B2Gold Reports Strong Fourth Quarter and Full-Year 2017 Results; 2018 Outlook Provides for Very Strong Production Growth with Forecast Gold Production of Between 910,000 and 950,000 Ounces
News Release B2Gold Reports Strong Fourth Quarter and Full-Year 2017 Results;
2018 Outlook Provides for Very Strong Production Growth with Forecast Gold Production of Between 910,000 and 950,000 Ounces
Vancouver, March 15, 2018 – B2Gold Corp. (TSX: BTO, NYSE AMERICAN: BTG, NSX: B2G) (“B2Gold” or the “Company”) is pleased to announce its operational and financial results for the fourth quarter and year-end December 31, 2017. The Company previously released its gold production and gold revenue results for the fourth quarter and full-year 2017, in addition to its production and cash cost guidance for 2018 (see news release dated 1/11/18). All dollar figures are in United States dollars unless otherwise indicated.
2017 Full-Year Highlights
- Record annual consolidated gold production, for the ninth consecutive year, of 630,565 ounces of gold (including 79,243 ounces of pre-commercial production 1 from Fekola), exceeding the upper end of the revised guidance range (of 580,000 to 625,000 ounces) and well above the upper end of the original guidance range (of 545,000 to 595,000 ounces)
- Annual consolidated gold revenue of $638.7 million (or an annual record of $739.5 million, including $100.9 million of pre-commercial production sales from Fekola)
- Fekola Mine construction successfully completed in late September 2017, more than three months ahead of the original schedule
- Fekola Mine achieved commercial production on November 30, 2017, one month ahead of the revised schedule and four months ahead of the original schedule
- Fekola Mine gold production was 111,450 ounces in 2017 (including pre-commercial production), far surpassing the upper end of its original guidance range (of 45,000 to 55,000 ounces)
- Fekola Mine achieves cash operating costs (see “Non-IFRS Measures”) of $277 per ounce and all-in sustaining costs (“AISC”) (see “Non-IFRS Measures”) of $419 per ounce (including pre-commercial results)
- Masbate Mine achieves near-record annual gold production of 202,468 ounces and Otjikoto Mine achieves record annual gold production of 191,534 ounces
- B2Gold’s full-year consolidated cash operating costs of $542 per ounce (including Fekola’s precommercial production results) were well below guidance of between $610 and $650 per ounce
1 Basis of presentation: The Fekola Mine commenced operation on September 24, 2017 and reached commercial production on November 30, 2017. In accordance with the Company's accounting policy, revenues and costs related to ounces produced in the pre-commercial operating period up to November 30, 2017, were not recorded in the consolidated statement of operations but were capitalized and treated as part of the net cost of construction of the Fekola Mine.
- B2Gold’s full-year consolidated AISC of $860 per ounce (including Fekola’s pre-commercial production results) were well below guidance of between $940 and $970 per ounce
- Cash flow from operating activities (after non-cash working capital changes) of $155.0 million ($0.16 per share); additionally, sales of pre-commercial production from Fekola, which were included in investing activities rather than cash flow from operating activities, generated net proceeds of $73.4 million ($100.9 million of sales revenue net of related production costs of $27.5 million)
- Strong cash position of $147.5 million at year-end
- With the planned first full year of production from the Fekola Mine, the Company’s outlook for 2018 provides for dramatic production growth, with consolidated production expected to be between 910,000 and 950,000 ounces of gold; cash operating costs and AISC are expected to remain low and be between $505 and $550 per ounce and between $780 and $830 per ounce, respectively
- Beginning in 2018, on average over the next three years, the Company is projecting per annum gold sales revenues of approximately $1.2 billion, cash flow from operations of close to $0.5 billion and a significant increase in free cash flow (operating cash flows less investing cash flows)
- In 2018, B2Gold’s strategy will focus on organic growth through the expansion of its existing mines and further brownfields exploration and grassroots exploration
2017 Fourth-Quarter Highlights
- Record quarterly consolidated gold production of 240,753 ounces (including 72,903 ounces of precommercial production from Fekola), 71% (or 100,102 ounces) greater than the same period in 2016
- Consolidated gold revenue of $174.0 million (or a quarterly record of $274.9 million, including $100.9 million of pre-commercial production sales from Fekola)
- Consolidated cash operating costs of $473 per ounce and AISC of $754 per ounce (including Fekola’s pre-commercial production results)
2017 Full Year and Fourth-Quarter Operational Results
For B2Gold, 2017 was an outstanding year of performance with the achievement of another record year of consolidated gold production (for the ninth straight year), and the successful construction and commissioning of its flagship Fekola Mine, in southwest Mali, which achieved commercial production on November 30, 2017, one month ahead of the revised schedule and four months ahead of the original schedule. With the large, low-cost Fekola Mine now in production, B2Gold is on target to achieve transformational growth in 2018. In 2018, with the planned first full year of production from the Fekola Mine, consolidated gold production is forecast to be between 910,000 and 950,000 ounces (see “2018 Production Outlook and Cost Guidance” section). This represents an increase in annual consolidated gold production of approximately 300,000 ounces in 2018 from 2017. The Company’s forecast consolidated cash operating costs are expected to remain low in 2018 and be between $505 and $550 per ounce and AISC are expected to decrease by approximately 6% from 2017 and be between $780 and $830 per ounce.
The Fekola Mine is projected to be a large, low-cost producer. The resulting increase in production levels combined with low costs are expected to dramatically increase B2Gold’s production, revenues, cash from operations and cash flow for many years, based on current assumptions (including a gold price assumption of $1,300 per ounce). On average over the next three years, beginning in 2018, the Company is projecting per annum gold sales revenues of approximately $1.2 billion, cash flow from operations of close to $0.5 billion and a significant increase in free cash flow (operating cash flows less investing cash flows).
For full-year 2017, consolidated gold production was an annual record of 630,565 ounces (including 79,243 ounces of pre-commercial production from Fekola), exceeding the upper end of its revised guidance range (of 580,000 to 625,000 ounces) and was well above the upper end of its original guidance range (of 545,000 to 595,000 ounces). Consolidated gold production for the year also increased by 15% (or 80,142 ounces) over 2016. B2Gold’s record performance in 2017 reflected the early start-up and strong ramp-up performance of the new Fekola Mine and the continued, very strong operational performances of both the Masbate Mine in the Philippines and the Otjikoto Mine in Namibia.
In the fourth quarter of 2017, consolidated gold production was a quarterly record of 240,753 ounces (including 72,903 ounces of pre-commercial production from Fekola), exceeding reforecast production by 5% (or 10,473 ounces) and significantly exceeding budget by 28% (or 52,141 ounces). Consolidated gold production for the quarter also increased by 71% (or 100,102 ounces) over the same quarter in 2016.
The Company’s full-year 2017 consolidated cash operating costs of $542 per ounce (including Fekola’s pre-commercial production results) came in well below the guidance range of between $610 and $650 per ounce, as a result of the Company’s strong operating performance. In addition, the Company’s full-year 2017 consolidated AISC of $860 per ounce (including Fekola’s pre-commercial production results) also came in well below the guidance range of between $940 and $970 per ounce.
In the fourth quarter of 2017 (including Fekola’s pre-commercial production results), consolidated cash operating costs were $473 per ounce (Q4 2016 – $546 per ounce) and AISC were $754 per ounce (Q4 2016 – $877 per ounce).
2017 Full Year and Fourth-Quarter Financial Results
The Fekola Mine commenced operation on September 24, 2017, and reached commercial production on November 30, 2017 (see “Operations, Fekola Gold Mine – Mali” section). In accordance with the Company's accounting policy, revenues and costs related to ounces produced in the pre-commercial operating period up to November 30, 2017, were not recorded in the consolidated statement of operations but were capitalized and treated as part of the net cost of construction of the Fekola Mine. Consistent with the exclusion of these pre-commercial production revenues and costs from the determination of net income for the period, the related net cash flows were not reflected as part of cash flow from operating activities in the Company’s 2017 consolidated statement of cash flows (but instead were reflected in the investing activities section). For full-year 2017, the Fekola Mine produced a total of 111,450 ounces (from September 24 to December 31). A total of 84,000 ounces were sold in the fourth quarter of 2017, with the remaining 27,450 ounces being recorded in inventory at December 31, 2017. Of the ounces sold, 79,243 ounces related to pre-commercial production. Consequently, only 4,757 of the ounces sold (for revenue of $6.1 million) related to Fekola Mine commercial production and were recorded in the Company’s 2017 consolidated statement of operations. Proceeds from the sale of the 79,243 precommercial production ounces totaled $100.9 million and together with related production costs of $27.5 million for a total net credit of $73.4 million were capitalized and offset against Fekola Mine construction costs.
For the full-year 2017, consolidated gold revenue was $638.7 million (or an annual record of $739.5 million, including $100.9 million of pre-commercial production sales from Fekola) on sales of 510,966 ounces (or an annual record of 590,209 ounces including 79,243 ounces of pre-commercial production sales from Fekola) at an average price of $1,250 per ounce compared to $683.3 million on sales of 548,281 ounces at an average price of $1,246 per ounce in 2016.
Consolidated gold revenue in the fourth quarter of 2017 was $174.0 million (or a quarterly record of $274.9 million including $100.9 million of pre-commercial production sales from Fekola) on sales of 137,695 ounces (or a quarterly record of 216,938 ounces, including 79,243 ounces of pre-commercial production sales from Fekola) at an average price of $1,264 per ounce compared to $181.2 million on sales of 151,524 ounces at an average price of $1,196 per ounce in the fourth quarter of 2016.
Consolidated gold revenue for the fourth quarter and year ended December 31, 2017, included $15 million and $60 million, respectively, relating to the delivery of gold into the Company's Prepaid Sales contracts (accounted for as deferred revenue) entered into in March 2016. Proceeds from the Prepaid Sales transactions, used to fund a portion of the Fekola Mine construction rather than a potentially dilutive equity financing, were originally received in March 2016 and are being recognized in revenue as the underlying Prepaid Sales contracts are delivered into. During the fourth quarter and year ended December 31, 2017, 12,909 ounces and 51,633 ounces, respectively, were delivered under these contracts.
For the full-year 2017, cash flow from operating activities (after non-cash working capital changes) was $155.0 million ($0.16 per share) compared with $411.8 million ($0.44 per share) in 2016. In addition, sales of pre-commercial production from Fekola in the fourth quarter of 2017, which were included in investing activities rather than cash flow from operating activities, generated net proceeds of $73.4 million ($100.9 million of sales revenue net of related production costs of $27.5 million). Cash flow from operating activities for the year ended December 31, 2017, included a negative $39.7 million adjustment for changes in non-cash working capital (compared to a positive $2 million adjustment for changes in non-cash working capital in 2016), mainly relating to an increase in inventories at the Fekola Mine. Cash flow from operating activities for the year ended December 31, 2016, included $120 million of proceeds which were received from the Company’s Prepaid Sales transactions in March 2016. In the fourth quarter of 2017, cash flow from operating activities was $25.6 million ($0.03 per share) compared with $82.3 million ($0.09 per share) in the fourth quarter of 2016.
For the year ended December 31, 2017, the Company recorded net income of $61.6 million ($0.06 per share) compared to net income of $38.6 million ($0.04 per share) for 2016. Adjusted net income (see “Non-IFRS Measures”) was $51.8 million ($0.05 per share) for 2017 compared to $99.0 million ($0.11 per share) for 2016. As discussed above, for the year ended December 31, 2017, proceeds from the sales of pre-commercial production from Fekola ($100.9 million) and related production costs ($27.5 million), for a net amount of $73.4 million, were netted against Fekola Mine construction costs and not recorded as part of net income.
For the fourth quarter of 2017, the Company recorded net income of $34.5 million ($0.03 per share) compared to net income of $8.1 million ($0.01 per share) in the fourth quarter of 2016. Adjusted net income was $5.7 million ($0.01 per share) in the fourth quarter of 2017 compared to $2.5 million ($0.00 per share) in the fourth quarter of 2016. As discussed above, for the year ended December 31, 2017, proceeds from the sales of pre-commercial production from Fekola ($100.9 million) and related production costs ($27.5 million), for a net amount of $73.4 million, were netted against Fekola Mine construction costs and not recorded as part of net income.
Liquidity and Capital Resources
At December 31, 2017, the Company had cash and cash equivalents of $147.5 million compared to cash and cash equivalents of $144.7 million at December 31, 2016. The Company had a working capital deficit at December 31, 2017 of $98.7 million compared to a working capital of $101.0 million at December 31, 2016. The working capital deficit resulted from the reclassification of the Company's convertible senior subordinated notes to current liabilities, as they are due on October 1, 2018.
In 2016, the Company made a strategic decision to fund the construction of the Fekola Mine without using any equity to fund part of the construction cost. With the successful and earlier than anticipated ramp-up of the Fekola Mine in 2017, the Company is well positioned to execute the second part of its debt funding strategy and has started to reduce its overall consolidated debt levels. This planned repayment of debt balances includes the anticipated repayment of the Company's $259 million convertible notes which mature on October 1, 2018, unless the notes are converted into shares prior to that date. While current convertible market conditions remain attractive, the Company has allowed the notes to fall under amounts due within one year on the basis that the Company projects that it will have sufficient liquidity from 2018 operating cash flows and existing credit facilities to repay the notes in full and maintain a strong cash position. This position mirrors the Company's current strategy to focus on developing its budgeted organic growth opportunities in the short to mid-term using a portion of its projected ongoing cash flow from existing operations, as well as its amended Revolving Credit Facility (“RCF”) without the need for additional new external debt or equity financing.
At December 31, 2017, the Company had drawn down $350 million under the $500 million amended RCF, leaving an undrawn and available balance under the existing facility at that time of $150 million. Subsequently, the Company repaid $50 million under the amended RCF leaving an undrawn and available balance of $200 million. At December 31, 2017, the Company also had Euro 22 million ($26.4 million equivalent) of undrawn capacity on its Fekola equipment loan facility and $9.1 million of undrawn capacity on its Masbate equipment loan facility.
Operations
Mine-by-mine gold production in the fourth quarter and full-year 2017 was as follows:
| Mine | Q4 2017 Gold Production (ounces) (1) | Full-year 2017 Gold Production (ounces) (1) | 2017 | 2017 | ||
| Revised | Original | |||||
| Annual Production | Annual Production | |||||
| Guidance | Guidance | |||||
| (ounces) (1) | (ounces) (1) | |||||
| Fekola | 105,110 (2) | 111,450 (2) | 100,000 - 110,000 | 45,000 - 55,000 | ||
| Masbate | 53,419 | 202,468 | 180,000 - 185,000 | 175,000 - 185,000 | ||
| Otjikoto | 52,446 | 191,534 | 170,000 - 180,000 | 165,000 - 175,000 | ||
| La Libertad | 14,696 | 82,337 | 90,000 - 100,000 | 110,000 - 120,000 | ||
| El Limon | 15,082 | 42,776 | 40,000 - 50,000 | 50,000 - 60,000 | ||
| B2Gold | 240,753 (2) | 630,565 (2) | 580,000 - 625,000 | 545,000 - 595,000 |
Consolidated
(1) B2Gold’s production results and guidance are presented on a 100% basis.
(2) Fekola’s fourth quarter and full-year 2017 gold production includes 72,903 ounces and 79,243 ounces, respectively, of gold produced during its pre-commercial production period.
Mine-by-mine cash operating costs and AISC per ounce in the fourth quarter and full-year 2017 were as follows:
| Mine | Q4 2017 Cash Operating Costs ($ per ounce) | Full-year 2017 Cash Operating Costs ($ per ounce) | 2017 | 2017 | ||
| Revised | Original | |||||
| Annual Cash | Annual Cash | |||||
| Operating Costs | Operating Costs | |||||
| Guidance | Guidance | |||||
| ($ per ounce) | ($ per ounce) | |||||
| Fekola | $277 (1) | $277 (1) | $580 - $620 | $580 - $620 | ||
| Masbate | $587 | $543 | $595 - $635 | $690 - $730 | ||
| Otjikoto | $490 | $468 | $480 - $520 | $510 - $550 | ||
| La Libertad | $1,094 | $836 | $795 - $835 | $625 - $665 | ||
| El Limon | $778 | $954 | $815 - $855 | $655 - $695 | ||
| B2Gold Consolidated | $473 | $542 | $610 - $650 | $610 - $650 |
(1) Includes Fekola’s pre-commercial results.
| Mine | Q4 2017 AISC ($ per ounce) | Full-year 2017 AISC ($ per ounce) | 2017 | 2017 | ||
| Revised | Original | |||||
| Annual AISC | Annual AISC | |||||
| Guidance | Guidance | |||||
| ($ per ounce) | ($ per ounce) | |||||
| Fekola | $419 (1) | $419 (1) | $700 - $730 | $700 - $730 | ||
| Masbate | $963 | $843 | $935 - $975 | $1,020 - $1,050 | ||
| Otjikoto | $606 | $715 | $725 - $765 | $855 - $885 | ||
| La Libertad | $1,504 | $1,106 | $1,075 - $1,115 | $785 - $815 | ||
| El Limon | $1,231 | $1,469 | $1,415 - $1,455 | $1,065 - $1,095 | ||
| B2Gold Consolidated | $754 | $860 | $940 - $970 | $940 - $970 |
(1) Includes Fekola’s pre-commercial results.
Fekola Gold Mine – Mali
| Fekola Mine | Fekola Pre- | Fekola Commercial Production (December) | Total 2017 (September 24 to December 31) | |
|---|---|---|---|---|
| Commercial | ||||
| Production | ||||
| (September 24 to | ||||
| November 30) | ||||
| Operating and Financial Information (1): | ||||
| Gold Production (ounces) | 79,243 | 32,207 | 111,450 | |
| Gold Sold (ounces) (2) | 79,243 | 4,757 | 84,000 | |
| Inventory at Dec 31, 2017 | ||||
| - In-circuit Inventory (ounces) | 3,343 | 3,343 | ||
| - Finished Gold Inventory (ounces) | 24,107 | 24,107 | ||
| Gold Sales Revenues (2) ($ in thousands) | 100,864 | 6,064 | 106,928 | |
| Average realized selling price ($ per ounce) | 1,273 | 1,275 | 1,273 | |
| Cash Operating Costs ($ per ounce) | 311 | 277 | ||
| AISC ($ per ounce) | 446 | 419 |
(1) Fekola Mine’s operating and financial information are presented on a 100% basis.
(2) During the pre-commercial production period, a total of 79,243 ounces of gold were sold resulting in pre-commercial production revenues of $100.9 million. Included in these sales are 42,243 ounces (related gold sales revenues of $53.3 million) that were physically sold in December but were produced during the pre-commercial production period.
On September 25, 2017, the Company announced that it had completed construction of the Fekola mill on budget and commenced ore processing at the Fekola Mine, more than three months ahead of the original schedule. The Fekola mill started processing ore on September 24, 2017, and the first gold pour at the Fekola Mine was achieved on October 7, 2017. On November 30, 2017, the Fekola Mine achieved commercial production, one month ahead of the revised schedule and four months ahead of the original schedule. Throughput ran above nameplate capacity during the 30-day test period (on average) with significantly better than expected plant availability, mill feed grades and recoveries.
Gold production from the Fekola Mine in 2017 was 111,450 ounces (including 79,243 ounces of precommercial production), far surpassing the upper end of its original guidance range (of 45,000 to 55,000 ounces) due to its early start-up and strong ramp-up performance. In the fourth quarter of 2017, the Fekola Mine produced 105,110 ounces of gold (including 72,903 ounces of pre-commercial production).
In the fourth quarter of 2017 (including Fekola’s pre-commercial production results), Fekola’s cash operating costs were $277 per ounce (compared to guidance of between $580 and $620 per ounce) and AISC were $419 per ounce (compared to guidance of between $700 and $730 per ounce). Both were significantly below guidance (by approximately 50%), attributable to Fekola’s very strong ramp-up performance which resulted in much higher than budgeted gold production and lower than budgeted production costs.
Total capital expenditures for Fekola for the year ended December 31, 2017, totaled $222.4 million versus a total budget of $231.0 million. Cumulative expenditures on the Fekola Project, to date, are $596.8 million including $41.0 million of pre-construction expenditures compared with a total budget to date of $599.0 million. The final $15 million costs, related to the Fadougou village relocation, are expected to be incurred in 2018.
For 2018, the Fekola Mine is expected to produce between 400,000 and 410,000 ounces of gold (see “2018 Production Outlook and Cost Guidance” section), the first full year of production. Cash operating costs are expected to be between $345 and $390 per ounce, and AISC between $575 and $625 per ounce.
Based on the new life of mine (“LoM”) plan (see news release dated 9/25/2017), the Fekola Mine is projected to produce approximately 400,000 ounces of gold annually for the first three years at cash operating costs of $357 per ounce and AISC of $604 per ounce. For the first seven years, the Fekola Mine is projected to produce approximately 374,000 ounces of gold annually with cash operating costs of $391 per ounce and AISC of $643 per ounce. Over the initial ten-year LoM, Fekola is projected to produce an average of 345,000 ounces per annum at cash operating costs of $428 per ounce and AISC of $664 per ounce.
The Fekola Shareholders' Agreement and the Share Purchase Agreement for the purchase of the additional 10% of Fekola have recently been finalized and signed by the relevant Malian government ministers and the Malian Council of Ministers. The agreements are now subject only to ratification by the Mali National Assembly which is expected at their next scheduled sitting in April 2018. Upon such ratification, the Company will transfer ownership of 20% of Fekola SA (the Company’s indirect subsidiary which owns the mine) to the State of Mali (consisting of a 10% free carried non-participating interest plus an additional 10% participating interest purchased by the State of Mali). The first nonparticipating 10% of the State of Mali's ownership will entitle it to an annual priority dividend equivalent to 10% of calendar net income of Fekola SA. The second fully participating 10% of the State of Mali's interest will entitle it to ordinary dividends payable (on the same basis as any ordinary dividends declared and payable to the Company for its 80% interest).
Masbate Gold Mine – The Philippines
The Masbate Mine in the Philippines achieved another very strong year in 2017, producing 202,468 ounces of gold, the second-highest annual production ever for the mine (only slightly below its annual production record of 206,224 ounces of gold achieved in the prior year). Masbate’s 2017 gold production exceeded the upper end of both its revised and original guidance ranges by 9% (or 17,468 ounces). The higher production was due to better than expected recoveries and grades, mainly driven by significantly higher than budgeted oxide ore tonnage from the Colorado Pit. The Masbate Mine also continued its outstanding safety performance, achieving over two years (810 days) without a Lost-Time-Injury at yearend. In the fourth quarter of 2017, the Masbate Mine produced 53,419 ounces of gold, significantly above both budgeted and reforecast production by 24% (or 10,498 ounces).
In July 2017, the Masbate operations were presented with the Philippine Department of Environment and Natural Resources’ prestigious Saringaya Award for its contribution to environmental protection, conservation and management in the regions surrounding the Masbate Mine.
For the full-year 2017, Masbate’s cash operating costs were $543 per ounce, well below the low end of its reduced guidance range (of between $595 and $635 per ounce), previously lowered by $95 per ounce in the second quarter of 2017. This was mainly the result of higher than expected production and lower than expected production costs (due to cost savings in most areas) and stockpile adjustments. In the fourth quarter of 2017, Masbate’s cash operating costs were $587 per ounce (Q4 2016 – $547 per ounce).
Masbate’s AISC for the year were $843 per ounce, significantly below the low end of its reduced guidance range (of between $935 and $975 per ounce), previously lowered by $85 per ounce in the second quarter of 2017. In the fourth quarter of 2017, Masbate’s AISC were $963 per ounce (Q4 2016 – $788 per ounce).
Capital expenditures totaled $52.6 million in 2017, consisting mainly of mobile equipment costs of $27.5 million, pre-stripping costs of $8.9 million, powerhouse upgrade costs of $3.6 million and processing plant upgrades of $3.1 million. In the fourth quarter of 2017, capital expenditures totaled $16.1 million which included mobile equipment costs of $10.3 million and pre-stripping costs of $2.8 million.
For 2018, the Masbate Mine is expected to produce between 180,000 and 190,000 ounces of gold, primarily from the higher-grade Main Vein Pit, at cash operating costs of between $675 and $720 per ounce and AISC of between $875 and $925 per ounce (see “2018 Production Outlook and Cost Guidance” section).
A detailed capital cost estimate of $25.5 million was recently completed by Lycopodium, working with the Company’s engineering team, for the expansion of the Masbate processing plant to 8 million tonnes per year ($23 million in 2018 and $2.5 million in 2019). The expansion primarily consists of adding a third ball mill and upgrading the existing crushing circuit. No addition to the mining fleet is required as the additional feed will come from the lower-grade material that is currently in the mine plan and scheduled to be stockpiled. When the expansion is on line (expected in early 2019), it is expected to keep Masbate’s annual gold production near 200,000 ounces per year during the mining phase, and is expected to keep gold production above 100,000 ounces per year when the low-grade stockpiles are processed at the end of the project life.
Otjikoto Gold Mine – Namibia
The Otjikoto Mine in Namibia had a record year in 2017, producing an annual record of 191,534 ounces of gold which exceeded the upper end of its revised guidance range by 6% (or 11,534 ounces) and the top end of its original guidance range by 9% (or 16,534 ounces). Gold production was also 15% (or 25,249 ounces) higher versus 2016. Otjikoto’s outperformance in 2017 was mainly the result of better than expected high-grade ore tonnage from the Wolfshag Phase 1 Pit and higher than expected mill throughput. In the fourth quarter of 2017, the Otjikoto Mine produced 52,446 ounces of gold, exceeding both budgeted and reforecast production by 10% (or 4,655 ounces).
For the full-year 2017, Otjikoto’s cash operating costs were $468 per ounce, beating the low end of its revised guidance range (of between $480 and $520 per ounce), previously reduced by $30 per ounce in the second quarter of 2017. This was mainly the result of higher production and lower production costs (due to effective cost management throughout the year through supply contract review and renegotiation, and design changes to pit phases to reduce waste tonnage mined). In the fourth quarter of 2017, Otjikoto’s cash operating costs were $490 per ounce (Q4 2016 – $367 per ounce).
Otjikoto’s AISC for the year were $715 per ounce, also beating the low end of its revised guidance range (of between $725 and $765 per ounce), previously reduced by $130 per ounce in the second quarter of 2017. The lower AISC reflect the reduction in cash operating costs noted above as well as lower than planned sustaining capital expenditures (pre-stripping costs were $9.8 million lower than budget due to lower mining costs and lower than expected strip ratios). In the fourth quarter of 2017, Otjikoto’s AISC were $606 per ounce (Q4 2016 – $587 per ounce).
Capital expenditures totaled $41.2 million in 2017 and included mobile equipment purchases of $12.2 million, pre-stripping costs of $11.4 million, $6.6 million for capitalized equipment rebuilds and $4.9 million for installation of a solar power plant. Capital expenditures in the fourth quarter of 2017 totaled $5.1 million and included $1.9 million for pre-stripping costs and $0.4 million for mobile equipment costs.
For 2018, the Otjikoto Mine is expected to produce between 160,000 and 170,000 ounces of gold, primarily from the Otjikoto Pit, at cash operating costs of between $480 and $525 per ounce and AISC of between $700 and $750 per ounce (see “2018 Production Outlook and Cost Guidance” section).
Geotechnical, hydrogeological and design studies for Wolfshag have been completed, based on an updated resource model, resulting in a larger open pit than previously reported. Updated Wolfshag mineral reserves and resources will be reported in the Company's 2018 Annual Information Form which is scheduled to be filed by March 29, 2018. In addition, the Wolfshag mineral resource remains open down-plunge and may be exploitable in the future by underground mining.
La Libertad Gold Mine – Nicaragua
For the full-year 2017, La Libertad Mine in Nicaragua produced 82,337 ounces of gold, 9% (or 7,663 ounces) below the low end of its revised guidance range. During 2017, gold production at La Libertad was negatively impacted by permitting delays for new mining areas. However, significant progress has been made in advancing the mine permits. The Company received the San Juan mining permit in September 2017 and the San Diego mining permit in February 2018. As a result, mining has now commenced in both pits. For the Jabali Antenna Pit, the Company is expecting to receive its permit in time to start production from the pit in the third quarter of 2018. Jabali Antenna Underground remains under development with the planned ventilation raise now complete. Access ramp development has advanced approximately two months ahead of original schedule for 2018, as a result of an early start by the underground mining contractor. In the fourth quarter of 2017, La Libertad Mine produced 14,696 ounces of gold (Q4 2016 – 35,165 ounces).
La Libertad’s cash operating costs and AISC for the year were $836 per ounce and $1,106 per ounce, respectively. Both were within their revised guidance ranges. On a total basis (versus per ounce) mining, processing and site general costs were all less than budget due to lower than budgeted mined tonnage, haul distance and reagent consumption, as well as aggressive cost management. In the fourth quarter of 2017, La Libertad’s cash operating costs and AISC were $1,094 per ounce and $1,504 per ounce, respectively.
Capital expenditures totaled $23.8 million in 2017, consisting primarily of project development costs of $7.2 million, underground development costs of $5.8 million, La Esperanza tailings dam expansion of $4.8 million and land acquisitions of $3.1 million. Capital expenditures in the fourth quarter of 2017 totaled $5.7 million and included $2.9 million in project development costs related to the new San Juan and San Diego open pits and underground development costs of $2.1 million at Jabali Antenna Underground.
For 2018, La Libertad Mine is expected to produce between 115,000 and 120,000 ounces of gold at cash operating costs of between $745 and $790 per ounce and AISC of between $1,050 and $1,100 per ounce (see “2018 Production Outlook and Cost Guidance” section). La Libertad’s production forecast assumes that production will start from the Jabali Antenna Pit in the third quarter of 2018 (dependent upon the successful completion of resettlement activities and receipt of the remaining mining permits). Current plans at La Libertad include mining and processing into 2020 with a combination of mineral reserves and mineral resources. The Company has a successful track record of converting its mineral resources to reserves, and exploration for additional mineral targets continues. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
El Limon Gold Mine – Nicaragua
For the full-year 2017, El Limon Mine in Nicaragua produced 42,776 ounces of gold, which was within its revised guidance range (of between 40,000 and 50,000 ounces). During 2017, El Limon’s production was affected by water pumping issues which had reduced high-grade ore flow from Santa Pancha Underground. In the fourth quarter of 2017, mining operations at El Limon returned to budgeted (normal) production rates with the successful rehabilitation of the Santa Pancha 1 dewatering well. In the fourth quarter of 2017, El Limon Mine produced 15,082 ounces of gold (Q4 2016 – 10,007 ounces). The mining permit for the Mercedes Pit was recently received, and development of the pit has commenced.
El Limon’s cash operating costs for the year were $954 per ounce (revised guidance was between $815 and $855 per ounce) and AISC were $1,469 per ounce (revised guidance was between $1,415 and $1,455 per ounce). In the fourth quarter of 2017, El Limon’s cash operating costs and AISC were $778 per ounce and $1,231 per ounce, respectively.
Capital expenditures totaled $16.0 million in 2017, consisting mainly of underground development of $8.9 million, mining development/project costs of $3.5 million and mining equipment of $2.5 million. Capital expenditures in the fourth quarter of 2017 totaled $5.1 million which consisted mainly of underground development of $2.9 million and mining development/project costs of $1.2 million.
For 2018, El Limon is expected to produce between 55,000 and 60,000 ounces of gold at cash operating costs of between $700 and $750 per ounce and AISC of between $1,135 and $1,185 per ounce (see “2018 Production Outlook and Cost Guidance” section).
On February 23, 2018, the Company announced a positive initial open-pit Inferred Mineral Resource at the newly-discovered El Limon Central zone of 5,130,000 tonnes at a grade of 4.92 grams per tonne (“g/t”) of gold containing 812,000 ounces of gold (100% basis) (see news release dated 2/23/18). This large, good grade, new zone has the potential to decrease El Limon’s cash operating costs per ounce and AISC per ounce, and significantly increase its mine life. El Limon Central zone, at its closest location, is approximately 150 metres from El Limon mill facility, extending southeast and northwest, adjacent to existing plant and administrative infrastructure. Historical records indicate that parts of the Central zone had been mined underground in past decades. The Company’s recent exploration work indicates that underground mining was much more limited than previously thought. The Company is currently conducting additional metallurgical testing on El Limon Central ore and a study to evaluate the potential to expand El Limon throughput to significantly increase annual gold production and reduce cash operating costs. The study results are expected by mid-2018.
2018 Production Outlook and Cost Guidance
In 2018, with the planned first full year of production from the Fekola Mine, consolidated gold production is forecast to be between 910,000 and 950,000 ounces. This represents an increase in annual consolidated gold production of approximately 300,000 ounces for B2Gold in 2018 from 2017. The Company’s forecast consolidated cash operating costs are expected to remain low in 2018 and be between $505 and $550 per ounce, and AISC are expected to decrease by approximately 6% from 2017 and be between $780 and $830 per ounce, respectively.
The Fekola Mine is projected to be a large, low-cost producer. The resulting increase in production levels, combined with low costs, are expected to dramatically increase B2Gold’s production, revenues, cash from operations and cash flow for many years, based on current assumptions (including a gold price assumption of $1,300 per ounce). On average over the next three years, beginning in 2018, the Company is projecting per annum gold sales revenues of approximately $1.2 billion, cash flow from operations of close to $0.5 billion and a significant increase in free cash flow (operating cash flows less investing cash flows).
Mine-by-mine 2018 ranges for forecast gold production, cash operating costs per ounce and AISC per ounce are as follows:
| Mine | 2018 Forecast Gold Production (ounces) (1) | 2018 Forecast | 2018 Forecast AISC ($ per ounce) | |
| Cash Operating | ||||
| Costs | ||||
| ($ per ounce) | ||||
| Fekola | 400,000 - 410,000 | $345 - $390 | $575 - $625 | |
| Masbate | 180,000 - 190,000 | $675 - $720 | $875 - $925 | |
| Otjikoto | 160,000 - 170,000 | $480 - $525 | $700 - $750 | |
| La Libertad | 115,000 - 120,000 | $745 - $790 | $1,050 - $1,100 | |
| El Limon | 55,000 - 60,000 | $700 - $750 | $1,135 - $1,185 | |
| B2Gold Consolidated | 910,000 - 950,000 | $505 - $550 | $780 - $830 |
(1) B2Gold’s production guidance is presented on a 100% basis.
B2Gold has a 2018 exploration budget of approximately $52.4 million. West Africa and Nicaragua will be the primary areas of focus in 2018.
Positive drill results from the Company’s 2017 exploration program at the Fekola area indicated that the main Fekola deposit, with additional drilling, could extend significantly to the north (see news release dated 11/9/2017). In addition, drilling below the extensive saprolite resource at the Anaconda, Adder and Mamba zones has discovered three, well-mineralized bedrock (sulphide) zones, indicating the potential