Categories Earnings Call Transcripts, Energy

B2Gold Corp. (BTG) Q1 2021 Earnings Call Transcript

BTG Earnings Call - Final Transcript

B2Gold Corp. (NYSE:BTG) Q1 2021 earnings call dated May. 05, 2021.

Corporate Participants:

Clive T. JohnsonPresident, Chief Executive Officer and Director

Mike CinnamondSenior Vice President, Finance and Chief Financial Officer

John Rajala — Vice President, Metallurgy

William LytleSenior Vice President, Operations

Tom GaraganSenior Vice President , Exploration

Dennis Stansbury — Senior Vice President , Engineering & Project Evaluations

Analysts:

Tyler LangtonJ.P. Morgan — Analyst

Ovais HabibScotiabank — Analyst

Geordie MarkHaywood Securities — Analyst

Josh WolfsonRBC Capital Markets — Analyst

Don DeMarcoNational Bank Financial — Analyst

Lawson WinderBank of America — Analyst

Carey MacRuryCanaccord Genuity — Analyst

Anita SoniCIBC — Analyst

Jared HooverMorgan Stanley — Analyst

Charles RahlPrivate Investor — Analyst

Presentation:

Operator

Good afternoon. My name is Jason, and I will be your conference operator today. At this time, I’d like to welcome everyone to the B2Gold First Quarter 2021 Financial Results Conference Call. [Operator Instructions] Thank you.

I would now like to turn the call over to Clive Johnson, President and CEO. Mr. Johnson, you may begin your conference.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Thanks, Jason. Welcome to the conference call to discuss the financial results for the first quarter 2021. Thanks for attending.

We had another very strong quarter, as you’re going to hear from Mike shortly. As evidenced and as laid out in the news release, very good financial performance, again, driven by strong operating performance at the mines, which allowed us significantly beat on our operating all sustaining costs. And all of this, as everyone is still aware, is during COVID. So once again, it speaks to the tremendous leadership and tremendous management and the employees we have at all of our sites, everyone on the same page, which was committed to continuing to mine during COVID, if we could do it safely and responsibly, with a great relationship with the governments in the countries that we mine. And I think we’ve earned a lot of trust there, I think, over time with our cultural approach that we bring to the business of treating people with fairness, respect and transparency, I think that pays off at a time of crisis or in a situation like COVID, because we established a mutual trust. So the government, our employees, and the Company, all wanted to do the same thing, well is to keep mining but do it safely and recognizing the impact of COVID.

So we took many steps, we’ve talked about before, to assist areas we’re in to offset [Phonetic] COVID, as we do with all sorts of aspects of their lives, but I think it’s been a great success in a very difficult scenario. Overall, these companies don’t have a safety net; so the fact that we can continue to mine and pay taxes and keep these good paying jobs going and keep our communities as safe as possible, I think it’s been a good thing for the industry. I think there’s a positive going forward potentially in the mining space, because I think post-COVID many governments will look at who were the good performers, what were the good businesses to have in your country during COVID. And I think responsible miners, not just others as well, have shown governments that gold mining can be a very positive thing in a time of crisis.

So just in general, we’re going to review the results of the quarter. And then, we’re going to talk a little bit about Gramalote. And as everyone sees in the news release, we delayed the completion of a final feasibility study in Gramalote and we think it will be about a year. And the economics were positive from the feasibility work that we’ve done so far. But we feel there’s a much better project there or — sorry, potentially better project there with optimization for the drilling and other things that we can do. So, while the economics are positive, we want to make a better project, and we’re going to take the time to do that.

I think it’s important to know that also we were going to be looking at — we originally hoped to potentially have boots on the ground in September of this year, if there was a positive development decision. That — there was going to be some delay in that anyway, because the government has — was interested in our idea of doing resettlement in stages, instead of altogether waiting 2.5 years to do all of resettlement and then start construction. So we’ve had conversations with the government where they’ve been interested in hearing more about that idea. But they did ask us to go and then do some public consultation, understandably, and also to have the government reviews proposal, which would take some time. So we probably would have been looking at a six-month delay for boots on the ground regardless of the economics or whether we’d have a positive development season. So now we’re talking about a feasibility study in a year. And Bill will give you some detail as to what we think and why we think more drilling, and some of the other things are important.

People talk about optimization sometimes to perhaps try and negate some negative. But in this case, there’s a number of things you’ll hear from Bill that we identified in the project some time ago that we thought were things we may have liked to have optimized, but overtime, we were trying not to change the footprint because AGA and the pre-feasibility study had realized a construction permit. So we are trying to stay within the bounds of that. Now we can open that up and look at the authorization. You’ll hear more about that from Bill.

We remain very positive on the project. We’ve had good conversations with AGR partner. And we’re looking to briefly to shortly finalize a budget over the next year, an increase in the budget, and we should be able to hopefully announce that soon. But conversations we’ve had, and we’re on the same page. We’re disappointed that we didn’t have a robust economics we saw in the PEA and Bill will talk to some of the things that change. But they along with ourselves remain positive that this can become a good asset and good project for us. So we’ll go ahead and do all that work.

I think it’s really important to note as well, the government relations remain very good in Ethiopia and in — with the federal government, we had a meeting them yesterday. I had a call with a representative of the Minister of Mines in Colombia, and they’ve been very supportive, but they’re bit disappointed to hear that it’s not going to happen right away, but very supportive of our desire to build the best project for everyone, including the Colombian people and the government, as well. So very supportive there, and there’s a lot of activity going to be happening, as you will hear, on the site in terms of working towards the resettlement program, all of our social programs we’re doing there, working with the government, with small miners, there’s a lot of good things are going to happen, in addition to the optimization to pretty much keep this project moving forward.

Generally, corporately, I think, I’ll just touch on strategy briefly. We remained pretty much on the same page on strategy we’ve been on for some time, which continued to optimize production around our sites, or at the sites as we’ve seen. We’re going to continue to pursue our development opportunities to see where we’re going with those in Gramalote and Kiaka, and then also looking at the potential for additional production at Fekola from the Anaconda area. As we announced in the news, we have applied for an extension of the Menankoto license, which is part of Anaconda with the government, we felt we fulfilled all the requirements and obligations to legally do that. And we’re in discussion with the government, as we speak, about remedying the situation, and we hope to have a positive resolution of that. But we will take whatever legal means we have to, if required. Because we think legally, we were — we should have been awarded that extension to the license, so we’re working to eliminate any confusion on that and we’re also working with the government on that.

It’s an important project for us, and in fact, as you’ll hear from Bill, we have been — we are planning to be tracking ore from Menankoto in Anaconda down to the separator ore down to the Fekola mill as early as early next year. Obviously, that’s subject to getting the license issue sorted out. And once again, we think there’s tremendous potential in Anaconda, not only for the saprolite, which we’ve seen the resource, but it is also so far, but much greater potential than the saprolite and underneath and so far some very good drilling attempt. So it’s an important project to us. I think it’s a very important project to the people and the government of Mali as well, and we’re uniquely suited to produce from there to everyone’s benefit, given the proximity to the Fekola mill.

And then, we’re going to continue to focus on another thing we’ve done extremely well, which is exploration. We have great results around. I’ve asked Tom to say a few words today, because we traditionally had great results around the mines, turning resources into reserves, increasing mine life, that work continues, and this continues to go very well. But also, we have broad exploration twice and being on B2Gold, we’re very good at grassroots exploration, as well as brownfields. So, we’ve got a very good exploration budget this year. A large budget, which I think is a good thing. If you look at the return on investment over, let’s say, the last three years or so, I think somebody worked up and it’s about $19 an ounce for exploration spend to several ounces of gold, our costs are remarkably low. So as I always say, the cheapest ounces will be the ones that you find. So Tom will talk about some of the exciting grassroots projects that we’re doing, and then touch on the brownfields, as well.

In addition, we’re always looking for opportunities to grow. M&A has been topic these days. We’ve said repeatedly that for us to go into that area would have to be something that we could find value for our shareholders on an accretive basis, not anticipating higher gold prices or exploration success. That’s the discipline we’ve had for decades and that will continue. So, we’re looking in here. If anything, we transact to anything, it’s going to be something that we think there’s an opportunity for us to drive shareholder value. We’re not likely, frankly, in a way in any bidding wars [Indecipherable] that are out there, because we won’t overpay. And we did some heavy lifting before in the sense of building with Otjikoto and acquiring a building with Otjikoto and Fekola when it was very unpopular to be growing, but hence the opportunity at the time being contrary. But we continue to look at things that make sense to ensure value through — from an acquisition point of view.

So that is an overview. I’ll pass it over to Mike, and he’s going to give us some of the financial highlights from the quarter, discuss our financial position, and then we’ll be hearing from Bill, and then Tom. Over to you, Mike.

Mike CinnamondSenior Vice President, Finance and Chief Financial Officer

Thanks, Clive.

I think I can run through the results of the quarter fairly quickly. It was good, clean quarter and some nice results. So just starting firstly with revenues, we had revenue of $362 million on the sale of 257,000 ounces and realized an average price of $1,791 an ounce. And overall, we sold 14,000 ounces more than we’d originally budgeted. And that’s really a function of having higher production than budgeted in the quarter. So total production in the quarter, including our share of Calibre, was 221,000 ounces, basically 19,000 ounces ahead of budget. Total production from our three sites operating mines was 206,000 ounces, which was 18,000 ounces ahead of budget.

So looking at those individually, Fekola, we produced 125,000 ounces, which is about 8,000 ounces higher than budgeted. That’s primarily a function of Fekola processing facilities just continuing to outperform. We had originally expanded Fekola mill to a notional annual throughput rate of 7.5 million tonnes. We did budget 7.75 million tonnes for 2021. But in the first quarter of 2021, we had quarterly record of almost 2.1 million tonnes, or an annualized rate of well above 8 million. So Fekola mill is outperforming and we’re seeing more production as a result.

Masbate was 58,000 ounces, 7,000 ounces ahead of budget, and that’s a function mainly of higher than budgeted mill recoveries. We got — if you look at the ore or feed that was processed in the period, we had better recoveries from the high-grade sulphide ore that we mined from Main Vein in the period. And also, better recoveries from the low grade stockpile, that with some — which material we ran through the mill, and that was originally mined from Colorado, but both of them had better recoveries.

Then, Otjikoto production was 23,000 ounces, 2,000 ounces higher than budget. Now, that was really just slightly better in all fronts, processed tonnes, grade and recoveries.

Looking at that in the context of cash costs per ounce produced, consolidated cash costs per ounce just for the quarter $609 per ounce, that was $54 lower than budget, and from our three operating mines $581 per ounce, and that was $60 less than budgeted.

And if you look at the individual components, Fekola $503 per ounce, $55 less than budget, and the beat on budget, in terms of cash costs per ounce is a function of a few things. It’s higher than budgeted production, as I mentioned, and lower than budgeted mining and processing costs. We had lower maintenance costs at the mill in terms of — sorry lower budgeted maintenance costs for the mining fleet, and then we had lower budgeted processing costs at the mill, higher mill throughput and then lower cyanide use. Also, to note, the new Fekola power facility actually came online in the quarter slightly earlier than we thought, and we think that probably benefited cash cost by approximately $4 per ounce in the period against budget.

Masbate $608 per ounce, cash costs $80, less than budget, and that’s almost exclusively higher production in the period. We did have some savings in mining cost that’s mainly driven by higher production.

Otjikoto was $940. That was $56 per ounce lower than budget. And that again is primarily a function of the higher production.

Then turning to all-in sustaining costs per ounce sold. Consolidated including Calibre $932 an ounce, which was $146 lower than budget. And if you look at our three operating mines, it was $919 per ounce or $159 per ounce lower than budget. And that’s a function of a few things. Obviously, the lower cash costs as described a second ago. And also the higher than budgeted ounces sold. We produced more and sold more. And that has a positive impact on the sort of fixed capital element when you look at it in terms of all-in sustaining costs per ounce. And also, we had lower capex in the period. That’s mainly lower sustaining capital for — it’s really the timing of fleet maintenance and rebuilds. So it’s really — those are really the primary drivers. The capital costs, we think are just timing and we think they’ll reverse later in the year.

Just to give you the individual components of the all-in class: Fekola was $770 per ounce, that was $128 lower than budget; Masbate was $818, $194 lower than budget; and Otjikoto $1,475, which is a larger number, but it’s still $214 less than budget. Just a reminder for everyone on the line, the production from Otjikoto was very significantly weighted to the second half of the year. And the first half of the year, we’re processing almost exclusively from stockpiles at site, while we continue to strip the Otjikoto and Wolfshag pits. And when we get into those pits later in the year, especially the higher grade components of Wolfshag in the second half of the year, we’ll see that production level significantly increase.

Overall, production-wise, cash cost-wise, we still think we’re on target for guidance for the year, guidance is maintained. Again, reminder, it’s significantly weighted to the second half of the year. Our production for the first half is between 390,000 and 415,000 ounces, and the second half is 580,000 to 615,000 ounces. And that reflects us getting into that — the better grade material in the second half of the year, both Fekola and in Otjikoto. Masbate is fairly consistent as it goes all the way through the year.

A couple of other comments on the operation, I know Bill is going to give you some comments later, but just a couple other thoughts. At Fekola, what’s not included in the budget or guidance for Fekola is any new material from the Cardinal area. We’re currently looking at that now and what we can pull into 2021 mine plan, but that wasn’t included in our budget or guidance.

Fekola Solar, I mentioned that, that came online. We did — I think we’ve now managed to source the remaining solar panels and get them on the way to site. They were on a ship at one point waiting to go through the Suez Canal. But fortunately, that’s resolved. And so, we’re still on track to finish the solar plant by the end of the second quarter. But in the meantime, we did bring it online, the first part of it, online earlier than expected.

I got a couple of comments, I think, on really income statement, good results, nothing major to highlight. The earnings for the period, $99 million; earnings attributable to shareholders of the Company, $91 million, or $0.09 per share; and adjusted EPS was also $0.09 per share.

Then, a few things to highlight on the cash flow statement. So, cash provided by operating activities was $146 million. So that’s pretty close to our budget in the end. So we did have a beat, as I mentioned, on the cash cost side. So the cost of our operations were lower, but offsetting that, we had some working capital movements really related to the timing of that and certain tax payments that offset that. So, we ended up pretty much right on budget for the quarter for operating cash flow.

And assuming that gold price is $1,800 for the full year, we’re still on track we think for that guided operating cash flow number of somewhere around $630 million. Approximately $500 million of that will come in the second half of the year, as we get into that higher grade material and higher production, higher sales. And just to remind everyone, that the second quarter’s operating cash flow will be impacted by the payment of those outstanding 2020 tax liabilities. There’s about $140 million worth of 2020 tax obligations that will be settled in the second quarter, the largest part of which is for Fekola, but $125 million of that total relates to either Fekola taxes or priority dividend payments, which are triggered as a tax. And we’ll also have, in addition, that $140 million, we’ll also have some other withholding tax payments we’ll make for monies that we’re going to pay — remit up from sites as dividends to pull us the cash up from sites.

A couple of things to highlight in the cash flow statement. Dividends to shareholders in the quarter $42 million, $0.04 per share. We’re pretty comfortable with our dividend level right now. Annualized, it would be $170 million. We are paying one of the highest dividend yields right now in the gold sector. And it’s a significant component of our 2021 free cash flows. So we will look at it again in the second half of the year, but as I mentioned, I think we’re pretty comfortable with that level just now.

The only other couple items I’d highlight on the cash flow statement, investing activities, just under $60 million for the period. That’s about $18 million less than budget. And as I mentioned in the all-in sustaining cost discussion, some of that’s timing on capex for mobile fleet and rebuilds at sites. We think that will reverse later in the year.

And on the non-sustaining site, we were under fairly significantly. Gramalote was under $6 million. It’s under budget. But we’re continuing work on the feasibility study, so we expect that will reverse. And, in fact, as we noted in the newest release, we are currently in discussions with AGA about increasing the feasibility study budget by approximately $34 million, so our share would be $17 million higher than we’ve currently budgeted. And that would take us through to the end of first quarter of 2022 when we expect to finish the feasibility study.

Also, under on the capex side, we were about $5 million under in the quarter in exploration. That’s just a function of timing again, and we expect that to reverse later in the year.

And so, overall, we finished Q1 $512 million in the bank and $600 million undrawn. We’ve got the full amount of our revolving credit facility available to draw. And so, we’re in good shape, cash flow-wise, liquidity-wise, and it was good solid production quarter and results quarter.

So, I think those are the main things I was going to highlight there. So, thanks.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Thanks, Mike. Bill, over to you. Give us an overview of operations, review and a bit of an outlook for highlights from operations, and what we’re looking at going forward.

William LytleSenior Vice President, Operations

Yes, sure. Thanks, Clive. Do you hear me all right?

Clive T. JohnsonPresident, Chief Executive Officer and Director

I do.

William LytleSenior Vice President, Operations

Yeah. Okay. Well, thanks. A lot of the stuff certainly was either hinted at by Clive or by Mike, maybe I can just provide a little more color, commentary to the actual operations.

If you look, overall, obviously, we’re quite happy with how everybody did at all three operations for the quarter. Every site exceeded its budget. And we really didn’t see any downsides as far as working forward into Q2 and into the second half of the year.

Kind of going mine by mine, if you look at Fekola, great quarter. As far as development, I think everyone’s aware, we’d previously said that our budget was around at 7.75 million tonnes per annum, we put out in the press release that obviously the mill is running much better than that. We’re still holding it at kind of what we’re saying is 8 million plus, but our life of mines are due here in the middle of the year. So we’re going to take a good hard look at what we think that number is going forward. We certainly believe that we’ve got some potential to add quite a bit of saprolite from both Cardinal and from the Menankoto or the Anaconda area.

Discussing Cardinal specifically, we did receive our bulk sample approval. So we are right now out there starting to strip it, and — or we’ll be heading to the mill or already started heading to the mill, I think, or if not, it’s imminent. So, we certainly see going through the rest of Q2, and into Q3, we will be developing that. And of course, as Mike insinuated or discussed, we see in 2022 and 2023, the potential for additional ounces to come from Cardinal, which are not in our current life of mine.

And the same story kind of holds true for Menankoto. We — from the operations perspective, we’re assuming that the current situation is resolved. And we believe when it gets resolved that we’re going to see truck saprolite into the Fekola mill in 2022. And given the fact that we have a large additional capacity for the mill, those numbers could be quite significant as far as changing the life of mines. So once that’s resolved, I think in Q3, we’re talking about coming out with what we want to do there, and putting it into production in 2022.

And it’s also — I think it’s important to note, while we’re talking about trucking to Fekola, we see that as like phase one of the project. Tom’s group continues to drill out there. And we continue to have some success as far as looking at the hard rock. And so, once we get the phase one studies complete, and get it all set up for trucking, we really want to take a hard look at is there’s a potential to put another mill up in that area. And so, that’s kind of — that will be the emphasis once we finish the trucking study and get that all put to bed, we’ll move on to what is a trade-off look like trucking versus putting a mill up there.

Real quickly on the solar side, Mike hinted at it, but solar plant is up and operating really well. I think we’ve been publicly stating that we’re kind of at 75% completion, but the reality is, we’re probably higher than that. We’ve seen great returns on that solar as far as reducing our power costs. And we believe that in Q2, we’re going to finalize that, and we’ll have the full benefiting starting in Q3.

Going to Otjikoto, Otjikoto once again had a really nice quarter. No issues as far as mining or milling, right on schedule. The development is, as Mike pointed out, the key is the second half of the year. The development for getting into Wolfshag three remains on schedule. We don’t see any issues there for meeting our targets. The underground remains — while it’s a little bit behind, we still see gold coming out as projected in Q1 of 2022. So overall, no issues at all at Otjikoto.

Maybe one of the things to talk about is, we are in the process of connecting up our overhead power line. That facility, the power facility at Otjikoto operates in standalone configuration, it’s an island. We believe by connecting to the overhead power line that we’ll be able to continue to reduce power cost there significantly throughout the rest of life of mine by taking the off-peak power prices, which I saw something, I think it reduces almost $0.04 a kilowatt hour for those hours that were on the off-peak hours.

Looking at Masbate, Masbate once again, a great quarter. That’s — I continue to say, that’s the project that is probably just day in and day out just performs as designed. We continue to see better recoveries and better grade at Masbate, as we say every quarter, and that certainly contributes towards the overproduction for the quarter. The rest of the year there is kind of business as usual. We’re in the process of developing another lift for our tailings, that remains on schedule. So overall, on the operational side, everything completely as advertised and as predicted.

Maybe talking a little bit — as Clive asked, a little bit about Gramalote. I think it’s important to talk — to start out talking about what the feasibility was trying to do and really get our head around why we’ve now talked about on handcuffing maybe the project design from what the pre-feasibility was. When we took over the project, we agreed with AngloGold that we were going to basically hold the design. And the reason was is, they had already pulled a construction permit. So the footprint had remained the same. And we basically had to just try and optimize within the existing footprint.

What we found very early on is that there was a lot of things that we wanted to do, and some of these things were quite significant, things like re-diverting rivers in a different direction, moving infrastructure facilities, taking a look at the tailings pond. And in order to do that, we would have been required to open up the permit. So, we’ve decided to go ahead and maintain the same footprint, but keep a log of where we were going and what we could change. And so, when the feasibility was done, remember, there was — one of the key things was upgrading the resource from inferred to indicated. And that was very successful. And then updating the costs. When that was all said and done, we looked at it, we said, while this project is positive, we certainly think that there’s a better project here. And so, we presented it to AngloGold.

Anglo agreed with our concept. And basically, what we decided is that we were going to do some additional drilling, because we thought there was some further potential to increase the resource up to indicated. We were going to take a look at the engineering design as far as taking the handcuffs off and moving things around. And we thought it was still critical, because we do think this is a project and we do think this is something that that we can move forward quite rapidly once we get what we’re now considering kind of the updated feasibility. We wanted to make sure that the social aspects continue to move forward. So things like resettlement, we’ve been talking with Anglo, we’ve been talking to the government about how we can make sure that that stays on track. We are — the Colombian government is in the process of formalizing some artisanal mining within the region. That’s a very positive development. So we wanted to continue to support that. And we wanted to make sure some of the critical path items, things like bringing the power line into the region continue to move forward.

So all of these things we put together as a packet for AngloGold. Conceptually, they agree with the concept. And we provided a budget to them. They’re in the process of having a look at that. And we think very shortly, we will continue to move this project forward. We see the updated feasibility study coming out at the end of Q1. And, obviously, if it’s positive, we would mobilize shortly thereafter.

And I think, it was Clive that talked a little bit about. It’s really important to remember, the difference between our proposed new schedule and what the actual schedule was, was not that different, because when we talked about kind of doing the B2A when we were going to do concurrent resettlement, the government came back to us and asked for us to do some additional stakeholder engagement, and to have them review the results of that stakeholder engagement. So we saw the potential for six-month delay in any case, so we’re not really that far off of that schedule.

Talking — moving maybe now to Kiaka, I’m not going to spend too much time on that. As we’ve said and we continue to message, we do believe by the end of Q2, the results will be out. We’ll be discussing that.

Clive, was there anything else that you wanted me to talk about? Hello?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Sorry, I was on mute, of course.

William LytleSenior Vice President, Operations

Okay.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Yeah. Thank, Bill. I think that’s good. And maybe for the interest of people on the line, maybe you should talk a little bit about some of the issues between the PEA and the feasibility work. Now, the study when it comes on next year will not be an updated feasibility study, it will be the feasibility study. So now we’ve done the feasibility work has given us some economic indicators, but we have not completed the study. I think it’s important point. But can you maybe talk a little bit about some of the differences between the PEA and what we’re seeing now and the feasibility work that we’ve done, some of the factors behind that?

William LytleSenior Vice President, Operations

Yeah, sure. I mean, some of the key ones relate to the resources, I said, obviously for 43-101 feasibility study, we can only use indicated. And we did the modeling only on Gramalote Ridge, and didn’t include the oxides in that. The pit design itself has changed a little bit based on some geotech issues related to the pit design. But the mining itself, the mining rate and the mining design remained exactly the same. On the milling side, we believe that we have a more elegant and more efficient milling process. We have looked at — it certainly was cheaper. We’ve included some additional equipment that weren’t — that wasn’t in the pre-fees, and that’s just due to level of detail. The tailings facility remained exactly the same. Power — overhead power lines come in. Some of the key cost drivers which had changed, things like the power cost was slightly different. We had updated some of the costs due to inflation.

And then one of the key ones, as you talked about already is resettlement. We want it to move people out sooner instead — the way that the pre-feasibility had the resettlement was that it had a really long period where you had to complete — fully complete resettlement before you can start construction. That said, we are looking for concurrent resettlement. There the issue there currently is a river that flows right through where the existing pit or where the future pit would be. There is a big tunnel where they diverted that. We think that there’s a potential to make that a better project. So some of these issues — those are the key differences.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Okay, thanks. Yeah. I guess just maybe on a — from a strategic and a corporate point of view, we’re quite well known for being aggressive. And there’s a big difference between being aggressive and being reckless, I always point out to people. But in terms of the way we approach projects, the way we do it very safely and responsibly, but do it really quite often — more quickly than some others in the industry may move. I think this is perhaps an example. And some people recognize that of our discipline. And we have a project that has some positive economic indications albeit not as robust as it was before. But we took a look at it and said, well, what’s the best thing to do? We’re the best thing to do here, because we’re famous for building quality projects based on quality work and attractive economics. So, that continues. So this is an indication, perhaps, if anybody needed to know and I don’t think they should have needed to know, given our history, but an example of our financial and corporate discipline, where we think we can make a better project and our partners and ourselves are prepared to believe in that concept as well, and we are prepared to spend some money to do it. So at the end of the day, the delay is appropriate to do a lot of very good work, and then have a look at what comes out. We’re hoping we’re going to have a significant improvement from the economic indicators that are positive or not meet our threshold, given abstractly see so much upside or significant upside potential in the work that we’re going to be doing. So, thanks, Bill, for that.

And I’d like to pass on to Tom Garagan now to talk a little bit about some of the — some of things he is excited about, about our large exploration budget this year and some exciting new countries and targets for us.

Tom GaraganSenior Vice President , Exploration

Thank you, Clive. Hello, everybody.

As you know, we have an exploration budget this year of some $66 million to be spent not only on our main projects, but also in grassroots exploration. In fact, in the grassroots exploration, we’re looking at just over $27 million.

Just brief comment on the exploration around the mines. At Masbate, we’re continuing to drill on the pit edges and deeper portions of the pits where the pits get bigger with the better gold prices that we’re seeing now. In Mali, we’re continuing to do exploration down plunge on Cardinal, remains open, and we’ll continue to do exploration in the Anaconda area as that area remains open. In Namibia, our exploration is almost exclusively focused right now on what we call the OTG-23 Zone, which is about 100 meters away from our Wolfshag. We’ll have more on that later as our work continues. But we view that as a positive sign for Otjikoto.

Just in the grassroots exploration, we’re talking about significant budget. Within that budget, we’re talking about over 30,000 meters of diamond and RC drilling on some of our newer targets. I’ll mention specifically. We’ll start with Uzbekistan. It’s an area we’ve been looking at, I hate to say this, because it could dazed me a little bit. But for probably close to 15 years, dating back to the DENR days, it was an area, we had visited back then, when we continue to work on relationships with government and geologists in that country. And that led to us a few years ago being awarded some licenses within the country. The license we have are right near three world class ore bodies, Muruntau, which is everybody — there’s a large variety of numbers related to that, but it basically is the world’s largest gold mine that — over 2 million ounces of production per year.

And then there are two other 10 million ounce deposits in the immediate area. Our work in the area to date has been trenching, auger drilling and some lab programs, and we’re just about to start a 10,000 meter RC program this week, this will be followed later in with diamond drilling. This is an area of world class deposits and has not seen a lot of exploration outside the exploration being done by the local government components. We’re very excited about this area.

In addition to that, in Finland, we have almost 8,000 meters of diamond drill planning on our property. We’re currently earning — we’ve already earned 51% from the mine and we’re up — we’re getting close to having 70% on this project. We said about the area, it’s on strike with a new discovery called Ikkari in the geology of Ikkari continues on to our ground, and we’ve had some decent gold anomalies in our overburden drilling and our till drilling, and then also in some of our soil sampling and certainly rock sampling. So, we’re excited about the potential for that, which is that hold something.

Something new that’s just come up from just recently. We’ve been awarded licenses in Egypt in a historic mining area. Those licenses are just being papered right now. So, I don’t have too much detail on that at this time. We’ll have more later, but it’s an area we’ve been — again been focused on for several years doing grassroots exploration and evaluating the potential of that area. So, we are excited about.

And then we’ll continue doing grassroots exploration and other targets at — in other areas of the world that hopefully will be available for more discussion now later on this year.

Thank you, Clive.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Well, thanks, Tom. Appreciate it. I think — operator, I think we’re ready to open up for questions now.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Tyler Langton from J.P. Morgan. Your line is open.

Tyler LangtonJ.P. Morgan — Analyst

Hey, good afternoon. Thanks for taking my question. Just to start with I guess Gramalote, I mean, could you talk a little bit about to kind of make the economics more attractive, just the importance of either sort of increasing production at the project or kind of lowering operating costs or capital costs? I’m just trying to get a sense of maybe kind of what’s sort of the most important or bigger focus.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Sure. Bill?

William LytleSenior Vice President, Operations

Yes, sure. So certainly we see some potential for capital reductions. That’s one of the big ones. Another one of the big ones relates to increasing the ounces that we can generate over the life of the project. And this includes kind of a drilling program within the existing design pit. There was some — there were a few ounces left within the existing pit, which were in the inferred category. And then just outside of sight of the proposed pit, which would be in the measured indicated and inferred category. So we see those two things really as some of the key economic drivers.

And in particular, if you look at the capex, as I said, there are some mostly related infrastructure projects where we think we can bring the cost down. Things where maybe the project’s been going — been designed for like 10 years now where people kind of lose focus if you had a blank sheet of paper, could you optimize things. And then also relates to certainly the constructability of the project. And so those are some of the things that we’re looking at.

As far as the OpEx, we don’t see a lot of changes that between what we have now versus what we would have a year from now.

Tyler LangtonJ.P. Morgan — Analyst

Got you. Okay. That’s helpful. And then maybe just switching to Fekola. With Cardinal, I think maybe last quarter, you talked about that mine potentially contributing, I think, 20,000 to 25,000 ounces, kind of in Q2, and that’d be kind of the main contribution for the year. Is that kind of still what you’re thinking? I think maybe I heard some comments you are talking about maybe contributing in Q2 and Q3. Could you just provide some more color over there that’d be great.

William LytleSenior Vice President, Operations

Yeah. I think what I said was — hopefully, what I said was 20,000 to 25,000 ounces over 2021 starting in Q2 from the bulk sample, right. So we’re talking about 20,000 to 25,000 ounces out of that bulk sample. But I will say that it looks to me like we’re, while we do not have it yet, now I must stress that, and I should also stress that, that is an inferred resource. That we see starting really right now through the end of the year, we’re going to start mining at Cardinal. So there is potential that it could be a little bit more than that.

Tyler LangtonJ.P. Morgan — Analyst

Got it. Great. Thanks so much.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Thanks.

Operator

Your next question comes from a line of Ovais Habib from Scotiabank. Your line is open.

Ovais HabibScotiabank — Analyst

Thanks, operator. Hi, Clive and B2 team. Congrats on a good quarter, and thanks for taking my questions.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Thanks, Ovais.

Ovais HabibScotiabank — Analyst

First, couple of questions guys are on Gramalote, and this I guess, I can direct to Bill. Now, you’ve already answered a lot of the questions I had, so good overview on that front. But in regards to the additional, I guess, extended resettlement, just to make sure that I understand correctly, was this due to additional footprint needed to be added, or is this resettlement always in the plans, on the works?

William LytleSenior Vice President, Operations

No, Ovais, it was always — even back in the AGA, there were — there was a quite a big resettlement, which went along with it. We certainly have provided now more detail around that. And we’re in the process of really working through our resettlement action plan. So a rap has been developed. And the difference really was, as I said, there was a condition precedent for the construction permit, which basically said you had to do all of the resettlement. So everywhere, in every region, you had to move everybody out. And what we realized is that there was a big chunk of it, which we could do, and then we can start construction, and there were some people on the periphery that we could then deal with it as we got to that area. And so that’s really the difference. But the overall resettlement is basically the same. There are some people that are saying that they’re in there, some people saying they’re out. But in general, the quantum is pretty close to the same.

Ovais HabibScotiabank — Analyst

Got it. Okay. Thanks for that, Bill. And just kind of talking about the optimizations that are expected, is the plan basically to get close to the economics shown in the PEA before going to green light to the property? What I’m trying to ask is, is that a point where you would kind of walk away from Gramalote? Or is this kind of — where is the point where you will make a decision essentially is what I’m trying to ask.

William LytleSenior Vice President, Operations

Clive will probably answer that. From an engineering standpoint, I mean, all we want to do is we want to make sure that it’s got the best economics possible, and that it’s most easy for us to build.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Yeah. I think we are going to spend a significant amount of money in addition with our partner, we’re expecting to agree in a new budget, as we’ve talked about in the news release. So we definitely are doing that for the reason. The reason is because we think we’re seeing enough indicators. As Bill says, when you start taking the handcuffs off the engineering side of the design side of things, we see significant potential to make it a project that we would want to go forward with. So, the economics today are positive. I mean — I guess there — some companies might use mechanisms like hedging, etc., to maybe look at making those things better potential. But that’s not where we are in the sense of we’re looking at it from a technical point of view, saying we think we can have more ounces, we think we can lower the capital. If you look at the all-in sustaining costs based on the current economics from the feasibility work, I think it was somewhere close to the mid-7s. So attractive project from that perspective, can you add more ounces, can you lower the amount of capital, and add to that 15% IRR. So we wouldn’t be — I mean, ourselves in AGA are companies I believe — I can’t speak for them, but I believe that we are not companies that would continue to pursue something if we thought we were sort of flogging a dead horse or just giving false hope. We really see an opportunity here to make this a project that we would want to develop.

Ovais HabibScotiabank — Analyst

Perfect. Thanks, Clive and Bill. And, I’ll — I have a more couple of more questions, but I’ll let others ask questions, and then jump back in the queue.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Okay. Thanks, Ovais.

Operator

Your next question comes from the line of Geordie Mark from Haywood Securities. Your line is open.

Geordie MarkHaywood Securities — Analyst

Hey, good morning, everyone. Thanks for time today, and very good quarter. Maybe if I can expand on some of the Ovais’ questions. Not to belabor the point. Just in terms of the change in budget, is that largely drilling expense related in addition to the 18,000 meters of drilling that was already planned this year?

William LytleSenior Vice President, Operations

You want me to answer that Clive?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Yes.

William LytleSenior Vice President, Operations

Yeah. So, Geordie, there’s kind of three components there for sure. You’re right, there is a big chunk of drilling, which goes along with that, and I can let Tom or Brian kind of maybe give more clarity there. But there’s also the engineering component, which is more just the actual consulting and engineering aspect of it, and then there’s a social component. And like said, we do want to push forward some of the key social issues. And so we have put some money in there for things like basically preventing some sort of inflation happening with resettlement, purchasing land packages now, making sure that we’ve got the right areas available for resettlement, those types of things also take up a chunk of the budget.

Geordie MarkHaywood Securities — Analyst

Thank you. Brilliant. And then there’s also mention of the power line. Is that in terms of you trying to bring it online to basically move the project forward or the project timing forward and progress with optimization?

William LytleSenior Vice President, Operations

Well, what we know is the power line is absolutely on the critical path regardless of what happened, right. So we’ve been in negotiations with a couple of power companies down there, and I picked a group that we’d like to do the studies for. So they have to go out now and do a full ESIA. They have to do all the engineering. And basically, they have to design the route on the site. And so they’re talking about something like a 28 to 30-month schedule to do that. So we decided, at this point, that we’re going to put a little bit of money at risk to get those studies going. And so that’s what that is.

Geordie MarkHaywood Securities — Analyst

Okay, that’s excellent. And in terms of — if we stay on power, just a color, so obviously, if you call it two-thirds solar panels is heading beyond capacity, is that right moment or nominal baseline? At least, with additional final 25% of panels in place, do you expect any linear sort of capacity increase there? Or you kind of met with battery storage sort of limitations there for delivering more power into local grid?

William LytleSenior Vice President, Operations

Yeah. So, I’m super bullish on this. So I’m going to pass that one on to probably John Rajala, who’s really more qualified to answer that.

John RajalaVice President, Metallurgy

Yeah. We’ll plan on trying to maximize our solar power usage. Only 75% of the capacity is online right now. So — because of — we lost some panels, about 25% in the fire, and they’re going to be on site very soon, and then installed, we plan on having that in operation by around the end of June or so. So, it’ll be up to 100% of capacity, and hopefully increase — we should be able to increase the amount of solar power contribution from that. Does that cover it?

Geordie MarkHaywood Securities — Analyst

Okay, I was just wondering if there’s going to be beyond the original expectations given the performance…

John RajalaVice President, Metallurgy

Well, we think we have a good shot at it. We’ve been exceeding expectations just with 75% capacity in operation. So hopefully, we’ll be able to continue that with the additional solar panels installations.

Geordie MarkHaywood Securities — Analyst

Okay. That’s great. And if I can just do one more. Moving over to Kiaka, obviously, experience on solar power and looking at a dual LNG/solar source there. And what sort of capacity you’re thinking for that power plant?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Dennis, you want to talk to that?

Dennis StansburySenior Vice President , Engineering & Project Evaluations

Yeah. The power plant we’re looking at for Kiaka is — be a combined LNG/solar plant. We’re currently looking at about 30 megawatt plant very similar to Fekola for that right now. Optimization, we might want to kick that up a little bit, but it’s in that magnitude.

Geordie MarkHaywood Securities — Analyst

Okay. Thank you for that. I’ll probably get back in line for questions. Thank you.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Okay. Thanks, Geordie.

Operator

Your next question comes from the line of Josh Wolfson from RBC Capital Markets. Your line is open.

Josh WolfsonRBC Capital Markets — Analyst

Thanks. Bill, earlier on the call, you mentioned that the Anaconda trucking study was going to be continuing on this year. Could you clarify what the permanent challenges there relate to? And I guess it sounds like you’re still able to proceed with Anaconda, or if not, what the sort of implications are in advancing that opportunity?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Bill?

William LytleSenior Vice President, Operations

Yeah. So I’ll talk — as I said, so — I think Clive was pretty clear that they were kind of working through what our permitting issues are right now. But what we’ve always said is it is a separate license, right? So it would have to go through the full permitting. And we’re working on those studies right now. So obviously, for permitting, you would need a full ESIA, which we’re in the process of completing right now. You would need some sort of feasibility study. And what we’re calling that is kind of the phase one aspect of the Anaconda project. All of those, it is our intent to kind of complete those in Q3. And then you would have to go and look at what the license conditions would be for actually bringing the product up, how it would be for tolling it through Fekola, all of those things would need to be discussed. So that’s why we’re talking about really. You’re probably — with the exception of maybe a bulk sample, you’re probably not going to see any ounces, best case probably in the second half of 2022 being trucked.

Josh WolfsonRBC Capital Markets — Analyst

And that — just so I understand that those ounces that would be produced, the Menankoto permit, the issues there do not affect the ability to truck the ore to Fekola?

William LytleSenior Vice President, Operations

All that stuff has to be resolved before we could do it for sure.

Josh WolfsonRBC Capital Markets — Analyst

Okay.

Clive T. JohnsonPresident, Chief Executive Officer and Director

There’s another — there’s a few different licenses there though. There’s been other licenses that are not impacted by this current discussions going on with the government about the Menankoto license. So — but yes, clearly — and we should be very clear about that, we need to resolve this issue with the government about our right to the extension of the license, but hoping to resolve that shortly.

Josh WolfsonRBC Capital Markets — Analyst

Okay. And then looking at Kiaka and update that’s going to be coming out, I guess we won’t have the updated Gramalote numbers until early 2022. What’s the potential for the team to look to advance that project in the second half of this year, either in lieu of Gramalote or even alongside it, assuming Gramalote proceeds next year?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Yeah. That’s — I mean, we haven’t gotten too far into that yet, because we’re waiting to see the results of the feasibility study in Kiaka, to see whether it needs to threshold for us to go forward. We’re going to know that by the end of the year. We yes, conceptually, if it was a positive development decision there, we can look at. We talked before about the potential for if, they were both positive, Gramalote and Kiaka. We wanted to develop both of them. We talked about various possibilities. One would be to sequence the construction team. We never build and organize at the same time, that’s one of our rules. That’s key to our success without one great team. But you can also look at potentially using the team for earthworks. Initially, let’s say, at Gramalote or Kiaka and then moving that team to the next one, whichever one you do it. And then similarly, the mill construction team, when they complete one project, they move to another. So all of that, of course, is based on the final feasibility at Gramalote, and also the feasibility study, the updated feasibility study will working out right now, that will be — will expect to be prepared to release in the middle year in Kiaka.

Josh WolfsonRBC Capital Markets — Analyst

Understood. And then one sort of final one. Just in the language in the release, the comments about Gramalote and the — I guess, the expanded footprint that could require the permit modifications that not affecting the license, but that potentially affecting the implementation schedule, is that just for, I guess the project as it was if it was advanced here? Or does the potential footprint change and the permitting changes affect the implementation schedule if it was advanced next year as well?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Bill, you want to answer that?

William LytleSenior Vice President, Operations

Yeah. The language maybe is not quite as clear as it could be. So what we’re really talking about, the way it works in Gramalote in Colombia is that they kind of have three levels of permit modifications, right? So there’s this kind of insignificant. And these are things like when the resolution of your typography gets better and your road has shifted just a little bit, right, and there’s no real kind of major social or environmental impact change. And those are kind of you do on the fly. And then there are these minor modifications where it might be where you’re moving something around just a little bit, and once again, there are no significant environmental or social impacts or potentially positive social or environmental impacts. And those have a small review process. And you can kind of do those on the fly. And so those are the things that we’ve always been talking about inside of the existing permit we can do.

Now what we’re talking about is kind of, as I said, taking the handcuffs off and looking at what we’re calling, potentially major permit modifications, where you’re actually taking structures and maybe moving them into a different valley or moving an access road somewhere else, which have real impact, which have to be investigated. So as we go along for the engineering process now, we’ve got to start looking at, okay, this is really optimal. This is how much money it could save us. Is it worth trying to get a permit modification to do that? If it is, then you start talking with the government what would it take as far as updating your impact assessment? So all of those things are now going to be in play, as opposed to us just saying, okay, we’re going to keep it to kind of be non-consequential or minors. Now, we’re talking about, let’s talk about majors. I don’t like that the phrase that we’re increasing the footprint, because that’s not necessarily the case. What we’re actually doing is we’re kind of modifying the footprint. And in that modification, we may be changing the potential social environmental impacts and those need to be evaluated.

Josh WolfsonRBC Capital Markets — Analyst

Okay. That’s a lot more clear. Thank you.

Clive T. JohnsonPresident, Chief Executive Officer and Director

I think it’s important to note there, we talked a bit about it earlier on, but the relationship with Colombian government is very strong. There’s really strong Canada-Colombia relationship. We’ve got the Minister of Mines and the government — the government are very supportive of responsible mining. It’s an important part of their economy. So we’ve always said Gramalote in a great location in the mining district of Antioquia. If you flew over Colombia, where is the best place to build the first large open gold mine in the country? You’d probably pick up Gramalote. Absolutely tremendous local support with community and there’s some disappointment now, because they thought this was going to crank up pretty quickly. But once again, if we are successful, what we’re looking at doing — this is a really important source of jobs. And there are lots of people working there now and that continues, all that work continues, as we talked about, resettlement, working with the government, small miners, and other things.

So between ourselves and AGA, there’s been a lot of good work done here over the years, it’s very important to note that. I’m building these, working with the local community and the federal government, and all governments. And there’s a lot of support for this project. So, we think it makes a lot of sense, the government gets that and I think they’re highly motivated to work with us to see Gramalote become the best project it can be and to get it built for them, for all sorts of positive reasons for the economy, local economy, but also the overall benefits to government and the people of Colombia. So there’s a lot of support for this project. And it’s really important to keep that in mind.

Josh WolfsonRBC Capital Markets — Analyst

Okay. And then sorry, final question. I know, I’m taking a lot of time here. When you think about these potential changes and modifications in the footprint, are there permitting elements that you’re able to accelerate before that first quarter 2022 target date or does that sort of date then start the permitting process for these modifications?

William LytleSenior Vice President, Operations

Yeah. Well, that’s a really good question. And the answer is, we have to look at that. That’s really literally what we’re doing right now. As I said, it’s a huge trade off study, in our mind, on the potential delays as far as permitting versus a potential economic benefits, as Clive has indicated and I said already, we have a positive project now, but can we make it that much — can we make it even better, those are the things we’re looking at. What I will tell you is, well, you have to remember that resettlement still kind of is on that critical path. And so we’re now working through that resettlement action plan. And that’s really going to push us out into Q1 2022 in any case. And so, how do you play around with that? That’s what we’re looking at right now.

Josh WolfsonRBC Capital Markets — Analyst

Okay. That’s great. Thank you very much.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Thanks, Josh.

Operator

Your next question comes from the line of Don DeMarco from National Bank Financial. Your line is open.

Don DeMarcoNational Bank Financial — Analyst

Thanks a lot for taking my call guy. Just building on one of the last questions. There was mentioned of comparing Kiaka to Gramalote. Maybe I take this a bit further. Is there a chance for some of the projects that Tom talked about to take priority over Gramalote, say, in the next 12 months? I mean, you’ve been in Egypt and Finland and Uzbekistan for a few years now. Which of these projects is most advanced, maybe even closest to a PEA?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Yeah. No, I think — no, we haven’t been working on — in Egypt or Uzbekistan for a couple of years. We’ve done some work in Uzbekistan. This is relatively — this is pretty early-stage stuff where we’ve done some longer drilling and things like that and some — we’re doing some reverse circulation drilling and heading towards diamond drilling as well. I mentioned both. They’re all pretty early stage. They’re really big attractive targets, but we don’t want to — or some of them are at an early stage. So we’re a long way away from talking about PEA in any of these things, but we’re in the elephant country and the circumstances we’re we’re looking at and that’s the reason why we’re there.

Tom, do you want to make a comment on that further?

Tom GaraganSenior Vice President , Exploration

I think that’s pretty accurate, Clive. We’re still early on in the game. But as Clive says, these are all elephant country targets. It’s why we chose them. But I don’t know that within a year — well, for sure, not within a year, we’re going to be replacing the other development projects with these.

Don DeMarcoNational Bank Financial — Analyst

Okay. Great. Then even given the Gramalote NPVs in the $500 million range at this point and obviously, as you mentioned, there’s visibility for it to grow. But is this project perhaps of a magnitude now that’s better suited to one owner? And it may be if you believe in the project, is now a time to increase ownership? What are your thoughts on that? We know from your previous comments that Anglo likes the project as much as you do.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Yeah. I think that — I can’t speak for AGA. But we’ve had lots of calls recently, of course, talking about the situation being very transparent, in a good joint venture. And from what — they — take a look at our news release, what we’re saying, we’re, of course, wanted their input into that. So, they’ll be coming out shortly with their quarter and their thoughts on more of the development projects. But we’re both disappointed that it wasn’t as robust as the economics we saw in the PEA. Let’s see the opportunity, as we said, over time and we can make that better.

In terms of ownership. I think that what I’ve heard is that AGA was prepared to spend a significant amount of money along with us to see if we can — with those operating to see if we can make it a better project. So, I’d be a little surprised if — we wouldn’t be considering changing our ownership now. We’ve invested a lot of money and time, etc., and believing the path that we’re on, the potential. Once again, you can ask AGA that question in their quarter, which I think comes out in the middle of May. But the indications were based on sources, they want to be a player in Colombia. They’ve got other projects, Quebradona, etc., that they’re pretty excited about. So, they think Gramalote, what they’ve said to me was an important part of what they’re looking to do in Colombia, and they were hoping to, with us as operator, to showcase what we could do together to the Colombian government. We still hope to be able to do that. Just on — little bit of delay as we’ve said here. So, sure, we’d always said that if opportunity came to increase ownership, we’d consider that. From what I’ve seen so far, I don’t see that there’s going to be a willing seller. I think we’d go forward. So, once again, I can’t speak for AGA, but that’s what — we’ve been told from them recently.

Don DeMarcoNational Bank Financial — Analyst

Okay. Thanks for that. And just finally, you guys have a strong development team. You build Fekola, finished the Fekola expansion. With Gramalote delayed, is there any motivation to deploy your development team onto some type of an interim project?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Well, I think that we have — there are some areas within the company of things that we’re working on, whether it be looking at expansion opportunities or other things like that. We might use some of the team or some of the senior team and input. But we’re not going to go and acquire something and build something because we have a tremendous construction team that we need to keep busy. That’s just not the way to run this business in our opinion. Well, we have a great team. And the team is — I think this team has been together for so long — or come back together, it’s a better way to put it.

So back in the Bema days, Julietta and then Kupol, and then, of course, the Kinross takeover, they — some of the work for Kinross for a period of time. But as soon as they got the call to come back to the culture of B2 and the vast majority came back. So, a second-old sort of rock band in a way where they take some time off and then they decide to do another tour, then the whole band gets back together or most of the band, and they’re able to attract other high quality people because of that. And I think there’s a mutual respect here and trust. Our construction guys are really feel valued in the Company as they are, and they love doing stuff for us. So, if we find the right opportunity in a situation of acquiring a depositor or whatever, of course we’d be looking at that. Not to keep the team busy. I believe the team will be available when we’re ready to go and get the band back together. But if we find something, of course, they’re ready to roll.

Bill, you have anything to add to that?

William LytleSenior Vice President, Operations

Yeah, I would like to add to that just a little bit. One thing that people don’t realize, clearly a lot of these guys in the construction realm are very good at all of the civil type stuff. And so, some of these guys are deployed right now within — Fekola, or maybe they’re doing a quick project at Masbate. But they’re actually working on the operational side. One of the key secrets is this whole core team, like logistics team, the procurement team, the warehousing team, those people sit down on a site, and so right now, they’re at Fekola bringing up the next crew. But we haven’t lost them, right? They’re still there. Obviously, the exciting part of mine running is the construction aspects. So everybody wants to go on construction project, but they understand if there’s not a project that they’ll sit down and wait for the next one.

Don DeMarcoNational Bank Financial — Analyst

Okay. Thanks so much, and thanks for your time, guys.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Thanks, Bill. Thank, DeMarco.

Operator

Your next question comes from a line of Lawson Winder from Bank of America. Your line is open.

Lawson WinderBank of America — Analyst

Hi, good morning and good afternoon, thank you for the update. Just a question on — obviously acknowledging the political risk management being a core competency for B2Gold. Could location of Gramalote and Kiaka feature into which you might ultimately prefer developing?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Sorry, can you just say that again?

Lawson WinderBank of America — Analyst

Could the location of kiaka and Gramalote factor into which of the two projects you might have a preference to develop first?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Well, that’s an interesting question. I think that I’ll go first here, but I think that we think they’re both in good locations in the country that they’re in. Kiaka is in an area with significant mine operations, and the relatively “safer” part of the country. In the sense of Gramalote, I think I touched on earlier, we’re in Antioquia, historic mining district, local people understand that. We’ve worked hard to show them what it would look like and what we’re trying to do. A lot of support there. And that’s great locations within Colombia, for sure. So I would say — I don’t know, somebody else can chime in here, Bill, whoever, but I don’t know, I think they’re the both in attractive areas in the country. So I don’t know that one would be decided over the other on that basis.

Bill, you want to take that?

William LytleSenior Vice President, Operations

Yeah. No, you’re absolutely right, Clive. For sure, I mean, we just like the good projects. I will tell you, most of the guys, if I’m being honest, from a construction standpoint, we’ve spent the last three or four years in West Africa building that project. So they’d like a new venue, and of course the fishing is much better in Colombia, so they do have a preference.

Clive T. JohnsonPresident, Chief Executive Officer and Director

I think a few things are better. [Indecipherable]

Lawson WinderBank of America — Analyst

Okay. That’s a good one. Also, on Kiaka, Clive, you mentioned in the past that it could be developed with a partner. Have there been any discussions in that direction?

Clive T. JohnsonPresident, Chief Executive Officer and Director

No, I think the key thing, of course now is you’ll get the feasibility, and see what it looks like. The alternatives have always been to bring a partner in, sell the asset if we don’t think it’s for us or we just don’t want to take too much on. There’s always an alternative. So, that I think the key now is going to be getting the results of the feasibility study, see if it meets our criteria. If not, then there’s somebody else interested in it, potentially, all those options are still on the table, but it’s hard to have those discussions once you really knows the economics of the project.

Lawson WinderBank of America — Analyst

Fair. And if I might, can I just ask a question on Menankoto permit? In terms of what’s going on the ground there, has this third party that now has a license already started exploring? And in follow up to that, are you able to share with us who the third party is just in terms of like are they a junior, are they a local company, are they a major mining company? Maybe you can’t share that, but if you could be helpful.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Yes, I think, obviously, we’re in the process and have been for some weeks of having extensive conversations over the government. And then we feel we’ve had some positive indicators from those discussions, it’s just — it’s a small Malian company, frankly, without a history of mining, construction expertise, or financial strength. So at the end of the day, we just feel that — I do want to point out, and I think, I meant to say earlier, but the history of Mali and gold mining, it’s been a really good palace to do business. And I’ve said this many times, if you go back to our mine opening up many years ago and listen to the speech of the president at the time, it was tremendous, and the government’s support was really great and a mutual trust relationship. We delivered on the promises we made, which we have — which is what we try to do always. And we’re transparent with the government and very respectful. Really good relationships.

And I think they, if you look at — talk to Mark Bristow and look at the Randgold experience and the Barrick experience, he’s argued for decades and he got it right, he got there early and was contrarian and it paid off really well for the Randgold shoulders. He says the same thing that it’s one of the better — it’s a really good company to work for with the government. They understand the importance of gold mine for their economy, hugely important, never more than today, when you look at COVID, etc., and they’ve always honored their laws.

It’s not that many countries in the world where you actually have a mining convention as we do in Mali, the marks [Phonetic] and your taxes for the duration of your project, the tax regime. And back in the early days, Randgold has a pretty attractive tax deal. They were typical in the industry at the time, putting in things like five-year tax holidays, relatively low royalties, but the government never ever attempted to change the tax structure in those mining conventions. And those mining conventions are backed up, and if you have issues, you end up in Paris to deal with them. So that means that we’ve gong there.

So, this new government, we’ve had success in working with this new government within the Ministry of Mines, the civil service there, who many of them are the same, and then getting things like permits for bulk sample, permits for other things. So, this is one that we feel, as we said, on the news release, we feel we have a right to the extension of the medical licenses, that’s what should have happened, and we’re working with the government to really show our side of that story in that argument.

We spent $27 million there, and really logical thing for Menankoto, for everyone, including the government that own 20% of Menankoto, and owns 20% of Fekola, the clear better thing for vesting for the people of we believe of Mali, and our shareholders is — and the government with their ownership is to see that Menankoto will truck down to Fekola, and we think we have a legal right to that license. So, we will take — we will be working cooperatively with the government respectfully just to resolve this situation. But we will take the steps to defend our rights as required as we go through the process. So, our hope is to resolve through discussion and get back to work. We had scheduled at least $8 million sort of work in Anaconda area. Some of it’s ongoing into the north of the Menankoto license, so we’re still going. But this is an important part of the potential to even further improve Fekola, but also is there another Fekola where we see a lot of potential there.

So, yeah, the history of Mali has been very good. And I’ve been very strong in my view of saying the shareholders and people that don’t — as my father used to say, all people that generalize are wrong. Don’t generalize about Africa or even West Africa. Look at situations and kind of where they are. Mali has centuries of gold mining. They get it. The governments have always gotten that. And we’re looking for this government to continue the tradition that the Malian governments have, which is honoring the laws and seeing the importance of gold mining — future gold mining investment in the country. So that’s our position today. And we’re having some constructive conversations around that. And I hope to see the situation resolved.

Lawson WinderBank of America — Analyst

Okay. Thanks, Clive. And I just realized it’s a quarter past the hour. So I had one more, but I’ll try to ask it really quick. I think this is from Mike. Basically, in January, you guys guided to much higher H1 unit costs, and Q1 came in well below the low end of what your guidance was. Is it fair then to expect a very material increase in like all-in sustaining costs in Q2?

Mike CinnamondSenior Vice President, Finance and Chief Financial Officer

Well, on the operating side, we just — we did better, right? If you look at the factors impacting the better cash cost, this quarter, they’re better recovery that we just didn’t model, right, so expect that we’ll keep those, the benefit of those as we run through. And then, like lower input costs at Fekola for things like cyanide. So again, we expect to keep the benefit of that. So I think some stuff will roll forward, and just benefit overall. You shouldn’t just push it all in the second half of the year. The guidance we gave, the second half of the year, we think is still good.

And then on the all-in side, it was the benefit of those lower costs higher production, which we think will lead to that higher production as we roll through the year, and then some of it was that capex versus timing. So you will see that what we don’t spend in H1, we still expect to spend in H2. So on the capex side, yes, those costs will just roll over into the second half. On the OpEx side, most of those benefits we should keep.

Lawson WinderBank of America — Analyst

Okay. Thank you. That’s it from me, guys. Thank you very much.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Okay. Thanks, Lawson.

Operator

Your next question comes from the line of Carey MacRury from Canaccord. Your line is open.

Carey MacRuryCanaccord Genuity — Analyst

Hey, good morning, everyone. Maybe just one more question on Gramalote. I think the all-in sustaining costs were about 15% higher than the PEA. How much of that is underlying costs inflation versus maybe just fewer ounces in the plan or is there are some other factors driving that change?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Who wants to answer? Bill or Mike?

William LytleSenior Vice President, Operations

Yeah. So the all-in sustaining cost will be up a little bit, because of some inflation for sure, particularly related to — I’ve mentioned labor, power and fuel prices versus what the PFS/PEA had.

Carey MacRuryCanaccord Genuity — Analyst

Is there any context may be on, like, what the dollar per tonne difference or…

William LytleSenior Vice President, Operations

Maybe, I can dig that up, but I don’t have a right here at my fingertips.

Carey MacRuryCanaccord Genuity — Analyst

Okay. Fair enough. Thanks.

Operator

Your next question comes from the line of Anita Soni from the CIBC. Your line is open.

Anita SoniCIBC — Analyst

Hey, good morning, guys. I love how [Indecipherable] sneaks in a question there. I only have one question left, and that’s with regards to the Gramalote. I know, it’s a broad question, but can you give me an idea of the timing, how long it takes for permits in Colombia? I’m not as familiar with Colombia.

William LytleSenior Vice President, Operations

Yeah. So as I said, there’s sort of kind of three levels. And we’ve had some pretty in-depth discussions with the government on these particular issues. And so, you’re kind of looking, as I said, for the insignificant ones, those are on the fly. The minor ones might be kind of in that three to four month range for review and approval. And I think it’s six to nine months on the majors from the time you submit.

Anita SoniCIBC — Analyst

Okay. And the last question. I know, also very early stage, but as you think about a construction decision, what are you looking at for construction timeline on this one?

William LytleSenior Vice President, Operations

Well, I’ll just say, we were always talking in that 30 to 36 month range. I don’t — I can’t think of any reason why that would change.

Anita SoniCIBC — Analyst

All right. Okay. Thank you very much.

Operator

Your next question comes from the line of Jared Hoover from Morgan Stanley. Your line is open.

Jared HooverMorgan Stanley — Analyst

Good morning, guys. Thanks for the call. I know there’s been a number of questions asked in Gramalote, but I just wanted to get two more in, please. It seems from a lot of the commentary that the two main points that are going to result in potentially better economics on this project is around infrastructure and how you can move that about and optimize that. And the other is potentially increasing the life of mine production. But if I look at the two pints Monjas West and the Trinidad pits, it looks to me like those are lower grade pits. So if you have to bring it into the life of mine, it seems like it would automatically increase your costs. So is it more case of, yes, you potentially bring that into life of mine, but it’s more a case of you having to look at the recoveries around that project, and that potentially enhancing the economics? So, if you could just chat to that, please.

And then, my second question is just around your partner AngloGold. If for some reason it doesn’t meet their particular hurdle rate, and they were wanting to be sellers of the project, are there any mechanism that would allow them to, or in your agreement that would allow you to potentially be picked the projects up like the full 50% or it would be in stages sort of 10%, 20%, 30%, etc.? So if you could chat to that, that would be very helpful. Thank you.

Clive T. JohnsonPresident, Chief Executive Officer and Director

So, on the second part — your second question, what you were saying — I didn’t quite get that. Are you asking whether we think AGA would be amenable to us purchasing some of their interest in stages? Is that the question?

William LytleSenior Vice President, Operations

And is there a mechanism for that?

Jared HooverMorgan Stanley — Analyst

Yeah. Also just in the case of ending — or a one-off, the total 50%?

Clive T. JohnsonPresident, Chief Executive Officer and Director

Right. There’s a mechanism — okay. Bill will answer the first one, but I’ll answer that one maybe first, the second part. Yeah, there’s a mechanism in the agreement where if you make a — if we put forward a development plan as operator and AGA has a limited period of time, I think it’s 30 days to respond — both parties to respond to deciding to fund that development plan. Or there’s a mechanism whereby you can purchase the other 50%, either party can based on fair market value, based on a feasibility study that the development decision would be based on. In addition though, there is a provision where either party can go down to 30%. There’s a mechanism where we can go to 30%, if you want to stay involved in the project, but not have the full 50%. So, there was those mechanisms that work both ways in the agreement.

And Bill, do you want to answer the first?

William LytleSenior Vice President, Operations

Yeah, sure. So you are correct. Monjas and Trinidad currently, their resources are lower grade. And I guess internally at this point, we see those as potential out near the end-of-life of mine is kind of upside to extend the life of mine, for sure, and that really wouldn’t do a lot for your NPV. But what I was talking about when I was talking about drilling is we’re talking within the Gramalote Ridge area, just outside of the existing design pit, and even outside of that, in the measures indicated and inferred, we see some potential to increase the NPV and IRR by bringing inferred ounces into the indicator, which of course then allows us to put them in the 43-101. And as far as the infrastructure, you’re correct, that was the other issue.

Jared HooverMorgan Stanley — Analyst

Perfect. Great. Thank you very much.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Thanks for the extra questions.

Operator

Your final question comes from the line of Charles Rahl [Phonetic], a shareholder. Your line is open.

Charles RahlPrivate Investor — Analyst

Thank you for taking the call. Much of what I was going to ask about has to do with the problem with Malia — Mali, I guess, so that’s been answered. The only thing, I would ask you to do is, I’ve been asking for a copy of your annual — what do you call it, your annual information form. And the last thing I’ve got was shareholder relations saying they had put something in the mail to me of the week of April 6th. I still haven’t received it. So if you could just remind your shareholder people, I’m still waiting for the annual information form. [Speech Overlap] No, it isn’t. And I’m obviously following what’s going on with — in Mali, because so much of the Company’s interest to there. But again, without the annual information report, I’m kind of winging — I’ve got 40,000 shares, sure very small compared to the corporate people, but…

Clive T. JohnsonPresident, Chief Executive Officer and Director

No, it’s important. We pride ourselves on our transparency and delivering on what we promised. So obviously, something slipped through the cracks there. So, it’s very important, Charles. And you can send an e-mail if you’d like to imaclean@b2gold.com or to me cjohnson@b2gold.com. And I will get on and make sure that you get not by snail mail, but by a mechanism that gets it to you quickly. But thanks for speaking up and thanks for your support as a shareholder.

Charles RahlPrivate Investor — Analyst

Okay. Good luck to us all. Stay healthy.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Sure. Thanks a lot. Thank you. Appreciate it.

Operator

There are no further questions. I now turn back over for closing comments.

Clive T. JohnsonPresident, Chief Executive Officer and Director

Well, I think, we’ve covered a lot of ground here, and thank you for your time and you’re interest and some very good and interesting questions. We’re very pleased with the quarter obviously, and looking forward to another very good productive year, profitable production and lots of exploration and development opportunities that we see. So thanks everybody for your time. And obviously, if you have follow-up questions you can reach out to Ian MacLean to put you into the person you want to or if you know the person you want the answer from, you can go directly. So, thanks for your time, everybody, and stay safe. Thank you, operator.

Operator

[Operator Closing Remarks]

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