In a series of recent articles we investigated the country risk of various mining jurisdictions in which US-listed precious metal miners are active. We collated country risk ratings for these countries from eight different sources and averaged these ratings into compounded country risk scores. The most recent results from this work can be found in this article. Most definitions of country risk include factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socio-economic risk and others. Depending on the source, various contributing factors of country risk are weighted differently. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article. We used our compounded country risk score to evaluate country risk exposure for selected gold and silver mining companies using 2011 production results and reserve statements. As 2012 data becomes available we are providing updates and in the present article we would like to do so for B2Gold (BGLPF.PK).
B2Gold is a mid-cap gold mining company with a market capitalization of $1.63B. Yahoo.com does presently not list a forward P/E or analyst ratings for B2Gold. B2Gold operates two mines in Nicaragua (Libertad and Limon) and has just commissioned its third mine in The Philippines (Masbate). Another mine in Namibia (Otjikoto) is scheduled to start production in 2014 and finally, the Granalote mine in Colombia is earmarked to be in production by 2017. Total production in 2012 was 160,000 ounces of gold which is forecast to more than double in 2013 and increase further to 750,000 ounces per year in 2017 once the Granalote mine comes online. The table below gives the 2012 numbers for production, reserves and resources at each of B2gold's mines and projects.
Consolidating the production, reserve and resource data showing summations for each country of exposure results in the table below. The data is already calculated in percentages of gold-equivalent ounces. Country risk ratings as documented here are also shown in the central column of the table. Additionally the country risk ratings for Nicaragua, Namibia and The Philippines were derived using the methodology described in this article. Country risk ratings range from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk. The right side of the table shows the weighted risk contributions for each country separately for production, reserves and resources with summarized scores in the bottom line. The individual ratings can be interpreted as ratings going from present risk (production) into the future (inferred resource).
B2Gold presently operates two mines in the high-risk jurisdiction of Nicaragua resulting in a country risk rating of 61.3 when considering production numbers. This rating is comparable to Iamgold (NYSE:IAG) and indicates relatively high country risk. Due to the contribution of the Masbate mine this rating can be expected to decrease during the present year.
Risk levels are noticeably lower when considering reserve (51.57) and resource data (50.84 for measured and indicated, 50.03 for inferred) due mainly to the contributions from the Namibian and Colombian projects.
B2Gold has followed an impressive growth curve and has plans to continue along this trajectory. Management of country risk will need to be taken very seriously in order to succeed with its ambitious plans. However, projects contributing to future growth are situated in jurisdictions that are considered safer in terms of country risk than Nicaragua where B2Gold has operated exclusively (and successfully) in the past.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.