B2Gold Corp. (BTG) Q2 2021 Earnings Report, Transcript and Summary

Good afternoon, my name is Collin, and I will be your conference operator today. At this time, I'd like to welcome everyone to the B2Gold Second Quarter 2021 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Johnson, you may begin your conference.

Thanks, operator. Thanks everyone for joining us. As the operator said, we are here today to talk about our financial results from a strong Q2 of 2021, and continued strong gold production performance above budget, and we are on track to meet or exceed the upper end of our annual production guidance range, which 970,000 ounces of gold to 1.030 million ounces of gold. I’m just going to give a couple of remarks and Mike walks us through the key financial results we put on a pretty extensive news release talking about the results of the quarter, and also where we sit on our financial overall growth, and updating you on a few other issues. The three mines continue to produce well. I think as we've signaled very early and very often, that the second quarter of this year versus the first half of the year was going to be lower production and the production weighted to the second half of the year. And the second quarter of this year, we knew was going to be the weaker quarter on the financial results basis, which hopefully we signaled that very well to the market. So we're seeing the reality of that, we're also seeing a positive start to the second half of the year. In terms of overview, we'll hear the three mines continue to operate very well. We've worked very hard and diligently through the COVID experience with our communities, our employees and the governments in the areas we work with. They're proud of the contributions from everyone. And I think that, we will shore off the amount of social license and trust we have in the places that we work in that we're able to collaborate very early on and mutual trust relationship to ensure that we can continue to mine, which is critical in the countries around for the economy, but continuing mine, but only if we can do it safely. So I'm proud of the contribution from all of our – all of our employees, and people. So in terms of looking forward a little bit of talking about some of the catalysts going forward, I'll touch on that now for those, who don't make it through the whole call. But at the end of the day, where as I said we're on guidance, that's need for the year. That does not include a couple of upside potentials. As well, we have the cardinal zone, which is adjacent to Fekola, deposit and we're looking – we've already done a mock test and we're looking to start moving on from cardinal to good grade material from Cardinal through the Fekola mill, which is not included in any of our projections. So that could bump up production there. And then looking a little bit further out, we are looking at the Anaconda area which consists of Menankoto and Bantako. As we all know, were currently in dispute with the government over the ownership of the Menankoto license, we continue to discuss with the government looking to solutions. We believe we have a legal right to an extension to an exploration license where we've spent $27 million and identified a significant resource that has potential to get larger and can be tracked down potentially too difficult to Fekola mill. But importantly, the Anaconda areas where these two licenses in the Bantako North and just North of Menankoto has a significant amount of satellite weather material at surface wroth of good grades, that's actually where we would start mining the Anaconda area. And that's the license that has not on disputed. So we're looking potentially subject to – subject to the front of mine plan. And the permit working with the government is our partner there as in Fekola as well. We'll be looking to start shipping a lot of potentially the up or down to the Fekola mill, as early as the second half of -- starting in the second half, early second half of next year. The Fekola mill we talked about in the [indiscernible] we had spectacular performance in the mill from when we first constructed it and through the two expansions of the mill and we're getting some very good tonnage throughput. So that's another upside given the projections we made for tonnage throughput given the reality of what we're seeing if that continues for the year. That's another potential positive upside. And the saprolite really because of its whether nature material can run through the mill on top of the normal capacity for the mill. So there's an upside scenarios there the overall picture of the Anaconda area, we think there's tremendous exploration upside in Menankoto and Bantako and continue to join Bantako while we resolve hopefully positive results and get on with business on Menankoto. In terms of that scenario, I just want to comment that your Mali’s been a very good place to do business and Fekola mine for many years, as Menankoto now there can attest to another companies, including ourselves. So we expect to resolve this current situation, and get back to explain that Menankoto on behalf of our part of the government and the people of Mali and creating jobs in the short-term. But in the meantime, we'll go ahead and tackle, as we will have started there. Anyway, but we think Mali is a good place to be in the gold mining business. We still believe that. And we believe that the government will continue to honor the laws as it has for decades, making it an attractive place for foreign investment in gold mind. Other than we’ve got a lot of projects, everyone knows we decided to delay the feasibility study there to do some additional work on engineering with meet some different concepts there to lower them sensibly, let's lower the capital cost. It looks like we're getting some traction there from some of the early indications from the engineers. And also we're doing additional drilling on the Gramalote itself, but also on two other areas Trinidad and Monjas West and getting some interesting early results from Trinidad, which has been a low grade zone that might have gotten mine life back in the day now, which seems some potentially higher grade there. We'll see how that pans out. So we're now looking at because of COVID related delays, and getting going on the drilling and adding some more additional drilling to the program for the Gramalote area. We're looking at hopefully early in the second quarter now for the release of the new feasibility study. So we're optimistic the Gramalote and we can improve the project through some of the initiatives we have going on and we'll be able to talk about that, as I said earlier, in the second quarter. Other than we’ve got very active expression program going around many targets around the world things we've been working on, in some cases for years to get opportunities like Uzbekistan, where we're drilling, same targets in Finland, then, of course, all of our various brownfield exploration programs around the mines. We've had great success over the years, continuing to add ounces. And therefore our mine life to our operating mines. Registration will continue to be an important part of our growth profile. The Kiaka Project in Burkina Faso, we're updating the feasibility study there, and we're considering various alternatives to unlock the value that for our shareholders. M&A, we're looking definitely -- we're always looking at opportunities. We don't see a ton of things that we really love out there that we think are fair value. We'll continue to look for opportunities, but firstly to M&A is more likely we'll find some different situation where some are bringing our expertise to bear or the opportunity that may suit us that may not suit other companies. It's going to be pretty competitive environment for M&A. And we'll continue to look at that and look at opportunities very selectively, we're not going to start overpaying for assets. Now we never have before. So with that, I think I’ll general overview pass over the Mike, and he'll tell you about the financial position, we find ourselves in continuing to pay a very robust dividend, one of the highest dividend yields in the gold sector, and talk about our strong cash position and our lack of debts and continued financial strength looking into the future. So with that, I'll pass it over to Mike Cinnamond to give us an update view. We also have I think the entire B2Gold’s executive team, excuse me on the line available to answer questions after Mike's presentation. So over to you Mike.

Thanks, Clive. And good morning, everybody. Just going to run through the quarterly results, quick comment on the year-to-date and then sort of where we are cash flow wise and balance sheet wise. So firstly, on the quarter, for the second quarter with 363 million in revenues that's from the sale of 200,000 ounces at an average price of $1,814 per ounce. So gold still holds on its own, as everyone's seen in the quarter. It's kind of -- it's a bit range bound about $1,800 mark, but certainly holding its own. And when we gave guidance on cash flows for the year saturate start of the year, we actually use $1,800 gold. So right in that ballpark of where we thought when we were budgeting and giving guidance to everyone. Sales were 12,000 ounces, higher than budget in the Q and that's really a function of the overproduction at the sites. So turning to that production for the quarter, so consolidated including our share of Calibre, production was 212,000 ounces, which is basically 10,000 ounces higher than budget. And that came really from outperformance from each of our sites. Fekola, same kind of story as the first quarter. The mill -- just the throughput of the mill continues to outperform even our expectations. We did budget 7.75 million tons annualized throughput for the newly expanded Fekola mill, but even in Q1 we did 2.29 million tons, so well in excess of what we budgeted. That's a combination of a few things favorable ore fragmentation and hardness and optimizing the grinding circuit, but it's all very promising. What we did see in the Q, was that to feed some of excess production more than we thought we'd have. We did use some low grade stockpiles which provided that sort of additional unbudgeted mill feed. And that did lead to a slightly lower grade in the Q as a result. But overall, Fekola 114,000 ounces, there were 4000 ounces ahead of budget. Then Masbate 57,000 ounces production for the quarter again, 4000 ounces ahead of budget. And same story for Masbate on Q1. Mill recoveries continue to outperform our model and process grade from our transition lower and main vein we're working right now was above budget. We did actually have time in the Q to run a couple of metallurgical test campaigns just to try and help us optimize recoveries as we move forward into the hard rock later in the mills or in the mines life. And what we found from one of the test campaigns involved high grade ore from the main pit. So even though we had a bit of a downturn in throughput because of the campaign, we actually improved grade overall, because of the some of the tests that we ran. So overall, Masbate running very well still beating the model on recoveries and grade. And Otjikoto 27,000 ounces. And that's 2,000 ounces ahead of budget. And really as you know and as we guided, I think, in the budget all the way through the year so far, a lot of the production from Otjikoto majority of it was coming from stockpiles in the first half and then Otjikoto as we get into the mining, the higher grade in both Wolfshag and Otjikoto pit in the second half of the year, we're going to see a real upturn, I think in the production from that mine. But in Q3, even when we mine from sort of medium grade stockpiles the grade that we actually got was actually better than model. So we saw a beat overall in the numbers for Otjikoto. So to translate that into cash costs and this is on a per ounce produced basis, overall, across all our sites and including the share of Calibre, we're basically right on budget, $664 an ounce against the budget of $662. But there were some offsetting factors in the offsetting sites. So for Cola it was $617 a month, and that was about just over $70 an ounce higher than budget. But that's primarily a function of a couple of things. The first one, the main one is that we were running that lower grade material through the mill to feed the excess throughput, so lower grade leads to higher costs overall per ounce. And then we just see some higher costs in terms of higher than budgeted fuel prices. We've seen that across all operations and I think I'm sure you're hearing the same thing from all mining operations. But even with that, we still managed to overall on a consolidated basis to come in right on budget. So offsetting for Cola, higher cost per value was $616 an ounce produced, which is over $80 lower than budget. That's primarily a function of higher than budgeted production with generally online budgeted operating costs, a lower -- again fuel was higher in the study site. And then Otjikoto, $854 an ounce, again, just over $80 an ounce lower than budget and same kind of story, higher on budgeted production, slightly higher fuel costs and a stronger than $1. But that was also offset by higher than budgeted prescripts that we saw some more costs capitalized as part of our prescript. So overall, right on budget for the Q, consolidate for cash costs, all ends we were overall consolidate basis $30 an ounce lower that's a function as always of what happened with the cash costs in the Q, and also lower than budget sustaining CapEx as a primary reason that there's a beat on budget there. And most of that, all of that really is timing related, the main part that wasn't incurred on the sustaining capital side relates to, I guess, fleet rebuilds and stripping, mainly of Cola and Otjikoto, and we do expect to see that reverse in the second half of the year. But overall, $30 per ounce, lower than budget on a consolidated basis. And then just quick commentary on year-to-date, so year-to-date on production, we're 29,000 ounce ahead of budget. So really reflecting very good first and second quarter that we had, and it's quite matches, I think we gave a good outline of some of what we don't have in our guidance right now relates to what we can get from Cardinal as we move into Q3, we expected to come online at some point in Q3, and later in the year and also the higher production that's going through for Cola mill right now. So I think the engineers are working on those numbers, so that we can try and factor them in. So right now we haven't -- they weren't included in the guidance that we put out for the year, budgeted guidance. We do think there's definitely chance that we could beat the high end of our production rates when that's factored in. So we expect to be able to give you bit more color on that as we move into Q3 as part of the Q3 reporting. And then just comment on the cash cost, the all-in cost for the year, so on a cash cost basis, for the six months, we're $26 lower than budget that really reflects the -- although we may have some cost inflation, cost pressures across the sites, we were beaten on the production side. So overall, we're below budget there. And all-in sustaining costs are $88, below budget, again, a function of those better cash costs and some of those deferred CapEx. We're also seeing -- on the all-in sustaining cost side, we're also seeing the benefit of some fuel hedging that we've done. So as I mentioned, there were some higher class fuel costs in the period. But we've been -- had a hedging program for quite a few years now, where we had 50% of the first, the next 12 months and 25% of the subsequent 12 months on field basis, those hedges right now at the end of the quarter were about $18 million in the positive and we're seeing the benefit of those hedging gains when you look at the all-in sustaining costs, because they're factored in there. So guidance wise, like to say that either above the high end of our production range of 970 to 1037 ounces for the year. Haven't we guided on the cost, so expecting to meet probably within the ranges for cost overall, and again once we see the updated production numbers for Q3, we'll have a better idea of how that may impact any of the cost per ounce parameters. Just a couple of comments, maybe on the operations and sales. Clive mentioned Fekola and what's going on there and cardinal. Fekola solar plant also came fully online -- the construction of the plant is complete, we're still working on a few commissioning things, but really it's there and it's expected to reduce Fekola’s HFO consumption by over 13 million litres of HFO per year. And we you know, we've already said it would very successful in Namibia and now we're Nebraska to Fekola. And Fekola I think Clive has already given you an overview on that. And then just a comment Otjikoto. The gulf of Wolfshag the underground mine continues, we got the portal developments completed and now we're working on the underground – primary underground ramp to we get and we hope to get into gold production sometime in early 2022 as was forecast. Maybe just a couple of comments on some P&L items that don't fall automatically out of some of the production steps that we talked about. G&A is up a little bit in the Q and that's really, primarily it's a function of two things, increase insurance costs, the whole industry seeing insurance costs go up. Unfortunately, that's a fact of life. And part of that comes with higher gold prices because you have higher values and BI numbers to deal with. And then some of it's just ongoing higher COVID costs as you manage the sort of COVID protocols at sites. Just pointing, the gains in derivative instruments of $9 million for the Q and $17 for the year that's fuel. It's almost all of that is fuel. And that's just the positive gains on some of the hedges that we have in place. Taxes, $15 million for the Qs, CIT withholding, we're going to see higher taxes as ours is profitable gold sites and these higher gold prices. And the one thing that's in there that you know, you're going to see on an ongoing basis now there were $18 million and now for withholding tax mostly for Fekola and mostly related to dividends as we pull money up for the sites. The loans at all sites have been repaid some time ago. And now monies that are pulled up from sites repatriated via dividends. So again, it's a function of being profitable successful, but you're going to see some higher taxes here because of withholding some dividends. Overall earnings for the period – earnings per share on adjusted $0.07, adjusted EPS, $0.05 and then for the six months EPS $0.15 per share and adjusted $0.14 per share. And the adjustments are primarily to remove unrealized derivative gains and DHT charges and credits. And then just finally just wanted to mention our comments on a few items in the cash flow. We've spent a lot of time certainly trying to guide over the last couple of periods or a few quarters as to how we see cash flow unwind through this year. So it is definitely a tale of two halves this year, we have run about $140 million in Q1. And we expect about $0.5 a billion in Q2. So overall for the year, we expect about $630 million. That's what we guided at $1,800 goals. And we expect certainly to come in at that or close to that. So that guidance is unchanged. But what it did mean is that, we had basically breakeven or just start to reflect cash outflow of $8 million for the quarter for operating activities for Q2. And as guided frequently that really relates mainly to working capital changes. And the biggest component of that is payment of last year's tax obligations, most of which relate to Mali. So we paying off the Malian tax obligations, and the government dividend, which is due in the June following the next year. So 2020s government dividends or ordinary dividend for Mali was paid in the second quarter of 2021. So that's significant full there. But right as planned, I think when we look at what we guided at the end of Q1, we couldn't really be any closer for this. But I think then how we turned out so. So we're feeling very positive for the second half of the year. And once another displacer, getting into the battery grade or both Namibia and for Cola and we expect to see a significant upturn in that operating cash flows to go through the next few quarters. Couple of other comments, maybe dividend paid as Clive mentioned we paid $0.4 per share, again in the Q. Dividend yield somewhere just under 4%. So it's still right up there in terms of the gold business. And we feel very comfortable maintaining that level of dividend. Distributions to non-controlling interest, you're seeing the cash flows 7 million outflow for the Q, $9 million for the year. That's again, a function of profitability. So, we have minority -- those are related to payments to minority interest partners, both Mali where the government has a 10% dividend interest and then in Namibia where we have a 10% minority interest partner for Otjikoto. Then finally, just to comment on investing activity, so $66 million bucks for the quarter $125 million cash outflow year-to-date, were about $30 million lower than budget for the year-to-date number and about $5 million that relates to sustaining CapEx, so mostly stripping, that we'll see rollover into next year. And then non-sustaining, there's about $24 million behind a non-sustaining right now, $9 million of that relates to Gramalote. I think that's just a timing thing. We've certainly done a lot of work there now. And we'll catch-up those costs very quickly. And in fact, we were just in the process of finalizing Gramalote's revised budget for 2021 with our partners AGA we just have that formally approved now in the joint venture meeting. It's going to happen next week. So the new budget there is $69 million, that's an increase from the $52 that we had, originally in the budget and our shares, roughly $9 million of that additional for the year. And then we also expect to agree on an updated amount for the early part of next year right now it's approximately about $17 million to get us right through the final completion of the feasibility study for Gramalote. That revised look at that feasibility study. And how we think we want to approach it there. So we think now the Gramalote feasibility study will be done some sometime in Q2. Next year, it's pushed us slightly from Q1 as a result of more drilling that we've now agreed with AGA that we're going to do. Trinidad in MOS and also just ongoing COVID restrictions in Colombia, which haven't stopped us from doing work, but just makes it a little slower than we had planned. So like I said, on that CapEx side, that $30 million ounce for year-to-date we do expect to see that reverse and flow through the second half of the year. Oh sorry, I should mention the other thing on the non-sustaining CapEx that was under – it's about 11 million for exploration that hasn't been signed yet. But we've definitely got the plans and the teams assembled and working now at various sites that we expect to catch that exploration in the second part of the year. That leads us to the end of the queue with 382 million in the bank. And I like to say waiting for that – the big cash flow part of the year to come now in the second half of the year, approximately 0.5 billion from cash flow from operations to flow through and we've got the line undrawn we got 600 million line revolver, sitting with our syndicated banks that’s undrawn. So liquidity wise, we're in a excellent shape. And that concludes my remarks on the financial side of the quarter. Back to you, Clive?

Thanks, Mike. I guess we'll – operator, we’ll open up for any questions now.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Okay, your first question comes from Tyler Langton from JPMorgan. Tyler, please go ahead.

Hey, good afternoon. Thanks for taking my questions. Maybe just start with Cardinal I think you'd previously talked about it maybe being able to contribute around 20,000 to 25,000 ounces this year. Is that still the case? And then, I guess, start production? Are there any sort of permits or approvals that you need from the government?

Sure, yes. That's actually a question, Tyler. I'll pass it over to Bill to answer that. A – Bill Lytle: Yeah, thanks. So the answer is yes. You know, kind of for the whole year, that 20,000, 25,000 is certainly within the range that we talked about. Remember, that it is still a resource and inferred resource. So we're still working through that. But with that being said, certainly the initial bulk sample that we completed, in Q2 did represent quite well, what we thought was going to be there. So that number still holds true. And we have already, we went through a full update to our environmental impact assessment. And that was approved and now we're just adding it to the mining plans. We actually have this next week, the ministry is coming out to have a look at it. And so certainly we see within Q3, we'll be ready to mine it fully.

Thanks. And then just – sorry…

Go ahead, Tyler.

Okay, yes, the second question, just, I think we've certainly seen some inflationary pressures, I guess, can you just and you mentioned in the release some of new pressures, from fuel and other items, but could you just, I guess provide a little bit more details on what you're seeing whether it's materials, consumables, fuel, and if you started at any supply contracts, or fuel hedges that kind of mitigate the impact this year?

I think Mike can speak to – in fact, he touched on in his remarks about the fuel hedging. I don’t know Bill, do you want to talk other views on inflation and what we're doing to mitigate the impact? A – Bill Lytle: Yes, well, certainly, we are seeing some inflationary pressures for sure. In particular, on the shipping side, there's – as everybody comes out of COVID, the shipping costs are up. But what we're doing as far as trying to mitigate it as you know, in the last couple of years, we've become a major producer as opposed to a junior. And that's allowed us really to get global pricing everywhere. So when we go out for prices on reagents, and that type of stuff, then we're able to kind of get – all the big boys are getting the best price as possible. So, I would say that certainly there is a pressure on inflation, but we're managing it as best we can for sure. And in fuel, I think Mike was going to talk about--

On the fuel side, I don't have a lot to add than I already talked about. We are -- we have kept our fuel hedging programs up-to-date. So, we're basically 50% hedge for diesel and HFO needs for the next 12 months and then 25% for the subsequent 12 months. So -- and right now, that's on the book. It has a mark-to-market about $80 million, so it's $80 million in the positive. And then the other hedge that we've talked about historically, it's kind of like permanent hedge is we put the solar plants, firstly, in Libya, where we've used that as part of the overall hygiene approach to fuel and then obviously, with Fekola coming online as well. We think that reduces overall operating cost somewhere in that 3% range. So, that's kind of part of how we, on a permanent basis, are mitigating some of those costs risks.

Okay, great. Thanks so much. That's it for me.

Thanks Tyler.

Your next question comes from Josh Wolfson from RBC Capital Markets. Josh, please go ahead.

Thanks. Just a quick question maybe on capital allocation. Obviously, this quarter was not necessarily representative of what the go forward cash expectations are going to be, but with second half the year being positioned much better and even beyond that, with Gramalote, what's the current thinking in terms of dividend policy and what the excess cash is going to be allocated towards?

Mike?

So on that front, Josh, I think a couple of thoughts. The first one is, we're pretty comfortable like -- I think we're saying that our current dividend rate, we've got one of the highest yields out there, we put ourselves up there pretty quickly. And so we feel pretty comfortable maintaining those rates, certainly, for the long-term, even given significant fluctuations in gold price, so that was one of the reasons for certain. That is the reason we did. We are trying to balance cash flow generation with also and returning capital shareholders with being a growth company as well. So, the growth company. So, I think you'll see us run through and see where we get to by the end of the year and evaluate it then. But I think I think right now, we're pretty comfortable at the rate we're at. We don't have any plans for share buybacks and we don't have any plans for any kind of special dividend or right now for any increasing dividends.

Yes, we'll continue as Mike say to look at -- at the end of the day, we're going to have a -- as we get into later this year and into next year, we're going to have an idea of what we think about Gramalote in terms of potential capital, and the idea. I think most of our shareholders get it, we pay a very healthy dividend. But we are a growth company, we want to continue the opportunities for growth, whether it be using Anaconda, we've talked about whether it be Gramalote, or other opportunities. So, we've got the right balance for the shareholders right now. But we'll be looking at that as nicely by the end of the year. Now, obviously, if gold were to make a significant moves, that might change our thinking there as well. But I think we've -- right now, we said we've got the right balance and let's see what we look like as we get towards the end of the year.

Great. Thank you. And then maybe if I can tuck-in one more just for Otjikoto with the sequencing in the second half of the year, is there any sort of key difference between third and fourth quarter? Is there going to be just a real stepwise change now with the with the great sequencing at the bottom of the pit?

Bill, you want to tackle that one?

Yes, I'm just looking at what grade we're feeding into the mill here in the second half? The answer is, it's going to be pretty evenly broke out. So the first half, obviously, we had, a very -- not a very high output, but the second half, we're going to see it come up in Q3 and Q4.

Okay. A0nd that -- how long does that sequence go for? Like, does it go past year end 2021?

Well, we haven't done the 2022 budgets yet. So I'm a bit lull to say exactly what it's going to be.

Okay. That's it for me. Thank you very much.

Okay. Thank you. Your next question comes from Ovais Habib from Scotiabank. Please go ahead.

Thanks, Operator. Hi, Clive and B2 team. A lot of my questions have been answered. But I did have a follow up question on Cardinal. In regards to, Bill, you mentioned that, you do have -- you have submitted the environmental and social impact assessment any kind of color that you can provide to us as to how those discussions are proceeding regarding the permit?

Yes, they're proceeding very well. Like I said, we submitted the bulk sample. Now they’re just coming out to see -- basically, to see where it's all at. And to -- and not even -- I don't even think we need an official written approval. But they just got to make sure that we've implemented it correctly within our mine plan. So we see mining errors imminent.

Perfect. And in terms of mining on Cardinal side as well. Once you get the official, I guess, permit or wherever, can you start on Cardinal right away, or is there any pre strip required, any sort of CapEx required on Cardinal?

We can start right away. As part of our bulk sample, we had to move -- had moved some material out to get some representative material. So it's been kind of a twofer. We got the good metallurgical testing and we got some of the pre-stripping done.

Okay, perfect. And just a little bit more color on the Anaconda side. You had mentioned that Menankoto is not somewhere you want to start off mining in the first place. But there was opportunity to start on other areas of Anaconda. Would you look to do a bulk sample similar to what you did at Cardinal, or how should we look at Anaconda?

Yeah. That's a real interesting question, Ovais. Because, originally, we did talk about doing a big bulk sample there, with the sample-like material, certainly the sample-like material that we have done some metallurgy on it and we think that it feeds quite well. But I guess -- I guess, that's not off the table. We would consider doing a bulk sample in the Bentaku [ph] area in Q4 this year, potentially.

Okay, perfect. That's it from you guys. Thanks so much.

Thanks, Ovais.

Your next question comes from Don DeMarco from National Bank Financial. Don, please go ahead.

Okay. Thank you, Operator. And thank you, Clive and team. My first question is for Bill. So, Bill, there's a lot of moving parts at Fekola. We've got low grade stockpile just on Q2. You have the pit that Cardinal is on. What should we be thinking about in terms of grade for Q3?

So you want -- your question is, what is the grade for Q3 at Fekola?

Yeah. Well, I mean, obviously, directionally, it will be higher than Q2, but we're just trying to get a sense of the balance of these three different components and so on. And if there's anything you can kind of -- whatever you're telling people at this point?

Yeah. So in the budget, our grade, kind of in Q3, were up around 2.8, 2.83. And then in Q4, we’re between 2.5 and 2.6.

Okay, great. Bill, just continuing on, you confirm Cardinal is going to be still in that range of 20K to 25K for 2021. But how much might we expect in 2022? And you did release that five year guidance at the AGM is Cardinal included in that guidance? And any color here be appreciated?

Yes. So Cardinal is included in the original guidance that we released, but none of it -- none of the Menankoto [indiscernible] stuff is included. And so that is still yet to be factored in. The interesting, real -- the thing that's really interesting about what was going on there, is we're going to have some optionality, which you mentioned. You know, you talked about, you've got the low grade stockpiles. You've got Cardinal. You've got some Cardinal sapper light. You've got potentially Bentako sapper light. So all these things are going to be put into play. And we do the budget. And so that's why I can't say really what's going to be carrying on in Q1 and Q2 of next year. And I just want to come back to the previous question, you asked because I didn't -- I actually saw the mining. The grade in Q3 is going to be 2.73, and in Q4 in Q4 2.1.

Okay. And obviously, Cardinal is going to be lifting out a lot. But just to that second question. Cardinal 20k to 25k for 2021, but that's probably a baseline for subsequent years, I would imagine.

Well, yes, I mean, once again, we haven't really scheduled it out because we don't know how it's all going to fit in within [indiscernible] and Anaconda. So the answer is, there's, as you know, the resource is quite big there.

Okay. Great. And on that tacko, is there any concern that the mining license in that area North of Mexico could be retracted? I mean, it's pretty -- I'm pretty confident that I mean, obviously, we hope to have the portion that was taken away, restored. But what about risks to the rest of the property?

Yes. We see that as really low -- low probability. The reality is that still sitting under a very early exploration license. So there's still another I think, another seven years or six years of exploration potential there. So the fact that we're already willing to put it into production now, and of course, the government is in a need for cash. There are certainly other projects around which are getting their permits as normal. So we see metacoda as an anomaly, and we see a business as usual everywhere else.

Okay, thanks.

That's an important point. The [indiscernible] is a very different situation where we had – we believe we have the legal right to an extension to allow us to get going on and file for an exploitation license. And we believe under the law, we have the right to do that. That's a very different stage. Once again, I mentioned we're discussing with the government. We also are in arbitration in Paris, which is a big step. But we didn't do that lightly because we believe we should have a significant right here. So but [indiscernible] is very good situation from [indiscernible]and we will the government and all indications are they're very keen to see us get going in that area initially with [indiscernible]. And ultimately, I think there's a lot of will to see as the appropriate place to [indiscernible]. And then tackle is of course, the circle of mill. And that's not lost than a lot of people, including a lot of people, I would suggest we've seen governance in Maui.

Okay, guys. Good luck with the rebound in starting in Q3. Thank you.

Thanks.

Your next question comes from Carey MacRury from Canaccord Genuity. Please go ahead.

Hi. Good morning, everyone. Maybe a question for Mike on the operating cash flow guidance. 500 million in the second quarter. Is that line up with the midpoint of your production and cost guidance i.e. if you pressure guidance now, but if you do better in cost, could we see upside to that number?

On the operating cash flow side? Yeah, yeah. I mean, obviously, the more production you have, arguably, it depends what the cost profile is. I would I would balance that on the other side but we have seen some cost inflation. So our view overall is I think, we can meet our cost guidance, but -- what the cost per ounce obviously can be benefited from more lower cost production, say from Cardinal in the period but overall, I think I would view us as coming in on the range. That's, that's where we sit right now.

Okay, great. And then maybe a question for Bill. I notice in the MD&A, you guys talked about the solar plant being completed and looks like it's going better than planned. Just wondering, if you can add a little colour on, potentially that that could translate into progress.

Yeah, I mean, John Rajala is on this call, he's probably more appropriate to answer. But what I'll tell you is that we're definitely seeing designs --designs plus and given the fact that we're in the rainy season now, we certainly anticipate that we're going to be above where we thought the design capacity was going to be. John, do you want to add anything to that?

No, I think that's a good summary, Bill. During the second quarter, or the solar provided 16.8% of the total power production, but that was only with 78% of the panels installed. So it did really well for the number of panels installation, which is now completed, and we're doing testing, and we've gone up as high as 30 megawatt hour production, which is the rated capacity of the plant. So it's all looking good.

So high level, you mentioned the savings 30 million liters of HFO, which we can do the math on, but what is it like I assume the operating costs of that qualify now that again, is pretty, pretty minimal?

Yes it's minimal. So is going to contribute to roughly $0.025 per kilowatt hour savings is I think, is what we're projecting so. And we may have potentially even exceeded that.

Carey, just a reminder, I think I mentioned that in the remarks. We think overall, when you look at it on balance, it reduces cash cost by about 3%. But that's what we think the impact of solar is we see similar kind of contribution in the maybe as well.

Okay, thanks, guys.

[Operator Instructions]. And your next question comes from Anita Soni from CIBC World Market. Anita, please go ahead.

Hi, thanks for taking my call. Good morning, or afternoon Clive and team. Most questions have been answered. But can you just clarify again, one more time, in a long night, the just the cupola sort of made the components of how we're getting to the sort of the higher production in the second half of the year. So I was a little confused, because I thought you said that, you know, in the person who says Cardinals not part of the -- of what you factored into the grades. And that could be an additional upside. But I thought, Mike, that you had said that just now that that Cardinal was factored in. And so I'm just -- could you clarify that for me? And then also, secondly, on the throughput levels, it seems like you're hitting above the throughput level at Ricola [ph]. And you've got it to a slightly lower level on throughput for this -- for next year as a run rate, is there something that we should be thinking about in terms of like, additional bottlenecks, or the mind may be a bit constrained, so you can't run at that full -- full level, I think was at 8.3k ton per day that you did this quarter for in one month?

Well, I'll start with the initial question about Cardinal was factored in. It's not factored into the budgeted numbers. It's not factored in to current guidance. What I was saying in earlier remarks was when we get more clarity on exactly how we see that flowing in Q3 and Q4, we'll have a look at our guidance to see if there's any guidance where we would update that. And then, my other comments on it just more recently, it was in -- the question was do we see Cardinals potentially benefiting cash costs? And I would say, yeah, I mean, in theory it could for sure, because more production hopefully lower cost, but we are not changing our guidance range even once. Right now, we haven't changed our cost range. When we see what Cardinal looks like and give a bit more flavor to it in Q3 then we'll come back if we think it changes anything.

Okay.

Bill you’re talking about no throughput or build genre.

Yeah. I do for sure. And I also the second half of that question, I was asked if Cardinal there was we did a five year guidance, was Cardinal included in that? And the answer is yes, starting in 2022. So, going forward that was already included in our assessment for the next four-year guidance through 2025. As far as how do we see getting the additional ounces this year? There's quite a few ways that could happen for sure. One, obviously, is the throughput, right? Our budgets for this year, we’re run at 7.5. I don't know -- sorry, 7.75 million tons per annum. We're currently running up there much closer to 9. And we're thinking, once again, this is we're always kind of coy about this. But we're basically thinking if we can get a million tons of stifle right down there or something like that are 15%. We think that we could actually be running up around 9 million ton per annum going forward. And so that's kind of what we're shooting for right now. And that's what we'll be looking at for our budget. So, what we have is we have this huge extra capacity versus what's in the budget versus, which is what obviously, generates the ounce profile versus what we're actually running. So you could have ounce profile from Cardinal. You certainly have it from stockpile. And as someone mentioned earlier, if we're real slick about it, we could actually pull a bulk sample from Bentayga and bring it down. So, a bunch of different options.

All right. Thank you. That answers my question.

Excellent.

There are no further questions at this time. I'll turn it back to Clive Johnson for closing remarks.

Okay. Well, thanks for your participation and your good questions. And we look forward to a very strong second half of the year and continue to great performance in the mines and we're excited about proceeding looking around development projects, exploration and see whether other opportunities come our way and we look forward to talk with you again soon. Thanks, everybody.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.