Good afternoon, ladies and gentlemen, and welcome to D2Gold Corp. First Quarter 2019 Financial Results Conference Call. I'd now like to turn the call over to Mr. Clive Johnson, president and CEO. You may proceed, Mister Johnson.
Thanks, operator. I'll look everyone to the, conference call to discuss the 2019 first quarter results for financial results for B2Gold. We had another strong quarter, and I'm gonna hand it over to Mike in a minute. I'll make sure I'm our CFO to She was to run through the Huddlix. I think the initial lease is quite thorough and and the service territory inspected by the MD and A that we filed as well.
So we've lost some information there. So, you know, the short sleeve. I think he was around 2 of the financial results. And then we're gonna, we're gonna, please, turn it over to questions after that. Now, see if we can answer any of your question.
For the quarter and going forward, we continue to remain focused, on maximizing our operations around the world. We are very focused on continuing to generate free cash flow. We're looking at another very good year this year as Michael outlined as well, which was in our, guidance for the year. We're also very focused on Deputy payment the important part, but we continue after last year repaying $220,000,000 of debt last year to cover. We just started to hit significantly and we'll continue on that path as well.
When we look to the future, we're very focused on our pipeline. I think we talked about it a little bit before. In the pipeline, some of it's pretty immediate. 1 is the, of course, the expansion of Hekola, which is underway, and we expect to kick in next year. But, given our view of the preliminary involved potential that we've got, we think it's just gonna make a significant increase in production and we'll talk about 17,550,000 ounces.
We're you're starting, next year. But we haven't done detailed mind points. Those will come later in the year, but the results of the GEA on the expansion for home that we're extremely robust, and that's a bit of a no brainer. So that's that's a real focus going forward. We're also very excited and focused on exploring the additions to the north of Fekola.
And as long as we've we've discovered around Fekola and then further to the North Sea and economies zones. Well, so it'd be a lot more to the line production info commands have been part of this part of the year, but I'm looking forward to rest of
the year a lot of
the exploration drilling. Pretty excited about the long term potential of the call up and probably beyond the wide resources we've built so far. So that's your focus. The other things we we have our joint venture from Latte is from the Atlantic Ocean. If you will route with that right now is we're discussions with ATA about a budget going forward.
We have a new model, which is a lot better model than we have in past. And that model does, however, indicate that there's a lot more drilling, required. So the next step would be to do more drilling. So we're in discussions with AngloGold, Shanti, whether it's less than more money, I'm trying to understand and show who's gonna spend it and what's it gonna look like. So we'll probably have something to talk with there over the next couple of months whether we go forward spend more money if grandma wants to hear enough.
So I'll just put a comment on, you know, the things I can talk about, which we did increase our, revolving loan facility with our great group of bankers who've been extremely supportive of us. The reason why you increase look to increase that facility, we don't need cash. It's pretty clear to generate any positive cash flow, but the offer to renegotiate the terms more attractive terms to us, get think we turned it by our performance stellar performance, you're very happy with us, and we're very happy with them. So we increased the budget to 100,000,000 the facility that's available is a very low standard rate when we're not using it. The key feature is that we have better insurance for the Max.
So increasing our mind by a 100,000,000 shouldn't suggest anything other than we got really good terms with banks and despite the increase in the size of our facility, That's the reason we did it. Comment on M and A for four and a half years, I've been saying, we're not seriously looking at M and A. So let's say it one more time. We're not seriously looking at M And A. We have a pipeline of projects.
We're very excited about the potential to build them. I said four and a half years ago, we're not likely to do any series 78 a utility credit for Fekola. That was 4 and a half years ago. It's not getting credit for Fekola. We're definitely not getting credit for the Fekola expansion and what else might be in the pipeline.
So we're not close to doing any M and A of last year. We don't see anything else that you like. We don't wanna use our shares anywhere near this trouble to do anything. We got a great pipeline of projects. And if and when we do another acquisition, I don't think we're gonna do something really stupid after 30 years of doing some pretty good deal So, no, we're not doing it.
G, if we ever do, I think we're gonna do another good deal. Call it turned out, Christina, some of the other ones did as well. So I hope that's clear on that point. Just for the word, lemonade, But the only thing we're looking at acquiring are great expiration opportunities. If you require some of them, we're gonna acquire more of them, but we're not gonna pay for houses the parts are there.
You never have. So with that, I'll pass it over to Mike to give you the financial headlines and then we'll open up for questions. I'll walk you through the revenues and the operating results and and then some comments, I guess, on some elements of the cash flow statement. So first is on the revenue side. The quarter, we reported $302,000,000 in revenues on sales of 232,000 ounces, also about $42,000,000 less than the prior year order.
And and the main reason for that is is that we sold 28,000 fewer ounces. We have to just wanna remind you that in in the prior year quarter of Q1 twenty eighteen. That's the quarter when we sold down more than 20,000 ounces of low cost of forward, imagery that we built up in in the Fekola ramp up space. So that was an opening inventory at the end of 2017. And then sort of there was a sort of one off that we be brought to Paula online.
So it's still a very strong sales quarter for us this year. And there was there was a sort of one off of explanation for last year's in the higher quarter. On the Production Credit Consulting, production of $231,000, with key budget of 200 and 18,700,000 ounces. This continues to reflect the outperformance of Nicole and Masati Otjikoto would would strike me up and then, in in Nicaragua, we won't we're basically on budget and liver types. Flat with 3 thousand ounces.
Looking at an individually, Fekola, a production of a 110,000 ounces to be purchased by 7000. That was due to higher throughput. During the period, we we, we, processed the term out whether it's not going to be required by grinding. And because the mail throughput was was doing so well, we also made a decision in a quarter to process, more of our low rate drop out than than we originally budgeted. Because the low fixed cost or lower trade overall, I'm going to slightly down.
We were the average base for the quarter was 2.1 versus 2.5 as budgeted. And this resulted in slightly, a moderate increase in Fekola costs, which we already pre released. The value production was 57,000 ounces, and $87,000,000 left on budget. The value continues to outperform on a whole all levels, higher grades and higher recoveries. And in particular, a lot more occupied content, than what slices it main we're we're now mining a main thing, and the outside content there was 31%, for full time funding, partially% of the budget.
So also commented, that expansion came up and online early in the quarter, and we're now running full tilt now with the forecasting capacity of 8,000,000 tonnes for the year. Orocodone 33000 ounces, triple 7 ounces of buses, basically online, And the moment was 12,000 on budget and liver types of 18,000 ounces or 3000 ounces less than budget. Liver types is mainly due to lower grade the plan from San Diego, which partially offset by our production timeline, but overall resulted in 3000 ounces under budget. On a cash cost base, consolidating cash cost for the quarter were $5.45 an ounce, that was $27 an ounce, less than budget. So it's mainly by, Medallion and Otjikoto caused that appraisal of your higher cost of Fekola and some higher cost of the loan in Libertad.
Individually for COVID solar loads cost producer $3.97 an ounce, which was $28 for higher than budget. And but that was the reason I just elaborated on earlier, we made a decision to process a lot more gold grade material than originally budgeted, which just raised the top marks point. We probably had a tracking quarter, $5.46 an ounce, which is a $123 less than budget. And just by a number of factors, about budgeted gold production. And then from mining cost attracting well below budget.
There were cost savings in a number of areas. Showing his last name to lower. It's not just some of the Michelle, we were mining came from backfill areas just as in the last name. And we're also able to to increase the spacing from some of our other blessing in the in the period. And then load and hold on for lower because we we focus a lot more activity around the main banks rather than than running up to the the a common shortfall.
Ojikoto cost $519 an ounce, that's over a $136 less than 20. The reason for that is that we we see that more at work comes than we thought. We advise you to complete some of the Otjikoto get through a wheelchair, that's with all the lower strip ratio. And so we actually knocked out a bunch of material up in mine. In a period that that had a positive impact on the cost reported.
And Nicaragua, at the moment, $99 an ounce, which is 115 higher than budget and leveraged ad, $1295 an ounce, which is $249,000,000 higher than budget due to the lower production within our control here. On the all in, the same cost of $8.48 an ounce consolidated, which was $133 worth of And our summoners, the 2 make jackets. The first one is the $27 per ounce lower cash offering costs this year. And the balance is mainly related is the cash flow of our capital expenditure planning. We were $24,000,000 lower in the quarter on the CapEx side than we originally budgeted, but almost all of that will reverse.
Maybe you have a $4,000,000, a a a stretch of Otjikoto that we won't see reverse, but other than that, we'll see the majority of that reverse later in the year. So, and we don't expect that under or that's under $132 to flow through the rest of the year. Public Donald comments in the operation, Fekola PA that'll be out shortly, in a couple of days' time. And then I think I've already mentioned, so we'll we'll work on for Gramalote. You should say that Gramalote, we originally applied it at $5,000,000.
This is our share of whole cost for the year. And we're still waiting to determine what what program we might see in 2019 and into 2020. So at some point in the next little while, I think we'll probably land on it as an adjusted budget for Gramalote, and we'll do a report that in the next quarter. I wanted to mention a few things on the on the statement of operations and then the cash flow. Just just running down the statement of operations, few comments.
On on the G and A side, we were about $3,000,000 higher in the prior year quarter. That's just mainly due to reason 1 and salary increases across those deferred consolidating groups. And also a couple of $1,000,000 for, under approval bonuses at the end of each language program in Q1 2019? On a derivative side, it's $6,200,000 in derivative chains. That's almost all fuel $7,000,000, came from our fuel hedging program.
It was off to a 1,000,000, unrealized loss on our interest rate basis. Then on the tax side, We're gonna start paying higher taxes on on a consistent basis. I don't know if you go through because Fekola is a relaxed woman's fatty. It came out of a tag Holly about a year ago, but we're gonna when the charge is reported, on a consistent basis now. So of the 27,000,000 current income taxes, working about Fekola.
Turning to taxes of $4,000,000 of that was Fekola starting to in, just to remind you that that's where the government's rechecked 10% is reported. Jim and Sadi made up $4,000,000 of the tax number. And then we also have some alternative minimum taxes in Nicaragua and some other withholding taxes. Collection related into a net income for the period of 26 $1,000,000 or 2¢ a share on on an adjusted earnings basis. We reported, $0.04 a share adjusted earnings.
I just have a few comments on the cash flow, and then I'll turn it back to Clive and Bill. So on the operating Cash, we got over 86,000,000 in the quarter, which was $30 a number, but it's $60,000,000 less than we reported in 2018. So again, a couple of comments on that comparator. The main one is the lower sales number that I discussed earlier when we mentioned revenues. So we were about $40,000,000 lower in sales mainly because of the one optical inventory drawdown in 2018.
Then, we also paid them noting in tax installments, and we also funded some other working capital movements mainly in the energy build up. Tom, overall, 86,000,000 is, it turns turns away through a cash flow per share of $0.99. Post quarter end, we, paid another $30,000,000 in Fekola taxes and COVID. That was to clear up 2018 Fekola's bank liability. And we're also going to pay in the 2nd quarter $17,000,000 for the Fekola priority dividend that's built up 2018.
So just for your models, would you be aware of that? For the full year, we're forecasting critical prices somewhere around $400,000,000 in operating cash flows. On the financing side, you'll see, no drawdowns or repayments of the revolver, but it's quite nice that we are still focused on repayment time. We we did have a $140,000,000 of cash at the end of Q1. And normally, we would we would be down somewhat revolver, but because we knew we were gonna make those for coal attacks, installments and prior year dividend payments.
We didn't pay anything in Q1, but as we moved later in the year and especially with the waiting, production results and and, asphalt to to the second half of the year versus the first half. That's when we expect to start paying some some more down on the revolver. In the investing in CapEx, we had $58,000,000. For the quarter of the debt, we were $24,000,000 under across all the sites for various reasons. But we expect most of that to reverse in the period.
But you'll also see now, as we go forward, that wasn't in the original budget, it is approximately 25,000,000 will be added to CapEx for Fekola expansion. I think we disclosed that in our a lot of truck leases. That's the 2019 share of the mill expansion cost. We're also evaluating what we need to be might have as well. And, we need to start to have more information about that as we determine that.
A bit later in the year. We we do think that we'll talk about it. It'll either be financial use or negotiating cash flow as a revolver. We may also look through some sort of that facility for that. That total, we ended the period of a $140,000,000 in cash, I'd like to say, in good shape, the bigger liability, but also, I think, go forward to, to start paying down some more debt.
Okay. That changes with all of the the main points I wanted to highlight there, but, I'll just go through it back inside. Actually, we'll open up the questions now.
Thank you. At this time, if you would like to ask a question to press star from the number 1 on your telephone keypad. And if your question has been answered, or you wish to remove yourself from the queue, to press
the pound key. Thank you, and
we'll pause for just a moment to confirm this Q and A roster.
Hope you have any questions. This
Your first question comes from Carrie McCreery from Canaccord. Carrie, your line is open. Hi. Good morning, Eric. I just had a question on Fekola to when you had throughput of about 6.9000000 from the annualized.
I know your guidance here is 5.75. Just wondering how we should think about throughput this year. I mean, obviously, the plants can do well above nameplate. Any color you can provide on that?
Yeah. Well, we've always said that if we have some of the proper materials that we can, then we can run more for sure. What what we are saying is that our base case is is 6,000,000,000 tons per annum. We can't we can't run each place. On the harder war that we've found at the goal.
So I would say if we continue to continue to find the softer war, which we're in, then you can expect that we'll be up higher than 6. Did you reach out to do some hard work? Yeah.
And and what's the mix correctly of what I've
heard currently? Well, we talked a little bit about that for sure. I mean, in in Q1, we were running, what, was it 9% sapro 12% saprolite. And, some of the other stuff, but we're able to higher up in the zone. So we didn't see much hard stuff in Q1.
Okay. Thank you. Yes.
And your next question comes from Chris Thompson of PI Financial. Chris Your line is open. Right. Thanks a lot. Good morning guys.
Congratulations on a great quarter. Just, as always, thanks for all the detail in the M and I really appreciate that. Two quick questions. First one on mezzpaddie. 2nd one on Archie Kodo.
Obviously, great results from mezzpaddie. Obviously, you can get on grave and Oxnard tonnage. Can we expect any more juice in the tank by way of, oxide ore before the mine was sent back to, let's call it a normal transition fresh off-site, no text.
Hello, Rosella? Yep, as we, as continue, we we keep receiving this quarter continuing on a similar mix. So, this quarter, I think we'll see positive results. Reverting to that plan by, the King Street of this year.
Okay. Thanks for that. And then finally, Otjikoto, you know, obviously expecting, back half weighted, obviously, more production, I guess, in the back half high grade. It looks like from, from Wolfshag, 2 pits phase 2 there. What are you guys thinking about the underground potential?
Is that still something you'd still still evaluating there?
The answer is absolutely yes. If you remember, the the long, long kind of drawn out saga that we had last year, it was almost it was a push. I mean, economics both in Denver is underground, And, a lot of that really dependent on the geotech that we had thought was gonna be there and and the geohydrology. Those studies have now come in much more positive than we had anticipated. And so we are now thinking that we will go underground there for sure, and we may un go underground sooner than later.
This this is their current plans as well are studied by the end of Q3 so we can present it to the board in Q4 of this year. And, how to do when we report our our life of mine next year will come out.
Great. Thanks, Phil. Thanks, guys.
Great. Thanks, Chris. Be sure.
And, again, if anybody does want to ask a question, just press star then number 1 on your cell phone. Okay? And your discussion comes from Evan Islam of Haywood Security. Robin, your line is open.
Hi. Good afternoon, guys. Congrats on a good
quarter had two questions on Fekola if I may. Given
the higher rate run rate of Fekola, are you guys noticing any benefits on any particular fixed cost items?
Sean, do you want it, sir? I think we're we're seeing, lower costs, return process. With the soft drawer because of the higher divisor, with the, that goes along with the higher throughput, less creating consumptions because of the, the nature of the art, the oxide nature of the art as well. So, you know, we're seeing cost reductions from it.
And last one, if I may, how sensitive are you guys to fuel cost variations at Fekola?
Well, well, if I call fuel overall, Fekola is about 30% of our production cost, and that's gonna split half and half. Basically, you know, really. So, that's, like, 59 feet of the quantum. Okay. An overall production.
Right? Great. Thanks, guys. Yeah. And one of the things we are looking at, it can come from that someone else to go to.
We we are undertaking right now a a COVID study to put in a COVID plan. And those results are coming out. They're imminent and anticipate probably the next, once you get to the amount, whether or not we would switch over to at least some of the power plants being on solar. We're feeling quite positive about that so
Hey. The next question comes from, Lawson Winder Orvinder from EOA Merrill Lynch. Austin, your line is open.
Hi, guys. Thanks for taking my call. I just wanted to ask about a a belly antenna. Obviously, you have made progress there. It's a very positive progress.
But, I mean, you still need a resettlement and then alternate, you still need the final permit. I mean, my my thinking is correct me if I'm wrong, I mean, the firm is probably gonna be easier than the resettlement because one's pending on the other. And then, you know, what gives you confidence that the the resettlement will ultimately happen in time for, for H2. And, where is that right now? Thanks.
Yes. Resellman is down to the right hand. So we take some good advances there. That's the only environment that
he indicated yeah, the permit was gone through the public, consultation process and we're in good order there. So given our chances of resettlement, we're
we're pretty confident looking into H2 that we'll
be there at least
And then, and then just on Gramalote. So in your in in your most recent release, prior to, the the Q1 results out last night. I mean, you basically mentioned that, before making a decision that you you'd complete an internal PA on Gramalote. So I'm just curious. I mean, was that completed?
And then you do ultimately just side or or when you decide to, increase the budget for, Gramalote. And will you be releasing those results of the PEA to sort of to outline, sort of a justification for the for that investment. And then anything on timeline around that that investment decision would be helpful as well. Thanks.
Yeah, man. We don't really go, to wait for it right now. We have a lot of people that say we are in discussions with with with the AGA, our partner. You know, we, we we have a new model there now. And, there's a much better model than it was before than the model that's an HCA used in there, and they called the pre feasibility study 2017.
So we were always on the view that there was issues in the model and we need more drilling. But now there's, you know, meeting of the minds that we need more drilling. So, the question now is, there's some guarantee the new model has some, much better economics about the key to that is it will need procuring to make it indicated, and, ultimately, patient recovery services, economics. So that's that's the conversations going on now. So the question is who wants to spend more money in Gramalote.
If so, how much, who's gonna spend it? The next step would be what you're doing. Gramalote's have a lot of engineering, When they're any changes to EXPRESS operator, there's been huge amounts of money spent. Probably should have been a little more selling, but it's been huge amounts of money So the numbers, you know, create shade, the engineering's in great shape. We have a permit in hand, and we've gotta keep the permit going as part of the process.
But I just got a lot of things going for it. Low grade, yes, the low state ratio of the attractive alerts, etcetera, etcetera. So all of a sudden, there may be some new life of Gramalote on a new model that the key will be, who wants to be working forward. And, ultimately, what does the new law mean to meet some more for sure. So, hopefully, I'm moving within a month.
I'm moving to the month that we're gonna have to be able to have a to reach an agreement one way or the other with our partner.
Okay. Okay. That's great. And then just, how do you think about the 49% interest at this point? I mean, if
you if you have a preference one way
or another, whether you'd like to see your interest stay the same, increase, or, decrease?
Well, the unusual thing about the joint venture team at Gramalote is the fact that 49% is is, basically, effectively 5050. Old cars, we normally see in a 5050 jet jetcher, but all the things you have to unanimous degree are in this joint venture, whether you're on 49% or 35%, fairly unusual agreement, in that regard. So the 49 or It's very powerful with that sense. So we're not really stuck on percentages for a whole lot. Working as the operator, if that's something our partner wants us to do, we'll seriously consider.
Okay. Great.
And then, Mike, sorry. I don't think I I I heard the numbers that you gave for the Fekola tax makeup. So so both the tax installment and the priority dividend, did you give the amount that was in Q1? And then I think you gave the amount that was for q 2. Yeah.
I just recalled that I missed it. The well, what what's in the actual current income tax charge is is 18,000,000 for Fekola, 14 for current income taxes, and 4 for the priority to finance life on an accrual basis in the P and L. What was physically paid in cash during the quarter for Fekola's 6,000,000 and Fekola's tax in Fekola's The subsequent to the quarter end, we paid another $30,000,000 to to settle out our final 28 18 at Cliovelty Fekola. We're also about expecting to pay $17,000,000 in Q2 to settle the 2018 priority dividend. Gotcha.
Okay. That's great. Thanks. That's that's all from you guys. Thank you.
And your next question comes from Craig Stanley of Needham Capital. Can I get your lines open?
Thank you. You mentioned that you in 3 baller because, you get better terms. Can you give us an idea of just what the terms are or just maybe how much you might save for you? And so we've got the detailed MD and A, but thanks for letting us know. Well, we haven't we haven't fully closed yet, so we didn't we haven't disclosed the details, but we will.
When we of it, which is expected very shortly. I can say the pricing has gone only a little better than it was. And, less owners on the covenants and the thing we'd probably focus on the most is just the baskets of what carve outs that you can have, but I think we'll disclose a bit more on that when we actually close it we're we're almost there. 2nd quarter 2nd quarter. Okay.
Thank you.
And we have no further questions at this time. I'm trying to go back over to Mister Johnson for closing remarks.
K. 69 is 1.
And this concludes today's conference call. You may now disconnect.