B2Gold announced that the Malian Council of Ministers and the President of Mali have approved the participation of the State in Fekola SA for a total interest of 20%.
In 2016, pursuant to applicable mining law, B2Gold formed a new 100% owned subsidiary company, Fekola SA, which now holds the company's interest in the Fekola mine.
Following signing of a shareholder's agreement in August 2017, between B2Gold and the State of Mali, the company confirmed the basis under which it was to contribute a 10% free carried interest in Fekola SA to the State of Mali.
In addition, the State of Mali also had the option to purchase an additional 10% of Fekola SA which it elected to exercise.
The terms and conditions of the acquisition of this additional 10% interest were agreed between B2Gold and the State of Mali in a share purchase agreement dated August 2017.
In March 2017, B2Gold signed a mining convention in the form required under the 2012 Mining Code that relates to, among other things, the ownership, permitting, reclamation bond requirements, development, operation and taxation applicable to the Fekola mine with the State of Mali.
In August 2017, the company finalised an amendment to the Fekola Mining Convention with the State of Mali to address and clarify certain issues under the 2012 Mining Code.
The Fekola Mining Convention, as amended, governs the procedural and economic parameters pursuant to which B2Gold operates the Fekola mine.
On August 8, 2018, the company was informed that the Malian Council of Ministers approved the participation of the State in Fekola SA for a total of 20% through an ordinance and a decree of the Council of Ministers, signed by the President.
Now that the State of Mali's interest into Fekola SA has been formally authorised by the Malian authorities, the company will transfer ownership of 20% of Fekola SA to the State of Mali.
The first non-participating 10% of the State of Mali's ownership will entitle it to an annual priority dividend equivalent to 10% of calendar net income of Fekola SA.
The second fully participating 10% of the State of Mali's interest will entitle it to ordinary dividends payable on the same basis as any ordinary dividends declared and payable to the company for its 80% interest.
Ordinary dividends are not payable by Fekola SA until the Fekola SA intercompany loans totaling approximately $700 million, plus accrued interest, have been repaid to B2Gold in full.
The intercompany loans include historical exploration loans, early works costs, funds advanced for the Fekola mine construction and expansion, 2017 accelerated pre-stripping and fleet purchases plus accrued interest.
The intercompany loans bear interest at a rate of the prime lending rate of the Central Bank of West African States plus 2%.
In addition to assuming the obligations of ordinary shareholders to repay the Fekola SA intercompany loans and interest prior to the payment of any ordinary dividends, the State of Mali has also agreed to make additional payments totaling $47 million with respect to the acquisition of the additional 10% interest.
This valuation was primarily based on the optimised Fekola mine feasibility study filed with the State of Mali in July 2016.
The underlying valuation studies were prepared by two separate international valuation firms, one acting for each of B2Gold and the State of Mali, respectively, using a discounted cash flow methodology.
The final $47 million valuation reflects the point at which the valuation ranges prepared by the two independent valuation firms overlapped.
The $47 million obligation of the State of Mali will be set up as a loan from B2Gold to the State of Mali.
This loan will bear interest at a rate of the prime lending rate of the Central Bank of West African States (currently 4.5%) plus 3%.
The loan will be satisfied by netting it off against any ordinary dividends receivable by the State of Mali for its second 10% participating interest in Fekola SA until such time as the full amount of any principal and accrued interest outstanding under the loan are extinguished.
B2Gold has developed an excellent relationship over the past four years with the Government of Mali.
All negotiations between the company's senior representatives and the Malian government ministries have been conducted and concluded in an environment of mutual fairness, respect and transparency.
The company looks forward to working with the Malian government as partners in the mutually beneficial world-class Fekola mine.