expiration budget for the year is $53,000,000. And again, where forecasting has spent most, if not all of that by the end of the year. So that's kind of where we are overall in the leases with Cash and cash flow at the end of Q3 and very strong cash flow generating position. Cash and cash flow was $365,000,000 at the end of the year, and we look forward to moving forward.
And continue to see that cash balance grow as we move forward into the end of the year and into next year. And those are that really summed up the main comments I was going to make. On the result.
Okay. Thanks, Mike. I just realized that my intro I may have left to work. Think I said the words lower end of guidance for 2020. I meant the lower end of cost guidance, of course, as Mike thankfully got it right.
So, obviously, very strong quarter. Good financial results. And as we've said, on track, For the mid range of our production guidance of between 1,000,000 and 1,050,000 ounces of gold and our costs were expecting to be at or below the low end of our guidance range on operating costs between $4.15 $4.55. And all in sustaining costs, we expect to be at the lower end of our guidance which is the range of between $7.80 $8.20. Just wanted to make sure I clarified that.
Okay, I think we'll pass it over to Bill now and if there's a quick review, I'm more focused on, I guess, some of the growth opportunities we see going forward. As I mentioned, we had session with the analysts recently. We've covered a lot of ground. So, but Bill, maybe you can just give us an update on that. And we'll open questions.
All right. Thanks Clive. Yes, I don't want to really go rehash kind of what Mike said through the 1st 3 quarters of 2020. So I'll just reiterate what he said that we remain on guidance for the year. Obviously, great quarter given everything that's going on around the world.
I would like to just point out real quickly, once again, that we did have another amazing health and safety quarter where we had the 2nd quarter in a row with no lost time accident. So our Our lost time industry or injury frequency rate is down really amongst industry leaders for sure, if not at the low end of industry And then of course, we continue to perform on all of our ESG commitments as best in class as well. Maybe looking forward a little bit So the budgets are now for 2020. We normally put them out right after the 1st year, publicly, but I do want to talk a little bit about production I've said over the next couple of years, for sure, the next 5 years even. We did put out a slide for the analysts, which kind of showed us really kind of production, assuming everything goes according to plan should basically look like what it did as good as it did this year, kind of in right around that 1,000,000 ounce range.
So there's a couple of things coming up. By the end of this year, the exploration group has agreed or has has told us that they're going to turn over an updated resource for Anaconda, and we'll be using that to look at some long term potential, which I'll talk about in just a minute. At Fekola, And then in Q1 of next year, Mike's already talked about the Gramalote feasibility. We feel pretty good about that so far. And so I'm going to talk a little bit about how that fits in our profile.
Potentially. And then at the end of Q1, also, the exploration group is going to put out a resource on Cardinal FMZ. And that really has the potential. If you look at what we're doing right now, that really has the potential to have almost immediate impact, because When we did the expansion for the mill, we talked about that we're going to from 6,000,000 to 7,500,000 tons per annum, but we've always been a bit cagey about that. We've always said it's really whatever we think the maximum production is, plus 1,500,000 tons for Anthem.
And so now that we've got the expansion done, we're in the process of really, we just finished up a 2 week test on where we think that mill can run at least for 2020, 2021. We put some ore through that was representative next year's mill feed. There's the potential, certainly, that we can have additional capacity above that 7,500,000 tons per annum. Now, of course, we could feed that with low grade, and that would have kind of a marginal impact on our ounce profile. But Or we could actually, if there is something in that Cardinal FMs that area, we could fast track that into a production.
And we could see even potentially late 2021 2022, seeing some production from Cardinal FMZ, if that pans out at the end of Q1. So We're kind of tentatively scheduling some material that's come through next year for that, and that would help us with our ounce profile. In 2020 or 2021 2022. Additionally, one of the things that we want to do is we want to take a big bulk sample from the saproliteed Anaconda. And we're talking 200,000 tons or something like that.
And run that through the mill. We've always been very open saying that if we can get saprolite, there isn't a there is a percentage, 10% to 50% above our our maximum operating rate that we could feed the saprolite through. So there's the potential, once again, to get ounces from there. And of course, even the existing resource shows a lot of lot of potential for some high grade pockets that we could truck down to Fekola, while we're waiting to figure out what we're going to do long term with Anaconda. And that we could see that fitting into our production profile kind of in that 2023 2024 range.
So, you know, once we get that all sorted out with a bulk sample. Looking at 2021, so our production will come from Fekola Maine potentially Anaconda FM or sorry, Cardinal FMZ and, and then of course the regular sources in Mazbati and Otjikoto. Now if you go on to 2022, again, you'd have the same thing at Fekola, Cardinal FMZ, you'd have the same thing at Masbate, you'd have Otjikoto, from the open pit, but you'd also start to see the ounces flowing from the underground. So those underground or underground ounces could see us up around 200,000 ounces at Ocha Code in 2022. On the 2023, Then you start to see the cardinal come in.
You see, obviously, the same thing from Fekola. You'd have Masbate. You'd have Otjikoto. You'd have Otjikoto underground. And then all the way out in 2020, 2024, what you'd see, Fekola, you'd see, Cardinal, Montquate, Otjikoto, Otjikoto Underground.
But by this time, it's our opinion that we would have, it's our intention that we'd have Gramalote up and running. So that, that would hit us in 2024. And once again, so you'd see a very nice profile, just about a 1,000,000 ounces for all 5 of those years. Obviously with the potential for anything, which might be developed through KiOC or other sources coming in on top of that. Clive, is there anything else you want me to talk about?
No, Bill, I think that's a good summary. So I think with that, we'll we'll open up the questions. We've got the team on the phone.
As I said, we
have pretty extensive, a good session with the analysts recently. Will be Thomas on the phone. I'm answering those questions and expiration, but we'll open up the questions now. Thanks.
And our first question comes from the line
of Vovais Habib from Scotiabank. Go ahead please. Your line is open.
Thanks, operator. Hi Clive and B2 team. Congrats on a good quarter. And thanks for taking my questions. My first question was going to be on capital allocation, but Mike covered that well.
So my next question then is for Bill. In regards to Wolfshag, 500 tons per day, which equates to about 182,000 tons per year. And you currently have about 1,600,000 tons of recoverable tons. And in the Analyst Day, you have guided towards the underground ending in mid-twenty 25 and starting in 2022. Are you just being conservative on the underground mine life or am I kind of missing somebody here?
Hello, Bill?
I'm sorry. I was I've been talking like for 2 minutes on mute. Apologies. The answer is yes, it is a bit conservative, O'base. There absolutely is production rate upside and the reality is If you remember, we've always talked about this potential down plunge extension, which can take us even further.
So at this time, we're talking primarily about reserves that are in the existing mine life with the potential upside for down plunge expansion?
Okay. So that's just a more functional drilling then and just better understanding?
That's correct.
Okay. Got it. And just moving on to Cardinal. So on Cardinal FMC, which, like, I mean, what are you looking to see at Cardinal basically in the resource update, to get the deposit across the line into production. Is there anything kind of metallurgy or anything else that you'll need to see before it comes into production?
Yes. So, certainly, I think maybe certainly, I can't talk about it from an exploration standpoint. What I can tell you is that they're going to put a resource on it. What we've done is we've looked at what they've had what they have, which is at an inferred level, And we put a mine plan on it and it really saw how it really fit in as far as our waste dumps and everything else. And so what we're just looking for is additional confidence in what their inferred resources.
I think the reality is this thing, this thing, even without a lot more drilling, we could put into our mine plan. We do have metallurgical testing already done on it, at a high level. And we don't see any issues from a milling standpoint.
Our next question comes from the line of Geordie Mark with Haywood Securities. Go ahead please. Your line is open.
Yes, good morning, Alan.
Thanks for the call today. Maybe you can run over the masbate reversal and perhaps the implications potential implications for updating future resource reserve estimates, whether that's an easy migration given the change in commodity price assumption, and or, I mean, are you looking at additional drilling there to flesh out the geological confidence of, resources and what sort of life of mine expansion that we could expect to come into that financial assumption now to 2036, as shown in the MDMAD.
Sorry, sorry.
Could you maybe just clarify your question? A little bit. Like, it sounds like there's 2 parts. I just want to clarify again. Sure.
I guess, the first part would be any near term changes in the reserve. Resource estimates sort of to arise from a higher gold price assumption. And the other component there is what would be required, on a drilling basis to, to, fulfill that, if any.
And wants to take that.
Yes. George, to answer your question, we took the existing resource that we had and we projected it to debt and looked at it with increasing gold prices. And what came out of that was, yes, the pitch can get bigger with the higher gold price or current gold prices. So the drill program we're doing right now, and then we've been doing this year, was to take that material and get as much of that into indicated as possible. If it's not going to be complete, we're going to have to continue that program next year.
But with the results from this year, we'll be able to update some of the resources, in the areas we drill to, and hopefully, some of that will get into the AIF. Does that answer your question?
Yes, that's pretty good. Thanks. And maybe one last question, because we have a good Alan Stater, a little while that Just on Cardinal, following from a base there, and maybe some of Bill's commentary, you're currently drilling continuing to drill out cardinal with 2 rigs and still looking at sort of pushing out, the known boundaries on a down plunge basis.
Right now at Cardinal, we're down to just one drill drilling deeper in Cardinal. Rolling capable rate this year with our camp setup and isolation for COVID to really manage core drills. The other three drills now we've pushed up into Mamba as we see that area as being a significant upside for us, but we'll still continue with the one drill going down plunge in a deeper part of Cardinal.
Thanks, George.
Our next question comes from the line of Carey MacRury from Canaccord Genuity. Go ahead please. Your line is open.
Hi, good morning guys. Maybe just another question on Cardinal. How does it compare, versus Fekola proper in terms of things like widths and strip ratio terms of like getting in there and mining it? And maybe grade.
In terms of width, it's quite a bit narrow than Colony. I remember Fekola in places is close to a couple hundred meters wide. We don't see anything like that at Cardinal. I think the map natural wits we've seen at Cardinal or upwards are close to 30 meters. Generally Cardinal is less than 10 meters.
Strip ratio don't have those yet because we haven't completed the resource. And in order to resource, we can't really put a decent mine plan on. So When we complete our results in the first quarter, it'll be an updated inferred, a portion of what will be indicated then the engineering guys will put a mine plan on it. And then at that point, we'll have a better idea of what the strip question is going to be.
Sorry. Maybe just switching down Kiaka, you mentioned the technical study coming there.
Can you give us a bit of a
sense of what you're looking to do there in terms of plant size, is this like a smaller higher grade project than what the previous owner considered or just some context around what you're thinking there?
You want me to answer that, Calabrio, you want to pass it on to Dennis?
Sorry, I missed the question. Yes.
So in general, what we're looking to do is we're looking to update the existing feasibility study. And so we're really the plant sizing through, but I think we're talking around 12,000,000 tons per annum is what we're really looking at that's primarily because all those studies have already been done. The key differences is we're looking at things like, obviously, the cost, the fuel costs, natural gas is in play now. We're talking about running a dual fuel truck system there. And so really we're looking at the cost side and about 12,000,000 tons per annum to make that project, economic.
Got it. Thank
And our next question is from the line of Lawson Winder with Bank of America Securities. Go ahead, please. Your line is open.
Hello, gentlemen. Thank you for taking the question. Great quarter. Just on Fekola, I might ask, with the increased mining equipment you now have in the increased mining you're doing. I mean, should we be expecting the grades to be materially higher in like 2022 than what we saw in the last technical study?
Well, so I'll answer it and then Randy can correct me. I think Randy's on the call. He'll correct me if I'm wrong. If you remember, when we did the study, we optimized it for that mining equipment, right? So what we did is we employed kind of an optimized stockpiling strategy from day 1 And so I don't think you're going to see anything different than what you're seeing in the PEA for coming up in the next, in 2022, for sure, so I kind of think what we had in the PA is what you're going to get.
Am I correct Randy?
Yes, that's correct, though.
Good.
Okay. That's very helpful. And then I just wanted to ask again on Kianca. I think it's intriguing you're looking at it. But, as we know it now, I mean, it seems to me like, it's an asset that's probably dilute the portfolio to some extent just given the very high quality of the existing assets you guys have.
And I'm wondering if potential sale is still something you guys are considering or are you leaning towards building it yourselves at this point?
Yes, good question. I think it's pretty early days in that regard. I mean, just to remind everybody, we have some that we've been doing some internal valuations and we mentioned it, I think, in the news release. That we've been looking at natural gas as an option, fuel and some other things solar, etcetera, that actually can have a pretty significant impact potentially on the economics of Chaca. So we have some internal runs that show some pretty, compelling economics.
And if we can prove that up, with the new resource and the updated feasibility study by the middle of next year, then we'll have a clear picture. I think it's become not just because of gold price, it's become more interesting asset to us. For some of the reasons I explained, it's a good ore body. It's 4,000,000 ounces. So I think it has some unrealized value for our shareholders.
So our job is to get value for our shareholders. So as we go through the next month's understanding it better, think we'll start looking at timing. We're not going to change our strategy and start building 2 gold mines. They go mines at the same time. We've always said that's something that you would not do.
So you start looking at scheduling between Gramalote and Kiac and we'll look at that and say, is there potential opportunity to unlock the value of both of them over a period of time without, without detracting from what we're doing at once. So we're going to stay disciplined on our approach to one mine at a time construction. So the other alternatives would be to bring a partner in to build the mine. And there's other active players and key players in Burkina Faso. As I mentioned, it's a good deposit.
We think Zettos will find it attractive as well or ultimately the potential of course, there's always 2 consider selling the asset. So we'll look at those alternatives over the next few months. The government of Burkina Faso understandably is expect this project to move forward if it's economic. And we think that if the current internal view, which is early, But if the current internal technical view would lower fuel costs, obviously, federal price environment, but if those become reality, we think we've got a very significant asset that has the potential to produce for a long period of time or somewhere around 3 or 350,000 ounces of gold a year. In a country where many others have succeeded.
So that's our current take on the Cactus. I think it's becoming potentially a significant asset for our shareholders.
Okay. That's great. That's tremendously helpful color, Clive. And then just remind us, the attention still is sort of mid-twenty 21 to have an updated study. I don't know.
I can't really recall. Is that going to be a preseason or feasibility level of study.
So we've got a full feasibility study that we had done before. Now we're going to be doing updating the resource, but it'll be a full feasibility study. We'll have a better view on the first quarter. Internally, I think, but it'll be a full feasibility bill, I think by the middle of the year sorry, Dennis? Yes, that's our goal is to get to a completed we're going to redesign the thing at $12,000,000.
We're going to do all of the work first principle study and really get the economics to where we have really good solid economics to base certain decisions on. We hope to have that by the end of the first quarter. And then we'll take that information and put it into a a full feasibility study around the middle of the year, by around the middle of the year.
Okay. That's very helpful. Thank you. And then just one final question on the gold price assumption during the Analyst Day, you guys had mentioned that, for reserves, you intend to use $1500 And I just wanted to follow-up and kind of ask what your thinking was around that particular level, partly in light of how some of your peers are choosing to be a little bit more conservative and not change prices versus the year end 2019, whereas others are planning to go still higher. Thanks.
Mike, you want to touch that?
Well, I think if you look at the reserve price, the $1500,000,000, we repaid that on long term consensus. So We think that's as reasonable a basis as anything to look at. If you look back, I think the trailing 3 year average is not a whole lot different anyway. So that's kind of where we got to in the reserves. And then on the resources side, which is higher 2018, it's still obviously fair bit less in current pricing and resources by definition need to be priced higher than the reserve level.
So this is kind of where we are. We think that 2018 again, if you look at Santas range, something I want to add. It's in the ballpark for sure. So it's in the range. So that's kind of how we arrived at it.
It's a combo of looking at what has happened. Kind of where the analysts see things going forward in order to come up with what we think is a reasonable price to at least know what we have in each location, especially you heard Tom comment with Masbate there. It's significant for Masbate a change in price there in terms of reserves and resources.
Yes, maybe just provide from the COVID point of view, I mean, we don't use $1500 gold to try and bring in, to try and to bring in, reserves, resources per se. I mean, at the end of the day, we're a low cost producer. We're talking about based on what we know today. The next 5 years being around 1,000,000 ounces a year on average, and we've passed up around that 800 the ball and sustaining cost. So, we're one of the lowest cost is not the lowest cost producer.
So, we could have used 1200 or 1100 I guess, I don't know, made people think we're conservative. We're really conservative. I'll be, and we're very good at, you know, low cost producer. So the gold price we choose to use it's not a reflection like many other companies desperately using a higher gold price to try and make a bit of money or to bring in, resource. That's not, we
don't play that game.
So I would focus on our costs $1500 gold using the preserves does not mean we expect our costs to go dramatically higher than the $900 gold to make money. We were making a lot of money at $1500 gold. So I just want to give you a little bit of insight. You can play the local conservative team, I guess, but we don't need to. We don't need to, do that.
I think the evidence of what we've accomplished in the last 13 years or so should speak to that, I think.
Yes, and maybe just to add to that, Clive, I mean, one of the things that we really struggle with from an operational standpoint, when you have numbers, which are much lower than what they actually are, is how do you plan for things? How do you design for your waste dumps and where you're going to put low grade stockpiles, what is going to be your cutoff rate, all this stuff, which is not really based on what we're seeing in reality. It makes it a lot harder. So you kind of end up running kind of two books. And so for us, the 1500 is operationally what we think is right.
Yes, okay. That's very helpful. Thanks for eliminating that guys. And again, great quarter. Thanks.
I think we I just thinking we might need you might have raised more questions on, on, Cardinal. We like it, even though it's narrower in Fekola, we're fast tracking for a reason, right? Maybe you can respond to that from engineering point of view? Yes, we don't have a full resource on it yet, but why have we moved all those drill rigs onto it? And despite the fact that it's narrower, and Fekola, my understanding is we think it has some good open pit potential in the near
Yes. Actually, when Tom was answering, I thought maybe I'd throw that in there, but we kind of moved past it too quick. So I guess it requires some historical context. Originally, that's where we wanted to put our next waste dumps. We were thinking about moving right there.
And so before they could do it, they obviously had a condemned it in So they started at surfaced identifying this as an area, which has great potential at surface, for some sort of small pit. We didn't want to bury that with a waste dump. So we said, okay, we put on a mine plan on a very rough inferred resource and said, Jeez, there's a potential to pull those ounces. And so those ounces actually that I was talking about in kind of that 2021 2022, those are from that study that we did. So we know that there's an open pit potential there regardless of what they come up with.
But then what actually happened is then once we started doing that, the exploration group came and said, stop on this short pit, this little pit, we think there's a much bigger project there. And so that's what they're drilling right now. So we're very confident at the very least at this small open pit with the potential birds to get much, much larger.
And ultimately, underground potentially. Thanks, Phil.
Our next question comes from the line of Don DeMarco with National Bank Financial. Go ahead, please. Your line is open.
Hi. Thank you, operator. It's a question for Mike. So, Mike, given that some of the tax prepayments from 2020 that are not due till 2021. Should we model an offset in 2021 with maybe lower tax payments
Yes.
The way Molly works is mainly
Molly, most of the other jurisdictions basically you settled up in the year in question. So Molly, you pay based on the prior year. Since you pay, it's like you do in Canada and you pay installments based on the prior year, then you threw it up in the following year. It's April, actually, that you do it. So yes, whatever you've modeled as actual taxes payable this year, that whatever we prepay in December, you would reduce from the true up in April next year.
That's right.
Okay. And just remind me then, what did you do in 2019? Did you prepay in 2019 as well, for 2020?
In 2019, we had a small pre payment. I think we paid from memory. It was either 12000000 or 15000000
Okay. So it's just your question. Okay. My next question is, in the past, you've only built 1 mine at a time. Would you guys ever consider overlapping construction of 2 mines like Gramalote and Kiaka or maybe Gramalote and Anaconda stand alone?
I mean, I'll get Bill to add on to that, but I think principle is we've been very successful by focusing and building one mine at a time. My initial reaction when Cianca started to look more interesting was to say, well, okay, great, but we're not going to build to himize at the same time. So if it's in the same time frame as Gramalote, then we need to bring a partner in or south was kind of my first respond And then Bill, then the guy started to playing around and saying, well, actually, you know, maybe from a scheduling point of view, we might be able to consider a long term very early, but we might consider an alternate to be able to progress both without by overlapping, as you said. So I'll pass it on to Gopher's thoughts. It's very early, But that's where we were.
I was assuming we're going to need to find a partner or sell it to stay within our conservative strategy of building one line at a time. So want to give some, I mean, the early days, but we can throw it around. If you can share some of that with these guys.
Yes, sure, sure. And as you said, Clive, at this point, everything we're talking about is early conceptual, but the question came up. If we had the money and the ability, would the construction team be able to do it? And of course, then you start looking at it. Can you can you slot in your earthworks team to come in first and then rotate off the site while they're waiting for the next big earthworks job to come back to.
So basically you'd have people rotating into various facets of the project. And we think there is a path to do that. We've never done it. You know, the exception of maybe some smaller projects, So it would definitely be new for us, but we certainly have the we have the team, we have the capability. If you look at kind of our senior, the top guys, they almost always have at least one cross shift and maybe another person waiting in the wings.
And so there probably is the potential to do it. But it is something that would take a lot of scheduling
Okay.
I was just
going to move on to your next question, but so go ahead, sorry.
No, I'll just say as Dawson, obviously, we proceed with, great caution. We don't, we just look at it now as an asset, as I said, and how do we block the value of it. We still believe that there are some investors in the industry that want growth. I think a lot of the gold funds are still scared from the mistakes of the past of management and some of their investments. So they're still really freaked out about some of our growth, but we're looking at generalist funds who want a well run company that pays a dividend and is good at what they do.
It can grow the business. So we think we've shown that over 13 years. So then I'm pressing the ability to go responsibly. So that'll be the driving. We've got lots of lots of assets in the pipeline.
We'll review them and we'll seek our approach to it as we also.
Okay. And maybe just a final question then, previously you've mentioned how you've combed over potential greenfield opportunities and you made remarks that this is not a
lot out
there. But where do you stand right now with respect to greenfield M and A? Is it still something you're pretty actively looking at and maybe adding something small stage to your pipeline still?
Yes, I think I said or meant to say that when we look at development that's out there today. We don't see a lot that we're in love with and those that are there are scarce and therefore perhaps highly valued. We have always believed and have always had a very strong budget in the bema years and the B2 years industry leading budget and expiration. The other success that's come from that. So we will we are always looking for greenfield exploration opportunities, whether they be joint ventures, whether they be opportunities that we generate ourselves, such as Uzbekistan, a joint venture with the government, of Uzbekistan, Finland were drawing an interesting target there and others.
That will continue. So I think the always felt there was exploration potential in the world where we'll continue to be driven by geology, not geography. Very unlikely for us to do any major M and A here. You know the growth profile, the assets we have, let's find out what level offering. Let's get that going with it's going to be mine and realized value.
And let's just find out more about Cardinal and anaconda. And ultimately once beneath the saprolite Nana Konda, and now of course, Kiaka as well. So we see a pipeline of potential a very good asset, somewhat unrealized in the market. Understand that at these stages, we're going to continue to probably a budget somewhere. Issue is 50 $4,000,000, I think an exploration next year is probably, I don't think it was boarded yet, probably going to be $60,000,000.
A lot of that will be Brownfield. But we're definitely going to be looking for significant exploration opportunities worldwide. And there's a bunch of the pipeline that we can't talk about yet with other some of them advanced exploration opportunities. So that's kind of the way we see our growth and looking forward definitely with a great team we have in exploration. Of course, we want to continue as we always utilize them, if you just now see Google always, either ones you find?
Okay. Thank you very much for that. And thank you for answering my questions. It's all from me.
And there are no further questions in queue at this time. I'd like to turn the call back over to Clive Johnson.
Okay. Thank you all for your time. And if other questions occur to any of you, including shareholders, feel free to reach out to you in the clean, and he'll put you in touch with the appropriate party to answer your questions. So thank you for your time.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.