Q2 2015 B2Gold Corp Earnings Call

Aug 14, 2015 AM EDT
BTO.TO - B2Gold Corp
Q2 2015 B2Gold Corp Earnings Call
Aug 14, 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, Finance and CFO
   *  Bill Lytle
      B2Gold Corp. - SVP of Finance and CFO
   *  Dale Craig
      B2Gold Corp. - VP, Operations
   *  John Rajala
      B2Gold Corp. - Manager of Metallurgy

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Conference Call Participants
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   *  Rahul Paul
      Canaccord Genuity - Analyst
   *  Ovais Habib
      Scotiabank - Analyst
   *  Chris Thompson
      Raymond James & Associates, Inc. - Analyst
   *  Ronald A. Lloyd
      - Private Investor
   *  Geordie Mark
      Haywood Securities Inc. - Analyst

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Presentation
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Operator   [1]
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 Good afternoon, ladies and gentlemen. Welcome to the B2Gold second-quarter 2015 conference call. I would now 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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 Thank you, operator. Good afternoon or good morning depending on where you are. This is our conference call to report the financial results for the second quarter of 2015. We are going to do a quick review of the financials because, as you know, we always release the production numbers prior to this, and we will focus today on the financials. And also we want to leave some time to answer any questions as well about details. The news release is quite detailed, as the last one was, but obviously more information will let you ask questions on that.

 But when we -- from my perspective, we do a very good quarter again. Some people said no surprises. I consider $70 an ounce less on operating costs to be for us a pleasant surprise, and it's indicative of the work we have been doing and will continue to do going forward here to continue to legitimately look at ways to fine-tuning our processes, etc. to optimize the minds that we have.

 The focus going forward is not -- and it will be also on the course construction of Fekola in Mali, which is going well. I realize in today's market that that's a contrarian move to build a gold mine -- a profitable gold mine when gold prices are lower. We don't think that should be contrarian, but that's the nature of the market today. I will talk a bit about strategy later on.

 I'm going to pass it over to Mike now to give -- run through the highlights and then give some of the detail that's outlined in the news release on the second quarter. Mike?

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 Mike Cinnamond,  B2Gold Corp. - SVP, Finance and CFO   [3]
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 Thanks, Clive. So I will take us through -- run through the income statement first for the quarter. So we had sales in the quarter of 114,000 ounces, which was greater than the prior year quarter of 93,000 ounces and just marginally lower than budget of 118,000 ounces and record sales in the quarter driven primarily by Ojtikoto being included first full quarter of commercial production since Ojtikoto started up, and Ojtikoto continues to ramp up very well, and we are again very pleased with how it's gone.

 Overall, we realized that we have an average realized price of $1193 per ounce versus a spot of $1192 average. And in total, we had a 22% increase in ounces sold, but offset by an 8% decline in the spot price. So overall net revenues from sales of gold were up 14%.

 On the production side, we pre-released our production, and we had a very good quarter. We produced [122,000] ounces versus the prior year quarter production of 86,000 ounces and budget of 118,000 ounces. So 36,000 ounces more than the previous quarter last year, and that's a function against the prior year of Ojtikoto again being included for the first full quarter. There was 37,000 ounces from Ojtikoto in Q2.

 It also was a function of Masbate was about 4000 ounces higher than last year, not due to higher throughput, and if you recall last year in June, we had the installation in the new SAG. Most of that led to a drop in production while that was being installed and brought online. So we didn't have that issue this year, so again Masbate had a good quarter.

 Libertad was down compared to last year as expected. That is really a function of timing and the fact that last year we had the higher grade Crimea and Santa Maria Pits which were mind out in 2014.

 Then looking at, I guess, budgets, so 122,000 ounces versus budget of 118,000, so we were 4000 ounces over budget, and that was again due to -- Masbate had a good performance against budget, 3000 ounces higher at 38,000 ounces -- or sorry 41,000 ounces in the quarter versus 38,000 ounces budgeted, and at Masbate, that was due to more oxide being mined than budgeted and higher recoveries. Libertad was marginally down against budget, and that's a function of just of the timing.

 We didn't get into the Jabali Antenna material as quickly as we thought. We anticipate that now to be later in the year. We thought we would have initially started mining that at the end of Q2, and also we are in the new higher grade Los Angeles area. But we got in there a little later than we'd expected.

 Ojtikoto, as we said, it had 37,000 ounces in the quarter, and it has great -- higher throughput and recoveries than we anticipated offset by slightly lower grade than budgeted. In all, that translated into very good operating cost performance for the quarter. So on a consolidated basis, our operating cost runs for $677. Compared very favorably to the prior year, $43 an ounce lower than prior year total of $720 an ounce and against budget of -- we're $71 below budget, which was $748 an ounce.

 So a number of contributing factors to that very strong performance. Some -- partly the higher production as I just discussed. We also benefited obviously from Ojtikoto being online for the first full quarter. It's our lowest cost operation right now. It was $485 an ounce in Q2, which is an excellent performance for a mine that's just come online, and that compared very favorably with a budget of $541 an ounce. So all the operations I think benefited from fuel savings right across the board. Obviously with the oil price being down, we've taken the benefit of that. And as I mentioned earlier, Masbate did have higher throughput and recoveries than we had originally anticipated.

 When you translate those consolidated cash costs into all-in sustaining costs, all-in sustaining costs for the quarter were $1056, which is $90 lower than our budgeted all-in sustaining of $1146. And if you break that down a little more, that $90 saving, it translates into $70 of that was the improvement in operating costs, and $20 of that was a reduction in G&A costs across all the operations.

 So overall, on a production and operating cost basis, a good quarter led to gross profit for the quarter of just under $20 million. Moving down that income statement, just to comment on some of the other cost lines, general admin costs were $10 million -- just over $10 million, but $3 million less than the prior year quarter. That's really a function of a couple things. One is timing. Last year we booked bonuses in Q2, and this year we did it in Q1. And also there is a weaker Canadian dollar, so our G&A costs as incurred in Canadian dollars were slightly lower when you report them in US. And those are offset by the inclusion in G&A now of Windhoek, office G&A for Namibia now that Namibia's online. There's about $1.5 million in that $10.5 million number for the quarter that relates to Windhoek.

 Other significant line items in the P&L. There was an unrealized loss on our convertible notes of $8.3 million, and that's -- we see that every quarter. That's just marking to market the fair value of those convertible debentures, and as they trade up and down, that mark-to-market goes through. It's non-cash, and we just book it every quarter.

 A couple of things to come on in interest and realized loss in derivatives lines. So one of the main things that we did get finalized in the quarter was we closed out our new revolving credit facility. So as we previously reported, we've increased that facility amount from $200 million to $350 million, and we've also changed, I guess, the participating banks who are in there.

 So one of the things that was required when we did change that revolver, it was there were a number of go forwards and hedges that have been put on with the prior participating banks, and some of those were required to be novated or transferred to the new banks. So that comes with a couple of costs. One of them was a novation charge of $2.5 million. It's non-cash. We just related to a change in the price of those contracts, and that's included in the interest and financing expenses. Also, in interest and financing expenses is a one-time charge of $3 million related to deferred financing costs on the old facility that had to be written off when we transferred from the old to the new, but those are costs that were previously incurred. They weren't cashed in this period.

 So those -- that's a total of $5.5 million that are one-off costs in the interest and the finance expense line. Then also on the derivatives line, there is a NAT of $5.7 million, but that's made up through three things. One -- again, when we move these hedging contracts from some of the old participating banks to the new banks, we had to bring -- we had to mark-to-market those hedge contracts that were -- already existed. So those were contracts that we had, but for accounting purposes, the mark-to-markets weren't booked each period. They were just booked as they were delivered into. But because we moved them over for accounting purposes, we had to book the expense. So there is an $11.5 million charge that went through that line related to that, offset by a positive mark-to-market after that date of $4 million, and there's also fuel hedges gains of $2 million, and that went through there unrealized.

 So total hedging amounts, unrealized known cash at this point were $5.8 million. All those things translated at the end of the day into a net loss for the period of $22.8 million. When you adjust for those non-cash items, as I mentioned on the convertible notes, the nonrecurring interest in financing expenses and generalized hedges, it led to an adjusted loss of just over $1.3 million for the period or $0.00 per share.

 Just moving over, I will talk briefly on that cash flow statement. So on the operating side, we had $34 million operating cash flow, $0.04 a share. So getting positive results, these are lower gold price environments that we're in right now. We've had a short-term price decline, but we still -- because of the positive cost variances at our operations, we produce good, strong positive cash flow, and we got just almost $93 million cash flow from operations for the year.

 In the quarter, in the financing section, you can see that we drew down $25 million under the old facility and then we paid it and drew down $150 million under the new facility. So as it stands at the end of June, we have drawn $150 million on the new revolving credit facility.

 And all that translates down into when you look at the bottom line, we have cash of $110 million at the end of the period, and liquidity wise we got $110 million there, plus still $200 million left available on our revolver. So with total liquidity of $310 million and we think we are well placed to maintain our current construction timeline and activity of the core projects, which are mining operations and, of course, the focus on building Fekola, which we expect to come online in Q4 2017.

 The other thing I would comment on, in light of the recent downturn in gold prices, we also want to just be conservative and look in our mine plans and make sure that we are well placed if we think we're going to see gold at around $1100 in the short term for certainly the next year, maybe two years. Then we want to be well placed to react to that, so we are undertaking an exercise right now looking at alternate scenarios in our mines where we run the resources of lower gold prices, higher cutoff grades, and then we look to see how we might change our mine plan and scheduling for response of those lower prices.

 I will also look at cost savings across the board. Obviously we have been doing that already over the last couple of years. We've been in a declining price environment, but with this recent decline being further, we're going to have another look at that. We're looking across the board sort of review on sustaining exploration and really focusing on -- keep looking at our standalone -- our core projects, which again, I reiterate would be our current mining operations on the construction Fekola. So we just want to be ready if we find ourselves in an environment where $1100 or a price like that is sustained for a little longer than I think everybody hopes.

 One of the other things we will be doing as well is, as I mentioned, the operating costs for the current quarter benefited significantly from lower fuel prices than we budgeted, and obviously oil is still down there. So we are looking at our fuel hedging program again. Right now we've hedged up to 50% of the current year production and our fuel usage and 25% of 2016. So we're going to roll that out further and look and see what we might do just to protect those prices. We may look at a combination of just contracts -- straight forward contracts. We may look at collars. We think that might be an effective way to do it.

 So overall, I think we are well placed, well-funded, and I think we've had a very strong operating quarter.

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 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [4]
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 Thanks, Mike. I think we will talk about -- get an update from Bill now -- Bill Lytle, who is our VP, Africa, has just come off a successful Ojtikoto construction and startup there, which has been a tremendous effort by an awful lot of people in our group and also obviously an excellent crew in Namibia. I will get Bill to give us an update on Fekola.

 The key team of construction has finished recently in Namibia at the end of last year, I guess, is in place, and we started construction activities and Bill will talk to that.

 So Bill, can you give us a quick update on the next one, Fekola?

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 Bill Lytle,  B2Gold Corp. - SVP of Finance and CFO   [5]
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 Yes, how do you hear me, Clive?

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 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [6]
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 Fine.

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 Bill Lytle,  B2Gold Corp. - SVP of Finance and CFO   [7]
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 Okay. So on Fekola and I am calling from the Fekola site right now, so if I break off, I will try and call back in right away. Basically, everything that we have promised to do is in place now. The key thing that we had committed to doing was preparing an access road from the tar grove between [Peneva] and [Vamaco] to site. That is now in place. We are receiving everyday containers and equipment to site. We are most of the way through an airstrip now, so we can fly in and fly out. The pad for the construction camp is complete, so our contain is -- our container camp that we have ordered will be arriving in the first part of October so that that curve is getting ready to mobilize, which works out very nicely.

 And I know I wasn't asked to talk about Ojtikoto, but that expansion project is wrapping up this month. They will get about a month off, and then I will come here and start the Fekola project. So it's worked out very well.

 The mill footprint has been cleared, and basically we are ready now to start our foundation work there after the rainy season. We have stockpiled enough sand and gravel basically to get us through the first two years of concrete aggregate. So from a construction standpoint, everything remains on schedule, materially complete with what the budget was proposed for and on schedule.

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 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [8]
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 Okay. Thanks, Bill. Just we will open up for questions here shortly, but just maybe a few comments on strategy and I can maybe clear up a few things from a corporate point of view.

 Obviously from what you heard from Mike, we remain pretty focused on operations and optimizing, which everyone talks about. We've actually been doing it quite effectively in the sense that obviously oil prices helped us -- some other factors. But really there's also been a tremendous amount of work done on site to continue to improve every aspect of our business, and you are seeing some effects of that. Our recoveries have been fantastic.

 The recoveries at Ojtikoto and, in fact, the startup for Ojtikoto has been the best that many of us have ever seen in our careers in terms of how rapidly that thing cranked up, and that's a real testament to the quality of construction I think that we did there.

 Also, John Rajala, our VP of all things metallurgical has done a great job at all the sites, and that's an area where -- an example of the kind of strength that we have in the team and the ability to bring -- or to have a team of some of the top people in the industry doing critical things like that. So lots of improvements in operations, and as Mike said, we're going through a good exercise here, which I will -- in my opinion all responsible gold producers should be going through, and that is to look at your operations at lower oil prices and, therefore, looking at the economics for the next three to five years and see how that looks. And we think that will be an interesting exercise and might have some pleasant surprises in that exercise as well. But a commitment to being fiscally responsible as we go forward.

 The other thing that we get asked questions -- and I understand what's happened in the sector and understand how many disappointments there's been for shareholders. It's been a really rough ride, but I think we've carefully considered our strategy, and we always have strategy reviews. Our strategy now is to, as I said, optimize our operations, but also is to build a new mine. And that appears to be the contrarian part, I guess, from talking to some people, and we routinely review our strategy. We talk about our Board -- with our Board, we listen to our shareholders. We've done some of that recently in our view and historically what we've done at Bema and B2 is continually review your strategies, but if nothing has really changed fundamentally that made you make the decision that you made, then don't be afraid to continue with your strategy, even if sometimes others are critical of it, perhaps because it's a bold strategy that many other people wouldn't feel comfortable with. So we can talk about why not build Fekola in today's environment, and some people said why don't you slow down on Fekola and then build up the cash flow.

 I get that thinking. That's conservative thinking, and we've looked at that as one of the options. But we've decided to stay this strategy because our thing is, why not build it? It is a world-class project. It is one of the -- which isn't a word that's used too often, it's a very strong robust project that has huge legs in terms of additional ounces beyond 4 million, 5 million. But the main thing -- and [paid ounces] might be there as you know -- so the main focus was on the good work that Papillion had done in drilling off very healthy higher grade resource that is open pittable.

 A very attractive project. Our feasibility study, which is a BEMA V2 quality feasibility study that was done by obviously some outside consultants working very closely and directed by our group, I think it's an excellent study. If you look at the results of Ojtikoto versus the feasibility study, we are a group that delivers on the mines and beats, in fact, off on the feasibility study estimates. So our studies are a little different than some that we've seen in the industry.

 But our study calls for the first seven years of 350,000 ounces a year from Fekola with our operating costs at $418. If you use today's oil prices, we would be below $400 an ounce in operating costs and obviously very low all-in sustaining costs. That's one of the reasons you build it. You build it because it's a great project because we did, we believe, a very good acquisition. It's ready to go. The government of Mali is very keen. We've had very positive responses. I was down there a while ago. Very positive support from the Malayan government. They have some mines that are shutting down because -- not because of gold prices particularly, but because of running out of reserves.

 So they are very keen. Mining is an important part. You are in a country that has embraced mining. It is an important part of the economy. There are issues, as we know, in the northwest of Mali. The government has recently signed a peace agreement with the [Turags]. That's the hope of peace in the northwest. It's a country that has a very strong gold belt that we're part of near the border of Mali and Senegal in Mali. A very prolific gold belt and a lot of companies have been successfully producing there for many years. We don't view it as a high political risk environment, and we are very pleased with the response of the government so far.

 We have an experienced team not only in Vancouver, but we have an experienced team in our sites, and we can draw the strengths as we have before to all of our projects. We have an experienced construction team. I know you have heard this before, just to reiterate the fact our construction team is built -- is ready to go on to Mali. Some already have. We don't see that construction as a particularly high risk. It's a similar plant. We just built, in fact, the same but larger that we just built in Namibia. So we've had effectively a dry run of purchasing and construction and all that for Fekola by doing Ojtikoto.

 So we are very confident in the team's ability to deliver. We will have a -- we will be very self-sufficient in Mali. We will have a camp that is accessed by our own road, which is we completed construction. We will also have our own strip, which is nearing completion of construction, so we can fly in and out. We will have -- if there's a river nearby with obviously plenty of water, we will generate our own power.

 So we're going to be very much self-sufficient in Mali, very similar to, in fact, in a very different part of the world to what we did at Kupol. Because you have a camp that people are going to live in, and it's going to be a first-class camp for sure.

 So those are some of the reasons why we don't consider this a high risk proposition. We see it as an opportunity. We believe that the time to build low-cost gold mines is when gold is lower. This is a long-term proposition. We're sure we will be mining for 15 or 20 years at Fekola. So to be able to build it when gold prices are lower is a tremendous opportunity.

 And we are a well-funded company. We just did a -- I understand recently and I understand some of the views on the market. We get it. A month and a half ago, it was free cash flow is all we care about. We're not going to own you if you don't have free cash flow. I understand that from a conservative perspective. We chose not to have free cash flow because we chose to build another -- a great mine. We will have it take our production from 480,000 ounces last year to very close to 1 million ounces by 2018 with our operating costs dropping dramatically, not just because of the operating costs we're seeing from Ojtikoto, but of course, it projected very low cost at Fekola.

 The banking -- financing -- the $350 million, that was -- when you think about the fact that this Company had no production in 2010, it's quite remarkable given the market we are in to get that support for the banks. Now the banks get a small amount of interest and their money back if we're successful, which, of course, we expect to be and we're doing going forward.

 Interesting enough today that the banks are on board and believe in our future, and equity is clearly not for some of the reasons that we talked about. So we maintain this is the time to continue doing exactly what we're doing, and we remain very focused on it. I would argue that if gold prices stay around where they are today, if they are there for three years, not only in my -- will we successfully build improved Fekola, but we will be generating significant amounts of free cash flow. And I think -- expect that that will end our market cap, frankly. If we take our production and double from last year to 2018 and lower operating costs, we think that that's going to be reflected ultimately in the stock market value of the Company and get value where we should be.

 It's lost in the market. We became an intermediate gold producer recently with Ojtikoto starting up. We moved over the 500,000 ounce threshold. We never did get evaluated in that group because of the unfortunate timing of the gold prices. But I would just remind people you've got -- look at the success of the acquisitions we've done from 2010 starting in Nicaragua onward and the success of our team. In building these and running them very well, I think when you hear stories these days, it's a great question to say who is telling me the story and what have they done before? If people had asked that question more in the last five years, the industry wouldn't have had some of the messes that it's had. But think about who is saying it to you, think about what they've done, and think about what do you think the odds are that we're going to be able to accomplish it.

 Just remind you that many of the people involved in Auryx Gold were involved in financing the gold mine in Far East Russia called Julieta in 1999/2000 when gold was $260 and our market cap was $30 million at Bema. So we've been through, as a group, some pretty challenging times, and nothing like -- this was nothing like some of the things we've been through. You learn as you go through. We are very focused on it. We reviewed our strategy, and we believe it to be the right strategy going forward.

 We are continuing to do some exploration. We are obviously looking at cutting back on G&A and cutting back on expenses where we can. We are committed to continuing exploration around our sites where we've had some very good results if you look at things like the Jabali and you look at our success at Ojtikoto with Wolfshag, and we're having some success in the Philippines, and also we're very excited about the exploration upside, of course, at what we're seen at Fekola and property around Fekola. But we're not going to be having really aggressive exploration program to go on if they will drill something. Obviously because the key is now fiscal responsibility and growing what we have.

 There have been some rumors out there that I guess maybe we'll just deal with just so we can set the record straight. We've promised we weren't doing any big equity financing for over a year whenever we thought we would. Now you see why we didn't because of this access to funding like the $350 million very attractive revolving credit facility that we have.

 So we are going to continue to focus on those cost-cutting measures as we talked about, running the mine plan and being able to focus very clearly on achieving the goals in front.

 So exploration will be focused on mainly grounds field exploration around the sites, and we will limit our budgets. We will also be looking hard at sustaining capital costs, of course, and all those things. So within the next month and a half, we will have a good view of how we see things going forward in the mines with updated mine plants. Then will continue to update on Fekola.

 One perhaps final comment on the banks, I heard a while ago, as I said, that there's -- free cash flow is king, and then within two weeks (inaudible) whacked and scaring everyone, the next thing was that free cash flow is still important, but all debt was bad. That's a bit of an overreaction. This loan that we just received for $350 million, this revolving facility, was put on with a new group of banks to us led by HSBC, a very strong group of banks that want our business now and in the future. They are not looking at this like equity. They are looking for a long-term banking relationship. This was not a facility that was put on a $16 million gold, and when people say all debt is bad, they assume that we have a problem with our banks, though. That's crazy. We have a group of banks that we put this on a $1200 gold. The banks aren't going to freak out about a $100 drop in the gold price. They've done all their work.

 So all debt is not created equally. Yes, there's a company that took on too much debt it appears. We're not in that situation and feel we have a very manageable scenario going forward. And in fact, based on our current projections, this Company could be, if we chose to be, debt-free by probably something in 2019 if we chose to be. With a revolving facility, of course, it's great to have access to that.

 So a huge vote of confidence from the banks, and I think that's really important. This is -- not that equity is not real money, but this is debt, and the banks are obviously very comfortable with our future and our ability to repay the debt.

 Finally, in terms of there have been some concerns apparently that have been voiced about succession planning on B2Gold. I always wonder when people ask that whether they are worried that we don't have a succession plan or are they worried that I'm going to stay around? I'm not sure which it is, but anyway, I am definitely staying in place, and I'm very excited about the future of B2Gold. We've been through a really challenging number of years where we have chosen to do acquisitions and advanced that Company dramatically. We are very pleased with that. Now is the time to focus on what we have. No major acquisitions coming up. We are ready to roll into the fall, and it was a very positive story. There's no one hanging their heads at B2Gold because we have a Company that is growing dramatically, and we are all very focused on that.

 So I think that's most of what I wanted to talk about in terms of strategy. We're going to stay the course, which is our course, and we're going to build another successful mine and then merge as the -- one of the lower cost intermediate goal produces that is profitable and responsible, and that has growth in our DNA -- successful growth. So we do have other projects in the pipeline such as Kiaka in Burkina Faso, which is a good project. It needs some help in the gold price, and unfortunately the government there has got some tax changes that will require maybe a little higher gold prices if that continues, but it's a good project in a good part of the world. That's one example, and of course, we ultimately have -- but are interested in the Gramalote project in Columbia, which I expect to go into a fairly -- a standby position why we still continue to pursue permitting there.

 So for us, we are happy with it. We're very happy with the quarterly results, and we are doing a good job operationally, and we're going to continue to focus there and also on the Fekola projects. So I think I'll open up for questions now.

 Just so you know, we -- Dale Craig is here, and Dale is responsible for overseeing Nicaragua and the Philippines, Masbate, and Bill Lytle, you heard from him on the phone and Dennis Stansbury's on the phone as well and has been helping out Bill a lot down in Mali, getting things going, and John Rajala, who I mentioned before is on the phone in Vancouver. We have Ed Bartz, VP of all things taxes. And of course you heard from Mike Cinnamond. Roger Richer is here, Executive VP in Wisconsin, Ian MacLean, VP, Investor Relations is here. And of course myself. So if there's any questions for us, they can be detailed about the quarter or they can be any other thing. Don't forget, two question maximum for all.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) Rahul Paul, Canaccord Genuity.

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 Rahul Paul,  Canaccord Genuity - Analyst   [2]
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 Thanks for the reminder about two questions. First one, you said you are undertaking a review of all your existing projects and lower costs, but you still seem to be committed to moving forward with Fekola, which makes sense. Just curious, what about the development of Wolfshag? Should we expect any changes to the timelines today, or is that another project that shouldn't be impacted?

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 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [3]
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 Well, we were going to -- Wolfshag is going to be part of the exercise of -- for this new exercise, we were continually -- we've done a lot of infield drilling with Wolfshag. So we're now moving it into a plan -- as part of the mine plan in the next -- that's going to be a little behind the other ones. Mike (inaudible)

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 Mike Cinnamond,  B2Gold Corp. - SVP, Finance and CFO   [4]
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 Wolfshag has been -- the new mine plan incorporating at least the first part of Wolfshag is expected by the end of the year.

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 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [5]
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 Yes, so that doesn't have anything to do with this kind of current additional review we are doing. That's part of the normal process we were on, but by the end of the year, we will have incorporated Wolfshag. And look, if the economics suggest that we go for more Wolfshag earlier, we will obviously have a look at that. So that will be part of that exercise in the sense we will look at that. But obviously you know what Wolfshag adds.

 Gray -- the big question is how much is open pit and how much is underground? I know there's a couple different views on that obviously given by economics to say how far you go open pit until the strip ratio pushes you underground. So that's all going on now. No nasty surprises.

 Infield drilling has been very consistent with what we saw before, so nothing there surprising at all, and it will enhance and improve Ojtikoto as we projected. But I think it's important to note that so far next year, we don't see -- even though our production goes to 200,000 ounces next year, that that isn't because of Wolfshag. That's because of mining -- faster with the expansion of mining the Ojtikoto main body faster and the way the Great Falls over the next year.

 So next year it's higher. We're not in Wolfshag. Late 2016, really realistically 2017, will be a year -- the first full year of Wolfshag, and so we will have time to look and see what percentage of Wolfshag do we incorporate and when so we could have a further boost -- potential boost economics from looking at it that way as well.

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 Rahul Paul,  Canaccord Genuity - Analyst   [6]
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 Thanks, Clive, and then I think in the past you mentioned that you are working on a new resource model, incorporating all the mining -- data from mining and grade control year to date and all the drilling that was undertaken in the last few years. And that was expected to be completed in Q3 versus -- is it safe to assume that the next update we'll see -- the lease will be early next year, incorporating all that and Wolfshag as well, or are we still expecting another interim update in Q3?

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [7]
------------------------------
 I'm sorry?

------------------------------
Unidentified Company Representative   [8]
------------------------------
 Yes, I think that you are right. The next one will be publicly released through the model where it incorporates Wolfshag.

------------------------------
 Rahul Paul,  Canaccord Genuity - Analyst   [9]
------------------------------
 Okay, okay. Thanks. That's all that I had. Congratulations on a very nice quarter.

------------------------------
Operator   [10]
------------------------------
 Ovais Habib, Scotiabank.

------------------------------
 Ovais Habib,  Scotiabank - Analyst   [11]
------------------------------
 I guess, congrats on the great quarter. This new rule of two questions, so I will stick to that. First question, just on in terms of Masbate, you're looking to add two more CRO tanks. You are expecting now late 2015, early 2016, I believe.

 In terms of your studies that you guys are done, are you looking to see recoveries improving or kind of being maintained at these current levels?

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [12]
------------------------------
 I think I'll pass it over to Dale -- Dale Craig for that one.

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [13]
------------------------------
 Sure. Yes. To be clear, the tanks we are expecting to be operational in the second quarter of 2016. We delayed the ordering of the tanks a little bit to make sure that the tank design and the specs tied in with some of the other work that we plan on doing with the plant next year.

 With the addition of the tanks, remember we are running at a slightly coarser grind right now. That helps with throughput, and it's really the right thing to be doing on today's gold prices. We expect about a 2% additional recovery with the tanks in place. So right now we are operating at about 2% less than what we would expect grinding to 150 microns or 100 microns.

------------------------------
 Ovais Habib,  Scotiabank - Analyst   [14]
------------------------------
 Thanks Dave. And the next question, just at Ojtikoto, in Q2, you guys were primarily processing oxide, I believe. When do you expect to start entering the transition of the sulfide zone at Ojtikoto?

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [15]
------------------------------
 I don't know if -- Bill, we don't have -- Tom's not on the phone. He's away, so I don't know. He is probably the best guy to answer that. We might have to come back to you on that. Does anybody have a sense of that, Bill?

------------------------------
 Bill Lytle,  B2Gold Corp. - SVP of Finance and CFO   [16]
------------------------------
 No, I have a sense of that, Clive. We are in the transition zone for sure. We are actually about halfway through it and moving towards the consolidated zone. So certainly Q3 we're going to see some harder material.

------------------------------
 Ovais Habib,  Scotiabank - Analyst   [17]
------------------------------
 Okay. And then in terms of reconciliation down there as well, that should improve when you are hitting the sulfites. Is that correct?

------------------------------
 Bill Lytle,  B2Gold Corp. - SVP of Finance and CFO   [18]
------------------------------
 Yes, that's the overall impression that we're getting for sure. I think if you see it for the last three months -- I need to include July, which obviously wasn't included in this press release. We continue to see grade coming closer and closer to reconciliation, so we still are very confident that that's going to be the case.

------------------------------
 Ovais Habib,  Scotiabank - Analyst   [19]
------------------------------
 Okay. Sounds good. Thanks, guys. That's it for me.

------------------------------
Operator   [20]
------------------------------
 Chris Thompson, Raymond James.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [21]
------------------------------
 Congratulations on good quarter. So my two questions relate to near-term operating plans from Libertad and the second one for Masbate. So wondering if you could just give us an idea on the near-term operating plan as far as pits are concerned for Libertad?

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [22]
------------------------------
 Sure. Pit sourcing through this quarter will continue to be heavily central Mojon pit, and Los Angeles pit is now on stream.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [23]
------------------------------
 What sort of tonnes -- can you just expand a little bit on Los Angeles? We don't know much about that, so what sort of tonnes are you leering into the plan, and then what sort of grade can we anticipate from that?

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [24]
------------------------------
 Yes, Los Angeles is a relatively small pit. It's about 210,000 tonnes. It's pretty close to our operations in the Libertad. We are counting on about 30,000 tonnes a month out of that operation. It carries 3 grams per tonne. So far we've seen about 2.58 grams per tonne out of it, but grade is improving as we advance in the pit. Typical in some of these areas, small miners that work the upper elevations, so we've got that sorted out. We are now into main orebody.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [25]
------------------------------
 Great. Okay. And then just a quick comment, if you would, still sticking with Libertad on Mojon underground and maybe just expand into the status as far as Jabali Antenna, please.

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [26]
------------------------------
 Sure. What we're looking at right now for Mojon underground -- this year we would like to initiate a test stripe and the test stope development off the 390 elevation and logs just over 300 meters of drifting and then some tests will work. That should finish up -- we will initiate that fairly soon, and it should finish up towards the end of the year or early 2016. And that will give us confirmation of my method and my mobility in the bottom central piece area of Mojon. There are a couple of potential targets there for underground in Mojon itself.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [27]
------------------------------
 Okay. And the Antenna?

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [28]
------------------------------
 Antenna, we remain planned to develop our underground infrastructure there. That's all that is in the current plan this year, and that's all that's included in our CapEx this year for Jabali Antenna underground.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [29]
------------------------------
 And the permitting? Do think we're going to see production in Q4 or early next year? Is the permitting a real issue that?

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [30]
------------------------------
 Yes, we pushed our forecast back really for Jabali Antenna to come into the back -- the last quarter and barely into the last quarter of 2015. The permit is advanced. It's just gone through the municipal review, and it's sitting with [Morena]. We are wrapping up a couple of issues, and we then proceed to the public review portion of the permit. That is a process that typically takes two to three more weeks. So, in general, it's coming along quite well.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [31]
------------------------------
 Okay. Great. Okay. And then quickly just moving on to Masbate, obviously a fair amount of ore coming from Colorado. You mentioned 62% oxide feed from there. Is that the sort of blend you want to maintain in the near term?

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [32]
------------------------------
 Only in the very near term. We're looking at the third quarter running just under 50% oxide. By the fourth quarter, we will be down to about 20% oxide. So towards the end of the year, we come pretty much back on stream to where we would be in terms of oxide versus [French] ore. Our total for the year, though, we will be mining more oxide. So on average for the year total, it would be more in the range of 50% against our original anticipated 39%. So a little bit more out of Colorado Pit, less out of [Penekay Mending].

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [33]
------------------------------
 Great. Thanks, Dale. And then finally, Montana, what's the status there?

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [34]
------------------------------
 We are continuing to work on the permitting. We are still planning on mining there next year. This permitting land acquisition -- that process that's underway right now, and that's advancing.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [35]
------------------------------
 Is that middle of next year, do you think? Towards the end or the beginning?

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [36]
------------------------------
 I would say end of third quarter.

------------------------------
 Chris Thompson,  Raymond James & Associates, Inc. - Analyst   [37]
------------------------------
 That's terrific. All right. Thank you, Dale. Thanks, guys. Congratulations again.

------------------------------
Operator   [38]
------------------------------
 [Ronald A. Lloyd], private investor.

------------------------------
 Ronald A. Lloyd,  - Private Investor   [39]
------------------------------
 So it's a shareholder here. Do you want to comment on the first question about senior management and directors selling tens of thousands or hundreds of thousands of shares in July?

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [40]
------------------------------
 Sure. Yes, okay. Sure. What was our volume in July, do you think? I don't know, it was probably 3 million a day times 30. So a lot of volume in our stock -- we're a very liquid stock. So a little bit of share sales really don't affect the share price. People I know become fixated on it.

 Let's talk about that. I know that -- I know Mark Connelly, our new Director, sold some shares which caught a lot of attention. Thank you for bringing this up, by the way, because this is another one of the things I wanted to deal with. Mark sold some shares because he had a tax issue in Australia. He did an excellent job of building the company up and acquiring and doing really good work on what is a first cost deposit, and he had a tax issue. I do not expect him -- because of the shares he got replaced by our shares for Papillion shares, I don't expect him to be tax vulnerable, nor do I expect any of our executives or directors to be tax vulnerable.

 So I have no issue at all with Mark selling those shares and no one else should in my opinion. I think there's lots more -- there's other things to be looking at more closely, so let's talk about compensation. Do you want to talk about that? Because I think if you go and look at compensation for executives, we are way, way, way behind some of these other companies that have lost 60% of their market cap over the last three years or 80% in some cases. So you should look at the whole conversation package I think when you look at this.

 In terms of sales, other sales -- people around here, we are -- throughout this last period of time, we've taken some cash bonuses. Not really a large cash -- totally appropriate according to our comp committee and the Board and the rest of the sector -- the peers and we -- because cash is king and we are growing a Company, we agreed with the Company that we would accept RSUs -- restricted share units -- shares in payment for our bonuses.

 So if I get some shares -- if I say to the Company, well, I don't need to take cash, I believe, I will take my shares -- I will take my bonuses shares, well, that gets that paid out over two years, and I get hit immediately with the taxes on a third of that as if I had sold it. So I get taxed as income.

 So you are a bit of an idiot if you have shares and executive to the Company, and you get your shares paid -- your bonus paid in shares, you are an idiot if you don't sell enough shares to cover your taxes. You are a real gambler. So we don't encourage anybody in an executive group of directors to be idiots.

 So that's really a lot of it, and this is -- 10% of (inaudible) I've never seen one. We created this Company in 2006. If you look at our share ownership, I think I own around 8 million shares or whatever. We reserve the right and will never apologize for selling shares when all information is in the public domain. We created this company, and most of the guys that create companies in high tech or in Lululemon, everyone shares a moment. They take a piece of the Company. They sell a piece -- their piece of the Company. We founded it. We've taken a huge risk to get to this point in the Company, we're fairly compensated, and people who focus on share sales really should try and look at the bigger picture because that's what's going to affect your investment, not us selling a small amount of shares for totally legitimate reasons. So we're not going to apologize for that, and really there should be much better ways to focus on the offset of the Company. I share your frustration with the price, believe me, but we have done everything we said we would do, and that's really under our control. And we will continue to do that and, in fact, do better.

 It takes balls to be a growth company in the gold sector right now, and there are a lot of balls around apparently. So we're going to continue to do it, but I would suggest that if you are a long-term holder, hold the stock for a couple of years and see what we've done. Because I think you'll see within two and a half years another great mine built, and this Company will be the fastest -- continue to be the fastest-growing intermediate producer, and more importantly, our operating costs are going to drop dramatically and will be in a very strong financial position.

 So I hope that helps a little bit, but I really would encourage people not to focus on the share sales unless you see something dramatic that doesn't make any sense. Small bits of stock are normally sold to cover taxes. Every once in a while, we will take some money off the table because we are -- we believe in diversified portfolios as well, and people shouldn't begrudge us.

 You and anybody you know can start a company and issue as many shares as you want at $0.01 or $0.02 a share. What's that company going to look like three years in a falling gold price? You probably won't (multiple speakers)

------------------------------
 Ronald A. Lloyd,  - Private Investor   [41]
------------------------------
 I have really no problem with your compensation. I think you are totally underpaid, so I don't have a problem with that. Last time I mentioned about stock buybacks, you weren't too keen on it, but with the stock price down here and a new line of credit, you can take $100 million free cash flow, almost $100 million, and you can buy it down here at $1 a share. You don't think that will be a good value for the shareholders?

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [42]
------------------------------
 No, I mean I don't traditionally believe in buybacks as I think I told you last time because I think that if that's the best that we can do with the money, that is a growth company and we should get it out and give it to you guys. We should just dividend it all out.

 At the end of the day, really, we are building a mine, and we chose to build the mine because it's the right thing to do. There is no -- so any cash we take from China to realize our objectives today will definitely be hurt if we were to buy back shares. Cash is king, and we want to make that strong cash position for the next three years as we go through building a mine. So we even have more reasons not to like them today, I guess.

 At the end of the day, look, most companies that buy their shares back, they have them going back to the same price they were before anyway, if you really look at traditionally what happens with that.

 So we're not likely to do that. We are much more likely to pay a dividend in three years. So 2018 and beyond, we would be looking as a company to be issuing a dividend. So those dividends should grow substantially with our projection of free cash flow going forward.

------------------------------
 Ronald A. Lloyd,  - Private Investor   [43]
------------------------------
 Thank you.

------------------------------
Operator   [44]
------------------------------
 (Operator Instructions) Geordie Mark, Haywood Securities.

------------------------------
 Geordie Mark,  Haywood Securities Inc. - Analyst   [45]
------------------------------
 Congratulations on a good quarter. Just to follow up with a couple of questions. Leading in with Masbate, given the evolution and the nature of the material going through the processing facility I guess through this year and next, how would you project recoveries this half and 2016? And do you think -- was there any significant impact with the delay in CIL plan expansion? I will leave that -- the first question for you, Dale, I guess.

------------------------------
 Dale Craig,  B2Gold Corp. - VP, Operations   [46]
------------------------------
 Just pulling up the number here. We're looking at average recovery through the year in the original budget of about 74%. Built into that was some -- no CIL expansion for the first three quarters. 2% adjustment on recovery in the last quarter, so that 2% recovery penalty applies for our final quarter and first quarter of 2016, and then we'll move forward.

 Longer-term, I need to pull up the projections, frankly, Geordie, to look at those. By all means, send me an email and I can comment at them a little more specifically, probably better with a little bit of time, and I can make a longer explanation for it.

------------------------------
 Geordie Mark,  Haywood Securities Inc. - Analyst   [47]
------------------------------
 Okay. No worries. Thanks, Dale. And just a follow-up question on (inaudible) obviously fantastic processing rates going through there at the moment. And that's still the same, you are through the transition getting into (inaudible) coming into Q3. Were there any demonstrable correlations with the proportion of gold coming through the gravity, and what is the proportion of gold coming through gravity? And obviously that is a question and follow-up on email?

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [48]
------------------------------
 John Rajala, do you want to answer that one?

------------------------------
 John Rajala,  B2Gold Corp. - Manager of Metallurgy   [49]
------------------------------
 Yes, sure, Clive. Well, the gravity recovery has been running 65% to 70% of the gold set into the plants. So -- and that's been since we've fine-tuned the circuit, and that included while we were processing oxide and now into transition and that's where we expect it to remain as we get into the deeper sulfite. And that's the biggest reason for our high recovery -- overall recovery through the plant.

------------------------------
 Geordie Mark,  Haywood Securities Inc. - Analyst   [50]
------------------------------
 Okay. Great. Thank you. I will follow up with a few other emails in detail. Thanks.

------------------------------
Operator   [51]
------------------------------
 Thank you. This will conclude the question-and-answer session. I would now like to turn the meeting over to Mr. Johnson.

------------------------------
 Clive Johnson,  B2Gold Corp. - President, CEO and Director   [52]
------------------------------
 Okay, well, we realize it's Friday afternoon, Becky, so thanks for your time, and we will be talking again soon, and we will be coming out, as we said, with -- after scrutinizing our mine plans and using some lower gold prices, we will be coming with that in later on of the year and continuing to focus on growing B2Gold.

 Thank you.




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