The Global Mining Symposium wrapped up its final day with an interview with B2Gold (TSX: BTO; NYSE-AM: BTG) president and chief executive Clive Johnson, who sat down with MINING.com senior editor Cecilia Jamasmie.
Johnson's career includes leading B2Gold since its inception in late 2006 and, before that, Bema Gold, and has taken him from Russia to Africa and throughout the Americas. Drawing on his expertise, Jamasmie began by asking for his perspective on how gold miners and the investment community were reacting to the rise in the price of gold compared to the last time the commodity peaked.
"I think there are some differences this time," Johnson said. "You know, ten or fifteen years ago, we saw a lot of expensive deals done. We saw a lot of money lost in gold. And I hate to say it, but the truth of the matter is [it was] through a lot of bad management. Growth at any cost was sort of the buzzword. And people lost sight of the fact of what I believe: creative deals and profitability [are] the essence of our industry."
After investors saw their losses pile up and fled the gold sector, this led to a decrease in exploration and development in the gold sector over the last ten to 15 years, said Johnson. That lack of funding for exploration, and therefore development, he continued, means it's going to be a while before miners can shift into production, owing to the lag between discovery and commercial extraction.
"It'll be interesting to see how the industry responds," he said. "I'm really hoping the discipline we've seen over the last five years continues because I don't think it's good for anybody if we get back into that silly season where people are overpaying for opportunities."
Jamasmie asked whether mergers and acquisitions (M&A) would continue in the gold sector, to which Johnson replied that, yes, he did think we would see more.
"But once again, I don't think, or hope, that we see deals where those big premiums are paid. I think investors are very wary of that, because there was a lot of that done, and it was done poorly. Companies paying big premiums and overpaying for assets."
As for B2Gold's position on M&A, Johnson said that it does not feel pressured to do it at all, owing to the health of the company's finances and assets. However, should the right opportunity come along, his company would not say no to an M&A discussion, he added. Nevertheless, there were other companies that would feel the need to grow.
"So that's why I say there's got to be a cautionary note here, hopefully, about responsible growth."
He was next asked whether he thought the gold supply, which Johnson says clearly peaked a couple of years ago, could be bolstered in the short term by higher prices.
"I think it will in the short term, to an extent, because you will see some development projects that weren't going to make it at $1500 gold, that will have a chance to be built and be profitable," Johnson said. Still, Johnson sounded a note of caution. "Are people going to build a mine because gold is $1900? And are they going to assume gold is going to stay at $1900 to make it profitable? Or are they going to go back into some hedging to lock in some of that price?"
MINING.com's Jamasmie then shifted the discussion to corporate social responsibility (CSR) and the role of mining companies in society.
"We've always been very keen on being responsible miners. We were doing CSR and ESG (environmental, social and governance) and these things far before they had fancy titles. It's just what we did. Back in the days in Chile, back in the days in Russia."
As Johnson explained, for him and for B2Gold, these are core values that are deeply rooted in the culture of the company, and go back to its founding almost 14 years ago. And treating people with fairness, respect and transparency are vital components of this culture.
"If you deliver on the promises you make to people, as I've done - if you do that, you tend to make more friends than enemies," he said.
Recently, the company began the Rhino Gold Bar initiative, in which B2Gold raises money to help endangered black rhinos in Namibia. The company takes a thousand ounces of gold from its Otjikoto mine in the country and turns it into a thousand gold bars, which are then sold at the spot price plus 15%, with proceeds going to local communities to help save the animals.
"One of the things I liked about it is the historical aspect," Johnson explained. "You're taking gold that was deposited in Namibia by an exploding star 6 billion years ago, and you're using that gold to save an animal that's been roaming the planet, and Namibia, for 50 million years."
Staying with Africa, Jamasmie asked for updates on the situation in Mali, where the government was recently toppled in a coup and where B2Gold operates the Fekola mine.
"I would say we're not very worried," Johnson replied. "There are eight gold mines in our belt in western Mali, which is about 2,000 km away from Timbuktu," where the government is based. "All the eight companies that are in the area all understand the nature of security. None of the mines have ever lost a day to any kind of violent activity or any kind of terrorist event. So, we're in the good part of the country to be in."
He emphasized the importance of gold mining to Mali, which accounts for 10% of the nation's GDP and 25% of the revenue that comes to the government through taxes and other revenue streams. But he also pointed out that the bloodless coup has the support of the majority of Malians, so the situation has been very calm and supplies are still getting through to mining projects.
Jamasmie also asked about B2Gold's Gramalote joint venture in Colombia. For the project, B2Gold partnered with AngloGold Ashanti (NYSE: AU) and became the operator in January.
"It's at a very important stage," Johnson said, with a preliminary economic assessment (PEA) completed last year. "We liked the look of it economically at $1350, frankly. And we like it, obviously, more now."
After a delay caused by the pandemic, operations resumed at Gramalote in May and infill drilling has now been completed. Johnson said that although the feasibility study was originally scheduled to be prepared by year-end, they decided to extend the deadline to March 2021.
"Yes, it's a low-grade deposit, but it has the potential to produce starting up at over 400,000 oz. of gold a year. And based on the PEA we did, potentially very low cost, all-in sustaining costs were estimated at around $650 an ounce."
As Johnson reminded the audience, a lot of people get obsessed with low-grade deposits because there have been problems with those types of deposits.
"But grade is only one factor," he pointed out. "You've got, in this case, an extremely low strip ratio. So, off the bat there's no waste to strip to get started mining at Gramalote. And the overall strip ratio is about 2:1, which is really low."
In addition to low power costs, clean metallurgy, and supportive governments at both the local and the federal levels in Colombia, Johnson says this is a project that's in the right place at the right time.
"We're very comfortable there. That's an earned relationship, over time. In all of the countries we're in, it's about earning the trust of governments and people by being transparent, and having fairness and respect," he related. "The question we get asked most of the time down there is, 'When are you going to start building this mine?'"