B2Gold Corp (BTG) 2012 Q2 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen. Welcome to the B2Gold Second-Quarter results conference call. I would like to turn the meeting over to Mr. Clive Johnson, President and Chief Executive Officer. Please go ahead, Mr. Johnson.

Welcome, everyone. Thanks for joining us for our conference call to talk about the 2012 second quarter financial results and update you on other affairs of the Company. By means of introduction we have -- I'll talk about who's here representing the Company. In Vancouver, we have Mark Corra, Tom Garagan, George Johnson, Marjorie Shea, and Ian MacLean and myself. On the phone, we have Bill Lytle from Namibia and Dale Craig from Nicaragua and Dennis from South Africa.

In terms of an overview, we had another -- as most of you have seen our news release already, I think we had another impressive, solid quarter of production and financial performance, which continues to leave the Company in a strong financial position. We are, in addition to that, on track for the advancement of our development projects -- Cebollati, Otjikoto, and Gramalote, which we'll talk a bit about. We, of course, still have a strong, as always, exploration budget on a number of exciting targets around the mines, and also other projects around the development projects; but also some high-quality exploration targets outside of that, which Tom will give us a brief update on, as well.

We've also, as always, continued with our strong safety track record and our commitment to safety and environmental and social responsibility. That's, as always, a very important driving force for us in our industry. Finally I'll touch a bit on acquisitions, but we continue to pursue acquisitions, given our relatively strong performance in the market. We've shown in the past that we'll pull the trigger on deals with a great growth profile, so we don't feel we need to do significant acquisitions, but we sure would like to if we find the right fit and it's accretive to us.

Anyhow, now that I've said that, I'm going to turn it over first of all to Mark Corra, our CFO, to give you the highlights from the second-quarter financial results. Mark?

Thanks, Clive.

To start with the consolidated statement of operations, gold revenue for the quarter came in at $57.3 million, about $3 million higher than last year. That was despite the fact that actually ounces sold were almost exactly the same between the two periods, just 36,000 ounces of gold. On a year-to-date basis, our revenues up significantly, 12%, at $121.2 million, compared to $108 million last year. The increase in year-to-date gold revenue is mainly due to the higher gold prices. The gold price average for the first six months is $1,644 per ounce, which is $200 higher than last year. Actual sales was about a thousand ounces less than last year.

On cost of sales, again, as Clive said, we had a very good quarter operationally. The ounces produced came in at just under 37,000 ounces of gold, which, again, was comparable to last year's second quarter. And on a year-to-date basis, we've produced 71,400 ounces of gold, which is very comparable to last year's number, as well.

On a cash-cost basis, cash costs have increased this year, as we budgeted. They averaged $583 for the quarter, versus $507 last year. A lot of that had to do with higher strip ratio at La Libertad, and also some of the cost pressures that we've seen in the mining industry, offset by improvements in our recoveries and performance at the mines, which have mitigated the higher costs.

On a year-to-date basis, our cash costs were $585 per ounce, versus $519 last year. Our cash costs for the quarter and for the year-to-date are lower than our budget, and we do expect that our production in the second half of this year will be higher than the first half. That is as we budgeted, and we're already starting to see that in July. Libertad had its best gold production month ever at 9,684 ounces produced. Limon also had its best production month of the year in July, as it produced 4,448 ounces. We are starting to see the increase in production for the third and fourth quarter, as we budgeted.

We did have one significant thing that occurred in the second quarter, and it relates to our royalty taxes. In Nicaragua, there's a 3% -- they call it an ad valorem tax. It's basically a royalty tax, and it applies to all new mining concessions, and has been that way for several years. La Libertad, though, is still under the old mining law. We applied about a year ago to the tax department to see if we could take those royalty taxes and actually use them as a reduction of current income taxes, or actually apply them against current income taxes as per the grandfather effect of the old mining law.

In the second quarter, we actually got approval from the government that this 3% royalty tax for La Libertad could actually be considered as a pre-payment on income taxes. Our royalty taxes have been reduced significantly in the quarter. So our total cash cost number came in at $6.01 in the quarter, versus budgeted number of about $6.70. Going forward, our royalty taxes, or our total cash costs at La Libertad were based on $1,550 gold, will actually be $46 an ounce less than what we had originally forecast.

Just to clarify, we did know about this treatment of the tax, but we took a conservative stance until we got approval from the government, and we were recording it as a royalty tax instead of a current tax. And now we will be showing it as a current tax. We will see a reduction in our total cash use going forward. Limon, interestingly enough, is under the new mining law, so they do still pay a royalty tax of 3% on their income. The net result was that our gross profit increased in the second quarter to $28.5 million, compared to $27 million last year, and on a year-to-date basis, we've seen a significant increase in our gross profit to $60.2 million, an 18% increase from $51.1 million last year.

Under general administrative costs for the quarter, they did increase over last year's second quarter by about $1.1 million at $4.7 million. Most of that increase is actually attributable to travel costs and consulting fees in that we are looking at acquisitions. We've signed a lot of different CAs, and actually on a couple projects, we are quite advanced in our discussions, and that did increase our G&A costs because of that. On a year-to-date basis, our G&A is similar to last year, the difference being that last year, we paid cash bonuses of about $1.6 million to senior Management and mine operating personnel. This year, we paid those bonuses by way of RSUs, rather as a cash bonus. We actually issued stock for it. That, you'll see, is reflected in the share-based payments, which is increased to $6.9 million in the quarter from 700,000 last year.

I just want to point out that we also issued about 10 million stock options to employees and some new Management staff that we have hired. As is B2Gold's policy, there were no stock options issued to senior Management that are also founders of the Company. Most of those options, as well as the RSUs, actually vest over a two- to three-year time period.

Operating income decreased from the second quarter 2011 at $15.1 million, compared to $23 million, and that mainly relates to the share-based payments we made in the quarter. On a year-to-date basis, the operating income is similar, at $38.2 million, compared to $42 million.

I want to point out something else that's different on our statement of operations this quarter is that we're showing a derivative gain of $126,000. That does not relate to any gold hedging. What that is, is that in the second quarter, we started hedging some of our exposure to the Namibian dollar. The Namibian dollar is actually pegged to the South African rand. They trade on par. We've been hedging some of our currency. Our budget for this year is based on an 8-to-1 exchange ratio, and we hedged about 80% of our expected expenses for the second half of 2012 at between ZAR8.30 and ZAR8.70. We should come in slightly under budget on our Otjikoto expenses because of the hedging we did for 2012.

Current income taxes -- you also see that it actually shows a credit of $389,000 instead of an expense. That again relates to this change in the royalty tax for La Libertad. The overall benefit of that royalty tax change, as we are going to be re-filing our 2010 and 2011 tax returns for La Libertad, is about a $6 million positive effect. That's why we show a credit to current income taxes this year. Going forward, it will have a considerable effect as well. It also allowed us to defer some of our cost carry-forwards, and that's why deferred income taxes are slightly different. This resulted in net income for the period of just under $12 million, versus $15 million last year in the quarter. On a year-to-date basis, they are almost exactly the same at $26.5 million versus $26.4 million.

Adjusted income -- which what we do is we try to back out things like share-based payments and deferred taxes, which are not really a cash component of your earnings and tend to fluctuate in the quarter. To try to normalize our earnings, we back those out, and our adjusted income in the quarter was $21.1 million, $0.06 a share, compared to $21.6 million, also $0.06 a share last year. On a year-to-date basis, our adjusted income was $41.9 million, $0.11 a share, compared to $38.9 million, $0.12 a share last year.

Now direct your attention to the statement of cash flows. Our cash from operating activities was another strong quarter, which we generated $27.8 million net of G&A and other corporate costs; so $0.07 a share compared to $28.9 million last year. On year-to-date basis, our cash flows were $54.9 million, compared to $53.6 million. The increase in cash flows relates mainly to the increase in the gold price in the first six months of this year compared to last year.

Under financing activities, you'll see a purchase of a long-term investment there, applies just over $5 million. That relates to B2 doing a private placement in Calibre, where we purchased 20 million shares at $0.25 a share, giving us about 10.6% of that Company. Calibre is, of course, our joint venture partner in Nicaragua on the Primavera deposit, which, Tom, you talked a bit about today.

Under investing activities, you'll see our total cash used under investing activities has increased over last year. The total for the year to date is $68.8 million, or $20 million higher than last year, and that relates mainly to three projects, one being the Otjikoto, which we acquired at the end of last year. We've so far invested $12.2 million in that project.

Also, we started development of Jabali, where we've invested $4.6 million in that project. We spent more on Gramalote this year, working on the pre-feasibility study with Anglo Gold. Those three projects are basically -- account for most of the increase to our cash used in investing activities. We ended the year, or the quarter, with $77.3 million in the bank. Again, a very strong ending cash balance as we continue to advance our project and get excellent cash flows from our two mining operations.

Just a couple of comments on the consolidated balance sheet. You'll notice that our accounts payable dropped considerably from the year end. That has to do with a final property payment on the Otjikoto land that we purchased all the land we need to develop the mine there. That was $4 million that was accrued at the end of last year. Also, we paid down a lot of our drilling invoices that were accrued at the end of last year, so now we've caught up on our payments there.

Also notice there is a large drop in the current taxes payable, from $6.3 million at year end to $2.8 million currently, and that has to do with the treatment of this royalty tax at La Libertad that is now treated as a pre-payment on current taxes. One other small adjustment is the mine restoration provision. You'll see that number dropped from the year-end number, and that's because we spent just over $2 million doing some restoration work at Limon in filling some of the pits there. (inaudible) going to talk about, Clive?

Okay, just to follow up on that, talking about maintaining a strong cash position, we're looking at generating, Mark, $170 million from cash from mining operations next year--

In 2013.

In 2013, next year. Okay, great. Thanks, Mark.

We're going to continue on and any questions you can ask, if you have anything for Mark you can ask at the end. We want to dive on to Dale Craig, and talk about an update from the operations side of Nicaragua.

Thank you, Clive.

We had a good year in progress here in Nicaragua. La Libertad's open-pit mine continued to perform well in the second quarter. That operation produced 25,135 ounces of gold at an operating cash cost of $505 per ounce, compared to the budget of 25,161 ounces at an operating cash cost of $558 per ounce. Mill throughput was better, 506,203 tons of ore against a budget of 499,722 tons for the quarter.

Average mill rate was 5,563 tons per day, compared to 5,491 tons budgeted. Average grade was 1.69 grams per ton, compared to the plan grade of 1.73 grams per ton, and recovery was 91.5%, versus 90.4% indicated in our budget. La Libertad mine costs -- mine operating cash costs -- were $53 an ounce below the budget, mainly due to less waste mine than budgeted during the period, and great performance for throughput and recovery in the plant.

As Mark mentioned, total cash costs for La Libertad mine were $489 per ounce, which is less than the operating cash cost of $505 per ounce, because of changes in the way that tax policy was applied to La Libertad's operation. Those changes don't apply to the El Limon operation.

In summary, for the second quarter, there was slightly lower grade, offset by better throughput and improved recovery. Recovery and throughput improvements have come with operating experience in blending off the pit sources. This slightly lower grade is the result of a decision to mine less ore from Jabali's central pit area, preferring to recover the [collusion] once mining of the permitted pit commences later in the year. We don't see much impact from this decision. Gold production from La Libertad continues to improve, with record production in the month of July of 9,684 ounces of gold.

As we've indicated before, we expect that gold production will increase in the remaining quarters, as higher grade from the new Santa Maria pit opened, enters the mine plan, and we resume production of higher-grade ore from Jabali in the fourth quarter. We maintain the La Libertad mine forecast to produce approximately 102,000 to 110,000 ounces of gold in 2012 at an operating cash cost of approximately $550 to $575 per ounce.

CapEx costs at La Libertad in 2012, totalling approximately $27.7 million, are mostly for pre-stripping in Santa Maria pit, development of access related to future pit expansions, and for completion of the tailings pond expansion. The tailings pond capital of approximately $6 million will drop out of our capital for 2013 because no work is needed there in the coming year.

For Jabali, the 2012 budget for the development of the deposit and the associated infrastructure has been reduced by $2.9 million to approximately $21 million, which includes construction of a private haul road for transporting the Jabali deposit ore to the La Libertad mill, engineering, metallurgical, and socio-economic programs. These activities are currently under way and road preparation is advancing nicely. Jabali's central permitting is scheduled to be complete in Q3, with mining to start in the fourth quarter. Obviously, Jabali has a great impact for us in the coming years. The addition of Jabali ore to our mill feed in 2013 will result in an increase in production to 135,000 ounces for La Libertad operations.

Likewise, El Limon has had a strong quarter. Production was 11,668 ounces, compared to 12,341 ounces in the budget. Recovery was 91.2% against 90.63% of the budget, and processed tons were 96,932 against the budget of 101,240. Operating cash costs was $752 per ounce, compared to the budget of $711 per ounce. The higher cash cost is due to lower production, which is a consequence of delays related to the installation of the mill motor that took longer than planned in April.

Dale, can you speak up a little louder?

Sure. How's that? Better?

That's better.

Production continues to improve with a great month of July now completed. Production will continue to increase, owing to great improvement as a new pit, Puenta Nuevo, comes on stream later in the year. Consequently, the Company maintains its projection of 48,000 to 50,000 ounces in 2012, with an operating cash cost of $700 to $725 per ounce.

CapEx at El Limon mine will total approximately $21.3 million. CapEx includes expansion of the tailings pond facility, which is now complete; development of deeper ore in Santa Pancha, and includes the improvements in ventilation and water control infrastructure. Several new pieces of production equipment have been added as well. We expect capital expenditures for 2013 to be lower, because the tailings pond development is good for five years, and some of the projects, such as the ventilation raise are one-offs.

Thank you, Clive.

Thanks, Dale.

Now we're going to turn over to our development projects, and we're going to turn it over to Bill Lytle, who's our Vice President and Country Manager in Namibia. Bill, can you give us an update on the Otjikoto project?

Absolutely; thank you, Clive.

At Otjikoto, we continue to develop our feasibility. We are projecting a feasibility completion date by the end of the fourth quarter 2012. We are going to commence construction at the start of the first quarter 2013, and prior to that -- I'll talk about that in just a minute -- our plan is to have full production by the first quarter of 2015.

In addition to that, we have submitted our mining license application in July. We anticipate receiving the results by the end of this year, and in conjunction with that, and as Mark said earlier, because of the fact that we own the land that we are operating on, we'll actually start some pre-production activities in the fourth quarter of this year. This includes setting up security fencing, de-bushing, and development of a construction camp.

As part of our mining license application, we completed a full environmental and social impact assessment. This was completed in conjunction with a public consultation and disclosure period. We have met with the ministers and we've received all indications that we will continue to be on schedule and receive our license on time. Administratively, we've begun to hire construction and operational people, and plan to continue to ramp up our staff through the rest of 2012. That's it.

All right, Bill. Thanks for that.

Once again, there will be an opportunity to ask any questions of these guys as we wrap up. On Gramalote, with our joint venture, 51% Anglo, 49% B2Gold, with a budget this year of $36 million, Mark, is that right?

Yes, $36.9 million.

That's 100% budget and to significantly advance the project with a lot of further exploration and pre-feasibility (audio difficulty) studies, and whole bunch of other things, including some development work. The latest we heard from Anglo was that we're expecting them to submit a pre-feasibility study in September, and then it will go through a number of review processes after that. Every indication is that Anglo gold wants to aggressively push this project forward, and right now the schedule is to conduct -- subject to approval of the pre-feasibility study -- would be to move rapidly into final feasibility with our major program proposed for next year that would see a completion of the final feasibility study by the end of 2013.

That's an update on that. I'm going to pass it over to Tom now to give us an update on exploration, some interesting stuff happening around the mines in terms of targets, and then of course, some of our other exploration and development projects and some of our pure exploration plays.

Thank you, Clive.

For the last quarter, the bulk of the exploration -- drilling work and exploration work -- has been focused on near-mine, mine-related issues, and development projects. Having said that, to date in Libertad, we've drilled 115 holes for 15,700 meters, the bulk of which has been Jabali infill, and right now they're focusing on mine-related topics. At Limon, we've drilled 9,000 meters in 50 holes so far this year. Of that drilling, more than half that drilling has been related to the new area that we have found near the mine. We haven't released any results yet. It's just a recent event for us and we'll be coming out with the results for that when the sufficient number of drill holes back to come up with a reasonable view of the target.

At Otjikoto, we've completed 148 holes for 18,500 meters. All that drilling is related to feasibility study, geotech drilling, combination drilling, metallurgical work, infill, and the geotech costs. We've scheduled to start an exploration program later on this year, probably -- sorry, not later on this year, later on this month -- to start exploration on another target on the property. We're quite confident that there's really good potential to increase the reserves at Otjikoto with the exploration targets we have. We've now started a 10,000-meter diamond drill program with Primavera, the Primavera project. Results will be coming in as we get them. I suspect Calibre, our partner, will release results when they feel they're ready, and then we'll (inaudible).

Other exploration -- we're continuing exploration on Cebollati. We're scheduled later on this year, Cebollati in Uruguay, scheduled to start a 3,500 meter diamond drill project to follow up some surface exploration results from this year, and the re-interpretation of the geology event we've carried on. That (inaudible - background noise) is scheduled to start probably in October. We also scheduled in September to start drilling 2,000 meters at Mocoa in Colombia, the copper-moly project that we've had for some time.

At Pavon and Trebol and the Radius joint venture project called San Jose, we've been sharing out surface work. The (inaudible - background noise) will start drilling later this year at Pavon. San Jose will probably not do any drilling this year but save that for next year. At Trebol we've just completed a drill program, and we'll be reviewing all the results and coming up with an internal view of the potential of the project. We'll release the results at that time. As Mark Corra has indicated, we've spent a fair bit of time in the last quarter evaluating a number of other aspects of other companies and projects with the view of further acquisitions.

Thank you.

Thanks, Tom. Just one minor correction, just to be accurate. Mark referred to Primavera as a deposit, which we all hope it will get there. Now it is a very good exploration target with very good, in our opinion, initial results. We're very excited about it, but not quite a deposit yet. That's Mark's desire to finance and the mining getting a little bit ahead of exploration. Just kidding.

Just a couple of other things for me. One thing we're seeing in the industry all the time is jurisdictions; we're seeing a lot of challenges around. I just want to touch base on that a little bit. Nicaragua's a great place to be for us and the mining business, and it's a great win-win story. I think our involvement in Nicaragua's been great for the people, great for the government, and obviously great for the Company. Tremendous support of all levels in government. I think, frankly, it's partly because we've delivered on the promises we've made, and we've been very transparent and we're very important player of the local community; not only probably the third largest employer in the country today, but the largest exporter from the country, of gold, and also a very positive force in social and community activities, as Dale has talked about some extent.

We're very happy with being in Namibia. You will find that the government there is very keen on foreign investment. They do need it. There's a long mining history in Namibia, and we've had very good response from what Bill has been doing on a daily basis, and from my trips down there, from the most senior levels of the government, and all the way down. We're very comfortable that we can meet our schedules there and be a very positive impact in Namibia, as well. They're working with us, really good government support.

Colombia, as well, is a country that's obviously a huge transition over the last several years to a safer place and a place that's clearly open for foreign investment. We're excited about the potential of Gramalote with our partner, Anglo.

Just a couple of, just to comment about acquisitions, and this is a topic I'm going to deal with more in Denver with the institutions -- in my speech in Denver. We're very keen on acquisitions. Our stock has performed very well. If you look at us compared to the sector, we're a Company in the past -- whether it was the Bema days, or now the B2 days -- that are willing to pull the trigger. Our objective is to grow through exploration, which are the cheapest (inaudible) you'll find, and we've had great success there recently with Jabali, and continue to pursue more ounces around mines -- more discoveries below, some more discoveries from (inaudible) field exploration programs, as well.

On the acquisition side, we've got a very strong growth profile here with the potential to triple our gold production over the next three to four years from existing assets. We have a good strong financial position going forward and today. While we are keen on acquisitions, because obviously we think it's a good time to build a serious player in the industry, clearly, when you look at M&A in our industry, we need more of it at the end of the day, maybe even at the highest levels. With the performance that we've seen, the dismal performance, sadly, that we've seen in the gold mining industry, I really believe that there's just too many companies out there in the gold sector, whether it be exploration or whether it be development or small producers. There isn't enough good executive experience in this industry or technical capability, in my opinion, to make all of these companies successes. I think there's probably around 20% to 25% of the required executive expertise and technical expertise to make successful companies.

Bottom line is the institutions want less gold companies. They want them to merge and get together, and we think we can be a consolidator in this space. One of our frustrations is, somewhat surprisingly in this market today, with the performance of so many companies, there are still executive groups out there who are refusing to sign confidentiality agreements -- never let a Company like us try to help them and show the value by looking, considering a merger. I'm quite surprised at that, and I think the institutional investors need to realize that's going on.

The other frustrating thing is that, in some cases someone will sign a confidentiality agreement, which means of course you have a stamp, so you can't take a run at them, and then they won't give you the data, so it's a bit of a game. The game is to try to handcuff you, and then not give you any data. We're changing our confidentiality agreement as we speak, and it will have a clause in it listing the information we expect to get in a timely fashion -- the technical data, et cetera. If we don't get it, the (inaudible) goes away. If people won't sign that CA, I'm pretty sure their institutional shareholders would be interested to know why.

At the end of the day, we're very keen on acquisitions, and I hope to see the industry walk the talk. Some years ago, we didn't want to sell Bema Gold. We had 75,000 shareholders. It was a successful deal for Kinross back in the day, successful to the Bema shareholders, as well. We need more to people to walk the talk. We have this great luxury of being public, because we get to use other people's money to take risks. Part of the reality of that is, you work for the shareholders -- executives and Board of Directors work for the shareholders. I think we need to -- some semblance of the industry needs to respect that a little bit more. I'm not meaning it to sound like a sermon, but more to come in Denver.

Anyway, that's most of what we wanted to tell you, I think. We're definitely keen to answer any questions that you have, and we're looking forward to continuing a very exciting year and positive year in 2012 and looking beyond. I think we're ready for questions, Operator.

(Operator Instructions)

Rahul Paul, Canaccord Genuity.

Hi, everyone. Congrats on another good quarter. The (inaudible) seems to be performing fairly well at La Libertad, both in terms of throughput and recoveries. One question I had for you is why have you made the decision to push back the processing of Havalee colluvium to the end of the year?

Bill, do you want to talk about that?

Sure can. As you know, we're in a new operating environment adjacent to a new town. We've cleaned up the majority of the colluvium that's easiest to recover, and the remainder is probably best left until the permanent control infrastructures are in for the pit. We'll wait for that. As we said, we've not seen any impact on our mine plant, and it's just a matter of proceeding with prudence on a new operating pit and ensuring that it comes into production in a carefully planned manner.

Okay, thanks. Moving on to Santa Maria, when do you expect the pre-strip to be complete there?

We're anticipating that we'll start to see Santa Maria come on. It carries a nice grade profile. We're anticipating to see it start to be part of our ore process in through the third quarter September and in through October; initial phases at a lower percentage, about 10% of the feed.

Okay. 10% of it, so that is generally high-grade material, 3.27 looking at the reserve statement. Eventually, the plan is to do about 10% of your mill feed from Santa Maria?

No, we'll see that increase a little bit over the year, but we start to see it rise to the 10% level by the fourth quarter.

Okay, thanks. At Libertad, you did mention that lower costs during the quarter were due to less space mined. Just wondering if you could elaborate a little bit on that. Was that a timing issue? Is that stripping deferred into a future quarter, or did you encounter ore in areas that had been modeled as base. Just wondering if you can add a little more color?

Yes, sure can. First of all, when we look at our mine costs year to date, we're sitting at about -- for operating cash costs, we're sitting at about $78 per ounce below our budget. The impact of this rate movement is about $26. Even accounting for that, we'll still remain below our cash operating cost forecast. We've been working with our operator to recoup that difference, which we intend to do in the coming two quarters -- that's with Santa Fe, our first movement contractor.

Okay, thanks very much. That's all for me.

Thanks, Raul.

Steven Green, TD Securities.

I guess this is a question for Mark. Just wanted to confirm on the Libertad tax situation, the 3% government royalty is gone going forward, but it will still be subject to the additional 2%, is that right?

That's correct. Yes, the 2% is with a syndicate of people within the country.

Okay, great. Yes, and then the corporate taxation, the corporate tax rate, that doesn't change at all?

No, it doesn't. It's still 30%.

30%?

Yes.

Yes, okay. Great. That's all I have, guys. Thanks.

Thanks, Stephen.

(Operator Instructions)

Shawn Campbell, MacQuarie.

Hi, there. Really solid quarter. I just had a couple questions. On the balance sheet, the VAT tax receivable now sitting at around $17 million. Is there a point where we're going to start to see that sort of reverse the direction and start to see that collected?

Yes, I actually just went down and met with the ministry about three weeks ago to discuss that with them. It was interesting, because they were very complimentary of B2 and the taxes we pay, and the differences we've made to the country's GDP, and they do recognize this problem. They basically apologized to us for it, and said that they've now started their own line, their own online system, which should help expedite the approvals of these, of the VAT and recoveries for it.

We're one of 20 companies that are testing this new process. They promised me that most of it would be approved by the end of this year, and we actually just saw last week $3 million being approved, of which $1.1 -- I think it's either $1 million or $1.5 million -- they actually refunded us, and the rest was applied against other withholding taxes payable and things like that. We will be seeing movement on that over the next few months.

Okay. Was there any discrepancy between what was approved and what was applied for?

There were some minor discrepancies of about $100,000, and one of them that we probably won't pursue further. There was about another $0.5 million worth of stuff that we're going to double-check the numbers. We think it was just that we didn't provide the proper documentation to them. There's a bit of a learning curve for us there, too. One thing they told us as well was that they view us as a Class A taxpayer. In the future, they will, I guess, expedite a lot of the processing for us because of that.

Okay, that's sounds great. At Libertad in the quarter, only 2% of the ore was spent ore. Is there a mine plan in place now that virtually eliminates the use of the spent ore for the coming few years, or is that a one-quarter anomaly?

Dale?

Yes, forecast for year end is to not include spent ore, and we'll include it in the coming year if we see fit. Really one of the great improvements that we see short-term this year and coming into next is the displacement of spent ore with Havalee, which greatly improves our overall grade. There's some benefits to pursuing that displacement.

Okay, thank you. Those were all my questions.

Thanks.

Thank you. Rahul Paul, Canaccord Genuity.

Hi, guys. Just a follow-up question, I guess for Bill. On the EIA for the Otjikoto project, you mentioned that was submitted in July. I'm just wondering, just trying to get a better understanding of the process between now and actual approval -- what happens and what are the, what is the turn-around time usually like?

Okay. The turnaround time is basically with respect -- so the way the process works is you complete an environmental and social impact assessment. That goes in with your mining license application. That is submitted to the Ministry of Environment and Tourism, as well as the Ministry of Mines. We've met with both of those agencies. The Ministry of Environment and Tourism basically committed to following the same schedule as the Minister of Mines has.

When we met with the Minister of Mines, they said they typically shoot for 120 days. That fits well with our by-the-end-of-the-year schedule. They wouldn't guarantee 120 days, but they basically said they shoot for 120 days. Once that is released, then we just have to work through getting all the explosive permits and all of that type of stuff. With an approved mining license application, we can start construction.

Thanks. That's it for me.

Thanks.

(Operator Instructions)

There are no questions registered at this time. I would like to turn the meeting back over to Mr. Johnson.

Okay. Thanks, Donna, and thanks, everyone, for participating. We're looking forward to continuing the strong performance and growth for the rest of the year and beyond. Thank you very much.

Thank you, Mr. Johnson. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.