B2Gold, AngloGold Colombia project scoped for $900m pre-production budget

TORONTO’s B2Gold said it had scoped for pre-production costs of just over $900m for Gramalote, a gold deposit in Colombia held in joint venture with AngloGold Ashanti.

Based on an updated pre-feasibility study announced today, a mine developed on the site would produce an average of about 416,000 ounces a year for the first five years of production at an average all in sustaining cost (AISC) of $648/oz. Assuming pre-production costs, the average AISC moves to $882/oz.

The average annual life of mine gold production is estimated to be 283,990 oz/year at cash operating costs of $544/oz of gold.

In terms of an agreement between the joint venture partners in December, B2Gold is the manager the project in terms of which it will fund the next $13.9m worth of exploration expenditure. Once spent, B2Gold and AngloGold will each hold 50% in the joint venture. The pre-feasibility findings assume a gold price of $1,350/oz.

Gramalote is estimated to yield pre-tax net cash flow of $1.83bn and taxed net cash flow of some $1.28bn over the life of mine. Assuming a discount rate of 5%, the net present value pre-tax of the project is estimated to be $1,03bn. Project payback, including the time taken to build the project, was estimated to be about 3.6 years.

AngloGold said in March 2019 that it would focus its Colombia exploration efforts on Gramalote and Quebradona after selling Northern Colombia Holdings, which includes mining concession agreements covering approximately 36,000 hectares and the rights to acquire further mining concessions.

AngloGold Ashanti said today in an announcement that it would “… provide all necessary support to B2Gold as it works to advance this project in one of the world’s most important new gold-producing regions”.

B2Gold has also recently streamlined its operations. It sold its Nicaraguan mines – El Libertad and El Limon – to a company called Calibre for about $100m. B2Gold will retain exposure to the mines via a shares in Calibre.

B2Gold and AngloGold last year agreed on a feasibility study budget of some $40m for the remainder of 2019 through to the end of 2020 at Gramalote. The study will involve 42,500 metres of infill drilling and 7,645 metres of geotechnical drilling for site infrastructure. B2Gold said it expected to complete all drilling by the end of May 2020.

2019 represented a stand out year for B2Gold largely on the back of its Fekola gold mine in Mali which was a greenfields development. Production for Fekola is expected to total about 600,000 oz in the 2020 financial year which compares to forecast 2019 production of 445,000 to 455,000 oz.

B2Gold also announced a total annual dividend payment of $0.04 US cents which would be paid in quarterly instalments which started with the third quarter numbers last year.