Aug 14, 2015
Executives
Clive Johnson - President and CEO Mike Cinnamond - CFO Dale Craig - Vice President, Operations Bill Lytle - Vice President, Africa Dennis Stansbury - Senior Vice President of Production and Development John Rajala - Vice President, Metallurgy Eduard Bartz - Vice President, Taxation and External Reporting Roger Richer - Secretary, Executive Vice President and General Counsel Ian MacLean - Vice President of Investor Relations
Analysts
Rahul Paul - Canaccord Genuity Ovais Habib - Scotia Bank Chris Thompson - Raymond James
Operator
Good afternoon, ladies and gentlemen. Welcome to the B2Gold Second Quarter 2015 Conference Call.
I would now like to turn the meeting over to Mr. Clive Johnson, President and CEO.
Please go ahead, Mr. Johnson.
Clive Johnson
Thank you, Operator. Good afternoon or good morning depending on where you are.
This is our conference call to report the financial results for the second quarter of 2015. We are going to do a quick review of the financials because as you know, we already released the production numbers prior to this and we will focus to them in the financials and also we’re going to leave some time to answer any questions as well about B2Gold.
The news release is quite detailed as the last one was but obviously more information will let you ask - questions on that. From my perspective, we had a very good quarter again.
Some people said no surprise, I consider $70 an ounce less and operating cost to be for us a pleasant surprise and its indicative of the work we’ve been doing and we will continue to do going forward here to continue to legitimately work headways to find tool in our processes et cetera to optimize the mines that we have. The focus going forward is that and that will be also on of course construction of Fekola in Mali which is going well.
I realize in today's market that’s a contrarian move to build a gold mine. Profitable gold mine and gold prices are lower.
We don’t think that should be constraint but that's the nature of the market today. I’ll talk a bit about strategy later on.
I'm going to pass over to Mike now to give - run through the highlights and then give some of the detail that's outlined in the news release on the second quarter. Mike?
Mike Cinnamond
Thanks Clive. I’ll take us through the income statement first for the quarter.
With sales in the quarter of 114,000 ounces which was greater than the prior year quarter of 93,000 ounces and just marginally lower than budget of 180,000 ounces. Record sales in the quarter driven primarily by Otjikoto been included - at first full quarter of commercial production since Otjikoto started up.
Otjikoto continues to ramp up very well and again very pleased with how it’s gone. Overall we realized that - our average realized price of [indiscernible] $193 per ounce versus as part of 1192 average.
And total we had a 22% increase in ounces sold but offset by an 8% decline in the stock price. So, overall net revenues from sales of gold were up 14%.
On a production side, we pre-release the production and we have a very good quarter. We projected just 122,000 ounces versus a prior year quarter production of 86,000 ounces and budget of 118,000 ounces.
So, 36,000 ounces more add in the previous quarter last year and that’s a function, I guess to prior year Otjikoto been included for the first full quarter. There was 37,000 ounces from Otjikoto in Q2.
That also was a function of Masbate was about 4,000 ounces higher than last year due to higher throughput and if you recall last year in June, we had the installation of a new signal so that production while that was being installed and brought online. So, we didn’t have that issue this year.
So, again Masbate had a good quarter. Libertad was down compared to last year as expected.
That’s really a function of timing and effect of last year we had the higher Crimea and Santa Maria pits which were mined in 2014. Then looking against budget, 122,000 ounces versus budget of 118,000.
So, we were 4,000 ounces over budget and that was again - Masbate had a good performance against budget of 3,000 ounces higher 38,000 ounces. Sorry, 41,000 ounces in the quarter versus 38,000 ounces budgeted.
And as Masbate, that was due to more oxide being mined and budgeted in higher recoveries. Libertad was marginally down against budget and that's a function, just the timing we didn't get into the Jabali Antenna, material as quickly as we thought we anticipate that to be later in the year, we thought, we initially start mining that in the end of Q2.
And also we are in new higher grade Los Angeles area but we got in there a little later than we expected. Otjikoto, as we said it has 37,000 ounces in the quarter and it had - higher throughput and recoveries than we had anticipated offset by slightly lower grade and budget.
That translated into very good operating cost performance for the quarter. So, on a consolidated basis, our operating cost per ounce was $677 compared very favorably with prior year $43 an ounce lower than prior year, total of 720 bucks an ounce and against budget of - we’re $71 below budget which was $748 an ounce.
So, a number of contributing factors to that very strong performance. Some, broadly the higher production as I have just discussed.
We also benefited, obviously from Otjikoto being online for first two quarter. It’s our lowest cost operation right now.
It was $485 an ounce in Q2 which is an excellent performance from a mine that just come online. And that compared very favorably with the budget of $541 an ounce.
Fully operations I think benefited from fuel saving right across the board. Obviously, the oil price being down, we take an advantage of that and as I mentioned earlier, Masbate did have higher throughput recoveries than we originally anticipated.
When you translate those consolidated cash cost into all-in sustaining cost. All-in sustaining cost for the quarter was $1,056 which is $90 lower than our budgeted all-in sustaining of $1,146 and if you break that down a little more than $90 saving translates into $70.
So, that was the improvement operating cost and $20 that was a reduction in G&A cost across all the operations. Overall, on a production and operating cost basis, a good quarter led to growth profit for the quarter of just under $20 million.
Moving down to the income statement, just comments on labor cost lines. Gentlemen, admin costs were 10 million, just over $10 million but $3 million less than the prior year quarter.
That’s really a function of couple of things. One is timing.
Last year we booked bonuses in Q2 and this year we did in Q1. And also there is the weaker Canadian dollars, so our G&A costs as incurred in Canadian dollars are slightly lower when you report them in U.S.
And those were offset by an inclusion in G&A. When we took G&A for maybe online as $1.5 million and $10.5 million number for the quarter that relates to Wolfshag.
Other significant line items in the P&L those non-realized loss on our convertible notes of 8.3 million and we see that every quarter. That’s just market to market to fair value those convertible debauchers and as they trade up and market to market grow, its non-cash and we just look it every quarter.
Couple of things to comment on in the interest and unrealized loss and derivative lines. One of the main things that we did, get finalized in the quarter was we closed at our new revolving credit facility.
So as we’ve previously reported, we’re going to increase that facility amount from 200 million to 350 million and we’ve also changed the participating banks. One of the things that was required when we did change that revolver was, there were a number go forwards and hedges are being put on book to prior, participating banks and some of those were required to be innovated or transferred to the new banks.
So, that comes with a couple of costs. One of the most innovation charges of $2.5 million is non-cash.
It just related to a change and price of those contracts and that’s included in the interest of financing expenses. Also an interest financing expense is a one-time charge of $3 million related to fund financing cost on the old facility that had to be written off when we transferred from the old to the new but those are cost that were previously incurred there weren’t cash in this period.
So, that's a total of 5.5 million run off cost interest and finance expense line and also in the derivatives line, there is a net of 5.7 million but that’s made up of two or three things. Again, when we move these hedging contracts from some of the old participating banks to the new banks, we had to market to market those hedge contracts that were already existed.
So, those are contracts that we had but for kind purposes and mark-to-markets weren’t booked each period. They were just booked as they were delivered into but because we move them over for retaining purposes, we had to book the expense.
So those $11.5 million charge that went through that line related to that offset by a positive market to market after that date of 4 million. And there is also few hedge gains of $2 million that went through there unrealized.
So, total hedging amounts unrealized non-cash at this point was 5.8 million. All of the things translated at the end of the day were net loss for the period of $22.8 million.
When you adjust for those non-cash items as I mentioned in the convertible notes, they are non-recurring interest and financing expense and stimulates hedges. It led to an adjusted loss of just over 1.3 million for the period or $0.00 per share.
Just moving over, I’ll touch briefly on cash flow statements. So, on the operating side with $34 million operating cash flow $0.04 a share.
So again positive results in immediate lower gold price environments that we're in right now, we've had sort of short term price decline but we're still because of the positive cost experience at our operations we produced good strong positive cash flow and we got just almost $93 million cash flow from operations for the year. In the quarter, in the financing section you can see that we drew down $25 million under the old facility and then we paid it and drew down $150 million under the new facility.
So as we turn to the end of June, we've drawn $150 million on the new revolving credit facility. And all that translates down into -- when you look at the bottom-line, we have cash of $110 million at the end of the periods and liquidity wise we've got $110 million plus still $200 million available on our revolver.
So the total liquidity of $310 million, and we think we're well placed to maintain our current construction timeline and activity of our core projects which our mining operations and of course to focus on building Fekola, which we expect to come online in Q4, 2017. The other thing I would comment on, in light of the recent downturn in gold prices, we also wanted just be conservative and look at our mine plants and make sure that we’re well placed, if we think we’re going to see gold at around $1,100 in the short term for certainly next year maybe two years, then we want to be well placed to react to that.
So we’re undertaking an exercise right now, looking out alternative scenarios at our mines where we run the resources of lower gold prices, higher cut off grades and we look to see how we might change our mine plant and then scheduling for response to those lower prices. And we’ll also look at cost savings across the Board, obviously we’ve been doing that already over the last couple of years.
We’ve been in a declining price environment, gold has recently declined even further. We’re going to have another look at that, we’re looking across the Board sort of review on sustaining expiration and really focusing on keep looking at our expend on our core projects which again I reiterate would be our current mining operations and the construction Fekola.
So we just want to be ready if we find ourselves in an environment roll out, a price like that is sustained for a little longer than I think everybody hopes. One of the other things that we'll doing as well, as I've mentioned, the operating costs for the current quarter benefited significantly from lower fuel prices and we budgeted and obviously oil is still down there, so we’re looking at our fuel hedging program, again.
Right now we’ve hedged up to 50% of the current year production and our fuel usage, 25% at 2016. So we’re going to roll out even further and look until what we might do just to protect those prices and we may look at the combination of just contracts, straight forward contracts, we may look at colors, we think that might be an effective way to do it.
So overall, I think we’re well placed, well funded, and I think we have a very strong operating quarter.
Clive Johnson
Thanks, Mike. I think we’ll talk about -- get an update from Bill now.
Bill Lytle, who's there at Africa, and just come off as successful Otjikoto construction site up there which has been tremendous effort by – people in our group and also obviously in the next, and then maybe I’ll get Bill to give us an update on Fekola, the team of construction that's finished recently and maybe actually is in place and we've started [indiscernible]. Bill will talk to that.
So Bill, can you give us a quick update on the next one, Fekola?
Bill Lytle
Yes, how do you hear me, Clive?
Clive Johnson
Fine.
Bill Lytle
Okay. So on Fekola, and I am calling from the Fekola site right now, so if I break off I'll try and call back in right away.
Basically everything that we have promised to do is in place now. The key thing that we had committed to do and was preparing an access road from tar road between Canada and [Vancouver] [ph] to site.
That is now in place. We are receiving everyday containers and equipment's at site.
We are most of the way is through an air strip now so we can fly in and fly out. The path for the construction camp is complete, so our container camp that we have ordered will be arriving in the first part of October, so that crew is getting ready to mobilize, which works out very nicely.
I know I wasn't asked to talk about Otjikoto with that, expansion project is ramping up this month, I'll get about a month off and then I’ll come here and start the Fekola project, that's worked out very well. The middle footprint has been cleared and basically ready now to start our foundation work there after the rainy season, we have stockpiled enough sand and gravel basically to get us through the first two years of concrete aggregate So, from a construction standpoint everything remains on schedule, materially complete, with what the budget was proposed for, and on schedule.
Clive Johnson
Okay. Thanks Bill, just, we'll open up for questions shortly, but just let me make a few comments on strategy and I can maybe clear up a few things from the corporate point of view.
Obviously from what we heard from Mike we remain very focused on operations on optimizing which everyone talks about, we've actually been doing it quite effectively in the sense that obviously oil prices helped us, some other factors. But really there's also been tremendous amount of work done on site to continue to improve every aspect of our business and you are seeing some effects of that, our recoveries have been fantastic, the recoveries at Otjikoto and in fact the startup at Otjikoto has been the best that many of us have ever seen in our careers in terms of how rapidly that thing connect up and that's a real testament to the quality of construction I think that we did there.
Also John Rajala, our VP of Metallurgical, has done a great job at all the sites and that's an area where an example of the kind of strength that we have in the team and the ability to bring or to have a team of some of the top people in the industry doing critical things like that. So lots of improvements in the operations and as Mike said, we're going through a good exercise here which all in my opinion all responsible gold producer should be going through and that is to look at your operations at lower gold prices and therefore looking at the economics for the next three to five years and see how that looks.
And we think that will be an interesting exercise that might have some ton of surprises in size as well but a commitment to the physically responsible as we go forward. The other thing we get asked questions and I understand what's happened in the sector and I understand the main disappointment has been for shareholders.
It's been a really rough ride but I think we've carefully considered our strategy and we always have strategy reviews. Our strategy now is to, as I said, optimize our operations but also is to go over the mine.
And that appears to be the contrarian part I guess from talking to some people, and we routinely review our strategy, we talk about our Board, with our Board, since it's a part of shareholders, we done some of that recently and our view historically what we've done to B1 and B2 is continually review our strategies but if nothing is really changed fundamentally in the meet you make the decisions that you made, then don’t be afraid to continue with your strategy even if sometimes others are critical of it perhaps because it's a bull strategy that many of the people wouldn’t feel comfortable. So let’s, we can talk about why not build for Fekola in today's environment, and some people said why don't you slow down on Fekola and build up the cash flow, so much good.
I get that thinking, that's conservative thinking and we've looked at that as one of the options. But we've decided to stay with the strategy because our thing is why not build it.
It is a world class project, it is one of which is awarded, [indiscernible] and it's a very strong robust project that has huge legs in terms of additional ounces beyond four, five million. But the main thing, we don't pay for options that might be there as you know, so the main focus was on the good work that Papillon had done drilling off very healthy higher grade resource in [indiscernible].
Very attractive project, our feasibility study which is B2 quality feasibility study that was done by obviously some outside consultants working very closely and directed by our group, I think it's an excellent study. If you look at the results of Otjikoto versus the feasibility study, we're a group that delivers on the minds and then beats in fact off from the feasibility study estimates.
So our studies are little different then some of you have seen in the industry. But our study calls for the first seven years, 350,000 ounces a year for Fekola with our operating cost of 418.
If you use today’s oil prices it will be below $400 an ounce than operating cost, and obviously very low all in sustaining cost. Perhaps one of the reasons you build it, you build it because it's a great project because we did, we believe a very good acquisition, its ready to go, the Government of Mali is very keen, we've had very positive responses.
I understand there are lot of - a very positive support from the Mali government, they have some mines that are shutting down not because of gold prices particularly but because of running out of reserves. So they are very keen, mining is an important part, you're in a country that is embraced gold mining, it's an important part of the economy.
There are issues as we know in the north west of Mali, the government has recently signed a peace agreement with the Tuareg's, that's a hope of peace in the Northwest. It's a country that has very strong gold belt that we're part of near the border of Mali and Senegal, and Mali very collected Gold belt and lot of companies have been successfully using it for many years.
We don’t view it as a high political risk environment and we are very pleased with response of the government so far. We have an experienced team not only in Vancouver but we have experienced team in our sites and we can draw the strengths as we have before to all of our projects.
We have an experienced construction team, I know you've heard this before but just to reiterate the fact our construction team as Bill talked about is really to go on to Mali some already have. We don’t see that construction as a high particular high risk, it’s a similar plant, we just built in fact the same but larger that we just built in Namibia so we had affect to the drive run of purchasing and construction and all that for Fekola by doing Otjikoto.
So we’re very confident in the teams ability to deliver. We will have a – we’ll be very self sufficient in Mali, we will have a camp and it’s access by our road which is we completed the construction.
We’ll will also have our own strip which is nearly completion the construction so we can fly in and out wherever we have this river nearby with obviously plenty of water we will generate our own power. So we’re going to be very much self sufficient in Mali very similar to in fact in a very different part of the world to what we did [indiscernible] because you have a camp of people who are going to live in and its going to be a first class camp for sure.
So those are some of the reasons why we consider this a high risk proposition we see it as an opportunity we believe that the time to build low cost gold mines is when gold is lower, the is a long-term proposition we’re sure we’ll be mining for taking 20 years at Fekola so to be able to build at when gold prices are lower is a tremendous opportunity. And we’re very well funded company.
We just did – I understand recently and understand some of the views of the market, we get - a month and half to ago it was free cash flows all we care about, we’re not going to only if don’t have free cash flow I understand that from the conservative perspective. We chose not to have free cash flow because we chose to build another great mine to have tick our production from 480,00 ounces last year to [3 million] [ph] ounces by 2018 with our operating cost dropping dramatically not just because of the operating cost we are seeing from Otjikoto but of course projected very low cost at Fekola.
The banking, financing the $350 million that was when you think about the fact that this company had no production in 2010 as quite, its quite remarkable given remarkable win to get the support from the banks, now the banks get a small amount of interest and their money back it was successful which of course to be expect to be and everything we’re doing going forward. Interesting today that the banks are on board and believe that our future and equity is clearly not for some of the reasons that we talked about.
So we maintain this is the time to continue doing exactly what we are doing and very focused on that. I would argue that gold prices stay around where they are today.
If they are there for three years not only in mine where we successfully built and improve. Fekola but we will be generating significance amounts of free cash flow and I think we expect the doubling in our market gap frankly if we take our production and double it from last year to 2018 at lower operating costs we think that’s going to reflected ultimately in the stock market value of the company and get valuable it should be.
It’s lost in the market we became an intermediate gold producer recently with [indiscernible]. We moved over 500,000 ounce threshold we never did evaluate in that group because of the unfortunate timing of the gold prices but I just remind people, you have got little bit of success from the acquisitions we’ve done from 2010 starting in Nicaragua on road and success of our team.
And building these and running them very well, I think when you hear stories these days is great question to say who is telling you a story what they done before people had asked that question more in the last five years the industry wouldn’t have had some of the messages that it had. But think about who is say if you think about what they have done and think about what do you think they’re also that we’re going to be able to accomplish them just to remind you many of the people involved in future gold win were involved in financing gold mine infrastructure called [Juliana] [ph] in1999 and 2000 gold was 260 in our market capital was $30 million.
So we have been through there is a groups some pretty challenging times so nothing like this is nothing like some of the things you’ve done through we learn as you through we’re very focused on it we read our strategy and we believe that to be the right strategy going forward. We are continuing to do some exploration, we’re obviously looking at cutting back of G&A and cutting back on the expenses where we can.
We are committed to continue exploration around our sites where we had some very good results if you look at things like they and then you look at our success of Otjikoto with Wolfshag and we’re having some success in Philippines that also were excited about the expectation of certain course at what we’re seeing and Fekola and property around for Fekola. But we’re not going to we have a really aggressive exploration program to go on infill drill something obviously because with the key is our fiscal responsibility and growing what we have.
There have been some rumors out there that I guess maybe we’ll just deal with just so we can set a records straight. We promise we weren’t doing any big equity financing for over year we never thought we would and I see why we didn’t because of this access to something like $350 million very attractive revolving credit facility that we have.
So we’re going to continue to focus on those cost cutting measures as we talked about running my plan focus very clearly on achieving the goals of that so exploration we will be focused on mainly grounds to the exploration around the sites and we will limit our budgets. We will also be looking hard at sustaining capital cost of course and all those thing.
So within the next month and half we will have a good view how we see things going forward in the mines and updated mine plans and we will continue to update on Fekola one perhaps final comment on the banks, I heard a while ago as I said that there is free cash flow is king and then within two weeks they are getting whacked and scaring everyone. The next thing was that free cash flow so important but all that was bad.
I got it’s a little bit of reaction, this blow that we have just received for $350 million is revolving facility was put over the new banks was HSBC very strong banks the one time business now and in the future. We are not looking at the slight equity, we are looking for long-term banking relationship, this is not, this is not a facility that was put on 1600 vote and when people say all that is bad and soon we have a problem with our banks now, that’s crazy we have couple of banks that we put this on a $1200 gold the banks are going to free out about $100 wrap in the gold price if they have done all their work.
So all that is not treated equally, yes there is company that’s upon too much debt it appears we are not in a situation and feel we have a very manageable going forward and in fact based on our current projections. This company could be if we chose to be debt free by probably something in 2019 if we chose to be, we have our own facility of course as we have access to that.
So huge amount of confidence from the banks and I think that is really important this is not that equity is not real money, but this is debt and the banks are obviously very comfortable with our feature not only to repay the debt. Finally in terms of some concerns primarily that they have been voiced succession planning our B2Gold, I was always wondering what people ask whether they worry that we don’t have a succession plan or they worry that I’m going to stay around, I’m not sure which it is but anyway I’m definitely staying in place and I’m very excited about the future B2Gold, we have been so really challenging in another years where we’ve chosen to do acquisitions and that’s a company dramatically we are very pleased with that.
Now it’s the time to focus on what we have no major acquisitions coming out, we are ready to go until the fall and with a very positive story, there is no one hanging their heads at B2Gold because we have a company that is growing dramatically and we are all very focused on that. So I think that is most of what I wanted to talk about in terms of strategy, we are going to stay the course, which is our course and we are going to build another successful mine and emerge as the one of the lower cost intermediate gold producers that’s profitable and responsible and that has growth in our D&A, successful growth.
So we do have lot of projects in the pipeline such as Kiaka and Burkina Faso, which is a good project, it needs some help from the gold price and unfortunately the government there has got some tax changes that will require maybe the higher gold prices if that continues. But it is a good project in a good part of the world, that’s one example and of course we ultimately have our interest in Gramalote in Colombia, which I expect to go into fairly standby position, while we still continue to push permitting there.
So for us we are very happy with the quarter results, and we are doing good job operationally and we are going to continue to focus there also on the Fekola projects. I think we I’ll open up for questions, now we just who - we're here, Dale Craig is here and Dale is responsible for overseeing the Paraguay and the Philippines, Masbate and Bill Lytle he is on the phone and Dennis Stansbury is on the phone, as well as been helping up there a lot down in Mali getting things going and John Rajala, the floor is on the phone in Vancouver Ed Bartz, VP of Wolfshag Taxes, and of course here is Roger Richer is here, Executive VP and Ian MacLean, VP Investor Relations is here and of course myself.
So Fannie, if there is any question for us that can be detail about the quarter or they could be any other things don’t forget, two question maximum for all.
Operator
[Operator Instructions] The first question is from Rahul Paul with Canaccord Genuity. Please go ahead.
Rahul Paul
Hi everyone. Clive thanks for the reminder for two questions.
First one, you said you’re undertaking a review of all your existing products the lower cost but you still seem to be committed to moving forward with Fekola which makes sense. Now just curious, what about the development of Wolfshag?
Should we expect any changes to the timelines there or is that another project that shouldn’t be impacted?
Clive Johnson
Wolfshag is going to be private based, you exercise before this - new exercise we were continuing – we done lot of into drilling Wolfshag so, we’re now moving it into a plan as part of a mine plan in the next – and that's going to be a little behind, Mike do you want -
Mike Cinnamond
Wolfshag the new mine plan incorporating as part of Wolfshag expected by the end of the year
Clive Johnson
So, that hasn’t anything to do with this kind of current additional review we are doing. That’s part of the normal process we run by the end of the year we will have a incorporated Wolfshag.
And look, if the economics suggest that we go for more Wolfshag earlier, we’ll obviously have a look at them. So, that will be a part of that exercise and look at that.
But obviously at Wolfshag adds - creates a big question is, how much is underground and there is a couple of different views on that obviously driven by economics to say how far you go to open pit until the strip ratio pushes you underground. So, that’s all going on, no nasty surprises.
We've been for drilling, it's been very consistent with what we saw before and so nothing there is surprising at all and it will enhance and improve. For the quarter we projected - but I think it's important to note that, next year we don’t see even though our production goes to 200,000 ounces.
Next year that isn't because of Wolfshag that’s because of mining faster with the expansion mining, Otjikoto mine faster and the way the grade falls over the next year. So, next year is higher without any Wolfshag late 16, maybe 17 will be the year Wolfshag and so, we’ll have time to look and see what percentage of Wolfshag do we incorporate and when, so we could have a further boost, potential boost economics from looking at it that way as well.
Rahul Paul
Okay, thanks Clive. And then I think in the past you mentioned that you were working on a new resource model incorporating all the data from mining and create control year-to-date and all the drilling that was undertaking under last few years and that was expected to be complete in Q3 but fair to assume that the next update will see as release for the early next year incorporating all that and Wolfshag as well?
Are we still expecting another interim update in Q3?
Mike Cinnamond
Roger?
Roger Richer
[indiscernible].
Rahul Paul
Okay. Thanks.
That's all that I had. Congratulations on a very nice quarter.
Clive Johnson
Thanks Rahul
Operator
Thank you. The next question is from Ovais Habib of Scotia Bank.
Please go ahead.
Ovais Habib
Hi everyone. Again congrats on the great quarter.
This new rule of two questions, so, I’ll stick to that. First question just on in terms of Masbate, you're looking to add two more associated banks and you’re expecting now, late 2015, early 2016, I believe.
In terms of your study you guys have done, are you looking to see recoveries improving or kind of being in the currents levels?
Clive Johnson
I think, I’ll pass it over to Dale for that one.
Dale Craig
Yes, to be clear, the tanks were expecting to be operational in the second quarter of 2016. We delayed the ordering of the tanks a little bit to make sure that the tank design and the specs tied in with some of the other work that we plan on doing with the client next year.
With the addition of the tanks, remember we are running at a slightly closer grand right now that helps with throughput and it’s really the right thing to be doing under today's gold prices. We expect about a 2% additional recovery with the tanks in place.
So, right now we are operating at about 2% less than what we would expect grinding to 150 microns or 100 microns.
Ovais Habib
Thanks Dale. And the next question.
Just at Otjikoto, in Q2 you guys were primarily processing oxide I believe. When do you expect to start entering the transition of the sulphide zone at Otjikoto.
Clive Johnson
I don’t know if Bill we don’t have tones onto the phone he is away, so I don’t know he is probably the best guy to answer minutes come back to on that but so base anybody can sense to that Bill?
Bill Lytle
No I have a sense of that we are in the transition zone for sure, we are actually gone half way through it and moving towards the consolidated zone. So certainly Q3 we are going to see some hard material.
Ovais Habib
Okay. And then in terms of reconciliation down there as well, I mean that should improve when you are hitting the sulfides is that correct?
Bill Lytle
That’s the overall impression that we’re getting for sure, I think if you see for the last three months you need to include July which obviously wasn’t included in this press release, we continue to see grade coming closer and closer to reconciliations. So we are still are very confident that that is going to be the case.
Ovais Habib
Okay. Sounds good.
Thanks guys. That is it from me.
Bill Lytle
Thanks.
Operator
Thank you. The next question is from Chris Thompson with Raymond James.
Please go ahead.
Chris Thompson
Hi good morning guys. Congratulations on good quarter, so my two question relate to I guess net operating plans from Libertad and the second one from as that you said why don’t you just give us an idea on the niche on operating plan as far as pits are concerned for Libertad?
Mike Cinnamond
Sure. Pit sourcing through this quarter will continue to be have a lease central, Limon [ph] pit and Los Angles pit is on stream.
Chris Thompson
What sort of tons I mean can you just expand a little bit on Los Angeles we don’t know much about that, so what sort of tons you are layering into the plan and then what sort of grade can we anticipate from that?
Mike Cinnamond
Yes Los Angeles is relatively small pit, it’s about 210,000 tons it is pretty close to our operations in deliver debt we are counting on about 30,000 tons a month out of that operation, that carries three grams per ton. So far we have seen about 2.58 grams per ton out of it, but grade is improving as we advance in the pit, typical in some of these areas, small minors of work the upper elevation we have got that sorted out and we are now into main ore body.
Chris Thompson
Great, okay and then just a quick comment if you would of course taking with Libertad on Mojon underground and maybe just expand into the status as far as heavily in that please?
Mike Cinnamond
Sure. What we are looking at right now for Mojon underground this year, we’d like to initiate test grips and test development of the 390 elevation and was just over 300 meters of drifting and that is some test that should finish up, we will initiate that fairly soon and it should finish up towards the end of the year or early 2016 that will give us confirmation mine method and mine ability in the bottom central east area of Mojon.
There are couple of potential targets there for underground in Mojon pit itself.
Chris Thompson
Okay in Antenna?
Mike Cinnamond
Antenna we remain plan to develop our underground infrastructure there that is all of it is in the current plan this year and that is all of that is included in our CapEx this year for Jabali Antenna underground.
Chris Thompson
Then the permitting I mean is that do you think we are going to see production in Q4 or early next year, I mean is the permitting a real issue there?
Mike Cinnamond
We pushed our forecast back really for Jabali Antenna to come into the back the last quarter and early into the last quarter of 2015, the permits is advanced, it’s just gone through the municipal review and it is sitting with Marina we are wrapping up a couple of issues and we then proceed to the public review portion of the permit, that is a process it typically takes two to three more weeks, so in general it is coming along quite well.
Chris Thompson
Okay great, okay and then quickly just moving onto Masbate, obviously fair amount of oil coming from Colorado you mentioned $0.60 oxide fuel from there is that the sort of blend you want to maintain in the near term?
Mike Cinnamond
Only In the very near-term we are looking at the third quarter running just under 50% oxide by the fourth quarter will be down to about 20% oxide, so towards the end of the year we come pretty much back on stream to where we would be in terms of oxide versus fresh ore, total for the year though will be mining more oxide, so on average for the year total be more in the range of 50% against our original anticipated 39%. So little bit more out of Colorado pit less out of Main Vein pit.
Chris Thompson
Great, thanks gentlemen finally Montana what is the status there?
Mike Cinnamond
We continue to work on the permitting, we’re still planning on mining there next year it’s permitting land acquisition in that process it’s underway right now and that’s advancing.
Chris Thompson
Is that middle of next year do you think towards the end or beginning?
Clive Johnson
I would say end of third quarter.
Dale Craig
That’s 10%
Chris Thompson
All right. Thank you Dale thanks guys congratulations again.
Dale Craig
Welcome that was actually eight questions with only few questions. okay so in the future we could do those details drive in a separate with Dale or to…
Chris Thompson
Okay. So someone that all thanks for your interest and any other questions.
Operator
Thank you. The next question is from [Ronald Lloyd] [ph], Private Investor.
Please go ahead.
Unidentified Analyst
So the substance for shareholder here you want to comment on the first question about senior management director selling tens of thousands or 100,000 shares in July?
Clive Johnson
Sure. Yes, okay sure and what was our volume in July we say I don’t know, its probably $3 million day time 30% [ph].
A lot of volume in our stock very liquid stock, so little bit of shares sales really don’t affect the share price. People have now become fixed stated on well let’s just talk about that I know that I now Marconi, our new director sold some shares which got a lot of attention I thank you for bringing this up by the way because this is another one of the things I wanted to deal with.
Marc sold some shares because he had a tax issue in Australia he did an excellent job of building a company up and acquiring and doing really good work on our what is a first class last deposit and he had a tax issue. I do not expect him -- because of the shares he got replaced by our shares for popular shares I don’t expect him to be tax vulnerable nor do I expect any of our executives or directors to be tax vulnerable.
So I had no issue at all with Marc selling those shares and no one else should in my opinion, I think there’s lots more -- other things be looking at more closely. So let’s talk about compensation we’ll talk about that because I think we want to get promise – for executives who are way, way behind some of the other companies going to blast 60% of their market GAAP over the last three years or 80% in some cases.
So but you should look at the whole compensation package I think when you look at this. In terms of sales, other sales people who are around here we’re it’s real this last period of time we’ve taken some cash bonuses not really large cash but it’s only appropriate according to our comp committee and the Board and the rest of secondary peers.
And we -- because cash is king and we're growing a Company, if we do the company that we would accept RSU's, restricted share units, shares in payment for our bonuses. So if I get some shares, if I say to the Company, well, I don't need to take cash I believe, I'll take my shares, I'll take my bonus as shares, Well, I get that paid out over two years and I get hit immediately with the taxes on the third of that as if I had sold it.
So I get tax less income. So you're bit of an idiot if you have shares in exactly the company and you get your shares paid, your bonus paid in shares, you're an idiot if you don’t sell all shares are going to be tax less, you're a real gambler.
So we don't encourage anybody, an executive group of directors be idiots. So that's really lot, and this is – 10% - we created this company in 2006, if you look at our share holdership I think I own around eight million shares or whatever, we reserve the right and we'll never apologize for selling shares when all of the nation is going to pop domain.
We created this company and most of the guys that create companies, an hi-tech or a [Ludo Lemmens] [ph] everyone shares them, I want to take a piece of the company and they sell their piece of the company. We've founded it, we've taken a huge risk to get to this point in the company, we're fairly compensated and people who focus on share sales really should try look at the bigger picture.
Because that's what's going to affect your investment, not selling a small amount of shares for totally legitimate reasons. So, we're not going to apologize for that and really there should be much better ways to focus on the upside in company.
I share your frustration with the price, believe me, but we have done everything we said we would do and that's really under our control and we will continue to do that and in fact do better. It takes balls to grow up company in a gold sector right now, and there are not balls out apparently.
So we're going to continue to do it, I would suggest that if you're long term holder, hold the stock for couple of years and see what we've done, because I think you'll see within two and half years another great mine built and this company will be the fastest, continue to be the fastest growing intermediate producer and more importantly our operating cost is going to drop dramatically and we'll be in a very strong financial position. So, I hope that helps a little bit, but I really would encourage people not to focus on the share sales unless you see something dramatic that doesn't make any sense.
Small bits of stock are normally sold to cover taxes, every once in a while we'll pick some money off the table because we believe in diversified portfolio, as well. People shouldn't be grudgers, you and anybody you know can start a company and issue as many shares as you want, at $0.01 or $0.02 a share.
Let say company is going to look at three years in a falling gold price, you probably want to do that, you probably want -
Q – Unidentified Analyst
Hi, I have really no problem with your conversation. I think you're totally underpaid.
So I don’t probably would act. Last time I mentioned about the stock buybacks, you weren’t too keen on it.
But with the stock price down here and the new line of credit, you could take a $100 million free cash flow, almost $100 million, think to buy down here a buck a share, you don’t think that would be a good value for really shareholders?
Mike Cinnamond
No, I mean, I don’t traditionally believe in buybacks, as I think I told you last time because I think that affects the best that we could do with the money. As a growth company we should give it out, and to give it to you guys.
We should just dividend them all out. I think end of the day I mean, really we're building mines and we chose to do.
Great to do thing, there is no - so any tax we take from channels [ph] we realize our objectives today. We'll definitely – I'd be hurt if would have buyback shares.
Tax just came and we will remain at the end at strong cash position for the next 2 years as we go through building the mine. So we into that for more reasons, not for my considering.
I guess, at the end of the day look, most of these would buy their shares back, they end up go back to the same price they were before anyway. If you really look at traditionally what happens with that.
So we're not likely to do that. We're much more likely to pay a dividend into 3 years.
So 2018 and beyond I mean, we'd be looking as a company to be issuing a dividend and those dividends should grow substantially with our projection of our free cash flow going forward.
Q – Unidentified Analyst
Thank you.
Mike Cinnamond
Thank you.
Operator
[Operator Instructions] The next question is from [Goldie Bark with Haywood Securities] [ph]. Please go ahead.
Unidentified Analyst
Hey, good morning. Congratulations on a good quarter.
Just to follow with a couple of questions. Leading in with Masbate, certainly evolution in their nature of the material going through the processing facility are you guys through this year?
Next, how do you project recoveries, first half, I guess, and 2016? And do you think was there any significant impact with the line CIL plant expansion, I'll leave that to the first question for you guys to elaborate.
Mike Cinnamond
Dale?
Dale Craig
Yes. Just pulling up the numbers here.
We're looking at average recovery through the year, really in the original budget of about 74% built into that was no CIL expansion for the first three quarters, 2% adjustment on recovery in the last quarter. So that 2% recovery, penalty applies for a final quarter and first quarter of 2016 then we move forward.
Longer term, I need to pull the projections [indiscernible] does to look at both by all means send me an email and I can comment at them a little more specifically, probably better with a little bit of timing. I can make a longer explanation for it.
Unidentified Analyst
Okay. Thanks, Dale.
Just a follow up question on, are you guys are seeing some obviously fantastic processing rights going through their mine and as Bill was saying we are through the transition getting into, I guess processing. Coming to Q3 is there any – in Otjikoto correlations with the proportion build going through the gravity?
And what is the proportion of bill coming through gravity and obviously those’s the equation and follow line for you now?
Mike Cinnamond
John, do you want to add to that one?
John Rajala
Yes. Sure, Clive.
While the gravity recoveries is been running at 65% to 70% of the gold fed into the plant. So and that’s been since we've find tuned to the circuit and that included while we were processing oxide and now into transition and that’s where we expected to remain as we get into the deeper sell side.
And that’s a biggest reason for our high recovery, overall recovery through the plant
Unidentified Analyst
Okay, great. Thank you, I'll follow up with you with the emails and details.
Thanks.
Operator
Thank you. This will conclude today's question-and-answer session.
I would now like to turn the meeting back over to Mr. Johnson.
Clive Johnson
Okay, well, I realized its Friday afternoon back ease. So thanks for your time and we will be talking again soon and we will be coming out as we said with - after scrutinizing our mine plants and using some of our gold price, we will be coming with that in later on in the year.
And continue to focus on growing B2Gold. Thank you.
Operator
Thank you. The conference has now ended.
Please disconnect your lines at this time. And we thank you for your participation.