B2Gold Corp (BTG) 2013 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the B2Gold third-quarter 2013 conference call. I would now like to turn the meeting over to Mr. Clive Johnson, President and CEO. Please go ahead, Mr. Johnson.

Thank you, operator.

Good morning, or good afternoon wherever you are. Welcome to our call to discuss the third-quarter 2013 results from B2Gold.

I want to start off the call today talking just a little bit about the Philippines. As everyone knows, the Philippines was recently hit by a super typhoon, and from B2Gold, our thoughts and prayers go out to the people who were affected by this terrible tragedy. Fortunately for our employees out at the mine site, Masbate, we were far enough away from the main part of the typhoon to be largely affected, and Dale Craig will talk to us about that.

But we are announcing today that B2Gold will contributing $1 million towards the relief efforts and ongoing reconstruction in Philippines. $0.5 million of that money is being made available to the Canadian Red Cross and the Philippine Red Cross for immediate relief, and the other $0.5 million will be put into a fund for reconstruction, which unfortunately looks like it's going to take some time to complete.

So for those of our shareholders or other listeners who would like to contribute to this relief effort, the best way to do that is through going to the Canadian Red Cross website. Having said that, we'll get on with the third-quarter results.

We had another strong quarter of financial performance from our operations and the Company continues to be in the very strong cash position as you'll hear, and the operations are running well, and we're on track for our projected growth. And you'll hear today about what's happening at our mine in Namibia, the Otjikoto Mine, which is in construction today. So we're pleased on where we sit on this challenging market and challenging gold price environment and we are well-situated to continue our profitable gold mining and our growth as a Company.

With that I'll pass it over to Mark Corra, B2Gold's CFO, to take us through the financial results. Mark?

Thank you, Clive. 2013 will be B2Gold's fifth consecutive year of increased gold production.

So far this year, we've produced just under 261,000 ounces of gold, versus -- which is more than double the 113,400 we produced last year in the first nine months, and actually so far this year, it's about 100,000 ounces more than what we produced in all of 2012. All three mines exceeded budgeted production estimates in the third quarter, and cash costs came in lower than budget, so obviously, they are operating very well, and they have all year.

Gold revenue came in at $128.7 million, more than double -- a little less than double the $67 million last year. Gold sales were 93,400 ounces, compared to just under 40,000 ounces in last year's third quarter. Obviously, the realized price is quite a bit lower, it was $1,378 for the quarter versus $1,691 last year. On a year-to-date basis, our revenues are just over $400 million at about 275,000 ounces sold, compared to $188 million in revenue in 2012 on 113,000 ounces. And again, the realized price last year was higher at $1,660 compared to $1,479 this year.

Production costs were much better than budget, actually, in the third quarter. They came in at $653 an ounce, which was about $70 lower than our projections, and Dale will go through, I guess, the details of each mine, as to why they performed better than budget. Total production was about 99,000 ounces compared to 42,000 last year at a $571 cash cost.

On a year-to-date basis, cash cost came in at $699 which is about $50 lower than budget, and we produced about 261,000 ounces of gold compared to 113,600 ounces last year and $580 cash cost. The reason for higher cash cost this year than last year is mainly due to the acquisition of Masbate Mine in January of this year. The cash costs of that mine are a bit higher than our two Nicaragua operations. But, again, Masbate is performing better than budget, so we're quite pleased with how that's worked out.

Gross profit for the quarter came in at $41.2 million, $8.6 million higher than last year, even though the realized price was about $300 an ounce less. On a year-to-date basis, gross profit was $111 million compared to $93 million last year.

Actually, if we adjust out the -- there was an inventory adjustment for the acquisition of CGA that impacted the gross profit by about $33 million. If we adjust that back out, then gross profit would have been $144 million for the quarter.

Just moving a bit down farther on the P&L, G&A costs have increased. They were about $2.6 million higher in the third quarter than last year. About $1 million of that relates to the [McCady] office, which is the main office, I guess, that does the admin work for McCady or for the Masbate Mine in the Philippines. On a year-to-date basis, G&A increased to about $3.6 million, due to the CGA acquisition.

The other increases for the quarter relate to higher consulting costs. We've been doing a lot of work, both on the legal side and on the finance side and tax side, to try to do some of the restructuring within our group of companies, as we've had -- as everybody knows, we've done three acquisitions in the last few years, and we need to clean up, I guess, our administrative structure there, or corporate structure, just to make things a little more efficient and it's costing us a bit more.

On a year-to-date basis, G&A is up about $11 million, and as I mentioned $3.6 is related to the CGA G&A costs, and then there's about $3.3 million related to cash bonuses that were paid earlier in the year and we just have higher staff levels now, due to the increased size of the Company. Also point out that we did write off our holdings in one of our mineral properties in the third quarter. Cebollati, we wrote that down by 9.6 million. The reason we did that is, we haven't had as much success, exploration success there as we hoped for, but we still believe there's potential, and we're currently trying to find a joint venture partner to see if they want to move that project further. But its become a low priority for us, and we're concentrating on an exploration on higher quality targets.

If you look then down, you also notice there are a couple of adjustments in the quarter relating to the fair value of the convertible notes that we issued, and also the transaction costs on the notes. We are accounting for our convertible note issue on the fair market value basis, so each quarter, you'll be seeing an adjustment either up or down, based on what our stock prices are, and on what the market deems the value of those notes to be. The transaction costs are a one-time item, that relates to the all-in cost, the broker fees as well as legal fees, and auditing fees to do the note issue.

Current income taxes for the quarter were $6.7 million. I will just give you a break down on that, $5.4 million relates to the Libertad Mine, about $0.5 million relates to the Limon Mine, and then there's also about 300,000 relating to the Filminera, that's the Company in the Philippines that owns the mineral resource rights to the deposit and then that ore is sold to our processing company that we own 100% of, and all of the profits are recorded through.

On a year-to-date basis, Libertad was accretive of $10.7 million for current taxes, Limon $3.2 million, and about Filminera about $800,000. That left us with net earnings of just under $8 million for the quarter, or $0.01 a share compared to $14 million last year. On a year-to-date basis, earnings were $41 million, which is comparable to basically $41 million last year, as well.

On an adjusted earnings basis, where we take out some of the one-time items, just so that you get a better feel for how the operations actually performed, our adjusted earnings were $12.4 million, $0.02 a share, compared to $19.7 million last year at $0.05 a share. And on a year-to-date basis, adjusted earnings are around $60 million for both this year and last year, which works out to about $0.10 a quarter, or $0.10 a share, sorry. All-in, sustaining capital through the third quarter was just under $1,000 at $995 and on a year-to-date basis, came in at $1,092.

Just a few comments on the cash flows. Again, we had very strong cash from operations in the quarter, it came in at just under $32 million, or $0.05 a share, which was higher than $28.4 million last year. On a year-to-date basis, our cash flow from operations was $108.6 million, or $0.17 a share, compared to $83.2 million in 2012, which was $0.22 a share. We had less shares outstanding in 2012, that's why the per share cash flows was higher.

On the financing activities, again as I mentioned we did issue a convertible note in August, and our timing was probably quite -- well, almost perfect, to be honest with you, as the market was quite strong, and it was more than 2 times over subscribed. Just remind everybody, on that convertible note the Company actually has the option on maturity to repay the note in cash, or we can pay it in cash and shares. So depending on where the note is and the value, there's the likelihood that if we have the cash flows, we'll repay it in cash, and there won't be any dilution to the shareholders.

Going down, under investing activities, we spent almost $100 million in the quarter on our projects. The biggest part of that was $56 million for Otjikoto, and you'll be getting an update on how that's going. On a year-to-date basis, we have invested about $122 million on Otjikoto

On other large expenditures we're at Gramalote in the quarter, of $11.5 million, and on a year-to-date basis, just over $44 million. I suggest people look at the financial statements on the website if they want to get more detail on where our investments were.

On a year-to-date basis though, I just want to point out we did have cash inflows under investments of about $100 million relating to the Brucejack royalty sale, as well as cash required in the CGA acquisition. And net expenditures on investing was about $285 million, and as I mentioned, the biggest piece was for Otjikoto and Gramalote.

That left us in a very strong cash position, the highest cash position that B2Gold has had in its history, of just under $284 million. If you look at our balance sheet, you'll see that our working capital is a positive $314 million versus $92 million at December 31, so over a $200 million increase, and working capital at June 30 was $121 million so we find ourselves in a very strong position. We also have available another $100 million in our revolving credit facility, so we have plenty of cash to weather these low gold prices and continue to move our projects forward.

One other thing I'd like to point out is that people that are more astute will notice our goodwill numbers slightly changed from the June quarter. It went up by about $14 million, and that relates to an adjustment that we made to recoverable VAT from the Philippines. We've had a recent ruling that's gone against us there on our VAT refund application, relating to during the construction period at the Masbate Mine, so even though we're appealing that ruling, and by law, there are good reasons we should get the VAT back, we've set up a provision there, we've increased it by $20 million in the quarter.

We will be doing a more detailed review of our purchase price allocation in the fourth quarter, and so there may be further adjustments when we record our year-end numbers, having to do with the Masbate acquisition. That will come out, again, as I said, in the fourth quarter.

The goodwill number may go up or down. To be honest we don't know at this point, we're just trying to tighten up some of the numbers, and the other number I'd point out, I guess, is that deferred income tax is under the liability section. That's $221 million, which is quite a chunky number, and that relates to the difference between the acquisition costs of CGA and what the book value for tax purposes is.

So it's an accounting number, that, to be honest really doesn't affect your cash at all. It's just one of those, one of many different accounting things that you have to adjust for, that to be honest, don't always make the most sense to the normal reader.

So with that, Clive, I'll turn it back to yourself.

Thanks Mark. I'd like to pass it along now to Dale Craig, to walk us through the operations. Dale?

Okay, thank you, Clive.

We continue to see deliveries that keeps B2Gold operations on track for our 2013 guidance range of 360,000 to 380,000 ounces, with improved cash costs. Consolidated cash operating costs continue to decline, and are projected to be $675 to $690 per ounce. Year-to-date, they're $699 per ounce, and they are moving downward, as expected.

By our estimates, we are coming in well placed in the guidance, and of course, this will be a record year for B2Gold. And again, we are able to demonstrate year on year improvements.

For the Masbate gold mine, gold production was 47,643 ounces in the third quarter, for a total of 122,433 ounces since B2Gold acquired Masbate Mines on January 16 of this year. Last quarter, we talked about working past some pretty specific challenges, and we can see good evidence that this is coming to pass. Third-quarter production of 470,643 ounces exceeds budget by about 2,660 ounces and cash operating cost of $735 per ounce compares very favorably with the budget of $858 per ounce.

So as we anticipated in the second quarter, better throughput, some 88,200 more tonnes, and better recovery, 82.8% versus 79.3% in the budget, slightly offset by lower grade, 1.05 grams per tonne versus 1.09 grams per tonne, has put us on track to meet our stated goal for the year. Costs came in line for the quarter at $735 per ounce, on guidance that we provided from the last quarter in the range of $725 to $760 per ounce.

Unfortunately, we did have a single minor lost time accident. This was the first of the year, when an employees foot became infected.

Year-to-date capital expenditures totaled $20.8 million, primarily for tailings down expansion, major overhauls to mining equipment, new equipment workshop, and funds for our new sag mill that will be installed in 2014, and that project is on track.

We have made good advances with development of tailings water treatment facility. We've collected the appropriate technology, and we'll proceed soon to the permitting stage. We anticipate that coming during this same month.

That will allow us to better manage the ongoing costs associated with tailings down expansion. The metallurgical sampling program is progressing well, and this program is necessary in order to study the case for plant expansion.

Now some comments regarding Typhoon Haiyan. We all know millions of people have been affected by Typhoon Haiyan, which is locally named Yolanda, which swept through the Philippines on November 8.

The eye of Haiyan passed about 100 kilometers to the south of Masbate. Our operation was well-prepared, and as a consequence, there's been no significant impact on the operations. All infrastructure and services remain fully functional, including our supply chain. We knew that a day ahead of the arrival of the storm the eye was actually circled or targeted to pass directly over the mine; it swung further to the south.

We imagined what would happen and this is very serious, it's a monster storm, a super typhoon. Certainly, where we are located really helps. We're on the lee side of Masbate Island, and that serves to soften the winds as they approach the mine.

The Masbate Gold project also supported its surrounding communities to mitigate the impact of the storm. The evacuation tenders were identified and utilized, and some of these were buildings that were constructed by our social development fund in previous years. The Company has also made its emergency response team available to the Philippine relief effort. The island of Masbate itself is not without impact, but it has fared much better than locations to the south in the Philippines.

Post-typhoon assessment will reveal the totality of the impact on the Philippines, but B2Gold is committed to supporting the immediate rescue and relief efforts, as well as later phase of rebuild and rehabilitation, and B2Gold today announces the donation of $1 million, as Clive discussed, towards supporting these efforts.

For the Nicaraguan operations, total gold production from La Libertad in the mines in Nicaragua is ahead of budget, 51,349 ounces, versus a budget of 50,413 ounces. So we continue to build on our upper range performance from the first half of the year. As you recall Nicaraguan guidance for the first half of the year was 82,000 to 87,000 ounces and we came in at the upper end of that, at 86,954 ounces.

For our La Libertad gold mine, the Libertad mine continued to perform well, with record production for the quarter. Gold production at the upper range of the Company's expectations, and with cash operating costs below budget, at the lower range of guidance. Gold production for the third quarter of 2013 was 37,311 ounces, better than budget by 2% and 26% better than third quarter of 2012.

Third quarter of 2013, La Libertad mine produced 37,311 ounces of gold at a cash operating cost of $545 per ounce, compared to the budget of 36,492 ounces, at a cash operating cost of $570 per ounce. So improved grade 2.36 grams per tonne versus a budget of 2.22 grams per tonne, and improved recovery were offset by slightly lower throughput compared to budget.

Wet working conditions impeded throughput, and we're also working through a learning curve, as we work towards our 6,050-tonne per day process rate. Some of the fixes are operational, and some are modifications with the plant.

For example, by the arrival of the next rainy season, we will have a second crusher circuit constructed from equipment we already have at hand, and that will eliminate the wet material issue. We are also learning to blend ore for hardness, which will help to optimize throughput at the sag mill. There are a number of other initiatives we can look at as we push towards our throughput, at our stated goal.

Cash operating cost for the second half of 2013 are forecast at $500 to $530 per ounce, and we expect grade to continue in the final quarter in the 2.3 grams to 2.4 grams per tonnes range. CapEx year-to-date is $25.8 million, and for the quarter $5.5 million, which includes winding up payments for the haul road to Jabali, the final bridge is complete, and land purchases.

Year expenses include deferred stripping of about $8.5 million, Jabali capital costs of $11.3 million, processed plant improvements at $2.1 million, and equipment purchases of $1 million. The focus continues on cost and management of CapEx, and of course, full year CapEx including Jabali will be $38.5 million, down from the original budget of $45.6 million.

For the El Limon Gold Mine, which is an open pit and underground mine, has had a consistent -- series of consistently strong quarters. In Q3, the El Limon mine produced 14,038 ounces of gold, compared to 12,715 ounces in the same quarter of 2012, corresponding to an increase of about 22% for the year, 10% quarter to quarter. We continue to exceed budget production at lower than budgeted per ounce operating costs.

For the quarter, the gains were from increased throughput and reduced operating costs underground. Year-to-date, we have delivered higher grade, 4.43 grams against 4.3 grams per tonne, and processed more ore.

Cash operating costs of $658 per ounce, compared to the budget of $719 per ounce for the quarter. For the year-to-date cash operating cost is at $669, compared to the budget of $719 per ounce.

As indicated in our discussions in the last quarter for the full year of 2013, gold production within the El Limon mine is expected to be at the top end of the Company's previously-announced guidance of 54,000 to 58,000 ounces. So we continue to see throughput improvements, but each tank expansion is not yet operational. The tanks were installed, and we expect the system to be functioning by year-end, and at that point, we should pick up about a 1.5% on our recovery.

Capital expenditures in the third quarter of 2013 totaled $4.5 million, which mainly include deferred underground mine development of $1.1 million, $2 million improvement in expansion projects in the plant, with the balance for deferred stripping charges and equipment purchases. Year-to-date capital expenditures totaled $12 million, primarily for deferred underground development, $3.1 million, deferred pre-stripping charges of $2.3 million, and $3.1 million for improvements to the processing plant, including controls.

As indicated last quarter, capital expenditures at the El Limon Mine in 2013 were budgeted to total approximately $21.7 million, but will be reduced to $20.4 million. Operating costs related to better grade, increased throughput, and continued initiatives with our contractors and our underground operations.

In summary, each of our operations has demonstrated a commitment to cost management, and each operation is closely managing its capital requirements to reduce, defer and prioritize capital projects.

Thank you.

Okay, Dale, thanks, we'll wait until the end to ask questions, but next, let's get Bill Lytle to talk to us and update us on what's happening. Bill is at the capitol of Namibia. Bill, can you give us an update?

Yes, thank you, Clive. Can you hear me all right?

Loud and clear.

Okay, thank you. For Otjikoto, the key message is we continue to be on schedule.

Apparently they are having heavy rain storms in (inaudible), which actually is a good thing, to get some rain down in Namibia. So we'll wait for Bill to come on. George Johnson is here with us as well, and George has just come back from the site, and has been intimately involved in the construction efforts. So George why don't you fill in for Bill, and when Bill comes back on, he can continue with his part as well.

Okay, Clive, thank you. We have established a good portion of our workforce. We're up to about 450 people now at site.

We're going ahead with normal mining operations on the pre-stripping. We've done about 1.6 million cubic meters so far, the pre-strip, and that's on schedule or slightly ahead at this point. And we've also done all of the -- what I call infrastructure development for the construction project, including the shops and roads, and so forth on site. We've established a concrete patch plant. We have poured about 5,000 cubic meters so far.

The main emphasis on the mill site has been creating the foundations for the major equipment, including excavations, and fill with engineered fill. We've poured foundations for all of the leach tanks and the CIP tanks. We've also completed the base foundations for the ball mill and sag mill, and the crusher. And we've started on the reclaimed foundation.

We're well along and nearly complete with the tailings pond effort. We've completed almost 2 million cubic meters of excavation and fill at that facility, and lined approximately half of the pond, so far. So we expect that to be done by the end of this year, substantially complete, some small things to continue.

With that, our man camp is complete, and we're moving people in. For the remainder of this year we will work up until Christmas, take a short break, and then resume activities in early January, and bring on the large component of the construction personnel, and move on.

Thanks, George. Add to that, some things that have been happening, in addition to a tremendous amount of work, we have continued to enjoy tremendous support from the governments and local governments and federal governments in Namibia. I know that there was some [inaudible] the crew took with government officials in the last couple weeks, and they were met with surprise, frankly, at the pace of what we're doing, and very impressed with how quickly we're moving and how well we're meeting all of the criteria, environmental matters.

So it's an excellent -- so far the project has been met with tremendous support from the government there, in every aspect we're doing. We're on schedule and on budget and we're looking for the commencement of production in the fourth quarter of next year on schedule. And if Bill comes back on I'll get Bill to fill in any of the things that George and I missed.

Everything's going very well. Bill you there?

I'm back on.

Go ahead. Okay, so what did we miss?

I'm not sure. I missed everything you said. But I'm sure it was correct.

Well, George gave an update on what was happening on site and I was talking about some of the recent business you had. But go ahead and give us more detail, I'm sure people would like to hear.

Well, obviously, I don't know what George said, but as you indicated, we are on schedule and things are going quite well on the site with the team there. And as you just indicated right at the end there, certainly we've received strong, strong government support all the way from the Ministry and the President all the way down to the local communities around us. The open house that we had just recently was very well received and very well covered in the local papers.

Okay, well, we'll see if there's any questions for you too, Bill, at the end. I guess I'd like to turn over the call now, you saw that we released -- Tom Garagan, you saw that we released more exploration results from the Wolfshag, so just if Tom could briefly talk about the significance of those results, and what it could mean for Otjikoto. And some of you are aware, and some folks may not be aware of the significance of the Company's season in this development.

Thank you, Clive. Yes, we just recently released the last of the results for the Wolfshag zone. And a couple significant things about that, hole 103 contained 16 meters of 9.4 grams, and was quite high up in the Wolfshag zone, near surface, which improves the grade of the near surface material. And then, hole OTG2, which was at the 2-kilometer end of the deposit, we had 1.69 grams over 9.5-meters, which from an alteration point of view looked like it was just on the edge of the Wolfshag. So that suggests that the Wolfshag zone at its top right now sits about two kilometers long and remains open.

As we had said earlier on, on several calls, the infill program that we completed was designed to bring the inferred to the resource that falls within a design pit that we created into inferred, so that we could do a more detailed study with the engineers later this year. Having said that, the artificial model we created last year, the infill drilling has somewhat confirmed that model and based on that model, it suggests that one, the overall grade of the deposit, that is Wolfshag plus Otjikoto, should go up with much better grades from Wolfshag, and it will certainly increase the amount of tonnes available for mining.

And with this we think, or believe strongly that it will do two things for Otjikoto. It will certainly justify an expansion, and with the expansion, with the addition of higher grade Wolfshag zone, there's no reason we should not be able to improve the grade of throughput, and thereby improve production in the future. This resource will be completed about the end of the year, and then next year, we'll start the in fill program to bring it into indicated, so they can get in the mine plan as soon as possible.

So as Tom said there's two potential -- two impacts we're seeing looking forward to Wolfshag. One is, it gives it the confidence to look at expansion, which we talked about before, to build the facilities to put 5 million tonnes a year, based on the original Otjikoto deposit. And we always had a plan to be able to operate to 3 million tonnes a year, which would increase gold production potentially by 20%.

We're now looking at plans, we'll be shooting towards coming up with a plan to start doing that in potentially early 2015. By the end of 2015, we could potentially be at the higher production throughput rate, which could give us an increase of 20% over our projected gold production, which other [games in 15] we are projecting 145,000 ounces a year annually.

So the impact could be very significant in terms of increasing production closer to 170,000 ounces a year, and for very low capital costs, early estimates are somewhere around $20 million, which could be self-financed. But also as Tom mentioned and that increase in added production would be, just based on the initially based on the main Otjikoto Mine ore body.

Bringing in higher-grade Wolfshag material could be a bump up potentially in annual production, so pretty significant development for a project that's coming on well, and looks like it is going to be a low cost producer mine there with projected operating costs for the first five years of projection at Otjikoto are $525 an ounce. So we're happy with the developments there.

Just a few other quick updates. Gramalote, we are in the process of working with MX Gold towards meeting our schedule for a pre-feasibility study on the Gramalote joint venture. 51% annual AngloGold, Ashanti as manager, 49% to B2Gold. (Inaudible) teams have been working together on coming out with the pre-feasibility study. And a lot of quality work has gone into this over a number of years, and we're expecting a good quality study to come out, and we are looking at various cases, as B2 requested, various cases of throughput to see what the best economics look like going forward in Gramalote.

Based on numbers that we've seen before and are familiar with the project, it might be a little skinny in today's gold price environment, but we'll see. Obviously we are looking for economics to justify financing in building a mine of this nature. We are about to find out what the numbers say, and we'll be coming out with that before the end of the year.

The decisions for the joint venture to make are to continue with the final feasibility study, which could be completed by the end of 2014, partly based on the high quality of the engineering work and other work that's been done to date, and continuing with the environmental impact assessment, the permitting process, which is scheduled to be finished around the middle of next year.

(Inaudible) decision, [seasonal] course to be put on hold and wait for a better economic environment, and I think in either case, from the discussion today both parties are committed to making sure that the permitting work, which has gone very successfully, that the permitting work continues.

We do believe, however, we have the best location in Colombia to build the first open pit Petrex gold mine of any size in the country. So we still haven't come up at the end of the year on Gramalote, and at that point, we will be able to answer all of your questions.

I'd also like to talk about the recent acquisition that we made at B2Gold, with the intent of doing a friendly business combination with Volta Resources. You probably saw the release. The idea here was that Volta has done an excellent job on the Kiaka project in Burkina Faso, and they had, like a lot of companies, got to the point where it was difficult to raise money in today's environment to further advance their project. We had discussions about Gramalota for quite some time, and spent a lot of time on technical and other due diligence on the Kiaka property. We found that Volta has done an excellent job, very strong technical and executive team that have grown that Company, and we like them a lot.

For the Volta shareholders I would say that their management and Board did the right thing by their shareholders, which was to consider other alternatives to advance the project for the benefit of the shareholders. We paid, at the time the deal was announced, almost 100% premium to the spot price for the shares of Volta, and I think the benefit to the Volta shareholders are that they get access through owning B2Gold shares to B2Gold's significant gold profile.

The existing gold profile, they also of course get access to the future of Kiaka. When Kiaka gets built this will be a significant project for B2Gold, a big enough project to clearly move the dial if and when we put it into production some time in the future. Also, of course, they get access to the tremendous liquidity that B2Gold shares offer, so I think for them for looking out for their shareholders, hopefully we'll see more of that in the industry today, where people look out for generating value to the shareholders in whatever form that needs to come.

So from the B2 point of view, we thought this was a really good resource, as I mentioned strong technical work has been done. We also, for the B2Gold shareholder, it represented 3.4% dilution to our shareholders. While we feel we paid a fair price to the Volta shareholders, for the B2Gold shareholders, it's not very dilutive.

We think Burkina Faso is a good jurisdiction for mining. We aren't pioneering here. There has been a number of successful companies, some Canadian, and the government building gold mines and running gold mines in the country, and the government of Burkina Faso is supportive of mining as an important part of their country also.The project has good logistics.

So people who might be familiar with the project, we went through an economic assessment on the project not that long ago, and indicated it could be developed as a large open pit gold mine. And then their studies suggest that they, in this kind of gold price environment, the economics wouldn't be too attractive.

The next step for that is working closely with the Kiaka technical team. And once again the positive is the team in the country in key technical players are very interested in staying with the project, which is always our first choice and this happened before. Look at the strength in our B2Gold team, with people in country that have experience.

So the next step forward is working together to hopefully file a feasibility study. We're going to target that for the middle of next year, and it will be interesting to see Kiaka looks in final feasibility, and of course as part of that exercise, as always, we'll be looking at various cases of throughput to see what the most attractive economics are for this project.

So the deal is scheduled for December 18th. For shareholders to date, we've had tremendous support from their shareholders and ours in understanding the logic of this deal, and seeing it as a positive. And of course support from the Board of Directors of Volta, as well.

But if the vote goes to improving the deal on December 18th, the deal will close December 20th. So we're hopeful that will happen and we look forward to working with Volta going forward.

That's, in summary I guess, or conclusion I would say that for today, it would be hard not to conclude that the Company is in very strong shape. We're in a very strong financial position, and we have good operational performance that is ongoing, and we also have strong growth from existing assets. We're very well positioned, when you look at the gold price today, and feel ourselves fortunate, but we think we've worked very hard to make sure we were in a situation to be able to weather the storm, and not only weather the storm but grow at times of lower gold prices.

When we look to the future, there are lots of potential opportunities to continue to grow the Company. The most immediate of course is Otjikoto with its potential start of production and potential expansion.

We will be reviewing Masbate expansion potential, as Bill mentioned, we'll come up with something around that in the first quarter of next year in terms of, if we think that makes sense economically to do. Ultimately, there's not only the Gramalote project to look at if and when that happens down the road, and also potentially with the completion of the Volta acquisition, we will also have Kiaka as an option for growth in the future.

So you look at a tremendous growth profile going forward and I would say irrespective of gold price, things like Otjikoto are happening and things like looking at possible extensions of that and extensions of Masbate. So with all that, I think we'll go open it up for questions, and thank you for your time.

(Operator Instructions)

The first question is from Rahul Paul from Canaccord Genuity.

Congratulations on the strong Q3. Question, maybe for Dale. How long do you think it would take you to continue to ramp up to 6,050 tons a day at La Libertad?

Well, you've met Omar Vega, I talked with him, actually a couple of days ago, about this issue, and we anticipate that we're there, we see days that are as high as 7,200 tons and this month I think it was 6,700 tons, so we know we're there, and we've come to understand the problem so I would anticipate that coming through the end of this month and into next month, that should turn around. As I said, it's a bit of a learning curve, we're pushing a little harder, a little faster. The manufacturer's hard crusher circuit, we'll address that in the long term, and we're now in the dry season so that aspect disappears. The operational aspect for the sag, we understand now, so we're slowly turning the corner. And the short answer is we should have that buttoned down this year.

Okay, thanks. And on the seeing no (inaudible) higher recoveries, higher than budget recoveries in Q3, have anything to do with the lower throughput? In other words, should we expect recoveries to come down maybe just a bit when you're operating at full capacity?

Short answer, no. The recoveries that we seen to date over the last quarter are pretty much in line with what we have seen in the first two quarters of 2013, and so I don't think we're going to see any hit there at all. As you know, as part of our budget, we increased our tankage.

Okay thanks. And moving on, last question for me and then I'll get back in line. You indicated that the grade to the mill at La Libertad was a little higher than project. You also said that tonnage from Jabali was as per plan, so I'm wondering, were you able to obtain more tonnage from Santa Maria than budget, or did you experience positive grades of continuations from the deposits?

Yes, actually we've had some good news along the way in the last quarter in terms of grades, both coming from Jabali and from Santa Maria. So we had help. If you look at all of our pits, we're coming in with slightly higher grade than budgeted. That's probably the clearest answer I can give to you.

Okay thanks, that's it for me.

Thank you. The following question is from Paolo Lostritto of National Bank. Please go ahead.

Good afternoon, everybody. Thanks for taking my call. I guess this question is more towards Bill, and I don't know if this is available at this time, but can you get a sense of percentage of completion at Otjikoto, earthworks, pumping, piping, tailings facility, as opposed to just volumetrics?

You broke up a little bit. Can you repeat the question please?

I'm trying to get a sense of percentage completion. I recognize that it's still early days, but just to help the analysts map out how things are going, so if we can get a sense of percentage completion for each of the divisions on earthworks, and so on and so forth.

Well, George, maybe that one is better for you. Certainly I can talk about on the tailings facility, and on the mine. The mine we're ahead of schedule, and the tailings, we're probably -- we're certainly close to 100% on the earthworks and the tailings, the lining is well over 50%, and we propose to have that done by December. I think the piping is going to go into the first quarter of next year. And on the mill side, the earthworks is materially complete, so we're up out of the dirt. We're pouring concrete, I think we're somewhere in the neighborhood of 50%, or just under 50% on the concrete and getting ready to wet seal.

Thank you.

Thank you. The following question is from Chris Thompson of Raymond James. Please go ahead.

Congratulations on a good quarter. Two quick questions. Firstly, Otjikoto, as far as the capital spend here. I have you at about CAD121 million for the first three quarters of this year. Obviously, you're guiding towards CAD134 million for the year, now does this imply that you're spending a little bit more? I guess, frequency-wise on a quarter by quarter basis, or we'll be lightening up in the Q4. What's the story there?

Just our disclosure on Otjikoto, one of the things we did was -- we basically did, based on the cash basis when we came out with our 2013 budget, and on that basis, we expected to have a cap finance lease in place, and that would reduce then our cash requirements on a corporate basis. The cap finance lease is almost in place, and so, basically, when you look at the mobile equipment at CAD18.3 million, about CAD14 million of that will come back to us once we get the cap lease number in place, so it's really what -- we were reporting a net number, net of financing options, while what you see on the cash flow is a gross number.

Thanks for that, and then the second thing, Masbate. Obviously, 1.05 gram per ton grade in the quarter. What should we be modeling into next year? Is this or better sustainable looking at 2014.

Yes, recall though as in 2014, we will await, to a certain extent, from Colorado Pit, so our projections are a little bit different in that case. Grade varience against budget for the quarter, don't really concern me, frankly, we're going to see that move around a little bit.

Okay, but you say that it's maybe a 1.05 for next year acceptable on average?

Yes, I'm just checking, give me a minute to get the projected for next year before I comment on that, okay?

So, it's Mark. While you're waiting for Dale to come back, actually I was giving you the quarterly change on a year-to-date basis. Once we complete the cap finance agreement we'll probably get back about CAD30 million this year. So if you look at the net spend so far, it would be about CAD92 million, once we factor that in.

Great.

We come out with projected change for this time next year?

Yes, I just don't have it at my fingertips. If you drop me an e-mail, I can answer your question with the right facts at my fingertips, okay?

No worries. Thanks for a good quarter.

The following question is from Jeff Killeen of CIBC. Please go ahead.

Congrats on a good quarter. A couple questions, many have been answered already. Just wondering, with the all-in sustaining cash costs that you quote, is that based on the World Gold Council criteria or is there any variance from that?

Yes, it's based on the World Gold Council.

Okay, great, and then with Limon, you mentioned there was a reduction in underground mining cost. Just wondering, could you comment on what was the cause of that, and if that's something we would expect to see continuing?

Yes, reduction of some of my temporary staff we were using. What I see there is that the guys have done a good job in organizing their underground cycles, so we're seeing some efficiencies. We also have our [hull crux feet] well in place and operating, so the gradual improvements in organization there are certainly paying off. If you were on the visit earlier in the year, you probably recall Martin, as far as our manager there, talking about organizing this development, getting set for a year ahead. We're seeing that sort of organization paying off on our costs.

Great, and maybe final question then, again on Limon. It seems like the mine grades are currently sitting below the reserve grades, so is it to be expected that we'll see those grades start to climb, going into, say, 2014 or 2015?

Yes, I believe we forecast slightly elevated grades for 2014. Certainly, in the 2013 space we were anticipating grades to climb throughout the remainder of the year. One thing we do see, and it's worth remarking on in 2014, as we start to finish off [posal] five, which is a source of high grade, and that will factor into our 2014 results.

Great, okay that's it for me, thank you.

The following question is from Michael Gray of Macquarie Capital. Please go ahead.

Yes, good morning. Thanks for taking my questions. On Otjikoto, maybe just touch on the expansion or potential expansion timelines, based on WA zone going to a pre-resource artificial pit model. Presuming on the great continuity, am I correct that indicated resource by the end of 2014, early 2015 into a mine plan and potential of mining at Wolfshag in 2016?

This is Tom here. I can comment on the resource. We start finalizing budgets for next year, so it looks like we will probably -- in current plans only infill to indicated the upper part of Wolfshag, the upper part is the open pittable part of Wolfshag, and we'll complete the rest of that in 2016. That doesn't take away from the mine plans going forward and George is here, I don't know if George, you can comment at this time yet?

We don't have the inferred resource done, so it's an unfair question to the engineers to say take our model that we pulled out of our head and turn that into a plan. I don't know if they are ready for that yet.

But when we have inferred we'll start doing that, so by the end of the year, with inferred, the engineers will start looking at, based on that inferred resource what the potential planned pit will be, so that will give us a much better timing on the potential for Wolfshag, when it will come in.

And can you give us an idea of what the 2013 prestripping costs have been?

Yes, we've got that actually on the cash flow. It's -- so far this year its been CAD4.1 million.

Okay, great, and how about [district] ratio for 2014 at La Libertad, Jabali versus Santa Maria and Crimean Mojon?

[MGL] is probably going to say he's going to get back to you with that one.

Yes, yes, no problem.

We're just this weekend reviewing our final budget so that's premature for an answer.

Okay, thanks, that's all I have.

Thank you. The following question is from Ovais Habib of Scotiabank. Please go ahead.

Congrats again on a good quarter. Just on the Masbate, what's your hurdle rate in terms of expansion? What are you looking for in terms of making that move to the next -- taking the move to the next level?

Yes, first it's clearly understanding the metallurgy and understanding what opportunities are there, as well as what Tom Garagan can bring on to the plate for us as well. Logically, we think that there has to be some good answers there, and we handle a certain amount of low grade. We would certainly like to see that go through the mill, instead of over to the stockpile. So what we clearly need to do is understand the metallurgy and then do the economics to see how well we can grow. On the balance side of that, the various scenarios that we'll look at will require different levels of investment as well, so we have to balance those out, it's going to take a little while to sort through.

And I guess on the corporate side, it's going to be driven -- obviously the mine as well will be driven by economics. We do have a lot of interest down there and everywhere from banks looking to finance things like it. If we wanted to do that, we might do a self-financed expansion if it's appropriate. We may look to do a specific loan to Masbate down there, to prove out that for that project. So it's really going to come down economics. When you have a 13 year mine life with great exploration upside, you obviously want to look upscale and see if it makes sense. Also, we are putting in that new sag mill next year, and that will be interesting to see what that addition does just in and of itself, and what options that brings us. So we'll -- I think we're targeting around the end of the first quarter to come out with a report on that. Really a lot of work to do but it will be driven, obviously, by the economics.

Sounds good. That's good, thank you very much.

Thank you. The following question is from Rahul Paul of Canaccord Genuity. Please go ahead.

Just wondering how much mining dilution are you seeing right now at Jabali, and I presume you're probably mining the first bench or so. Should we expect less dilution as you get past the upper benches for net improvement in grade?

The three question maximum, so calling in twice, I don't know if it [gets into] that. Nice try, but the good news is that you have more than three questions, you get a private audience with someone here, so who would you like a private audience with? Sounds like it will be Dale but I'll let Dale answer this one, your core question.

Sure.

Logically, as we gain some operating room, our control will be better but the remarks that I have from [Momar] is that it looks to us like the separation, the identification of the vein there is pretty easy. I've got a great picture from about a bench ago, that has about an 80-meter stretch identified, so we feel we're getting pretty good separation there. Certainly a little bit of operating room will help to reduce dilution, but anecdotally over the last three months, we've also seen better grades come through.

Okay, thanks. I'll follow-up with the other questions that I have.

(Operator Instructions)

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

Well thank you for your attendance, and analysts, thank you for your good detailed questions, and we look forward to another positive report. I guess the next one will be for the year end. So thank you all for your time.

Thank you, the conference has now ended. Please disconnect your lines at this time, we thank you for your participation.