Projects

Masbate mine - the Philippines

Open Pit(1)

FY 2016 Update:

The Masbate mine achieved a very strong year in 2016, producing an annual record 206,224 ounces of gold, above the mid-point of its revised production guidance range (of 200,000 to 210,000 ounces) and significantly exceeding its initial guidance range (of 175,000 to 185,000 ounces). Gold production for the year also increased by 17% (or 30,421 ounces) over 2015. Masbate’s strong operational performance was driven by better-than-expected grades from the Main Vein Stage 1 pit and higher recoveries arising from higher than budgeted oxide ore tonnage from the Colorado pit. In addition, recoveries were positively impacted by the newly completed process plant upgrades (adding residence time and additional oxygen to the CIL circuit to achieve optimum leach performance).

Masbate’s full year 2016 cash operating costs(2) were an annual record-low at $463 per ounce of gold, and were even below the reduced cost guidance range (of between $465 and $505 per ounce) and significantly below initial guidance (of between $620 and $660 per ounce). Cash operating costs also decreased by $194 per ounce (or 30%) compared to the prior-year. This significant improvement reflects higher gold production and lower fuel/energy costs.

Masbate’s full year 2016 all-in sustaining costs (“AISC”)(2) were $653 per ounce of gold, significantly below both budget of $899 per ounce and $965 per ounce in the prior-year, reflecting the favourable cash operating costs as well as lower capital expenditures. The lower capital expenditures resulted from lower than budgeted pre-stripping costs driven by lower mining costs and a lower strip ratio for the Colorado pit. Timing delays in land acquisition costs also contributed to the lower than budgeted capital costs.

Q4 2016 Update:

Masbate’s fourth quarter 2016 production was 48,633 ounces of gold, 13% (or 5,734 ounces) above budget and 1% (or 675 ounces) higher than the fourth quarter of 2015. Masbate’s fourth quarter 2016 cash operating costs were $547 per ounce of gold (Q4 2015 - $512 per ounce). AISC were $788 per ounce (Q4 2015 - $795 per ounce).

2017 Guidance:

Commencing in August 2016, Masbate’s mine plan was adjusted to optimize the mine’s development sequence/gold production through to 2017 and beyond. These adjustments included accelerated mining in the Main Vein Stage 1 pit, expanding the Colorado pit and commencing site preparations for later Main Vein stages. In addition, the lower-grade (but higher recovery) Colorado pit ore was prioritized as mill feed ahead of the higher-grade Main Vein ore, largely due to the higher than budgeted oxide ore content being sourced from the larger Colorado pit. The excess higher-grade ore from Main Vein Stage 1 pit was stockpiled and is planned to be processed in 2017. 

Masbate’s 2017 production is forecast to be between 175,000 and 185,000 ounces of gold. Masbate’s 2016 production had benefited from better-than-expected grades from the Main Vein Stage 1 pit and higher recoveries arising from higher than budgeted oxide ore from the Colorado pit.

Cash operating costs are expected to be between $690 and $730 per ounce of gold. The expected increase over 2016 is mainly attributable to lower forecast production and higher projected strip ratios at the new Main Vein Stage 3 pit and expanded Colorado pit, as well as higher projected prices for diesel fuel/heavy fuel oil.

AISC are expected to be between $1,020 and $1,050 per ounce of gold. The expected increase over 2016 reflects higher anticipated cash operating costs per ounce, higher forecast capitalized pre-stripping costs and the planned mine fleet replacement and expansion. In the first half of 2017, the Company has elected to replace a significant portion of Masbate’s mine fleet with new equipment purchases, rather than rebuilding major components over several years, to optimize its fleet performance and reduce both operating and capital costs in future years. In addition, to be able to meet the additional haulage requirements in 2017 to 2021, Masbate’s mine fleet is also planned to be expanded in 2017. Since the new fleet will commence utilization in 2017, all of the related purchase costs have been included in Masbate’s 2017 AISC even though the equipment will benefit Masbate operations in future years as well. Masbate’s mine equipment purchases are subsequently planned to decrease significantly over the next several years.

Department of Environment and Natural Resources (the “DENR”) Update:

As previously reported by the Company on September 27, 2016, October 18, 2016, and in its Management Discussion & Analysis (“MD&A”) for the year ended December 31, 2016 (Click here for MD&A), the Philippine Department of Environment and Natural Resources (the "DENR") announced the preliminary results of mining audits carried out by the DENR in respect of all metallic mines in the Philippines and subsequently issued the Masbate mine audit report which contains the detailed findings from the audit and directed the Company to provide explanations and comments in response to the audit findings as described in its previous disclosures. The Company provided a comprehensive response to the findings and recommendations in the audit, which the Company believes addresses the issues raised. As reported by the Company on February 2, 2017, the DENR has announced further results of its mining audit and Masbate was not among the mines announced to be suspended or closed. To-date the Company has not received any updated formal written response from the DENR confirming the results of the audit in respect of Masbate and as such, the final outcome of the audit has not been determined. The Company believes that it continues to be in compliance with Philippine's laws and regulations. The Company will continue to work closely with the DENR to maintain compliance with regulations and continue to promote improved quality of life in the communities where it operates. The Company will continue to provide updates of its progress with the DENR. Operations remain uninterrupted at the mine and the projections and guidance for Masbate and the Company on a consolidated basis are provided on this basis.  

Recent News Releases:

Please click here for the full news release “B2Gold Reports 2016 Fourth Quarter and Full-Year Results; Achieves 2016 Record Gold Production, Record-Low Cash Operating Costs and Record Operating Cash Flow; Outlook Provides for Very Strong Gold Production Growth Profile by 2018”, dated March 16, 2017.

Footnotes (Click to expand)

  1. Please refer to “Project Description” section below for the ownership summary of the Masbate Gold Project (MGP)
  2. Refer to “Non-IFRS measures”

Certain portions of the following information are derived from and based on the assumptions, qualifications and procedures set out in the technical report entitled “NI 43-101 Technical Report Masbate Gold Project Republic of the Philippines” filed June 20, 2012 and prepared by, among others, Mark Turner, B.Eng., MAusIMM, and Andrew Vigar, B.App. Sc Geo., FAusIMM, MSEG (the “Masbate Technical Report”) and from our most recently filed Annual Information Form (“AIF”). For a more detailed overview of the MGP, please refer to the technical report noted above and our most recent AIF, which is available under the profile of CGA Mining Limited (“CGA”) on SEDAR at www.sedar.com.

Project Location

The Masbate Gold Project (MGP) lies within the municipality of Aroroy, Masbate Province, and is located near the northern tip of the island of Masbate, 360 km south-east of Manila, the capital city of the Philippines. The project can be accessed by a commercial airline service which flies daily to Masbate City (population of approximately 85,000) and a 70 km drive on a partially sealed road to the project site. Alternate access to the site from Masbate City is via a one hour boat ride. The site is equipped with a barge loading jetty where heavy equipment and consumables are delivered and offloaded. The site also has a private airstrip for charter aircraft.

MGP_0116

Project Description

B2Gold acquired its interest in the MGP through the acquisition of CGA in January 2013. Through 100% controlled subsidiaries, B2Gold owns 40% of Filminera Resources Corporation (“FRC”) and 100% of Philippine Gold Processing & Refining Corporation (“PGPRC”), the owner of the mineral processing facility. The remaining 60% of FRC is owned by a Philippine registered company, Zoom Mineral Holdings Inc. (“Zoom”). PGPRC and FRC work together contractually and cooperatively to operate the MGP.

FRC holds the mineral tenements that include the MGP. The mining claims and applications cover an area of approximately 15,209 hectares. Of that, FRC holds 1,366 acres which consist of a combination of patented mineral claims and four mining licenses known as Mineral Production Sharing Agreements (“MPSA”) where the Mineral Resources and Mineral Reserves occur. The majority of the Mineral Resources and Mineral Reserves occur on the patented mineral claims that have perpetual rights with no expiry date. The four other mining rights claims have the following expiry dates: MPSA 095-97-V currently expires on November 19, 2022, MPSA 255-2007-V and MPSA 256-2007-V both expire on July 29, 2032 and MPSA 329-2010-V expires on March 22, 2035. B2Gold also holds an interest, through Vicar Mining Corporation (“Vicar”), in the prospective Pajo property, immediately to the north of the Colorado Pit, an approved MPSA which covers an area of 786 hectares and expires October 19, 2030 (MPSA 219-2005-V). Pursuant to an Operating Agreement between Vicar and FRC that has been applied for, the latter at its cost and expense, will explore and, if warranted, develop and operate any mine in the MPSA area of Vicar. Vicar will receive a royalty share equivalent to 2% of the gross receipts (less certain expenses) of the mineral products realized from the Vicar MPSA.

PGPRC, which is indirectly wholly-owned by B2Gold, has developed and owns the process plant on the island of Masbate and is responsible for the sale of all gold. PGPRC and FRC have a contractual relationship, which includes PGPRC purchasing all of the Masbate Gold Project ore from FRC at a price equal to the cost for the ore plus a predetermined percentage, while maintaining joint financial and legal liability for the social and environmental obligations under Philippine law.

There is no royalty payable on the MGP, however a 2% excise tax on gross gold and silver sales is payable annually to the Philippine government under the MPSA regulatory framework, and a 1.5% tax on operating cost as a required expenditure for social development of host communities.

The Philippines is a highly regulated environment and there are a significant number of permits required. These permits are issued for varying periods and need to be regularly renewed. Although B2Gold has a dedicated permitting team that constantly monitors progress, the Company is also reliant on the various regulatory bodies issuing the required permits.

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