B2Gold (TSX: BTO; NYSE-MKT: BTG) will spend $6.2 million on exploration this year in the Philippines near its Masbate open-pit gold mine, and recent drill results suggest that the company may have a good shot at enhancing the mine’s economics.
The company released results from a 26,900-metre drill program in 2013 that extended the previously mined Montana vein, reaching more than 850 metres northwest from the Montana open-pit, and extending the strike length of the vein to 1,300 metres. The extension lies 600 metres west of Masbate’s Colorado pit and along the main haulage road to the Masbate mill.
Notable drill intercepts on the Montana Vein extension include 9.5 metres grading 27.73 grams gold per tonne; 23.4 metres of 7.31 grams gold per tonne; 15.5 metres of 7.41 grams gold; 16.7 metres of 5.63 grams gold; and 19.1 metres of 4.65 grams gold. (All true widths.)
“The average grade and width of the drill holes reported was 2.6 grams gold per tonne over 12.3 metres, which is significantly higher grade than the current reserves at 0.97 gram gold per tonne,” reports Brian Quast of BMO Capital Markets. “While these are the first exploration results BMO Research has seen at the Masbate mine since B2Gold acquired the project, the average grade is significantly higher than the current reserve grade and the delineated zone is close to the mill, both of which are indicative of potentially enhanced economics for the mine.”
B2Gold says it is on track to produce a new resource estimate for the Montana vein — which remains open at depth — in this year’s second quarter. Meanwhile, crews on five rigs are carrying out reserve-and-resource drilling on numerous mine veins, including Montana, the Main vein, Libra East, Grandview, Colorado and Panique, as well as exploration drilling on veins near the mine that lie outside its current reserve and resource base.
Masbate has a projected 15-year mine life, with expansion studies underway.
Last year Masbate produced 176,483 oz. gold, and the company forecasts the mine should turn out 190,000 to 200,000 oz. gold in 2014 at operating cash costs of US$765 per oz. to US$800 per oz.
The company notes that the income-tax holiday in the Philippines, which lasts until June 2015, could be extended until 2017. (Corporate taxes in the country run to 30%, with a 2% excise tax.)
For Masbate and B2Gold’s two gold mines in Nicaragua — La Libertad and El Limon — the firm forecasts total production in 2014 of 395,000 to 420,000 oz. gold at an average operating cash cost of US$667 to US$695 per oz., and all-in sustaining costs of US$1,025 to US$1,125 per oz.
Last year the company’s three mines produced a total of 366,313 oz. gold, for a 132% increase over 2012. B2Gold estimates that consolidated operating cash costs in 2013 will come in at the lower end of its guidance range of US$675 per oz. to US$690 per oz., with projected all-in sustaining costs of between US$1,050 and US$1,100 per oz.
Quast of BMO Capital Markets notes that upside at the Otjikoto project revolves around the recently discovered Wolfshag zone, where he says “the grade is two times the current deposit.”
In Nicaragua, B2Gold says it could increase production and cut operating costs by discovering more high-grade ore at its mines. At its 100%-owned open-pit La Libertad mine, B2Gold has a 2014 exploration budget of $4.2 million. At its 95%-owned open-pit and underground El Limon mine, it plans to spend $4.3 million on exploration.
The company has 675 million shares outstanding. Its directors and officers hold 36.6 million shares, or 5.4%.
Over the last year, the company’s shares have traded in a range of $1.87 to $3.69. At press time B2Gold was trading at $3.39 per share.
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