Good morning or afternoon, ladies and gentlemen. Welcome to B2Gold's second Quarter And First Half 2020 Financial Results Conference Call. I would now like to turn the call over to Mr. Clive Johnson, President and CEO. You may proceed, Mr.
Johnson.
Thank you, operator, and thank you all for listening in. We've got the Beach Gold Executive team either here and make are in the boardroom or on the phone. We're here to talk about the 2nd quarter results for the financial results for 2020. And for the first half of the year. Obviously, another very start quarter for us.
We had records for gold revenue and operating cash flow from quarterly records, and we had a good beat in, for budget on our Our operating cash cost per ounce and our all in sustaining cost per ounce, and we are announcing, as well that we are doubling our dividend. Again, from $0.02 to $0.04 a share. And that reflects the remarkable, remarkable strong financial position we find ourselves in, obviously, gold prices help, we're in a very strong position and we're announcing that we intend to fully repay our, our revolving corporate facility in the third quarter of the year, we're in a net positive cash position today. So great place to be in, given our projected, Marco projected, total cash operations. So this year, we're expecting we thought it was very appropriate to increase the more sense of share.
So before I hand it over to Mike Cinema to give you a rundown on the financial results, and then we'll have a quick update on the Fekola expansion. And then we'll open it up for any questions that you have. Just talk a little bit about the COVID. We've done extremely well, as the financial results and the operating results. Suggest, over the last couple of quarters despite COVID.
And I think there's a couple of reasons for that that we've done. So one of the main, I think, the first and last experience one of the things about our group is quite a story is the amount of experience we've had in this industry, not only in the industry and working together, through the bema years. And then the beachy cold years. So when you do that internationally, you learn a lot, and you learn a lot about things like logistics and living people and, but we've changed, we faced a lot of challenges over the years. We welcomed with the challenge and we took COVID on very early and took it very seriously, very early.
But I think the experience of our team and the experience of our people on-site, really came to the forefront in terms of our ability to, to adjust to manage. And so that problem solved during COVID. Other thing is key, I think, is the culture. We talk a lot about endeavoring to treat people with fairness, respect, and transparency. We, we run our business.
And I think the fact that we've done so well is partly because of the mutual trust that we've developed both our employees, our unions and our non union employees and also the governments and the countries in which we work in. And I do think when you treat people with fairness with respect to transparency, when you run into a timing crisis, I think that can really pay off because our employees and the governments we work with, they trust us. I think they know we're looking out for their best interests. So we all had something in common, the employees, governments and ourselves, the company, which was to continue to keep mining if we could do it safely during COVID. To take the various necessary steps in each of the different countries and they all have different challenges, generally, but also in COVID, they all have different challenges But we, we, I think that, that ability to work solely on with government and with our employees towards a common goal of safety mining was really an important part of the success here.
And obviously, we've made significant donations help with COVID in the countries that we're in and including here in Vancouver as well. But I think that, that common trust has been a really important part in our ability to deal with it. So we hear a lot of people talk about political risk and we're in some countries where traditionally, sometimes other people may have feared the trend. But at the end of the day, we want to be in countries that, that want us you know, might be in Countries and edas. And the countries were in.
They don't have a big safety net like some Western Countries. So, to continue to gold revenue, was hugely important that these countries had continued the jobs. It was hugely important. So the governments were very open to listening to how we could work together with them and are poised to run a safely. So I think that one of the there will be some positives that come out of the next in the future when people look back on COVID.
And I think one of the positives is going to be governments looking back and saying, which industries good to have in your country at the time of COVID. Unless even mining industry is going to be one of those industries, it looks really good. Perhaps it will even mean that there'll be more country in the future and moral into mining because of the fact that we could do it these days so responsibly. Not just as many others in the sector as well. We can answer specific questions if you have them on our treatment or our dealing with the COVID.
And then I just wanted to touch on some of the bigger picture pieces where I think continue to succeed in a challenging environment. With that, I'm going to pass it over to Mike Cinema to give you a rundown on the financial results. And then as I said, Bill will give us a quick update on the Fekola expansion, which is going extremely well, and then we'll open up for questions.
Thanks Clive. I'll start with the earnings statement. Revenue for $442,000,000, a quarterly record for B2. On sales of 257,000 ounces at an average realized price in the quarter of $17.19 per ounce. And it's remarkable to say that, please stay today.
We've sold some gold north of 2015, for instance, quite amazed in the corporate price statement. It's hard to even say that number. So also to comment on the sales side, we actually sold 17,000 ounces. Our close to 75 months is more than we produced. And that was mainly due to the drawdown of some Fekola closing inventory that we had at the end of Q1.
If you recall, the end of Q1 is just when the impact of the pandemic was first being felt at a number of the sites, more, most significantly with the timing charters and commercial flights in and out. So we had a little bit of a cool build up at the end of the quarter, but we were able to sell that down in the current quarter and into higher gold prices. On now to the production side. So from production from our continuing operations, our 3 operating mines was 240,000 ounces. 8000 ounces there.
The budget led mainly by Fekola and Otjikoto with Medbati broadly in line. And then if you add in our share of equity investments, which which are basically our share of caliber ounces. They reported our share was 2000 ounces for a total of 242,000 ounces of production reported in the quarter. Vekola was the main component of 147,000 ounces, 6000 ounces ahead of budget. And it just continues as very strong operational performance process throughput recoveries were better than budget and head grade was in line with budget.
And again, I think Phil's going to get rundown on how the expansion of Fekola is going after this presentation, but suffice to say it's going well. And, we've seen the benefit of getting that fleet expansion fleet up and running early in the year and seeing those, that has the stockpiling strategy and also in our ability to minefense and mill throughput. In Metbating, 49,000 ounces, pretty much straight online with budget. And that's even despite being limited by reduced workforce due to COVID-nineteen. We had a reduced workforce through sort of half of the second quarter coming before it came back up on pretty much full strength by mid May.
And in line with budget, during the 2nd quarter process, it was generally in budget, mill feed grade was 0.94 grams per ton, slightly lower than budget. And then recoveries were higher than budget. Recoveries were higher due to more, mining, more oxide than we had planned or modeled. And, Greg was slightly lower, mainly the fact that we're in the Montana now and due to sort of prior, artisanal mining activity at Montana at the surface level, grade was slightly lower than we planned But we expect that impact to disappear as we move slightly deeper into Montana and into the harder awards there. Ojikoto 43,000 ounces, 1000 ounces ahead of budget, and Ojikoto just continues to tick along another solid quarter.
Processed funds from coverings were slightly better than budget, but pretty much in line. And as a reminder, too, it was higher than last year, just because we're into the higher grade ore from Wolfcamp this year.
And then looking at
what that does for on the cost side, cash costs, for the quarter is $3.90 per ounce, $42 per ounce, less than budget for our continuing operation drug 3 mines. And driven by strong operating performance at all sites. At Fekola, $300 an ounce, just $6 an ounce, slightly higher than budget, pretty much on budget. And, they were the inline cash costs were a function of higher production, as I just described, Total production costs, which were broadly in line with budgets and then slightly higher than anticipated COVID costs. We had about $4,000,000 with the COVID related costs, mainly payroll related and some transportation.
And in the Q, approximately $30 an ounce. So putting all that together, with the higher production and slightly higher COVID costs, we came in pretty much on line budget on the cash cost side. At Fekola. Masbate $6.10 an ounce, $91 less than budget. And that's a function number of factors.
As I said before, we had, we were on budget in terms of production, but we had lower than budgeted mining and processing costs. Mine tonnage was lower than budget and we had less waste stripping than we budgeted. But then and also average fuel prices for the fleet were a lot lower. Due to lower unit fuel costs and also lower our shorter haulage distances. And then processing costs in the quarter were lower than budget, due to lower HFO prices.
And I'll comment with you all generally at the end once I talk about Otjikoto. With Dakota, $421 an ounce, $64 an ounce less than budget, as I said, just strong performance all around slightly higher than budgeted ounces, lower fuel costs than a weaker than budgeted in the mid dollar. And we saw the benefit of that and maybe an FX running through to the bottom line in terms of costs. Overall on fuel, we did see significant declines against budget at both Mazdaddy and Otjikoto. For coal, a slightly different story, HFO was lower than budget, slightly lower, but HFO was or just slightly above budget.
And just a reminder, as we put out in Q1, it's really due to the fact that in West Africa, and I'd call it the West African states that fuel prices are set 1 month in advance by the government. And so they don't float directly with what you see happening in the underlying oil pricing in the world. And so what we've seen is that the fuel prices have remained relatively static. They did come down a little bit in Q2, but we're pretty much on budget overall in Maui on fuel. Significantly under in the other 2 operations.
And if
you added the impact of the just a very small production that we had from our pickup from Calvert, the quarter, the total cash transfer and for all operations, were 3.90 dollars, $42 less than budget. Moving to all in sustaining costs. From our operations, $7.14 an ounce, that's 93 dollars per consolidated less than budget, mainly driven by Otjikoto being significantly under budget. And Otjikoto is really a function of those lower cash costs as we talked about, but also, lower CapEx They did see approximately, I think, $4,000,000 lower pre strip costs than they had anticipated the quarter. And some other sustaining capital expenditures were below budget, but approximately $8,000,000 just but half of that due to timing and half of it, we don't expect to be incurred through the balance of the year.
And if you add in, caliber 2 results are our total all in stating costs were $7.12 an ounce 107 Lesson budget. Maybe a few comment on the impact for the year, I think, I think, year to date. So I think what you'll see is those results we reported, in terms of cash costs, no one saw costs are almost exactly mirrored in the 6 months numbers as well. So what it's really saying is that we've had 2 very good, solid, consistent quarters. Would be more remarkable when you think about, how much COVID impacted the second quarter versus the first quarter.
COVID was, you know, we started seeing it start to hit operation in March. But we still managed to come all the way through the second quarter and still stay on the same track with very comparable results for the first quarter. Okay. Can you comment a little bit on the income statement? Just a few comments to highlight there.
Are further down the income statement. So on the G and A side, we did see lower G and A costs in the prior year by about 3,000,000 And the majority of that is due to reduced travel, obviously, with COVID being in place. We've got a moratorium when all that an essential business travel and also lower consulting fees again, as a result of less activity. Also in the income state, you'll see 3,700,000 associates. That's our pickup from our share of caliber in the period.
And just a comment and I'll let Clive sort of eluded on it. There's $3,800,000 in other expenses in the P and L. The majority of that $3,000,000 is our COVID donations that we made. During the quarter, pretty much donations at all sites, including in Canada. And the other item I'd comment on the P and L is is on the taxes.
Just we're fully taxable at all sites now. Any accelerated capital deductions have been used up. At all sites. So we're fully taxable. $82,000,000 corporate income tax expense for the period We've also given some guidance on what we think are cash taxes that will actually have to pay.
In the period, are there close to $180,000,000 now? And those Those were guided at $1700. So our goal, it'll be slightly north of $200,000,000 if we stay at these kind of gold prices that we're seeing right now. And also a reminder that that doesn't really reflect any increase from Fekola taxes. Fekola taxes are paid almost 1 year and over year.
So we're paying tax this year for Fekola based on last year's installments and then we'll true it up early next year. When you move down into earnings, net income for the period $138,000,000, our share attributable to shareholders of that is $124,000,000 or $0.12 per share GAAP EPS Once you take into account some of the significant noncash items in there such as derivative gains and deferred tax credit, our adjusted EPS for the period was $0.11 per share. I'm going to talk a little bit about the cash flow. Again, Mike mentioned that it's a record number of growth in the operating cash flow side, $238,000,000. And year to date, so also $454,000,000 operating cash flow again on record.
So for the quarter, the cash flow is $238,000,000 translated to $0.23 per share. And I think as well, we usually give a little bit of guidance as what we think it looks like to higher gold prices. So $1900 goal We're expecting we'll see operating cash flows north of $900,000,000. And obviously, right now, we're even above that. So in terms of gold price.
So a great way to be and lots of free cash will be generated. And with that, I guess, moving on the financing section, we you'll see in there, you'll see the $250,000,000 in the Q that we drew as a precautionary measure on the revolving credit facility. Our plan now is to repay that. In fact, we paid the whole drawn balance of the revolver in this third quarter. We're very comfortable with how the operations are running the impact of COVID, at our site average site has been impacted including Canada.
However, we've managed to maintain our operations and actually the prospering, as you can see from the results. So strong cash flow coming from each of the ops. And given that and the higher gold prices that we're seeing, we think the right decision to repay that revolver. So that'll be $425,000,000 in total that we've currently drawn in the revolver will be repaid this A couple of other things to mention the cash flow statement, you'll see in there that interest expense. A lot lower than it was in the prior year.
And that's just we had we started the year with lower revolver balance. We we've been paying that down ever since we got Fekola up and fully run. And at the point now in this quarter, we repaid all that revolver debt. Kind of late, cut to the end of the second part of our strategy overall in Fekola, which was to build it and using cash flow and debt and no equity. So it's kind of a a milestone first on the financing side to be able to repay that revolver.
I'll also note there was no dividend paid in cash in the second quarter. It was declared in was subsequently paid just early in July. That's just a function of the timing of the AGM. And when we were able to pay that dividend, And as Clive announced, if you look at how our dividend has moved, we declared our maiden 1st dividend in Q4 of 2019, it was $0.01 per share. We doubled that for the last second quarter to $0.02, and now it's up to $0.04 per share.
And that $0.04 per share, on an annual basis, $0.16 per share translates to somewhere just of $170,000,000 per year. In cash flow, it's about a right now, it's about a 2.2%, 2.3% dividend yield, which I believe puts us right at the high end. It's not the top of our peer group. Now let's talk a little bit about investing activities. We spent $70,000,000 and $182,000,000 on CapEx year to date.
And we're about $38,000,000 lower than where we budgeted to be at this point. I know that 38, I mean, a bunch of a lot of it's timing, but I would say maybe $16,000,000 of it is not likely to be incurred in the second half. I know, Jacoba, we got stripping savings of about $4,000,000, which we think are permanent and locked in. And then we've also got costs related to the Wilshire Underground Development and installation of a power line that connects us to national grid in total of $8,000,000, which we think are not going to be incurred earlier in 2021 rather than 2020. And I should highlight, we don't think that's going to change, the shy of the time when you get the end up and running.
When we expect, I think Bill is going to comment on that a little bit after this, but basically, it's just the timing of the cash flow. Anna, we also saw savings of about, $4,000,000 on the Fekola tailings facility, like $4,000,000 less than we budgeted. That's completed. And we don't expect that to be incurred. As a result.
So in terms of the balance of that $38,000,000, we're still forecasting to be spent the rest of the year, but there certainly is some softness or sensitivity around the timing of some things like difficult solar plants when we reengage there and get that up and running. Expiration is down against budget so far just because our ability to access sites across our different operations. So we are still planning to incur that during the year, but obviously, that will depend on that site access. Graeme, velocity. Again, timing of finishing the exploration there and getting the new model in place means that right now, we're buying a budget.
We are forecasting to spend that through the balance of the year. So we'll note we end the period with $628,000,000 And again, as Clive said, that put us in a net cash position of somewhere just south of $160,000,000 when you take into account our debt. So we'll place to repay the debt. And also as I mentioned on the how we see the cash flows online for the balance of the year, we expect to be in a strong cash position when we get to year end. And that pretty much winds up, what I was going to mention in the results.
A couple of just project related things that we'll highlight as we sort of tie in discussing CapEx. Fekola, as I said, Phil's going to talk about the expansion and where we are in the solar. Project. Ojikoto, things are going well. And, that the Wolfshag Underground as a reminder, the total project is estimated to be about $57,000,000.
And like I said, we are going to see some of the costs of the $18,000,000 that we scheduled for this year. Pushed out into next year, but overall, the projects on schedule. On Gramalote, maybe to highlight we took over as manager of Gramalote effective start of this year. Part of the commitment in order to do that and maintain it was to spend a sole fund in Gramalote for $13,900,000. $10,900,000 of that was to get us back to a fifty-fifty interest in the project with our partner and AGA and that was funded before the end of June.
And then the further 3,000,000 term commitments. So we would remain as measured thereafter in that. I can confirm that that has not been funded. So all of the sole funding at Ground will have to 13,900,000 as we incurred. And the feasibility for the project is expected still expected to be available by the end of the first quarter of 2020.
And with that, I'll wrap up the financial side of the presentation.
Thanks Mike. Before I pass it over to Bill, just maybe talk a little bit about strategy, where we are, where we see ourselves going forward, we're feeling pretty good about our long term strategy, say at least over the last 12 years. And that strategy was to continue to look to grow production through accretive acquisitions and exploration. Irrespective of the market at the time, the gold price at the time or the sentiment in the market. And we're really we look back now and we're very pleased with the fact that we stayed with that strategy.
And it was quite contrarian at times. When you look back at, the clients we built, the things we did over the last 12 years often done at times when growth was out of favor. And it speaks to the fact that where we sit today, because we persevered with that long term strategy, and we're one of the few companies to be building gold lines over the last number of years. So that's one of the reasons why we find ourselves essential for position, but it also gives us the benefit of the luxury of being quite ambivalent about M And A. We don't see a lot of great projects out there.
We like, and we don't see a lot of good projects up that they'll be like at the price they're at today, frankly. And at the end of the day, we are going to be very focused on continuing to grow from our pipeline, Gramalote feasibility study in the first quarter of next year. I still think people ought to be more understanding Gramalote yet, I think that'll come a time. It's a very good project. It's going to bounce great attributes to it.
We like it a lot. We've obviously seen a change in leadership in AGA. Recently, which I'm frankly sorry to see. We've had good working relationship with the Kelvin and, a great relationship working with the team, UHG team that we've combined with at Gramalote. So we look forward to continuing that strong relationship as you go through feasibility, next year, we clearly think we're going to end up with a project that's, clearly financeable and an economic in today's school environment.
We liked it quite a bit at 13.50 gold. So I would hope to see is in the second quarter of next year, getting moving towards a development decision of Gramalote just so everyone's aware, it isn't jumping to be its joint venture, but neither party can stand in a way of the project going forward, which I think should be the implication of 53 JV. In other words, if we come up with a positive feasibility study, in the first quarter of next year at any GA, decided that they did not want to fund their 50 percent of the estimated 900 milligram capital that we have a we have the written into our agreement, the opportunity to purchase their interest, the fair market value based on the feasibility study economics. That goes both ways. So it makes him up with the development plan, and we didn't want to go ahead and submit things applied.
We also have the option to put out a 30% instead of 50%. So we think this project, unless something really surprises in the the near term will be, among them. And by this should be built, the risk factor right now is the infill drilling, which is going very well. The results not surprising to us are very good at integrating homogeneous ore body. We're going to fill drilling it.
But that will be done very shortly and completed, and then we'll have a new resource out and then it'll all come together with the all the hard work and all the detailed work that was done a lot of work made to you over the years in engineering and all the lot of work we've done since then as well, metallurgy, etcetera. Is a very advanced project. The one thing that's lagging behind was the drill spacing. So we're improving that out. So the potential for Gramalote is 400,000 ounces or a little over that a year out
of the gate.
With the most recent projected, more sustaining costs were around $6.50 an ounce based on the economics that we put out on the preliminary economic assessment. So an attractive approach, if there are many of those in the world today, confident we're going to see that get, we'll go to next steps towards development and get developed, ultimately. Kyakka and Burkina Faso becomes a little more interesting on these kind of gold prices for sure. We're looking at, Dennis is doing some good work on our engineering side looking at some different sources of power for, Pekka Faso, we've learned a lot about solar, of course, between Namibia and Mali. So that's interesting.
And there's natural gas and other sources. So that looks like those things might improve the projects. And of course, gold price helps a lot. So we'll be looking at the next few months in order to tackle rewetting a logic model. We'll be doing detailed life planning, and coming up ultimately with a new feasibility study, but it's a project that, whether it's ourselves or whether it's a partnership someone else, or we're going to look at various ways over the next number of months here to unlock the value of the, gasket deposit, which is 4,000,000 ounces, and, the 4,000,000 ounce resources that are, it's a pretty solid project.
So good ore body. So we'll see where that goes as well. In addition, of course, exploration, we have one of the, very successful gold exploration the most successful gold exploration teams in the world will continue exploration around the sites. We've got great good results coming out of Cardinal, meaning the west. Fekola, I believe, of course, got the Snake Santa area to the north, We'll look at back to drilling that, 20 kilometers north of Fekola.
We did some really good results there. Very encouraging, both in the near surface materials separately, but also beneath that in the sulfide. Some pretty exciting opportunities there. So we'll be hitting that hard tooling again is wrapped up in Cardinal and other drilling, looking around the world for world class, deposits in interesting places. So in terms of, M and A, we will keep looking, as I mentioned, but we find ourselves in a fortunate position of being here but we don't feel we need to do a major acquisition by any means.
I think you're going to see more M and A. And hopefully, we're not going to get back into the silly season that we saw about 10 years ago from now. With people overpaying for margin assets with a higher gold price. You'll see, but at the end of the day, we've never played that game and we don't need to start playing that game now. Just a couple other points before I pass it along to Bill.
I do want to give a shout out. I talked about how we tell the COVID, I want to give a shout out to all of our employees 42100 employees and just the incredible work that's going on with people working, extra hours, difficult circumstances. To keep these mines running and running well. Great morale throughout the company. That's really rewarding.
And as I mentioned earlier, we like to think that speaks the culture of the company, the great incredible recruitment of employees, that have picked up the top to bottom. So what you'll see from us over the next, the next several months is more drill results, more exploration results coming out of Cardinal and also out of moving further drilling at other locations, including Econa. Well, as I mentioned, we officially launched the Rhino Gold Bar Initiative, Kidco, if you want to buy, rhino Gold Bar to help save the Black rhino in Namibia. The beautiful barters are for sale on kitco where you go to our website. Basically, it's, our way of donating 1000 ounces of gold towards helping save an endangered species and then maybe very good, creative, conservation of philanthropy.
It's been very well received worldwide, and it's really important today with COVID, we're seeing many effects. One of the effects we see in Africa is the devastation of the tourist industry, part of the tourist industry in Africa is what helps protect Indh species. So this contribution will go to helping the communities that help to, to monitor and, and, save the rhinos from approaching activity. So it's a great initiative. We're proud to be involved in it, and it's a it's kind of a new approach, which, which is garnering a lot of attention.
That gives us some additional ideas for how we can get back into the future as a responsible for producing. With that, I'll hand it over to Bill to give us a quick update on the Coca Cola office expansion.
Yes. Thanks Clive. I won't really go too much in production since the did a great job of putting it out. But there is one thing actually, which you haven't asked me to talk about, but I do want to state that we've had a continued amazing run on the safety side right? Even with the background of the COVID-nineteen and people working long shift, we had a quarter with 0 lost time accidents at our operations.
And that for the entire year, that gives us 1 across all three operations. So we're seeing certainly, our best statistics ever, which, once again, reflects Adam and Clive was talking about about the culture and the dedication of our employees, but it also shows us as an industry leader in some of the things we're doing should. And with that, I'll turn my attention to Fekola. As we talked after last quarter, there's really kind of four phases of the expansion on this quickly go through. On the mining side, as Mike pointed out, we continue to be ahead of our development schedule with the plan was really to double our mining production rate.
We got the first two tranches of equipment in ahead of schedule. Great job commission in lender COVID-nineteen. And those are in operation and working fabulous. We've got another tranche coming in before the end of the year. And we don't see any issues with that.
It looks like it's on schedule and the team is ready to commission. So on the mining side, ahead of schedule, on the milling side. We had previously announced that we would be ready to bring that thing into production full scale at the end of Q3. It looks like we will be at or ahead of that schedule. At this time, we are now in the final phases of getting our commissioning team in.
So we're more than 80% done with all of our tie ins and the commissioning team has arrived on-site. They've done they've gone through the mandatory quarantining. They're just coming out of quarantine now and getting ready. So our plan is the middle of August, early to spin those guys up and certainly by the end of August, we think we're going to be in pretty good shape to start commissioning and implementing that expansion. So we see the end of Q3 as a very real doable, target and maybe even a little bit early if we can get some, get a little bit of luck.
And then the third part is the tailings facility. We did a double lift, and that's not primarily to make sure that we could handle the expansion tons in the tailings facility. We actually looked at the historical productivity out of the mill, we're concerned that maybe what might get caught outside if, in fact, the mill runs better than even advertising. So we want to make sure we have additional capacity. So we did a double lift on that, which takes us into 2023 and 2022 beginning in 2023.
That was completed ahead of schedule, commissioned before the rainy season, and that's fully operational at this point. And then the last one is the solar plant. This is a solar planet team. If you remember, we went to an island type configuration at Fekola, where we basically brought all of our employees on-site to protect the site and the populations against any spread of COVID-nineteen. In order to do that, we had to free up additional beds to say the solar group agreed that some of the production teams probably had higher priority.
So they stepped off of site and
took them out But the project has continued to go forward. We've continued to receive all the materials. We've continued to put the batteries in place. We continue to work on the design, make sure that that's all finalized the detailed engineering. And I'm happy to say that as soon as the middle commissioning team is done and leave site.
We've got them queued up like a hockey team. They're sitting on the board ready to come in. So we're talking really mid September, middle east, September, those guys are going to be ready to go. And, we think that within 6 months, and once again, maybe a bit conservative, you might be able to do that a little bit. That silver plant will be up and operational.
And just remember, the silver plant is not needed for the expansion. It's just an additional cost saving measure that we see over the life of the mine. So we see no issues with getting that up and operational in kind of Q1 2021. Mike mentioned, I'll just quickly talk about the Otjikoto Underground. Neota Dakota Underground, as he indicated, is on schedule.
Once again, that contract was awarded on schedule. We brought in, we brought in the contractor, the port of development will be done by contractor. And at that time, we'll make a decision on whether we want to continue with the contractor, we want to take it over ourselves. But that contractor is in country. They've gone through quarantine now.
They're in the process of hiring all their managers and getting their team ready to go. And we see that project is completely doable on the existing schedule. So no issues here whatsoever. With that, Clive will turn it back with you.
Okay. Thanks, Bill. I think with that, we'll, operator, we'll open it up for any questions.
Your first question comes from Ovais Habib of Scotiabank. Your line is open.
Thanks, operator. Hi Clive and B2Gold team. Congrats on the call and thanks for taking my questions.
Sure. Thanks.
My first question, again, it's really great to see that B2 is in a net cash position. And you're also looking to pay off the RCF by the end of Q3. On top of that, your dividend has been increased as well. So the question is, how are you looking at allocating the strong free cash flow going into 2021, especially if current gold prices persist like Is it more higher dividends? You're looking at the construction of Gramlote Anaconda exploration.
I mean, like, can you give us a little bit color on capital allocation, please?
Yes, I can tell you the kind of things we're going to consider. We can't really talk too much detail about it yet till we get the decision point. Obviously, the dividend, when you bump up a dividend like that, it's with the view that you're going to maintain it, obviously. So I think you can sort of for that from what we're doing this quarter. And then on the capital side, the big decision points that are coming up The first one is Gramalote with the feasibility by the end of March, but we'll know what we think we need Gramblati and whether we want to go ahead and all the indicators to go ahead, as Claude said, are good.
And then we're looking at Kiaka as well. Now it's having to revisit in that and what that might look like might want to do there. And then also, with the drill programs that are ongoing in Cola, that's for the snakes and the cardinal zones. We're starting to turn our attention to based on the positive results there, what that might look like for the future as well in thinking about what capital allocations may be. So those are really the primary things, Ovi.
I think I would say.
Just to add to that, the you've seen a lot of companies in our guard a dividend based on the percentage of free cash flow.
We haven't gotten there yet, and
it's just a, right now, where, as Mike said, we're at a time of, understanding soon, our capital requirements going forward. Now when you look at Gramalote, we don't need to we can clearly, we're going to generate a coal price to stay anywhere near they are, we're going to generate, you know, well over a couple of $1,000,000,000 in cash from operations over the next 2 to 5 years or so. Why you'd be building Gramalote? So you can clearly do it from from cash flow, but there's no, you know, so let's say you would take on a little bit of project debt along the way with that as well, because it's out there and it's going to be extremely cheap. So So we're, we're, that's why we have defined it as a percentage of free cash flow yet because we're at a stage of understanding what our cash requirements are going to be in terms of capital etcetera.
I mean, for the expiration, you can probably assume we're going to continue to spend somewhere around $50,000,000 a year. I think, more detail of what we see in terms of sustaining capital going forward if you want to get into that detail. We'll set the call.
Sounds good. And just changing gears a little bit. And my question, next question is for Bill. In regards to the expansion. No, so the expansion was supposed to increase throughput by approximately 1,500,000 tons per annum.
In 2019, the mill was already gone at over 7,000,000 tons per annum without the expansion. So I mean, could you see if the Cola X achieving approximately 8,000,000 to 8,500,000 tons per annum instead of 7.5. And then if that's the case, is this rate sustainable and how do you see the rent mill ramping up once it's completed at the end of Q3?
Yes. So I'll answer it and then John can yell at me afterwards. So if you remember, we always said it was going to be $1,500,000 plus what we think it could do when it became kind of fully, fully production wise. John and I had a lot of discussions on this with hardware, software. But the other thing, which is a really interesting, which he keeps bringing up, is that when you're running these things so hard, if you're running it up at the top end, then you really risk the additional maintenance costs and everything else that goes with that.
So what we can say is that we're very comfortable with the 7.5% and probably above that a little bit. But I don't think until we get a commission and really see what this thing do that we're comfortable saying that we're above $8,000,000 or $8,500,000. I think the $1,500,000 plus what it was originally designed at is what we're comfortable saying. And maybe a little conservative. I don't know, John, if you want to add to that.
Well, I agree with everything. You said there, Bill. Yeah, it was designed for 7,500,000 tons a year on hard ore. With softer ore, we will be able to achieve a higher production rate, but that'll depend on the millseed blend coming from the mine. So, after we run it for a while, we'll have a much better idea, what the ultimate throughput can be.
On a softer feed blends?
The other thing that we're drilling the reason we're one of the reasons we're extensively drilling Cardinal now is because Cardinal has the potential to, to, to bring in some additional work spent close to 5 hundred meters or thereabouts away from Fekola. So you know, that that some of that's going to be softer ore. So if that continues depend on that could have an impact on production or could that could be positive opposite throughput, Bill, for you to say that?
Yes. No, it's actually a fund it's actually a fund exercise, which you bring up Clyde. We're not only looking at Cardinal, but are the things can we now realize the Anaconda area that saprolite and bring it down and put it through the middle. Is there hard sources there that we can bring down and add it through the middle? All that, all those studies are going on right now, Oasis, But certainly, we I think we all acknowledge, that the mill has absolutely outperformed what the design has been for And we see that there is a potential, if everything goes according to plan, that could continue into the future.
And just in terms of the ramp up, I mean, do you see that taking a quarter or is that a longer ramp
No. Certainly, in our budget, by the end of September, we're going to be up and operational. I've, John, I mean, I out of line saying that? Certainly, by the end of September.
No, it's yes, I agree with that, Bill. We'll be wrapped up to design throughput by the end of September. I'm just going to add that, yes, when, if we, if we do blend in, saprolite in the mill feed, we can't, we will be able to achieve higher than the 7,500,000 ton per annum throughput.
That sounds good. Thanks.
Your next question comes from Josh Watson of RBC Capital Markets. Your line is open.
Thanks. Continue the theme on the Fekola questions. For the third quarter, should we expect steady state production over the duration of the quarter or is there going to be any sort of commissioning related downtime we should expect?
We have 10 days put in for all final tie ins. But we are expecting a full production full production for the quarter. I mean, that's all factored in the budget and the way we're running right now. So that kind of four quarters evenly spread out. I think it's actually slightly less, but it's really it's within the margin of error of what we've been doing.
Okay. And then for the Fekola mine license, I guess, which is slightly adjusted for the solar project, And also looking at where gold prices are today, when do you expect, capital to have been repaid and and the dividends start to be paid from that asset on a steady state ongoing basis?
Oh, you're asking when the when the initial investment, the loans that we put in to to build the line, all have been paid up. I think now these are places you're looking within the next 2 years. The initial investment will be recouped.
Okay. Thank you. And then last question on, on the commentary for Gramalote, in looking at, I guess, what looks to be an optimistic outlook for that project, is there anything else within the portfolio today, which could potentially sort of come up as a higher clarity opportunity Or is it safe to say that, that would be the number one project? I asked just because the commentary on Tiaco was, I guess, more constructive in the current environment. And then you know, potentially if there's been more work done for Anaconda, could that be the case, or is is that not sort of the case for maybe a mid 2021 timeline for Gramalote's decision?
Yes, no, I think I would try to imagine anything bumping Gramalote out of the queue because one, the event states that it's at. It was a permit in hand. We're closing in on the final feasibility, as we said, And also, we just really got some, as we said, we like the looks of that, the 13.50 goal, we thought it had a good shot. So, I can't see anything bumping it out of Q, ah, Kiaka, not as robust a project as we see it today has potential to get better, as we said, with some of the things we're doing through, the power cost, etcetera. So I don't think Jack will likely bump it out of the queue, but we've always said we, one of our keys to our success is our focus and our accountability and are doing things ourselves.
So we're not going to suddenly start building 2 significant goal lines at the same time. So therefore, a Pianca as a go, it's going to look interesting after this next round of number of months of updated that we might very well look to very quick to partner and, with a responsible industry partner to advance this one alternative. The other alternative would be to tell to sell it as an asset. And the government, but, you know, Pfassa is going to expect a project like that to get developed. And I don't know if they have a right to, in my opinion, if it's economic somebody should build So, but I don't see it bumping, time wise and also quality wise, I don't see it bumping Grammarante out of the queue.
And the conda definitely we're really intrigued by the potential for Fekola's albertization there in the sunlight. So we'll be in that regard to drilling. But once again, there may be a situation where someone is being trucked from, in a condo area potentially done to the mill, some of the saprolite material, but I think in actual, to actually look at building another major facility, if we're successful in finding another multi pay announced deposit, let's say, that a cloud area, that would become after Gramalote is my interpretation. In terms of if we were to build another major mill and maybe share that the solar power plant, etcetera.
Thanks. Those are all my questions. And I appreciate the upgrade on the conference call service this quarter.
Your next question comes from Geraldine Mark of Haywood Securities. Your line is open.
Yeah. Good morning, guys. Thanks for taking the call. Yeah, nice nice jump in there in the dude in there. I love it.
May I'll just continue on the theme with Josh and Josh and I may speak. On Fekola for Mining, can you remind me of what what your stockpiling strategy or your your cutoff is that you're implementing there versus what what, the reserves are quoted at,
I guess, at this point? Thank you, or something.
And, where the resources are credited for cutoff, see if you see any sort of wiggle room in terms of, looking at modifying stockpiling strategies to accommodate where your cost structure is and also where, you know, the gold price is moving.
Yes, for me, Randy, just come from site that he's probably the most appropriate kid. Randy, if you want to comment on Yes,
sure. So the stockpiling strategy at Fekola is We've got a number of different stockpiles. Obviously, the high grades, smaller or down to 0.8 grams per ton right now. But we're also stockpiling much lower down to 0.65 grams per ton in a, in a sub economic pile that in today's gold prices is definitely more economic. We are currently looking there and at Otjikoto at the different cut off grades and our stockpiling strategies.
It's been hard to keep up with this quick, increase in gold price, but that's what we're doing and the strategy right now, but we're in pretty good shape at Fekola, already and what we're stockpiling in our subeconomics.
Okay, thanks. And also on the, if we look at Cardinal, for instance, I mean, it's obviously pretty proximal to the existing pit. I mean, you give us an idea of the the scale of work you've been doing there on the on the drilling given, given what it could add and it's proximate, etcetera?
Tom, you want to trust that?
Yes, Jordie, right now, we've, Cardinal is, it's got high pig mineralization over 800 Meters. And then down plunge or the strike length of it is a couple of kilometers. And we're we've drilled so far close to 26,000 meters on it sorry, 21,000 meters. Original plant was 20 And, because of the drilling angle, we'll probably get close to 30, 30, 35,000 meters drilled on it this year. So we've shifted our focus from, Mamba right now to get Anacana to a point that we can do some decent line planning or sorry, not, get cardinal to do some decent line planning, but it remains open at depth and, also a little bit to the south.
So it's sort of developing situation, but it is, it does have some size potential for sure.
And and if I can extend on that one. Thanks, mate. Is that the same type of collars on mineralization? Is that different style that you may have to do some more metallurgical work to see how it fits in?
We're doing some metallurgical test work right now. And you know, it seems I would suspect it's going to be very similar. It's it is slightly different, but that's just minor differences. I would suspect, be too much difference. I don't know, John, if you could add anything more with the results to date?
Yes. All we received so far head assays, on the samples that we're going to be testing. But, so we'll know within the next week or 2, metallurgical results, but as you say, Tom, we're expecting similar results, but we will confirm that through the metallurgical test program.
Okay, great. Thank you. And a quick question on Kiaka. Obviously, given the scale of the original sort of plan at 12,000,000 ton per annum, are you looking at a a potential to do it, do what you've done at, Ojikoto, Fekola and Masbate in terms of potentially doing something small and ramping up over time? Or, see where you're going to trade off balances on power availability and cost etcetera?
I'd be
a little general understanding here, Jordan, but I think you're asking about what is the key I could potentially start something smaller and grow it. Frankly, that's So far, and that's not something we've seen as a really viable alternative. It's kind of a very pretty consistent kind of 1 gram ore body good things about it. But at the end of the day, we don't see a high grade starter pit there. And, when we acquired it for, I don't know, something like $25,000,000 was the actual acquisition cost.
When you go back to it both, we always felt that it needed a better gold price, but we thought more exploration success. We had some exploration says it's way, but it was too far away to help Cianca. So when we did a deal down, as you saw. So we don't see, we don't see Cianca's being, is that going to be done as a large scale, low beta, mid goal line, from what I have from our view, we don't see a ramp up, some option there.
Okay. Thank you.
Thanks, Sri.
Your next question comes from Gary Mackuri of Canaccord. Your line is open.
Hi, good morning, everyone. Hi.
Maybe a bit early for this question, but just looking back to the feasibility on Fekola into 2021, then given what you've learned there this year in terms of grade and how the plant's performing? And obviously, you got the expansion coming right around the corner, but I think production was expected to dip into 2021 in that feasibility study. So I'm just wondering what's the opportunity for flat production or even higher production in 2021?
The question is versus 2020, what's the production in Fekola?
Yes. 2021 versus 2020 was supposed to the original feasibility center is going to get what the DEA segment was going
to do. Yes. Well, certainly, I think we are going to have, if you want, I think we're going to have slightly less production in 2021, but what you have to remember is we really have a bucket there, a pretty consistent bucket over 5 years where we're talking about 500,000 ounces over the, over those 5 years. Sorry, 550,000 ounces over those 5 years. And we're pretty consistent with that.
Where do they actually fit within that bucket? Obviously, that depends on where we end up on our phase positions during the year. Can we prioritize and bring ounces forward? What I will tell you is that we're continuing looking at the best ways to bring ounces forward. So 5 50 over 5 years.
And
And that doesn't include anything potentially from Cardinal or from the condo?
Yes. That's actually very valid. One of the things we're looking at now is how do we even as you know, we don't know how the mill is going to outperform. So we are now making some wild swings in defense to see is there additional capacity there and how would we feel that if there is and whether it's from cardinal or it's from Anaconda or even maybe selling to some of the northern zones, which have yet to be able to talk about too much.
And how quickly could you bring those sort of ounces in? Like is there any permitting requirements there or is it pretty straightforward?
Yes, it's straightforward. Remember, we own the license, we own the license to the north as well. Most of the stuff we're talking about is in the med handy permit license, which is where the gold pod is at. So that stuff would be relatively easy. I like the cardinal area.
If it is to the north, we would have to do some work with the government to get it an agreement with them as far as how they're going to share in it? Or are we going to tow up?
But all those things are
I mean, the government's already come to us and said they're completely open to that and they want us to develop that as quickly as possible. Okay. Thanks, guys.
There are no further questions at this time. I turn the call back over to Mr. Clive Johnson.
Okay. Thanks, thanks everyone for your time. And, thank you, operator. Look forward to updating you against it.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.