B2Gold Corp.: Exhibit 99.2 - Filed by newsfilecorp.com
| B2GOLD CORP. |
| MANAGEMENT’S DISCUSSION AND ANALYSIS |
| For the quarter ended March 31, 2016 |
| (All tabular amounts are expressed in thousands of United
States dollars, unless otherwise stated) |
This Management’s Discussion and Analysis (“MD&A”) has
been prepared as at May 11, 2016 and contains certain “forward-looking
statements” under Canadian and United States securities laws. All statements,
other than statements of historical fact, included herein, including without
limitation statements regarding potential mineralization, exploration results
and future plans and objectives of B2Gold Corp. (the “Company” or “B2Gold”), are
forward-looking statements that involve various risks, uncertainties and
assumptions. See the “Caution on Forward-Looking Information” section. There can
be no assurance that such statements will prove to be accurate and actual
results and future events could differ materially from those anticipated in such
statements, as a result of a number of factors, including those set out in
“Risks and Uncertainties.”
The following discussion of the operating results and
financial position of the Company should be read in conjunction with the
unaudited condensed interim consolidated financial statements and the notes
thereto of the Company for the three months ended March 31, 2016 and the audited
consolidated financial statements and the notes thereto of the Company for the
year ended December 31, 2015. These consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”). All amounts
are expressed in United States dollars, unless otherwise stated.
OVERVIEW
B2Gold Corp. is a Vancouver-based gold producer with four
operating mines (one in Namibia, one in the Philippines and two in Nicaragua)
and one mine under construction in Mali. In addition, the Company has a
portfolio of other evaluation and exploration projects in Mali, Colombia,
Burkina Faso, Nicaragua, Finland and Chile. The Company currently operates the
Otjikoto mine in Namibia, which achieved commercial production on February 28,
2015, the Masbate mine in the Philippines and La Libertad mine and El Limon mine
in Nicaragua. The Company presently has an effective 90% interest in the Fekola
Project in Mali (as described below, it is expected that the State of Mali will
acquire an additional 10% interest), an 81% interest in the Kiaka Project in
Burkina Faso and a 49% interest in the Gramalote Project in Colombia.
Consolidated gold production in the first quarter of 2016 was
127,844 ounces. This exceeded budget by 8,966 ounces and was 10% greater than in
the same period of the previous year (consolidated gold production in the first
quarter of 2015 was 115,859 ounces, including 18,815 ounces of pre-commercial
production from the Otjikoto mine). The Company had gold sales of 120,899 ounces
and revenues of $144.3 million. Consolidated cash operating costs were a record
low of $499 per ounce of gold for the first quarter of 2016, which was $97 per
ounce lower than budget and $202 per ounce lower than the first quarter of 2015.
The favourable variance against budget reflects lower fuel costs at all sites, a
weaker Namibian dollar than budgeted at the Otjikoto mine and better realized
gold grades and recoveries than budgeted at the Masbate and La Libertad mines.
Consolidated cash operating costs in the first quarter of 2016 were lower than
the first quarter of 2015 for similar reasons and also benefitted from having
the Otjikoto mine operate at full capacity for a full quarter in 2016.
In March 2016, the Company entered into a series of prepaid
sales transactions, for the delivery of approximately 103,300 ounces of gold
totalling $120 million (the “Prepaid Sales”), with its revolving credit facility
bank syndicate. The Prepaid Sales transactions, in the form of metal sales
forward contracts, allow the Company to deliver the predetermined volumes of
gold on agreed future delivery dates in exchange for an upfront cash
pre-payment. The Prepaid Sales transactions have a term of 33 months commencing
March 2016, and settlement will be in the form of physical deliveries of
unallocated gold from any of the Company’s mines in 24 equal monthly instalments
during 2017 and 2018.
On March 14, 2016, the Company signed a commitment letter to
enter into a Euro equivalent of $80.9 million term Equipment Facility (“The
Equipment Facility”) with Caterpillar Financial SARL, as Mandated Lead Arranger,
and Caterpillar Financial Services Corporation, as original lender. The
aggregate principal amount of up to Euro equivalent of $80.9 million is to be
made available to the Company’s majority-owned subsidiary, Fekola SA, to finance
the mining fleet and other mining equipment at the Company's Fekola Project in
Mali.
Capital expenditures on the Fekola project in the first quarter
of 2016 totaled $46.4 million versus a construction budget of $62 million.
Expenditures on the Fekola project to date are $175.8 million including $37.9
million of preconstruction expenditures compared with a budget to date of $177
million. The variance was mainly due to the timing of payments for some key
pieces of equipment. The project remains on schedule and on budget.
1
As at March 31, 2016, the Company remained in a strong
financial position with working capital of $124.5 million including unrestricted
cash and cash equivalents of $109.1 million. In addition, the Company has $175
million of undrawn capacity on its new revolving credit facility. The Company
believes the closing of the above agreements, coupled with strong operating cash
flows from its existing mine operations, will provide adequate resources both to
maintain operations and fund the construction of the Fekola Project through
completion (forecast to be late 2017) based on current assumptions, including
current gold prices.
Subsequent to March 31, 2016, the extension of Masbate’s income
tax holiday was approved for an additional year to June 2017.
On April 26, 2016, the Otjikoto mine experienced a slope
failure on the pit access ramp. The failure, which did not result in any
injuries or damage to equipment, occurred on a fault plane that had been
activated by the recent rainy season. The stability of the slope above and below
the access ramp had been monitored for several months. Safety and production
mitigation measures were planned and implemented prior to the failure. As a
result of implementing these measures, second quarter and full year 2016
production at the Otjikoto mine are not expected to be impacted.
The Company is projecting another record year for gold
production in 2016. Consolidated gold production in 2016 is expected to be in
the range of 510,000 to 550,000 ounces. Consolidated cash operating costs in
2016 are expected to be in the range of $560 to $595 per ounce, compared to $616
per ounce in 2015. Gold production in 2016 is anticipated to be slightly
weighted towards the second-half of the year.
2
REVIEW OF FINANCIAL RESULTS
Selected Quarterly Financial and Operating Results
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
(unaudited) |
|
| |
|
2016 |
|
|
2015 |
|
| Gold revenue(2)
($ in thousands) |
|
144,252 |
|
|
138,892 |
|
| Gold sold, excluding Otjikoto pre-commercial
production results (ounces) |
|
120,899 |
|
|
114,799 |
|
| Average realized gold
price(2) ($/ounce) |
|
1,193 |
|
|
1,210 |
|
| Gold sold, total including Otjikoto
pre-commercial production results (ounces) |
|
120,899 |
|
|
133,265 |
|
| Gold produced, excluding
Otjikoto pre-commercial production results (ounces) |
|
127,844 |
|
|
97,044 |
|
| Gold produced, total including Otjikoto
pre-commercial production results (ounces) |
|
127,844 |
|
|
115,859 |
|
| Cash operating
costs(1)(2) ($/ounce gold) |
|
499 |
|
|
701 |
|
| Total cash costs(1)(2)
($/ounce gold) |
|
545 |
|
|
753 |
|
| All-in sustaining
costs(1)(2) ($/ounce gold) |
|
874 |
|
|
1,091 |
|
| Adjusted net income (1)(2)(3)
($ in thousands) |
|
18,872 |
|
|
10,908 |
|
| Adjusted earnings per share
(1)(2)(3) – basic ($) |
|
0.02 |
|
|
0.01 |
|
| Net income ($ in thousands) |
|
6,651 |
|
|
6,341 |
|
| Earnings per share –
basic(3) ($/share) |
|
0.01 |
|
|
0.01 |
|
| Earnings per share – diluted(3)
($/share) |
|
0.01 |
|
|
0.00 |
|
| Cash flows from operating
activities(4) ($ in thousands) |
|
171,553 |
|
|
58,663 |
|
| (1) |
A cautionary note regarding non-IFRS measures is
included in the section titled “Non-IFRS Measures.” |
| (2) |
Includes the results from the Otjikoto mine from March
1, 2015. |
| (3) |
Attributable to the shareholders of the
Company. |
| (4) |
Cash flows from operating activities for the period
ended March 31, 2016 include $120 million in proceeds from the Prepaid
Sales transactions. |
First quarter 2016 and 2015
Revenue
Gold revenue for the first quarter of 2016 was $144.3 million
on sales of 120,899 ounces at an average price of $1,193 per ounce compared to
$138.9 million (or $162 million including $23.1 million of pre-commercial
production sales from Otjikoto) on sales of 114,799 ounces (or 133,265 ounces
including 18,466 ounces of pre-commercial production sales from Otjikoto) at an
average price of $1,210 per ounce in the first quarter of 2015. The 4% increase
in gold revenue was mainly attributable to a 5% increase in gold sales volume,
partially offset by an approximately 1% decline in the average realized gold
price.
In the first quarter of 2016, the Otjikoto mine accounted for
$45.2 million (Q1 2015 - $16.2 million, excluding $23.1 million of
pre-commercial production sales) of gold revenue from the sale of 38,199 ounces
(Q1 2015 – 13,683 ounces excluding 18,466 ounces of pre-commercial production
sales). The Masbate mine accounted for $53.1 million (Q1 2015 - $68.4 million)
of gold revenue from the sale of 44,300 ounces (Q1 2015 – 56,500 ounces), the
Libertad mine accounted for $33.2 million (Q1 2015 - $37.5 million) of gold
revenue from the sale of 27,700 ounces (Q1 2015 – 30,816 ounces) while $12.8 million (Q1 2015 - $16.7 million) was contributed
by the Limon mine from the sale of 10,700 ounces (Q1 2015 – 13,800 ounces).
3
Production and operating costs
Consolidated gold production in the first quarter of 2016 was
127,844 ounces, exceeding budget by 8,966 ounces and 10% greater than in the
same period last year (consolidated gold production in the first quarter of 2015
was 115,859 ounces, including 18,815 ounces of pre-commercial production from
the Otjikoto mine). The increase in gold production was primarily attributable
to strong quarterly production from the Company’s Masbate mine in the
Philippines and La Libertad mine in Nicaragua. The Otjikoto mine in Namibia was
in line with budget while El Limon mine in Nicaragua was slightly behind budget,
mainly due to lower grade material processed in the first quarter of 2016.
In the first quarter of 2016, consolidated cash operating costs
were a record low of $499 per ounce, $97 per ounce or 16% less than budget. The
favourable variance reflects lower fuel costs at all sites, a weaker Namibian
dollar than budgeted at the Otjikoto mine and better realized gold grades and
recoveries than budgeted at the Masbate and La Libertad mines. Consolidated cash
operating costs in the first quarter of 2016 were lower than the first quarter
of 2015 for similar reasons and also benefitted from having the Otjikoto mine
operate at full capacity for a full quarter in 2016. Refer to “Review of mining
operations and development projects” for mine specific details.
All-in sustaining costs for the three months ended March 31,
2016 were $874 per ounce compared to budget of $1,105 per ounce and $1,091 per
ounce for the prior year quarter (refer to Non-IFRS Measures), with reductions
driven by the same factors impacting the reduction in cash operating costs per
ounce as well as lower than budgeted capital expenditures at several mine sites
during the quarter due to the timing of equipment and land purchases.
Depreciation and depletion
Depreciation and depletion expense included in total cost of
sales, was $34.3 million in the first quarter of 2016 compared to $32.8 million
in the same period in 2015. The increase in depreciation expense was mainly due
to a 5% increase in the gold ounces sold. The depreciation charge remained
relatively consistent at $284 per ounce of gold sold in the current quarter
compared $286 per ounce of gold sold in the comparative quarter.
Other
General and administrative costs (“G&A”) costs relate
mainly to the Company’s head office in Vancouver, the Managua and Santo Domingo
offices in Nicaragua, the Makati office in the Philippines, the Windhoek office
in Namibia and the Company’s other offshore subsidiaries. G&A decreased in
the first quarter of 2016 versus the comparable period in the prior year by
approximately $2.2 million. The decrease was primarily due to a reduction of
$1.4 million in cash bonuses and a $0.4 million reduction in Australian office
costs following the closure of the former Papillon corporate offices in March
2015.
The Company’s results for the first quarter of 2016 included a
non-cash mark-to-market loss of $6.0 million on the convertible senior
subordinated notes compared to a non-cash mark-to-market gain of $1.7 million in
the first quarter of 2015. The convertible notes are measured at fair value on
each financial reporting period-end date with changes flowing through the
statement of operations. The Company’s 2015 first quarter results also included
a gain of $2.2 million resulting from the sale of the Bellavista property in
January 2015 for consideration of $1 million in cash and a 2% net smelter
returns royalty on the sale of minerals produced from the Bellavista
project.
The Company reported $3.0 million (net of capitalized interest)
in interest and financing expense during the first quarter of 2016 as compared
with $1.7 million in the first quarter of 2015. The increase in interest expense
was due to increased debt levels in the period, relating mainly to the new
revolving corporate credit facility and equipment loans. Interest expense (net
of capitalized interest) relating to the convertible senior subordinated notes
was recorded as part of the overall change in fair value of the notes in the
statement of operations. During the three months ended March 31, 2016, the
Company capitalized interest costs on its borrowings attributable to funds spent
on the Fekola project in the amount of $1.8 million (Q1 2015 - $3.2 million was
capitalized to Otjikoto prior to commercial production).
For the three months ended March 31, 2016, the Company recorded
$9.5 million (2015 - $0.1 million) of unrealized losses on derivative
instruments. The net unrealized loss of $9.5 million was comprised of an
unrealized loss of $11.3 million on gold derivative instruments and an
unrealized gain of $1.8 million on the Company’s forward fuel price contracts.
The gold derivative instruments were a requirement of the Company’s previous
revolving credit facility agreement, entered into in April 2013. Following the
completion of the new revolving credit facility in 2015, these contracts are now
marked-to-market each reporting period through the statement of operations.
4
The Company recorded a net current income tax expense of $4.3
million in the first quarter of 2016 compared to a recovery of $2.3 million in
the first quarter of 2015. The net recovery in the prior year quarter was a
result of a number of factors including lower gold revenues at La Libertad in
the first quarter of 2015 and a reversal of tax provisions for previously
accrued tax assessments which were settled in the first quarter of 2015.
For the first quarter of 2016, the Company generated net income
of $6.7 million ($0.01 per share) compared to $6.3 million ($0.01 per share) in
the first quarter of 2015. Adjusted net income (refer to “Non-IFRS
Measures”) was $18.9 million ($0.02 per share) compared to $10.9 million
($0.01 per share) in the first quarter of 2015. Adjusted net income in the first
quarter of 2016 primarily excluded share-based payments of $5.4 million,
non-cash mark-to-market losses of $6.0 million relating to the overall change in
fair value of the Company’s convertible senior subordinated notes, unrealized
losses on derivative instruments of $9.5 million and a deferred income tax
recovery of $8.6 million.
Cash flow from operating activities was $171.6 million ($0.19
per share) in the first quarter of 2016 compared to $58.7 million ($0.06 per
share) in the first quarter of 2015, an increase of $112.9 million. This
increase was mainly due to $120 million of proceeds received from the Prepaid
Sales transactions and a $16.2 million reduction in production costs partially
offset by a $21.1 million negative change in non-cash working capital during the
quarter. The main change in working capital related to a $16.9 million increase
in inventory due to higher bullion inventory balances at Masbate and La Libertad
mines and higher supplies inventory balances at the Otjikoto and El Limon mines
at March 31, 2016.
As at March 31, 2016, the Company remained in a strong
financial position with working capital of $124.5 million including unrestricted
cash and cash equivalents of $109.1 million. In addition, the Company has $175
million of undrawn capacity on its new revolving credit facility. Also, on March
14, 2016, the Company signed a commitment letter to enter into a Euro equivalent
of $80.9 million term Equipment Facility with Caterpillar Financial SARL, as
Mandated Lead Arranger, and Caterpillar Financial Services Corporation, as
original lender. The aggregate principal amount of up to Euro equivalent of
$80.9 million is to be made available to the Company’s majority-owned
subsidiary, Fekola SA to finance the mining fleet and other mining equipment at
the Company's Fekola Project in Mali.
The Company believes that its current funding arrangements
coupled with strong operating cash flows from the its existing mine operations
will provide adequate resources both to maintain operations and fund the
construction of the Fekola Project through completion (forecast to be late 2017)
based on current assumptions, including current gold prices.
5
REVIEW OF MINING OPERATIONS AND DEVELOPMENT
PROJECTS
Otjikoto Mine - Namibia
| |
|
|
|
|
One month ended
March |
|
|
|
|
| |
|
Three months
ended |
|
|
31, 2015
(Post- |
|
|
Three months
ended |
|
| |
|
March 31,
2016 |
|
|
Commercial
Production) |
|
|
March 31,
2015 |
|
| Gold revenue ($ in thousands)
|
|
45,179 |
|
|
16,187 |
|
|
39,281 |
|
| Gold sold (ounces) |
|
38,199 |
|
|
13,683 |
|
|
32,149 |
|
| Average realized gold price
($/ ounce) |
|
1,183 |
|
|
1,183 |
|
|
1,222 |
|
| Tonnes of ore milled |
|
822,602 |
|
|
237,712 |
|
|
656,538 |
|
| Grade (grams/ tonne) |
|
1.37 |
|
|
1.65 |
|
|
1.53 |
|
| Recovery (%) |
|
98.5 |
|
|
98.6 |
|
|
97.2 |
|
| Gold production (ounces) |
|
35,703 |
|
|
12,319 |
|
|
31,134 |
|
| Cash operating costs(1) ($/
ounce) |
|
381 |
|
|
477 |
|
|
N/A |
|
| Total cash costs(1)
($/ ounce) |
|
419 |
|
|
515 |
|
|
N/A |
|
| All-in sustaining costs(1)
($/ounce gold) |
|
835 |
|
|
629 |
|
|
N/A |
|
| Capital
expenditures(2) ($ in thousands) |
|
18,708 |
|
|
N/A |
|
|
13,526 |
|
| Exploration(2) ($ in
thousands) |
|
589 |
|
|
N/A |
|
|
802 |
|
| (1) |
A cautionary note regarding non-IFRS measures is
included in the section titled “Non-IFRS Measures.” |
| (2) |
Capital expenditures and exploration are presented on
a quarterly basis only. |
Gold production at the Otjikoto mine for the first quarter of
2016 was 35,703 ounces against a budget of 35,653 ounces, exceeding budget by 50
ounces and 4,569 ounces higher than the same period of the previous year. For
the same period in 2015, the Otjikoto mine’s total gold production was 31,134
ounces (including 18,815 ounces of pre-commercial production).
With the success of the plant expansion project completed in
the third quarter of 2015, the budgeted throughput rate for 2016 was increased
from 6,855 tonnes per day to 9,024 tonnes per day. For the first quarter of
2016, mill throughput was 822,602 tonnes compared to a budget of 821,184 tonnes.
The average daily mill throughput for the first quarter of 2016 was 9,040 tonnes
per day versus a budget of 9,024 tonnes per day. The average mill recoveries for
the first quarter of 2016 were 98.5%, compared to a budget of 97% and recoveries
during the same period of the previous year of 97.2% . The higher recoveries
were mainly attributable to a high proportion of coarse gold (60%), combined
with leach and CIP recoveries, which were well above target. The average gold
grade processed in the first quarter of 2016 was 1.37 g/t compared to a budget
of 1.39 g/t and 1.53 g/t in the prior year quarter.
The Otjikoto mine’s cash operating costs were $381 per gold
ounce (refer to “Non-IFRS Measures”) for the first quarter of 2016 which
was $107 per ounce lower than budget and $96 per ounce lower than the prior year
quarter. The significant reduction compared to budget was attributable to a
weaker Namibian dollar/US dollar foreign exchange rate, lower fuel prices and
lower than budgeted consumption of grinding media. Mining and processing costs
were positively impacted by diesel and gasoline prices which were 19% lower than
budget, heavy fuel oil (“HFO”) prices which were 37% lower than budget and a 17%
weaker Namibian dollar/US dollar foreign exchange than budgeted. Cash operating
costs of $477 in the first quarter of 2015 reflect only one month of operations
following achievement of commercial production on February 28, 2015. All-in
sustaining costs for the three months ended March 31, 2016 were $835 per ounce
compared to a budget of $844 per ounce and $629 per ounce in the prior year
quarter. All-in sustaining costs in the quarter reflect the reduction in cash
operating costs noted above offset by higher than budgeted capital expenditures
in the quarter due to the timing of equipment purchases.
6
Net capital expenditures in the first quarter of 2016 totalled
$18.7 million and included $5.4 million for deferred stripping and $12.8 million
for mobile equipment.
On April 26, 2016, the Otjikoto mine experienced a slope
failure on the pit access ramp. The failure, which did not result in any
injuries or damage to equipment, occurred on a fault plane that had been
activated by the recent rainy season. The stability of the slope above and below
the access ramp had been monitored for several months. Safety and production
mitigation measures were planned and implemented prior to the failure. As a
result of implementing these measures, second quarter and full year 2016
production at the Otjikoto mine are not expected to be impacted. The Otjikoto
mine team in conjunction with consultant experts have already adopted a plan to
buttress the failure zone and recover the access ramp, and to construct an
alternative access ramp which will be utilized until the depletion of the Phase
1 pit ore in November 2016. Ore supply will be supplemented from other sources
whilst the ramp is being repaired and the second ramp is being constructed.
The Company’s guidance for the Otjikoto mine remains unchanged.
In 2016, the Otjikoto mine is expected to produce between 160,000 to 170,000
ounces of gold at cash operating costs between $400 to $440 per ounce. The mine
is on target to achieve budgeted gold production for the year. With the
high-grade Wolfshag zone entering the production phase towards the end of the
fourth quarter 2016, gold production in 2017 is expected to increase
significantly. A new life of mine plan, based on the new grade model and
geotechnical data, which will include mining from the Wolfshag deposit, is
expected to be completed during the fourth quarter of 2016.
Masbate Mine – Philippines
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| Gold revenue ($ in thousands)
|
|
53,101 |
|
|
68,448 |
|
| Gold sold (ounces) |
|
44,300 |
|
|
56,500 |
|
| Average realized gold price
($/ ounce) |
|
1,199 |
|
|
1,211 |
|
| Tonnes of ore milled |
|
1,785,891 |
|
|
1,756,234 |
|
| Grade (grams/ tonne) |
|
1.26 |
|
|
1.05 |
|
| Recovery (%) |
|
72.9 |
|
|
78.5 |
|
| Gold production (ounces) |
|
52,727 |
|
|
46,241 |
|
| Cash operating costs(1) ($/
ounce gold) |
|
456 |
|
|
674 |
|
| Total cash costs(1)
($/ ounce gold) |
|
511 |
|
|
735 |
|
| All-in sustaining costs(1)
($/ounce gold) |
|
638 |
|
|
877 |
|
| Capital expenditures ($ in
thousands) |
|
8,514 |
|
|
4,126 |
|
| Exploration ($ in thousands) |
|
466 |
|
|
1,204 |
|
| (1) |
A cautionary note regarding non-IFRS measures is
included in the section titled “Non-IFRS
Measures.” |
The Masbate mine had a very strong first quarter in 2016, producing 52,727 ounces of gold against a budget of 45,483 ounces, 7,244 ounces or 16% better than budget, and an increase of 14% or 6,486 ounces compared to the same period in 2015 (gold production for the first quarter in 2015 at the Masbate mine was 46,241 ounces). Gold production improved against budget mainly due to better grades from the Main Vein pit and higher throughput and recoveries driven by higher than budgeted oxide ore from the Colorado pit. Mill throughput for the first quarter of 2016 was 1,785,891 tonnes compared to a budget of 1,658,404 tonnes and 1,756,234 tonnes in the first quarter of 2015. The average gold grade processed was 1.26 g/t compared to a budgeted grade of 1.21 g/t and first quarter 2015 grades of 1.05 g/t. Mill recoveries averaged 72.9% which was better than budgeted recoveries of 70.3% but lower than recoveries in the first quarter of 2015 of 78.5%. Recoveries in the first quarter were better than budget as the Company processed 30% oxide material and 70% sulfide/transitional material in the first quarter of 2016 versus a budget of 14% and 86%, respectively. B2Gold expects to mine a similar ratio of oxide ore (30%) and sulfide/transitional ore (70%) against a budget of 17% oxide ore and 83% sulfide/transitional ore in the second quarter of 2016. Recoveries were less than the same period the previous year due to less oxide material being processed at the mill.
7
The Masbate mine’s cash operating costs were $456 per gold
ounce (refer to “Non-IFRS Measures”) in the first quarter of 2016 which
was $134 per ounce lower than budget and $218 per ounce lower than in the
prior-year quarter. These excellent cost improvements were as a result of lower
than budgeted fuel costs and better than budgeted productivity from the mining
fleet, combined with higher than budgeted production driven by higher grade and
recoveries as discussed above. Heavy fuel oil purchases were $0.23 per litre
compared to a budget of $0.33 per litre, resulting in power costs of $0.09 per
kWh versus a budget of $0.11 per kWh. Diesel purchases were $0.34 per litre
compared to a budget of $0.50 per litre. Cash costs in the prior year quarter
were higher due to higher fuel costs, lower throughput as a result of a SAG mill
pinion change out in January 2015 and lower grade processed. All-in sustaining
costs for the three months ended March 31, 2016 were $638 per ounce compared to
a budget of $872 per ounce and $877 per ounce in the prior year quarter. In
addition to lower production costs, all-in sustaining costs were also below
budget due to timing of equipment purchases and land acquisition costs.
Capital expenditures in the first quarter of 2016 totalled $8.5
million consisting of plant expansion costs of $4.4 million, $1.7 million in
deferred stripping costs and $0.4 million in mobile equipment costs.
B2Gold is in the process of completing a process plant upgrade
at the Masbate mine. The plant will be completed in phases and is expected to be
commissioned and in production by the end of the third quarter of 2016. Key
milestones include the following:
| |
• |
Carbon Harvest Screen installation |
| |
• |
Leaching/Adsorption tank completion |
| |
• |
Grinding Circuit upgrades completion |
| |
• |
Water Treatment Plant and Cooling System
upgrade completion |
| |
• |
Carbon Regeneration Kiln installation and
commissioning |
Total 2016 process plant expansion costs are budgeted to be
$15.7 million of which $4.4 million has been incurred to date.
The Masbate mine is projected to produce approximately 175,000
to 185,000 ounces of gold in 2016 at cash operating costs of approximately $620
to $660 per ounce.
Subsequent to March 31, 2016, the extension of Masbate’s income
tax holiday was approved for an additional year to June 2017.
8
La Libertad Mine - Nicaragua
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| Gold revenue ($ in thousands)
|
|
33,193 |
|
|
37,535 |
|
| Gold sold (ounces) |
|
27,700 |
|
|
30,816 |
|
| Average realized gold price
($/ ounce) |
|
1,198 |
|
|
1,218 |
|
| Tonnes of ore milled |
|
576,487 |
|
|
586,006 |
|
| Grade (grams/ tonne) |
|
1.66 |
|
|
1.48 |
|
| Recovery (%) |
|
94.7 |
|
|
93.9 |
|
| Gold production (ounces) |
|
29,198 |
|
|
25,326 |
|
| Cash operating costs(1) ($/
ounce gold) |
|
623 |
|
|
841 |
|
| Total cash costs(1)
($/ ounce gold) |
|
649 |
|
|
868 |
|
| All-in sustaining costs(1)
($/ounce gold) |
|
1,043 |
|
|
1,213 |
|
| Capital expenditures ($ in
thousands) |
|
8,780 |
|
|
6,139 |
|
| Exploration ($ in thousands) |
|
726 |
|
|
1,049 |
|
| (1) |
A cautionary note regarding non-IFRS measures is
included in the section titled “Non-IFRS
Measures.” |
La Libertad mine completed a solid first quarter in 2016,
processing 576,487 tonnes compared to a budget of 573,236 tonnes and 568,006
tonnes in the prior-year quarter to produce 29,198 ounces of gold against a
budget of 25,984 ounces. This was an increase of 3,214 ounces or 12% against
budget and 3,872 ounces or 15% compared to the same period the previous year
(gold production at Libertad in the first quarter of 2015 was 25,326 ounces).
The average gold grade processed in the first quarter of 2016 was 1.66 g/t
compared to a budget of 1.50 g/t and first quarter 2015 grades of 1.48 g/t. Mill
recoveries for the first quarter averaged 94.7% compared to a budget of 94% (for
the first quarter of 2015 they were 93.9%) .
During the first quarter of 2016, La Libertad mine had better
grade and recoveries compared to both budget and the same period in 2015, due to
processing of less spent ore and processing of higher grade material from the
Jabali Central and Los Angeles pits.
La Libertad mine’s cash operating costs were $623 per gold
ounce (refer to “Non-IFRS Measures”) for the first quarter of 2016 which
was $87 per ounce lower than budget and $218 per ounce lower than in the
prior-year quarter. This was the result of higher than budgeted gold production
compared with both budget and the prior-year quarter. Total production costs
were approximately in line with budget, however, the average grade was 12%
higher, as described above, resulting in higher production and therefore a lower
cash operating costs per ounce. All-in sustaining costs for the three months
ended March 31, 2016 were $1,043 per ounce compared to a budget of $1,578 per
ounce and $1,213 per ounce in the prior year quarter. Part of the lower than
budgeted all in sustaining costs relates to the deferral of Jabali resettlement
and development costs until later in 2016.
Total capital expenditures in the first quarter of 2016 were
$8.8 million, consisting primarily of La Esperanza Tailings Dam expansion of
$3.5 million, land purchases of $2.6 million and prestripping of $2.3
million.
Mining from the higher grade Jabali Antenna pit was scheduled
to commence in the second quarter of 2016. However, the Company has experienced
additional delays in relocation and permitting activities. As a result, the
Company now anticipates that the Jabali Antenna pit will enter the
production stream in late 2016, upon completion of the resettlement activities
and receipt of remaining mining permits.
9
By mining additional material from Jabali Central and Mojon
underground, the Company believes that any 2016 production shortfalls arising
from delays in accessing ore at the Jabali Antenna pit can be offset. Therefore,
it still expects to meet 2016 production guidance for La Libertad mine of
between 125,000 to 135,000 ounces of gold in 2016 at cash operating costs of
approximately $650 to $680 per ounce.
El Limon Mine – Nicaragua
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| Gold revenue ($ in thousands)
|
|
12,779 |
|
|
16,723 |
|
| Gold sold (ounces) |
|
10,700 |
|
|
13,800 |
|
| Average realized gold price
($/ ounce) |
|
1,194 |
|
|
1,212 |
|
| Tonnes of ore milled |
|
116,481 |
|
|
122,677 |
|
| Grade (grams/ tonne) |
|
2.92 |
|
|
3.54 |
|
| Recovery (%) |
|
93.6 |
|
|
94.1 |
|
| Gold production (ounces) |
|
10,216 |
|
|
13,158 |
|
| Cash operating costs(1) ($/
ounce) |
|
775 |
|
|
738 |
|
| Total cash costs(1)
($/ ounce) |
|
860 |
|
|
818 |
|
| All-in sustaining costs(1)
($/ounce gold) |
|
1,127` |
|
|
1,356 |
|
| Capital expenditures ($ in
thousands) |
|
1,380 |
|
|
5,397 |
|
| Exploration ($ in thousands) |
|
508 |
|
|
847 |
|
| (1) |
A cautionary note regarding non-IFRS measures is
included in the section titled “Non-IFRS
Measures.” |
First quarter gold production at El Limon mine was 10,216
ounces, which was 1,542 ounces or 13% below budget and 2,942 ounces lower than
the same period in the previous year. The average gold grade processed during
the first quarter was 2.92 g/t compared to budgeted grades of 3.63 g/t and first
quarter 2015 grades of 3.54 g/t. Mill recoveries averaged 93.6% compared to
budgeted recoveries of 93.5% and first quarter 2015 recoveries of 94.1% . Mill
throughput for the first quarter of 2016 was 116,481 tonnes compared to a budget
of 107,693 tonnes and 122,677 tonnes for the same period the previous year.
The main reason for the shortfall in production compared to
budget and the prior year quarter was limited access to higher grade ore from
deeper stopes at Santa Pancha 1. A dewatering system using a vertical bore hole
was developed to control water, however the resulting dewatering volumes were
found to be lower than anticipated. This resulted in a delay in accessing higher
grade deeper stopes. In March 2016, the Company completed drilling of a series
of horizontal dewatering holes at the lowest expected elevation to be mined in
fiscal 2016. Mine water levels are now fully controlled and mining is now
advancing as planned at Santa Pancha 1. Management remains confident that El
Limon, which represents approximately 10% of the Company’s 2016 consolidated
gold production, will be able to meet 2016 guidance. However, production will be
weighted towards the second half of the year.
The El Limon mine’s cash operating costs were $775 per gold
ounce (refer to “Non-IFRS Measures”) for the first quarter of 2016 which
was $76 per ounce higher than budget and $37 per ounce higher than in the
prior-year quarter. Cash operating costs per ounce were higher than both budget
and the prior-year quarter due to limited access to higher grade ore in Santa Pancha 1 as outlined above. All-in sustaining
costs for the three months ended March 31, 2016 were $1,127 per ounce compared
to a budget of $1,199 per ounce and $1,356 per ounce in the prior year quarter.
10
Capital expenditures in the first quarter of 2016 totalled $1.4
million which consisted mainly of underground development costs for Santa Pancha
of $1.0 million.
El Limon mine is projected to produce approximately 50,000 to
60,000 ounces of gold in 2016 at cash operating costs of approximately $610 to
$650 per ounce.
Fekola Project - Mali
On June 11, 2015, the Company announced robust results from the
optimized Feasibility Study at the Fekola project in Mali. According to the
Feasibility Study, the current average annual gold production for the first
seven years will be approximately 350,000 ounces per year at an average cash
operating costs of $418 per ounce and for the life of mine plan approximately
276,000 ounces per year at average cash operating costs of $552 per ounce. (The
total preproduction capital costs were estimated to be $395 million plus $67
million of anticipated mine fleet and power generator costs which are expected
to be lease financed.) Sunk costs related to early works (including access
roads, construction aggregate stockpiling, airstrip construction, and land
clearing) of approximately $38 million are not included in the total
pre-production capital estimate.
In the first quarter of 2016, B2Gold’s construction team
continued to develop the Fekola project on schedule and on budget. Significant
activities included:
| |
• |
Material completion of the tailings dam walls
(excluding a small opening to allow runoff during the 2016 rainy season);
|
| |
• |
Commencement of construction on the process
water and contact water dams; |
| |
• |
Completion of pilings installation in the mill
area; |
| |
• |
Initiation of concrete pouring at the crusher
and reclaim stockpile; |
| |
• |
Completion of Phase 1 permanent camp
construction; |
| |
• |
On-going crushing and screening of aggregate
necessary for earthworks; |
| |
• |
Increased workforce to approximately 700
employees and contractors. |
Capital expenditures in the first quarter of 2016 totaled $46.4
million versus a construction budget of $62 million. Expenditures on the Fekola
project to date are $175.8 million including $37.9 million of preconstruction
expenditures compared with a budget to date of $177 million. The variance was
mainly due to the timing of payments for some key pieces of equipment. The
project remains on schedule and on budget.
In addition to the on-site progress, the B2Gold project team
continues to work on final design, procurement, and planning. Most major
construction packages have been ordered and the project engineering team
(Lycopodium) remains on schedule to issue all construction drawings on a
schedule necessary to complete the project on time.
The Fekola property also has excellent exploration potential.
B2Gold has commenced a 92,000 metre diamond, reverse circulation, auger and
aircore drill program to follow up on the successful 2015 program.
The Company is in the process of incorporating a wholly-owned
subsidiary company in Mali (the “Exploitation Company”). In conjunction with the
negotiation of a related shareholder’s agreement, the mining licence for the
Fekola Project currently held by the Company’s wholly owned subsidiary, Songhoi,
will be transferred to the Exploitation Company and the Government of Mali will
take a free carried 10% equity interest in the Exploitation Company. The Malian
Mining Code also allows the Government of Mali the option to purchase (at market
terms) an additional 10% interest in the Exploitation Company. The Government of
Mali has expressed an interest in exercising its option to purchase the
additional 10% interest and negotiations are on-going. Both parties have engaged
an independent external valuator to prepare a valuation of the additional 10%
interest in the Exploitation Company so that a final purchase price can be
determined. If the Government of Mali elects to proceed as anticipated, the
final ownership of the Exploitation Company will be 80% held by the Company and
20% held by the Government of Mali. The Company has also begun the process of
negotiating a new Mining Convention with the Government of Mali which will
govern the procedural and economic parameters pursuant to which the Company will
operate the Fekola Project. Creation of the Exploitation Company is underway and
the Company expects to finalise ownership interests in the Exploitation Company
in the second quarter of 2016. At that point the Fekola Project mining licence
will also be transferred into the Exploitation Company in accordance with Malian
Law. Negotiation of the Mining Convention is required to be completed prior to
commencement of production. However, the Company expects to complete its
Convention negotiations by no later than the end of 2016.
11
Kiaka Project – Burkina Faso
An environmental and social impact assessment (“ESIA”) was
completed and submitted to the regulatory agencies in February 2014 and a
permitting study to advance the Kiaka Project to an exploitation licence was
completed and submitted to the Ministry of Mines and Energy in Burkina Faso in
March 2014. The two permitting applications were based on processing 6 million
tonnes per annum of higher grade ore at the plant while the lower grade ore is
stockpiled, and uses a smaller pit that resulted in an improved ore to waste
ratio. The Company completed the public consultation process and other
requirements and formal approval of the ESIA was granted on April 15, 2015.
Final review of the mining licence was completed, the formal application was
submitted on July 15, 2015 and the Council of Ministers from the transitional
government approved the mining licence on November 25, 2015. Since the national
elections on November 29, 2015, a new Council of Ministers has been appointed. A
second review of the mining licence has been completed and the licence was
re-approved on April 20, 2016.
The Company has incorporated a new exploitation company, Kiaka
SA, by way of a shareholders meeting held on January 20, 2016. The shareholding
of Kiaka SA is held 9% by GAMS-Mining F&I LTD, 10% by the State of Burkina
Faso and 81% by the Company (indirectly through its subsidiary, Kiaka Gold
SARL).
Burkina Faso has adopted a new Mining Code which was approved
on July 16, 2015. The impact that this new Mining Code will have on the Kiaka
Project is currently under review and is being discussed with the new
administration. The new Mining Code became effective on October 29, 2015 when it
was formally published. The new Mining Code includes increases in the corporate
income tax rate, an additional 1% tax for a Local Development Fund and a
preferred dividend for the State. These changes are negative for the Kiaka
Project and other development projects in Burkina Faso.
The transition leadership in Burkina Faso has stepped down as
national elections were held in Burkina Faso on November 29, 2015, and a new
cabinet was appointed on January 13, 2016. The administration is led by Roch
Marc Christian Kobore, the new President, Minister of Defense and Veterans’
Affairs.
The Company continues to evaluate its timeline for updating the
feasibility study. An updated study would include key items such as optimizing
the plant throughput rate, new cost estimates based on current economic
conditions, alternative sources of electrical power and exploration success near
Kiaka.
A total of 23,000 metres of reverse circulation, diamond and
air core drilling is planned in 2016 to follow up new targets identified in the
area around Kiaka. Drilling in 2015 contained up to 2.21g/t over 106 meters in
RC hole NKRC047.
12
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2016 the Company had cash and cash equivalents of
$109.1 million compared to cash and cash equivalents of $85.1 million at
December 31, 2015. Working capital at March 31, 2016 was $124.5 million compared
to working capital of $104.7 million at December 31, 2015.
Cash flow from operating activities was $171.6 million ($0.19
per share) during the three months ended March 31, 2016 compared to $58.7
million ($0.06 per share) during same period in 2015. The increased cash flow
from operating activities during the three months ended March 31, 2016 included
$120 million in proceeds from the Prepaid Sales transactions and a $16.2 million
reduction in production costs due to a full quarter of production from the
Otjikoto mine and strong operating performances at the Company’s Masbate and La
Libertad mines. These were partially offset by a $21.1 million increase in
required working capital funding in the period, including higher product
inventory balances at the Masbate and La Libertad mines due to the timing of
sales and higher supplies inventory balances at the Otjikoto and El Limon mines
due to the timing of purchases.
On May 20, 2015 and as amended March 11, 2016, the Company
signed a credit agreement with a syndicate of international banks for a new
revolving credit facility for an aggregate amount of $350 million. The new
revolving credit facility also allows for an accordion feature whereby, upon
receipt of additional binding commitments, the facility may be increased to $450
million any time prior to the maturity date.
The term for the new revolving credit facility is four years,
maturing on May 20, 2019, except that it shall become due on July 1, 2018 in the
event that greater than 25% of the Company’s convertible notes, initially due on
October 1, 2018, remain outstanding or the maturity date of the convertible
notes has not been extended to at least 90 days after May 20, 2019. The new
revolving credit facility will bear interest on a sliding scale of between Libor
plus 2.25% to 3.25% based on the Company’s consolidated net leverage ratio.
Commitment fees for the undrawn portion of the facility will also be on a
similar sliding scale basis of between 0.5% and 0.925% .
The Company has provided security on the new revolving credit
facility in the form of a general security agreement from the Company granting a
security interest over the Company’s assets and pledges creating a charge over
the shares of certain of the Company’s direct and indirect subsidiaries. In
connection with the new revolving credit facility, the Company must also
maintain certain net tangible worth and ratios for leverage and interest
coverage. As at March 31, 2016, the Company was in compliance with these debt
covenants.
In March 2016, the Company entered into a series of Prepaid
Sales transactions totalling $120 million with its revolving credit facility
bank syndicate. The Prepaid Sales transactions, in the form of metal sales
forward contracts, allow the Company to deliver pre-determined volumes of gold
on agreed future delivery dates in exchange for an upfront cash prepayment. The
Prepaid Sales transactions have a term of 33 months commencing March 2016, and
settlement will be in the form of physical deliveries of approximately 103,300
ounces of unallocated gold from any of the Company’s mines in 24 equal monthly
instalments during 2017 and 2018.
On March 14, 2016, the Company signed a commitment letter to
enter into a Euro equivalent of $80.9 million term Equipment Facility with
Caterpillar Financial SARL, as Mandated Lead Arranger, and Caterpillar Financial
Services Corporation, as original lender. The aggregate principal amount of up
to Euro equivalent of $80.9 million is to be made available to the Company’s
majority-owned subsidiary, Fekola SA to finance equipment at the Company's
Fekola Project in Mali. The Equipment Facility shall be available for a period
commencing on the closing date of The Equipment Facility and ending on the
earlier of the day when the Equipment Facility is fully drawn and 30 months from
the closing date. The Equipment Facility may be drawn in installments of not
less than Euro 5 million, and each such installment shall be treated as a
separate equipment loan.
Each equipment loan is repayable in 20 equal quarterly
installments. The final repayment date shall be five years from the first
disbursement under each equipment loan. The Equipment Facility has an interest
rate of EURIBOR plus a margin of 3.85% on equipment loans advanced and a
commitment fee of 1.15% per annum on the undrawn balance of The Equipment
Facility for the first 24 months of the availability period and 0.5% thereafter,
each payable quarterly. Completion and funding under the Facility are subject to
normal conditions precedent, including the preparation and execution of
definitive documentation, due diligence and receipt of any necessary regulatory
approvals.
In addition, the Equipment Loan Facility, entered into on
December 4, 2013 between B2Gold Namibia Minerals (Proprietary) Limited (“The
Borrower”), a subsidiary of The Company, and Caterpillar Financial SARL as
Mandated Lead Arranger, and Caterpillar Financial Services Corporation, as
original lender, has been increased by $4.5 million to $45.4 million. This will
allow The Borrower to finance additional equipment at the Company's Otjikoto
Project in Namibia.
13
The Company believes that closing these agreements, coupled
with strong operating cash flows from the its existing mine operations will
provide adequate resources both to maintain operations and fund the construction
of the Fekola Project through completion (forecast to be late 2017) based on
current assumptions, including current gold prices.
For the three months ended March 31, 2016, resource property
expenditures totalled $88.9 million with the most significant component being
Fekola Project with expenditures of $46.4 million, the Otjikoto mine with
capital expenditures of $18.7 million, the La Libertad mine with capital
expenditures of $8.8 million and the Masbate mine with capital expenditures of
$8.5 million.
As at March 31, 2016, the Company had commitments, in addition
to those disclosed elsewhere in the MD&A for payments of $89.3 million for
Fekola project equipment and development costs. Of this amount, $75.5 million is
expected to be incurred in 2016 and $13.8 million in 2017.
Gold commitments
At March 31, 2016, the following gold forward contacts with
respect to the Otjikoto mine were outstanding and continue to be accounted for
as executory contracts (by maturity dates):
| |
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gold forward contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
| - Ounces |
|
6,750 |
|
|
9,000 |
|
|
7,500 |
|
|
23,250 |
|
| - Average price
per ounce (rand) |
|
16,020 |
|
|
16,020 |
|
|
16,020 |
|
|
16,020 |
|
Derivative financial instruments
Gold forwards
As at March 31, 2016, the following gold forward contracts
which are recorded at fair value through the statement of operations with
respect to the Otjikoto mine were outstanding (by maturity dates):
| |
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gold forward contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
| - Ounces |
|
26,937 |
|
|
35,916 |
|
|
35,916 |
|
|
98,769 |
|
| - Average price per ounce
(rand) |
|
15,044 |
|
|
15,044 |
|
|
15,044 |
|
|
15,044 |
|
The unrealized fair value of these contracts at March 31, 2016
was $(31.7) million.
Gold zero-cost collar contracts
For the three months ended March 31, 2016, the Company recorded
an unrealized derivative loss of $0.9 million (2015 – $0.1 million) in the
statement of operations on its zero-cost gold collar contracts.
14
The following is a summary, by maturity dates, of the Company’s
zero-cost gold collar contracts outstanding as at March 31, 2016:
| |
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gold zero-cost collars: |
|
|
|
|
|
|
|
|
|
|
|
|
| Floor amount
(ounces) |
|
7,650 |
|
|
10,200 |
|
|
1,400 |
|
|
19,250 |
|
|
Average floor price |
$ |
1,000 |
|
$ |
1,000 |
|
$ |
1,000 |
|
$ |
1,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceiling amount (ounces) |
|
13,725 |
|
|
18,300 |
|
|
2,100 |
|
|
34,125 |
|
| Average ceiling
price |
$ |
1,721 |
|
$ |
1,721 |
|
$ |
1,700 |
|
$ |
1,720 |
|
The unrealized fair value of these contracts at March 31, 2016
was $(0.1) million.
Forward contracts – fuel oil, gas oil, diesel
During the three months ended March 31, 2016, the Company
entered into additional series of forward contracts for the purchase of
7,471,000 litres of fuel oil and 3,016,000 litres of gas oil with settlements
scheduled between August 2016 and March 2017. These derivative instruments were
not designated as hedges by the Company and are being recorded at their fair
value at the end of each reporting period with changes in fair value recorded in
the statement of operations.
The following is a summary, by maturity dates, of the Company’s
forward contracts outstanding as at March 31, 2016:
| |
|
|
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Forward – fuel oil:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Litres (thousands) |
|
|
20,591 |
|
|
19,877 |
|
|
1,328 |
|
|
41,796 |
|
| - |
|
Average strike price |
|
$ |
0.29 |
|
$ |
0.29 |
|
$ |
0.31 |
|
$ |
0.29 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Forward – gas oil:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Litres (thousands) |
|
|
10,909 |
|
|
5,982 |
|
|
280 |
|
|
17,171 |
|
| - |
|
Average strike
price |
|
$ |
0.43 |
|
$ |
0.40 |
|
$ |
0.44 |
|
$ |
0.42 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Forward – diesel:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Litres (thousand) |
|
|
6,357 |
|
|
706 |
|
|
- |
|
|
7,063 |
|
| - |
|
Average strike
price |
|
$ |
0.46 |
|
$ |
0.46 |
|
$ |
- |
|
$ |
0.46 |
|
The unrealized fair value of these contracts at March 31, 2016
was $(6.4) million.
Operating activities
Cash flow from operating activities was $171.6 million ($0.19
per share) during the three months ended March 31, 2016 compared to $58.7
million ($0.06 per share) during same period in 2015. The increased cash flow
from operating activities during the three months ended March 31, 2016 included
$120 million in proceeds from the Prepaid Sales transactions and a $16.2 million
reduction in production costs due to strong operating performance at the
Company’s Masbate and La Libertad mines. These were partially offset by a $21.1
million increase in required working capital funding in the period, including
higher product inventory balances at the Masbate and La Libertad mines due to
the timing of sales and higher supplies inventory balances at the Otjikoto and
El Limon mines due to the timing of purchases.
Financing activities
The Company’s cash from financing activities for the three
months ended March 31, 2016 was a net outflow of $54.2 million. During the
period, the Company made drawdowns of $50.0 million on its new revolving credit
facility and $1.2 million on its Otjikoto equipment loan facility. This was
offset by repayments on the new revolving credit facility of $100.0 million and
the Otjikoto equipment loan facility of $1.8 million.
During the year ended December 31, 2015, the Company paid
interest and commitment fees of $3.1 million
15
Investing activities
During the three months ended March 31, 2016, capital
expenditures on sustaining capital, pre-stripping and development at the
Otjikoto mine (see “Otjikoto Mine” section) totalled $18.7 million (Q1 2015 -
$13.5 million net of $23.1 million of pre-commercial production sales proceeds),
the Masbate mine (see “Masbate Mine” section) totalled $8.5 million (Q1 2015 -
$4.1 million), the Libertad mine (see “La Libertad Mine” section) totalled $8.8
million (Q1 2015 - $6.1 million), and the Limon mine (see “Limon Mine” section)
totalled $1.4 million (Q1 - 2015 - $5.4 million). Capital expenditures at the
Fekola Project for the first quarter of 2016 were $46.4 million and included
site earthworks, camp construction and acquisition of equipment.
Expenditures on the Fekola project to date are $175.8 million
including $37.9 million of preconstruction expenditures compared with a budget
to date of $177 million. The variance was mainly due to the timing of payments
for some key pieces of equipment. The project remains on schedule and on budget.
Exploration
Resource property expenditures on exploration are disclosed in
the table below.
| |
|
For the
three |
|
|
For the
three |
|
| |
|
months
ended |
|
|
months
ended |
|
| |
|
March 31,
2016 |
|
|
March 31,
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Masbate mine, exploration |
|
(466 |
) |
|
(1,203 |
)
|
| Libertad mine, exploration |
|
(726 |
) |
|
(1,049 |
) |
| Limon mine, exploration |
|
(508 |
) |
|
(847 |
)
|
| Otjikoto mine, exploration |
|
(291 |
) |
|
(802 |
) |
| Fekola project, exploration
|
|
(924 |
) |
|
(18,481 |
)
|
| Kiaka project, exploration |
|
(616 |
) |
|
(649 |
) |
| Primavera, exploration |
|
(277 |
) |
|
(417 |
)
|
| Other |
|
(1,225 |
) |
|
(815 |
) |
| |
|
|
|
|
|
|
| |
|
(5,033 |
) |
|
(24,263 |
) |
Otjikoto Mine
The total exploration budget for Namibia including the Otjikoto
mine in 2016 is $4.7 million, which includes 10,700 meters of drilling to infill
the down plunge extension of the Wolfshag resource. In addition, it is expected
that drilling will commence to test the newly acquired Ondundu project, located
190 kilometres southwest of the Otjikoto mine.
Masbate Mine
The Masbate exploration budget for 2016 is approximately $4.9
million and is expected to consist of 18,000 metres of drilling to continue to
test the Pajo and Montana SE zones. At the same time an aggressive surface
exploration program comprising geological target generation and follow up
prospecting, geochemical sampling and trenching is also planned for 2016.
La Libertad Mine
Libertad’s exploration budget for 2016 is approximately $5
million for a total of 9,050 metres of planned diamond drilling. The program is
largely comprised of brownfields (near mine) drilling, including Jabali Antenna
East infill drilling, Mojon underground potential and other targets.
El Limon Mine
El Limon’s exploration budget for 2016 is approximately $4.1
million for a total of 8,300 metres of planned diamond drilling. The program is
largely comprised of brownfields (near mine) drilling, including further #8
shaft infill drilling, Atravesada infill drilling and some blue-sky potential to
the west side of the property.
16
Fekola Project
In 2016, the exploration program in Mali is expected to include
approximately 92,000 meters of diamond, reverse circulation and aircore drilling
at the Fekola Project and targets around the Fekola Project. The total budget
for 2016 exploration in Mali will be $11.4 million.
Kiaka Project
A total of 23,000 metres of reverse circulation, diamond and
air core drilling is planned in 2016. The total budget for 2016 exploration in
Burkina Faso will be $3.6 million.
CRITICAL ACCOUNTING ESTIMATES
Full disclosure of the Company’s accounting policies and
significant accounting judgments and estimation uncertainties in accordance with
IFRS can be found in Note 5 of its audited consolidated financial statements as
at December 31, 2015. Management considers the following estimates to be the
most critical in understanding the judgments involved in preparing the Company’s
interim consolidated financial statements and the uncertainties that could
impact its results of operations, financial condition and cash flows:
| |
• |
Ore reserve and resource estimates; |
| |
• |
Value of value-added tax receivables; and
|
| |
• |
Uncertain tax positions. |
Ore reserve and resource estimates
Ore reserves are estimates of the amount of ore that can be
economically and legally extracted from the Company’s mining properties. The
Company estimates its ore reserves and mineral resources based on information
compiled by appropriately qualified persons relating to the geological data on
the size, depth and shape of the ore body, and requires complex geological
judgments to interpret the data. The estimation of recoverable reserves is based
upon factors such as estimates of foreign exchange rates, commodity prices,
future capital requirements, metallurgical recoveries, and production costs
along with geological assumptions and judgments made in estimating the size, and
grade of the ore body. Changes in the reserve or resource estimates may impact
the carrying value of mining interests, mine restoration provisions, recognition
of deferred tax assets, and depreciation and amortization charges.
Value-added tax receivables
The Company incurs indirect taxes, including value-added tax,
on purchases of goods and services at its operating mines and development
projects. Indirect tax balances are recorded at their estimated recoverable
amounts within current or long-term assets, net of provisions, and reflect the
Company’s best estimate of their recoverability under existing tax rules in the
respective jurisdictions in which they arise. Management’s assessment of
recoverability involves judgments regarding balance sheet classification and the
probable outcomes of claimed deductions and/or disputes. The provisions and
balance sheet classifications made to date may be subject to change and such
change may be material.
Uncertain tax positions
The Company is periodically subject to income tax audits at its
operating mine locations. At March 31, 2016, the company had a provision
totalling $4.0 million outstanding (December 31, 2015 - $4.0 million)
representing its best estimate of the outcome of current assessments. The
provisions made to date may be subject to change and such change may be
material.
RISKS AND UNCERTAINTIES
The exploration and development of natural resources are highly
speculative in nature and are subject to significant risks. For details of these
risks, please refer to the risk factors set forth in the Company’s AIF, a copy
of which can be found on SEDAR at www.sedar.com, which could materially
affect the Company’s future operating results and could cause actual events to
differ materially from those described in forward-looking statements relating to
the Company. Additional risks and uncertainties not presently known to the
Company or that the Company currently considers immaterial may also impair the
business, operations and future prospects of the Company. If any of the risks
actually occur, the business of the Company may be harmed and its financial
condition and results of operations may suffer significantly.
17
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company’s management, with the participation of the
Company’s Chief Executive Officer and Chief Financial Officer are responsible
for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with IFRS. Any system of internal control over financial reporting,
no matter how well designed, has inherent limitations. As a result, even those
systems determined to be effective can only provide reasonable assurance
regarding the preparation of financial statements.
The Company’s management has determined that there has been no
change in the Company’s internal control over financial reporting during the
three months ended March 31, 2016, that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
NON-IFRS MEASURES
Cash operating costs per gold ounce and total cash costs
per gold ounce
‘‘Cash operating costs per gold ounce’’ and “total cash costs
per gold ounce” are common financial performance measures in the gold mining
industry but with no standard meaning under IFRS. Management believes that, in
addition to conventional measures prepared in accordance with IFRS, certain
investors use this information to evaluate our performance and ability to
generate cash flow. Accordingly, it is intended to provide additional
information and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. The measure, along
with sales, is considered to be a key indicator of a Company’s ability to
generate earnings and cash flow from its mining operations.
Cash cost figures are calculated in accordance with a standard
developed by The Gold Institute, which was a worldwide association of suppliers
of gold and gold products and included leading North American gold producers.
The Gold Institute ceased operations in 2002, but the standard is the accepted
standard of reporting cash cost of production in North America. Adoption of the
standard is voluntary and the cost measures presented may not be comparable to
other similarly titled measures of other companies. Other companies may
calculate these measures differently. Cash operating costs and total cash costs
per ounce are derived from amounts included in the statement of operations and
include mine site operating costs such as mining, processing, smelting,
refining, transportation costs, royalties and production taxes, less silver
by-product credits. The table below shows a reconciliation of cash operating
costs per ounce and total cash costs per ounce to production costs:
Consolidated
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs per
consolidated financial statements |
|
61,644
|
|
|
77,823 |
|
| Inventory sales adjustment |
|
2,139 |
|
|
(9,759 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
63,783 |
|
|
68,064 |
|
| Royalties and production
taxes per consolidated financial statements |
|
5,856 |
|
|
4,995 |
|
| |
|
|
|
|
|
|
| Total cash costs |
|
69,639 |
|
|
73,059 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces)
|
|
127,844 |
|
|
97,044 |
|
| |
|
|
|
|
|
|
| Cash operating costs per
gold ounce ($/ounce) |
|
499 |
|
|
701 |
|
| |
|
|
|
|
|
|
| Total cash costs per gold
ounce ($/ounce) |
|
545 |
|
|
753 |
|
18
Otjikoto Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015(1) |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
14,376
|
|
|
6,833 |
|
| Inventory sales adjustment |
|
(764 |
) |
|
(956 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
13,612 |
|
|
5,877 |
|
| Royalties and production
taxes |
|
1,337 |
|
|
464 |
|
| |
|
|
|
|
|
|
| Total cash costs |
|
14,949 |
|
|
6,341 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces)
|
|
35,703 |
|
|
12,319 |
|
| |
|
|
|
|
|
|
| Cash operating costs per
gold ounce ($/ounce) |
|
381 |
|
|
477 |
|
| |
|
|
|
|
|
|
| Total cash costs per gold
ounce ($/ounce) |
|
419 |
|
|
515 |
|
| (1) |
Includes the results from the Otjikoto mine from March
1, 2015. |
Masbate Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
21,245
|
|
|
37,396 |
|
| Inventory sales adjustment |
|
2,816 |
|
|
(6,219 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
24,061 |
|
|
31,177 |
|
| Royalties and production
taxes |
|
2,902 |
|
|
2,800 |
|
| |
|
|
|
|
|
|
| Total cash costs |
|
26,963 |
|
|
33,977 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces)
|
|
52,727 |
|
|
46,241 |
|
| |
|
|
|
|
|
|
| Cash operating costs per
gold ounce ($/ounce) |
|
456 |
|
|
674 |
|
| |
|
|
|
|
|
|
| Total cash costs per gold
ounce ($/ounce) |
|
511 |
|
|
735 |
|
19
La Libertad Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
17,139
|
|
|
23,341 |
|
| Inventory sales adjustment |
|
1,056 |
|
|
(2,041 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
18,195 |
|
|
21,300 |
|
| Royalties and production
taxes |
|
745 |
|
|
676 |
|
| |
|
|
|
|
|
|
| Total cash costs |
|
18,940 |
|
|
21,976 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces)
|
|
29,198 |
|
|
25,326 |
|
| |
|
|
|
|
|
|
| Cash operating costs per
gold ounce ($/ounce) |
|
623 |
|
|
841 |
|
| |
|
|
|
|
|
|
| Total cash costs per gold
ounce ($/ounce) |
|
649 |
|
|
868 |
|
El Limon Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
8,884 |
|
|
10,254 |
|
| Inventory sales adjustment |
|
(969 |
) |
|
(544 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
7,915 |
|
|
9,710 |
|
| Royalties and production
taxes |
|
872 |
|
|
1,054 |
|
| |
|
|
|
|
|
|
| Total cash costs |
|
8,787 |
|
|
10,764 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces)
|
|
10,216 |
|
|
13,158 |
|
| |
|
|
|
|
|
|
| Cash operating costs per
gold ounce ($/ounce) |
|
775 |
|
|
738 |
|
| |
|
|
|
|
|
|
| Total cash costs per gold
ounce ($/ounce) |
|
860 |
|
|
818 |
|
20
All-in Sustaining Costs per Gold Ounce
In June 2013, the World Gold Council, a non-regulatory
association of the world’s leading gold mining companies established to promote
the use of gold to industry, consumers and investors, provided guidance for the
calculation of the measure “All-in sustaining costs per gold ounce”, which has
no standard meaning under IFRS. These standards became effective January 1,
2014. Management believes that the all-in sustaining costs per gold ounce
measure provides additional insight into the costs of producing gold by
capturing all of the expenditures required for the discovery, development and
sustaining of gold production and allows the Company to assess its ability to
support capital expenditures to sustain future production from the generation of
operating cash flows. Management believes that, in addition to conventional
measures prepared in accordance with IFRS, certain investors use this
information to evaluate our performance and ability to generate cash flow.
Accordingly, it is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
B2Gold defines all-in sustaining costs per ounce as the sum of
cash operating costs, royalty and production taxes, capital expenditures and
exploration costs that are sustaining in nature, corporate general and
administrative costs, share-based payment expenses related to RSUs, community
relations expenditures, and reclamation liability accretion, all divided by the
total gold ounces produced to arrive at a per ounce figure. Adoption of the
standard is voluntary and the cost measures presented may not be comparable to
other similarly titled measures of other companies. Other companies may
calculate these measures differently.
The table below shows a reconciliation of all-in sustaining
costs per ounce to the unaudited condensed interim consolidated financial
statements:
Consolidated
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015(1) |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs per
consolidated financial statements |
|
61,644
|
|
|
77,823 |
|
| Inventory sales adjustment |
|
2,139 |
|
|
(9,759 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
63,783 |
|
|
68,064 |
|
| Royalties and production
taxes per consolidated financial statements |
|
5,856 |
|
|
4,995 |
|
| Corporate administration |
|
7,488 |
|
|
9,708 |
|
| Share-based payments –
RSUs(2) |
|
2,049 |
|
|
2,159 |
|
| Community relations |
|
887 |
|
|
849 |
|
| Reclamation liability
accretion (3) |
|
319 |
|
|
350 |
|
| Realized losses on fuel derivative contracts
|
|
1,968 |
|
|
554 |
|
| Sustaining capital
expenditures(4) |
|
27,449
|
|
|
15,322 |
|
| Sustaining exploration |
|
1,991 |
|
|
3,901 |
|
| |
|
|
|
|
|
|
| Total all-in sustaining costs |
|
111,790 |
|
|
105,902 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces) |
|
127,844 |
|
|
97,044 |
|
| |
|
|
|
|
|
|
| All-in sustaining costs per ounce of gold
production ($/ounce) |
|
874 |
|
|
1,091 |
|
| (1) |
Includes the results from the Otjikoto mine from March
1, 2015. |
| (2) |
Included as a component of Share-based payments on the
statement of operations. |
| (3) |
Excludes reclamation accretion relating to Kiaka and
Fekola. |
| (4) |
Refer to Sustaining Capital Expenditures
reconciliation below. |
21
The table below shows a reconciliation of the consolidated
sustaining capital expenditures and exploration to the amount recorded in the
unaudited condensed interim consolidated financial statements:
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Consolidated operating mine
expenditures |
|
37,382
|
|
|
29,188 |
|
| Otjikoto mine construction, expansion and
pre-production costs net of sales proceeds |
|
- |
|
|
(13,526 |
) |
| Jabali underground
development |
|
(112 |
) |
|
(340 |
)
|
| Masbate plant expansion |
|
(4,418 |
) |
|
- |
|
| Otjikoto prestripping |
|
(5,403 |
) |
|
- |
|
| |
|
|
|
|
|
|
| Consolidated Sustaining
Capital Expenditures |
|
27,449 |
|
|
15,322 |
|
Otjikoto Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015(1) |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
14,376
|
|
|
6,833 |
|
| Inventory sales adjustment |
|
(764 |
) |
|
(956 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
13,612 |
|
|
5,877 |
|
| Royalties and production
taxes |
|
1,337 |
|
|
464 |
|
| Corporate administration |
|
867 |
|
|
389 |
|
| Share-based payments –
RSUs(2) |
|
56 |
|
|
75 |
|
| Community relations |
|
37 |
|
|
16 |
|
| Reclamation liability
accretion |
|
66 |
|
|
126 |
|
| Realized losses on fuel derivative contracts
|
|
246 |
|
|
- |
|
| Sustaining capital
expenditures(3) |
|
13,305
|
|
|
- |
|
| Sustaining exploration |
|
291 |
|
|
802 |
|
| |
|
|
|
|
|
|
| Total all-in sustaining costs |
|
29,817 |
|
|
7,749 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces) |
|
35,703 |
|
|
12,319 |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| All-in sustaining costs
per ounce of gold production ($/ounce) |
|
835 |
|
|
629 |
|
| (1) |
Includes the results from the Otjikoto mine from March
1, 2015. |
| (2) |
Included as a component of Share-based payments on the
statement of operations. |
| (3) |
Refer to Sustaining Capital Expenditures
reconciliation below. |
22
The table below shows a reconciliation of the Otjikoto mine
sustaining capital expenditures and exploration to the amounts recorded in the
unaudited condensed interim consolidated financial statements:
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Operating mine expenditures
|
|
18,708
|
|
|
13,526 |
|
| Otjikoto mine construction, expansion and
pre-production costs net of sales proceeds |
|
- |
|
|
(13,526 |
) |
| Push-back 2 prestripping |
|
(5,403 |
) |
|
- |
|
| |
|
|
|
|
|
|
| Sustaining Capital
Expenditures |
|
13,305 |
|
|
- |
|
Masbate Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
21,245
|
|
|
37,396 |
|
| Inventory sales adjustment |
|
2,816 |
|
|
(6,219 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
24,061 |
|
|
31,177 |
|
| Royalties and production
taxes |
|
2,902 |
|
|
2,800 |
|
| Corporate administration |
|
685 |
|
|
657 |
|
| Share-based payments –
RSUs(1) |
|
- |
|
|
19 |
|
| Reclamation liability accretion |
|
131 |
|
|
108 |
|
| Realized losses on fuel
derivative contracts |
|
1,280 |
|
|
468 |
|
| Sustaining capital
expenditures(2) |
|
4,096 |
|
|
4,126 |
|
| Sustaining exploration |
|
466 |
|
|
1,203 |
|
| |
|
|
|
|
|
|
| Total all-in sustaining
costs |
|
33,621 |
|
|
40,558 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces)
|
|
52,727 |
|
|
46,241 |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| All-in sustaining costs per ounce of gold
production ($/ounce) |
|
638 |
|
|
877 |
|
| (1) |
Included as a component of Share-based payments on the
statement of operations. |
| (2) |
Refer to Sustaining Capital Expenditures
reconciliation below. |
23
The table below shows a reconciliation of the Masbate mine
sustaining capital expenditures and exploration to the amounts recorded in the
unaudited condensed interim consolidated financial statements:
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Operating mine expenditures
|
|
8,514 |
|
|
4,126 |
|
| Masbate plant expansion |
|
(4,418 |
) |
|
- |
|
| |
|
|
|
|
|
|
| Sustaining Capital Expenditures |
|
4,096 |
|
|
4,126 |
|
La Libertad Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
17,139
|
|
|
23,341 |
|
| Inventory sales adjustment |
|
1,056 |
|
|
(2,041 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
18,195 |
|
|
21,300 |
|
| Royalties and production
taxes |
|
745 |
|
|
676 |
|
| Corporate administration |
|
1,019 |
|
|
1,220 |
|
| Share-based payments –
RSUs(1) |
|
- |
|
|
11 |
|
| Community relations |
|
606 |
|
|
544 |
|
| Reclamation liability
accretion |
|
54 |
|
|
46 |
|
| Realized losses on fuel derivative contracts
|
|
442 |
|
|
86 |
|
| Sustaining capital
expenditures(2) |
|
8,668 |
|
|
5,799 |
|
| Sustaining exploration |
|
726 |
|
|
1,049 |
|
| |
|
|
|
|
|
|
| Total all-in sustaining costs |
|
30,455 |
|
|
30,731 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces) |
|
29,198 |
|
|
25,326 |
|
| |
|
|
|
|
|
|
| All-in sustaining costs per ounce of gold
production ($/ounce) |
|
1,043 |
|
|
1,213 |
|
| (1) |
Included as a component of Share-based payments on the
statement of operations. |
| (2) |
Refer to Sustaining Capital Expenditures
reconciliation below. |
The table below shows a reconciliation of the La Libertad mine
sustaining capital expenditures and exploration to the amounts recorded in the
unaudited condensed interim consolidated financial statements:
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Operating mine expenditures
|
|
8,780 |
|
|
6,139 |
|
| Jabali underground development |
|
(112 |
) |
|
(340 |
) |
| |
|
|
|
|
|
|
| Sustaining Capital Expenditures |
|
8,668 |
|
|
5,799 |
|
24
El Limon Mine
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Production costs |
|
8,884 |
|
|
10,254 |
|
| Inventory sales adjustment |
|
(969 |
) |
|
(544 |
) |
| |
|
|
|
|
|
|
| Cash operating costs |
|
7,915 |
|
|
9,710 |
|
| Royalties and production
taxes |
|
872 |
|
|
1,054 |
|
| Corporate administration |
|
524 |
|
|
468 |
|
| Share-based payments –
RSUs(1) |
|
- |
|
|
6 |
|
| Community relations |
|
243 |
|
|
286 |
|
| Reclamation liability
accretion |
|
68 |
|
|
70 |
|
| Sustaining capital
expenditures(2) |
|
1,380 |
|
|
5,397 |
|
| Sustaining exploration |
|
508 |
|
|
847 |
|
| |
|
|
|
|
|
|
| Total all-in sustaining
costs |
|
11,510 |
|
|
17,838 |
|
| |
|
|
|
|
|
|
| Gold production (in ounces)
|
|
10,216 |
|
|
13,158 |
|
| |
|
|
|
|
|
|
| All-in sustaining costs
per ounce of gold production ($/ounce) |
|
1,127 |
|
|
1,356 |
|
| (1) |
Included as a component of Share-based payments on the
statement of operations. |
All capital and exploration expenditures at El Limon mine are
considered to be sustaining expenditures.
Adjusted net income
Adjusted net income is a non-IFRS measure that does not have a
standardized meaning prescribed by IFRS and therefore may not be comparable to
similar measures presented by other issuers.
Adjusted net income excludes certain non-cash items from net
income or net loss to provide a measure which allows the Company and investors
to evaluate the results of the underlying core operations of the Company and its
ability to generate cash flows.
Management believes that the presentation of adjusted net
income is appropriate to provide additional information to investors regarding
items that we do not expect to continue at the same level in the future or that
management does not believe to be a reflection of the Company’s ongoing
operating performance. Management further believes that its presentation of this
non-IFRS financial measure provides information that is useful to investors
because it is an important indicator of the strength of our operations and the
performance of our core business.
25
A reconciliation of consolidated net income to adjusted
consolidated net income is set out in the table below:
| |
|
Three months
ended |
|
| |
|
March 31 |
|
| |
|
2016 |
|
|
2015 |
|
| |
|
$ |
|
|
$ |
|
| |
|
(000’s) |
|
|
(000’s) |
|
| |
|
|
|
|
|
|
| Consolidated net income
(loss) for the period |
|
6,651 |
|
|
6,341 |
|
| Adjustments: |
|
|
|
|
|
|
| Gain on
sale of Bellavista property |
|
- |
|
|
(2,192 |
)
|
| (Gain) loss on fair value
of convertible notes |
|
5,959 |
|
|
(1,693 |
) |
|
Share-based payments |
|
5,385 |
|
|
5,488 |
|
| Write-down of long-term
investments |
|
- |
|
|
1,338 |
|
|
Unrealized losses on derivative instruments |
|
9,450 |
|
|
93 |
|
| Deferred income tax
expense/(recovery) |
|
(8,573 |
) |
|
1,533 |
|
| |
|
|
|
|
|
|
| Adjusted consolidated net income |
|
18,872 |
|
|
10,908 |
|
| |
|
|
|
|
|
|
| Basic weighted average number of common
shares outstanding (in thousands) |
|
927,139 |
|
|
917,660 |
|
| |
|
|
|
|
|
|
| Adjusted consolidated net earnings per
share – basic ($/share) |
|
0.02 |
|
|
0.01 |
|
SUMMARY OF UNAUDITED CONSOLIDATED QUARTERLY RESULTS
| |
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
|
Q1 |
|
|
Q4 |
|
|
Q3 |
|
|
Q2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2016 |
|
|
2015 |
|
|
2015 |
|
|
2015 |
|
|
2015(3) |
|
|
2014 |
|
|
2014 |
|
|
2014 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold revenue ($
in thousands) |
|
144,252 |
|
|
139,008 |
|
|
139,250 |
|
|
136,506 |
|
|
138,892 |
|
|
122,422 |
|
|
114,924 |
|
|
120,258 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold sold
(ounces) |
|
120,899 |
|
|
127,482 |
|
|
124,481 |
|
|
114,423 |
|
|
114,799 |
|
|
102,612 |
|
|
91,282 |
|
|
93,330 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average
realized gold price ($/ounce) |
|
1,193 |
|
|
1,090 |
|
|
1,119 |
|
|
1,193 |
|
|
1,210 |
|
|
1,193 |
|
|
1,259 |
|
|
1,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gold produced
(ounces) |
|
127,844 |
|
|
131,469 |
|
|
124,371 |
|
|
121,566 |
|
|
97,044 |
|
|
111,804 |
|
|
90,192 |
|
|
85,704 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash operating
costs (1) ($/ounce gold) |
|
499 |
|
|
527 |
|
|
584 |
|
|
677 |
|
|
701 |
|
|
646 |
|
|
732 |
|
|
720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash
costs (1) ($/ounce gold) |
|
545 |
|
|
580 |
|
|
627 |
|
|
725 |
|
|
753 |
|
|
686 |
|
|
772 |
|
|
766 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income
(loss) for the period (2) ($ in thousands)
|
|
6,651 |
|
|
(115,085 |
)
|
|
(13,585 |
)
|
|
(22,784 |
)
|
|
6,341 |
|
|
(356,750 |
)
|
|
(274,128 |
)
|
|
(11,529 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss)
per share (2) – basic ($) |
|
0.01 |
|
|
(0.13 |
)
|
|
(0.02 |
)
|
|
(0.02 |
)
|
|
0.01 |
|
|
(0.39 |
)
|
|
(0.39 |
)
|
|
(0.02 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss)
per share (2) – diluted ($) |
|
0.01 |
|
|
(0.13 |
)
|
|
(0.02 |
)
|
|
(0.02 |
)
|
|
0.00 |
|
|
(0.39 |
)
|
|
(0.39 |
)
|
|
(0.02 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from
operating activities ($ in thousands) |
|
171,553 |
|
|
48,513 |
|
|
33,911 |
|
|
34,315 |
|
|
58,663 |
|
|
41,090 |
|
|
33,723 |
|
|
24,013 |
|
| (1) |
A cautionary note regarding non-IFRS measures is
included in the section titled “Non-IFRS Measures.” |
| (2) |
Attributable to the shareholders of the
Company. |
| (3) |
Starting March 1, 2015, the table includes results
from the Otjikoto mine which reached commercial production February 28,
2015. |
Quarterly gold revenue increased in the first quarter of 2016
due to the increase in the average realized gold price. Quarterly cash flows
from operating activities for the first quarter of 2016 include $120 million in
proceeds from the Company’s Prepaid Sales transactions.
Quarterly gold revenue increased significantly from 2014 levels
in all four quarters of 2015 due to the start of commercial production at the
Company’s new Otjikoto mine which contributed to higher ounces sold. The
Otjikoto mine reached commercial production on February 28, 2015. The net loss in the
fourth quarter of 2015 reflects the $108.0 million impairment charge relating to
the Company’s El Limon and La Libertad mines and investment in Gramalote joint
venture.
26
The net loss recorded in the first quarter of 2014 primarily
resulted from the loss on fair value of convertible notes of $38.3 million
recorded during the quarter, while the net loss in the second quarter of 2014
primarily related to the loss on fair value of convertible notes of $4.4 million
and a write-down of long-term investments of $2.7 million. The net loss in the
third and fourth quarters of 2014 reflect the $298.4 million impairment charge
relating to the Company’s goodwill and investment in Gramalote joint venture and
a $436.0 million impairment charge, net of deferred income tax recoveries of
$130.8 million, relating to the Masbate mine’s long-lived assets, respectively.
OUTLOOK
For 2016, consolidated gold production at B2Gold is expected to
increase to between 510,000 to 550,000 ounces, compared to 493,265 ounces
produced in 2015. The expected higher production relates mainly to increased
throughput at the Otjikoto mine, following the completion of its mill expansion
project in September 2015. Gold production in 2016 is anticipated to be slightly
weighted towards the second-half of the year.
Consolidated cash operating costs per gold ounce are projected to further
decrease in 2016 and be in the range of $560 to $595 (2015 guidance range was
$630 to $660 per ounce). The favourable reduction (approximately 10%) reflects
the positive impact of greater production from the low-cost Otjikoto mine,
including the benefit of an anticipated weaker Namibian dollar, lower projected
fuel and energy costs across all operations, and continued efforts to enhance
productivity and cost efficiencies. The Company’s consolidated all-in sustaining
costs per gold ounce are also expected to be significantly lower, between $895
and $925 (2015 guidance range was $950 to $1,025). Due to the anticipated timing
of budgeted capital expenditures, all-in sustaining costs per gold ounce are
expected to be higher in the first half of 2016 than in the second-half.
In March 2016, the Company put in place additional funding
measures which it expects will provide sufficient liquidity and resources to
ensure that, based on current assumptions, construction of the Fekola Project is
fully funded through to completion (forecast to be late 2017).
The Prepaid Sales transactions entered into are a flexible way
of generating additional funding today from the Company’s existing operations.
Execution of the Prepaid Sales transactions with the Company’s revolving credit
facility bank syndicate further reinforces the support the Company has received
from and the working relationship the Company has developed with its core
lending group.
In addition, signing of a new $80.9 million equipment financing
facility with Caterpillar underscores the continued support of another of the
Company’s long term business partners and secures the funding of the Fekola
project mining fleet and other equipment.
The Company’s 2016 budget reflects cost control initiatives,
the scale-back of non-core development activity and reductions in capital
expenditures, exploration and G&A costs. In addition to these cost control
initiatives, the company is also focused on maintaining strategic expenditures
on core projects such as the Masbate mine process plant upgrade. These cost
control measures and core project investments should continue to contribute to
the Company’s overall operating cost improvements and operational efficiencies.
The core activities of the Company remain its current mining operations and the
construction of its Fekola Project. In addition, the Company expects to continue
exploration programs focused primarily on brownfields exploration at the
Company’s existing projects.
The Company’s ability to secure funding for the construction of
the Fekola Project on attractive terms without a dilutive equity financing,
combined with a strong growth in the Company’s production profile, clearly
demonstrates that, in the Company’s view, its construction and growth strategy
is effective and successful. It is this strategy that continues to strengthen
the Company via accretive acquisitions, exploration success and the demonstrated
ability to reduce operating costs. The Company’s Otjikoto mine was a key
contributor towards the Company’s overall production growth profile in 2015, and
is projected to be the Company’s lowest cost producing mine in 2016. Adding what
we expect to be another low-cost producing mine to the Company’s production
profile, the Fekola Project, which is currently in construction and scheduled to
commence production in late 2017, is expected to enable the Company to further
increase its production base and reduce its consolidated cash operating costs
per gold ounce and all-in sustaining costs per gold ounce.
Based on current assumptions, the Company is projecting gold
production in 2016 of between 510,000 to 550,000 ounces, increasing to between
800,000 to 850,000 ounces in 2018.
27
OUTSTANDING SHARE DATA
At May 11, 2016, 929,303,680 common shares were outstanding. In
addition, there were approximately 68.3 million stock options outstanding with
exercise prices ranging between Cdn.$0.84 to Cdn.$12.67 per share and 2.0
million RSUs.
CAUTION ON FORWARD-LOOKING INFORMATION
This Management’s Discussion and Analysis includes certain
“forward-looking information” and “forward-looking statements” (collectively
“forward-looking statements”) within the meaning of applicable Canadian and
United States securities legislation, including projections of future financial
and operational performance; statements with respect to future events or future
performance, production estimates, including the Company’s projected gold
production between 800,00 to 850,00 ounces in 2018, anticipated operating and
production costs and revenue, estimates of capital expenditures; and statements
regarding anticipated exploration, development, construction, production,
permitting and other activities of the Company, including finalizing the
negotiation of the Mining Convention and Shareholder Agreement for the
Exploitation Company with the Government of Mali and the ownership of the
Exploitation Company, the Government of Mali’s potential exercise of an option
to acquire an additional 10% of the Exploitation Company, the potential
development and potential production from the Fekola Project in late 2017; the
Fekola Project being fully funded; completion of a mining study for the Otjikoto
Mine incorporating the Wolfshag zone, as well as a new geological model for the
Otjikoto Pit; updating the Kiaka Project feasibility study; the projections
included in existing technical reports, economic assessments and feasibility
studies, including the Feasibility Study for the Fekola Project; the potential
for expansion of production capacity, including the expansion of gold production
at the Otjikoto Mine and development of and production from the adjacent
Wolfshag zone in late 2016; the planned upgrade of the Masbate plant by the end
of the third quarter in 2016; the completion of permitting and resettlement
activities in respect of the Jabali Antenna Pit; production from the Jabali
Antenna Pit in late 2016; projected capital investments and exploration; the
extension of the Company’s income tax holiday for the Masbate Mine; the delivery
of ounces under the Prepaid Sales arrangements; the adequacy of capital and
financing needs and the satisfaction of conditions precedent, including the
completion and terms of definitive documentation and completion of funding under
the Equipment Facility with Caterpillar. Estimates of mineral resources and
reserves are also forward looking statements because they constitute
projections, based on certain estimates and assumptions, regarding the amount of
minerals that may be encountered in the future and/or the anticipated economics
of production, should a production decision be made. All statements in this
Management’s Discussion and Analysis that address events or developments that we
expect to occur in the future are forward-looking statements. Forward-looking
statements are statements that are not historical facts and are generally,
although not always, identified by words such as “expect”, “plan”, “anticipate”,
“project”, “target”, “potential”, “schedule”, “forecast”, “budget”, “estimate”,
“intend” or “believe” and similar expressions or their negative connotations, or
that events or conditions “will”, “would”, “may”, “could”, “should” or “might”
occur. All such forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made. Forward-looking
statements necessarily involve assumptions, risks and uncertainties, certain of
which are beyond B2Gold’s control, including risks associated with the
volatility of metal prices; risks and dangers inherent in exploration,
development and mining activities; uncertainty of reserve and resource
estimates; risks related to hedging activities; the ability to obtain and
maintain any necessary permits, consents or authorizations required for mining
activities; risks related to environmental regulations or hazards and compliance
with complex regulations associated with mining activities; the ability to
replace mineral reserves and identify acquisition opportunities; unknown
liabilities of companies acquired by B2Gold; fluctuations in exchange rates;
availability of financing and financing risks; risks related to operations in
foreign countries and compliance with foreign laws, risks related to remote
operations and the availability adequate infrastructure, fluctuations in price
and availability of energy and other inputs necessary for mining operations;
shortages or cost increases in necessary equipment, supplies and labour;
regulatory, political and country risks; risks related to reliance upon
contractors, third parties and joint venture partners; challenges to title or
surface rights; dependence on key personnel; the risk of an uninsurable or
uninsured loss; litigation risk; changes in tax laws; community support for our
operations including risks related to strikes and the halting of such operations
from time to time; risks related to failures of information systems or
information security threats; as well as other factors identified and as
described in more detail under the heading “Risk Factors” in B2Gold’s most
recent Annual Information Form and B2Gold’s other filings with Canadian
securities regulators and the U.S. Securities and Exchange Commission (the
“SEC”), which may be viewed at www.sedar.com and www.sec.gov,
respectively. The list is not exhaustive of the factors that may affect the
Company’s forward-looking statements. There can be no assurance that such
statements will prove to be accurate, and actual results, performance or
achievements could differ materially from those expressed in, or implied by,
these forward-looking statements. Accordingly, no assurance can be given that
any events anticipated by the forward-looking statements will transpire or
occur, or if any of them do, what benefits or liabilities B2Gold will derive
therefrom. The Company’s forward looking statements reflect current expectations
regarding future events and operating performance and speak only as of the date
hereof and the Company does not assume any obligation to update forward-looking
statements if circumstances or management's beliefs, expectations or opinions
should change other than as required by applicable law. For the reasons set
forth above, undue reliance should not be placed on forward-looking statements.
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CAUTIONARY STATEMENT REGARDING MINERAL RESERVE AND RESOURCE
ESTIMATES
This Management’s Discussion and Analysis has been prepared in
accordance with the requirements of the securities laws in effect in Canada,
which differ from the requirements of U.S. securities laws. All mineral resource
and reserve estimates included in documents referenced in this Management’s
Discussion and Analysis have been prepared in accordance with National
Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). NI
43-101 is a rule developed by the Canadian Securities Administrators that
establishes standards for all public disclosure an issuer makes of scientific
and technical information concerning mineral projects. These standards differ
significantly from the mineral reserve disclosure requirements of the SEC set
out in Industry Guide 7. Consequently, reserve and resource information
contained in documents referenced in this Management’s Discussion and Analysis
is not comparable to similar information that would generally be disclosed by
U.S. companies in accordance with the rules of the SEC.
In particular, the SEC’s Industry Guide 7 applies different
standards in order to classify mineralization as a reserve. As a result, the
definitions of proven and probable reserves used in NI 43-101 differ from the
definitions in SEC Industry Guide 7. Under SEC standards, mineralization may not
be classified as a “reserve” unless the determination has been made that the
mineralization could be economically and legally produced or extracted at the
time the reserve determination is made. Among other things, all necessary
permits would be required to be in hand or issuance imminent in order to
classify mineralized material as reserves under the SEC standards. Accordingly,
mineral reserve estimates contained in documents referenced in this Management’s
Discussion and Analysis may not qualify as “reserves” under SEC standards.
In addition, documents referenced in this Management’s
Discussion and Analysis use the terms “mineral resources” and “inferred mineral
resources” to comply with the reporting standards in Canada. The SEC’s Industry
Guide 7 does not recognize mineral resources and U.S. companies are generally
not permitted to disclose resources in documents they file with the SEC.
Investors are specifically cautioned not to assume that any part or all of the
mineral deposits in these categories will ever be converted into SEC defined
mineral reserves. Further, “inferred mineral resources” have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or
economically. Therefore, investors are also cautioned not to assume that all or
any part of an inferred mineral resource exists. In accordance with Canadian
rules, estimates of “inferred mineral resources” cannot form the basis of
feasibility or, except in limited circumstances, other economic studies. It
cannot be assumed that all or any part of “inferred mineral resources” will ever
be upgraded to a higher category or mineral resources or that mineral resources
will be classified as mineral reserves. Investors are cautioned not to assume
that any part of the reported “inferred mineral resources” in documents
referenced in this Management’s Discussion and Analysis is economically or
legally mineable. For the above reasons, information contained in documents
referenced in this Management’s Discussion and Analysis that describes the
Company’s mineral reserve and resource estimates or that describes the results
of feasibility or other studies is not comparable to similar information made
public by U.S. companies subject to the reporting and disclosure requirements of
the SEC.
QUALIFIED PERSONS
Tom Garagan, Senior Vice President of Exploration and Peter
Montano, Project Director, both qualified persons under NI 43-101, have approved
the disclosure of scientific and technical information contained in this
MD&A.
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