B2Gold Corp. (BTG) Q3 2022 Earnings Report, Transcript and Summary

Good day. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the B2Gold Third Quarter 2022 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.

Thank you, Michelle. Welcome, everyone. We're here to talk about as Michelle said, we're here to talk about the financial results for the third quarter of 2022 as we released them last night. I'm going to hand over to Mike shortly here to talk about -- Mike Cinnamond, our CFO, to talk about the financial results, and then Bill Lytle will give us an update on operations. As we previously announced in the production release for the third quarter, we were less than budget in terms of our ounces produced. And there are reasons for that which are detailed in the news release and we'll discuss them as well. Primarily it was higher much higher than expected rainfalls, the difficult to mine, which will allow us to access some higher grade material that was projected in our budgets. And the other main other factor was being behind schedule at Otjikoto and giving the other growth, because we had placed a contractor who was not performing with a better contractor and both of those things are identified clearly as primary as the driving force by being and line in production. And both of those are issues that are and rectify themselves as we speak. In fact, at the Fekola mine, we have a subject to finals to final auditing. We had produced approximately 77,000 ounces in October for Fekola. So that's getting into this much better grade than we couldn't get into before because of the rains, and that's the kind of performance we expect for each of the months in the fourth quarter, which if you do the math, takes us back to the projections that we have. That's why we have announced in the release very importantly, I think that we are very confident to say that we are still on target for our consolidated for the year guidance, both interest production and in terms of operating in all sustaining costs. Similarly, on a positive note, if you look at the first 9 months of the year, because we had such a strong first half of the year production. If you look at us at the end of the third quarter, we were actually very closely on budget in terms of operating all sustaining costs despite the fact that the third quarter was less than anticipated, as I've said. So the key thing here is we have our -- some of our fixed costs and those costs are divided by less ounces in the quarter because of the production shortfalls as we discussed. So therefore, we're -- and you'll hear more about why we're so confident in returning to where we've been in the fourth quarter and beating that year-end guidance. We've had over 5 years of meeting our own budgets quarter-by-quarter for over 5 years. So obviously, it's disappointing to have a quarter where we're a little bit behind, albeit catching up. But we're -- as we'll hear today with reasons why we're so confident of meeting that. We're also going to hear a little bit today from Bill on the Anaconda update, the exciting progress we're making. There were some external drill results and the Fekola complex, as we now call it, and our plans to look very seriously at building after initially trucking so saprolite material down Fekola mill looking at building another mill to focus on saprolite material to the North, which can dramatically increase the annual gold production from Fekola. In terms of -- before I pass along, just a couple of thoughts on Gramalote we announced officially that AngloGold Ashanti and ourselves have decided to put the asset up for sale. And we've discussed it before. I think it's some detailed reasons for that despite our attempts to improve the project through cutting -- through some cost-cutting measures and capital cost inflation either way of that, but also we had hopes to further drilling to perhaps upgrade the resource that didn't happen. So it's about economics of the other day did not meet our economic criteria and then AngloGold Ashanti meet the same assessment. So we're looking to see where we can go with that asset in terms of asset sale. And this is consistent with our corporate strategy of recognizing things where they shouldn't be our priorities, perhaps that don't meet our criteria such as vending the Nicaragua Assets into Calibre. They've done a very good job. We're happy to be show as of Calibre. Those projects are getting on small for -- in our world and similarly when we did the deal in Burkina Faso, West Africa mining, to own some shares in them and then cheer them on to go and build a successful project. It will probably be somewhat smaller than what we would have been envisaged to building there back in the days when we own it. So it's consistent with our strategy. Going forward, obviously, our focus will be continue to catch up in the fourth quarter on our production, get back to our quarter delivering on a good quarter. Also we will be focused as usually on the upside potential in the Fekola complex. And looking at other exploration opportunities, we are entering into more and more relationships with junior companies to help them in terms of funding their exploration programs and offerings some technical assistance. And I think that's used to be very welcome strategy in the kind of market that we're in today. So, see if we can help the juniors and ultimately down the road if they want to joint venture their project could be likely candidate as a show in the company. In addition that we are looking at M&A, we don't feel a sense of urgency in that regard, but we're always looking and I think, we probably increased our interest in potentially finding the right fit. That will require as always given our history of funding an accretive deal that would make sense to us and to our shareholders. We'll perhaps bring our expertise and financial strength and our construction expertise to bear. But the other issue there with M&A is finding oil and gas partner. And I do think today's opportunity to get into it, but I think one of the threats in the gold sector is financing alternatives such as streams and private equity financings that are very expensive and ultimately, in my opinion, damaging to the [shareholders] of these small companies down the road. So we're hoping that we can encourage people to realize the right thing in certain circumstances from their shareholders and consider opportunities with companies like B2Gold and others can come in and do a merger, an opportunity for everyone wins. And these projects get advanced on reasonable financing terms and with teams that are proven to be able to build these projects around the world. So with that, I'll pass it over to Mike Cinnamond to give us a rundown on the highlights from the Q3 results. And then as I said, Bill will talk about operations. We -- have our last majority of our executive team here are -- in fact, all of us here and on the phone. So we will take questions after and spend some time answering your various questions. So, Michelle -- sorry Mike over to you now to talk about financials.

Thanks, Clive. I think Clive's basically set the theme there for the Q and had a look at it in the quarter year-to-date. So I'm going to try and focus just putting -- I put this quarter in context of where we worked the half year, where we are at the end of the 9 months and where we expect to be for the full year. So as we've reported in results, production was lowered, 45,000 ounces in the Q overall, on a consolidated basis. And that's really -- it's a great -- it's driven by great and it's a temporary change in mine sequencing that's driven that great issue that we think it is recoverable and, overall, in the year. So we did have heavier than normal seasonal rainfall in Fekola and that limited our ability to access the higher grade ore in Phase 6 of Fekola pit, which is what we've been stripping towards and forecast to produce in the second half of the year. And then we also had delays that -- than we did identify earlier in the year and getting into the Wolfshag. And the Wolfshag Underground, higher grade ore, that were lower development rates earlier in the year and we identified that as a problem. We did replace our mining contractor there and underground development has picked up. And this is on budget now, but it didn't mean that Wolfshag production get pushed out. We felt we may have some of it in Q3, but it's actually got pushed into Q4, and when we get into the higher grades there. So really it's a sequencing issue. When you take into the context of the whole year, we expect to see it reversed in Q4. Fekola Phase 6, it's forecasted the grades for that whole mining phase of Phase 6 somewhere between 3.4 grams, 3.5 grams per tonne. We'll see the benefit of that Q4 and into next year. And through Q4 overall, I think we see Fekola mine grades somewhere north of 3 grams per tonne. And so that's the kind of like pickup in grade that we see will drive us how the higher production. We're already in the higher grade of Phase 6 now. And then Otjikoto -- we're at the Wolfshag Underground, we're facing now -- we've got stope ore. And we're also in higher grade portions of the Otjikoto pit that we've been developing. So all of those things we think that will help us pick up that production number. So with that reversal, overall, we still expect to make our full original production guidance range of between, on a full consolidated basis including Calibre of 990,000 to 1.55 million ounces. We'll make a big Q4 production on our target for Fekola and Otjikoto and basically business as usual as Masbate. But like I say, it's grade-driven and it's still -- it wasn't the mine plan, it's still on the mine plan, it's just pushed into Q4. We think it's very doable. So we think, overall, we think Fekola will be well within its original guidance range of 570,000 to 600,000 ounces. And Masbate, I think will come in at the lower end of its re-guided uplifted range of 215 million to 225 million ounces. And Otjikoto, we think will be at the low end of its re-guided range of 165,000 to 175,000, but overall consolidated basis right in the range. And then also just remember where we were at the end of half. When we are overall ahead, Fekola and Otjikoto were pretty much on budget and -- but Masbate was ahead. So when you take that context to where we were in the first half, annual on the Q3 where we did -- we are behind a little bit because sequencing. We still a bit behind in Q3, but the shortfall is not as big as the overall shortfall in Q3 and we think we can pick it up in Q4. I think Bill give a bit more detail let due course obviously then. On the operating results side, I think you also read that those results, cash costs, all-in sustaining costs, in the same context of where we were in the first half, what we have in Q3 and where we expect to go for the full year. So, for the quarter, I mean, cash cost and all-in sustaining costs were higher at all sites and expected with that primary driver being lowered Q3 production. Costs in the quarter we did continue to be impacted by higher-than-budgeted fuel costs, something that we've seen built-up over the year in most sites and some other consumables, but by far, the main one, the main drivers of fuel. But there were some offsets because Wolfshag Underground Mining is not coming online in production base in Q4 some of those costs didn't come into Q3, as we had expected. We did have some lower haulage costs and some lower-than-budgeted mining costs of Fekola due to the sequencing there of the Phase 6 production. And then we also had a weaker Namibian dollar, which benefit our cost at Otjikoto. And on the all-in sustaining cost side, higher cost, cash costs did flow into that overall all-in sustaining cost number as well. But there were some other offsets within all-in sustaining costs. There were lower than budget, it's sustaining CapEx to gain it's a timing issue. And I think we expect it to reverse in Q4. And we're also getting into continued benefit of fuel hedges as we realized some of the fuel derivatives. We've got -- we see those as an offset in the all-in sustaining costs. So again, put it all together, we're -- for the full year, we're still expecting to meet our original consolidated guidance ranges for both cash costs and all-in sustaining costs. Cash costs, we think, will be at the upper end of the range. That range is $620 to $660 per ounce. And again, that's -- it's a function of we'll get back to production number. There are slightly higher costs as fuel flows through for the whole year. But overall, we think will be within the range, but maybe at the upper end. And all-in sustaining costs we think will be in the range and look at that where we are in the context of the 9-month period. Consolidated cash costs were broadly in line with budget. Gross costs are close to budget, and we've got the impact of higher fuel costs flowing through there for the full year. But we've also got the offset some of those offsets I mentioned like lower mine tonnes of Fekola, some of the benefit of lower Wolfshag Underground mining costs an uptick in maybe dollar, all of those benefiting cash costs for the full year. And then fuel prices have increased a bit over the year, but they're not uniform at all sites. And then Fekola, as we've previously explained in our -- we actually haven't seen a big fuel increase as we might have expected. There were delays earlier in the year as the government didn't cast on what we're seeing in the market is fuel prices, but the government set pricing in the year. So that means when you look at Fekola in context year-to-date. Fuel prices were actually basically in line with budget and HFO is actually slightly on budget. And also, yes, we do see higher fuel costs at the other sites. And just for the analysts, I guess, the balance of the year we've assumed that what we saw at the end of Q3 is fuel prices, that's going to flow in Q4. That may or may not be conservative depending on what's going on in the fuel market right now. Another power or energy point to make a couple of points to make the Otjikoto -- it's now connected into the grid in the main stope. Now we see that this will significantly reduce, if not eliminate the use of HFO for powering the mill at Otjikoto as we go forward, because we can take that lower grade power when we're not using or benefiting from the solar plant there, which is significantly reduce our costs. And we've also seen the same thing in Fekola at both sites. Our solar capabilities they're -- basically reduced our mill power costs from anywhere from 17% onwards. In fact, in terms of overall costs so that benefits our overall cost profile. And when you look at all-in sustaining costs for the full first 9 months, pretty -- again, overall, pretty much in line with budget. We have both this online cash costs pretty much on budget. We've got significantly lower-than-budgeted sustaining CapEx for 9 months. We're about $36 million under, but this is another temporary thing. We think that will reverse in Q4. That's what we've guided in our results. Production year-to-date flow below, but overall we're kind of in that ballpark. And the other thing that's benefited all-in costs for the 9 months are at the fuel derivative program. So we are seeing higher fuel costs at sites, pulling not so much but the other sites a bit more. But we've also got realized gains on fuel program of about $26 million. So basically offsetting those fuel price increases. So you put all together, we think the cost, the overall cost profile for the business for the consolidated basis for the 9 months and for the year is definitely in line or can be roughly in line with budget. And so production will catch-up in Q4 -- that's temporary in Q3, CapEx will catch up in Q4 that was temporary by the end in Q3. Cash costs will be a little bit higher up the curve this fuels a little bit higher. But then we also have the benefit of Q4 derivatives. All of that means we think will bring all-in sustaining costs for the year just well within the original guidance range. In the context of what's been going on in the world all year to meet that original guidance range, we're pretty happy about. That's sort of high level picture of the operations. A few other things going on at sites, we have continued to consolidate licenses as we've gone through the year in Mali. So we picked up Bakolobi license, we picked up Dandoko and closed that now. And now, we're really looking at how, do we bring all these new licenses that we have into the production plan. And Bill will talk a bit more about what we see in Anaconda. There's a Phase 1 trucking plan, where we can get some more production through the mill from saprolite trucking. Then there's Phase 2, where we actually look at building the second, maybe an oxide mill. And that could significantly increase our production for Fekola in the short-term and, especially in the longer-term. We're also working on the various tactical agreements that we need political stability agreements to support all these things in place. Then the near to major terms so that we can sustain this production level in the long-term. Clive mentioned Gramalote. So, yes, we have agreed with our partner there that we should start sales process for Gramalote in Q4, and we'll see where that takes us. That's a high level -- the production in the truck site results, few other things maybe to comment on in the financial results themselves. Foreign exchange, we did get -- we did see a hit of $8 million in the Q. And that's a function of we've seen currencies weakened significantly in Mali and in Namibia. So in U.S. dollar terms, but when you translate those local currencies, you do, it is a foreign exchange loss. We did take a derivative loss of $8 million in the quarter as well. Most of that's unrealized, $70 million unrealized offset by $8 million realized gain in the Q, but like I say, year-to-date, the realized gains of $26 million with unrealized losses of $8 million. The other thing I'd comment on in the financial results like the tax rate. There is a significant deferred income tax expense, $35 million, and most of that foreign exchange driven again. It's an accounting issue, its non-cash. And it's basically related to the translation of tax balance sheets in Namibia, and in Mali with the reduced -- as those currencies weakened at least deferred income tax charge. So overall for the Q, factoring in the lower production, the lower sales, that keeps through in some of those other items that I highlighted. We had a loss for the period of just over $20 million -- $21 million or $0.02 per share on a GAAP basis. Once you adjust out the significant non-cash items or significant non-recurring items, we had adjusted earnings of $31 million or $0.03 per share. Then on the cash flow side, few things to highlight so, cash flow from operations for the period $93 million. We had guided that we expect to see cash flow, significantly uplift in Q3 and Q4. It's a very much a second half of the year weighted thing after this year. Cash flows -- operating cash flows for the period went as high as we thought because of that shortfall in production. So again, expect to see cash flows pick up significantly, but even more significantly weighted to Q4 as we see the higher grade come through in Q4 and the ability to sell more of those higher grade ounces. On the financing side, dividends for the period $42 million -- just under $43 million that's still about USD0.04 per share quarter level, and still one of the highest dividend yields in mining sector. And we're happy to sustain that. And then on the investing side only $55 million for CapEx in the Q like I say, we are significantly under in both sustaining and non-sustaining CapEx of budget for the Q and year-to-date, but we expect that to pick up as reversed in Q4. And overall, we see, I think, CapEx for the full year. We are pretty much going to be in our budgeted guidance range. 1 -- maybe 1 item to highlight that did happen in the quarter, we had $45 million of deferred consideration that we were waiting to come in from our sale of, as Clive mentioned, I see the spin-out of some assets, the Burkina assets to West African Resources. So we had planned to take that $45 million maybe in a mixture of cash and shares, but ultimately we elected to take all cash. Net benefited our investing cash flows by about $22.5 million this quarter. All said and done, we ended up the Q with $550 million in the bank very solid position. The line -- our revolving credit facility lines fully undrawn, $600 million on the line with another $200 million accordion feature. And a balance sheet that's overall virtually debt-free. There are some equipment loans and leases down there, but they're down to like not much more than $30 million right now, so basically debt-free on the balance sheet and very solid financial shape. So I think that's pretty much all I was going to mention in the quarterly results.

Thanks, Mike. Okay, we'll pass it over to Bill give us an indication of Waihi and the operations team are so confident about our ability to meet our projections for these.

Yes, thanks Clive. As Mike and Clive have kind of already -- at a high level, talked about, really there were two key issues -- it really boils down in two key issues. The Underground at Otjikoto, which I think we've really, since Q1, kind of been forecasting that we were going to be behind. So that shouldn't really be a surprise. And then, of course, the water issue at Fekola. Starting just working our way around all three operations, Masbate, we see in Q4, no issues there. It's steady state. As you've seen the other three quarters, we certainly see us -- we don't see any issues coming in at the lower end of our uplifted guidance. Otjikoto is -- it's been discussed. We changed out the mining contractor in April -- they got on site in April. It took them, obviously, a couple of months to get themselves all ramped up. But as of June, they were meeting or exceeding the development meters as the production schedule required. And we -- as Mike indicated, we've already got into some stope ore. And so we see in Q4 a very good quarter kind of putting us at the lower end of our revised guidance for Otjikoto. And then at Fekola, Clive hinted at or said it actually, in October, we had an amazing month in excess of 76,000 -- almost 77,000 ounces unreconciled, of course, it's still early in the month. But we see -- we definitely see the grades that we wanted to see. We have removed the water from the pit. And we don't see any issues. We're out of the rainy season now. So we don't see any issues for November and December, really seeing very similar numbers in production. As Mike said, we were seeing better than 3 grams per tonne coming through the mill now on average. And we expect that to happen through the end of the year and actually into Q1 of next year. So we think we're set up really to meet our guidance as previously discussed. So maybe, just a little bit on the development projects. Going forward into the Anaconda area, really you have to remember kind of what we were trying to do, as Mike said we're trying to do a Phase 1 and Phase 2 development for Anaconda, where Phase 1 is a trucking scenario. Basically, we're going to pick out some of the higher grade saprolite areas of the Anaconda area -- the Anaconda region and truck those down to Fekola. So what we've done? We're in the process of finalizing all the permitting, but in the meantime, all the equipment has been ordered and it's actually starting to arrive on site. All the infrastructure that being the support of buildings, things like warehouses and shops, those have all been ordered, those are currently on [largest]. The team itself -- the B2Gold construction team has started to come back together, the earthworks team and some of the infrastructure team is back already on site, doing take-offs for electrical and that type of stuff. So we certainly see that the schedule that we have putting Anaconda into production next year. In Q2, we see that is very real. Additionally, we've talked about development of the underground at Fekola. We have -- we have signed a Letter of Intent with an Underground mine contractor for that development. We are anticipating to build the onsite in January. We've already received approval from the government for the infrastructure that goes along with the Underground. So we will put that in the plan, really is to start development of the underground in Q2 of next year. That remains on schedule. Regarding kind of longer-term projects, we talked about Phase 1 being a trucking study, but we actually have Phase II where we're looking at developing a separate mill up in the Anaconda area for initially, potentially oxides only, but then potentially expanding that into fresh rock. And John Rajala and Peter Montano are the two guys developing that would like a podium. That scope has been identified and we're starting on that study right now. I think we're saying the end of Q2 next year is when we're going to kind of start to see results on that. So we see that as a very real thing so much so that we've already included some of the front-end engineering and design into the initial contract -- like the podium. So that's one you should look for us to try and fast-track. And then just talking a little bit about -- we don't give much talk to the solar plant. But I heard Mike mentioned and it maybe think of something, we're actually, as part of just part of our kind of ongoing studies, we've had a look at -- can we continue to decrease our reliance on HFO at Fekola. So John and his team are looking at a study, where we basically, during the daylight hours, take this take the HFO plant down to 0 generators, so basically running off of pure solar. So that study is getting picked up. I think we're starting -- the first meeting is tomorrow. We're talking about kind of a Q1 decision on that that also has fast-track where we could -- move very quickly and put that into production over the short-term. And then of course, as part of our Anaconda development, we'll be looking at solar out there. I think maybe, of course, Dandoko -- the Dandoko deposit. That is currently scheduled for really development in the second half of 2023. But we have to remember and we did this study with real consultants, where we're really trying to optimize production from everywhere. So it's not really -- Dandoko, while it's important to get into our schedule, we're seeing similar type grades coming out of Anaconda. So I wouldn't focus too much on when Dandoko comes in. Just know that that resource is also in the pipeline. So we're basically going to have the optionality of taking from wherever we're going to be able to expose the highest grade.

Thanks, Bill. Just before we open for questions, just to mention the exploration we've had some tremendous results that we've put out in the Anaconda region not about center, not only giving us great encouragement about the validity of building a second plant for oxide. As we discussed that could increase production to be in the thousand ounces a year from Fekola potentially. And that continues with very good results. We are expanding that oxide through this entire 25-kilometer belt we have now. But also some of the excellent drill results we've seen in Mamba and other areas. And Anaconda and now further result indicate that potential for additional Fekola sulfide type deposits -- its extensive potential throughout the belt with numerous targets, some renewed previously, some renewed based on some of the acquisitions that we've been doing. So we see this very, as Tom Garagan likes to say and the other exploration guys talked about internally is that we see this despite the great success of starting at 4 million ounces at Fekola being somewhere over 10 million ounces in resource. Now we really see it -- we're still actually in the early stages of exploration of this rather extraordinary gold belt what we now call as Bill likes to call it the Fekola Complex. But so more results coming out through the year with several rigs turning with our major program looking to further expand the oxide, saprolite material deposits, but also intriguingly following up with some of these really good grade material below through numerous targets something on the belt. So -- but we're all sort of exploring in Finland and other areas and exploration has been a big part of the success of B2Gold -- for B2Gold for holding that for many years. So that continues around -- successfully around the mine sites, but also additional opportunities. The cheapest ounces will always be the ones you find. So we have substantial exploration programs looking for more gold. With that, Michelle, we will open up for questions.

[Operator Instructions] Your first question comes from Lawson Winder of Bank of America Securities.

I wanted to start off with a question on M&A. So as you scour the globe for potential acquisitions or keep your eyes open for potential acquisitions, are you seeing any opportunities today? And what are the target geographies and sort of how large of an acquisition are you guys thinking you could make, if the opportunity comes along?

Sure Lawson well, I think the good news is we're said open across the entire spectrum given our success in the past and given our technical strength and our exploration capabilities along of the rest of the ability to -- we're so financially strong and also so technically strong do the exploration, but also construction. And because of our track record -- B2Gold, we're being able to do this almost anywhere in the world successfully, time and time again. And we always talk about that comes from the corporate culture and the -- perhaps, secret sauce of just delivering on the promises you make everywhere you go. So we're -- we can look at everything from, as we said now, early stage exploration joint ventures or investments in juniors, who are on-site projects, we think are exciting. But we can add to help them financially, but also help them with some exploration expertise and, perhaps a larger relationship down the road. We're also looking for potentially development projects. We have our construction team guys Bill mentioned getting busy now on the Fekola Complex in the Anaconda region et cetera. But we have the capability to take on another development projects, if we find the right fit. Our history through both B2Gold has been very disciplined with our tense due diligence, but very disciplined about the acquisitions we do. They have to be accretive based on a reasonable gold price, perhaps it makes sense to all of our stakeholders to why would we do transactions like that. Now, in every case we've done, every acquisition we've done, we've never paid up for exploration upside, I don't we should the same, on the other hand. We've always found tremendous exploration upside to make an accretive acquisition look even better. So, also potential mergers with other producers -- we're interested in the possibility of that as somewhere else where we can bring our financial strength, our expertise to combine with someone else's expertise in other areas of the world to combine, to go and build a bigger company. That's definitely an interest to us. But once again, it's got the right fit. We have a history of responsible development and then we -- and the acquisitions we want to continue there. I touched on it earlier. I don't want to go too much today, but I am concerned about single-asset companies whether they have a project that we may find attractive and can probably that could help with or do a friendly takeover as we've done in the past. The problem today is that there's a lot of single-asset companies out there that 10 years or 15 years ago, they would have to be in context of the market today in play. In the sense that they would have to consider a merger or a takeover from a bigger company that have the financial capabilities and the technical capabilities to build the mine. A lot of these companies cannot get traditional reasonable debt financings and project financings. They also have the market to skeptical understandably because of too many failures. Unfortunately in our industry, the last 10 years or 15 years of projects not being what was advertised in terms of construction in terms of the projects or the price pace of the projects. So you have you -- today unfortunately, I don't think it's a good thing for the long-term of the industry, because you have companies that really should be open to a merger. For the -- the best things for the shareholders are to takeover, but they have this opportunity to finance through extremes, which we know can serve a purpose, but they definitely mortgage the future of the company, maybe now or maybe later. At the end of the day, those can be in the extreme, I think can be not good for shareholders. And secondly, some of the private equity financings we're seeing are very -- if you really dig into the terms often they're redacted disclosure, which should change. But at the end of the day, you look at some of the terms of financing. So at the end of the day, they shareholders could lose out in the sense of the management of the company or the Board gets to keep going and saying it's our [baby] and understandably that -- want to try and build it. But at the end of the day, it's the cost to shareholders of that in the short and actually more partly in the mid and long-term, can be quite extreme. So I think that's a trend I don't like to see in the industry. I think we should get back to people that can do financing in reasonable terms and people know build mines, should know what's doing it, because more financial in our industry doesn't help anybody in terms of what we're seeing. So that's a disturbing trend in my mind. And I think people need to consider doing what's best for the shareholders when they look at the possible how to -- the fiduciary duty to build shareholder value. So -- but we're looking at that number of opportunities, once again we'll continue with our disciplined approach. We definitely don't feel. We know we have in our plate some of the opportunities we're seeing such as Fekola Complex expansion. We don't feel a desperation to go do it. And we seem to have based on our last Annual General Meeting, a tremendous support from our shareholders to continue the strategy of this company. Of course, the idea is to continue to grow after 10 remarkable years of growth from zero production 2 million ounces a year so far, so more to come in that regard.

Okay a lot of fruitful thought there. If I may -- I might just ask 2 more questions, I wanted to ask about the Mali and mining company audit that I think, we've all heard about, and just get your thoughts on the nature of that. And whether or not there is an expectation that could be potential changes to the mining code coming or if there's some other read-through to take from that?

I'll pass it to Mike.

Yes okay so I think that the audit is pretty way ranging. I think it's basically looking at how mining companies and governments interact, as I understand it. So I think from our point of view, it's pretty well placed in terms of the audit that it's going. Well, you see changes to the mining code. I think we've heard rumors maybe of the new mining code, obviously, whichever mining code you're under for your license under you stabilize. Could be looked forward and change it may be. But I think they're also trying to figure out under the government and the company's best interact for the benefit of mining overall in Mali. So I would say there is no, no significant ones, I want to comment on right now. Bill is probably a bit closer to it. So he may want to add something.

So I think, you materially said what they're looking for. We've actually been very working very close with them. And what we're hearing is what they're really trying to do, there's a lot of talk in Mali amongst the general population, is Mali getting the benefit out of what -- out of their goals, right. And so this is really the government's attempt to try and quantify what they actually earn from mining. So we see it as a very -- as any audit could as far as any audit could be, I suppose. We see it as a positive thing that Mali certainly could understand now just how much they do benefit from having foreign investment for sure. And the other thing is, as part, of this they've actually asked from our side, are there any things that we -- that we think the government can do to improve the relationship. So it is a bit of a 2-way street. So while it is still in audit at least it seems on the face -- that they're trying to make it better.

Yes just a couple of [things]. So we don't consider to be a predatory audit per se. This is something where, I think it's really, I'm glad you asked the question, because it's really important to understand the history of gold mining in Mali, the history of governments, of good government policies and laws towards foreign investment. And mining is very important part of the economy and some massed on the current government or previous governments or future governments and it's a great relationship. We have an excellent relationship. And if you listen to the government talk about B2Gold, we're definitely being hold us up as a good example of what they want in terms of responsible, transparent, respectful foreign investors. So we're very comfortable there and working very closely. And the government is a 20% partner, don't forget, not only Fekola, but also in the entire Fekola Complex. So the government when we talk about Anaconda, they says -- they say it was how fast you can get into production, because of the substantial revenues. Another point I'd make is, as Bill said, every all other people around the world are trying to figure out what the benefits of local communities and countries are to the mining industry, where as they should do with every industry. But if you look at a case like, once we recoups the original $500 million, $600 million of capital cost to build the mines, we funded it 100%. Then you -- then the numbers suggest that the numbers show that the benefit of -- from operating activities from the profitability of the mine and the benefit credits the mine, the Mali people through their government, through 20% ownership, through dividends, royalties, et cetera, actually get more than 50% of the economic benefit of Fekola Mine. And that's something that we're proud to talk about. In fact you -- this has to be win-win situation in the future to all mine industry and other businesses, if you're going to be a foreign investor in these countries. So I think that's an important point to remember. And that is not at all lost on the government knowledge. So we're comfortable with the current government and future government in Mali and they're moving back to democratic elections. We will continue to recognize, maybe even more so after COVID and financial struggles for many countries in the world, the importance of further foreign investment. So, and also COVID, I think we've really done an excellent job through all of our operations, we actually set records for both production during COVID, which is quite remarkable. And more importantly kept our people safe and working in these jurisdictions critically need these jobs. Final comment, in terms of mineral concessions, it's really important to point out that many countries and [Kevin] don't have the protections that you have in Mali, which is -- if you walk in into your mining convention, you lock-in your tax rates. And if you look back historically to the early '90s when AngloGold went to, one of the first movers in West Africa and Mali and others was incredibly successful to their credit to go in there early and explore and discover. The answer is very low tax rates 3% royalties, 5-year tax holidays and those things by, not many years after look like they were perhaps the best thing. They were -- industry standard deals at the time that they may not been the best thing with the benefit of hindsight in terms of -- for the country -- people of these countries. But the government of Mali never went back ever and tried to change those conventions that Randgold and other companies have. So it's really not the rule of law, which is subject to international arbitration. They'd be breaking their laws if they were to go and try and suddenly arbitrarily change tax rates et cetera. That's very important. And we have seen a history of them not doing that. So we have higher tax rates, of course, back in the day and I think they're appropriate. We have got to be careful not to kill the customer of gold today in terms of making taxation in any country too high to encourage foreign investment. But we're very comfortable with our industry there, our relationships there, and the current convention that we're under and we don't just see, I think there's a lot of misunderstanding of the marketplace sometimes of these countries, where they're always going to wake up one day and decide to nationalize mines or to dramatically increase the taxes, et cetera. We just did not see that. There is no history of that and we have no reason to see that going forward. This was an excellent relationship with B2Gold with the government of Mali, the local communities, the local governments, and we're proud of our relationship. And I believe the government, as you can hear them talk publicly about good investors, not just others, but B2Gold be a good model for responsible foreign investment in Mali.

Okay fantastic. And then just one final question, which would be on looking into 2023 on costs, but in particular, the Fekola Complex development. So it sounds like you're pretty far advanced, if you expect to have a study out in Q2 of next year. Can you give us an idea of what kind of CapEx you would expect that project to be overall? But then more, I mean, also very importantly, how much of that CapEx would you expect to show up in 2023? And just if you can provide any sort of sense of directionally where you think CapEx will be going in 2023 versus 2022 and that's it from me?

Yes so, I think John would kill me, if I started throwing numbers out. It seems we're just starting the study tomorrow and he sitting there. And he is sitting right next to me. So I don't want to -- I don't want to comment on. Certainly, when we did kind of the scoping level study, we were throwing kind of back of the envelope numbers around, which I think we actually put out there mill at $300 million or something like that. But that was just a kind of a scale up from a study we've done earlier. So let us take a little bit of time and get some real numbers in and come back to you. But we do have -- we've got a major tailings expansion next year. We're doing whole tailings facility. So that's a big one. Certainly, as you know, we're putting in the road to the Underground. We've got $50 million in capital already in this year for that. So all those projects will continue to ring the budget cycle right now. So I don't want to see what the final numbers are until we talk about it internally.

The next question comes from Anita Soni.

I just had -- some of the -- most of the questions were often asked about costs going into next year. But let me just get a little bit more color on Otjikoto and the types of grades and tonnage that you're expecting to see at Wolfshag in Q4. And will that persist onwards at this point, or should we expect a bit of a pullback in the first half of the year, next year?

So you're talking specifically about the Underground?

Yes I am, talking especially Wolfshag the Underground yes?

Okay so, just so happens and I asked because I thought somebody would ask this today. Reading email from site we're really talking about there is in excess of 6 grams in Q4 and then from -- coming from Underground, of course, that'll be blended, as you know, with the open pit and some of the lower grade stuff. And in particular -- in particular, full well, like so basically over the next little bit -- particularly for the next year, we're 6 plus grams.

Okay and what kind of tonnage, are you guys pulling now out of the Underground?

Well, let's just say for the year, we're going to project about -- just about 73,000 tonnes.

And the full ramp-up rate is what for the Underground?

Yes I don't have that. I think Peter Montano is online. He probably -- Peter, can you jump in here.

Yes so we're in the range of 1,000 tonnes a day long-term, but that's -- there some variability on that, especially because we're just preparing that first open now. So I think in another quarter or two, we'd be able to give you some much better information on that.

Okay. And then I guess a little bit more color on what you similar in terms of cost. As we're seeing costs, you talked about some of the offsets in the good Q4 that you're going to have, but as you go into next year, how are you looking at costs? Is it going to be more similar to the unit costs that you've seen in the third and what we'll see in the fourth quarter or is it -- are you already -- are you seeing any abatement in some of these inflationary pressures? Would you have some grades to offset it or rather sort of operational efficiencies that you can talk about?

Yes so it's a bit of a mixed bag, right.

Yes.

Certainly we've had a look at what the fuel. What we think fuel is going to do and then, of course, had a look at that in life of mine, but there's also shipping costs that we're starting to see some of those down. So it's a bit of a mixed bag. Once again we're right in the middle of the budget process, so it's tough to say where we're going to end up here. You got to give us another quarter.

[Operator Instructions] Our next question comes from Don DeMarco of National Bank Financial.

First question to Mike so Mike, guidance is unchanged, but if you -- you have that guidance for the cash flow from operations in Q2, you mentioned, it's $575 million for the year. How is that tracking is that also still unchanged?

I think while a couple of things there. That number had $1,700 gold price assume for the balance of the heater, obviously, we're seeing a lower number right now. We did see some cost inflation, like I mentioned, below overall will be at -- if we're at the higher the cash customers, we may see some of that ground away in terms of overall operating cash flow. And then the other thing, just as we get into Q4, it's grade based right. So it's grade weighted. So there maybe -- the portion will be on at the end of the quarter to see what we can get sold frankly. There may be a slight production -- or there may be a slight lag between production and sales as we get those higher grade ounces through the mill and available for sale. So I'd say yes 575, we may be tracking some of that right now, but it's a little hard to say until we see how this great sequencing is going to work and our production profile is going to work in Q4.

Okay, okay great. Then just shifting couple of questions for Bill and Bill, so continuing some of the questioning on Wolfshag from last caller so are you actually producing ore from stopes right now?

Literally right now, I think -- I think like yesterday or the day before was the first time that they slashed and delivered to the mill.

Okay, okay it sounds great. And then moving to another potential Underground operation in Fekola, you mentioned Underground Fekola. What would be the timing of a release, a maiden Underground resource?

Well, that's a good question for probably Brian. I mean if you remember the whole intent of developing the Underground is to get down to the face and drill it off at the face as opposed to kind of releasing a resource. So I don't know.

Yes I guess my question really just comes from just trying to get an idea of what the grades, might be like 4, 5, 6, 7, 8 grams per tonne. I'm not sure, when we have an idea. Do you have any sense right now what the Underground grade potential might be?

Brian, you take that.

Yes, it's going to be in the 4 to 6-gram range right now, everything is inferred and that spacing sort of varies between 60 to 40 meters, depending if you're looking at down plunge or down dip, but the plan is, as Bill said, to get Underground. And once we underground, and we can start drilling off the Underground and updating that inferred material to sort of an Underground indicated. So maybe by end of Q1 next year we might be able to look at releasing what it would look like and then inferred above certain cut-off grades in that 4 to 6 grams.

There are no further questions at this time. I will turn the conference back to you.

Okay, thanks, Michelle, and thanks everyone for joining us and have great day.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.