© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon. My name is Colin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the B2Gold Second Quarter 2021 Financial Results Conference Call. [Operator Instructions] Mr. Johnson, you may begin your conference.
Thanks, operator. Well, thanks, everyone, for joining us. As the operator said, we're here today to talk about '21. And continued strong gold production performance, above budget, and we are on track to meet or exceed the upper end of our annual production guidance range, which sits between 970,000 ounces of gold to 1.030 million ounces of gold. I'm just going to give a couple of remarks on the front and Mike's going to walk us through the key financial results. We've put a pretty extensive news release talking about the results of the quarter and also where we sit financially overall but also updating you on a few other issues. The 3 mines continue to produce well. I think, as we've signaled very early and very often, that the second quarter of this year was -- the first half of the year was going to be lower production and the production weighted to the second half of the year, and the second quarter this year, we knew, was going to be the weaker quarter on a financial results basis, which hopefully we signaled that very well to the market. That's all -- we're seeing the reality of that, and we're also seeing a positive start to the second half of the year. In terms of an overview, we'll hear that the 3 mines continued to operate very well. They worked very hard and diligently through the COVID experience with our local communities, our employees and the governments in the areas we work. We're very proud of the contribution from everyone. And I think that we really showed off the amount of social license and trust we have in the places that we work and that we were able to collaborate very early on in a mutual trust relationship to ensure that we could continue to mine, which is critical in the countries we're in for the economy, but continue to mine but only if we could do it safely. So I'm proud of the contribution from all of our employees and people. So in terms of looking forward a little bit, I'm talking about some of the catalysts going forward. I'll touch on that now for those that don't make it through the whole call. But at the end of the day, we're -- as I said, we're on guidance to meet the year, but that does not include a couple of upside potentials as well. We have the Cardinal Zone, which is adjacent to the Fekola deposit, and we're looking to -- we've already done a bulk test, and we're looking to start moving ore from Cardinal to -- good-grade material from Cardinal through the Fekola mill, which is not included in any of our projections. So that could bump up production there. And then -- and looking a little bit further out, we are looking at the Anaconda area, which consists of Menankoto and Bantako. As we all know, we're in a -- currently in a dispute with the government over the ownership of the Menankoto license. We continue discussions with the government, looking to solutions. We believe we have a legal right to an extension to that exploration license where we've spent $27 million and have identified a significant resource that has potential to get larger and can be trucked down potentially to the Fekola mill. But importantly, the Anaconda areas, really these 2 licenses in the Bantako North just immediately north of Menankoto, has a significant amount of saprolite weathered at surface where it's the good grades. That's actually where we would start mining in the Anaconda area, and that's the license that is not under dispute. So we're looking potentially, subject to the final mine plan and the permit, working with the government who's our partner there, as in Fekola as well. We'll be looking to start shipping ore potentially, the saprolite ore, down to the Fekola mill in as early as the second half of -- starting in the second half -- early second half of next year. The Fekola mill we talked about in the news release, but we had spectacular performance in the mill from when we first constructed it and through the 2 expansions of the mill. And we've -- we're getting some very good tonnage throughput. So that's another upside given the projections we made for tonnage throughput, given the reality of what we're seeing. If that continues for the year, that's another potential positive upside. And the saprolite, really because of its weathered nature, material can run through the mill on top of what -- of the normal capacity for the mill. So there are some upside scenarios there. The overall picture of the Anaconda area, we think there's tremendous exploration upside in Menankoto and in Bantako, and continued drilling in Bantako, well, will resolve -- hopefully positively will resolve and get on with business in Menankoto. In terms of that scenario, I just want to comment that Mali has been a very good place to do business and for gold mining for many years as Randgold, now Barrick, can attest to and other companies, including ourselves. So we expect to resolve this current situation and get back to exploring Menankoto on behalf of our partners, the government and the people of Mali, and creating jobs in the short term. But in the meantime, we'll go ahead with Bantako as we would have started there through anyway. But we think Mali is a good place to be in the gold mining business. We still believe that. And we believe that the government will continue to honor the laws, as it has for decades, making it an attractive place for foreign investment in gold mining. Other than that, the Gramalote Project, everyone knows we decided to delay the feasibility study there to do some additional work on engineering, looking at some different concepts there to lower the -- ostensibly to look to lower the capital cost. It looks like we're getting some traction there from some of the early indications from the engineers. And also, we're doing additional drilling in Gramalote, which -- itself but also on the 2 other areas, Trinidad and Monjas West. We're getting some interesting early results from Trinidad, which has been a low-grade zone that might have added mine life back in the day. Now we're seeing some potentially higher grade there. We'll see how that pans out. So we're now looking at -- because of COVID-related delays in getting going on the drilling and adding some more additional drilling to the program for the Gramalote area, we're looking at hopefully early in the second quarter now for the release of the new feasibility study. So we're optimistic that Gramalote can -- we can improve the project through some of the initiatives we have going on, and we'll be able to talk about that, as I said earlier, early in the second quarter. Other than that, we've got a little -- very active exploration program going around many targets around the world, things we've been working on, in some cases, for years to get opportunities like Uzbekistan where we're drilling, exciting targets in Finland, then, of course, all of our various brownfield exploration programs around the mines where we've had great success over the years, continuing to add ounces and, therefore, our mine life to our operating mines. So exploration will continue to be an important part of our growth profile. The Kiaka Project in Burkina Faso, we are -- we're updating the feasibility study there, and we're considering various alternatives to unlock the value of that for our shareholders. M&A, we're looking -- definitely, we're always looking at opportunities. We don't see a ton of things that we really love out there that we think are fair value. We'll continue to look and look for opportunities. But for us, as to M&A, it's more likely we'll find some different situation where some -- are bringing our expertise to bear with the opportunities that may suit us and may not have suited other companies. It's going to be a pretty competitive environment for M&A. And we'll continue to look at that and look at opportunities but very selectively. We're not going to start overpaying for assets now. We never have before. So with that, I think I'll -- general overview, pass it over to Mike, and he'll tell you about the great financial position we find ourselves in, continuing to pay a very robust dividend, one of the highest dividend yields in the gold sector and talk about our strong cash position and our lack of debt and continued financial strength looking into the future. So with that, I'll pass it over to Mike Cinnamond to give us an update. We also have the entire B2Gold executive team on the line available to answer questions after Mike has given his presentation. So over to you, Mike.
Thanks, Clive, and good morning, everybody. So I'm just going to run through the quarterly results, quick comment on the year-to-date and then sort of where we are cash flow-wise and balance sheet-wise. So firstly on the quarter, for the second quarter, with $363 million in revenues. That's from the sale of 200,000 ounces at an average price of $1,814 per ounce. So gold still holding its own as everyone's seen in the quarter. It's kind of -- it's a bit range bound around that $1,800 mark but certainly holding its own. And when we gave guidance on cash flows for the year, et cetera, right at the start of the year, we actually used $1,800 gold. So right in that ballpark of where we thought when we were budgeting and giving guidance to everyone. Sales were 12,000 ounces higher than budget in the Q, and that's really a function of the overproduction at the sites. So turning to that production for the quarter. So consolidated, including our share at Calibre, production was 212,000 ounces, which is basically 10,000 ounces higher than budget. And that came really from outperformance from each of our sites. Fekola, same kind of story as the first quarter. The mill just -- the throughput at the mill continues to outperform even our expectations. We did budget 7.75 million tonnes annualized throughput for the newly expanded Fekola mill. But even in Q1, we did 2.29 million tonnes, so well in excess of what we budgeted. That's a combination of a few things. Favorable ore fragmentation and hardness and optimizing the grinding circuit. But it's all very promising. What we did see in the Q was, though, that to feed some of that excess production more than we thought we'd have, we did use some low-grade stockpiles, which provided that sort of additional unbudgeted mill feed, and that did lead to a slightly lower grade in the Q as a result. But overall, Fekola, 114,000 ounces, over 4,000 ounces ahead of budget. Then Masbate, 57,000 ounces production for the quarter, again 4,000 ounces ahead of budget. And same story for Masbate as we saw in Q1, mill recoveries continued to outperform our model and processed grade from our transitional ore and Main Vein, where we're working right now, was above budget. We did actually have time in the Q to run a couple of metallurgical test campaigns just to try and help us as we optimize our recoveries as we move forward into the harder ore later in the mill's -- or in the mine's life. And what we found from -- one of the test campaigns involved high-grade ore from the Main Vein pit. So even though we had a bit of a downturn in throughput because of the campaign, we actually improved grade overall because of the -- some of the tests that we ran. So overall, Masbate running very well and still beating the model on recoveries and grades. In Otjikoto, 27,000 ounces, and that's 2,000 ounces ahead of budget. And really, as you know and as we guided, I think, in the budget all the way through the year so far, a lot of the production from Otjikoto or a majority of it was coming from stockpiles in the first half. And then in Otjikoto, as we get into the -- mining the higher grade in both Wolfshag and Otjikoto Pit in the second half of the year, we're going to see a real upturn, I think, in the production from that mine. But in Q2, even when we mine from the sort of medium-grade stockpiles, the grade that we actually got was actually better than modeled, so we saw a beat overall in the numbers for Otjikoto. So when you translate that into cash costs per -- and this is on a per ounce produced basis, overall across all our sites and including our share at Calibre, we're basically right on budget, $664 an ounce against the budget of $662. But there were some offsetting factors in there, offsetting sites. So Fekola was $617 an ounce. I mean that was about just over $70 an ounce higher than budget, but that's primarily a function of a couple of things. The first one, the main one, is that we were running that lower-grade material through the mill to feed the excess throughput. So lower grade leads to higher costs overall per ounce. And then we did see some higher cost in terms of higher-than-budgeted fuel prices. And we've seen that across all operations. And I think you -- I'm sure you're hearing the same thing from all mining operations. But even with that, we still managed to -- overall on a consolidated basis to come in right on budget. So offsetting the Fekola, high-cost Masbate was $616 an ounce produced. That -- which is 80 -- over $80 lower than budget. That's primarily a function of higher-than-budgeted production with generally online budgeted operating costs, although, again, fuel was higher at Masbate site. And then Otjikoto, $854 an ounce, again just over $80 an ounce lower than budget. And same kind of story, higher-than-budgeted production, slightly higher fuel or -- higher fuel costs and a stronger Namibian dollar. But that was also offset by higher-than-budgeted prestrips. So we saw more costs capitalized as part of that prestrip. So overall, right on budget for the Q consolidated for cash costs. All ins, we were, overall, on a consolidated basis, $30 an ounce lower. That's a function, as always, of the -- what happened with the cash costs in the Q. And also, lower-than-budget sustaining CapEx is the primary reason that there's a beat on budget there. And most of that -- or all of that really is timing related. The main part that wasn't incurred on the sustaining capital side relates to, I guess, fleet rebuilds and stripping mainly at Fekola and Otjikoto. And we do expect to see that reverse in the second half of the year. But overall, $30 per ounce lower than budget on a consolidated basis. Then just a quick commentary on year-to-date. So year-to-date on production, we're 29,000 ounces ahead of budget. So really reflecting a very good first and second quarter that we had. And as Clive mentioned -- I think he gave a good outline of some of -- what we don't have in our guidance right now relates to what we can get from Cardinal as we move into Q3, we expect it to come online at some point in Q3 and -- later in the year; and also the higher production that's going through the Fekola mill right now. So I think the engineers are working on those numbers so we can try and factor them in. So right now, we haven't -- and they weren't included in the guidance that we put out for the year, the budgeted guidance. We do think there's definitely a chance that we could beat the high end of our production range when that's factored in. So we expect to be able to give you a bit more color on that as we move into Q3 as part of the Q3 reporting. And then just -- I want to comment on the cash costs and the all-in costs for the year. So on a cash cost basis for the 6 months, we're $26 lower than budget. That really reflects the -- although we may have some cost inflation, cost pressures across the sites, we're beating it on the production side. So overall, we're below budget there. And all-in sustaining costs were $88 below budget, again a function of those better cash costs and some of those deferred CapEx. We're also seeing -- on the all-in sustaining cost side, we're also seeing the benefit of some fuel hedging that we've done. So as I mentioned, there were some higher cost -- fuel costs in the period, but we've been -- had a hedging program for quite a few years now, where we hedge 50% of the first -- the next 12 months and 25% of the subsequent 12 months on a fuel basis. Those hedges right now at the end of the quarter were about $18 million in the positive, and we're seeing the benefit of those hedging gains when you look at the all-in sustaining costs, because they're factored in there. So guidance-wise, like we say, at or above the high end of our production range of 970,000 to 1,030,000 ounces for the year. Having -- we guided on the costs. Still expecting to meet our -- or be within the ranges for our costs overall. And again, once we see the updated production numbers for Q3, we'll have a better idea of how that may impact any of the cost per ounce parameters. Just a couple of other comments maybe on the operations themselves. Clive mentioned Fekola and what's going on there and Cardinal. Fekola Solar Plant also came fully online in the Q. The construction in the plant is complete. There's -- we're still working on a few commissioning things, but really it's there and it's expected to reduce Fekola's HFO consumption by over 13 million liters of HFO per year. And we've already seen solar be very successful in Namibia, and now we're seeing the benefit of it in Fekola. Menankoto, I think Clive has already given you an overview on that. Then just to comment on Otjikoto, development in Wolfshag, the underground mine, continues. We've got the portal developments completed, and now we're working on the underground -- primary underground ramp as we get -- and we hope to get into stope ore production sometime in early 2022, as was forecast. Maybe just a couple of comments on some P&L items that don't fall automatically out of some of the production stats that we talked about. G&A is up a little bit in the Q, and that's really -- primarily, it's a function of 2 things. The increase in insurance costs. The whole industry has seen insurance costs go up, unfortunately. That's just a fact of life. And part of that comes with higher gold prices because you have higher values and BI numbers to deal with. And then some of it's just ongoing higher COVID costs as you manage the sort of COVID protocols at sites. Just a point on the gains in derivative instruments, the $9 million for the Q and $17 million for the year. That's fuel. That's -- almost all of that is fuel. And that's just the positive gains on some of the hedges that we have in place. Taxes, the $50 million for the Q., it's CIT withholding We're going to see higher taxes now as we're profitable at all sites from these higher gold prices. And the one thing that's in there that you're going to see on an ongoing basis now, there was $18 million in there for withholding tax, mostly for Fekola and mostly related to dividends as we pull money out from the sites. The loans at all sites have been repaid some time ago, and now monies that -- are pulled out from sites are repatriated via dividend. So again, it's a function of being profitable and successful, but you're going to see some higher taxes there because of withholdings on dividends. Overall, earnings for the period -- or earnings per share, unadjusted, $0.07; adjusted EPS, $0.05. And then for the 6 months, EPS, $0.15 per share; and adjusted, $0.14 per share. And the adjustments are primarily to remove unrealized derivative gains and VAT charges and credits. Okay. And then just finally, I just wanted to mention our comments on a few items in the cash flow. We've spent a lot of time certainly trying to guide over the last couple of periods or few quarters as to how we see cash flow unwind through this year. So it is definitely a tale of 2 halves this year. We had run about $140 million in Q1, and we expect about $0.5 billion in Q2. So overall for the year, we expect about $630 million. That's what we guided at $1,800 gold, and we expect certainly to come in at that or close to that. So that guidance is unchanged. But what it did mean is that we had basically breakeven or just actually a slight cash outflow of $8 million for the quarter for operating activities for Q2. And as guided frequently, that really relates mainly to working capital changes. And the biggest component of that is payment of last year's tax obligations, most of which relate to Mali. So paying off the Malian tax obligations and the government dividend, which is due in the June following the next year. So 2020's government dividend, ordinary dividend for Mali was paid in the second quarter of 2021. So a significant outflow there but right as planned. I think when we look at what we guided at the end of Q1, we couldn't really be any closer for this Q, I think, than how we turned out. So we're feeling very positive about second half of the year. And once -- now that the sites are getting into the better-grade ore, both Namibia and Fekola, we expect to see a significant upturn in that operating cash flow as we go through the next few quarters. A couple of other comments maybe dividend paid. We paid -- Clive mentioned we paid $0.04 per share again in the Q. Our dividend yield is somewhere just under 4%. So it's still right up there in terms of the gold business, and we feel very comfortable maintaining that level of dividend. Distributions to noncontrolling interests, you'll see in the cash flow $7 million outflow for the Q and $9 million for the year. That's again a function of profitability. So we have minority -- those are -- relate to payments to minority interest partners, both Mali, where the government has a 10% dividend interest, and then -- and Namibia, where we have a 10% minority interest partner for Otjikoto. And finally, just a comment on investing activity. So $66 million for the quarter, $125 million cash outflow year-to-date. We're about $30 million lower than budget for the year-to-date number. And about $5 million of that relates to sustaining CapEx, so mostly stripping that we'll see roll over into next year. And then nonsustaining, there's about 20 -- $24 million behind in nonsustaining right now. $9 million of that relates to Gramalote. That's just a timing thing. We're certainly doing a lot of work there now, and we'll -- I think we'll catch up to those costs very quickly. And in fact, we're just in the process of finalizing Gramalote's revised budget for 2021 with our partners, AGA. We just have to -- have that formally approved now in the joint venture meeting that's going to happen next week. So the new budget there is $69 million. That's an increase from the $52 million that we had originally in the budget. And our share is roughly $9 million of that additional for the year. And then we also expect to agree on an updated amount for the early part of next year. Right now it's estimated to be about $17 million to get us right through the final completion of the feasibility study for Gramalote. That revised look at that feasibility study and how we think we want to approach it there. So we think now the Gramalote feasibility study will be done sometime in Q2 next year. It's pushed out slightly from Q1 as a result of more drilling that we've now agreed with AGA that we're going to do at Trinidad and Monjas and also just ongoing COVID restrictions in Colombia, which haven't stopped us from doing work, but it just makes it a little slower than we had planned. So like I said, on that CapEx side, that $30 million that we're under for year-to-date, we do expect to see that reverse and flow through second half of the year. Or sorry, I should mention the other thing on the nonsustaining CapEx that was under -- it's about $11 million for exploration that hasn't been spent yet. But we've definitely got the plans and the teams assembled and working now at various sites. So we expect to catch that exploration underspend in the second part of the year. And that leaves us at the end of the Q with $382 million in the bank and, like I say, waiting for that -- the big cash flow part of the year to come now in the second half of the year, approximately $0.5 billion from cash flow from operations to flow through. And we've got the line undrawn. We've got a $600 million line revolver sitting with our syndicate of banks. It's undrawn. So liquidity-wise, we're in excellent shape. And that concludes my remarks on the financial side of the quarter. Back to you, Clive.
Thanks, Mike. I guess we'll -- operator, we'll open up for any questions now.
[Operator Instructions] Okay, your first question comes from Tyler Langton from JPMorgan.
Maybe just to start with Cardinal. I think you had previously talked about maybe being able to contribute around, I think, 20,000 to 25,000 ounces this year. Is that still the case? And then I guess to start production, are there any sort of like permits or approvals that you need from the government?
Sure. Yes. It's actually a good question, Tyler. I'll pass it over to Bill to answer that.
Yes. Thanks. So the answer is yes, kind of for the whole year, that 20,000, 25,000 is certainly within the range that we talked about. Remember that it is still a resource, an inferred resource. So we're still working through that. But with that being said, certainly the initial bulk sample that we completed in Q2 did represent quite well what we thought was going to be there. So that number still holds true. And we have already -- we went through a full -- we did an update to our Environmental Impact Assessment, and that was approved. And now we're just adding it to the mining plan. So we actually have this next week the ministry coming out to have a look at it. And so certainly, we see within Q3 we'll be ready to mine it fully.
And then just a...
I'll let...
Oh, sorry.
Go ahead, Tyler.
Okay. Yes. Just as a second question, just -- obviously, we've started seeing some inflationary pressures. I guess can you just -- and you mentioned in the release some new pressures from fuel and other items. But can you just, I guess, provide a little bit more detail on what you're seeing, whether it's materials, consumables, fuel, and if you sort of have any supply contracts or fuel hedges that kind of mitigate the impact this year?
Well, I think Mike can speak to -- he talked -- he touched on it in his remarks about the fuel hedging. I don't know. Bill, do you want to talk about other -- our views on inflation and what we're doing to mitigate the impact?
Yes. Well, certainly, we are seeing some inflationary pressures, for sure, in particular on the shipping side. As everybody comes out of COVID, the shipping costs are up. But what we're doing as far as trying to mitigate it, as you know, we -- in the last couple of years, we've become a major producer as opposed to a junior. And that's allowed us really to get global pricing everywhere. So when we go out with prices on reagents and that type of stuff, then we're able to kind of get what all the big boys are getting, the best price as possible. So I would say that certainly, there is a pressure on inflation, but we're managing it as best we can for sure. And fuel, I think Mike was going to talk about.
Mike?
On the fuel side, I don't have a lot to add than I already talked about. We are -- we have kept our fuel hedging programs up to date. So we're basically 50% hedged for diesel and HFO needs for the next 12 months and then 25% for the subsequent 12 months. So right -- and right now, that's on the book. It has a mark-to-market value of about $18 million, so it's $18 million in the positive. And then the other hedge that we've talked about historically is kind of like a permanent hedge as we put the solar plants firstly in Namibia, where we view that as part of the overall hedging approach to fuel, and then, obviously, with Fekola coming online as well. We think that reduces overall operating costs somewhere in that 3% range. So that's kind of part of how we're -- we, on a permanent basis, are mitigating some of those cost risks.
Your next question comes from Josh Wolfson from RBC Capital Markets.
Just a quick question maybe on capital allocation. Obviously, this quarter was not necessarily representative of what the go-forward cash expectations are going to be. But with second half of the year being positioned much better and even beyond that with Gramalote, what's the current thinking in terms of dividend policy and what the excess cash is going to be allocated towards?
Mike?
So on that front, Josh, I think a couple of thoughts. The first one is we're pretty comfortable. Like I think we're saying at our current dividend rate, we've got one of the highest yields out there. We've put ourselves up there pretty quickly. And so we feel pretty comfortable maintaining those rates certainly for the long term even given significant fluctuations with gold price. So that was one of the reasons for setting that at the rate we did. We're trying to balance cash flow generation with also -- and returning capital to shareholders with being a growth company as well as still a growth company. So I think you'll see us run through and see where we get to by the end of the year and evaluate it then. But I think right now, we're pretty comfortable with the rate we're at. We don't have any plans for share buybacks, and we don't have any plans for any kind of special dividend or right now for any increase in dividend.
Yes, we'll continue, as Mike says, to look at that. At the end of the day, we're going to have a -- as we get into later this year and into next year, we're going to have a bit of an idea of what we think about Gramalote in terms of potential capital. And the idea -- I think most of our shareholders get it. We're paying a very healthy dividend, but we are a growth company and we want to continue the opportunities for growth, whether it be in Anaconda. We've talked about whether it be Gramalote or other opportunities. So we think we've got the right balance for the shareholders right now, but we'll be looking at that as it makes sense by the end of the year. Now, obviously, if gold were to make a significant move, then that might change our thinking there as well. But I think we've -- right now, we feel we've got the right balance, and let's see what we look like as we get towards the end of the year.
Got it. And then maybe if I could tuck in one more just for Otjikoto. With the sequencing in the second half of the year, is there any sort of key difference between third and fourth quarter? Or is there going to be just a real step-wise change now with the -- just the great sequencing at bottom of the pit?
Bill, do you want to talk to that one?
Yes, I'm just looking at what grade we're feeding into the mill here in the second half. The answer is it's going to be pretty evenly broke out. So the first half, obviously, we had a very -- not a very high output. But the second half, we're going to see it come up in Q3 and Q4.
Okay. And that -- how long does that sequence go for? Like does it go past year-end 2021?
Well, we haven't done the 2022 budgets yet, so I'm a bit low to say exactly what it's going to be.
Your next question comes from Ovais Habib from Scotiabank.
A lot of my questions have been answered, but I did have a follow-up question on Cardinal. In regards to -- Bill, you mentioned that you do have -- you have submitted the environmental and social impact assessment. Any kind of color that you can provide to us as to how those discussions are proceeding regarding the permit?
Yes, they're proceeding very well. Like I said, we submitted the bulk sample. Now they're just coming out to see -- basically to see where it's all at into -- and not even -- I don't even think we need an official written approval, but they just got to make sure that we implemented it correctly within our mine plan. So we see mining there as imminent.
Perfect. And in terms of mining on Cardinal's side as well, once you get the official, I guess, permit or whatever, can you start in Cardinal right away? Or is there any prestripping required? Any sort of CapEx required on Cardinal?
We can start right away. As part of our bulk sample, we had to move -- had moved some material out to get some representative material. So it's been kind of a twofer. We got the good metallurgical testing, and we got some of the prestripping done.
Okay. Perfect. And just a little bit more color on the Anaconda side. You had mentioned that Menankoto is not somewhere you wanted to start off mining in the first place, but there was opportunity to start on other areas of Anaconda. Would you look to do a bulk sample similar to what you did at Cardinal? Or how should we look at Anaconda?
Yes. That's a real interesting question, Ovais, because originally, we did talk about doing a big bulk sample there with the saprolite material. Certainly, the saprolite material that -- we have done some metallurgy on it, and we think that it feeds quite well. But I guess that's not off the table. We would consider doing a bulk sample in the Bantako area in Q4 this year potentially.
Your next question comes from Don DeMarco from National Bank Financial.
My first question is for Bill. So Bill, there's a lot of moving parts at Fekola. We've got low-grade stockpiles just on Q2. You have the pit, Cardinal and so on. What should we be thinking about in terms of grade for Q3?
So you want -- your question is what is the grade for Q3 at Fekola?
Yes. Well, I mean, obviously, direction will be higher than Q2, but we're just trying to -- just get a sense of the balance of these 3 different components and so on and if there's anything you can kind of -- whatever you're telling people at this point.
Yes. So in the budget, our grade kind of in Q3 were up around 2.8, 2.83. And then in Q4, we're between 2.5 and 2.6.
Okay. Great. Bill, just continuing on, you confirmed Cardinal is going to be still in that range of 20,000 to 25,000 for 2021. But how much might we expect in 2022? And you did release that 5-year guidance at the AGM. Is Cardinal included in that guidance? And any color here would be appreciated.
Yes. So Cardinal is included in the original guidance that we released, but none of the Bantako or Menankoto or any of that stuff is included. And so that is still yet to be factored in. It's - -the interesting -- the thing that's really interesting about what was going on there is we're going to have some optionality, which you mentioned. You talked about you've got the low-grade stockpiles, you've got Cardinal, you've got some Cardinal saprolite, you've got potentially Bantako saprolite. So all these things are going to be put into play when we do the budget. And so that's why I can't say really what's going to be carrying on in Q1, Q2 of next year. And I just want to come back to the previous question you asked because I didn't -- I actually saw the mining -- the grade in Q3 is going to be 2.73 and in Q4 2.1.
Okay. And obviously, Cardinal is going to be lifting that a lot. But just to that second question, Cardinal, 20,000 to 25,000 for 2021, but that's probably a baseline for subsequent years, I would imagine.
Well, yes, I mean, once again, we haven't really scheduled it out because we don't know how it's all going to fit in with Bantako and Anaconda. So the answer is there's -- as you know, the resource is quite big there.
Okay. Great. And on Bantako, is there any concern that the mining license in that area north of Menankoto could be retracted? I mean it's -- are you feeling pretty confident in that? I mean obviously, we hope to have the portion that was taken away restored. But what about risks to the rest of the property?
Yes. We see that as really low probability. The reality is, is that's still sitting under a very early exploration license. So there's still another -- I think another 7 years or 6 years of exploration potential there. So the fact that we're already willing to put it into production now. And, of course, the government is in a need for cash. There are certainly other projects around which are getting their permits as normal. So we see Menankoto as an anomaly, and we see it business as usual everywhere else.
Yes. I think that's an important point. Menankoto is a very different situation where we have -- we believe we have the legal right to an extension to allow us to get going on and file for an exploitation license, and we -- under -- we believe under the mining law, we have the right to -- for that. That's in a very different stage. Once again, I mentioned we're discussing with the government. We also are in arbitration in Paris, which is a big step, but we didn't do that lightly because we believe we still have a significant right here. So - -but Menankoto is a very different situation from Bantako, and we will -- the government -- and all indications are they're very keen to see us get going in that area initially with Bantako and, ultimately, I think, they saw -- well, -- they see as the appropriate place to take ore from Menankoto. And Bantako is, of course, the Fekola mill, and that's not lost in a lot of people, including a lot of people I would suggest we would see in government in Mali.
Your next question comes from Carey MacRury from Canaccord.
Maybe a question for Mike on that operating cash flow guidance, $500 million in the second quarter. Does that line up with the midpoint of your production and cost guidance? I.e., if you -- obviously, you're at the top end of the production guidance now. But if you do better on costs, could we see upside to that number?
Oh, on the operating cash flow side? Yes. Yes. I mean obviously, the more production you have -- arguably, it depends what the cost profile is. I would balance on the other side but we have seen some cost inflation. So our view overall is I think we can meet our cost guidance for that. The -- would -- the cost per ounce, obviously, can be benefited from more lower-cost production, say, from Cardinal in the period. But overall, I think I would view us as coming in on the range. That's where we sit right now.
Okay. Great. And then maybe a question for Bill. I noticed in the MD&A you guys talked about the solar plant being completed, and it looks like it's going better than planned. Just wondering if you can add a little color on potentially what that could translate into for you guys.
Yes. I mean John Rajala is on this call. He's probably more appropriate to answer. But what I'll tell you is that we're definitely seeing designs -- design plus. And given the fact that we're in the rainy season now, we certainly anticipate that we're going to be above where we thought the design capacity was going to be. I don't know, John, if you want to add anything to that.
No. I think that's a good summary, Bill. During the second quarter, the -- solar provided 16.8% of the total power production, but that was only with 78% of the panels installed. So it did really well for -- with a number of panels, the installation and -- which is now completed. And we're doing testing and - -we've gone up as high as 30-megawatt power production, which is the rated capacity of the plant. So it's all looking good.
So high level, you mentioned savings, 13 million liters of HFO, which now we can do the math on. But what is it -- like I assume the operating cost of the solar plant now that it's been is pretty minimal.
Yes.
Yes, it's minimal. So it's going to contribute to roughly $0.025 per kilowatt-hour savings is -- I think, is what we were projecting. So -- and we may have potential to even exceed that.
And Carey, just a reminder. I think I mentioned it in the remarks. We think overall, when you look at it on balance, it reduces cash costs by about 3%. But that's what we think the impact of solar is. We see a similar kind of contribution in Namibia as well.
[Operator Instructions] And your next question comes from Anita Soni from CIBC World Markets.
Most of the questions have been answered. But can you just clarify again one more time? It's been a long night. The -- just the Fekola, sort of the components of how we're getting to sort of the higher production in the second half of the year. So I was a little confused because I thought you said that -- in the press release, you said Cardinal is not part of the -- of what you factored into the grades, and that could be additional upside. But I thought, Mike, that you had said that -- just now that Cardinal was factored in. So I'm just -- can you clarify that for me? And then also secondly, on the throughput levels, it seems like you're hitting above the throughput level at Fekola, and you've guided to a slightly lower level on throughput for this -- for next year as a run rate. Is there something that we should be thinking about in terms of like additional bottlenecks or the mine may be a bit constrained so you can't run at that full level? I think it was 80 -- 8,300 tonnes per day that you did this quarter for -- in 1 month.
Well, I'll start with the initial question about Cardinal, what is factored in. It's not factored into the budgeted numbers. It's not factored into current guidance. What I was saying in the earlier remarks was when we get more clarity on exactly how we see that flowing in Q3 and Q4, and we'll have a look at our guidance then to see if there's any guidance where we would update that. And then my other comments on it, just more recently, were just -- it was in -- the question was, do we see Cardinal as potentially benefiting cash costs? And I was saying, yes, I mean, in theory, it could, for sure, because more production hopefully lower costs. But we are not changing our guidance range even once -- right now, we haven't changed our cash cost range. When we see what Cardinal looks like and give a bit more flavor to it in Q3, then we'll come back to you if we think it changes anything.
Now, Bill, you want to talk about mill throughput? Or Bill or John or...
Yes. Yes, I do, for sure. And I also -- the second half of that question, I was asked if Cardinal -- there was -- we did a 5-year guidance. Was Cardinal included in that? And the answer is yes starting in 2022. So going forward, that -- and that was already included in our assessment for the next 5-year or 4-year guidance through 2025. As far as how do we see getting the additional ounces this year, there's quite a few ways that could happen, for sure. One, obviously, is the throughput, right? Our budgets for this year were run at 7.5 -- I don't know. Sorry, 7.75 million tonnes per annum. We're currently running up there much closer to 9 million, and we're thinking -- and once again, this is -- we're always kind of coy about this, but we're basically thinking if we can get 1 million tonnes of saprolite down there or something like that or 15%, we think that we could actually be running up around 9 million tonnes per annum going forward. And so that's kind of what we're shooting for right now, and that's what we'll be looking at for our budget. So what we have is we have this huge extra capacity versus what's in the budget versus -- which is what obviously generates the ounce profile versus what we're actually running. So you could have ounce profile from Cardinal. You can certainly have it from stockpile. And as someone mentioned earlier, if we're real slick about it, we could actually pull a bulk sample from Bantako and bring it down. So a bunch of different options.
There are no further questions at this time. I'll turn it back to Clive Johnson for closing remarks.
Okay. Well, thanks for your participation and your good questions, and we look forward to a very strong second half of the year. And we continue to have great performance in the mines, and we're excited about proceeding with looking at our development projects, exploration and see what other opportunities come our way, and we look forward to talking with you again. So thanks, everybody. Thanks, operator.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.