The new SAG mill at B2Gold’s Masbate project is operating at designed throughput rates and is running consistently. During October the mine achieved record monthly production of 20,423 ounces, 4029 ounces ahead of budget.

The new mill is still operating at reduced power consumption but with good throughput because of the soft oxide material being processed.

Gold production during the third quarter at Masbate was temporarily affected by SAG mill commissioning/maintenance issues. As a result, the mine produced 43,746 ounces of gold, 7514 ounces below budget and 3897 ounces less than in the same quarter in 2013. However, with the mill now running consistently the mine is expected to complete the year with a strong fourth quarter.

As planned, the previous SAG mill was shut down and replaced with a new SAG mill in the second quarter of 2014. Initially, the new SAG mill performed well, but later, as the operators increased SAG mill loading, increased temperatures were observed at the SAG mill discharge bearing.

Delays during maintenance affected throughput in the quarter with 1.578 million tonnes processed compared to budget of 1.751 million tonnes. The reduced loading affected gold recoveries which were 76.7% versus 81.4% budget, attributable to a coarser grind size.

Masbate’s management is finalizing the long-term remediation plan with the mill consultant whose final report is pending. Those solutions are expected to be implemented in January 2015.

In the current quarter higher grade oxide material from the Colorado Pit is being processed, with mill feed expected to be 70% oxide and gold grades expected to average 1.3 grams/tonne. An additional excavator has been moved to the Colorado Pit now that the new SAG mill is running consistently.

Masbate cash operating costs in the third quarter of 2014 were $793 per ounce, $9 per ounce lower than budget and $58 per ounce higher than in the prior-year quarter. Cash operating costs per ounce were lower than budget mainly due to lower processing costs (due to lower throughput), lower strip ratios and less volume mined, as well as a lower stockpile inventory adjustment (associated with processing less stockpiled ore than planned). Cash operating costs were higher compared to the third quarter of 2013, mainly due to lower production.

Although B2Gold anticipates that Masbate will continue to have a strong fourth quarter, the company now expects full-year 2014 production to be approximately 180,000 ounces while the previous guidance had been 190,000 to 200,000 ounces.

Transition from contract mining to self-mining is proceeding smoothly at Masbate with mining equipment and employees now having been transferred to the company. Maintenance functions will be transferred at year-end.

Last year, the company began a large metallurgical sampling and analysis program, including additional metallurgical drilling, in order to assess the potential for a mill expansion at the Masbate mine and to assist in mine planning. Conclusions are expected later in the fourth quarter of 2014, including an update of Masbate’s mineral reserves and related mine plan. Management also continues to review and revise grade control procedures and mine practices to enhance performance.

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