Good afternoon, ladies and gentlemen. Welcome to the B2Gold Corp third 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 for the first nine months of the year. We've had a very strong quarter of production, good cash flow, and all sorts of positive developments. I'm going to pass it over to Mike shortly to walk you through the highlights of the financials. We put out a pretty detailed news release, we put out, of course, the financials, including pretty detailed MD&A with lots of information in it. We do have our investor call, Investor Day, coming up November 29th in Toronto, so we'll keep quite a bit of our details powder dry and answer your questions in detail there. There will be a Q&A at the end of the session here.
Some of the other things, in addition to the financials over this last year, which obviously is a pretty transformative year, a dramatic transformative year for B2Gold with Fekola coming on, but also the great performance from Masbate and continued strong performance at Otjikoto. Obviously, major increase in gold production, major increase in cash from operations, as we'll hear, from $155 million last year to about $450 million is our current estimate for this year. One of the big developments, of course, was the announcement, an excellent job done again by Tom and the exploration team, dramatically increasing the size of the Fekola resource.
Being practical as we are, we started some studies early this year looking at grinding studies and metallurgy and other things to say if in fact it's a lot bigger at Fekola, what would we do to expand it, how quickly could we do that? We're way ahead of the game there. As the year progresses here, we'll be wrapping up by the end of the year an internal study on Fekola expansion, looking at going from 5.5 million tons a year to 7.5 million tons a year. Just an important highlight there, I think, that we put out in the last release was the fact that given the studies that John Hall has been doing, the work he's been doing, we are now pretty confident that we don't need to add a ball mill to go from 5.5 to 7.5 million tons a year.
That's very significant in the sense that we see a moderate amount of capital required, or modest perhaps, to actually see another significant expansion of Fekola. That's going to be a real focus for us, and looking forward, we're going to continue our strategy. It's going to continue as suspense to optimize our gold production, but also to continue to unlock the value of our existing assets. Obviously Fekola being one. Fekola remains open to the north. Lots of targets up to the north, the Anaconda zones. Tom's going to talk about some recent good hits to the west of Fekola, lots of work to be done there. Also our other assets.
We've got many things on the go, and perhaps you get a little bit spoiled by Fekola, but if you look at the cost of acquisition by taking over Fekola and the cost of our exploration to date, if you look at our new global resources here, look at our acquisition and exploration cost per ounce of Fekola resources running around $70 an ounce. We are not likely to jump into the game of buying ounces over the next period of time. We've got lots that we need to get value for, and we'll be continuing to look at exploration initiatives ourselves and looking at joint ventures with juniors. It's highly unlikely that we will be playing any significant M&A game here.
At the end of the day, we're always looking, but we did the heavy lifting with Otjikoto and Fekola acquisitions and construction and development when very few were doing it. We feel in a fantastic position with what we have and the assets we have, and we're going to continue to focus on that. With that, as I mentioned, there'll be a Q&A at the end. We've got the whole executive team here. I'll hand it over to Mike now to give you a summary of the results, the highlights of the financial results for the quarter and also for the year to date. Mike?
Thanks, Clive. Just perhaps opening comments just to say overall, the story in the quarter is record quarterly production with the inclusion of Fekola for the full quarter and Fekola firing on all cylinders. Our costs on a consolidated basis are right on budget for cash costs, all-in sustaining. When you take all that into account with the results we've already had for the first two 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 all-in sustaining cost guidance. That's kind of the overall picture that we get from the quarter. Just running through some of the detailed line items in our financial results. Revenue, $324 million, more than double from the prior year quarter.
We sold 269,000 ounces of gold, which was 27,000 ounces more than we produced. We produced 242,000. That was really from a very deliberate campaign to sell down some of the gold, the volume that we have in inventory. We wanted to control that level of volume that we carry in inventory and also maximize cash flow for the quarter with the view that on October 1st, the day after the end of the quarter, we were going to repay the convert. We basically picked up 27,000 ounces from opening inventory that we were able to sell in the period. Production side, consolidated production, 242,000 ounces. Just 2,000 ounces below budget and a record for the company.
Of those components of that, Fekola is 107,000 ounces, 2,000 ounces more than budget. Fekola now is consistently, throughput at the mill is consistently running at 5.5 million tons or greater. I think probably Bill, John, or Clive could comment on that later. We budgeted at a 5 million ton rate. Therefore, during the quarter, we made a decision to feed that additional throughput at the mill. We fed it with the medium- and low-grade, some of the medium- and low-grade stockpile material that we have on site. We did that for a couple of reasons. One was it allowed us to preserve the higher-grade stockpile material so that we can bring that into production in 2019, as we originally planned.
Secondly, it allowed us to do a limited campaign of lower grade and different ore types through the mill just to see how the mill performed with those different lower-grade ore types. Frankly, the recoveries are tracking right where we thought they would at or better than modeled. Very encouraging, especially when we look forward and start planning for the Fekola North material in Fekola for that potential expansion of the mill at Fekola. Otjikoto came in at 42,000 ounces, right on budget. Masbate continued to outperform at 58,000 ounces, hence the budget of 45,000. Masbate just continues to see the benefit of that higher oxide material from Colorado, higher grades, higher recoveries, higher throughput. Colorado was mined out. We accelerated mining there in the quarter. It was mined out by the end of August.
There is still some material from Colorado in the stockpile there, so we expect to see the ongoing benefit of that as we go through the fourth quarter. Libertad and Limon, they were both under budget. They struggled a little bit with the gains because of that continuing social unrest in the country at Libertad. Because of the unrest there, some of the issues getting supplies there, we had to suspend development Jabali underground temporarily. That was subsequently recommenced, and we finished dewatering in August, so we now expect to see Jabali tonnage of underground material come into the production plan by later in the fourth quarter. At Limon, we incurred some ongoing delays in getting permits for explosives and other shipments.
By the end of the quarter, we were back on track there, and we expect that Limon will return to its normal budgeted steady state in this quarter. Overall, 242,000 ounces production, great result, and like I said, a quarterly record for the company. On the cash costs, all-in sustaining costs slide, firstly, cash costs, $504 an ounce on a consolidated basis, exactly on budget. They had some offsetting items in there. Firstly for Fekola. Fekola was $383 an ounce, $34 an ounce higher than budget. That's for a couple of reasons, and the first one is what I explained earlier. We had made that decision to run more material through the mill, and because it was lower grade, it increased the cost per ounce by approximately $10. Also, we experienced higher-than-budgeted fuel costs.
Diesel and fuel oil were both between 13%-18% higher than we thought when we budgeted. It should be noted that that had an impact of about $15 an ounce in the quarter, we also have fuel hedges in place, and those fuel hedges, the gains on those realized gains accounted for about $9 an ounce in the period. $15 higher cost, we offset about $9 of that higher cost with the benefit of the fuel hedges. When you take those together, the overall impact from fuel is really negligible. Otjikoto, $470 an ounce, $14 under budget, Otjikoto's basically ticking along as budgeted and as planned. Masbate $528 an ounce, that was almost $180 an ounce less than budget. Masbate continues to outperform through the year.
It had a great year last year, it's had a great year this year, and most of that is driven by the higher production, the higher ounces that we're seeing there. They also managed to actually, the way they were running fleet there, they managed to reduce some of the mining costs on site, and all of that flowed in and benefited the cash costs in the period. Libertad and Limon were both high on the cash cost slide as a result of the lower production that I explained earlier. When you look at all-in sustaining costs, $749 an ounce, just $5 less than budget, pretty much tracking right on budget. Again, there's some offsetting items in there, it basically mirrors what was on the cash cost slide with Masbate being the standout outperformer of the operating mines.
Very positive on the production side, on the cost side for the period. Look, we've actually re-guided on a couple of metrics. Firstly, on the production side, we re-guided Fekola up. It was 400,000-410,000 ounces. We now guide it between 420,000-430,000. Also Masbate, because it's outperforming, we guided that up another 20,000 ounces, now it's between 200,000-210,000 ounces. On the downside, we guided Libertad downwards to between 90,000-95,000 ounces. Overall, our overall consolidated guidance range has been up by 10,000 ounces. It's now 920,000-960,000 ounces.
As I mentioned at the start, we expect to track towards the upper end of that production guidance based on where we are now. Then to mirror some of the production and the cost performance that we think in the future, we also re-guided on the cash costs and all-in sustaining cost side. Masbate, we've re-guided downwards from Masbate because it's outperformed so well during the period. For the Nicaraguan operations, we guided those up on both cash costs and all-in sustaining costs because of the lower production that we've seen. Overall, though, we did not change the overall consolidated guidance range. That's still $505-$550 an ounce for cash cost and $780-$830 all-in sustaining cost. As I mentioned, we expect that we're going to come in at the lower end of those cost guidance ranges for the year.
A couple other items maybe to mention in the results. On the earnings side, really the main thing I wanted to highlight is on the taxes. If you look at the income before taxes, then you look at the current tax charge, it's a relatively high percentage. Just wanted to remind everyone of a couple of things. The reason it looks relatively high is because we're taxable all across the group now. The tax holiday in Masbate has finished. Fekola doesn't have any significant accelerated losses that you can claim upfront. It basically becomes taxable right out of the gate. There's also a bunch of corporate costs and unrecognized costs in there, so purchase price adjustments, tax basis comp type adjustments 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, our effective tax rate is approximately 15%, which is actually on the low end. I just wanted to flag that up. If anyone wants more detail on that, we did lay out some more detail in the MD&A explaining how to get to a effective tax rate. The other thing I'd highlight for the folks on the phone, just for their models, is that in the first year of operation of Fekola, it's taxable all the way through, and we're accruing those taxes through the quarter.
Because there was no taxable income last year, our very low taxable income last year for Fekola, the installments we're paying in cash in 2018 are relatively low, and you'll see a big catch-up payment when we settle this year's taxes in Q1 and Q2 next year. Just something to analysts just to remember that as you're modeling. We've put some detail in the MD&A for you. Overall earnings, $16 million or $0.01 per share. If you look at adjusted net income, it is $0.05 per share and it's $0.15 per share overall year to date. Just flag up a couple of things on the cash flow side. Cash flow from operating activity is $143 million and $376 million year to date. We've indicated in the MD&A, we assume a $1,200 gold price for Q4.
We think we're going to come out somewhere around $450 million for operating cash flows for the year. On the financing side, you'll see in the period we drew down an extra $200 million on the revolving credit facility. We already repaid a significant amount of the revolver earlier in the year. 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 1st, $258 million. Big picture for debt, if you look at total debt at the start of the year was approximately $700 million, and we expect to finish the year with somewhere around $500 million total debt. A repayment overall in the period, a significant repayment of $200 million. On the investing side, $52 million 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 delay in getting into Jabali and Tana. With that, at La Libertad, Jabali and Tana open pit was expected to come into the mine plan originally this year and then a little later next year. We have been successful in getting mine permits in Nicaragua. We've got San Juan and San Diego already, and we're operating from those pits. We're making progress on Jabali and Tana open pits for that permit, and we now expect that we'll see that come into the mine plan in the second half, basically after the first half, start of second half of 2019. Stepping back overall for the period, we finished the period with $355 million in cash.
The next day, October 1st, we repaid the convert as planned and as part of our original strategy to fund Fekola without using equity. We used that operating cash flow and prepaid sale to do it. October 1st, we used $258 million of that $355 million to repay the convert. Now as we move forward, we will continue to focus on the excess cash flow to just pay down the line on the revolver. The revolver, we've currently drawn $400 million. It's a $500 million total facility, so there's $100 million capacity there, plus there's another $100 million accordion. We don't see the need for it right now, but there is $100 million in accordion future available if we choose to use it. I think that's the sort of high-level financial results I was going to get into.
I don't know, do you want to open it up for questions now, Clive?
No, I think just a couple of comments first, a few things to add to my opening remarks. Talking about Fekola 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, we'll be doing optimization studies on the mine plan over the first quarter to find out the most efficient, effective and have that changes set from what I call the point of view way to mine the Fekola with the expansion as well. That will involve some infill drilling. There was a large percentage of the resource. The new resource was larger than I'd anticipated in the indicated category, and that will continue to grow. We expect with a successful program of infill drilling starting in January, that should continue to turn these resources into reserves, as we expect.
That will be part of the plan for 2019. By the end of the first quarter of 2019, we'll be ready to come up with a 43-101 report, and we'll be able to talk in detail about the expansion plan. We're pretty excited about that and Fekola is showing to be the beast that we always thought it could be. Once again, though, we've stuck with our discipline of acquisitions where we will not pay for anything that needs a significant exploration success and/or higher gold price to justify the purchase price. Clearly, at that $70 an ounce number, the acquisition of Fekola looks like a great deal. It was accretive with the initial reserves of 3.4 million ounces that we saw, and obviously with this great exploration success, it's a great project.
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 we've seen some M&A activity, of course, the big one being Barrick and Randgold. I do think there's some positive fallout from that for us in a couple of ways. Obviously, the Randgold shares are going to disappear with the expected vote today from the Randgold shareholders. All of a sudden, there may be some institutions who are a little overweight on the Barrick side. There's an opportunity there. Randgold's been a very successful company over the last 10 years or so. Interestingly enough, it's had a very similar discipline to what we've had about acquisitions and not chasing things and not overpaying for things. It'll be interesting to see if there are talk of potential opportunities in West Africa.
We're obviously looking at everything. Given the fact that there's so many companies out there that need growth much more than we do, because of our focus on continued growth during the last number of years, it's frankly pretty unlikely we're going to go out there and outbid people for ounces in the ground because I think there's others that need growth more. We have all this exceptional opportunity with Fekola and other things looking forward. I think there's a real opportunity there. Also, the Barrick, Randgold deal is very interesting in many ways. One is the fact that it's a no-premium deal. I think that sets a good standard for us for the big guys.
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 someone like a B2Gold. I think at the end of the day, the big premiums, now that there's been a no-premium deal for Randgold, I don't see big companies stepping up with big premiums. In my opinion, you need to offer a big premium if you're interested in looking at B2Gold because a lot of our shareholders really want to keep us doing what we do well, which is continue to grow this company as we have so well over the last 10 years or so.
When you look at the world of M&A, I'm sure there will be quite a bit more M&A, and maybe you'll see 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 justified but criticized for people perhaps overpaying for things or not getting it right. With that, I think we will open it up to questions.
Ladies and gentlemen, to ask a question, please press star, then the number 1 on your telephone keypad. To withdraw your question, press the pound key. Your first question comes from Michael Gray with Macquarie. Your line is open.
It's Michael Gray 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?
John Ralston?
Yeah, Mike, the campaign of low-grade material during the third quarter, we were able to achieve recoveries similar to what we had been year to date prior to that, 94%-95%. Then we ran another campaign early October, I think we mentioned it in the press release on the resource, that averaged 1.1 gram per ton, we were just about 93% recovery. That was over a 5-day period of batching material. That was above model, so we were very pleased with that.
Also, John, I forgot to mention the ore in the expansions to the north. You've done your metallurgical testing on that.
Yeah, we've completed all the metallurgical testing on Fekola North. Results are very similar to what we saw in the Fekola feasibility study. We're expecting very similar metallurgical performance once that material begins to be processed through the mill in the future.
Thanks for that, John. Tom, if you're there, it's been a little bit quiet on the Toega front for news, but it looks like you're going to be putting news out before the end of the year. Can you give us a bit of color on the scope of drilling that will be released for that before the year end?
Yeah, I don't know if we'll have a lot of Fekola material. We'll have some Fekola drill hole results to look at, I guess, at the meeting in Toronto. No, I can't add any color to it. It remains open down plunge. It narrows up down plunge, but the grade picks up.
Okay. Well, thanks. We'll get more color at the analyst day. Mike Cinnamond, just on the reversing the impairments on the Nicaragua assets, any reason why to do that now as opposed to year-end?
No. Well, the main reason is we updated our mine plans in Q3 as we normally do, GAAP requires that if you have a change, that you consider whether that change indicates that either there is an impairment reversal or there is an impairment. We did that across all of our operations and sites because we had new mine plans for all of them. The biggest factor there was that new Central deposit and that being built into potential impact of that and the upside of that being built into a mine plan, that was the trigger and an indicator that we had to consider it. It's a GAAP requirement to do it when that information's available.
Okay. Thanks very much.
Thanks, Michael.
Your next question comes from Lawson Winder with Bank of America Merrill Lynch. Your line is open.
Well, hey, guys. Thanks for taking the question. Just on Fekola on the new M&A, or sorry, Measured and Indicated estimate that you guys published last week or two weeks ago, I guess it might have been. Just on the cost. I noticed both the processing cost and the mining cost per ton mined came down quite a bit versus the year-end 2017 estimate. In particular, I'd be curious as to what's driving the lower mining cost per ton. I think 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. Thanks.
Bill, do you want to
Yeah, no. Certainly on the mining side, certainly, if you remember in the feasibility, we took the advice of a lot of the people working in the area as kind of what the best guess was going to be. I think everybody felt that that number was high, and of course, operations to date have borne that out, that it is high. As you know, we've been running at less than $1.50 a ton. We felt that $2 was a reasonable number and conservative. On the milling side, I think we're actually very close to where we were in the feasibility study. We're confident with that number as well.
Just in terms of over the entire mine life, is there a distribution of where those lower costs are coming? Have you, for example, just lowered the cost expected in the earlier part of the mine plan and kept them the same in the later part? Is it just across the board, you expect it to be lower mining cost straight through for the entire life of mine?
Well, certainly we'll see the cost come up as we go deeper and get into harder ore, but we don't expect them to come up to that $2.70 range. We just made our best guess that it was $2.
Okay. All right. That's helpful. What was the mining cost per ton in Q3?
In Q3, we were at. Let me just look it up here. I have Fekola in front of me. The current period for September, we were at an actual of $1.35. For Q3, we were at $1.51.
Okay. All right. That's very helpful. One more from me, sort of sticking with the cost theme here on Fekola. Given your guidance, if you just kind of back out what the guidance and the nine-month result implies for Q4 Fekola cost, especially if you adjust for the $34 per ounce above budget Q3 result, it's looking like you're calling for a pretty material increase in Q4 2018 cost per ounce, sorry, COC, cash operating cost per ounce. I'm just curious, is this driven by grade? Are there more studies? You plan to put more low grades through it? Or are you seeing something that's going to fundamentally drive cost per ton up? 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 Q3. That coupled with a couple of things which went on, we did a big reline or two relines in Q3, which we won't see in Q4. We won't see those costs hit the books. We don't see our costs going up in Q4.
Just on that as well, we did indicate in the MD&A, we expect to see Fekola come in for cash costs right at the low end of the guidance range we've given for the year. For all-in, right at the low end or even below the low end of that range. We've laid that out in the MD&A.
I think it's really important. We tried to emphasize it, obviously not clearly enough. The fact of the matter is in the third quarter, we put through more tons than we'd anticipated through the mill, which is very positive. We chose to use some middle lower grade material to do that, so we weren't going to rob next year's production. We want to have as lean those we can production year to year. This isn't a negative, it's a positive. The cost per ounce was slightly higher because we put through more tons than anticipated and produced more gold. Let's keep this in perspective, okay. If you want more detail than that, we'll put you on a separate call with the guys here, and they can explain it to you even further.
That's great. I appreciate that call. 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 Masbate. Obviously, focus being on the plant expansion. What sort of ramp-up should we be modeling for that?
Yes, Chris Thompson? Yeah, we're closing in on finishing up that project. We're looking at commissioning and ramping that thing up in January. Very short ramp-up. The original schedule was April. We're actually getting it online ahead of schedule by about three months. That's very favorable. It's the same crews. It's the same maintenance crews. It's 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. We expect it to come up very quickly. We think we can be pushing those rates near the end of January.
Just the site is budgeting 8 million tons per annum next year.
8 million. All right. Thanks for that. I guess just looking, I guess, at quarter, obviously exceptional performance from Masbate for the year so far. It looks like you're effectively tracking ahead of guidance and below costs. 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 Colorado ore that you plan to put through the mill in the fourth quarter?
Not the case at all. We know we're going to finish the year off strong. Through October, we did take one ball mill down for almost 15 days to replace an end, replace the ring gear and pinion. Work as planned. Even with that, we continued on stride for budget. We anticipate that continuing through to a 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 the main vein at three and four. All cylinders are running. We expect a strong finish for the year. For the fourth quarter in particular, pretty much on budget or better than budget.
All right, great to hear, Dale. Thanks for that. Just finally, just a quick comment on Otjikoto. We're still anticipating, I guess, Wolfshag to come in towards the end of next year. Is that right?
Yes. We do have Wolfshag in next year. We are currently looking at the mine plan. Perhaps we'll stay in Otjikoto. That's still under budgetary review right now.
All right, guys. All right, congrats. Thanks, mate.
Thanks.
Your next question comes from Richard Deutsch with National Securities Corporation. Your line is open.
That's my call. Thanks for doing the job of meeting expectations, which is rare to find a lot around this reporting season.
Having a hard time hearing you, Richard.
I have a question about your gold delivery obligations under one of your previous financings. 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 sales cash flow, if at all? I just wondered if there was any effect from closing out that debt.
You got to get a new phone. I think we barely heard that, Mike. Did you hear that?
Well, I think I heard some of it. Certainly, on the previous financing, we have some NAD-denominated gold forwards, approximately 8,000 or 9,000 ounces from an old revolving credit facility financing we did a long time ago. Those final ounces will be delivered into in this quarter, so they'll be gone, they'll be extinguished. The other financing we had where we got obligations to deliver ounces were on the prepaid sales. As at the end of September, we had $45 million worth of outstanding contracts on those sales for delivery of just over 38,000 ounces. We expect about 13 of those to be delivered in Q4 with the balance in the first half of 2019. I couldn't hear your whole question, but hopefully that answers it, at least in part.
Yes. 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.
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 funds from the prepaid sales were previously received on a cash flow basis. Now when we deliver into them, there's no new cash flows related to those ounces. Once we start delivering into them, you'll see all the ounces that are produced and sold in the period, you'll see the cash flow benefit of those in that period.
Okay. That's what I thought. Thank you very much.
Thanks.
Your next question comes from Kerry Mark with Haywood Securities. Your line is open.
Yeah, good morning, and good evening.
A bunch of questions have already been asked. Maybe just following on with the Fekola central theme, it seems. Yeah, nice resource update with that expansion plan. Wondering, not worried about the exactitude of the final outcome of the plant and mine study. Once you have an idea in mind of what to do with 7.5 million tonnes per annum plant, how long would that take to come into fruition ultimately, do you think?
Well, we haven't got into that level of detail yet. We've got to figure out what we need to order first of all, of course. We've got to figure out, we know we don't need another ball mill, but we need to upgrade the motors, increase capacity of the ball mill motors and things like that. It's really, we're not going to guess at a capital cost right now, and similarly, we're not going to guess at the schedule right now. We'll have a much better idea of that by the end of the year. Is that correct, Joe?
Yeah, that's right, Clive.
Internally.
Yeah.
Yeah, internally, we'll have a view, then in the first quarter next year, we'll do all the optimization and come up with a final study.
Okay, no worries. You were saying, ultimately in Q3, despite running around about 5.5, seven million tonnes per annum rate through the mill, you had a couple of relinings there. Where should we look if we're looking in the future in terms of an average run rate for the plant in absence of the expansion? Should we look at five and a half, or is it range between five and a half and six?
Right now we're budgeting five and a half for next year. Clearly, I think everyone can obviously see that it can do more, but right now we are budgeting at 5.5 million tonnes per annum until we get these studies and get all this information together.
Okay, great. Thanks. Perhaps moving a little bit to the north, for exploration, you were stating sort of focusing on some of the hypogene sort of Fekola style gold targets through the quarter with an AC and an RC rig. Is that on one target or multiple targets, and do you expect the rig count to increase in that area this quarter, or what should we expect?
No, I think we've pretty much, I don't want to say blown our budget because it doesn't sound right, but we spent most of our budget on the infill. With the remaining part of the year, we'll have air core running, but we'll have one to two rigs working on a little bit of the new discovery that Clive mentioned to the west of Fekola called Cardinal, and we'll get up in the Anaconda area also, and one or two holes maybe in the north of Fekola testing some ideas. We won't start infill drilling and budgeting up infill drilling till next year. It's a little bit of a chicken and egg. We want to see where the reserve pit's going to go before we detail out the infill drill program.
I think we're expecting a significant budget. Obviously, infill is what it is, and with the great success with that, and we expect that to continue starting in January. Tom, we haven't done our budget yet, but I'm fully expecting Tom to come up with a suitable budget justifiably to go and drill Anaconda in that area to see what's underneath the saprolite. I think it's worth mentioning that we are, and I think you said it somewhere in the material you've given out, but we are looking at the Anaconda area now and looking at the saprolite and seeing if that could be a standalone on-off leach pad, something like that, where we see the potential to produce maybe 100,000 ounces a year for some years as a standalone there. That obviously just adds to our overall production profile.
That's another thing that's in the works, and we're having a look at doing test work to look at that as well. You can expect a lot of drilling next year. As Tom said, the priority this year was the new resource, a great success, but also we've got some new pretty exciting early stage results to the west. 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.
Okay.
There are no further questions, [inaudible], at this time. I turn the call back over to Clive Johnson.
Okay. Well, thanks a lot for your questions. As we mentioned, we're having an investor day. I'm starting to think maybe it should be two days in late November, giving some of the detail that we're being pressed to give, which is fine. We appreciate the interest. Thank you all for getting on the call, and we look forward to hopefully seeing as many of you as possible in late November for a really good update on everything we're doing. Thanks, everyone.
This concludes today's conference call. You may now disconnect.