Good afternoon, ladies and gentlemen. Welcome to the B2Gold Corp. 3rd Quarter and Year to date 2018 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 to our conference call to discuss the third quarter 2018 results and for the 1st 9 months of the year. This has a very strong quarter of production, the cash flow and also the positive developments. I'm gonna pass it over to Mike shortly to to walk you through the highlights of the financials. We put out a pretty detailed news release, and we put, of course, the financials including the detailed MD and A with lots of information in it.
And we do have our investor call, investor day coming up at over 29th in in trial. So we'll keep quite a bit of our detailed powder dry and answer your questions in detail there. There will be a Q and A at the end of the session here. But some of the other things in addition, to the financials over the last last year, which obviously is a pretty transformative year of dramatic transformative year for me to both with the call coming on, but also the great performance from those data and continued strong performance at Otjikoto. Obviously, major increase in gold production, major increase in cash flow operations as we appear from $155,000,000 last year to about $450,000,000 as a current estimate for this year.
One of the big developments, of course, was the announcement that an excellent job done again by Tom and the exploration team, dramatically increasing the size of the Fekola resource. And, days tracked. As we are, we started some studies early this year, looking at grinding, grinding studies and metallurgy and other things to say, But if you get the fact, so I figured, Fekola, what would we do to expand it? And when and how quickly can we do that? So we'll wait ahead of the game there.
So as
year. Those of the progress this year will be wrapping up about the end of the year in an internal study on Fekola expansion looking at going from 5,500,000 tons a year to 7,500,000 tons a year. And just an important highlight there, I think, when you put out in the last release, was the fact that we've given the the studies that John Hall has been doing. The work he's doing, we we are now, pretty confident that
we don't need to add our ball
mill, another ball mill to go from 5 point 5 to 7,900,000 tons a year. So that's very significant in the sense that we see a moderate amount of capital required. About us perhaps to actually see this snippet, another significant expansion of the colon. So, that's going to be a real focus for us. And looking, forward, we're going to continue in our strategy system and continue to sustain and optimize our gold production, but also to continue to, to unlock the value of our existing assets Obviously, Fekola B-one, Fekola Bekola remains open to
the north. Lots of targets up to the north
of the Anaconda zones. Tom has been talking about some recent good hits to the west of Fekola, some lots of work to be done there. But also our other assets, we've got many things, on the go. And perhaps you do a little little bit slow by Fekola. But if you look at the cost of acquisition, taking a little copy on it, the cost of our especially to date, If you look at our new local resources, you're looking at our acquisition and exploration cost per ounce of Fekola resources running around $70 an ounce.
So we are not likely to jump into the game of buying ounces over the next period of time. We've got lots we need to get value for them, and we'll be continuing to look at expiration, initiatives ourselves and looking at joint ventures with juniors. Is highly likely that we would be playing any significant M and A game here at the end of the day. We're always looking, but we did heavy lifting with Otjikoto and Fekola acquisitions and infrastructure development when very few were doing it. So we feel that that's the position of what we have in the assets we have and since it's continue to focus on that.
So with that, as I mentioned, there'll be a few and a, at the end, we've got the whole executive team here. I'll hand it over to Mike now to give you a a summary of the results, the highlights of the financial results for the next quarter and also Penn Cortosa for the year's date.
Thanks. Thanks, Clive. Just a perhaps opening comment just
to say overall, the story
in the quarter is is a record. Quarterly production, with including a Fekola for the full quarter, Fekola fired at all cylinders. Our costs on a consolidated basis are right on budget. For cash costs and all in sustaining. And when you take all that into account where we the results we've already had for 1st 2 quarters of the year, we're tracking well to come in at sort of the upper end of our production guidance for the year and at the low end of our cash costs and always cost guidance.
So that's kind of the overall picture that that we get from the quarter. Just wanted to throw some of the detailed line items in our financial results. Revenue of $324,000,000 more than double, from the prior year quarter.
We sold
269,000 ounces of gold which was 27,000. This is more than we produced, right, we produced under 42,000. And then that was really from a period delivered, campaign to to sell down some of the gold, the the volume that we have in inventory. So we wanted to control that level of volume and returning inventory. And also maximize, cash flow for the quarter with the view that we were we view that on October 1st the day after the end of the quarter, we were going to repay the converts.
So, so we basically picked up 27,000 ounces. Of promoting M and P that we're able to sell in the period. Production site and consulting 242,000 ounces just 2000 ounces below budget and a record for the company. Of those components of that Fekola is 107,000 ounces, 2000 ounces more than budget. And Fekola is now is consistently throughput, but now it's consistently running at, 5,500,000 tons or greater.
I think probably Bill and John would like to comment a night later. So we budgeted 5,000,000, a 5,000,000 ton. Great. And so therefore, during the quarter, we made a decision to feed that additional throughput if you know, We we set it with, the medium and low grade, some of the medium and low grade stockpile material that we have on-site. And we did that for a couple of reasons.
1, one was, as long as to preserve the higher grade stockpile material so that we can bring that into production. In 2019 as we originally planned. And secondly, it led us to a limited sort of, campaign of lower grade and different or types. The mail just to see how the bill performed with those different lord, regular types. And and very pleased that it it's tracking right.
The recoveries are tracking right where we thought they would add or better than models. So pretty encouraging, especially when we look forward to start planning for the Fekola North, material and Fekola potential expansion of the mill and Fekola. Otjikoto came in at a 42,000 ounces of right on budget. Masbate. You continued to offer 458,000 ounces.
Into the budget of 45,000. And we're starting to just continue to see the benefit of that higher oxide material from Colorado. Higher higher grades, higher recoveries, higher throughput. The Colorado was mined out. We re accelerated lighting there.
The quarter was mined out, by any end of August. But there is still some material from Colorado and stockholders, so we expect to see the ongoing benefit of that as we go through the fourth quarter. And Libertad and Limon, they they were both under budget. They struggled a little bit with the game because continuing so far and lasting the country. At Libertad.
Because we'll be on roster, some of the some of the issues getting supplied there, we have spend development heavily underground temporarily. That was subsequently recommenced and we finished dewatering at Noggin. So we now expect to see heavily account on underground material coming to the production plan by later in fourth quarter. And then at the moment, we we incurred some ongoing delays in getting permits for explosives and other shipments. However, by the end of the quarter, we were back on track there.
And we expect that the loan will return as sort of normal budgeted steady state in this quarter. Overall 222,000 ounces, production, great results, and I'd like to set a quarterly record for the company. On the cash cost of all interest saving cost, right? Firstly, cash cost, $504 an ounce in consolidating basis, exactly on budget. And they had some offsetting, items in here.
So firstly, for Cola, the Cola was $383 an ounce, $34 an ounce, higher than budget, but that's for a couple of reasons. And the first one is what I explained earlier. We had to make that decision to run more materials in the mill, and it was because it was lower rate and increased the tons per ounce by approximately $10. Also, we experienced higher than budgeted fuel costs. Diesel and and fuel oil levels between 38.18 percent higher than we've got when we budgeted.
But it should be noted that it's not had an impact of about $15 an ounce in the quarter, but we also had fuel hedges in place. And those fuel hedges, the gains, and those realized gains accounted for about $9 an ounce in the period. So $15 higher cost, but we we offset about $1,000,000 with a higher cost with the demand than the fuel hedges. So but when you take those together, the overall impact from fuel is really negligible. Ojikoto, $4.70 an ounce, $14 under budget.
The Ojikoto station is taking a lot of these budgeted and that's planned. It's about $528 an ounce. That's almost a $180 an ounce less than budget. So it the bed continues to outperform. Through the year.
It had a great year last year. It had a
great year this year. And it's really most of that is driven by the higher production the higher ounces that we're seeing there, but they also managed to, actually, the way they were they're running the fleet, they managed to reduce some of the ore some of the mining costs, looks like an all of that flowed in and benefit of the cash costs have been treated.
Never gotten the
loan. We're both high on the cash cost side for the as a result of the lower production that I explained earlier. And then when you look at all in sustaining costs, $7.49 an ounce is $5 less than budget, so pretty much tracking right on budget. And again, the there's some offsetting guidance in there, but it's basically near as well. So the cash cost side, with Nifati being the standard help with the help of the of the operating line.
So very positive on the production side on the on the cost side for the period. Well, we've actually reguided on a couple of metrics. Firstly, on the production side, we've reguided Fekola, but it was 100 to 400 and 10,000. Hostess, we found that at between 4:20:4:30. And also, McBaddie is a separate form that we've we've guided that up another 20,000 ounces.
So now it's between 202,021,000 ounces. On the downside, we've we've guided Libertad now we're, between 19, 95,000 ounces. So overall, our overall consolidated guidance range of things up by 10,000 ounces now $920,000 $960,000. And as I mentioned at the start, we expect to track towards the upper end of that production guidance based on where we are now. And then to to mirror, some of the the production and the cost performance that we've seen in the Q3, we also reguided on the on the cash cost and all in sustaining cost site.
So Masbate, we we bring that in downwards from Masbate because it's out formed so well during the treatment and for, the Nicaragua operations, we've guided those up on both cash costs, more than sustaining costs. Because of the lower production that we see. Overall, we did not change the overall consolidated guidance range. That's still $505 to $550 an ounce for cash costs and 780 to 130. All in sustaining costs.
Again, as I mentioned, we'd expect that we're gonna come in at the lower end of those cost guidance ranges for the year. A couple other items maybe to mention in the, the results. On the on the earnings side, really the main thing I wanted to highlight is on the taxes. So if you look at the income before taxes, and then you look at the current tax curve. It's a relatively high percentage.
And just wanted to to to remind everyone of a couple of things that the reason the reason it looks relatively high is because there are We're we're taxable all across the group on the tax holidays and the status has finished. Fekola doesn't have any significant accelerated losses that you can claim. And, you know, upfront, it it basically becomes taxable right out of the gate. And there's also a bunch of corporate costs and unrecognized costs in there. So purchase price adjustments, that the, type adjustments that that that don't flow into the overall tax charge.
If you look down through the tax number and look at what the actual taxable income is at each of the sites are effective tax rate approximately 15%, which is actually on the low end.
So I
just wanted to flag that up and pick people, and I also wanted to know that we did lay out some more be killing the MD and A explaining how to get to lose the effective tax rate. The other thing I'd highlight, for the folks on on the phone, just for the models, is that in the 1st year of operation of Fekola, it's it's actually all the way through, and we're pulling those package through the quarter. But because there was no taxable income last year, the the installment, our very low taxable income last year for Fekola the installments, we're paying in cash. In 'eighteen are relatively low, and we'll see a big catch up payment when we settle this year's taxes in Q1 and Q2 next year. So Just, Danielle, just to remember that in your model.
And again, you put some detail on the SG and A for you. Overall, earnings, $60,000,000 or 1¢, per share. But if you look at adjusted net income, it is 5¢ per share, and it's 15¢ per share overall year to date. Just flag up a couple things on the cash flow side. So cash flow from operating activities of $143,000,000 $376,000,000 year to date, so we've indicated in the MD and A, we think we assume a $1200 gold price for the for Q4.
We think we're going to come out somewhere around 450,000,000 for operating cash flows for the year. On the financing side, you'll see in the periods we drew down an extra $200,000,000 on the revolving credit facility. We we already repaid a significant amount of the amount revolver earlier in the year. So We drew down some more with the view that we were going to use it, and we did use it to help us repay the convertible notes which we repaid on October 1, 258,000,000 Big picture for debt. If you look at total debt at the start of the year was approximately $700,000,000, and we expect to finish the year with somewhere around 500,000,000 total vessel, a repayment overall and a period ending repayment of 200,000,000.
On the Adapting side, $52,000,000 across all operations, including exploration, pretty much on budget. The only place where we're under budget, on the CapEx side is at Libertad, and that's mainly because of the the delay in getting into Jabali, Encana. With that, La Libertad, heavily internal open pit was expected to to come into the life plan. Originally this year, and then a little later next year. So we have been successful getting my permit in Nicaragua.
We've got Simon San Diego already, and we're operating for most people. We're making progress on Jabali and Thomas, open pit for that permit, and We now expect that we'll see that commence the land plan in the second half, basically after the first half, start second half of twenty nineteen.
Stepp and Mackle roll for the trade and finish,
the trade with $355,000,000 in cash. But the next day of October 1st, we repaid the convert as planned and as part of our original strategy, to fund Fekola that I use in equity. So we we use that operating cash and prepaid sales to do it. So October 1st, we we used $258,000,000 of that $355,000,000 to be paid at convert. And now as we move forward, we will continue to focus on the excess cash flow to just pay down the line.
They'll move over. The revolver, we've currently drawn 400,000,000, and we hit the 500,000,000 full facility, so there's 100,000,000 capacity there, plus there's another $100,000,000 accordion. We don't see the need for right now, but there is a $100,000,000 accordion feature available if we choose to use it. So I think that's the sort of high level financial results. So that's going to get into.
I don't know if you want to write up for questions.
No, I think just a couple First, a few things that add to my opening remarks. I talked about Nicole to finish off, the plan there going forward. I mentioned the internal study by the end of the year looking at expansion, in the first quarter, next year will begin optimization studies on the mine plan. Over the first quarter, to find out the most efficient effect of them, as the changes said, what I call it would be way way too light in the the the call with the, with the expansion as well. That will involve landfill drilling.
There was a, a larger percentage of the resource, the new source was, larger than,
than that anticipated in the,
in the indicated category, and that will be, that will continue to grow. We expect moving success with programming and field drilling starting January, this should turn, due to to turn these resources into reserves. Unless we expect that requirement plan for 2019. So by the end of the quarter, we'll be ready to come up, for fiscal 2019, we'll be ready
to come up with a
if you want to report, we'll be able to talk in detail about the expansion plan. We're pretty excited about that. If Nicole is showing that it could be the beast that we wish that it could be once again, though, we stuck with our discipline and acquisitions where we don't pay, we will not, we
will not
pay for anything that needs significant next by success and or higher gold price to justify the purchase price. And clearly at $70 an ounce number, the acquisition of Fekola was it was accretive, with the initial reserves of 3,400,000 ounces that we saw. And obviously, with this great acreage patient success, it's, it's a great project. It's, we're looking at the kind of project that I think, according to, Barrick and others that everyone's looking for. Just a couple of comments perhaps on on, we've seen some early activity.
Of course, the big one being Eric and Randgold. I do think there's positive there's some positive follow-up in that browser in a couple of ways. Obviously, the Randgold shares are going to disappear with the expected to vote, today from, the Randall show. So, all of a sudden, there may be some institutions who are going to look away on the Barrick side. There's an opportunity in their vehicle.
It's been a very successful company over, over the last 10 years or so. An interesting left has had a very similar discipline to what we've had about acquisitions. And not chasing things and not overpaying for things. So it would be interesting to see if, there are other opportunities in West Africa. We'll obviously look at everything.
Given the fact that there's so many companies out there that we grow much more than we do, because of our focus continued growth during the last number of years. It's, frankly, unlikely we're going to go there and outbid people for houses in the ground. Because I think there's obviously more we have all this, conceptual opportunity with Fekola and other things looking forward. So I think there's a real opportunity there. Also, it's interesting to the deal is very interesting in many ways that Barrack Brand will deal more as the fact that it's a no premium deal.
So I think that sets a new standard for us with big guys. And for those of us with this company, our management and our directors and many of our shareholders who want to continue to see us do what we do. I don't think there's going to be, any large gold companies,
looking to take a
run at somewhere like a beachy gold. I think at the end of the day, the big premiums now that there's still a no premium deal for RANGL, I don't see the company setting up a big premium. So in my opinion, you need to offer a big premium if you're interested in looking at each because a lot of our showrooms were doing what we do well, which is that you need to grow this company as we have so well over the last, 2 years or so. So when you look at the world of M and A, I'm sure there will be quite a bit more M and A, and then you'll see some some of the, some companies getting together. But I think the days of big premiums are probably over because those deals were not great.
A lot of them in the last 10 years and a lot of them were heavily just justified but criticized for people who perhaps overpaying for things where we're not getting it right. So with that, I think we will open it up for questions.
Your first question comes from Michael Gray with Macquarie. Your line is open.
It's, Michael over here. Thanks. First off, the campaign of the limited, medium to low grade at Fekola. Any chance you could give us a breakdown of that feed and whether you're going to maintain that blend going forward and whether you think you can maintain the recoveries in that 94%, 95% range?
Hello. Can you answer that? Yes. Mike, the, the campaign long during the sale during the, during the third quarter, we were able to achieve recoveries, similar to what we had been, year to date prior to that, 94% to 95%. And then we ran another, Anthony in early October.
I think we mentioned it in the press release on the resource, that averaged 1.1 grams per tonne and we were just about 93% recovery. That was over a 5 day period in Latin period. So that was above mileage. So we were, we were very pleased with that.
Also earlier, I think I mentioned the the the work in the extensions of the
Northeast on your Yes, we completed all the metallurgy capacity on the coal and north. Results are very similar to what we saw in the call feasibility study. So, we're expecting, very similar metallurgical performance once that material begins to be process in the middle of the future.
Okay. Thanks for that, John. And Tom, if you're there, it's been a little bit quiet on the Twega front for news, but it looks like you're gonna be putting news out before the end of the year. Can you give us a bit of color on the scope of draw a link that will be released for that, before the year end? Yeah.
I don't know. We'll have a lot of Toyota material. We'll have some Toyota we'll resolve to look at, I guess, at the meeting in Toronto. But, you know, I can't add any card to it. It remains open down plunge.
It narrows up, down plunge in, but the grade picks up. Okay. Well, thanks. So we'll get more color at the Analyst Day. And then Mike Simmons, just on the, reversing, the impairments on the Nicaragua assets, any reason why to do that now as opposed to the year end?
Well, the main reason is we updated our mine plan in Q3 as we normally do. And, you know, cap requires that if if you have a change, that you you consider whether that change indicates that either there is an impairment reversal or there is an impairment. And so we did that across all of our operations and sites because we had new mine plans for all of them. And the biggest the biggest factor there was that you central deposit and that being built into central impact of that and the the upside of that being built into a mine plan, that that was the trigger indicator that we had to consider it. So take that requirement to do it when that information is available.
Your next question comes from Lawson Winder with Bank of America Merrill Lynch. Your line is open.
Just, on on for Colin, the new M and A or, sorry, Meredith indicated, estimate that you guys published. Last week or 2 weeks ago, I guess, might have been, just on the cost. So I noticed, both the processing cost and the mining cost per ton mine came down quite a bit versus the year end 2017 estimate. I mean, in particular, I'd be curious as to what's driving the lower mining cost per ton. So I think so it's $2 per ton now.
And I think it was quite a bit higher before like $2.60 or $2.70 prior to that.
Bill, Ronald? Yeah. No. Service is on the mining side. Certainly, if you remember, in the feasibility, we we took the advice of of a lot of the people working in the area as as kind of what the best guess was gonna be.
And so we we act I think everybody felt that that number was high. And, of course, operations today get born in and out, but
it is high. As you know, we we've been running
at less than a buck 50 a ton. So we felt the $2 was a was a reasonable number. And and conservative. And and then on on the on the billing side, I think we're actually very close to where we're in the feasibility study. So we're confident with that number as well.
And then, just in terms of over the, over the entire mine life, where is there a distribution of where those lower costs are coming?
So have you, have you, for example,
I just lowered the cost expected in the earlier part of the mine plan and kept them the same in the later part? Or is it just across the board? Do you expect it to be lower mining cost straight through for the entire life of mine?
Well, sir, I mean, certainly, we'll see the cost come up as we go deeper and get into harder ore, but we don't we don't expect them to see it come up time to come up with that $2.70 range. So we just need we just need our FTS instead of two bucks.
Okay. All right. That's helpful. And then just what was the mining cost per ton in Q3? In
Q3, we were at, what, it looks to me like we are at a I'm just looking up here. Yep. Cool. Cool. Cool.
Cool. Cool. Bye. The current period for September, we were at a an actual order of about 35. And then for Q3, we're at above 51.
Okay. Alright. That's very helpful. And then Just one more from me sort of sticking with the, the the cost seen here in Fekola. So just just giving your guidance, if you just kind of back out what the guidance and the 9 months result implies for Q4 at Fekola costs.
I mean, especially if you adjust for the $34 per ounce above budget Q3 result. I mean, it's looking like you're calling for a pretty material increase in Q4 'eighteen. Cost per per ounce, I'm sorry, COC cash operating cost per ounce. I'm just curious, like, driven by grade. Are there more studies you plan to put more low grade through it, or are you seems something that's going to fundamentally drive like cost per ton?
Thanks.
The answer is no, I don't think so. Certainly, we're going to see the ounce profile in Q4, we expect to be higher. Remember, we kind of limited the ounces in in Q3. That that coupled with a with a couple which went on. We did we did a big reline or 2 relines in in, Q3.
We we won't see Q4. So we won't see those those costs the folks. We don't we don't see our costs going up in Q4. So just
just on that as well, we did indicate the end of the day. We we expect to do for call come in for cash costs, right, at the low end of the guidance range we've given for the year. And for all ends, that's why it's a low end or even below. Low end, but not ready. So that's we we played that out in the MD and A.
I think it's really important we tried to emphasize it, obviously, not clearly enough. The fact that matters in the 3rd quarter, we put through more tons than we had anticipated through the mill, which was very positive. We chose to use some lower, middle lower grade material to do that. So we worked at a Rob next year's production. We're going to have those lead nodes we can production year to year.
So this is a negative. It's a positive the cost per ounce are slightly higher as we put through more types of anticipated to produce more gold. So let's not let's keep this in perspective. Taking a few more details on that, we'll put you on a separate call with the guys here and they can explain it to you even further.
No, that's that's great. I appreciate that. That color. Thanks guys. That's it for me.
Your next question comes from Chris Thompson with PI Financial. Your line is open.
Hi, good morning guys. Congratulations on a great quarter. Just a quick question, I guess, on Merspati, obviously, focus being on the the the the the plant expansion. What sort of ramp up should we be modeling for that?
That's that's for me. Yeah, we're we're, we're closing it on finishing up that project. We're looking at commissioning and ramping that thing up in January. So very short ramp up. The original schedule was April.
So so Rack and getting one online ahead of schedule, by about 3 months. So it's not very favorable. It's the same crews. It's the same, maintenance crews, the same operators and stuff since it is an expansion. It's not like a typical new ramp up where you're doing a lot of extra training and things like that.
So we expect it to come up very, very quickly, think we can be pushing those rates, near the end of January. Just sighted budgeting 8,000,000 tons per annum next year.
$8,000,000. All right. Thanks for that. I guess, just looking, I guess, a quarter of, obviously, exceptional performance from Masbate for the year. So far, it looks like you're effectively tracking ahead of guidance, and below costs.
I mean, and that would imply, I would imagine, a weak fourth quarter. I'm just trying to get a sense, I guess, of whether that's the case, because you still have, I guess, some in Colorado, or, that you plan to put through the mill in the 4th quarter?
Not the case at all. We know we're, doing the finish year off strong, through October. We could take one ball mill down. All of 15 days, replaced demand, replaced during your opinion, work as planned. Even with that, we continue to on strike for budget.
So we anticipate, continuing through to the strong year end we have because of the acceleration in Colorado. We have a certain amount of oxide on the pad ready to go. We're mining, directly out of main vein at 34. All cylinders are running, and we expect a strong finish for the year. For the quarter, 4th quarter in particular, pretty much on budget or better than budget.
Great to hear, Dale. Thanks for that. And just finally, just a quick comment on, on Otjikoto, it's still anticipating, I guess, a Wolfshakes come in towards the end of, of next year. Is that right?
Yeah. We we do have will check-in next year, but we are currently looking at the mine plan. And perhaps we'll stay in Otjikoto. We that's still under budget here at review right now.
Alright, guys. All right. Congrats. Thanks, Wayne.
Your next question comes from Richard Deutch with National Security. Your line is open.
Meeting expectations, which is, rare to find, a lot around, I have a question about your, your gold delivery obligations under one of your previous financings I I believe it expires sometime in 2019 or early 2020. Upon the delivery of the final obligation, how does that affect your reported numbers on on the sales cash flow, if at all. I just wondered if there was any effect from closing out that, that debt.
You gotta get a new phone. I think we barely heard that.
I think I heard some of it. Certainly, on the on the previous financing, we have some Namibian dollar denominated pull forwards, approximately 8 or 9000 ounces from an OLR revolving credit facility, financing we did a long time ago. Both final ounces will be delivered into in this quarter, so they'll be gone. They'll be extinguished. And then the other financing we had when we got obligations to deliver ounces were on the prepaid sales.
And as at the end of September, the $45,000,000 worth of outstanding contracts in those sales for delivery of 38 just over 38,000 ounces. And we expect About 13 of those to be delivered in Q4 with the balance in the first half of twenty nineteen. So I'm not I couldn't hear your whole question, but Hopefully, that answers with the leasing part.
Yes. So the prepaid sales obligation will be completed by the middle of next year. Is that what you're saying?
That's right. That's correct.
And then, as opposed to extinguishing debt, it just adds to your cash flow at that particular point. So there's no real net effect, beyond what we're already seeing.
That's correct. The the funds from the prepaid sales were previously received on a cash flow basis. So now when we deliver insulin, there's no new cash flows related to those ounces. So once we start delivering insulin, you'll see all the ounces that are that are, produced and sold in the period, you'll see the cash flow benefit of those in that period.
Okay. Uh-uh. That's that's what I thought. Thank you very much. Thanks.
Your
next question comes from Jordy Mark with Hayward Securities. Your line is open.
Yeah. A bunch of questions have already been asked. Just maybe just following on with the what's the call a central theme, it seems. A nice resource update with that extension plan. Just just wondering, I mean, not worry about the exactitude of the final some of the of the plant and mine study, how long once you have an idea in mind of what to do with 7,500,000 tons per annum plant, How long would that take to come into fruition ultimately do you think?
Well, we haven't gotten to that level detail, yes, we've got to figure out what we need to order. First of all, of course, we've got to figure out. We don't need no involvement on what we need, new upgrades and the motors, especially the ball of motors and things like that. So it's really, we're not going to guess at a capital cost right now and similarly, we're not going to guess yet for right now. So we'll have a we'll have a much better idea that by the end of the year, just that.
Correct, John?
Yeah. That's right, Clive. Yes.
The internal goal is to do. And then in the first quarter of next year, we'll, we'll have the optimization to come up with the final study.
Okay. No worries. And, and you were saying, ultimately, in q 3, you know, despite running around about 5.57 1,000,000 tonne per annum rate through the 1,000,000 a couple of, re linings there. I mean, where should we look if we're looking in the future in terms of an average run rate for for the plant in absence of the expansion. Should we look at 5 a half, or is language between 5 a half and a 6?
Right now, we're bundling 5a half. And if you're clearly clear, I think it's in and everyone can obviously see that it can do more But right now, we are budgeting a 5,500,000 tons per
annum until we get these studies and we get and get all this information together.
Okay, great. Thanks. And perhaps moving a little bit to the north, for exploration, You were stating sort of focusing on some, I guess, some of the hydrogen sort of Fekola style gold targets. Through the quarter. We've had an AC and an RC rig.
Is that on on one target or multiple targets then do you expect the rig count to increase in that area this quarter or what should we expect?
No, I think we're pretty much I don't want to say blow their budget because it doesn't sound right, but we spent most of our budget on the infill. So with the remaining part of the year, we'll have Aircore running But we'll have 1 to 2 rigs working on. A little bit of the new discovery Clive mentioned that to the west of Coca Cola called Cardinal, and, we'll get up in the Anaconda area also. And, 1 or 2 holes, maybe in the north of Fekola testing some ideas. We will start infill drilling and budgeting up infill drilling till next year.
And it's a little bit of
a chicken and egg. We want to see where the see the pit's gonna go the reserve pit's gonna go before we detail out the infill drill program. If you're expecting a significant budget, Obviously, infill is what it is. And we've been great success with that. We expect that to continue starting in January, but also Tom, we're expecting a, we haven't done a budget yet, but I'm we'll expect any time to come up with a, with a suite of budgets, just a 5 way to go and drill Anaconda in that area to see what's underneath the, the saprolite, I think it's worth mentioning that we are, and I think you said it somewhere in the material we've given out, but we are looking at the Anaconda area now.
I'm looking at the saprolite and seeing that stand alone on off of each pad, something like that.
If you
have the potential to produce
the median 100,000 ounces a year, for some years as a standalone there, that obviously just adds to our overall production profile. So that's another thing we're that's in the works. We're having a look at doing test works and look at that as well. But you do expect a lot of drilling next year, the stop center priority issue was, was, was a new resource, great success, but also we've got some new some new pretty exciting or received results to the west. And of course, it's open to the north and we'll be doing a lot of drilling on the Anaconda area looking for the next Fekola there as well.
Okay. Well, thank you very much.
There are no further questions queued up at this time. I'll turn the call back over to Clive Johnson.
Okay. Well, thanks a lot for your questions. And as we mentioned, we're having an Investor Day, and I'm starting to think maybe it should be 2 days, in late November. Given some of the detail that we, that we're being requested to give, which is fine. We appreciate the answers.
So thank you all. We're getting on the call. And, we look forward to hopefully seeing, as many of you as possible in late November for, for a really good update on everything we're doing. So thanks everyone.
This concludes today's conference call. You may now disconnect.