First-quarter results for B2Gold (TSX: BTO; NYSE-MKT: BTG) are in, and they show a company that is establishing itself as a bonafide mid-tier gold producer.
Gold production for the quarter was up 21% from the same time last year, as it tallied 96,303 oz. And with cash costs of just US$634 per oz. — US$90 less than costs for last year’s first quarter — it generated cash flows from operations of US$43.3 million, or 6¢ per share. This figure is 14% higher than the previous quarter, and beats Haywood Securities analyst Geordie Mark’s US$36.4-million forecast.
The cash flows came out of US$129 million in revenues, which beat Mark’s US$121.6-million estimate, but was in line with consensus. Adjusted net income for the quarter came in at $17.5 million, or 3¢ per share.
The solid operational results from its three mines — La Libertad, El Limon and Masbate — left B2Gold with a strong balance sheet, thanks to a US$183.5-million cash position.
Haywood’s Mark attributed the stronger-than-anticipated performance to its ability to drive up production, while pushing costs down well below his expectation of US$732 per oz. Mark rates B2Gold as a “buy,” with a $3.80 price target.
La Libertad drove the wider margins, as the Nicaraguan mine delivered 40,000 oz. gold at cash costs of just US$568 per oz.
The company’s other key asset in Nicaragua, El Limon, delivered 15,000 oz. at a US$699 per oz. cash cost.
The Masbate mine in the Philippines was the biggest producer, pumping out 43,000 oz. gold, but costs averaged US$772 per oz. over the quarter.
Such positive momentum on the operational side has Mark bullish on the company’s prospects.
“We view B2Gold as an emerging mid-tier producer capable of delivering 630,000 oz. gold per year in 2016 through the development of Otjikoto at a reasonable cash cost,” he wrote in his report.
Mark expects that the future Otjikoto mine in Namibia will produce gold at all-in sustaining costs of US$880 per oz. B2Gold says mine construction at Otjikoto is both on track and on budget, with production expected to start in the fourth quarter of this year.
The company acquired Otjikoto along with Masbate when it bought Auryx Gold for $160 million in 2011. The acquisition was the second of three deals — each spaced two years apart — that have built the company into a serious gold producer. The first was gaining Nicaraguan assets when it bought Central Sun Mining for $66 million in 2009, and the third and most recent was acquiring Volta Resources and its Kiaka mine in Burkina Faso for $63 million in 2013 .
“In addition to near-term production growth, we see the advancement of technical understanding of a smaller scale, potentially more economically viable development option for the Kiaka gold deposit,” Mark wrote in his report.
The company’s key pipeline project had previously been Gramalote in Colombia.
B2Gold has a 49% stake Gramalote, with AngloGold Ashanti (NYSE: AU) holding the remainder. Mark, however, says that while the project gives investors more leverage to higher gold prices, it is “more economically challenged” at today’s softer metal prices.
On May 15 — the day after the results were released — the company’s stock was off 4%, or 11¢ to $2.98, on 1.5 million shares traded.
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