Good morning, afternoon, ladies and gentlemen. Welcome to B2Gold's Fourth Quarter And Year End 2019 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. Welcome everyone. We're here to talk about the, as the operator said, the results for the fourth quarter last year and the full year. Obviously, a great year for B2Gold. And Mike's going to come on, and Mike's going to be on short of the year.
Talk about the financial results for both the fourth quarter and year end, but a solid 4th quarter ending a tremendous year, as indicated in our initial actual results, etcetera. I guess I'll just talk then to give a little overview of where we, where we see ourselves going here, in 2020. We gave you quite a lot of detail usually send even more in the MD and A talking about where we are and where we see ourselves going. But the strategy going forward for this year obviously is to focus on some of the major things doing such as the Fekola expansion, which is going very well. I'll ask Bill to say a few words on that, that's on budget non schedule.
And of course, that's a pretty dramatic expansion as it increases production from last year's for 60,000 ounces to, where we're spending somewhere around 600,000 ounces Fekola for this year, bringing us in at about 1,000,000 ounces, to the company, including our 34% ownership of California, reflecting the portion of their production. Mike will take us through some of the details of what we're projecting in terms of cost as such. I'm afraid I don't know if you had a low cost year, operating costs and costs are pretty good as well. And we're also generating an awful lot of cash. We are projecting $1500 gold based on the current assumptions that we could see $700,000,000 from cash from operations.
For every $100 gold is higher than that. So for that, the $1500,000,000 is about $90,000,000 per year in our cash from operations. So significant, year, this year for cash flow, free cash flow will continue to increase into next year. As we see the expenditures of things like what up expenditures like physical expansion, will be behind us, into next year. So I'm very positive, looking forward in that regard.
In terms of growth, we're going to focus on the pipeline. As we've said for many years now, we still have an and pipeline of projects. And with the 2 of the key ones, although there's lots going on, 2 of the key ones, would be Gramalote. We gave you some detail in the MD and A and those the news release. And we'll be talking about our market quite a bit more as we go through the year, major drill program underway with another rigs turning to turn the inferred resources of Gramalote Ridge Agency indicated.
We put out what we thought was pretty positive numbers on the preliminary economic assessment. Which is a dramatic change from the previous economic analysis, which was based on a model that needed some improving, some drilling help, but also we interpretation of the children's tomorrow crowd. So we're, we're, keen to see if Gramalote has potential as we are next live with the operator now the joint venture and have an excellent relationship with AngloGold Ashanti. We're looking at a full feasibility study by the end of the year to have potential decision whether it's anecdotal or don't go early next year. We have a permanent hand.
There's lots of positives that we go back in. In the industry, some of where we are in, Kamia and why we're so positive about Ethiopia as a place to build, for significant gold mining in Colombia, lots of government supports and all levels. Another key factor is, a key focus for this year will be further exploration. We've got a budget $50,000,000 from World Warhead. We love that as brownfields, looking around immediately around Fekola.
And the other mines where we've had very success, of course. But we also have a major program with 5 rigs turning up in the Anaconda where the snakes are, as we call it, 20 kilometers north. Of Fekola. We've had some very good results here. We have a very large, very large, levered zone of saprolite.
Now the fifty meters that continues to extend to the north But perhaps more, perhaps of greater excitement is the potential for what's beneath the suffering. And we've had some very good, jewelercepts that we released a while ago. From lymphoma underneath the, the saprolite into the sulfide and the bedrock. So it's early days, but this is, there's the some of the type structures to help children from what we see at Fekola. And so we're seeing some good rates and good widths.
So, we're kind of excited about potential of that vast area of the North and there'll be lots of other, exploration news coming out where we're definitely looking at still continuing to grow through the drill bit, especially in this climate where I think are going to get even more expensive. And we're looking to have a number of, we're pursuing a number of grassroots exploration programs. Worldwide, which we'll be talking more about as they come in, and then also looking for joint venture with junior exploration companies. So obviously, you have a bit of a strange day to to come up with results in the sense of the overall market and the gold price of all of that. But we're in a wonderful position.
We could be happy where we are, and we're looking at being. Based on $50,000,000 lower gold and the current assumptions we can be debt free in the third quarter of this year, which puts some good position on the performance. A bit of summary from EMEA strategy and, I still would like now to give you the detailed financial results, from the year 2019 on fourth quarter.
Thanks, Clive. Just before I start, just to remind everyone, we restructured our interest in Nicaragua operations in October. In Q4. So for financial statement reporting purposes, results for Nicaragua update are reported as a one liner in the financials as discontinued and thereafter, we pick up our 34 percent attributable interest and equity accounted for Nicaragua from October December 31. So when I run through those, I'm going to talk about results from continuing, and then I'm going to talk about what they also were when you take into account Nicaragua.
Revenues for the quarter from continuing operations, $314,000,000, a significant increase over the prior year, mainly driven by the increase in gold price and more ounces sold. If you take in adjusted revenues, so including $10,000,000 discounted revenues from discontinued operations that we $124,000,000 for the Q, quite a significant increase over the prior year quarter. Production, very solid in the Q. So from continuing operations was 228,000 ounces, driven mainly, outperformance by Fekola and Otjikoto Mekola was 11,000 ounces ahead, of its original plant. And that's driven by the same stories we had through the year.
There's more throughput going through the mill. And because of that, we were able to process more tonnage than we thought. Some of which is lower grade stockpile tonnage. Now that did lower the grade a bit, but the throughput out beat beat the impact of the reduction in grade. So overall, we have formed and Fekola had 119,000 ounces in the Q.
Ojikoto is 58,000 ounces, again, ahead of budget by about 4000 ounces. That continues to be driven by, is this more ore and better grade coming out of Wolfshakes than it was originally planned? Slightly offsetting that was meant bad. Even that is 51,000 just three thousand ounces below plan. And that was as expected, and as discussed in Q3, we did plan to have production from Montana in Q4 of 2019, but that, as we indicated previously, that was pushed out.
Into the first quarter of 2020. In fact, work of Montana commenced sort of mid, mid February of this year. The result, the impact of that was that we had or was slightly lower recoveries in Q4 than we had period. And therefore, we were about 3000 ounces under budget. But overall, production from continuing operations was 12,000 ounces ahead of where we had planned.
When you take our share of Nicaragua out with discontinued operations and our attributable share from, October 15 onwards, total production was 245,000 ounces. Just to comment a little bit on, the cost for the Q. So Cash costs, and this
is on a, on a
produced basis, from continuing operations, $4.42 and from all operations, 4.67 dollars per ounce for the quarter. We beat plan overall, and that's, again, a function of, the strong performance at both Fekola and Otjikoto, with the higher production coming from those operations. Masbate was a little higher than originally planned. Masbate 6 $4 cash cost per ounce. And again, it's a direct impact of that not having that ore come from Montana in Q4.
But overall, we beat budget by close to $30 an ounce on a cash cost side. On the all in cost side, From continuing operations, all in all in cost per ounce, sustaining cost per ounce were $8.69 an ounce And the total from all operations, including Nicaragua, was $8.82 an ounce. And what we saw in the Q was was mainly catch up of CapEx. Although we had to beat overall on the cash cost per ounce, we were ahead of plan. We did have CapEx that had been postponed at from the 1st 3 quarters of the year and was incurred in the fourth quarter.
And that's so we had some higher capital at Fekola and Otjikoto as we had CapEx caught up. In that period. Also, impacted all the sustaining costs that we need to remember that we actually budgeted, on the basis of $1200 per ounce last year and the royalties were based on that price. In fact, through the year, we realized gold price for the whole year of close to $1400 note. So there's a bump in the total royalties that were included in the all in sustaining costs.
So total on a consolidated basis from all operations again was $8.82 per ounce. Just a comment on some of the results now for the year. Revenues from all operations, including our share of discontinued operations, was a record $1,300,000,000. And reflects the fact that all the mines have run very well through the period. On a production basis, from continuing operations, we had 800 51,000 ounces well ahead of budget of 800 and including our share of Nicaragua, overall, we had 980,000 ounces.
Against, which bates the upper end of our guidance range of 975,000 ounces. So pretty much we'd already pre released those numbers. If you break it down and look at each op, Fekola has 456,000 ounces 33 ahead of budget and it's for the same reasons as discussed on the cash cut. Site, just more throughput, slightly lower grade, but more throughput through the mill. Overall, gave us more ounces than we planned.
And that beat the upper end, the 456,000 ounce beat the upper end of its already increased guidance range of between $4.45 $4.55. Mizbate had 217,000 ounces, 9000 ounces ahead of where we were all budgeted. It's an annual record for Masbate and it beat the upper end of its guidance range of $200,000 to $210,000. And that again beat the upper end of its range of 165 to 175. And the production stories at each of those sites is basically the same as I just described for quarter, just outperformance at all sites.
Just also to comment that our 2020 guidance, so we united on a fully kind of basis, including Nicaragua, 980,000 ounces for the year. Next year with the impact of the Fekola expansion coming online, throughout the year, I guess, partly from the expanded fleet. And then when the mill, the full mill expansion comes to line in Q3, we're now we're getting, 1,000,000 to 1,555,000 ounces, including our 34% attributable share of Nicaragua. And the other one is the other I might just comment at this stage as well as Fekola Jurn in Q4 twenty nineteen Fekola produced its 1,000,000 ounces since the start of production, which is quite an achievement when you consider has only been going just over 2 years. Just to comment on the overall costs and all in sustaining costs for the full year.
So, on the cash cost side, perhaps produced from continuing operations $4.49 an ounce and including our share of Nicaragua, $5.12 an ounce sold. And, overall that, that consolidated the number of $512 per ounce produced. That beat the low end of our guidance range of $520,000,000 to $560,000,000. Next year, as we go through the year with A, the impact to gain of Fekola expansion coming online through the year. And a smaller percentage share of the higher cost Nicaragua and operations, we're guiding cash costs of between $4.15 $4.45 per ounce.
On the oil and sustaining cost sites, consolidated, including all operations in Nicaragua were $8.62 an ounce, and from continuing operations, $7.94 an ounce. And that's right in the range that we gave. We originally gave a guidance range of $8.35 to 8.7 $5. So the $8.62 an ounce came just past the midpoint of that range. And as I said, it was partly impacted by higher royalties in the period And also the fact that for the year, we produced 980,000 ounces and we sold 944.
So the sales were slightly lower and therefore increased the cost per ounce slightly because all in sustaining costs are presented on a on an ounce sold basis. Next year for 2020, we're sort of mirroring the lower costs we see on the cash cost per ounce side. We're getting between $7.80 $8.20 overall.
Just going to comment on
the income statement for 1st the quarter and then the year. So a couple of items to highlight, I think, in the 3 month period to December, sort of unusual items. So impacting earnings, firstly, were a couple of, one significant noncash item, which was the reversal of an impairment, for $100,000,000. So A few years ago, we booked in impairment, of our interest, our the cash value of the Masbate mine. We originally purchased that line when gold was 1500 plus higher than 15 and impairment tests as gold debt were subsequently run at 12.50 and we've booked an impairment with the increase in the gold price that we've seen today's moment, excluded, of course.
We changed our long term goal price assumption to $13.50. And with that, we realized the reversal of $100,000,000 on that impairment that we previously recorded on Masbate. That also impacting the income statement for the period was a gain on sale of the Nicaragua assets of 40,000,000 So, as you may recall from our disclosure previously, we that restructuring of our interest in Nicaragua, was for proceeds of $100,000,000 plus working capital adjustments. Included in that, and so that resulted because we had that in That was finalized in October. We booked that gain of $40,000,000 in Q4.
You should also comment that as part of the consideration made up in that $100,000,000, we $40,000,000 worth of equity in Calibert. There was also a $10,000,000 convertible debenture that what subsequent increase in caliber share price was converted. And today, we hold an effective interest in caliber of 34%. Bottom line, net income for the quarter, $182,000,000, as noted, that includes the impact of those two items. I discussed, and that's a EPS of $0.17 per share.
On an adjusted net income basis, adjusted net income is Southerner MD and A is $69,000,000 or adjusted EPS of $0.07 per share. Comment now on the 12 month financial results, as mentioned before, $1,300,000,000 in revenue include Nicaragua, $1,200,000,000 around it, if discontinued operations are concluded. We had operating income for the 12 months of over $500,000,000. A couple of the earnings was mentioned in the P and L. Interest and financing expense is 26 $1,000,000 or $26,500,000 for the year versus closer to $31,000,000 last year.
And that's due to the lower debt levels that we we've had through the period. In 2019, we repaid approximately 220,000,000 of our debt, including $200,000,000
on the
revolver. And as we currently look forward, we're expecting this by the end of Q3, 2020, we will have repaid the remaining $200,000,000 on the outstanding revolver balance. So leaving us with $600,000,000 undrawn available. But you should also expect to see a significant decrease in interest expense through next year as we pay that debt down. Also, another item to highlight, current income tax expense for the year was 114,000,000 And we'll see higher tax expenses as we go forward, compared to some prior years.
For B2 as Fekola is very profitable and there's no accelerated deductions in Molly. So you pay your share of income taxes straight out of the gate. You get your deduction to your original investment over time. And also, any previously unutilized losses, loss carry forwards at both Masbate and Otjikoto have been utilized by the time we got to 2019. So we're starting to see a hiring from tax expense there.
On a cash basis, total income cash income taxes paid during the year were $119,000,000. And just a reminder that that also includes payment of the Fekola priority dividend. On a comparable basis for 2020, I think you can expect recurring the estimating total, income taxes, stock cash and CapEx payments, including Fekola's dividend, of approximately 115,000,000 bottom line earnings for the year, attributable to shareholders 316,000,000 or sorry, Trevor Willis shareholders was 2 sorry, $293,000,000,000, and that added up to $0.29 per share EPS. If you adjusted the noncash items for the period, adjusted earnings were $237,000,000 or $0.23 a share.
Just going to comment on
a couple of aligning items in the cash flow. Firstly, for the quarter, cash provided by operating activities, 145,000,000 approximately $0.14 per share. Just to highlight in Q4, we did make a volume $3,000,000 to $12,500,000 installment cash tax installment payment for Fekola. We pay installments for the year, but the final balance was due to be settled up in full in Q2 2020. But we actually prepaid $12,500,000 in Q4.
Also in Q4, we repaid, as we'd indicated, at the end of Q2, we repaid another $100,000,000 in the revolver leaving $200,000,000 at the period end. And in Q4, we paid, we declared to pay our 1st dividend for B2Gold. So $0.01 per share U. S. Expense of $10,000,000 overall for the Q.
And looking forward, we've also highlighted in our news release that we declared our dividend for Q1 and the same amount. $1 per share U. S. In the quarter, cash from investing activities was NAF was $58,000,000, but That was inclusive or net of $51,000,000 proceeds of cash, from the Caliber transaction. So gross, it was $108,000,000.
And like I mentioned, as I talked about the all in cost per share, that included approximately $11,000,000 cash up for some deferred stripping costs. At both Fekola and Otjikoto. It also included, I think, $54,000,000 for the Fekola expansion. Overall, in 2019, we incurred $76,000,000 cost related to Fekola expansion. And remember, that includes both fleet expenses, mine expansion costs and work that we've done on the solar plan.
So $76,000,000 overall in 2019, and we budgeted remaining $97,000,000 for 2020. And also just a reminder that, we do expect that for the fleet cost, which totaled approximately $85,000,000 overall, We expect to finance up approximately $40,000,000 of that with caterpillar loans and the latter part of next year in 2020, sir.
And finally, just to comment on the cash
flow for the full year, cash from operating activities overall was 4 $2,000,000 or $0.49 per share. Like I said, we did pay off in Q4, $12,500,000 prepayment on our final Fekola tax expense And also, right at the end of 2019, we did have about 25,000 ounces that because of late shipments and delays in shipments from the from the sites. We had sitting at refineries, but wasn't a build for sale until just into the start of 2020. So we sold those 25,000 ounces proceeds of approximately, $39,000,000, at a significantly higher gold price actually than we would have realized that we sold on the feed in December. Overall, for the year on the financing side, we repaid $200,000,000 of debt as discussed.
We had proceeds from option exercise of $73,000,000. And $10,000,000 for that first dividend payment. Investing activities for the full year, $263,000,000, our gross to the Nicaragua proceeds $316,000,000. And that was a bit higher in the original budget, because remember, included in their $76,000,000 of Fekola expansion expenses, which weren't in original budget, we approved and announced those midway through 2019. And then we had others sort of main differences with Masbate, we're probably $12,000,000 over, under budget, sorry, overall, mainly due to Montana timing and timing vinylend acquisition and development costs for Montana, which were now, incurring in the first quarter of 2020.
And Nick Rock, we were about $6,000,000 under just because of the timing of the sale layer where $6,000,000 hadn't been incurred before we sold it. Overall, I ended the year with cash and cash equivalents of $140,000,000, $400,000,000 undrawn on the revolver and in good shape to go forward as we have as we work to complete firstly the Fekola expansion through the year. And then also to fund, our increased share now of the Gramalote. Budget where we're planning to drill ground Lafayette out now in 2020 to feasibility stage and have a feasibility study completed by year end. And to earn room, our plan there is to earn back to fifty-fifty interest and also to, therefore, thereafter fund our share of the fifty-fifty JV expense going forward.
So in total, in 2020, we've got $25,000,000 in the budget for that. But overall, we're well placed to fund all the current activities that we've got. And I think that probably summarizes what I was going to talk about.
Let me pass it over to Bill Lytle, GDVP operations to, give us a run through on the progress to date of the expansion of the Fekola Mill and the new fleets.
Okay. Thanks, Clive. Maybe just by way of introduction to the projects, I think everyone remembers last year, we were challenged to look at, should we expand the mill at Fekola. And so we did a study, which clearly showed the, optimized optimizing the mill and increasing throughput was
positive, but we as part
of that, we looked at optimizing the entire facility. And one of the interesting things that came out of it was that the optimization actually indicated that we should also expand the mining fleet and bring some of the higher grade ounces forward. So we that was approved in June of last year. And we immediately started ordering, our mining fleet. And it's important to realize that because for 2020, the keys for getting the 600,000 ounces really relate to the mining fleet and pulling high grade ounces forward.
I'm happy to say that on the mining side, the mining fleet actually is arriving ahead of schedule. On budget ahead of schedule. We already received our 1st big excavator to our sixty-forty excavator. That has been commissioned and we'll shortly move into, mining in phase 6. We also have received the first 5 of our 200 ton trucks.
Those have been put together and will almost momentarily be put into operation as soon as we put some tires on them. So that remains ahead of schedule. On the milling side, if you remember, we're expanding from 6,000,000 tons per annum to a throughput of 7.5 tons per annum at a budget of $50,000,000. That, what happened, which was going to be spent last year and half this year. That again, remains on schedule for a Q3 commissioning.
They're obviously, we're currently watching all the issues related to the coronavirus, but we are still forecasting at this time that we will be on budget for Q3 delivery of the mill. In addition to that, we looked at expanding because of the throughput at the mill and some of the past out performances of the mill. We want to make sure that the tailings facility had sufficient capacity. And so we actually called for a double lift. Last year, which would take us up into 2023 before it had to be lifted again.
That remains on schedule and will be completed prior to the rainy season this year. We also looked at, the success at Otjikoto, the solar plant, and the economics of implementing a solar plant at Fekola. And we, approved last year a $38,000,000 budget to expand the power plant by 30 megawatts AC solar. That remains on schedule and on budget. We're currently looking at some of the equipment which is coming out of China related to the batteries, which may be delayed slightly, but overall, the solar plant will be started up at the end of Q3.
And, that solar plant is not needed to support the expansion. That's just better economics over the long term.
Next, Bill. I think with that, we'll turn it over to questions. We have the entire executive team here in Vancouver. So, any questions we can answer?
Your first question comes from the line of Lawson Winder with Bank of America. Your line is open.
Hello, gentlemen. How are you doing today? Thanks for taking the questions. Just on Gramalote, maybe, just looking at that project becoming more and more attractive to you. And then I compare it to the other 3 sort of core assets in your portfolio where you are, not only 100% enrolled operations, but a majority owner.
In the event that your partner were to be interested in tendering there or half of that project. Is that something that you guys would be interested in considering?
Well, I think we're both, EGA and ourselves are very focused on, well, depending to the final feasibility. By the end of the year. There is a provision in our agreement. I think both, each and ourselves believe that in fifty-fifty joint venture, neither party should be able to stay into to block the development of our mind if it's, if it's economic. So there is a provisioning agreement where if we, if we move after a final feasibility study, if we moved to a development plan and present that to AGA.
And they neglect not to participate to 50%, then there's a mechanism those would appoint an independent financial advisor based on the economics of the feasibilitydevelopment plan, or leading water to sell our 50 percent interest as a mechanism to come up with that. So there's also a provision where they can drop potentially to 30% interest. And, so we feel very confident that it's never a reason to go. I think if it's the economics are good, expect there's a good chance AG would want to participate in 50%, especially since we're going to do a lot of work. And, secondly, though, there's a mechanism whereby we can move on.
And this is a big nut to crack in terms of the financing. We were liking the economics a lot, but we have lots of alternatives if we would get that happening because we could bringing in with a partner in for 30% or whatever percent if we didn't want to take on the full hit. I think it's worth noting though, I mean, it's still early because work to do, you're going to get to feasibility and develop decision. But if you look at the cash generation from us based on current projections over the next in the next two years is somewhere around $1,600,000,000 to $2,000,000,000. So, given the fact that we're, we could be testing by the quarter this year.
We'll be an extraordinary position to be able to finance, projects going forward, from our cash flow.
Thanks very much for that Clive. That's a very helpful answer. And then in just looking at your portfolio. There's one asset that you guys are project rather that you guys haven't spoken a lot about lately and that is Kiaka. In Burkina Fasen.
I was wondering if maybe you could just quickly update us on what you're thinking is around that asset. But then in doing so. Maybe comment on sort of geopolitical risk exposure with that asset. And where I'm coming from is assuming the project economics were far superior than they are today with Kiaka, I mean, would building it be an obvious choice for you or Is there an element of geopolitical risk in Burkina Faso now that would perhaps make you think twice about that decision? Thanks.
Well, obviously, all countries have some political risk and unfortunately, Regina Faso has had a lot of significant issues that concern all of us. Over the last while, whether it be the mining industry or in general, safety of our people is paramount. But I think we'd, we'd, we continue to evaluate the economics of KAKA see what kind of gold prices might make some sense. But I think, we're also looking to see the government continue to work hard. I think there are continue to improve security in the country.
If we had a Fekola, the Burkina Faso, I think we'd be working very hard government to build it and ensure the safety of our people. So, we'll continue to evaluate the act as we go forward. To be honest, if there was someone interested in the partnership or something like that, we'd probably consider that. Otherwise, we'll we'll continue to evaluate it and we'll monitor the situation for Kiena Faso and hopefully it continues to improve. Unfortunately, Kiena Faso faces some additional challenges, the neighboring country, Molly, who's, who's made a major commitment to improving safety, with 10,002s being trained as we speak and for their ongoing support from France and the United Nations, etcetera.
So we'll be, you know, it's a, it's a great, great, good country, great, and really good people are real, but, they have a safer future. And we provesse the binding issue can progress there. So there are other operations that are looking to move forward. I'm sure safety is their 1st priority as
Okay, that's great. Thanks for your comments, Clive. I appreciate it. That's all for me.
Your next question comes from the line of Chris Thompson with PI Financial. Your line is open.
Good morning guys. Congratulations on a great year last year and thanks for taking my questions. Just a quick point of clarification, are we anticipating, I guess, revised, mine plans for Jacobo and Fekola in the AIF?
Yes, we should have mentioned that, who wants to take that? She answers, yes.
Yes. The
answer to her answer is yes.
Part of the year I have, we will be updating those mine plants. We'll be underground addition. I'm sorry. We will be updating the mine plants both at Fekola. Based on the latest resource, which came out in December, I think, of 2019.
And then, and then the, approved by the board to go underground at Otjikoto Metals and the RVIS.
Thanks for the reminder, Kristina. The other thing, with the expense of Fekola, of course, was, was based on the tremendous results of increasing Fekola, you know, we came with a new indicated resource recently at 6,000,000 ounces mined a 1,000,000 ounces. So it's really 7,000,000 ounces when we started with, in reverse, as we started with 4, we remain open. So the expansion I'm still having a basically 10 year mine life even with the expansion. So the expansion is showing to have been a great decision.
And I think that's one of the things that we're very proud of because it's the Obviously, we're the bricks and mortars, but we maintain our entrepreneurial approach to this business having expanded Fekola twice already since we've decided the first mill of leading wet ultimate statute and having a commitment to try to find out if it was bigger as we were building it. So, It's a great example of, I think, the way we approach the business is the success of Fekola and produced a 1,000,000 ounces already, and the way the 2 of this is just coming into the second expansion.
Great. Thanks for that Clive. And just another quick question, I guess. Can you just sort of walk us through what's happening with the snakes the Snake Deposits at Fekola?
Sure. I'll hand it over to Tom. You know, you saw he put up some pretty intriguing results a lot ago, but Tom give you one more detail on what the focus is there.
Yes, Christy, expiration at the snakes right now is as, say, a threefold. We're expanding the, the saprolite mineralization to the north with, with our seed drilling
we are drilling, Mamba
to try and understand it and try and extend Mamba, the sulfa deposit Mamba. And then we would be looking at a couple other sulfide targets that are sitting underneath Anaconda and Adder. So that'll be the focus for this year's expiration.
Okay, great. Thanks. And then just a final question, guys. I hope you don't mind, but just Mads Baddy, just a very, very quick comments on, I guess, the grade and metallurgical carat at 6 of Montana compared with, with Main Lane.
Great. I believe we're going to average about 1.8 grams per tonne, correct. And we're expecting about, 80% gold recovery, Chris, from Montana. In a softer ore. So no issues with throughput.
Okay. All right guys. Congrats. Look forward to
this year, mate. That's Chris.
Your next question comes from the line of Geordie Mark with Haywood. Your line is open.
Yes, good morning, all. Yes, if I can maybe just extend the question from Chris's This is one thought, particularly on, on Anaconda and in the context of, I guess, you know, rounding out Fekola However, many expansions are here are now. Plus the context of probably moving with the decision to go through to Gramalote next, and moving your owner's team there and the time commitments, I guess, and the cash flow required for that. I'm just wondering, you know, how does, you know, holistically, how does the Anaconda sort of potential snake fit within that in terms of human resource capital for development timeframes, cash flow requirements to attribute to that, in line with, permitting. So it's more of a holistic sort of midterm growth plan because you've you've already got, you know, obviously another peg there with Gramalote like that you come through, I guess.
Yes, so just giving some sort of more broader scale theme on the
book review. Sure. I mean, if we wave our arms a bit to see if we come up with a, a positive, volatility state of Gramalote and we make the development decision proceed, then we're looking at about, what, the 30 months of, construction. It's 11,000,000 ton that they plan. So we might be started in the second half of next year.
Once again, if we waive the arms a bit, but, the team up will be ready to roll because they're going to be coming off finishing the Pekola expansion. So that timing works out well. In terms of that economy, it's such early days, but there's a number of alternatives there. We're seeing the saprolite now 3 to 6 kilometers. And before that, the 5 kilometers of strike, we have 800,000 ounces at the lower ground.
So, as you know, it's, it doesn't require any any blasting or crushing of this. So it's because of the nature of the Leonard rock of the saprolite down to fifty meters. So we've always thought that as that's getting bigger now, We'll cover the new resource during the year, year for the saprolite. And then, Amit, we've been looking at is that potentially a standalone situation or or other higher grade parts of the separately, then there seems to be one or some that you might truck down to Fekola one day, let's say, after was 1st 5 years averaging 550,000 ounces a year. That's one of the main alternatives would be to do that.
And Tom tells us that we might be wasting our time to analyze too much on the saprolite because he's, I think he's feeling cautiously optimistic on the end of the tunnel and the potential of the sulfide below, the huge area. So then, you could be looking at a significant standalone mine, and you could sort of look at that. Once again, we're waiting, if that ought to go, that could be slotted after Cabalote. But we don't, we don't build these things. Everyone on-site at the same time all the time, it's still always reminds us.
You know, you have the earth where three people come at first they do their thing and I think it'd be ready to go somewhere else. We're not going to take on building 2 plants at the same time. I don't expect this to change our strategy, but we have lots of alternatives not again there. We've got obviously Anaconda's behind Gramalote in the sense of where it is, I mean, in terms of the process of feasibility and permitting. So we, so right now, slotted behind that.
But as many alternatives, especially having this huge mill, down the road, 20 kilometers down the road, start looking at that, at a comment, no, any impact to that?
No, maybe just to add that the part that's often forgotten is the engineering side, which we have a very good engineering team and it actually slots, I think, very nicely. If you look at what's happening at Fekola now, we do have some of our key engineers on-site. They would in kind of the 3rd quarter have to be rotated Odegramulote, that worked very well. Once again, hand waving if it's a project, getting it into, detailed engineering. And of course, that would also work very well to give time, Tom, the time to finish up actually drilling at Anaconda and handing it over to the engineers sometime maybe in the second half of next year to really start looking at what's happening there.
So the on engineering side, it fits very well.
Guess, just one final point that when you talk about Gramalote that we didn't mention, it's very, very advanced for a, allegedly a PEA, which we put up. We only put it out as a PEA because we were a bit surprised to find out that 45% of the ore body was inferred when that wasn't what had been advertised before. So we haven't had a slack or drilling to do of the infill drilling. I guess that's a very consistent ore body that Tom tells us. So we're, it seems we'll do it.
There's always a measure of risk, but think that, we're hopeful that that will be a success and give us a similar type of economics grade. It's something we're looking at now. But in so many ways, it's so advanced Gramalote because AG had it for 10 years and spent a lot of money, and quite a bit of a work to create a very good job dealing with local artisanal miners, the community, and we have a permit. So they obviously did a good job. And the nice thing about this is we're inheriting the Gramalote team.
Which is really, which is there's a lot of very good people there. And rather than having to restart, let's say, if we had some AGS sold out and we had to take over as operator from scratch, we'd be along with not further behind than we are today. So in terms of metallurgy, there's always a good work to do, but I think 18 tells me they're feeling very comfortable with that. And of course, it's got super cheap power between $0.17 a kilowatt hour in Africa. Projected to be around $0.07 a bill at our because of a nearby power line.
And the grade, year people criticize the grade. We understand sometimes the obsession with low grade. No surprise given the feelings of any low grade projects. But here, you have a very low strip ratio, I think it averages to go on to the project and 1 to 1 at the start. So that's a very, those are very attractive factors that actually forgive some extent the lower grade.
We can show you some 1.5 gram more bodies with a huge chip ratio and some inferior metallurgy that would not have the economics that we're seeing at the end of Gramalote. So as we always like to say, nothing matters. Nothing matters in isolation, grades, ratio logistics, all that, it all matters. It's all about how it comes together. So, we've got a lot more real Gramalote by the end of this year, a lot more than a lot more, let's think about the other cloud area.
Great. That's a very, very robust answer. And if I can extend one more to Mike there. Just in terms of obviously free cash flow is going nicely, a reduction in the revolver balance. But obviously, for future growth, going forward with an elevated gold price.
Second, the dividend payments coming out there soon, What are you thinking in terms of you thinking in terms of opportunities going forward to put in a specific impact ratio or something to to Ghana, you know, exposure to rising gold price? Or, just thinking about, you know, obviously, you're putting a lot of cash on the balance sheet and how you might look at using that going forward?
Yes, I think we're looking at what what we may do as we go forward. I think that maybe the way to look at it is we're going to get ourselves to more of a decision point later in the year on what we want to do. We'll have the Gramalote feasibility study by Q4. We'll know a lot more about Anaconda and what we're seeing from the drilling in Molly and have ideas about what we might need in terms of project finance there. And so it's really, right now, we're using the funds to pay the debt down in the absence of, having a larger dividend.
So we'd like to do that to Q3 and then obviously we can evaluate what our dividend policy is what our capital needs are for Gramalote and potentially a bit longer term out there, what our capital needs would be for Anaconda. All of those things can be considered considered. And really the first key decision point come up, there'll be the end of the year when we see what the GrammarTC's ability study shakes out like.
Yes. We, over time, we'd like to see the dividend increase. As we said, we don't want to rush into that. We've got some capital is happening this year. Let's get to, with a debt reduction.
Let's get to the 4th quarter. And then we'll evaluate that situation. I mean, the objective here is to used to be a company that, takes some of the hard, this hard earned money earned by producing gold and uses it to find more ounces and, develop some of the things that are in the pipeline, no more moments, but also at the same time, reward our shareholders by giving something back. So that's the strategy, and we've started that process and we'll evaluate the end of the year if it's appropriate to consider increasing the dividend. And of course, that part is growth rates as well.
Your next question comes from the line of Carey Macquarie with Canaccord Genuity. Your line is open.
Just another question on Gramalote. You mentioned that the project's pretty well advanced. I'm just wondering beyond the infill drilling, are there other opportunities that you're looking at there to potentially tweak the economics?
Sure. Tommy will turn it up.
First, just on the drilling, at the bear in mind that the PEA gold prices really at $1100. So when you look at higher gold prices, you grab a lot, you have the potential to get significantly bigger. And certainly it remains open as you go deeper in the project. And we'll find out some of that with our drilling this year. As far as sort of other opportunities,
Well, us,
I'm trying to add.
There's other satellite deposits that we have not
included in the PEA. We did not do
that deliberately because we wanted to get to a decision point with this thing with
the feasibility study and we just work refund and get
those drilled off to an indicated resource to be able to do that.
So that could add to it.
And the resource before this vastly improved was hinting into account for Trinidad or more on sweats. So it, than the grade, the increase in grade is a bit a little bit because of focusing on Grammartha Ridge. But instead of said, in Thompson, there's we saw other, deposits or one deposit, one zone out there with these 2. So we're going to be doing a little bit of drilling on Trinidad this year, right?
What we do is to drill an entrepreneur debt and then one hospital statement.
So one of the, one of the, one of the odd parts we have is typical of our style of doing things like Fekola. And Otjikoto is we may look to the feasibility is positive. It looks very good, and we go through a billable decision to allow Buildford's Build for Chief Expansion again. The mill. So that is, in fact, Moenas West and Trinidad have come in and we want to crank the tons or whatever, we have a potential to do it.
That's kind of one of our strategies that I think sets us a little bit apart sometimes. And that's where we don't lose value by not exploring those now. We like the way to move forward, get going, get this thing built, but if it's appropriate, then we lead room to add more to more towards you, but if that pans up.
And maybe one more, just your thoughts on your relationships in Columbia. Obviously, you've been there for a while. I think it was been there for a while just relative to the rest of your portfolio.
Well, so far, it's, the great relationship, we've got some really good meetings coming out next week with Mr. Lyons and other senior people from Columbia and that we use the guys have been down. I'm planning a trip down assumed to meet the government officials, but Calvin Dushnisky has done a great job there and some of the people before him, of the dealing with government, you know, the social relationships in many countries in Columbia where they're more and more important everywhere these days. But I think IgI is, setting a good start there. We're more than a start to begin for a long time.
The relationships to government, the president, their cabinet, Calvin was telling me he met with all the parent cabinet, at least 6 months ago or so. Yrum Gold. Now they were very, very positive about gold mining, responsible gold mining. And then you've got Van Fuehlke where the, government of Ethiopia recently elected as a mining in his family background, and he's come up very pro binding and so as his minister, of mines and others. So every all the indications are, the questions we can ask them when we guys are down there, the questions are, wanting to start building this thing.
We also have, we hit the ground running, as I said, with having the Gramalote team. We've also deal Craig who's a VP operations here and who was the country a long time ago in Nicaragua and they came out to Vancouver and assumed a more senior position. Dale put a stand up of volunteer to go down and be the country manager, in the Colombian. Is fantastic. So we've got, you know, one of one of our very experienced guys, at the helm there who'll be well supported by all of us, of course, here.
So, and a good team underneath Dale. So so far that part of it is very, very encouraging. It seems that there's a real, is a real push from the local, the local people, they've done a good job of the AltiusO miners, their roads on board to move this thing forward and we'll continue to work, with what we've done, all of our careers, fairness, respect to transparency and accountability and the way with local governments, federal government. I know the government is very happy to have a Canadian company who I've been hearing, at the helm of this one. And, there's a great candidate the relation, but don't forget, we were the operator here before.
So we have some history with them as well. So, that so far, actually, that seems to us to be economics have to be there, but it seems like this will be the best police in Columbia to build the gold mine being in a mining district and all these other positive factors we're talking about. So That's absolutely very good.
There are no further questions at this time. I will turn the call back over to the presenters.
Okay. Well, thank you, everyone, for joining us. It's obviously a bit of a a challenging day given the meltdown of the gold price and then the gold activities, which is perhaps a little bit surprising, but we see these liquidity crisis, I guess sometimes as we move through the length of two business, but we're very happy to do that. We said that we didn't build this company based on the fact that gold had to be higher. Now this is a hell of a company had more of a go really almost you want to pick, you know, in terms of, historic prices for the last while.
So we're excited about the future. We look forward to continue to deliver for our shareholders and all our stakeholders on the promises we make. Thank you.
Ladies and gentlemen this concludes today's conference call. Thank you for participating. You may now disconnect.