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Edited Transcript of BTO.TO earnings conference call or presentation 7-Aug-19 5:00pm GMT

Q2 2019 B2Gold Corp Earnings Call

VANCOUVER Aug 17, 2019 (Thomson StreetEvents) -- Edited Transcript of B2Gold Corp earnings conference call or presentation Wednesday, August 7, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Clive Thomas Johnson

B2Gold Corp. - President, CEO & Director

* Dennis Robert Stansbury

B2Gold Corp. - SVP of Engineering & Project Evaluations

* John Rajala

B2Gold Corp. - VP of Metallurgy

* Michael Andrew Cinnamond

B2Gold Corp. - Senior VP of Finance & CFO

* Thomas Alan Garagan

B2Gold Corp. - SVP of Exploration

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Conference Call Participants

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* Carey MacRury

Canaccord Genuity Corp., Research Division - Analyst of Metals and Mining

* Chris Thompson

PI Financial Corp., Research Division - Head of Mining Research

* Geordie Mark

Haywood Securities Inc., Research Division - Co-Head Mining Research

* Lawson Winder

BofA Merrill Lynch, Research Division - VP & Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to B2Gold Corp.'s Second Quarter and First Half 2019 Financial Results Conference Call.

I'd now like to turn the call over to Mr. Clive Johnson, President and CEO. You may proceed, Mr. Johnson.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [2]

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Thank you, operator. Thanks to all of you on the phone for joining us. As you saw came up last night, our results from the -- financial results, operating and financial results for the second quarter of 2019, and we had some very strong results, record quarterly gold production of 246,000 ounces which is 8% above budget, and we have some good beats in terms of our costs, so it was another very strong quarter. I'm going to hand it over shortly to Mike Cinnamond, our CFO, so he can get you some detail on that, and then we will -- as part of that, we'll be updating you based on what was in the news related to some of the things we're working on.

I guess I'll talk just a little bit on the front-end about strategy. Obviously, it's very nice to see the gold price up substantially and nice to see our share price reflecting that and, of course, the quarterly results as well. I think really for us, the strategy going forward doesn't change a whole lot in the sense of with gold being higher, if gold does stay higher. We try not to get too carried away when gold goes up, and we don't get too suicidal when gold's down. So at the end of the day, we like to try and keep -- this company was never built on the assumption that gold has to go higher to make money or to see our shareholders benefit, and that's been a discipline of Bema and B2Gold, and we will continue with that discipline. But I think it's really one of the things I -- we're pleased about, of course, was how well the strategy has worked for many years (inaudible) the disciplined acquisition of projects, accretive acquisitions and then responsible quality construction and operating of the mines. In addition, of course, a tremendous exploration success around our mines and exploration success in their own right.

So now we're still focused on our pipeline, and we have a lot in the pipeline. And as we said before, we don't see ourselves chasing M&A. And I would suggest with this movement in gold price, if it lasts, we're going to see other companies that need growth do the heavy lifting while we were doing it with building on Chukotka and Fekola and other things.

So but we think it's going to get more expensive to go and buy ounces. We don't need to buy ounces, we have a lot and potential in the pipeline to realize more. So the pipeline very much is, of course, Fekola expansion, which is underway and on schedule. We should have a dramatic impact on Fekola production starting next year. I think that looks like a very good strategic decision now, not only, of course, to acquire Fekola with no competition some 4 years ago for $500 million. With the work we've done, the construction and exploration, and great job we've done on operating the mine, it shown to be what we thought a world-class gold mine was the envy of many companies out there.

But also looking like a really important decision was -- our move outside the box was over 1.5 years to start a study seeking out what would it cost to expand Fekola and doing the necessary drilling to facilitate or to see if that expansion was appropriate. While we were in our first year actually still in construction in our first year of Fekola. So that leaves us -- gives us this amazing opportunity to benefit from Fekola and seeing it based on our current projections producing somewhere around 600,000 ounces starting next year and averaging 500,000-plus for the first to 5 years from now.

And the other thing is, of course, with Fekola in the pipeline, there's all of this exploration we're doing there. Tom's going to talk about that, looking to extend the size of the existing Fekola deposit. Also other targets including the Anaconda area to the north, about 20 kilometers to the north, we see huge exploration upside potential in Fekola and the area around Fekola.

Another important thing, I guess, that's coming up in the pipeline that obviously becomes pretty intriguing if gold prices are staying higher, and that, of course, is Gramalote. We're meeting next week with AngloGold Ashanti and partners to discuss the next way forward at Gramalote. For those of you not familiar with it, it's a large, potentially open pit of gold deposit in Colombia that we've been working on for many, many years.

In the last little while, AngloGold came out with a updated model. We always had some disagreements about the mines, but they came out with an updated model late last year which certainly showed potentially much better economics for Gramalote. There's a ton of work they've done, it's ready to go to feasibility. We need to do some drilling because about 45% of it, as it now turns out, is in the inferred category. So the next step forward would be to go and drill for about $20 million total costs (inaudible) go and drill Gramalote. And then [it will be slowly quite happening]. We think it looks interesting, at the generic level. So clearly, if gold is higher than that, it looks more interesting. But we need the feasibility study and it's subject to infill drilling, but we're looking forward to getting on with that. So that's another project that we own right around 49% of. And it becomes quite -- potentially quite an asset if this infill drilling proves up. So I think probably the -- another year or so, we'll -- pretty much we'll have a view of how that infill drilling has done.

Other things in the pipeline, Kiaka, which is 4 million ounce low-grade deposit in Burkina Faso, which we acquired some years ago. When we acquired it, it was a cheap acquisition because it didn't need a higher gold price in our view to be economical or exploration success. We have an exploration success of some 15, 16 kilometers in Toega, which doesn't perhaps directly impact Kiaka. But we have been doing some exploration around Kiaka as well. And obviously the gold price, the main factors at Kiaka would be the gold price and power. So we're looking at things like solar power and other things in terms of power generation, and of course, this higher gold price will make it interesting to look at Kiaka, as another potential asset in the pipeline. It might, in fact, have a shot to become a mine and a significant sized mine.

So between that and all the other things we're doing in exploration , you can see once again why we're even -- probably even -- we're just as (inaudible) not to do M&A today as we have been for 4 years because of not getting value for assets. But now of course, it's also -- the argument now is what's in the pipeline. I've said it many, many times, the cheapest ounces are the ones you find. I think we have a good track record of finding them and we've got these great projects in the pipeline and (inaudible) coming up.

Our focus as well as that is going to be debt reduction. And obviously with this kind of gold price, we can dramatically accelerate our debt reduction. We have a very low debt-to-EBITDA ratio, one of the lowest in the sector already. Actually, these type of gold prices will help us (inaudible) Mike will talk a little bit more about.

So that's the focus. Stay very focused on responsible mining and running our operations very well and look at the pipeline. We're going to talk -- Mike's going to talk a little bit about Nicaragua, what we intend to do with Calibre, and we'll touch on that as well. We think it's a win-win deal. It's good for everyone. And we think that they have a good management team and that they can, working with our people in Nicaragua and with our assistance during initial period of time, can make those projects, they are turning the corner and make those projects more successful. And also perhaps consolidate other opportunities in Nicaragua, perhaps we'll get involved in that.

So that's our overall approach and strategy. I'm going to pass over to Mike now to give a rundown of the financial results and then Tom's going to give us a little talk on exploration, and we will -- we have the entire executive team here. So we'll jump in and invite you to ask questions after that and answer your questions.

So over to you, Mike.

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [3]

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Thanks, Clive. Just before I start running through the results, just a comment on the presentation that we have in the financials and the MD&A. Because we've announced the proposed sale of Nicaraguan operations to Calibre, we've presented in the financial statements the Nicaragua results as discontinued operations. It's shown as one-liner in the P&L, and there various one-line items in the balance sheet. So the discussions and the results will focus on the continuing operations, which is our remaining 3 core mines, Fekola, Masbate, Otjikoto and then also on Nicaragua and the operations that we're proposing to sell.

So with that, I'll move to the results. Firstly, on the revenue side. From continuing operations, revenues were $267 million and overall, including Nicaragua, $310 million. And the increase there was $25 million was based on an 8% increase in ounces sold, also 2% increase in the realized gold price, and also to complete the (inaudible) quite pleasurable experience with (inaudible) on gold of $1,500 this morning and it's long way to continue.

On the operating side, I think as Clive has mentioned, the total production including continued and discontinued ops 246,000 ounces. That's a quarterly record for B2Gold, and very pleased to see it. And it's really driven similar considerations to previous quarters is outperformance by Fekola, which is 10,000 ounces ahead of budget; Masbate, which is 4,000 ounces ahead; and Otjikoto, which was 1,000 ounces ahead. On the Nicaraguan side, overall, they were 2,000 ounces ahead of budget.

So to discuss that in a little more detail. Fekola's at 114,000 ounces from the production in the quarter, 10,000 over budget. And that's really driven, again, by the higher throughput, 34% higher than budget. (inaudible) around 1.8 million tonnes through the mill in this single quarter. And because of that, as we discussed in Q1, we made a deliberate decision to feed more of the low-grade stock comp through the mill, because the mills could consume it. And we've shown that we can do that without reducing recoveries. The mills [suite] also included more saprolite and finer than expected ore feed from the primary crusher. So overall, because we've got some of that low grade stockpile material through here, grade was lower than budget, but we had much higher production.

Masbate was 58,000 ounces, 4,000 ounces higher than budget. Slightly higher throughput, 3% over budget and higher grade. Production in the quarter focused on Main Vein. And also unbudgeted backfill areas, areas that we didn't have in the mine plan but we found that did have decent grade and we put it through the mill.

Otjikoto 37,000 ounces, just 1,000 ounces above budget, basically in line. Marginally higher in throughput and recoveries there and slight beat on budget. And to remind you as well, and as we've said before, Otjikoto production this year is still significantly weighted to the second half of 2019 as we get higher grade material coming into mine plan now from Otjikoto Phase 3 in the third quarter and then from Wolfshag Phase 2 in the fourth quarter.

And Nicaragua, El Limon, 11,000 ounces, just 1,000 ounces below budget, approximately in line at Santa Pancha underground and Veta Nueva underground as development continued, plus we have rapid advancement of the Central open pit which produced a little early in -- by June, in the back of the quarter.

And Libertad side, 26,000 ounces, that's 3,000 ounces higher than budget due to higher grade. Should say as well that we did some work in the first and second quarter where we caught up on some of the deferred strip at San Juan and Mojon but that have -- we haven't been able to complete at the end of the last year. And also significantly positive for Libertad, we now have to have [a lease on an] open pit permit. We've started the development there and then first production is expected in October, so early in the fourth quarter. And so overall, I think production-wise at Nicaragua, we've turned the corner and as Clive said, both arms are performing well.

Just to comment on the cost side now. I'm going to -- on the cash cost side, I'm going to talk about cost based on ounces produced, whereas in the all in side, we're mandated to talk about it based on ounces sold. But I feel like it's easier to understand and if we talk about cash cost on the ounces produced basis.

So overall, consolidated cash cost including all operations -- sorry? No? So cash costs overall consolidated $529 an ounce, $37 lower than budget, which is basically based on the higher production in most of the sites and sort of lower on budget total operating costs. They were a bit higher than the prior-year quarter, which was $474 an ounce and that's due, a, to a deliberate decision to process the low-grade stockpile material at Fekola in this quarter. We did have budgeted an expected labor and drill increases. And then also we shouldn't forget that Fekola had an excellent startup where in our setup and initial run in 2018 when they were processing higher grade stockpiled materials and that wasn't repeated this year, as we get into steady state operations at Fekola.

Overall, in detail, Fekola was $367 an ounce, $33 less than budget. And that was due to the higher production, as discussed earlier. Total costs of production were on budget. And basically, things are running very nicely there.

Masbate, $570 an ounce, $64 lower than budget. Cash operating costs are below budget mainly due to the higher gold production and also lower than budgeted mining cost. We experienced cost savings in a number of areas including drilling and blasting, and the backfill areas, which didn't require blasting. And we also had blast pattern spacing which has increased resulted in savings in drill meters and [block basins]. And also because we focused or concentrated on production in the Main Vein area, we also had lower trucking cost and lower strip ratio.

Otjikoto was $554 an ounce, $25 lower than budget. Again, this is due to slightly higher production, also lower strip ratio than modeled at Wolfshag. And just -- as a total from continuing operations, it was $529 per ounce consolidated, all operations. But from the 3 continuing operations, the cash costs for the quarter were $456, which was -- beat budget by just over $40.

On the Nicaragua side, Limon, $953, $44 lower than budget. It was mainly lower budget due to greater activity in the Central, [they've been] sort of advancing production near the Central slightly faster than we'd anticipated. And that, as I said, was offset a little bit by a cash up development at Santa Pancha underground, which is now being done.

Libertad was $936 an ounce, slightly over budget. The higher cost per ounce mainly resulted from processing higher cost of [inventory] balances, and they're also higher due to some higher mining costs related to budgeted weight tonnes moved at San Diego and San Juan as part of that development catchup.

But overall, as we comment -- as you already know, the costs for Nicaragua almost, we'll get them in a sec on the all-in side, is definitely more weighted to the first half of the year as we did some of that catchup activity. And now that we're getting into some of the better ore sources and we have we have Jabali coming online and Limon Central coming online, we see the cost -- the second half cost profile for Nicaragua will definitely be lower than the first half. And overall, we're maintaining guidance for both operations.

Finally, just to comment on all ins for the quarter, and as I said, these are based on ounces sold. $914 consolidated, $37 under budget and mainly nearing the reduction in cash cost, as discussed earlier. And also there were some CapEx timing differences there. We have seen lower pre-strip at both Fekola and Otjikoto, lower than we'd anticipated, and some of them -- some of those pre-strip costs will be timing differences of reversal. We think there's about $11 million of budgeted pre-strip year-to-date that won't reverse that we'll see in the savings against budget.

Individually, Fekola, $625 an ounce, $80 lower than budget. Lower cash cost and also some of that pre-strip cost, which was partially offset by higher mobile fleet costs that had been budgeted for an earlier quarter was caught up in this quarter.

Masbate, $749 an ounce, over $100 an ounce lower than budget, again, reflects that lower cash operating cost and timing of some land purchasing.

Otjikoto was $1,174 an ounce, which is still under budget and that again reflects the fact that we had budgeted higher cost for Otjikoto on the first half of the year. Otjikoto's another one of those operations that definitely has production weighted to the second half, and that will impact its costs in the second half too.

For the total from continuing operations, so those 3 mines was just $807, which was nearly $90 under budget. Again on Limon and Libertad side, overall Nicaraguan operations were $1,589 all-in for the period, which was higher than budget. And that was mainly due to the timing of the CapEx and some of that catch-up CapEx timing. And like I said, as we move forward, we expect to see a reduction in those all-in sustaining costs in the second half of the year.

Maybe just a reminder overall in production guidance for the year. Fekola, we've guided between 420,000 and 430,000 ounces. We see ourselves, based on the excellent production profile to date, we see ourselves coming in at the high end of that guidance overall for the year. And also, we no longer see a significant weighting at Fekola between half 1 and half 2, just based on the fact that we're already so far ahead of the game in the first half.

Masbate, still guiding between 200,000 and 210,000, so [would be] primarily production from Main Vein. Otjikoto, the range of 165,000 and 175,000, like I said, that is weighted to the second half of the year in terms of production profile. And then Limon, still maintaining guidance 55,000 to 60,000 ounces weighted to the second half based on the timing of Central ore processing. And Libertad, 95,000 to 100,000 ounces guidance for the year, again weighted to the second half based on the timing of process of Jabali Antenna open pit underground ore sourcing.

Overall, our guidance range maintained is 935,000 to 975,000. We had originally guided that it would be fairly significantly weighted to the second half of the year versus the first half due to the stripping activity in the first half. We're now seeing that -- we don't see such a significant weighting to the second half now just based on the performance in the first half of the year.

And then also to comment, just if the Nicaraguan -- the sale does go through as we think early in Q4, we will only be picking up 31% of those operations thereafter. But we still think if that happens, say at the end of October, for example, that we'll still meet the lower end of our overall budgeted guidance range. So in total, no change to that overall range. And no change to the overall forecast cash costs and all-in sustaining costs guidance ranges.

Couple of comments on the income statement, just for your information. Mainly on the taxes, I know sometimes there's confusion as to what the tax breakdown is, particularly in Mali. So $24 million tax expense for the year -- or for the quarter, and that's made up of Fekola income tax of $13 million; Fekola government dividends, which is accounted for as a tax, $4 million; and withholding taxes of $3 million. And then we also have another $5 million in there from Masbate and that's because Masbate is now fully taxable. No tax holiday there anymore. Remember, we did guide $120 million in cash tax payments for the year including 2018 liabilities and also making 2019 cash tax installments. And we've got just under $60 million of that to go for the balance of the year.

On the income for the period, $41 million. Adjusted income was $52 million. So basic earnings per share of $0.04, adjusted earnings per share of $0.05 and year-to-date basic earnings $68 million or $0.07 a share, adjusted income $89 million or $0.09 a share.

I'm going to comment also on a few items in the cash flow statement. First thing, on the operating cash flow side, we generated just under $93 million for the quarter or $0.09 a share operating cash flow, $180 million year-to-date. We had guided at the start of the year that based on a gold price of $1,300 per ounce, we'd generate somewhere around $400 million in operating cash flow. Obviously, cash flows are significantly higher with a higher gold price, and we now see ourselves coming in sort of around maybe around the $480 million or close to about $500 million operating cash flow for the year. And just to give you an idea, every $100 change in the gold price, after royalties and taxes, translates to about $70 million in additional operating cash flows.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [4]

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That $480 million was sustaining $1,400.

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [5]

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$1,400, yes. Looking just on the financing section, we did repay $25 million on the revolver in the quarter, and we expect as we go through the year, those higher cash flows to repay more debt as we go through the year. On the investing activities section, business as usual at all the sites. If I could say, we probably got about $11 million in deferred strip that we expected to incur over the year-to-date, and we don't expect to incur now for the balance of the year.

Just a reminder, there have be various additions to the CapEx that have (inaudible) some of the original budget results were predominantly (inaudible) on prior calls and news releases. But just give to you a reminder, those are made up of mainly related to Fekola. So Fekola expansion was subsequently approved and expect to be $50 million in total for the mill expansion, $25 million this year, $25 million next year. Fekola fleet, in total now, we think that the larger trucks, larger-sized trucks, total anticipated fleet cost to be $86 million, of which $26 million is expected to be incurred this year, including some -- pulling other fleet forward in from 2018 into 2019.

Fekola Solar Plant also approved. We think it's going to be largest off-grid hybrid solar HFO plant in the world. We think that'll reduce processing costs by about 7%, and [we will take up to 3 chances] outside of operations at any point in the day. The CapEx for that is $38 million, of which $20 million is budgeted for this year with a balance of $18 million in 2020.

In addition, we also increased Fekola's exploration budget by $3 million earlier in the year. Just to fast track some more drilling in some of the targets that we've got there, I'm sure Tom can talk to in a bit. Overall, we were able -- all that's been built into the budget or into the re-forecast cash flows for this year. I'm pleased to say that with the increased operating cash flows that we have and the -- that and the budgeted production at the sites, we're able to observe all those and more and still forecast that we'll be able to pay off more debt as we go through the balance of the year.

And in addition, if the Calibre sale goes through, that's expected early in Q4, there should be another $40 million in cash proceeds. This is the [first time] the cash proceeds that'll come in, in the fourth quarter. So again, that'll add to the available cash and our ability to pay down debt.

And final comments is that based on how we see 2020 unfolding right now on our current mine plan, we'll update the mine plans later in the year. But based on the current mine plans, particularly including the expanded Fekola operation, both expanded fleet and stuff later in the year, the expanded mill, we expect significant cash flow generation next year. So we chose to be debt-free and pay the revolver down, we think we could by year-end 2020.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [6]

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(inaudible)

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [7]

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At $1,300 or $1,400 gold. So the way we see it right now, we have $375 million on the revolver, $1,400 gold, we certainly think we can pay that off over the balance of this year and the end of next year.

I think those were the main items I wanted to talk about on the results.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [8]

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Okay. Thanks, Mike. Just one clarification or one -- to add to that, the $85 million for the large expanded fleet for the Fekola expansion would be -- we anticipate financing that with equipment loans. So just that's (inaudible).

Okay. Yes, I guess we pass onto Tom now to give us an overview of -- which, obviously, major exploration budgets and a number of locations that (inaudible) of Fekola and the area around Fekola. So over to you, Tom.

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [9]

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Thank you, Clive. As Clive says, we've got a pretty major exploration budget for this year for all the projects. And up to this point, we've drilled over 100,000 meters in all our exploration projects. And in Fekola, up to this point, we've drilled 30,000 meters of diamond drilling in 100 holes -- over 100 holes and 22,000 meters of RC drilling in over 200 holes.

The focus of that has been in several areas. Initially, it was to do the infill drilling on the PEA pit, and then [we'd do] exploration in the down plunge on Fekola and to the south of Fekola and also up in the Snakes areas to the north and then to a new license we acquired to the north of that.

So just -- and we've completed the infill drilling on the PEA pit, but with the change in gold prices has forced us to look at going further down plunge. As everybody has known or I've talked about several times, our $1,400 resource pit that we came up with is really -- although it was $1,400, it was at the edge of our data, so which really says we don't know where the $1,400 pit really goes. And so we started doing some infill drilling within that $1,400 pit, and now down plunge that $1,400 pit. And the mineralization still continues. For example, we just hit a hole 413. We had almost 4 grams over 59 meters at the bottom of the $1,400 pit, so at the edge of our current resource. And at the edge of the PEA pit, we hit some holes, we had 6 grams over 20 meters, 4.5 grams over 24 meters. And we had almost 4 grams over 56 meters at the edge of the PEA pit. So that suggested the orebody is still continually strong at that edge and continually strong within the $1,400 pit. So we'll continue exploration further down plunge. We are studying -- we're talking internally about what our new gold price will be for reserves. But it certainly suggests that Fekola, although it's become one hell of a large orebody, still continues to the north and has potential to get larger again.

In addition to that, we've started saprolite drilling, extending the saprolite mineralization in Anaconda to the north with the Batanko license we recently acquired. We've hit saprolite mineralization over 1 kilometer north of the current resource, with some very significant mineralization within 500 meters of the current Mamba zone. With that mineralization, we're now doing not only the saprolite RC drilling, but we're now starting diamond drilling in the sulfide mineralization down plunge of the zones of saprolite mineralization we found at Mamba.

So in summary, although we've expanded Fekola, and it certainly looks like a really big pit, it remains significantly open to the north. And now with the saprolite mineralization, we're seeing large extensions of that mineralization beyond our current resource, and we'll continue with exploration throughout the year aggressively in those 2 areas, and we'll have results to release in probably a month or 2 time.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [10]

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Thanks, Tom. Before we open for questions, just maybe a couple comments. I do want to just -- shout out to our Nicaragua employees. We've got a tremendous group down there led by Dale Craig, who was with it from the beginning. And just a tremendous team of people that have done an excellent job over many years. We really put Nicaragua on the map for gold mining in a big way and attracted lots of other people to go in Nicaragua, including Calibre some years ago. They have experience in the country from an exploration perspective as well.

But I just wanted to thank our employees and part of our -- those of you that know our culture know how much we care about our people. So the Nicaragua deal was a really good fit for us because -- and when you look and evaluate what we got or didn't get for it, don't forget we didn't sell it outright. We didn't look -- decide to get out of Nicaragua and sell the assets. We did -- we structured a deal, we wanted our people, our legacy to continue there by combining it with Calibre. And they've got a very good, strong executive team. But our management team and our employees stayed in place. So their legacy continues. And you'll now have, with the closing of the deal, Calibre very focused on growing within Nicaragua and I'm sure other things potentially in Central America, et cetera.

So the deal was great and I think a real win-win for us. But we were happy to be 31% shareholders of Calibre. Our decision to combine with Calibre, see them go forward with the assets in Nicaragua was not based on politics. This was not a decision based on political activity. We are -- we really are great believers in Nicaragua and its people, wonderful people. It's had great success. People forget that sometimes with what's happened recently with some of the rhetoric coming from people who don't really know what they're talking about. At the end of the day, Nicaragua has been a great success story. And it's really unfortunate to see what has transpired over the last year. We believe in the country, its people and the future, and we believe that they will be successful.

And part of the reason to recognize our people down there is just the remarkable job they did over the last year, very difficult circumstances, in keeping the mines running. One thing that everyone in Nicaragua seems to -- almost everyone in Nicaragua seems to have in common is they want these mines to continue. So they want these jobs to continue. These are some of the best-paying jobs in the country. We're very safe miners, responsible environmentally and done huge social programs that have a great benefit.

Nicaragua has been good for us, and we've been very good for Nicaragua, and that continues. If, as expected, the deal closes, it continues the legacy with Calibre and our people, and also we'll [they're helping] along the way in any way that we can.

I think now we'll open it up for any questions that you might have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Geordie Mark with Haywood Securities.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [2]

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Great quarter. Just one question in several parts, I guess. On -- I guess the main call is Fekola, so let's start there. Obviously doing very well throughput plant at 7.3 million tonne run rate for the quarter. Can you give us an idea, given that you're sort of going above the original nameplate, using that capacity where available to put in stockpiles, how you foresee the sort of balance of mined tonnes in H2 versus stockpile? Or how many -- put another way, how many tonnes are coming from the -- from being mined in H2 in the current plan?

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [3]

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Tom or Randy?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [4]

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Yes. Randy is probably closer to it. I can answer if you want. But Clive [thought Randy should].

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [5]

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Randy? You there, Randy?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [6]

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Yes, maybe I'll take a shot at it. So Geordie, we see -- I mean certainly it's not just the second half of 2019 we've got to consider. As we build up our stockpiles, we've got to look at what we're doing in 2020 as well. As we put out this PEA with some pretty aggressive numbers, we want to make sure that we don't move too many ounces out of our high-grade and medium-grade stockpiles that we would have in 2020. So I think the short answer is we're managing it to be kind of what the first half looked like.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [7]

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Okay. Great. And I guess ultimately, the -- I guess the performance, well above, I guess nominal nameplate, could be expected concurrent with the up rate to 7.5 million? You'd expect 7.5 million could be 8.5 million to 9 million in the right conditions?

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [8]

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You guys want to talk about softer rock and all the rocks going to get harder? Let's talk about that. John?

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John Rajala, B2Gold Corp. - VP of Metallurgy [9]

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Yes. Well, the higher throughput now is the result of the saprolite that's in the mill feed as well as softer rock that's from the low grade that we're processing through the mill. So with all fresh rock coming in the future of higher grade, those higher -- we wouldn't have as high a throughputs now we had the higher-grade fresh rock, so and that's what the expansion is designed to process, is the high-grade, harder rock.

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [10]

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Yes. And maybe just to add on that, Geordie, one of the things that we're looking at right now, don't forget with this expansion, we've got a tie-in. And tie-in obviously means shutdown time. So when you're talking about 7.5 million or 8 million or 9 million over the course of 2020, you've got to factor in certainly we're going to have quarters where we're not going to be able to run that because we'll be shut down for a tie-in.

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [11]

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Yes, okay. Great. And maybe just some housekeeping on Libertad. I see you obviously [have your] internal mining activities started there and expecting ore, I guess, from September onwards. Can you give us an idea of kind of grade distribution Q3, Q4 and perhaps expectations on CapEx there in the current play?

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John Rajala, B2Gold Corp. - VP of Metallurgy [12]

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Yes. I can respond to that, Geordie. CapEx, really the major items in CapEx have been taken care of in the front end of the year, that includes the land acquisition and dam construction. So we're expecting CapEx to tail off for the back half of the year. And in terms of grade projections coming out of (inaudible), we're expecting it to run just under 4 grams per tonne and a contribution to the mill feed to be in the 10% to 15% range, so it punches above its weight on freight. And our advanced production will really depend how effective we are in operating the pit. That's our starting point [number one].

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Geordie Mark, Haywood Securities Inc., Research Division - Co-Head Mining Research [13]

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Fabulous. And maybe one last one, if I can, for Tom or anyone else, I guess. In terms of drilling at Fekola, you've done very well, in terms of the [hydrogen at depth]. Obviously, that's done well. It looks like you've doubled your budget there to have another $3 million. I guess that bodes well in terms of some success on grade. And you're quoting Fekola's star mineralization there, but from memory, the other target, Cardinal, is something different again?

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John Rajala, B2Gold Corp. - VP of Metallurgy [14]

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Yes, Cardinal is something different again. We don't have a lot of drilling on there right now. We're just, as we said at the beginning, tied up everywhere else. But Cardinal seems to be quite a bit tighter than Fekola. So I don't expect a Fekola target at Cardinal. I'd expect that, that may be something small, that at one point in the future, they'll carve out.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [15]

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Where is it? How far away?

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John Rajala, B2Gold Corp. - VP of Metallurgy [16]

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Cardinal is only less than 500 meters from the pit.

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Operator [17]

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Lawson Winder with Merrill Lynch.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [18]

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I actually just wanted to look at Masbate. I mean that's an asset that certainly seems hard to sort of pin down, which I mean is actually good because it's always surprising to the upside. But maybe just couple of questions on what the second half looks like. And so in your original budget, you -- or your guidance, you said 69.7% would be the average recovery for the year at Masbate. And so based on that, that would imply that the budget for H2 would be something over 80%, is that correct? And if so, what's kind of driving that expectation?

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John Rajala, B2Gold Corp. - VP of Metallurgy [19]

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Yes, the original budget concept had a significant Montana component, which is high recovery. The blend will depend on the arrival of that component. And our recoveries projected through the back half of the year will run between 69%, 70% in Q3, up to 80%, climbing to 80% in the fourth quarter, so slightly below our original projections.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [20]

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Okay. That's great. And then you also spoke about the Montana pit expansion. Are you able to give us an idea of how many ounces we're talking about there and at what grade? And then are you looking to publish an updated technical report on that?

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [21]

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No.

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [22]

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I'll have to get back to you in a minute. I've got a quick chart to check here.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [23]

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Okay. No problem. I got some other questions on Masbate as well. Just on the oxide, I mean it's always surprising to the upside in terms of the percent of oxide. So I mean I guess first off, your budget for the first half was 1% in terms of oxide. What is the budget for the second half in terms of the oxide percentage? And then maybe if you could just speak to your understanding as to what's kind of driving that huge variation in the percent of oxide versus the budget and particularly if the previously mined out areas have anything to do with that.

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John Rajala, B2Gold Corp. - VP of Metallurgy [24]

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As far -- it has a lot to do with our current mining paces. I'm anticipating through Q3, we'll run about 20% oxide in our most recent forecast, and that declines to about 2% in the final quarter of the year. Really, the blending -- the original blending strategy through Q3 and Q4, while we developed our budget, included a nice blend of low-grade ore coming from stockpiles and high recovery of material coming from Main Vein and Montana. So that blend in our forecast is changing slightly, and that's why you see the difference heading towards more oxide and less [priced] ore in our mine component.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [25]

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So from the history of that, the whole oxide history, Tom, Brian, as somebody who knows, you want to talk about what you -- why you think we're seeing so much more oxide historically than we thought we would?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [26]

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I'll give her a shot. I mean we’ve been studying this a lot. I mean couple things. First of all, that sulfide material or the stockpiles, most of those stockpiles are getting oxide if it's sitting out there between 10 years and 30 years with saltwater rain coming on them. So they've had some oxidation themselves. So there's a bit of a surprise, a positive surprise in the stockpiles. Second, and I'm guessing a little bit, but we have looked at this a lot. The interpretation of sulfide within the rocks is largely based on RC drilling where there's some diamond drilling. And what happens with RC drilling, the mineralization itself, which occurs in veins and fractures, is getting oxidized. But they're quite narrow and are hard to see when you drill RC drilling across the alteration halos around these veins have a lot of sulfides in them, and they don't get oxidized.

So I think there is a little bit of misclassification going on. I don't know how much. And we really can't, unless we redrill the whole thing with diamond drilling, we really can't change our interpretation on our models. So I think we can expect some positive changes, but I wouldn't put too much on that. I think the bigger changes is a lot of the stockpiles were classified as sulfide, and I think they're being oxidized.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [27]

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Tom, the previous owner there, they didn't spend as much time differentiating, is that right, between the different ore types?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [28]

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No. No, we certainly studied it a lot more than they had for sure.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [29]

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So that's partly why there's more -- with further analysis, there is more oxide than they had thought.

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [30]

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Yes.

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Lawson Winder, BofA Merrill Lynch, Research Division - VP & Research Analyst [31]

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Okay. That's great. That's very helpful explanation. And then just on the backfilled prior workings in the Main Vein. I mean obviously you had expected to encounter those, but have they ever been drilled out? And like to what extent can you expect that to continue, where you're actually getting grades worth processing out of those old workings?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [32]

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Again, the same thing applies to -- as we talked about with the oxidation state. When you go drill a good chunk of your orebody with RC, as what has done here in Main Vein, it's very difficult to pick out all the workings. So there's going to be some conservatism applied to the modeling of the workings. Certainly, when you're drilling RC and you go through a pit opening that's been backfilled with rock and maybe a bit of paste, you don't really pick it out in an RC hole. So I think what's happened is we've had -- we've been conservative in our modeling on some of these workings, and it's turning out to our benefit. I'd say it's [starting] to do that and not the opposite happen.

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John Rajala, B2Gold Corp. - VP of Metallurgy [33]

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Observation of conservative forecasting and recovery issue drilling through backfill, [hard to recover nothing].

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [34]

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Yes.

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [35]

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[I can take the] Montana question as well. Montana has got about 225,000 ounces at about 2 grams.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [36]

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Over what period of time will that be mined?

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [37]

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Over 2 years, approximately.

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John Rajala, B2Gold Corp. - VP of Metallurgy [38]

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Yes, we see it holding in at about 12% of our mill feed, and the grade in the coming 6 to 8 months will range from 1.4 to just over 2 grams per tonne active recovery, 80%.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [39]

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I would advise you to reach out to the guys for any more detailed technical questions. There may be other people in the queue that want to ask questions as well. So thanks for your good questions and your interest.

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Operator [40]

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(Operator Instructions) Your next question comes from Chris Thompson with PI Financial.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [41]

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Congratulations on a great quarter again. Three quick questions. Just a point of clarification on, I guess, the discussions from the previous caller on Masbate. So what I'm hearing here is that you're planning on pushing more oxide through the plant towards the back end of this year to increase the recoveries. Is that right?

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John Rajala, B2Gold Corp. - VP of Metallurgy [42]

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No, we will be sending more low-grade through the plant, not oxide, in the back end of the year, final quarter.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [43]

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Okay. And then I think you were mentioning close to 80% in the fourth quarter. Is that right?

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John Rajala, B2Gold Corp. - VP of Metallurgy [44]

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No, closer to 2% in the fourth quarter, approximately 20% oxide in the third quarter.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [45]

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So a good recovery is 80%?

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John Rajala, B2Gold Corp. - VP of Metallurgy [46]

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Say again?

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [47]

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Sorry, I'm just looking at the recoveries, what we should be modeling, I guess, in the fourth quarter.

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John Rajala, B2Gold Corp. - VP of Metallurgy [48]

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Yes. Recovery, third quarter, sits around 70%. 80% in the final quarter of the year.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [49]

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And just moving on to Otjikoto quickly. Obviously, you've been guiding for a stronger second half. I guess grade-driven, I would imagine, Phase 2 Wolfshag. Can you give us a sense of the sort of the head grade profiles we should be putting in our model for this?

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John Rajala, B2Gold Corp. - VP of Metallurgy [50]

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Yes. I'll look it up. Hold on. Yes. Maybe, Chris, call me outside of this call, and I'll let you know.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [51]

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Fine. Sorry. Sorry for asking the details here. Final question, guys. Obviously, Fekola, fantastic performance from the asset here. I think you mentioned earlier on that you're going to be managing the second half tonnes, milled tonnes, very much like what we saw in the first half of this year. Would the same be for the head grade as well?

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John Rajala, B2Gold Corp. - VP of Metallurgy [52]

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Yes. I think you could assume that. Once again, we are managing the head grade as well. And so what we're really trying to do is target an ounce profile as opposed to a grade for tonne throughput.

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Operator [53]

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Carey MacRury with Canaccord Genuity.

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Carey MacRury, Canaccord Genuity Corp., Research Division - Analyst of Metals and Mining [54]

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Just had a question on Anaconda. It looks like you've pushed out the scoping study as you're continuing to drill there. Just wondering from what you're seeing there, are you still contemplating a stand-alone operation? Or is it still potentially could be mixed in with the Fekola mill? And then finally, do you anticipate -- I was just wondering about the timeline in terms of coming up with -- or releasing details around the plan around Anaconda.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [55]

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Tom -- Dennis, I mean Tom, you want to talk to. I mean you just mentioned that it's open to the north, and we're getting good results there. So getting bigger, of course, makes this bend a little more interesting. Dennis, [do you want to talk to that a little bit]?

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Dennis Robert Stansbury, B2Gold Corp. - SVP of Engineering & Project Evaluations [56]

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Yes, it gets bigger. And some of the things we're seeing in saprolite now, it's a bit higher grade, which is the real head on this thing for making a standalone saprolite plant. And we're just kind of waiting and seeing a bit right now. Tom's guys are just really getting into the -- drilling this thing out further to the north. We'd like to give a little more definition on what we really think we've got there for 2 things, saprolite, the saprolite itself, both tonnes and grade. I mean how big can this thing get and what is the grade really. And as soon as we have a better understanding of that, we'll drop it into our models, and we'll take another look at how that plant looks and is there a hard rock component of this thing up north that we need to consider also, so will we build a different style of plant. So all the success -- with the success the exploration guys are having comes a whole new list of questions for us.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [57]

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Tom, would you just be able talk about, I don't know if you mentioned, about when we're going to be drilling the hole, the saprolite?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [58]

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Yes. So I think Dennis' point is a really good point, in terms of timing of knowing things. I mean the saprolite is getting bigger, so we're expanding the saprolite, and we have started -- we actually have our first hole #1 going into Mamba sulfide target at the north end of it. So we're still early stages on the sulfide targets. But initially, we had several targets in the sulfides, we had one in Adder, in Anaconda; we had 2 in Mamba; and now we're drilling one of our best sulfide targets in Mamba below the saprolite. So to talk about timing on when we would know what we have there, your guess is as good as mine. If hole #1 turns out a monster intersection, then we'll hit it really, really aggressively. If it's hole #50, well, we'll be working at it for a while. So it won't be hole 50, but that would be my bet. But yes, still early-stage exploration. So your guess is as good as mine as when we'll have the feasibility on it.

But I think in summary of it, I think what Dennis says and John said yesterday is let's find out what we have there in the sulfide before we decide what plant we want to build there.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [59]

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So it could be potentially a standalone if the saprolite continues to get bigger and the grade looks like there are decent areas that have got a grade. But then again it may be the saprolite gets mined in a bigger mill if it's on top of another large deposit [and the] sulfides.

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [60]

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Can I answer the other part of that question on (inaudible)?

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [61]

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Yes.

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Michael Andrew Cinnamond, B2Gold Corp. - Senior VP of Finance & CFO [62]

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So the [other part of the] question, second half of the year, Q3 grade through the mill, 1.73 grams, Q4 is 2 grams per tonne.

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Carey MacRury, Canaccord Genuity Corp., Research Division - Analyst of Metals and Mining [63]

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So just a follow-up on Anaconda. Based on the drilling today, do you think you'll be in a position to at least expand the resource at the end of the year?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [64]

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I don't think so. And just because we haven't done the edges yet. So here it's August already. Unless we find the edges, I don't know that we'll have a new resource by the end of the year.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [65]

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But we might potentially do an updated resource at some point in the next year or so, end of year if it's still open, because that -- is that right?

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Thomas Alan Garagan, B2Gold Corp. - SVP of Exploration [66]

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Yes, I -- maybe sometime next year, we'll be able to come out with a new resource.

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Operator [67]

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There are no further questions at this time. I would now like to turn the call back over to Mr. Clive Johnson for final remarks.

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Clive Thomas Johnson, B2Gold Corp. - President, CEO & Director [68]

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Thank you all for being on the call and for your interest. And as I said, you have further follow-up questions, reach out to -- through Ian to -- he'll get you in and talking to the right person here. I think we're obviously very pleased with the results that we've seen for the quarter again. And I think based on our successful growth strategy over 10 years, remember, we had no gold production 10 years ago. But based on the successful growth strategy, perhaps it's a little contrarian, I really do believe we're almost, if not uniquely positioned to continue to generate strong cash from operations, but also to continue as a real growth engine by focusing on what we have in the pipeline. So we're going to generate lots of cash flow. We were looking [for the cash flow point of view] a $1,300 gold and a debt repayment, obviously, with gold being higher, that looks even better. Our long-term goal, maybe not too long term anymore, is to continue to be a responsible producer but also obviously continue to grow. A lot of that from existing assets and through the drill bit, but also ultimately, we'd like to be a company that takes a portion of our cash we generate and uses it to grow the company's production further. But also we'll look at a dividend strategy in the future.

So I can't tell you what the gold price would have to be for us to proceed with a dividend and when yet, but we're going to be looking at that, and that's part of our goal as a company. We think we're a very attractive company for lots of investors, generalists and gold investors to look at a company that's low-cost, profitable, (inaudible) can grow from existing assets and the drill bit, based on our extraordinary track record of what we've accomplished so far but also become a dividend-paying company as well.

Once again, thank you all for your interest, and we'll look forward to talking to you soon. Have a good day.

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Operator [69]

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This concludes B2Gold Corp.'s Second Quarter and First Half 2019 Financial Results Conference Call. Thank you for your participation. You may now disconnect.