Q4 2014 B2Gold Corp Earnings Call
Mar 13, 2015 AM EDT
BTO.TO - B2Gold Corp
Q4 2014 B2Gold Corp Earnings Call
Mar 13, 2015 / 05:00PM GMT
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Corporate Participants
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* Clive Johnson
B2Gold Corp. - President, CEO and Director
* Mike Cinnamond
B2Gold Corp. - SVP of Finance and CFO
* Dale Craig
- VP, Operations
* Bill Lytle
B2Gold Corp. - VP and Country Manager, Namibia
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Conference Call Participants
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* Rahul Paul
Canaccord Genuity - Analyst
* Sam Crittenden
RBC Capital Markets - Analyst
* Ovais Habib
Scotiabank - Analyst
* Jeff Killeen
CIBC World Markets - Analyst
* Ron Lloyd
- Private Investor
* Joe Fazzini
Dundee Securities - Analyst
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Presentation
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Operator [1]
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Good morning, ladies and gentlemen. Welcome to the B2Gold 2014 fourth-quarter and year-end conference call. I would like to turn the meeting over to Mr. Clive Johnson, President and CEO. Please go ahead, Mr. Johnson.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [2]
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Thanks, John. Morning, afternoon, depending on where you are. We are here to talk about the fourth quarter of 2014 and the year-end results. We have put out a pretty extensive news release, I think, that has a lot of information in it. And we are going to address the financials today, and we are going to talk about going forward.
Lots of highlights from last year. We had a very good fourth quarter, record goal production. We also had some good highlights for the full year as well with record production for the full year. And Mike is going to take us through some of the details of that. Basically, we finished the year in good shape, in a strong financial position, strong cash position. The mines are running well. We had some issues last year, as everyone probably remembers, in the third quarter with Limon and also at Masbate. Those issues -- those were systemic problems; those were one-off situations which were resolved last year, and we are running well on all fronts.
This year, of course, the exciting news -- one of the great accomplishments last year was the completion of construction of Ojtikoto. And Bill is going to talk to us about that. It's going very well, continues to outperform. And obviously the table is set for future growth with the acquisition of Fekola. And we have actually started some initial construction work there. We can walk you through our plans there as well.
So, in all, a good 2014, and we have really set the table for our future growth with Ojtikoto and Fekola. Both of them are going to be driving forces in the Company going forward because both of them have very attractive economics. So between the two of them we have been adding as much as 500,000 ounces a year, ultimately. And we think they're going to be low-cost ounces as well.
So with that, I'll pass over to Mike to run through the financials, and then Dale is going to update us on Masbate and Nicaragua, and Bill is going to talk to us about what's going on in Ojtikoto and what's going on in Fekola.
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [3]
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Thanks, Clive. Just looking at production, first, we had record production for this quarter. It was overall up again, prior-year end prices, and primarily due to the record performance of Masbate. It had a great quarter in Q4, was just shy of 63,000 ounces, which is approximately 16,000 ounces more than both the prior-year and budget. And that was really a function of the (inaudible) know running really well in Q4 and higher-grade oxides and material in the period. We were running about a 72% oxide content through their degradable 136 grams per tonne.
Libertad performed right on the budget. It's lower grade than prior year because prior-year has (inaudible). And we've (inaudible) prices like 4,000 ounces -- or 6,000 ounces, sorry, less than budgeted. And that was really a function of, as Clyde mentioned earlier, on the temporary delays in accessing (inaudible) higher-grade material. We got to worrying, the issue was Rick defied in November and we started accessing that material again in December. So looking forward, we expect to be into the high grades as we go through 2015.
Social comments to all this -- Ojtikoto -- it's in the pre-production phase. It produced 7,000 ounces in the quarter, which is almost 2,000 ounces more than we budgeted. So it was a great start-up in December. Ojtikoto had its first gold port about a week ahead of schedule, in early December. And it's already producing more than budgeted ounces. And we've seen that continue as we move through January and February, which (inaudible).
On the cost side, on a consolidated basis for the quarter, consolidated operating costs of $646, very similar to budget of $645 and prior-year quarter of $638. So overall we met our guidance. It was a product of offsetting factors. Masbate had a great quarter again because of its record production. It was about $170 lower than the prior year and was almost $160 lower than budget. And that's really a function of the higher throughput and recovery of grade and also some savings in operating costs there.
Libertad -- slightly higher costs than the prior year, due to the (inaudible) in the period in some higher process cost. But overall for the year it will be -- it's right on budget. Limon a bit higher than budget, and that's really a function of the lower production in the period. Overall, all-in sustaining costs for the period were $946, which is significantly lower than our overall consolidated all-in sustaining guidance of $1,025 to $1,125.
Still, for the period we sold 102,000 ounces, right on budget. A bit lower than the production, and that's really just a function of timing. We had a couple of shipments that went out right at the last day of the year that didn't get to the refinery in time, the (inaudible) in time to be sold. So that's about 7,000 ounces from Nicaragua and Masbate.
Looking quickly at our annual performance, total production in the end for the year was 384,000 ounces, higher than prior year, a little lower than our original guidance but at the high end of our reguided amounts of 380,000 to 385,000 ounces that we put out in Q3.
On a mine-by-mine basis, Masbate total was 186,000 ounces, which, although we had some side mill implementation issues in Q3 that then got rectified and we caught up really well in Q4. Libertad had a record year for 2014, doing almost 150,000 ounces. And that's just a function of through recoveries and grade. And Limon came in at 48,000 ounces, less than our guidance. And that's for the reasons we already talked about in terms of accessing (inaudible) potential (inaudible) materials.
Overall, consolidated cash cost for the year, yearly close to both prior-year operating cost trends and budgets. We came in almost exactly on both. And it's a product of offsetting factors. Masbate did really well. It's approximately $60 per ounce lower than both the prior year and budget, and that's lower mining costs, higher volumes. And we also -- we had really good mining activity in the trade and we built up some of the stockpile. So we came in below the low end of our consolidated guidance for the year of $765. The Masbate number was up $24.
Libertad came in at $572, just slightly above the higher end of our guidance of $565 an ounce. And again, it had a great year and it was slightly above our guidance just because of the higher costs of accessing some of the Mojon material. And that's really a function of pushing Mojon past where we originally thought we would. I think actually, all in all, we've done a very good job of controlling costs there. Limon came in higher than -- $844 an ounce for the year, it came in higher. And that's, again, a function of the production for the period.
Overall, consolidated, $680, right in the middle of our guidance range of $657 to $695 per ounce. And all-in sustainings for the year came in at just $1,101, which is in the upper quartile of our range of $1,025 to $1,125. We are expecting -- as we reguided for next year, we are expecting to see those come down significantly, by $100 or more, just as we bring Ojtikoto online. And at the very max it seems to be starting very nicely. We did declare commercial production there at the end of February of 2015. And so far the ramp-up has gone really well.
Focused further down, the income statement, on the general and administrative side we are about $2 million higher than we were in the prior year. And most of that is a function of us acquiring Papillon in October of 2014. That added over $1 million to our G&A.
Provisions for nonrecoverable taxes has gone up. We booked a provision in the period of $13 million related to some of the old (inaudible) ounces that we inherited when we acquired CGA. We did book a new write-down in the period related to Masbate of $435 million. And that is a function of a number of factors. The first is we ran it at a gold price of $1,300. In 2013, we ran it at $1,350. We are also in the process of finalizing our expansion case study there. And although it's still being finalized, we have made a decision at this point not to proceed with a full expansion at Masbate. And that is a function of a couple of things, but the primary one being just to preserve our capital and allocate our resources to building [Sicola], which we will talk about shortly. But obviously the plan going forward for the Company is to advance Sicola as quickly as we can.
Now, although we are not doing a full expansion at Masbate, we have elected to go with a coarser grind there, but with a longer retention time in order to maximize the current economics. And to do that we've budgeted in 2015 $10 million for some new settlement tanks.
And then, in addition to part of the expansion case, we opened a new master drill program and factored those results into the new resource in reserves that we used in the life-of-mine plan. So when all those are built in, in the end it generated a write-down of $435 million, which, after you take it net after taxes, is just over $300 million.
We also had a write-down of mineral (technical difficulty) $21 million related to legislation (inaudible). Further down in the quarter this (inaudible) a gain of $20 million on the fair value of convertible notes. But that's a non-cash accounting entry in relates to the change in the trading value, trading at about 88% of face versus 96% at the start of the quarter. (inaudible) also commented before in other, under our operating loss of income line, there's $5.3 million of other. And the main components of that are $3 million, approximately, related to legal fees for several claims that we have in relation to both Masbate SAG mills and also Bellavista. And we also have some inventory write-downs there of about $1.3 million.
Overall, bottom line, that generated a loss of $356 million or $0.39 per share. On an adjusted loss basis it was an adjusted loss of $8 million for the quarter or $0.01 per share.
I don't think there's anything I'm going to comment on year to date. I think you are all pretty familiar with what we did in the first few quarters. Those are the main factors that fed into the current quarter.
Just moving over into cash flow, to highlight a few things here, cash provided by operating activities was $38 million. It's very similar to last year. And that's really a function of there were lower gold prices in the period, so we lost some cash flow there. But it was offset by some positive working capital changes.
Year to date, on the operating activity cash flows, our operating cash flows were $113 million compared to $147 million last year. But last year also had the benefit of $33 million worth of inventory that we acquired as part of CGA. So if you strip that out, like for like our operating cash flows are almost exactly the same. And that's really a function of a gain we lost out due to lower gold prices and some of our one-off G&A costs. But it's offset by (inaudible) percent increase overall in field volumes.
On the financing side, on the revolver there, [Jeff], we didn't draw anything in the quarter, but we did draw $75 million through the year. And as we noted in our press release, we are currently in advanced stages of customers (inaudible) is to bump our current revolver from its current level of $200 million up to somewhere around $400 million. And we think that, based on current assumptions, that will reposition, coupled with the strong operating cash flow that we are now seeing and expect to see from Ojtikoto in our minds as we go forward. But that will be enough to see us through the construction of (inaudible), which we expect to occur, again, at a commissioning date by the last quarter of 2017.
On the investment side, (inaudible) mine there, Ojtikoto, as we said, started up in December, completed just slightly ahead of schedule and on budget. And we also had some pre-operating in commercial operating in production cost there of $11 million related to the production that we had in December.
On the other -- I guess overall on the cash flow I should say, bottom line, we ended the period with $132 million in cash coupled with -- we only -- so far on that revolver we've drawn $125 million. So we have $75 million additional capacity there under our current revolver. So that gives us liquid funds of just over [$270 million].
I just want to quickly, on the balance sheet, highlight a few things. Inventories have gone up about $20 million percent the prior year end, and that's primarily a function of an increase in the Masbate stock piles, around $9 million, and also new inventory at Ojtikoto, where we've got about $3.5 million worth of progress there.
As the cost applied for resale and similar to the liabilities, (inaudible) which we been produced an option agreement to dispose of when that happened after the year end. Mining interests (inaudible) the value overall has gone up. That's a function offsetting of acquiring Papillion and the Fekola project in early Q4. We generated about $500 million in there, and that was the (inaudible) that we took on Masbate. Goodwill, [09], as we discussed in Q3 -- we took an impairment on the Masbate goodwill at that time.
And the only other thing I wanted to mention on the balance sheet, down at the bottom, is on the noncontrolling interest. And that went up quickly, particularly since last year. And most of that related to the Fekola Papillon acquisition. There was a minority interest (inaudible) minority interest of 10% when we acquired Papillion. And what we've done subsequent to year end is that we bought that interest out. We've negotiated with them a bundle of payments of cash and shares totaling $21.2 million as well as giving them a 1.65 NSR.
And that brings us up now to move forward in our negotiations with the government. The government is entitled to a 10% free carry in Mali and also if they choose to acquire an additional 10%. So with the expectation that we would end up with an 80%/20% ownership structure. Now that we've removed the minority interest and the associated litigation that results are ongoing in Mali. With minority interest we freed up the way to move forward, and we expect to do that and have that finalized hopefully by the end of Q2, which, coincidentally, is also the date of the period when we think we will have the Fekola feasibility study completed. So that has been very positive on both those fronts.
So I think there's are the main items that I wanted to highlight from the financials.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [4]
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Okay. Mike, I think we will (inaudible) questions for the and. We're going to pass it over to Dale Craig now, who is going to talk to us about Masbate and Nicaragua.
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Dale Craig, - VP, Operations [5]
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In our operations, B2Gold had a solid final quarter. Two key technical issues have both been resolved. In Masbate, the segment was performing well and as intended. And in El Limon the dewatering system (inaudible) potential is fully functional. For gold production Masbate delivered a big quarter and La Libertad fulfilled its budget commitment. And in El Limon, by late November dewatering had commenced, so we were able to resume our normal level of gold production in 2015.
For Masbate fourth quarter was a record breaker, producing 62,972 ounces, which was 34% better than budget. The process plant exceeded throughput at 1.71 billion tonnes versus 1.68 billion, and recovery was 83.1% (inaudible) budget of 80.1%.
Production in the final quarter relied on significant (inaudible) grade from Colorado Pit. Average grade was 1.36 grams per tonne against the budget of 1.09 grams per tonne and 72% on-site expense for the month against the original budget of 44%. The effect was to bring the operations back on track for 2014, on grade, and move off-site content to about 68.5% for the year compared to 52%, which helped compensate for the difference in throughput for the year. Throughput for the year was 6.13 million tonnes against the budget of 6.44 million tonnes. The difference in mill throughput was mostly accountable for with site now issues. In 2014, gold production was 186,195 ounces against a budget of 190,130 ounces.
So the SAG mill is running well now. In fact, looking at our months to date we are sitting at just over 20,000 tonnes per date. The crewing issues were resolved in 2014, and in January SAG Barrick was changed out, and a locking plate was installed. The locking plate helped keep the pinions aligned in its relationship to the ring gear. Our Metsol consultants have indicated that no further modifications are necessary. But as we advance through 2015, we anticipate harder materials and we will see oxide content decreased to an average of about 35% for the year.
Cash operating costs for the fourth quarter were $607 per ounce. We spent this budget by about $160 per ounce on the strength of the fine performance and lower costs in the areas of mine where here, drilling and blasting, fuel price, power costs and reagent costs. Year-to-date cash costs are $724 compared to a budget of $784 and compared to 2013, which stood at $788 per ounce. So the decrease for the year is primarily attributable to lower mining costs and positive stockpiling adjustments compared to budget.
In 2014, the transition to self mining was completed in the fourth quarter. The final step was to incorporate our maintenance group into the Masbate gold project, and that has been done. The outgoing contractor, Layton's, was highly cooperative throughout this process.
Mine projects and capital projects in the year included SAG mill changeout, water treatment plant construction. That water plant is now fully functional and discharging -- land purchases, equipment purchases which included the purchases of Layton's mine fleet and their marine community.
As a result of the completion of the metallurgical sampling program as part of our mill expansion study, the Company has projected life-of-mine recoveries to decrease 3%. This is related to the number of factors including the increase at depth of sulfide ores, which have lower projected recoveries, and the effect of continued mining of higher-grade oxide ores in 2013 and 2014, which leads to lower recovery of material for the remainder of the pit life.
At this time, B2Gold is determined not to proceed, as Mike indicated, with full expansion of the Masbate mill. Instead, we are evaluating the impact of a coarser grind and increased residence time to deliver improved project economics. B2Gold is planning to add additional pan capacity in 2015.
(inaudible) LCI frequency was 0.11 injuries per 200,000 man hours. However, during the year we reported three fatalities. And through February of this year, tragically, two of our guards were killed while on duty (inaudible). In summary, the fatalities could have been related to employee altercations within the mine site, and three have been the result of assault from outside (inaudible).
Obviously, this is a concern to us. The first areas of focus is what we saw in those areas that are within our control -- for our security force to ensure their safety, revise their training through procedures, and the management of the guard forces. We also recognize that we have to work at the national level with agencies such as the mine and (inaudible), then GP local leaders and citizens. We have a large number of interactions daily with the community, and a large majority of those interactions have positive results. And we in the communities know that Masbate Gold project has a huge positive impact on the island of Masbate. However, we also know that we need to focus and eliminate the actions of a small number of individuals whose actions have tragic consequences.
So far, in involving the MGB, the bureau of mines and local leaders, they have come on board and those talks are (inaudible). In fact, we will meet next week with the Department of Mines to (inaudible) our announcements.
For 2015, at Masbate Gold project we plan to process approximately 6.5 million tonnes of material at an average grade of 1.13 grams per tonne, which should produce between 170,000 ounces and 180,000 ounces of gold at a cash operating cost of $740 to $775 per ounce.
For La Libertad, Nicaragua, La Libertad mine closed the year by producing 36,862 ounces of gold in the final quarter, just under the budget number of 37,278 ounces and compared to 42,709 ounces in the last quarter of 2013.
Mike touched on the issue there. Last year, it was in the final quarter higher-grade materials from Crimea and the 10 Santa Maria pits. Those pits are now concluded.
Annual production for La Libertad was 149,763 ounces, which is at the upper range of our guidance, 3% better than last year and some 3,600 ounces better than budget. So for the year -- higher throughput, grade and recoveries all contributed to the successful year. Grade was 2.26 grams compared to the budget of 2.17 grams per tonne and compared to 2.9 grams per tonne in 2013. Throughput was 2.19 million tonnes, slightly less than budget, still 176,000 tonnes better than 2013.
Cash operating costs were higher, specifically in the final quarter, at $634 per ounce compared to a budget of $520 per ounce. This was due primarily to additional waste movement in the quarter and some additional process maintenance costs included with SAG (inaudible) work through October and other process maintenance costs. Unit costs remained in line. And against the annual budget, our year-end cost of $572 compares well against the $507 budget number.
In our cost of goods, however, for the year, in summary we moved additional (inaudible) primarily in Mojon pit. Cap ex expenditures for the final quarter, $4.4 million, which included prescript and (inaudible) development. The year-to-date cap ex totals $28.4 million, which reflects an anticipated. But passing into the coming year are some development work in Haveli and a Haveli antenna relocation program and some land purchases. So about Haveli antenna, the mine permitting process is proceeding well there and on schedule. And we have negotiated and signed agreements with about 60% of Santa Domingo residents who will be affected by the Haveli antenna pit development. We are very pleased with the progress there. As noted last quarter, we are receiving good support from the national, district and municipal governments.
In August, for the third consecutive year at La Libertad 460, the La Libertad operations received an award for leadership in Occupational Health & Safety from the Nicaraguan national health and safety commission. This award followed a comprehensive audit in the review system.
People from Libertad and El Limon mine in the B2Gold health and safety program is implemented, and this is the first year of audits for that program. And in La Libertad the lost-time injury frequency was 2.88 injuries per 200,000 man hours, which is high compared to the American performance of 1.8 injuries. Obviously, safety will continue to be an area of focus this year.
For 2015, La Libertad produced 135,000 ounces to 145,000 ounces at a cash operating cost of $605 to $635 per ounce. Operating costs will rise in 2015, related partly to the initial material brought in from the Haveli area and some costs associated with the initiation of underground mining in La Libertad. About 24% of the mill feed will come from Haveli.
Mine capacity is similar to 2014 at 6100 tonnes per day and we will process just over 2.2 million tonnes per year, creating 2.0 grams per tonne. At El Limon, as has been the case since the second quarter, go production El Limon is impact by the delay in implementation of the new watering system (inaudible) underground mine. That delay needed access to higher grade stopes and consequently more mine feed was taken from lower grade surface pits. The good news is the system was successfully implemented in November and has had better than expected performance for drawdowns. So we are seeing the drawdown effect of dewatering is allowing us additional access, better than anticipated, to a number of areas in the mine. So that issue is passed us and we are working in 2015 well in advance. We are looking for implementation of a similar dewatering program with (inaudible) mining in 2016.
For the final quarter of 2014, El Limon produced 11,970 ounces compared to [15,905] ounces in 2013 and compared to a budget of 17,980. As a consequence of using open-pit sources to offset (inaudible) mine production, grades of 3.18 grams per tonne compared to 3.53 grams per tonne in the final quarter of 2013 and 4.65 grams per tonne in the budget. For the year, El Limon produced 48,045 ounces compared to budget of 65,130 ounces.
Cash operation costs reflect the lower gold production. Fourth quarter, cash operating costs were $886 per ounce compared to a budget of $582 per ounce. For the year, $844 per ounce compared to the budget of $662 per ounce and 2013 annual performance of $652 per ounce.
CapEx totals were $15.5 million compared to the budget of $19.7 million, and those included underground development at both Santa Pancha mines, total of $3.9 million, stripping cost of $3.7 million, equipment purchases for the underground equipment (inaudible), and plant and electrical upgrades of $2.3 million.
For 2015, with the mine water issue controlled, we anticipate returning to normal production levels, generating between 55,000 and 65,000 ounces at a cash operating cost of $680 to $710 per ounce. The increase in cost relative to the start levels reflects the reliance on an increasing component of underground mine sourcing at Santa Pancha 1 and Santa Pancha 2 mines for three of the four quarters in 2015.
The mine safety departments will continue to focus on deployment of the B2Gold health and safety system. The lost time accident frequency for 2014 was two injuries per 200,000 hours. There were two fatalities reported in El Limon in 2014.
When (inaudible) for all operations, we look forward to another record year in 2015 for B2Gold, producing between 500,000 ounces and 540,000 ounces at a cash operating cost of $630 to $660 per ounce. That's about it.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [6]
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Thanks, Bill. We are going to pass it on to Bill Lytle. Now Bill is on the phone. Bill has recently been promoted to a position of Vice President of [Amplicon]. Bill has been country manager for us and a tremendous job in the Namibia. And he's going to be overseeing Ojtikoto as well as the construction of (inaudible). Bill is -- we recently hired an excellent guy Mark [Dahl] in Namibia. Mark has lived in Namibia for 25 years. It's his home. He raised his sons there. And he's not an ex-pat, but he's always been involved with mining in Nicaragua for 25 years. Comes from tremendous experience, tremendous experience in government relations, et cetera. And also dealing with, frankly, Africa. So he's a great addition to our team. And Bill will be overseeing (inaudible) -- so Mark will obviously be the mine manager and the country manager. And we are very pleased to have him join our group. He's an exceptional individual with great experience.
So Bill, I'll pass it to you to talk about both (inaudible) production we're having in Otjikoto and also talk about the next one, (inaudible).
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [7]
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Okay. How are you hearing this, Clive?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [8]
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Yes.
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [9]
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Okay. So I'll start with Otjikoto. I'll start out with the HFE statistics, seeing that that's how Dale ended up. We had another great year at Ojtikoto for HSE, one lost-time accident for the entire year, giving us a lost-time frequency rate of 0.11. That happened in March of 2014, so we are coming up on one year, just over 3.5 million hours without a lost-time accident. So we will continue (technical difficulty) in 2015.
On the production side, as Mike said, we started commissioning the Ojtikoto mill in November 2014 and produced our first gold on December 11, 2014, two weeks ahead of schedule. 7,159 ounces for the year of 2014, 2,000 ounces more than budgeted. 2015 continues on along that trend. For the first two months of 2015, we produced 320 ounces of the budget for January. The actual was 8,587. And in February we produced 1,365 ounces above budget of 10,228. Now, we anticipate that that will continue on through March.
The actual throughput for the mill for the month of January, 211,978 versus a budget of 158,000, so about 53,000 more tonnes than budgeted. February, 206,000 ounces -- or, sorry, tonnes versus a budget of 167,000; so 39,000 tonnes above budget. The March projections -- we are projecting more than 212,000 tonnes throughput through the mail in March.
The grades -- there have in several questions on the grade. In January we were little bit below 1.3 versus -- 1.34 versus 1.69. February, they've come up nicely, 1.57 versus a budget of 1.71. And in March we continue to expect that that will improve.
Our recoveries have been well above expected -- for January, 94.34% versus a budget of 96.16%; that's 1.82% better than recovery. In February, 97.82% versus a budget of 96.17%;, so once again, 1.65% better. The mill availability -- we had actually proposed a ramp-up which had us at 70% availability in January, 82% in February. I think it was around 86% or 87% in March. What we are seeing is in January we had almost 90% availability; February 92% availability. And March, as Mike has indicated, we are at commercial production, so we aren't seeing issues with meeting our throughput or our ounces for March.
The cost for January, $612, US dollars, cost per ounce versus a budget of $705. The February numbers haven't come out yet, but we certainly expect them to be online with budget; actually, better than budget. And let's see, what else can I tell you? That's all I'd like to say. I think -- and maybe talk a little bit about the expansion. The expansion, I'm sure everyone is aware we are expanding from 2.5 million tonnes per year throughput to 3 million tonnes for the year. This will be done through the addition of a couple of leach tanks, a pebble crusher and the associated piping. The construction team and the steelworks team is back on site. They came back in January. They've got the first tank set up and they are welding it. The second tank is going up. The pebble crusher has been ordered. The schedule shows that that's supposed to be in production in September of 2015. We do not see any issues with meeting that deadline.
That's all I've got, I think.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [10]
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Okay. Don't you want to walk us through what's going at Fekola?
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [11]
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Sure. It's actually a very nice segue. So the earthworks guys, as Clive has said, have started at Fekola. We moved them across in early February from Otjikoto to Fekola with the concept of beating the rain. We have to put in about a 35-kilometer access road. That work has been really ongoing since the middle of February. They have produced more than -- they have pioneered more than half that road already, and we've got 7 kilometers of good access road already in. There are a couple of major multi-play culverts which have to go in in the next month or so. But the plan really is to get that road in by June, and we see no issues in getting that done. Additionally, we will be constructing an airstrip. It will be a fly-in, fly-camp. That has now been submitted for approval. It's on our site, it's on our [tenement]. So we have authorization to start building that.
We have removed -- the Chinese actually had done a placer operation very close to the site, and they had built up some river gravels and some sand, which we have received approvals to excavate those back out of the riverbed. And it will be using that for a (inaudible) aggregate and 150,000 tonnes. We are about a third of the way through that.
Additionally, we are preparing the foundations for a camp, a permanent camp. We are starting to de-vegetate and strip the topsoil for the mill area. We also continue to, as Mike said, develop a feasibility, a feasibility team (inaudible) Lycopodium out of Australia, the same group that did the Ojtikoto feasibility. We do have our technical team in Brisbane, working with them right now, and we anticipate that that will be done on time in the second quarter of 2015.
That's all I had.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [12]
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Okay, great. Thanks. Just a couple things to add onto that. Bill is not going to sworn too much, but I will. At the end of the day, the construction team did an incredible job. And I think we are kind of in that. But unfortunately, we are an outlier in the gold-mining industry today because we actually do things on budget, on schedule and build mines, and we are pretty proud of that. And it's, I think, truly important to look at what we've done at Otjikoto and then basically the same team, it's the same engineers, Lycopodium is part of our team as well. It's our team and we are going to to Fekola and it's going to be very similar. It's going to be the same mill. It's going to be maybe a little bigger. We are talking about 4 million tonnes a year, probably starting out. And it's very, very similar. I was walking around the site with Kieran, who is in charge of the plant construction and the (inaudible). He did Julianna, he did Kupol. He was in Nicaragua and now he has done Otjikoto. He has signed on for Fekola. And he was walking with me around the plant and saying that they learned a few things that they were doing little bit differently at Fekola.
So Otjikoto was a great learning experience in building our first mine in Africa, and we are going to (inaudible) that experience with us to Fekola. So we are not waiting for the feasibility study. We have done this before; we did this at Kupol. When you have a robust approach of economics and you are comfortable with the technical work that has been done by Caterpillar and by ourselves --. We have got Richard Mapson, who is the don of civil engineers, who is on site now -- very happy, I think -- building roads, dragging his trailer around, [sleeping], and that's what he likes to do. And we are lucky he does, as he is great at it.
So he is already there with the team. I just want to talk a bit about employees.
Richard will tell you that he was told when we were going to Namibia that (inaudible) work for us. It's going to be tough. And that's just not the case at all; it's the opposite. Our guys have done an incredible job of training. The Namibians did a great -- they are a great work force.
So when we talk -- we peaked at about 1,100 people on site during construction. 90% of those people were Namibians, most of them trained by us. And when I look at a mine, I'm sure the mining analysts get this, you were down recently with us in Otjikoto -- I think one of the really important things to look at when you look at a mine is safety. If you are training people about safety and they are getting it, as in one lost-time accident in over a year, which is really a plot of -- that's an incredible safety record. And I was thinking people are taking safety seriously. They are probably taking their job seriously. So that's a good indicator when you look at a mine. If safety is good, it's probably a pretty well-run mine (inaudible) anomaly. And if safety is not good you can probably assume that other things aren't run well.
So that will be our focus. And then Fekola (inaudible) governance -- very, very keen to see this mine built. The Minister of Mines -- this will be the first new mine under his watch and it will be the first one since they came in with new mining laws in 2012. They are very keen, as some of the mines in Mali are declining in production. This is a big deal. And then all 20%, which we think is a positive thing to have the government involved. One of the things that was great about Kupol was that I insisted that the government of Chukotka keep 25% of one of the world's richest deposits. That was a great thing in terms of having good relations with the government going forward.
And so we think that Mali is a great place to be. There's obviously a good mining history. With (inaudible) building our next mine in it. And as [Tom] said, we are going to be self-sufficient, which is what we can do, and generate our own power. There's lots of water there. We will have a fly-in, fly-out camp. We will be training and hiring hundreds of Malayans; we are already doing that. And Mali has some pretty experienced people, actually, when you look at the mines in the country. So it's more so than Namibia, actually. So we are looking forward to a very good run their in terms of the structure.
Just a couple other things that I will comment on -- Mike mentioned the fact that we are in discussions with our banks and may be adding some additional banks to look at increasing -- extending and increasing our corporate facility. There's been lots of talk about equity; you know, the old (inaudible) equity in the overhanging the market, et cetera. I think we are starting to get traction where people understand that we do not see that as an issue. For us I think that if you look back at the history of (inaudible) and B2, we haven't missed too many windows of opportunity to raise equity. There was a window of opportunity about two months ago which (inaudible). So we didn't get that window. We were offered, I don't know, 10 bought fields for $100 million to $250 million. We turned them all down. We did that because we don't need equiy and we don't want to dilute our shareholders. And if we are successful in our discussions with the banks, which are going very well, we anticipate, as Mike said, between our cash flow operations for the next few years, both building Fekola in that facility, that should cover not only the construction of Fekola but all of our other costs.
So we are looking at generating based on current projections about $630 million of cash from operations over the next few years. And out of that, that said, that's the gross. You can take about $100 million a year off of that over three years for sustaining capital at the mine. Which, you've still got a lot of cash coming in there that can go towards the Fekola construction, combined with our revolving facility. And a revolver is the perfect way to finance a mine like Fekola because Fekola, with its robust economics, has a payback in just over two years at $1,200 gold. So we don't want to -- you don't want to (inaudible) sitting with a bunch of interest stuck to it. So it's a perfect use of our revolver because, obviously, you only pay interest as you use it. You pay a small (inaudible). So that's the way forward, and we are comfortable with that scenario. And we will be able to come out and talk more about that over the next couple of months.
I think that's most of what I wanted to say. I'm going to open it up now, John, for any questions.
One last comment that I will make is, in terms of the market, obviously we are always supposed to say we are disappointed by our share price. And we clearly are. We understand the markets. We've done this for a while and we understand what happens. But I think what happened was in the third quarter of last year was there was about three things that kind of conspired to see us go lower in terms of share price. One was the [tech dilutions] that we did have. Unfortunately, after 13 quarters in a row of meeting our projections, we did have, as I said, a few specific issues at Limon. And that obviously hurt that quarter, hurt us. And that was reflected in the market.
Also at that time we also put up 230 million more shares in the acquisition of Fekola. So whenever you pay a premium in your shares you know you are going to get heat up a little bit in the market. That happened and we issued 230 million shares, some of them (inaudible), which means they come back pretty quick (inaudible). At the end of the day that was a factor, for sure. And the mining (inaudible) as well in that quarter. So we didn't -- normally you would rebound from that. We have not seen a rebound. We haven't seen a rebound. We are stuck with everyone else.
But the (inaudible) is that we've done better than a lot. I've sent around, to cheer up everyone here in Vancouver in an attempt to -- I sent around a chart recently that Canaccord Genuity had provided us with that shows us versus our peers and the market cap looking back over the last three years -- very interesting. The last three years our market cap is down 20%, despite what we've done to grow the company. But looking at our peers, they were down as a group 73% over the last three years in market cap. Do you want to (inaudible) gold stock?
So we are victims of being lumped in with the others who performed so badly, most of them being self-inflicted ones. But this industry has not been very well run, and that's (inaudible) we are a bit of an outlier. But we were happy to be an outlier and we will continue to be. Maybe some other (inaudible).
That's basically what I wanted to say. I think we will open it up for questions, John.
==============================
Questions and Answers
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Operator [1]
------------------------------
(Operator Instructions) Rahul Paul, Canaccord Genuity.
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Rahul Paul, Canaccord Genuity - Analyst [2]
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Congratulations, everyone, on the strong [grandpa] performance at Otjikoto. A question on Fekola -- now that you have acquired the 10% minority stake, what do you expect the ownership rate down to be when you commence production? B2Gold was (inaudible). Should I assume (inaudible)?
------------------------------
Clive Johnson, B2Gold Corp. - President, CEO and Director [3]
------------------------------
Yes, yes. That's what we assumed. Rahul, that's what we assumed when we purchased it. And we assumed that we were purchasing, effectively, an 80% interest. So that was in our numbers. And yes, we need to get with the government now and work out -- as Mike said, they have the option to acquire an additional 10%. And we've got to figure out how that's done. Is that done through tax credits, or how is that done? We've got to sit with the government.
But that's -- we are not concerned about that. If they want their 20%, which they say they do, then we will figure the way for them to get there. So, yes, 80/20 is the right assumption there.
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Rahul Paul, Canaccord Genuity - Analyst [4]
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Okay. Thanks, Clive. And then just off the $305 million impairment charge at Masbate, how much was the result of a lower gold price?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [5]
------------------------------
There's a combination of things in there, so it's hard to say exactly. But I think if you ran the new resources at the prior-year assumptions and changed the gold price (inaudible) it was like 50% of it would be related to that.
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Rahul Paul, Canaccord Genuity - Analyst [6]
------------------------------
Okay. And then any sense as to how much of that was the expansion out, going ahead?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [7]
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Well, the assumption was that in the expansion would keep us at that 200,000-plus level of ounces a year, -- I don't know. Mike, what do you --
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [8]
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It's hard to say. (Multiple speakers) I haven't tried to strip that out and isolate that. So I couldn't answer that one right now. I can look at it for you.
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Rahul Paul, Canaccord Genuity - Analyst [9]
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Okay, thanks, Mike. And then just quickly moving on to Fekola timelines, you indicated potential start up in late 2017. You also said (inaudible) to increase your credits (inaudible) to $400 million from $200 million. Now, if the gold price were to stay at $1,150 or go lower, then stay there for a while, how would you respond? Would you slow down the rate of spending to preserve capital?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [10]
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Well, that's always an option. But I think that the keep point here is that between Otjikoto and Fekola you've got two very robust projects economically. Fekola is a mind that should get built if gold is $1,000 or lower or if it's where it is today. Definitely, it's that robust a project. So we will -- I don't think that our conversations we are having with the banks right now -- we are not having a lot of conversations about gold prices. The corporate facility -- and they believe in what we do. They believe that we can grow this company including building Fekola.
So we would be disappointed if we had to do that. But obviously that's one of the options would be to slow down in spending (inaudible) and we would only -- we would only do that, I guess, if we thought we were faced with significant dilution or something in order to build Fekola. We don't see that, and I don't think that -- the interest we are getting from banks right now is not predicated on gold being $1,150 or $1,200 an ounce. It's not indicated on that. It's more of a bigger-picture corporate facility. So I don't think that's going to be an issue.
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Rahul Paul, Canaccord Genuity - Analyst [11]
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Okay, thanks, Clive. And then just quickly, and I right in assuming that you are comfortable with possibly drawing down $400 million from the credit facility? Have you looked at how much debt you would be comfortable taking on? And you are comfortable with the $400 million?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [12]
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Yes, we are. We've done the numbers and I think that one of the great things about Fekola is just the rapid payback. Also you've got Otjikoto. So what we look at our the peak -- I think our peak was in -b 2016, Mike (multiple speakers)?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [13]
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End of 2016, early 2017
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Clive Johnson, B2Gold Corp. - President, CEO and Director [14]
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That's when we have our peak draw in terms of debt. And then, very quickly, by -- I mean we could be debt-free by, what?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [15]
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2019.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [16]
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In 2019 we could be debt free. But, given the cash flows from Otjikoto and Fekola -- so we don't think we are risking a lot by increasing the facility and obviously, the banks don't, either, so far, based on conversations we've had. And it would be -- we will not the using much of that $400 million facility for very long, unless we go and build something else, which is highly likely. But -- after Fekola. But at the end of the day we think it's the perfect financing for what we are doing. And we do not believe we are overextending ourselves with debt.
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Rahul Paul, Canaccord Genuity - Analyst [17]
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Okay, thanks a lot, Clive. That's all that I had.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [18]
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You are supposed to have two questions, Rahul. That was three or four, I think (laughs).
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Rahul Paul, Canaccord Genuity - Analyst [19]
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Sam Crittenden from RBC Capital Markets.
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Sam Crittenden, RBC Capital Markets - Analyst [20]
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The question on Masbate recoveries -- you mentioned you are assuming 73% life of mine. Just curious if you can give us any kind of how that looks over time. Is it higher in the next few years and then declining? Or is it pretty steady-state?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [21]
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Bill?
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [22]
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Certainly as we find up the operation, looking well at the end of life of mine, recoveries decrease because we have low grade material stockpile, and that would be processed
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Sam Crittenden, RBC Capital Markets - Analyst [23]
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A couple years from now? Is that --
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [24]
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That's a dozen years from now?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [25]
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Yes.
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [26]
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So a long time away. But if we look shorter-term, really, life of mine, oxide content runs just under 30%. This year we will average about 35% and we are sitting about 74% recovery. So not the kind of trend -- we are seeing fairly static.
We do have some years where we've take on a higher proportion of sulfide ores. And those, of course, affect our recovery.
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Sam Crittenden, RBC Capital Markets - Analyst [27]
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And do those reserve assumptions assume inclusion of any of that additional oxide material you found, or are you waiting on getting permits for that to bring that into reserve?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [28]
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That's all included.
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Sam Crittenden, RBC Capital Markets - Analyst [29]
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So what has been drilled to date is all included in these reserve assumptions?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [30]
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Right, reserved it.
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Sam Crittenden, RBC Capital Markets - Analyst [31]
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Okay. And then --
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Clive Johnson, B2Gold Corp. - President, CEO and Director [32]
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There is ongoing exploration. And Tom is not going to say too much about it, but at the end of the day we are kind of excited about some of the things we are seeing there in terms of potential to add either more oxide or higher-grade transitional or sulfide material. So we think there's a lot of upside. And don't forget, the expansion will probably come into play again at some point in the future. We decided not to expand Masbate not because of the study, because we are building online and we want to be very focused.
But I think where we could make a mistake in our situation would be to spread ourselves to thin on the technical side in terms of the construction. We would want to guys that are building Fekola to probably be involved in expansion of Masbate. So we don't want to try to do that those the same time. that's the driving force there. I think there's a very good possibility, with exploration success or without, that we will probably expand Masbate at some point in the future. We are doing a mini-expansion now by putting in additional leach tanks. So where we step out with Masbate going forward may not be the ultimate piece we have out there.
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Sam Crittenden, RBC Capital Markets - Analyst [33]
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And then just a follow-on --
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [34]
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A five-year timeframe, in that range, 74%, which is what we are looking at in 2015 (inaudible) is a reasonable explanation. (Multiple speakers) explanation.
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Sam Crittenden, RBC Capital Markets - Analyst [35]
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Okay, that's helpful. And then just one quick follow-on -- if -- you've got this 20-year mine life ahead of you and you say there is still a potential for an expansion. But are there any other tweaks you could make to the mail that could increase the recoveries without doing a full-blown expansion?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [36]
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Yes, sure. We talked about that a little bit earlier and touched on that a little bit earlier with the addition of the tanks. Really, some of the potential involves running a little harder and a little faster, which we've -- grinding to a slightly coarser grind and working on our recovery or residence time. And that's certainly in the plans for 2015. We're looking at that very closely, and in fact we've included that in our capital.
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Sam Crittenden, RBC Capital Markets - Analyst [37]
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Okay.
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [38]
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We are going to be adding a pre-aeration tank, which speeds up the recoveries a little bit. And we are making sure that we keep that, like I say, that retention time at somewhere between 24 and 28 hours. And that optimizes our recoveries.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [39]
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Just to perhaps summarize that, with the [type of] (inaudible) here, as you can imagine, about recoveries and etc., at the end of the day the reviews projected recoveries were around 80%. You can knock a percent off that because we have been mining most of the oxide so far, so call it 79%. We went from 79% to 76% based on the fact that some of the poor recovery, the deeper sulfided material was some more of that material that was indicated before, by drilling and testing. And so we went from 79% to 76% on that basis. The 73% comes from our decision which the economics push us to, a coarser grind, more tubs and a coarser grind, which costs us 2% recovery but gives us better economics.
So just so everybody knows, that's how we got there. And obviously, we're going to continue to look at all steps to optimize recovery. And I think I kind of look at where we are today as a downside scenario, whether it be through exploration success or other things we can do with that went to continue to look to improve upon this recovery.
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [40]
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We complete a nitrate program this year as well, 2015. Clearly, our experience from Nicaragua tells us that if we focus on our process plant, we can help us out and be really successful. We learned a clear lesson from that in Nicaragua. We have great technical know-how with the corporate support that we have and we certainly [are willing to] apply that and add value.
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Sam Crittenden, RBC Capital Markets - Analyst [41]
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Okay, great, thank you.
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Operator [42]
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Ovais Habib from Scotiabank.
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Ovais Habib, Scotiabank - Analyst [43]
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Just a couple of questions, guys -- first of all, in terms of just starting off in Masbate -- last time we were there you guys were talking about bringing on the [Mojon] and Montana vein. Is that sort of the plan? Is that reserve update coming? And then how soon do you think you can get that into the mine plan?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [44]
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The answer is yes; Montana we are working on. We'd like to see ourselves mining in their next year (inaudible) as the drilling falls into place. Maybe Tom has a comment on that -- include that in our mine slides.
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [45]
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We are lucky, really. We believe that the property has great potential. Part of those drivers are to look for higher-grade sulfide ores that recover well, and oxide.
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Ovais Habib, Scotiabank - Analyst [46]
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(inaudible) and just moving on to Libertad, now you guys are talking about moving underground at Mojon. Is that the plan right down? Or are you guys still running some studies to see what would be economical in terms of any sort of pushbacks that you guys could do, or go straight underground?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [47]
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The answer is yes and yes. And I just got back last week from a visit with [Omar Vega and Cesar]. Perhaps you remember the tours there. We had in our budget or we have in our budget for 2015 about 100,000 tonnes schedule that's underground. And what we've done in the last number of weeks is closely examined that. We believe there's more potential to push the pit loss in Mojon, and our strategies are indicating that. So we will probably push the underground development back, really, at first. We prefer to continue working open pit there. It does some good things for our costs.
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Ovais Habib, Scotiabank - Analyst [48]
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Okay, thanks. And just on the (inaudible), how is the permitting process going there? And is there any expectations that we will see that shortly?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [49]
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Yes, there are. We are running right to the timeline. The social conditions in Santo Domingo are positive to advance that both in terms of managing people in the area and executing for the mine permit. We are on schedule at (inaudible).
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Ovais Habib, Scotiabank - Analyst [50]
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Okay, and just a last question -- at Fekola, I believe you guys are doing some in filtering there at Fekola, The dated resources, income out of the feasibility study. Is there more, any sort of regional exploration work going on there as well?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [51]
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Yes. To answer your question first on the drilling that we are doing at -- for the infillsfor Fekola, the feasibility study there's going to be completed is based on the model that we just handed in to the engineers just now. So the current feasibility will not include the drilling that we are doing. The final mine design before they start digging will be based on the drilling that we are doing now. So there's essentially two models; there's a model that's going in for our feasibility. There's a model which will be done in time to include this drilling for a final mine design.
Turning to the rest of the property, right now we are focusing on the infills (inaudible) but the plan is, as the year goes on, to start drilling some of the other targets. We do have an to [augur] program that's going on to look through the covered areas. And that has just started. So there will be some news on the regional program around Fekola itself but not until later in the year, the back the year.
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Ovais Habib, Scotiabank - Analyst [52]
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Good. And would you be releasing results from the infill drilling as well? Or that's more internal?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [53]
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No. It's a question of materiality, I guess. So far the drilling we've seen is not showing anything different from what our existing model sales. So I don't know that it's material to us, the question back to (inaudible).
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [54]
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Yes; obviously, the results from Fekola would be pretty material in the sense of the ultimate potential there.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [55]
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Yes.
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [56]
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So after we get some, I think we would be inclined to put a release out on it.
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Ovais Habib, Scotiabank - Analyst [57]
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Okay, that's it for me, guys. Thanks so much.
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Operator [58]
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Benjamin Asuncion from Haywood Securities.
Hearing no response, we will move on.
Jeff Killeen from CIBC.
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Jeff Killeen, CIBC World Markets - Analyst [59]
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First of all, if I could ask on Masbate in Q4, it certainly sounds like you had a great quarter there in terms of reduction in, it sounds as though, driven by a higher amount of oxides and higher grade. Just wondering was that actually in the plan, that higher-grade material? Or is this something where you've had a positive response from what you expected in terms of grade? Or how did that actually fall out?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [60]
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High-grade material was in our plans. But as I indicated, we put more oxide in the final quarter, in Q4, than was specified in the final quarter. It certainly got us back on track where we needed to be. It's also provided us with the momentum. We are seeing that momentum carried through in the first quarter of this year.
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Jeff Killeen, CIBC World Markets - Analyst [61]
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Great, okay, thanks. And then just thinking about the current year, as you note, production should be greater in the second half than it is here in the first half. Obviously, we get the sense that the ramp-up of Otjikoto will drive that greater second half. But is there, at the other operations, any sort of indication on first half versus second half in terms of production?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [62]
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No. Two of minor extent, at (inaudible) we have (inaudible) to better grades. But that's a relatively small component of our overall production. Year-to-year -- it's a good question. I'll think about that in answer it on our tour as well (inaudible). Nothing specific comes to mind, though, front end to back end.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [63]
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Bill will get back to you, Jeff, on that.
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Jeff Killeen, CIBC World Markets - Analyst [64]
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Okay, great, thanks. And then finally, just thinking about corporate G&A, we've seen that come up this year, obviously. As you note, a good chunk of that in the back of the year is from Papillon. So I'm just wondering on a go-forward basis how would you see next year's Road current year's G&A level versus, say, 2014?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [65]
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Mike?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [66]
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I think the current year is being relatively consistent with 2014, maybe a little lower because we don't expect some of the legal costs to recur that we had in 2014.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [67]
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The way -- and I know you know this. But the way G&A works is you have to build your team to grow our company. So we put the pieces in place that we need to grow our production from 380,000 ounces last year to potentially almost 900,000 ounces in 2018. So you can do that without people. I think our G&A is appropriate, I would say, for what we are doing. And so -- but I think we're going to get to a pretty steady state now. As Mike said, there won't be this -- we don't see these ongoing legal costs. And those are under our control. We are not being sued; we are suing people. So we can control, to some extent, the expenditure on that.
But I think, now that we have got the people in place we need to run what we are doing at (inaudible) in Fekola, I think you'll see that get to a steady-state.
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Jeff Killeen, CIBC World Markets - Analyst [68]
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Great, thanks. Apologize -- just one more question. Thinking about the interest in Fekola with the government, do you have just a timeline of what you would like to see in terms of resolution on how the mechanics of this will happen?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [69]
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Yes. Over the next couple of months, guys, what do we think? We are thinking --
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [70]
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Early summer.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [71]
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-- Second quarter, like around the time of feasibility would have a target timeline, or a bit before that? But we are not -- it's a process, and we know the process. It has been done before in Mali. So we are pretty comfortable with it. And the meetings we've had with government so far have been excellent. The Minister of Mines is one of our biggest fans right now. And they -- we're not expecting any surprises there at all. We understand the system and how it works, and we are looking forward to concluding that successfully, as I said, by the summer if not before. That's one of our top priorities now will be to spend the time with the government to get that done.
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Jeff Killeen, CIBC World Markets - Analyst [72]
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Great. Thanks again so much for your time.
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Operator [73]
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Ron Lloyd, private investor.
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Ron Lloyd, - Private Investor [74]
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Congratulations on Otjikoto. A question -- with the price of oil going down, tanking around $45, have you guys considered on doing some hedging for like your diesel fuel in Africa? (Multiple speakers) go ahead.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [75]
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Go ahead. Sorry.
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Ron Lloyd, - Private Investor [76]
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The second question would be, since you issued stock on (inaudible) and with the stock down here about $1.45 or in the $1.40 area, why not do a 10% stock buyback and [discount] basically what you sold?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [77]
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Yes. Well, I'll answer that one first. I'm not a believer in buybacks. I think if that's the best thing we can do with our money, then we should probably (inaudible) or go do something else. At the end of the day we are growing company where cash is king. We are building a mine. (inaudible) I'm sure we're going to get a re-rating. We are now the newest intermediate gold producer and we've got great growth. And this is just a short-term thing. It's about (inaudible). And when people understand the implications of Otjikoto, positive indications of that, and understand Fekola, I think that we will definitely see the market going in the right direction.
But I am not a believer in buybacks. I think most of the time when you see companies buying back their own stock -- that costs money. And then the stock tends to go back exactly to where it was before they did a buyback. So that often happens. It's definitely not something we need to look at doing.
Mike, do you want to answer the other question on hedging, because we have had some fuel hedges?
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [78]
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Yes. On the fuels side, fuel and diesel make up between 25% or 30% of our operating costs, depending on which operation you are looking at. So we have done some hedging of the oil prices coming down. And our hedging goal was to, for 2015, to hedge 50% of the HFO and diesel at each operation where it made sense. And for 2016 we would hedge 25%. So that's what we've followed. We've done that for Masbate.
For Nicaragua we are actually on the grid there. So we've done it for diesel in Nicaragua. And then for Namibia we haven't locked in anything there yet becausee are still looking because we're still looking at the forward prices. With the contango there, the forward prices weren't as good as the other operations. But that's the sort of philosophy that we've followed. And those prices were built into our budgeted costs.
And if you want to actually look at the detail of it, in the financial statements (inaudible) lays out what hedging we have done on the fuels side.
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Operator [79]
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Joe Fazzini with Dundee Capital Markets.
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Joe Fazzini, Dundee Securities - Analyst [80]
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Just a really quick question -- at Fekola, obviously there's a carried interest on the first 10% to the Malayan government. Can you clarify on the second 10% if that's also carried to production?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [81]
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It's not carried. The government needs to pay for that. And what they've done in the past is, with some of the other companies, is they've granted tax holidays as a means to effectively pay for that percent. So we haven't had those conversations in detail with the government yet, but there's going to be a mechanism doubt whereby they, in some form, legitimately pay for the 10%. That's the requirement.
It's they are in election. They can not do the 10%. They've indicated to us that they do want to go to 20%. We are happy with that but do you expect to get paid for that in some legitimate way.
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Joe Fazzini, Dundee Securities - Analyst [82]
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Okay. And with respect to the carry, it's carry to production. So basically you don't have to pay them dividends until they've or you've recouped the capital costs?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [83]
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Mike, where do you think that's going to end up? Hard to say?
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Bill Lytle, B2Gold Corp. - VP and Country Manager, Namibia [84]
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I think that's true of the second 10%.
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Mike Cinnamond, B2Gold Corp. - SVP of Finance and CFO [85]
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Yes. On the second 10% guide, he gets to review -- if you are a funding issuer of capital, you get to recoup that versus against your Company. And then they are entitled to dividends, I guess, from what's left. So the first 10% is for a dividend. They get -- they are entitled to 10% of the earnings, regardless of what (inaudible) to the point (inaudible) we are also looking at that as -- as we look to the negotiation for how they are going to pay for their second 10%, that's possibly one of the things that we could talk about.
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Joe Fazzini, Dundee Securities - Analyst [86]
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Okay, perfect. And just finally on Fekola, can you just indicate if there's any other permits outstanding in order to move forward to full production -- or, sorry, for construction?
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Clive Johnson, B2Gold Corp. - President, CEO and Director [87]
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(inaudible) all the permits are -- including road construction, now, all the permits are in hand.
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Joe Fazzini, Dundee Securities - Analyst [88]
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Okay, perfect. All right. Thanks, guys.
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Operator [89]
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This concludes our question and answer session. I'd like to turn the meeting back over to Mr. Johnson. These go ahead, sir.
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Clive Johnson, B2Gold Corp. - President, CEO and Director [90]
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I think I will finish with Joe's line. I think you nailed it when he said that B2Gold is an intermediate gold producer that is treated like a junior producer and is due for a re-grading. So I think that -- I've used your line a few times, Joe. It was bang on.
So I think that's all we've got. And we look forward to reporting on our next quarter, which should be fun because we will have, I think, a very robust quarter from Otjikoto and the other mines are running well. We are having a good quarter at the operations. So we look forward to updating you on that. So thanks, all of you, for your time and your questions.
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