Source: Mining Review Africa - Fekola Mine
Investment Thesis
Vancouver-based gold miner B2Gold Corp. (NYSE:BTG) is quite an attractive gold miner that I am regularly following on Seeking Alpha. The long-term potential is evident when we look at the mining assets and their location in the chart below.
I started to cover this miner at the right time, and I believe a few followers have been lucky to discover this company through my articles a few months back. What characterizes B2Gold is that the mining model is simple and powerful.
The investment thesis has not changed, and this gold miner presents an attractive profile for long-term investment, and I qualify the company as a long-term "keeper." However, while B2Gold can be considered as a long-term investment, it is crucial to trade continuously about 30+% of your position short term to profit plainly from the volatility inherent to the gold industry and the risk of an operational hiccup.
The mining model is centered around the company's flagship mine called Fekola in Mali (80% owned by BTG and 20% owned by the Government of Mali).
The mine is an invaluable mine with steady gold production proceeding with an expansion project that will be completed around the Q3'20 with a forecasted gold production between 590K Oz and 620K Oz this year.
More good news coming from Fekola Mine is the recently updated mineral resources and the new Mali's mining code that adds more stability.
Under a new mining code, companies operating in Mali will be protected from fiscal changes for 20 years, down from the previous "stability period" of 30 years, the mines minister said late on Thursday.
Furthermore, the cost of extraction will be going down by 7% after the achievement of a new large-scale off-grid solar plant projected operational in August this year.
However, the Fekola Mine is not without problems due to extremists' activity, Government corruption, and inefficiency, that seems the general practice in Africa.
Source: BTG Presentation
The company is producing gold from five different mines spread around the world. It is involved with one development and one exploration project as well (a joint venture in Colombia with AngloGold Ashanti (NYSE: AU) called Gramalote and Kiaka/Toega in Burkina Faso).
On July 3, 2019, the company announced that:
sell two gold mines and assets in Nicaragua to Calibre Mining Corp. for $100 million and ~31% direct equity interest in Calibre. The two concerned gold mines are the El Limon and La Libertad Gold Mines, which B2Gold had acquired in 2009. The deal also includes the Pavon gold project and additional mineral concessions in Nicaragua currently held by B2Gold.
The deal was completed on October 15, 2019. B2Gold holds 93.332 million shares in Calibre Mining, representing approximately 30.08% stake.
These two mines indicated above produced 6,010 Au Oz in 4Q'19 (residual before transfer to Calibre Mining).
An interesting fact is that BTG has recently outperformed the VanEck Vectors Gold Miners ETF (GDX).
Trends, Charts, and Commentary: Revenues, Net Debt, and Gold Production.
1 - Quarterly total revenues for 4Q'19 are $324 million, including Calibre Mining.
The company announced consolidated gold revenues of $324 million (including El Limon and La Libertad residual production and Calibre Mining) in the fourth quarter of 2019, up 19.1% from the year-ago period and up 4.3% sequentially.
Annual gold production from the Fekola, Masbate, and Otjikoto Mines all exceeded the upper end of their 2019 production guidance ranges. We will know more when the company will release its 4Q'19 results.
cash operating costs forecast to be at or below the lower end of the Company's $520 and $560 per ounce guidance range and all-in sustaining costs ("AISC") [...] to be within the Company's $835 and $875 per ounce guidance range
Note: On November 5, 2019, B2Gold's board announced its first quarterly dividend of $0.01 per share. B2Gold announced the appointment of Ms. Liane Kelly to its Board of Directors effective January 1, 2020.
Quarterly production analysis
B2Gold produced 245,140 Au oz in the fourth quarter of 2019 and sold 218,437 Au oz (please see charts below). It includes El Limon and La Libertad mines (residual) and Calibre Mining stake, with a total amount produced for BTG of 10,724 Au Oz (please see details in the charts below).
Gold price realized was ~$1,483 per ounce (estimated) during 4Q'19, including La Libertad and Limon mines.
B2Gold's consolidated gold production was up 5.0% sequentially and was a multi-year record for the company. On a year-over-year basis, gold production increased by 6.7%.
Gold production from the Fekola, Masbate, Otjikoto, La Libertad, and El Limon mines was better than expected.
Full-year consolidated guidance 2019 (Assuming $1,300/Au Oz)
Annual production for BTG was 980,219 ounces (including 10,724 ounces relating to B2Gold's attributable share of ounces from Calibre Mining), exceeding the upper range of the guidance.
Source: BTG Presentation
Conclusion and Technical analysis
B2Gold is another great gold miner with a great balance sheet getting even better with gold price above $1,550 per ounce and substantial potential for growth, especially at the Fekola Mine in Mali.
One crucial factor is that the company is focusing on reducing debt and has started to pay a small dividend. Yes, of course, it is not a significant dividend, which represents less than 1% after-tax, but it is a good start, and I believe the dividend will increase steadily from here.
Technical Analysis
BTG is forming an ascending wedge pattern, which is bullish with increasing higher lows. Line resistance is now at $4.30, and line support is $3.90.
The short-term strategy is to take a 25% profit off at or above $4.30 and wait for a retracement to accumulate at or below $3.90.
However, if gold price continues its bullish climb, BTG is likely to cross the line resistance (breakout) and eventually reach $4.75 that I see as an upper resistance. I recommend selling another 20% in this case and wait for more pattern information.
Conversely, if the gold price starts to weaken and fall below $1,550 per ounce, BTG may cross support at $3.90 and drop to $3.55, which is a double bottom resistance. BTG below $3.60 is an excellent opportunity to accumulate safely.
In conclusion, watch the price of gold like a hawk.
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