Nov 14, 2014
Executives
Clive Johnson - President and CEO Mike Cinnamond - CFO Dale Craig - VP-Operations Bill Lytle - VP-Country Manager Namibia
Analysts
Andrew Quail – Goldman Sachs & Co. Rahul Paul - Canaccord Genuity Ovais Habib - Scotia Capital Michael Gray - Macquarie Capital Markets Chris Thompson – Raymond James Jeff Killeen – CIBC World Markets
Operator
Good morning, ladies and gentlemen. Welcome to the B2Gold Third Quarter 2014 Results Conference Call.
I’d now like to turn the meeting over to Mr. Clive Johnson, President and CEO.
Please go ahead, Mr. Johnson.
Clive Johnson
Thanks Ronnie. Good morning or good afternoon depending on where you are.
Thanks for joining us for the B2Gold third quarter quarterly conference call. We're going to review the quarter and talk about our operations going forward a bit and then we're going to open it up for questions at that time.
A few highlights from the third quarter. A lot of you have seen the results.
So far we've produced 90,000 ounces of gold. Cash operating cost of $732 an ounce, which was higher than we've been budgeting.
We had a gold revenue of $114.9# million for the quarter and maintained a strong cash position of almost $180 million at quarter end. We have had I think as we made it very clear some few operational challenges over the last couple of quarters, but we are happy with the results and now we're dealing with those and in fact as you'll hear the Masbate Mine had a record month in October since the start of the mine of over 20,000 ounces.
So it's recovering well and Dale is going to tell us a bit more about the issues we faced and how we resolved them both at Masbate and also at the Limon Mine. So these are not systemic problems with either operation, but they're one-off scenarios and we think we've learned from them and moved on and improved.
We're actually on track for our renewed guidance for the year of between 380,000 and 385,000 ounces of gold production and one other - important developments during the quarter was the completion of the acquisition of the Papillon Resources transaction. We're very excited about the Fekola project and we will talk a bit about that.
And also very important quarter in terms of the Otjikoto construction, which is going very well and Bill Lytle is on the phone from Namibia. Bill is going to bring us up to speed up the day and what's happening in terms of Otjikoto preparing for its first gold in the next four weeks or so.
So for the nine months, gold production was little over 270,000 ounces and actually our consolidated cash operating cost of 694 for the period were actually in line with the year-to-date and tracking up for our guidance, which is actually pretty good given that we went through some of the issues we talked about in the last couple of quarters. So we're looking at cash flow from operating activities of about $100 million for the nine months and that will be about $120 million for the year and that number will jump up significantly next year to at least gold price to about $190 million as we bring - as you bring on the first full year Otjikoto.
So we got through the quarter and resolved some issues and are looking very positively towards continuing to grow going forward and maintaining a strong cash position and being very focused on delivering assets. I am going to pass it over to Mike Cinnamond now, our Chief Financial Officer, who is going to give you a quick summary of the financial results and then we're going to move on to operations.
Mike Cinnamond
Okay. Thanks Clive.
I'll just walk us quickly through the quarterly results and then the P&L and then a couple of comments on the cash flow and the balance sheet. So firstly on the income statement, as Clive said, we had revenues for the period of about $115 million, which represents sales of about 91,000 ounces and that was about 14,000 ounces less than originally budgeted and those shortfalls really came from - of a 6,500 less ounces sold from Masbate and about 7,000 ounces less sold for Limon and we'll touch on those shortfalls as we discuss production numbers.
Overall revenues were down about compared to the comparable period by about 14 million. The decline in gold price accounted for about $6 million of that, decrease in ounces sold accounted for about $3 million and the prior year there were also accounting [indiscernible] we had in revenue of about $5 million, which weren’t repeated in the current year.
So looking at production, ounces produced in the period were just over 90,000 ounces, which again is just shy of 15,000 ounces less than budget and no shortfalls consistent with the sales in Masbate, a shortfall of [7500] [ph] ounces, in Limon of about 7,000 ounces. As Clive said, cash cost for the period was $732 an ounce consolidated and if you break that down, you can see Libertad performed very well as production was almost exactly on budget and it had cash cost of $560 an ounce, which is just about $17 higher than budget, but very close.
And Masbate, you had cash cost of $793 an ounce, which is actually $9 less than budgeted. So although we had a shortfall in production here Masbate benefitted from lower strip ratios and higher volumes actually mined and put into the stockpile.
And then Limon for the period was just under $1,100 an ounce and so if we look at the operating issues that drove those shortfalls, I think Dale will discuss in more detail, but basically Masbate reflected, the shortfall there reflected just less throughput in the mill and as a result of some of the commissioning issues in the segment which Dale will touch on. And Limon the shortfalls again temporary issue related to just access in the higher grade ore in Santa Pancha 1 which we expect to be into in this quarter.
So I think both of issues the [indiscernible] and the Limon higher grade access are items that are temporary and we think non-recurring in nature and we think we have them resolved. So it shouldn’t be an issue going forward.
Just looking at year-to-date cash cost, again Clive touched briefly on it. The consolidated cash cost year-to-date of $694 an ounce, which is actively still traded although we have shorter - lower production is actually still within our cash cost range and as we move into Q4, especially at Masbate where [indiscernible] against there is [indiscernible] production of 20,000 ounces in October, we think that those cash cost on a consolidated basis will come down and so we should be well within our previously recorded range.
To comment briefly on depreciation for the quarter was $29 million or $318 an ounce, that is an increase from the prior year, but it really just reflects the impact of capital that we invested in the prior year into our operations now coming on and having a full year's depletion. I’ll touch also on G&A, G&A for the period is about $1 million more than the comparable prior quarter, but 300,000 of that salaries just as we have more bodies here as we grow the company, but half a million of it’s legal - recurring legal expenses again just routine in nature as we're a bigger company and operate more jurisdictions, and then a couple hundred thousand just related to our other offices that we currently run and that we acquired through the various acquisitions and our [indiscernible] which is winding down over the period so we wouldn’t expect to be carrying those next year.
Then the other, the big item maybe to touch on here in the P&L is the impairment of goodwill and other long-lived assets so at September 30 as required under our guidance, we looked at what we thought might be the impairment indicators and the sustained decline in gold price was determined to be one. So we dropped their long term gold price estimate from 1350 to 1300 and ran an impairment test on all our operating lines along with the assets including goodwill.
So no impairment of the mines was identified. However for goodwill we determined that the whole amount of the Masbate goodwill of $202 million was impaired and was written off.
And again I think you should remember that when we purchased Masbate, it was in a period of much better gold prices, so I think we've seen a lot of goodwill write-downs triggered over the last couple of years. So I don't think it's a surprise when you get down to $1300 gold that would have triggered impairment.
And then for Gramalote, we also ran that model there, the PEA model that had been done by Anglo, so we did run that model at $1300 gold and determined that the Gramalote joint venture at $1300 was impaired by $96 million. So all in all, we had impairments for the period of just shy of $300 million.
And as that floats through the -- the only other item in the P&L maybe to touch on is the gain on the fair value of the convertible. We had a positive gain of $31.5 million.
As you noticed in the prior quarters, we see that fluctuate a lot. We carried that converted mark-to-market basis, So as it's trading value goes up and down we get the gains and losses in the P&L related to it.
Again similar to the goodwill that's a non-cash item. So all of that flowed down, we had a net loss for the period of $274 million or $0.39 a share.
On an adjusted basis, we had a net loss of $4 million or $0.01 per share. And maybe just touch as well on our all-in-sustaining costs, we have a range of $10.25 to $11.25.
Our cost for the quarter were $1,120 and year-to-date, we were $1,176. Again with the positive results that we see from the mines in the quarter, Limon coming back to regular operation and with Masbate operating at record levels we expect that overall all-in-sustaining cost to come down and be within guidance albeit at the upper end of our guidance range.
Just talk briefly now on the cash flow. Cash flows before changes and non-cash working capital was $27 million or $0.04 per share and year-to-date was $100 million or $0.15 per share.
For the quarter there was a [declining] [ph] [indiscernible] of $6 million and that really reflects the change in gold revenues accounted for $4 million of that decrease. Cash flow asset changes in non-cash working capital was $33 million for the quarter and $75 million year-to-date and for the quarter it's very similar [period on period] [Ph], year-to-date we're about $34 million less than the prior year, but in 2013 we acquired $32 million worth of inventory when we acquired CGA and which we got the benefit of in those numbers.
So if you strip that out, we're very comparable period year-to-date, year-to-date in terms of cash flow after changes in working capital of $75 million. On the financing side, we drew down another $50 million on our revolving credit facility.
We still got $75 million left and at this point we don't foresee that we will be drawing any more down in the current quarter; we paid $5 million of interest and commitment fees is expected there. And overall on the investing side, we had a net amount cash used in investing activities of $32 million.
That's net of cash acquired on the Papillon acquisition also of $32 million. So on the Papillon side although the deal didn't legally close until the 3 October, once the court, the final court decision and ruling had been made in late September, it was only a passage of time issue before we acquired control.
So for accounting purposes, we brought Papillon into the books and consolidated at that date. So we show $32 million of cash acquired in investing activities because of that.
So that leaves us at the end of the period with $179 million and still a further $75 million undrawn on our revolving credit facility, so good liquidity there. Finally I'll just touch on a couple of things in the balance sheet.
The main change period on period is the change in the mining interest and that reflects just over $0.5 billion allocated to Fekola asset when we acquired it and then reduced by a write down in the Gramalote joint venture of $96 million and also the write-down of $200 million related to the goodwill. And the only other item [I’d point in] [ph] balance sheet down on the equity section, because Papillon wasn’t actually acquired legally until the 2 October, the shares weren’t issued until that date.
So we do show the shares the consideration payable down in equity as a separate line, but we did factor in the shares to be issued into account when we calculated the earnings per share and the cash flow per share numbers. And I think that's all that I was going to touch.
Clive Johnson
Excuse me. Thanks Mike.
We're going to pass over to Dale Craig now, VP-Operations. Dale is responsible for overseeing production at the Masbate Mine in the Philippines and the two operating mines in Nicaragua.
Over to you Dale.
Dale Craig
Thank you, Clive. Our operations in the third quarter, we continue to focus on resolution of some specific issues in two of our operations.
For Masbate, third quarter production was 43,746 ounces, which was 7,514 ounces below budget. Reduced gold production was directly related to issues encountered with the SAG mill after the initial run in period.
As the operational team commenced to charge a [full mill Volvo] [ph] in mid-July elevated bearing temperatures were observed in the SAG discharge. Throughput and recovery was affected as maintenance crews worked through a series of exercise to determine the causes for the temperature increase and these included checks and modifications where necessary for [pedestal] [ph] clearance, pinion movement, lubrication function, cooling efficiency and mill alignment.
The mill is functioning well now. Currently we're running with a high throughput and a low ball mill load, which really suits the soft ore that we are processing from now through to year end.
In January, a pinion locking plate which will keep the pinion drive in position during loaded start-ups will be installed and a new bearing -- a discharge bearing will be installed. Additional modifications to the cooling system will be carried out later, although frankly the current operating temperatures are well within operational limits.
In fact they are at the low end of the operational limits. The changes in January are designed to permit the operation of the SAG mill at its full design performance.
The pending consultant report will indicate what if any critical spares we should be keeping [ahead] [ph]. For the final quarter in 2014, the mine is operating two excavators in Colorado pit to process softer higher grade oxide ore, which will work really well with our current SAG configuration.
We reserved it through September, October and November. We're achieving higher throughput with good grades and high recoveries have been achieved and this is using software oxide material at 70% of mill heat.
And so far in the fourth quarter by mid November, we're about 6,000 ounces better than budget for that same six-week period. October was a record month.
Throughput in October was 19,700 tonnes per day and month to date November we're showing 19,300 tonnes per day. We anticipate as we head into 2015 similar configuration on the mill feet, budgets are under development.
Right now we're anticipating first half of the year 60% oxide feed in our mills. B2Gold anticipates that Masbate will produce a 180,000 ounces this year.
Former guidance was 190,000 ounces. Cash operating cost for the third quarter was $793 per ounce, slightly lower than budget, lower cost was the result of lower processing cost related to lower throughput, but also lower strip ratios and lower mine volumes and less stock pile draw downs than were planned in the budget.
Year-to-date cash cost of $784 per ounce in line with budget and $37 per ounce less than last year. In other areas, the transition self mining is proceeding smoothly, the labor force has been assimilated and our maintenance staff is in place and ready to complete the takeover of maintenance function in December, which is the final step in our transition.
The metallurgical studies regarding potential plant expansion is still pending and is being worked on. For our Libertad Mine again, that deliver a strong quarter.
Production was 36,624 ounces at our cash operating cost of $560 per ounce, which compares to the budget of 37,000 ounces and $543 per ounce. Year-to-date our production is 4,051 ounces ahead of budget at 112,901 ounces.
Cash operating cost for the year of $551 per ounce, that's an improvement of $18 an ounce of the budget, an improvement of $42 per ounce over the same period in 2013. CapEx expenditures of $5.6 million include deferred stripping at Mojon and Jabali areas and development of the Jabali project.
Year-to-date CapEx spend is $23.9 million compared to a budget of $34 million. Pending expenditures in the final quarter include Jabali land purchases, advances in the Antenna area of relocation program and deferred stripping.
The mine permitting at Jabali Antenna is proceeding on schedule and our relocation team is now working actively with the signs of the Domingo residents who will be affected by our big development. We're receiving good report -- good support from the national district and municipal levels of government.
In November, B2Gold received a national award for CSR working sustainable development in Nicaragua from the organization. The award is for development of new [Hammond facility in the St Pauli] [ph] apartment in Nicaragua, which provides sustainable benefits for more than 800 persons.
The center has posted more than a million liters of milk in the last eight months and has allowed producers to increase the value of the product by four times because the product arrives that market more quickly and in better quality. As a great example of the kind of opportunities that can arise with our systems and partly as a result of the improved infrastructure and transportation that occurs, when you have responsible mine development.
In August for the third consecutive year, the La Libertad Mine received an award for leadership and occupational safety from the Nicaraguan National Health and Safety Commission. This award follows a comprehensive audit and a review system and we're really proud of this achievement.
In El Limon, production was affected in the third quarter by delays in development of the deep watering system in Santa Pancha 1. The principle cause for the delay was difficulty in establishing stable wall conditions at the bottom of two bore holes, which are located about 100 meters below underground pump station.
Our goal has been to install hidden line pumps at the bottom of those holes that move the pump water down and lower the level of hot water in the mine. The lower level will allow us to expand the mine to deeper levels while maintaining safe operating conditions.
As of November 10, the system was operational and it is anticipated that cruise will be able to access higher goods in December when the operation will return to normal production levels. During the third quarter, El Limon used other water sources from lower grade areas in Santa Pancha 1 in limited amounts from Santa Pancha 2 and ore from the open pits.
In the third quarter El Limon produced 9,822 ounces of gold, which was 6.829 ounces below budget. Average grades were 2.82 grams per ton, compared to a budget of 4.34 grams per ton.
Lower production levels resulted in cash operating costs of $1,099 in the third quarter compared to a budget of $667 per ounce. Year-to-date, cash costs are $830 per ounce, compared to a budget of $693 per ounce.
These costs will normalize on commencement of mining in the higher grade stopes and in fact our ongoing operating cost are much better than budget both $550,000 lower than budget for the quarter and some of the savings that -- some of these savings are from energy and reduced mine activity at Santa Pancha 1, but there are other areas such as in the admin and contracting cost where those savings should remain and have a positive impact as we resume normal production. CapEx year-to-date totals just over $13.31 million, which includes deferred stripping, underground development, mine equipment and pump purchases.
Remaining expenditures in 2014 and good construction at [ponge] [ph] pre order of [sand] [ph] construction material deferred pit and underground development in a variety of small projects that should total about $7.7 million. So as we look at the close of 2014 and start of the new year, the budget focuses on management of cost, reduction of external cost such as those from suppliers, improvement of mine efficiencies and maximization of production.
In Nicaragua, in the past years we've invested in our operation and our expectation that that investment will pay off in the coming years. Thank you.
Clive Johnson
Thanks Dale. We'll leave it to the end for any questions.
So I am going to ask Bill Lytle, who's in Namibia to give us an update on the exciting construction developments down at Otjikoto. Bill?
Bill Lytle
All right. Clive, do you hear me?
Clive Johnson
Fine.
Bill Lytle
Okay. Excellent.
Well I think Clive set it up by summing it all up. We continue to remain on time and on budget.
Basically we're coming right down to the very end of construction on the earth work side, on the civil side, we're more than 95% complete with only the final grading and drainage remaining. On the mill side, the primary crusher has been commissioned and hand over to operations who actually run [wafer from] [ph] the circuit and we're now piling on materials on to this stock pile pad.
The second ball mills are complete. They're planning on putting a ball charge around next week and the plan is to get them running by the end of this month and hand them over to operations.
The lease circuit is completely filled with water. All the agitators are running, they're pushing the node against the power plant and the intension is to produce gold by the middle of December.
On the -- the El facility has been complete since the beginning of the year. Basically what we're doing now is just finalizing the fence around the edges putting the [stake] [ph] in and putting lock ways in.
The mill on budget, basically on schedule, slightly more than 40 million tonnes produced. The power house was commissioned at the end of October and handed over to an contractor.
It's fully operational. So the schedule shows us at plus 95% complete with no major outstanding items to be completed to produce gold.
We're currently in the process of transitioning from construction to operational employees. So we've been doing a very strong stakeholder engagement program both with employees and with government officials to make sure everyone is aware of what's happening and as I said, the plan is to produce gold by the end of the year.
That's all I have.
Clive Johnson
Okay. Thanks Bill.
Just we talked in the news release little bit about Otjikoto and the plans going forward, as everyone is aware, we had the discovery in the drilling of a higher grade Wolfshag zone very close to the plant. So you’ve seen us talk about production increasing very dramatically over the next couple of years.
Otjikoto and we've planned all along to build plan to get around 2.6 million tonnes a year, which is what we're completing the section on right now, but we said that given the existence of Wolfshag, would actually should leave the ability to -- where very little extra money upgrade the facilities, so they can handle 3.1 million tonnes a year and we were starting that now actually. So that will be completed by the third quarter of next year and that will take the capacity out as I mentioned and we're only about $15 million which involves a couple crusher, couple more tanks, a little bit more equipment, so obviously no-brainer in terms of the capital returns.
So what that does is that simply by mining the Otjikoto ore body faster, that's where we see a significant increase in production and next year we're looking at 140,000 ounces, 150,000 ounces of low operating cost of around 500 -- little higher than 500 an ounce gain and should be less than 800 an ounce. And a big jump in production in '16 as we have the larger tonnage and better grade in that part of the Otjikoto ore body, so we're looking at approaching 200,000 ounces with similar low operating cost is what we're expecting in 2016 and then it comes back down a little bit so far in the month 170,000 ounces for '17.
Now all that is without Wolfshag yet, so what we're doing now is we drill the upper portion of Wolfshag and some part of Wolfshag in two or three years is going to be we expect [repeatable] [ph] and then we expect that given what we're seeing some of the grades come in, we think we're going underground not only in Wolfshag, but long-term probably at Otjikoto deposited. So we're going to -- next year we'll be able to give you more information about how Wolfshag comes in and how it plays out.
So we look at bringing Wolfshag into '16. We'll be able to show you implications in '17 going forward.
So it's very positive development having Wolfshag there and that's given us the confidence to go ahead and pull the trigger on increasing the throughput as well. One other -- just another thing I though while Dale was talking was that we've been talking for some time about doing an expansion study on Masbate.
We're getting close to completing that study and that study has gone back and we always knew that in order to as we got two harder orders at Masbate, we transition [on that material] [ph] and we will have to at some point in time look at an expansion to handle that ore and increase -- sorry decrease the grind size and look at mining the harder ores. But part of that is depending on exploration success because we've got some exploration success in oxide zones and also some higher grade sulfide zone.
So that's encouraging. In terms of the expansion, we don't know the results of that report, but frankly if the expansion looks like it's a positive thing, I think you'll see us defer that, given the fact that our focus for the company is really looking to build the Fekola.
So we want to be very focused on that. So unlike we're trying to do both at the same time expand Masbate and build Fekola.
So just to heads up on that, we'll give more information on that moving into the early part of next year. In terms of other projects before we get to Fekola where we're continuing to advance Kiaka doing some metallurgical test work there.
We've done some drilling. Frankly in this current environment today cash is king and we're going to be continuing to advance, but at a slower pace and sometime in second half of next year we'll be looking to coming out with a feasibility study on Kiaka.
We like it a lot. It's a good ore body.
We do think it in each of the well from the gold price to be economic, but that's the one of our projects along with Gramalote I guess that perhaps represents -- well does represent some optionality on the gold price. If you think gold is still cyclical and one day you might see it back at $1,500 or $1,600 an ounce.
I think that both of those projects look like they could become mines in the future. We are going to stay very focused on what we're doing in terms of moving on to building Fekola.
So just before we get to Fekola, Gramalote, we're in the process right now reviewing budgets with Angola. Obviously it angles in a position of trailing cost like everyone, maybe more than some and be able to working to agree a budget, we're committed to the project in the sense of holding it as an asset.
We would like to continue to advance it towards permitting, to get the environmental assessment done. So that's kind of ongoing and we expect to see a very low budget from Angola for this coming year, because the focus will be to keep the claims in good standing and to advance the permitting and look at the project again when and if the gold price makes it interesting the projected capital and the preliminary economic assessment of $1.1 billion we think is high and we will do it for less than that.
So over time we’d expect some work to come in lower in the capital cost. Just so on to Fekola, we’ve done a lot of work there.
We were very happy to get the merger agreement with Papillon concluded and issue the shares. Obviously, whenever we issue a large block of shares like that even on an accretive deal which we think is good, you're going to get some of the shares back in the market and also of course the timing of the deal was unfortunate and obviously the gold price.
So I think we got hit a little bit harder than we normally do and of course we had for us a weaker quarter than normal as well. So all that has kind of conspired to give us -- for us a bit of a harder hit in the market, which we’re hoping to see as we get a good ramp up.
At Otjikoto we’re hoping to see a re-rating in the market place. So Fekola, we love the project.
It’s a great gold belt as everyone knows. One of the best projects we’ve looked at, not only in Africa but pretty much anywhere else for a number of years and we looked to launch the stuff, good grade, low strip ratio, good logistics.
We’re moving on it very rapidly. We’re doing a lot of feasibility work now and we’ve taken a lot of the work, good work that was done at Papillon and some of their engineering groups they’ve used, and we've been working very closely over the last four months.
What we’ve tried to do is probably we’re closing the deal and it's showing it will take a long time to close, we were able to not lose the schedule by committing that’s we’ll continue to work together. So we’ve done a lot of engineering work behind the scenes over the last four months and now we’re into deciding what ton we should do or ton per year.
And right now, I'd say we're leaning to some 24 million tons a year, which would yield over 300,000 ounces of gold a year, that’s kind of meaningful now and the capital we don’t know yet, but sort of rough order magnitude depending on how you finance it for say three lease or contract mining etcetera. The capital is falling in at somewhere between $350 million to $400 million in that range.
We’re working on that now. We’re moving equipment very shortly from Namibia to Mali to Fekola, so we are not going to wait for a feasibility study, which should be closer to midyear.
We are going to get going and want to get going on construction. So we’re going to mobilize the team and the team is the same team that’s just coming off finishing their great work at Namibia, the B2Gold construction team.
One of our great advantages of having our own construction team, we’re going to take a well deserved couple of months off and go fishing in Mexico and then they’ll be back and ready to go in Mali on the next one. So we’re looking to get going in February with a start-up with road constructions, airstrip construction, so we’ll be completely independent there because of flying in and out and we’ll be looking at doing earth work starting some cap construction.
And then we’ll be looking at us as we go further through the year, how much money we need to add to Fekola. Obviously we've got some cash from mining operations next year and these gold prices could be around $190 million.
We have our revolving facility with the banks $200 million facility. The bottom line we will [at least this] [ph] we will need to have some financing for Fekola, but they’re alternatives and numbers.
There is a lot of money out there today for gold companies if you have robust projects, if you look into deals like Fekola and if you have cash flow and credibility building wise, it’s clear that we're demonstrating it again now with Otjikoto coming on. So we have a number of alternatives.
One, what's been discussed is talking to our banks who are very happy with us about increasing side of our revolver which might be one of the better alternatives for us because Fekola has got a very rapid payback. So it’s nice to pay interest as you go, it's attractive, so we’re going to look hard at that.
The high yield bond market, it’s pretty volatile these days, but you get the right, and there’s lots of money there. We're returning that offers all the time of doing high yield market and a number of other alternatives.
Frankly the banks would love to a project gold mine and Fekola will be a great candidate, but we don’t think that gives us the most flexibility as a company, but it's an alternative if we needed we could look at that. So, we’ll be working over the next couple of months to pull all that together and with great confidence I think part of Fekola is if the gold price stays right where it is for a number of years, it’s going to be a good acquisition if the gold price goes down, it’s going to look kind good acquisition and if gold price goes up, it’s going to look like fair acquisition.
So we’re very happy with it and if you look at Fekola combined with Otjikoto you know you can between those two, you could be approaching half a million ounces a year of potentially of production of half of operating cost of somewhere around 500 and all-in sustaining of less than 800. We’re very -- we think that's a tremendous position to be in as a company today and looking forward to that kind of growth.
So more to come -- a lot more to come on Fekola and we’ll be able to getting into New Year to talk more about on our plans and specifics and we’ve got a few things to do down there on the ground. We've got to negotiate now with the government, which the normal procedure down in Mali and that is to negotiate in connection with the government.
The government will end up with an interest in project and we’re going to follow the preventions that they have done in the past and get in to work with that. The government is very, very keen to see the mine built and very excited about that.
They know the importance of this mine to Mali. A couple of the other mines there in the community [the main port] [ph] will be running down over the next couple of years.
So this becomes a very important project and definitely we’re getting very strong support from the Government of Mali. And it's nice to be -- we’re not pioneer and we're going to share that, but we're in a recognized gold belt that has a series of world-class deposits and we think the upside of Fekola beyond the robust economics that we see in the main ore body, we think that upside is huge.
It’s open and there is lots of targets along with the belt. Papillon did what a lot of companies do.
They focused on something and getting something they thought they might be able the go and get funded and built. So we think the exploration of Siberia is huge.
In exploration this year, it’s a bit frustrating -- a lot frustrating for our deals. These guys may be will pass discoveries and that like to be out there -- looking at new stuff, we all recognize the importance of cash is king this year and we’re looking to build another mine starting next year.
So we’re going to do exploration of these focused around the mines. We’ve had a great track record of finding additional -- there seems to be higher great ounces at each of the operations that we’re at.
With our great exploration teams, will continue to do that and then hopefully as we get into stronger positions, we’ll be able to go out and do more aggressive. We still believe very much that these ounces are the ones you find and we have one of the best exploration teams in the world.
So now that they’ve take up the team and do the things like infield drilling and grounds drilling and metallurgical test drilling and all the other things. Just one thing that we should talk about, we’ve put up a news release, but it is the Ebola situation in Africa obviously is on everyone's mind.
We have been impressed with the preparedness in Mali because of Mali little bit it was in neighboring countries. There has been a good level of preparedness and we’re actually working with a group of mining companies that comforts on a regular basis and talking about the various things we can do.
We have put in very strict guidelines that require the internal and external communication and training and preparedness of workers where people have been visiting in the past and we’re going to take all the precautions appropriate as our other mining companies. We are all comparing notes working very closely with the government and we are very confident that it will be contained as it has been now and in some other areas.
So I think with that, difficult times in the gold sector. We’re very encouraged looking forward, we think we’re perhaps uniquely positioned in the sector to grow dramatically from this point on with Otjikoto coming on and then Fekola and really focusing on our operations that continue to look at reducing our cost.
I would like to mention G&A, I think people have to realize that you can’t go from no gold production in 2009 to 500,000 ounces plus in 2015 without increasing your G&A, but we will see lower G&A next year and we’re focusing on that coming down as well. I don’t think our G&A will jump up again dramatically over next few years.
We are at a level now where we have the people and we believe majority of people in place to build the company from its existing assets. I think that’s most of what we wanted to tell you about the quarter and going forward I guess I think we’ll open it up now for questions.
Operator
Certainly, thank you. (Operator Instructions) The first question is from Andrew Quail of Goldman Sachs.
Please go ahead.
Andrew Quail – Goldman Sachs & Co.
Hey, hi Clive and team, just a couple for me, first on Masbate, look obviously the raises you guys have highlighted the recovery right as well and we can point to things like that, but did you say revaluing in Q4 and obviously in 2015, but do we get back to a more sort of level rise that we saw end of say 2013 on the recovery rate?
Clive Johnson
Well we’re Dale, do you have the fourth quarter…
Dale Craig
Yeah sure we’ve in our initial production schedule, we knew the back half of 2014 would be a better half and we’re certainly seeing that now that we’ve got the issues of the SAG mill break that. We’re certainly looking for a big final quarter in order to recoup some of the challenges that we had in the third quarter.
Recoveries are sitting better than 80% at this point with the high offsite value. And about as anticipated, I’d say given the pieces that we're providing at this point.
Clive Johnson
We haven’t come out yet with our projections for each of the mines which we'll do. So surely or early into the new year so we'll -- and also we’re going to -- we’re awaiting the results from the expansion test which included a bunch of additional metallurgical drill work.
So we're putting all that data together to see what looks like going forward.
Andrew Quail – Goldman Sachs & Co.
And just on maybe what to do with Otjikoto, what sort of -- can you just run sort of breakdown of the power cost?
Clive Johnson
Bill, do you have that?
Andrew Quail – Goldman Sachs & Co.
And just sort of exactly if there are any sightings given the oil cost so often.
Bill Lytle
It’s hard for me to hear the question, can you repeat it.
Clive Johnson
The question was on the power cost at Otjikoto, what field price are we using and what do we see there?
Bill Lytle
Oh, the actual power cost for Otjikoto, it's basically in line with the feasibility. We're slightly less than feasibility which is about $0.16 per kilo-watt hour and the feasibility had slightly less power consumption than what we’re actually going to -- what we’re projecting for 2015.
So the actual cost will be slightly higher, but the cost per kilo-watt hour is slightly lower. So it's about a wash.
Clive Johnson
And Bill where are we at on the solar possibility for Otjikoto?
Bill Lytle
Yeah, so we’ve completed a feasibility with the company called Suntrace at Europe to deliver between 5 megawatts and 10 megawatts of solar power. Currently we're in the process of negotiating what the long-term ramifications there would be.
It's basically going to be a take or pay contract until we trying to figure out what the maximum or optimal amount of megawatts would be and so that -- that’s really up and exactly coming right now to bring a proposal to the Board, but that looks very positive.
Andrew Quail – Goldman Sachs & Co.
Thanks.
Clive Johnson
Thanks.
Operator
Thank you. The following question is from Rahul Paul of Canaccord Genuity.
Please go ahead.
Rahul Paul - Canaccord Genuity
Hi, everyone, a question on Otjikoto development seems to be going quite well at the seat. Just wondering if could tell me what the size of the ore stock file is in terms of tons and freight?
Clive Johnson
Rahul, first of all, really it's not going quite well, it's going great. Bill, do you know what we've got in terms of the stock file there?
What we’re going to have? I think we've put up a release.
Bill Lytle
Did we put it in the release? I am not sure we did.
In the stock pile, we’re sitting at currently just under 350,000 tons at a grade of about 1.1 grams per ton.
Rahul Paul - Canaccord Genuity
Okay. And then on the just also wanted to clarify on the capital of the $244 million initial capital, how much is left to spend and how much do you expect to spend in Q4 and do expect some of that to carry over into 2015?
Clive Johnson
Mike, do you have an answer.
Mike Cinnamond
Yeah, I think the -- well, the total capital all in with everything for the feasibility was 337 and according the staff that was originally intended to be released in pre script, all of that we've got approximately in the fourth quarter $32 million plus plan to bring us in line on budget as we've discussed and it's likely that a little bit of that might roll over into next year in terms of the actual cash spend, but right now that’s what we’ve got budgeted.
Rahul Paul - Canaccord Genuity
Okay. So you’ve spend as you think the side sum another $32 million to be spent?
Mike Cinnamond
Yeah, correct.
Rahul Paul - Canaccord Genuity
Okay, thanks.
Clive Johnson
Thanks Rahul.
Operator
Thank you. The following question is from Ovais Habib of Scotia Bank.
Please go ahead.
Ovais Habib - Scotia Capital
Hi, guys most of my questions were answered, but just a couple of questions I wanted to ask, just on Limon, you guys were talking about starting up the [pit to a vain] [ph] I believe in Q2 and now you’re looking -- it looks like you guys are back at going further with developing one, is the plan still to develop Santa Pancha 2, in conjunction with one and does that give you more flexibility going forward?
Clive Johnson
The short answer is yes, had a Santa Pancha 2 originally was budgeted for only about 10,000 ounces or 10,000 tons of contribution in the 2014 budget. Our development is well extended in Santa Pancha 2 and it will be a significant contributor to our production profile in 2015.
Ovais Habib - Scotia Capital
That's great guys. Okay and in terms of the Masbate expansion, Clive you were mentioning that obviously Fekola comes at a better priority than the Masbate expansion right now.
Depending on the study, would you still be looking at an expansion there or you having other priorities in place right now before the Masbate expansion comes into play?
Clive Johnson
Well we'll have to wait and see. Of course the report says, but if the report suggests that its positive in the future, to look at an expansion which could be adding more mill capacity I guess and more tanks things like that.
Obviously yeah, the future we could look at that and the nice thing is that under our control there is no debt at Masbate so down the road, something you could do if you wanted to, you could use five-year revolver to go in and do [matching] [ph], but the good thing is it's in our option in our call.
Ovais Habib - Scotia Capital
Okay. Thanks, and just a final question on Libertad in terms at Mali EnCana you guys are going through permitting and you also mentioned the relocation that's ongoing as well.
I mean how many people are you reinstating and how -- can you give us some color as how that's going about?
Clive Johnson
Yeah sure. The short answer is really quite well.
We're really happy with the adapters. There are about 70 houses that we see that will be needed to be relocate it.
Our relocation team is already been in the field in the last month reviewing the coming event with residents and coordinating with them for a move. So we anticipate that that will move forward and it should be completed in time for our anticipated EnCana development roughly in mid year, next year.
Ovais Habib - Scotia Capital
That's great guys. That's it for me.
Thanks so much.
Clive Johnson
Thanks.
Operator
Thank you. The following question is from Michael Gray of Macquarie Capital Markets.
Please go ahead.
Michael Gray - Macquarie Capital Markets
Hey good morning. Clive, on Otjikoto the stock pile, was that a total grade between high grade and low grade stock piles, can you just clarify?
Clive Johnson
Bill did you hear that?
Bill Lytle
Yeah I heard that, but that's the overall grade, that's correct.
Michael Gray - Macquarie Capital Markets
Okay so you have multiple stock piles of high grade and low grade right now?
Bill Lytle
That's correct. We have a high grade stock pile that's about 1.3 grams and a low grade stock pile of 0.5 grams per ton.
Michael Gray - Macquarie Capital Markets
Okay great, thanks. And on Wolfshag I noticed you've got new drills also in the MD&A untapped to some over a half ounce or 15 meters, are these in line with expectations overall and is the structural stereographic models continuing to be predictive?
Clive Johnson
I'm going to pass it over to Tom. We're just trying to find the results.
Tom Garagan
Sorry Mike, I'm not sure what we put in the MD&A but the core Wolfshag is as expected. The WA is on, the WB zones are both coming in with other and locally you get some pretty good grades.
But there's nothing to say that it's a huge surprise either positive or negative. We do get, we know that we get some really high grades on there.
In terms of the structural model it's changing slightly but not a lot based on what we see in the open pits or the open pit at Otjikoto, that [thrust] [ph] is still real, but there is a straight component to it also that's creating the openings.
Michael Gray - Macquarie Capital Markets
Okay. Thanks.
Just congratulations on the CSR Award in Nicaragua.
Clive Johnson
Yes. Thanks.
Operator
Thank you. The following question is from Chris Thompson of Raymond James.
Please go ahead.
Chris Thompson – Raymond James
Hi good morning guys. Thanks for the opportunity.
Thanks for the call. A couple of quick questions here, I mean probably for you Dale, looking at I guess mill feed mix for Masbate, percentage of grades actually that came from the Colorado pit for the quarter against I guess the mains vane.
Dale Craig
Overall offsite feed was 70 percentage of grade, give me a minute, see if I can infer it from our summary sheets here, yeah I don’t have the good grades down here, but I can tell you that we're running about 1.24 grams per ton and the material coming out of Colorado will be pretty significant contributor to that area other background grades were running typically on transition and primary yours would be in the 1.1 range.
Chris Thompson – Raymond James
Okay, great, so you know I mean just looking I guess at the reserves I guess, the lost reserves in Colorado were significantly lower in grade and obviously this is under review and we're anticipating a new reserve shortly, you have enough good grade I guess in Colorado to satisfy maybe six months of production, that sort of rate?
Clive Johnson
Yeah, our budget is still under development so that we said that things may change a little bit, but we see carrying 60% oxide through the front half of the coming year. I think one of the things that could positively affect Masbate going forward and that's just pertain to expansion as well.
So that's basically the discovery of additional oxide material or better grade transitional material. We've never seen that in two zones [indiscernible] and Montana and this is some of the drilling that Tom and his guys have been doing.
So, the other way to push out the need for expansion and the other way to continue with better recoveries has always been Masbate the exploration potential which we rate very highly to find near surface oxide or good recovering -- better recovery transitional stuff -- so that's happening and that's encouraging. And as that goes on, so will a lot of material may be we'll be able to get in mining there sooner rather than later.
So that’s a good entry for this month.
Chris Thompson – Raymond James
Thanks Clive. Just quickly moving on to Libertad, again I understand that you guys are preparing your guidance for next year and budgets and whatever but sort of mix that we saw against as far as from the pits for the mill feed for the Q3, is Santa Maria still around or is that, what's the status there?
Dale Craig
Santa Maria has been completed. Crimea we are even processed and finishing up.
So the primary mill feed that you'll see over the coming months in the Mojon development area, Jabali Central and [indiscernible] as we can use it.
Chris Thompson – Raymond James
All right, okay. Any comment, any color on the ground potential against Mojon.
Dale Craig
Sure. We're in that process of looking at that development and our plans are to include that development in our 2015 budget?
Chris Thompson – Raymond James
All right so there is a chance you might go underground I guess with Majon?
Dale Craig
Yes.
Chris Thompson – Raymond James
Okay. All right and then finally it's just something obviously that I noticed in the MD&A and I noticed it before but just comment very quickly on the ownership I guess, the color something to do with this ZTS claim?
Clive Johnson
Sure -- that's closed by [Papillon] [ph]. There is an underlying ownership of the Fekola project and they've been in discussions with a local owner and they've been looking at negotiating an agreement with locals.
So we're understanding but that is now we've got some things down there right now actually and that's part of way going forward here soon. That's been an [event] [ph] addition to that, we need to get what the local partner there and see if we can find a way forward for everyone.
We do believe that the local ownership has the right to a certain ownership. Our view of there, was that is and there is -- we're very [happy] [ph] and there is seem to have been a part in the past.
But we're getting involved now that we're confident that [interest] [ph] and move along and move forward. So we're looking forward to getting that wrapped up as part of the whole convention to go forward with government.
Chris Thompson – Raymond James
Great Clive thanks a lot and the team congratulations. I look forward to Otjikoto.
Clive Johnson
Thanks Chris.
Operator
Thank you. The following question is from [indiscernible] Please go ahead.
Unidentified Analyst
Yeah hey, thanks for taking my question, just a real quick, once you get Otjikoto online, what will be the maintenance or sustaining CapEx going forward?
Clive Johnson
Well shuffling with that.
Dale Craig
Otjikoto next year we're looking at somewhere in the region of $20 million, round about $25 million. Yeah there are some prescripts in there and we're in the process of updating the life of mine plant for Otjikoto, so I don't think I can comment on that.
Clive Johnson
Yes hopefully recurring, sustainable capital number.
Dale Craig
We're hoping to lower that probably I guess on a sustaining basis, but…
Unidentified Analyst
Okay, thanks.
Clive Johnson
Thanks.
Operator
Thank you. The following question is from Jeff Killeen of CIBC.
Please go ahead.
Jeff Killeen - CIBC World Markets
Hi guys, thanks for your time today. Just to go back perhaps -- I had a question on that claim at Fekola.
was that something just to clarify, was that something that has been disclosed through the acquisition process and did you get a felling from [them] that this is something that have already been working on? Or…
Clive Johnson
Yes, definitely, we were having with their disclosure and obviously due divulgence they now they disclosed all of the history of updating legal agreements and to wind your way to that, you may now have a certain percentage of ownership that we agree with that, so we, divulgence and we came to the summer view of Papillon legal people about the rights of ownership for that. Percentage and now we will get involved in negotiation discussion with the local owner and I think they should be.
I was hoping it would be positive, because we're including [NOV] [ph] in the position to move this project forward now. So that will be part of a close honor next few months is looking to -- that we satisfied ourselves that Papillon was in a very good and a strong legal position and that is still our view today.
Jeff Killeen - CIBC World Markets
Okay, great and then just from the previous work that you’ve looked at do you get a sense of deal that comes down the road, would it be the monitory sense or is more of something looking in the interest in the project or where would you gravitate towards?
Clive Johnson
Well, we are negotiate then your ---I don’t want to say too much at the end of the day we think that the owner has a right to certain interest in the proceeds and the project. So the question will be defining that and there is lots of different ways to do that.
There may be a combination of some -- we’d assumed I guess we assumed a combination of some form of a and it belong with something that never long.
Jeff Killeen - CIBC World Markets
Okay, great thanks and then lastly you’ve noted, you would like to get moving on the project Fekola fairly quickly and obviously it's a lower cost asset and make sense of these kind of prices, what do you think your flexibility is if you know just from a decision of maybe financing taking longer than expected something like that, what do you think your flexibility is in terms of moving that project timeline around?
Clive Johnson
Well I think we have the rights to do that. So we have -- we’re looking from an exploration to an expectation basis now because that's a lot of questioning for that and we understand the way forward there and I think it about a three year, initial three-year term to get going in construction.
So we've got -- we have the ability to move that schedule if need be and frankly you’ve got some good grade there. So the alternative would be I don't see this coming about.
The alternative would be in the lower gold environment. You could potentially build something smaller to start and look at expansion, but we're comfortable with the interest level we’ve got and our positive performance to date and there is a lot of keen interest out there.
So I am very confident, we can put together attractive package for whatever additional financing we acquired. As I said, a lot of it might be as simple as renegotiating our revolver and there’s a lot of banks that are very keen.
A lot of their French banks are very keen at Mali and have done a lot of work there. So we’re very confident that we can get going and this is the right time to build the mine like this.
So we’re going to be cognizant in making sure we don’t have something too much debt that's something we're always cognizant of, but this is the kind of mining we want to build in a market like this and we're really committed to getting at them.
Jeff Killeen - CIBC World Markets
Okay, very well thanks and then sorry just lastly then can you give us an idea on you said you know there is a possibility it could be staged the long-term gold price you’re using now for your current mine is 1,300 is that what we should expect for Fekola updates and potentially for Masbate expansion as well?
Clive Johnson
Yeah, we’re looking at, we’re using internally of course we look at 1,200 and how hard look and even though below that. But we’re not comfortable with looking at around 1300 as a guide for going forward for now, but the question on our budgets for next year what are we using 1,250 or...
Dale Craig
So we use 1,150 for running our cash flow.
Jeff Killeen - CIBC World Markets
Okay, great that’s all for me thanks for your time.
Clive Johnson
Thanks Jeff.
Operator
Thank you. This concludes today's question-and-answer session.
I would now like to turn the meeting back over to Mr. Johnson.
Clive Johnson
Okay, well thanks everyone for your time. We're looking forward very much to getting up right and we're excited about what the future holds for B2Gold and we feel very fortunate to be in a strong position going in what is obviously a challenging market for the metals but we're responding well to that and fortunately we have a lot of we think it's ample growth opportunities.
So we look forward to reporting again soon. Thank you.
Operator
Thank you. The conference has now ended.
Please disconnect your lines at this time. We thank you for your participation.