B2Gold: Starting To Look Attractive Again

Shares of B2Gold (BTG) obtained off to a robust begin to start the yr, rising in tandem with the spot value of gold. For a short second in February, the share value of BTG even managed to set a brand new 52-week excessive, hitting $Three.35/share, coinciding with gold’s rising ascent and try to interrupt by large resistance within the $1,350/ozvary (which in the end proved unsuccessful for the yellow steel, but once more).

Since March, it has been kind of a downhill journey for shares of BTG, because the inventory has now fallen -15.41% year-to-date, now buying and selling at $2.47/share.

Q1 Outcomes

Nevertheless, regardless of the current weak point within the share value of BTG, the corporate was capable of announce some constructive information in current months, reminiscent of stable Q1 numbers that beat earlier inside estimates within the following key areas:

From B2Gold.

Consolidated gold manufacturing of 230,859 ounces, 6% (12,704 ounces) above finances. Consolidated gold income of $302 million on gross sales of 232,076 ounces (6% or 13,564 ounces above finances). Consolidated money working prices (see “Non-IFRS Measures”) of $545 per ounce bought, beneath finances by $27 per ounce (5%). Consolidated all-in sustaining prices (“AISC”) (see “Non-IFRS Measures”) of $848 per ounce bought, considerably beneath finances by $133 per ounce (14%).

For a extra visible look into B2Gold’s Q1 numbers, please confer with the next slide beneath.

Supply: B2Gold Could 2019 Company Presentation

Q1 was a profitable quarter for B2Gold, as manufacturing was above finances and prices have been beneath. For 2019, the corporate stays on observe to provide between 935-975okay ozof gold, which assuming a $1,300/ozgold value (not too far above the present spot value of $1,285/oz) might assist generate ~$400 million in money circulate from operations ($86 million was reported in Q1).

Fekola Growth Undertaking

Additional, previous to the announcement of the newest Q1 figures, B2Gold revealed an encouraging Preliminary Financial Evaluation (PEA), again on March 26, for an expanded manufacturing situation as much as 7.5 Mtpa (up 1.5 Mtpa from the present processing price of 6.zero Mtpa) at its flagship Fekola Mine, positioned in Mali.

The Fekola Growth Undertaking is estimated to price $50 million (with CAPEX being funded by Fekola money circulate), take 18 months to finish (with upgrades working by Q3 2020, with half the CAPEX being spent this yr, and the remainder subsequent yr), and have a payback interval of lower than one yr.

As well as, the Fekola Growth Undertaking is estimated to extend venture NPV by $500 million (utilizing a reduction price of 5% and assuming a base case gold value of $1,300/oz). On account of the growth, gold manufacturing on the Fekola Mine would improve to 550,000+ ozyear over the subsequent 5 years (2020-2024). Value retaining in thoughts, for 2018, the Fekola Mine produced 439,068 ounces, and is projected to output between 420-430okay ozin 2019 (110,349 ozwas already achieved in Q1). Additional, with a mine lifetime of 12 years (together with 2019), Fekola ought to produce, in whole, ~5 million ounces over the course of its life with aggressive money prices within the vary of $500-700/ozover lifetime of mine, and AISC of $630/ozover the preliminary 5 years (2020-2024).

Current Manufacturing Progress and Share Worth

For B2Gold, the Fekola Mine has clearly confirmed itself to be a world class tier 1 asset, which lately has helped elevate the corporate from mid-tier gold producer standing to massive cap producer (~1 million ounces/yr in manufacturing); this yr, B2Gold is projecting annual gold manufacturing to succeed in between 935-975okay oz.

As a refresher, previous to the Fekola Mine ramping up, B2Gold had beforehand produced “solely” 550,423 gold ounces in 2016, with manufacturing unfold out throughout its four different working mines: Otjikoto (positioned in Namibia), Masbate (positioned within the Philippines), La Libertad (positioned in Nicaragua), and El Limon (positioned in Nicaragua).

Supply: B2Gold Could 2019 Company Presentation

By way of stability sheet, B2Gold ended Q1 with $142 million in money and was capable of scale back long-term debt obligations to $480 million (down from $700 million).

Supply: B2Gold Could 2019 Company Presentation

Nevertheless, regardless of B2Gold’s robust manufacturing profile development over the previous couple of years and improved stability sheet, the share value of BTG has kind of been range-bound, buying and selling in a decent channel between ~$2.10-Three.40/share.

Rumors And Alternative

Over the previous week, there have been rumors circulating that B2Gold was on the acquisition hunt for extra belongings, presumably trying to purchase a gold venture, the Shamva Gold Mine, positioned in Zimbabwe.

From Mining.com:

If a transaction with proprietor Metallon Corp. is concluded, B2Gold will make investments $150 million to $200 million creating the Shamva gold mine, one of many folks mentioned. The Vancouver-based firm pays a couple of third of the guide worth for the mine, which was final assessed at about $167 million seven years in the past, the particular person mentioned, with out giving additional element.

Supply: Mining.com

Now, the publication of the above story/headline appeared to happen at a most peculiar time, since simply earlier this month, B2Gold CEO Clive Johnson had these ideas to share with the market, relating to the corporate’s stance on Mergers & Acquisitions (M&A):

“Unfold the phrase – no M&A from us,” Johnson advised analysts on the miner’s earnings name on Could eight, when reported whole gold of 230,859 ounces, about 6% above plan. “We’re not going to pay for ounces,” he added.

Given the huge quantity of upside potential that also exists to bolster gold manufacturing B2Gold’s Fekola Mine presently, Mr. Johnson’s feedback above appear extra in step with the corporate’s current actions to conduct a PEA growth research for Fekola (mentioned earlier on this article), versus resonating with any tales being reported within the media.

Maybe coming as no shock, then, B2Gold shortly responded to the rumors and put an finish to any hypothesis that it was wanting into M&A offers.

From Mining.com:

Mid-tier Canadian miner B2Gold on Friday dismissed studies indicating it was mulling the acquisition of an idled gold mine in Zimbabwe, emphasizing it was not at present concerned about any mergers or acquisitions.

Chief government Clive Johnson reiterated B2Gold’s long-term development technique by saying that along with creating its current pipeline of initiatives, the corporate continued to hunt world exploration alternatives.

Supply: Mining.com

In any occasion, shares of BTG fell -6.08% this previous week, with a few of the decline arguably attributable to the transient shock, uncertainty, and confusion brought on by M&A rumors.

Though it is also value noting that the month of Could, generally, has traditionally not been a superb month for returns within the gold sector, which might be one other issue contributing to the current weak point within the share value of BTG.

Supply: Bloomberg

In any occasion, with the gold value at present holding comparatively agency at $1,285/oz, B2Gold needs to be properly positioned to proceed producing sturdy money circulate (notably at its flagship Fekola Mine) into the longer term, M&A or no M&A.

Additional, with a printed PEA outlining a 7.5 Mtpa manufacturing situation on the Fekola Mine that might increase annual manufacturing to over 550okay ozyear, B2Gold appears properly positioned to crack the 1 million ozyear manufacturing profile ultimately, which ought to present speculators with robust leverage to a rising gold value, if/when that occurs once more sooner or later.

At $2.47/share, the present share value of BTG is at/close to its 6-month low and is beginning to look enticing once more. Final time round, shares of BTG bottomed out at $2.10/share again in August 2018, so if the summer season doldrums handle to seize the gold sector once more this yr and drive costs decrease nonetheless, one other great shopping for alternative in BTG could quickly be approaching.

On the earth of gold producers, B2Gold is likely one of the larger high quality names on the market; as such, with the ability to decide up shares of BTG at/close to 52-week lows is often a superb factor for consumers.

Disclosure: I’m/we’re lengthy BTG. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (apart from from Searching for Alpha). I’ve no enterprise relationship with any firm whose inventory is talked about on this article.

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