B2gold: Fekola Continues To Surprise Us

B2Gold Company (BTG) has lately introduced Q1 2019 outcomes. Consolidated gold manufacturing was 6% increased than budgeted whereas AISC was 14% decrease than the price range. BTG has witnessed a decline in common realized gold costs throughout Q1 2019, on a Y/Y foundation and gold costs have edged even decrease. Nevertheless, there are possibilities of gold restoration, and that would have an effect on BTG’s revenues within the coming quarters. The FM (learn: Fekola mine) is the star performer amongst BTG’s mining property, and this mine will assist enhance manufacturing in H2 2019. FM’s growth plan would considerably improve the mine’s manufacturing capability. Let’s get into the main points.

Determine-1 (Supply: Mining Evaluation)

Throughout Q1 2019, BTG produced 230,859 ounces of gold at a median AISC of ~$848/oz. For a senior gold producer like BTG, the associated fee metrics have been favorable in contrast with Kinross Gold’s (KGC) AISC of ~$925/oz. and IamGold’s (IAG) AISC of ~$1,086/oz. The corporate’s common realized gold costs stood at ~$1,300/oz. declining from $1,325/oz. final yr. Within the present quarter, gold costs have declined additional (inside the vary of ~$1,280/oz) and this might mirror negatively on BTG’s revenues within the coming quarters. Nonetheless, there’s some room for enchancment in gold costs notably as a result of growing US-China commerce tensions.

In my opinion, the elemental power of BTG helps the possibilities of share value appreciation. BTG’s key mining property embody Fekola, Masbate, and Otjikoto. These mines have depicted wholesome quarterly efficiency when it comes to output (Determine-2) and AISC (Determine-Three).

Determine-2 (Information Launch)

Determine-Three (Information Launch)

Whereas La Libertad and El Limon operations additionally contributed to the gold manufacturing, they have been a burden on the corporate since mine-site AISC lies means above the common realized gold costs of ~$1,300/oz. (discuss with Determine-Three).

However, the FM is the one most vital asset in BTG’s portfolio (when it comes to each output and AISC) and has delivered wonderful efficiency throughout Q1. The mill’s throughput was ~1.73 million tons, recording a hefty enhance of 31% Y/Y. FM’s manufacturing is predicted to ramp up in H2 because it delivers high-grade ore manufacturing from Section-Four. Additional, the Fekola growth undertaking is at present being thought-about by BTG, and this has the potential to boost Fekola mill’s throughput from 1.5 Mtpa to 7.5 Mtpa. As soon as accomplished, this may allow the FM to supply a median of ~550,000 gold ounces throughout the interval 2020-2024. All through the mine’s life, BTG expects the FM so as to add NPV of ~$2.2 BB (in whole).

On a separate word, BTG plans to incur ~$19 MM on the Fekola exploration undertaking. This is able to assist in confirming (and changing) among the mine’s ‘Inferred’ sources into ‘Indicated’ reserves. BTG’s robust liquidity place helps the corporate’s deliberate mine CAPEX and OPEX. BTG generated working money flows of ~$86 MM throughout Q1 and had $142 MM in money on the finish of the quarter. Additional, the corporate nonetheless has ~$200 MM in revolving credit score that might be utilized when wanted (Determine-Four).

Determine-Four (Supply: Might Presentation)

Furthermore, the technical value chart reveals that based mostly on an extension of the development traces connecting the bullish and bearish developments, an affordable goal value within the short-to-medium time period might lie someplace between $2.Eight-$Three.zero/share. Take a look at Determine-5.

Determine-5 (Supply: Finviz)

Briefly, BTG’s Q1 efficiency reviews revealed gold manufacturing and associated prices that surpassed the price range. Despite the fact that the quarter has began with depressed gold costs, however there are possibilities of restoration as a result of macroeconomic components in gold’s atmosphere. This might influence favorably on BTG’s revenues. Additionally, BTG’s FM has the potential for increasing its manufacturing capability and the corporate is engaged on growth and exploration plans for the mine. BTG’s robust liquidity place facilitates such plans and the technical value chart reveals the probability of enchancment in share costs.

Disclosure: I/we’ve no positions in any shares talked about, and no plans to provoke any positions inside the subsequent 72 hours. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (aside from from Looking for Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.

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