B2Gold (BTG) Gains From Solid Mine Performance Amid Cost Woes
B2Gold Corp. BTG is benefiting from improved mine performances and recent acquisitions. This is impressive, given that inflationary costs (primarily fuel and labor) are denting the company’s margin.
B2Gold has been focusing on organic growth, unlocking potential value through the possible expansion of its existing mines. This will further drive the company’s results.
Solid Balance Sheet Bodes Well
B2Gold’s long-term debt was $39 million at the end of the second quarter compared with $42 million at the end of 2022. At the end of Jun 30, 2023, it had an available revolving credit facility of $600 million. In July 2023, the available and undrawn capacity of the revolving credit facility was raised to $700 million under the accordion feature with the inclusion of the National Bank of Canada to the syndicate of lenders.
B2Gold maintains its dividend rate of 4 cents per share, driven by the company’s strong cash position and strong operating results. It has one of the highest dividend yields in the gold sector.
Strategic Acquisitions to Drive Growth
B2Gold completed the acquisition of Oklo Resources Limited in September 2022. The acquisition provides B2Gold with an additional landholding of 1,405 square kilometers covering highly prospective greenstone belts in Mali, West Africa, including the Dandoko Project, which now forms part of the Fekola Complex.
With the acquisition of Oklo and its flagship Dandoko project, the company is continuing to evaluate its options for the timing and sourcing of material on a regional basis from all deposits within the Fekola Complex area (including Fekola, Cardinal, the Anaconda Area, Bakolobi and Dandoko).
On Feb 13, 2023, the company inked a deal worth C$1.1 billion ($820 million) to acquire Sabina Gold & Silver Corp. Per the deal, B2Gold will have its first mining assets in Canada and receive the full ownership of Sabina’s Back River Gold District, including five mineral claims spanning 80 km. Among these, the Goose project is the most advanced, and is fully permitted and construction-ready. It has been de-risked with substantial infrastructure.
BTG intends to increase production in the first five years of the mine life by accelerating the Goose project's underground mine development. The transaction will boost operational and geographic diversification by combining B2Gold's stable production base with a high-grade, advanced development asset in a Tier-1 mining jurisdiction.
Upbeat Outlook to Instill Confidence
All of B2Gold's operations are on track to reach or surpass their annual production targets. B2Gold’s 2023 total gold production guidance is between 10,00,000 and 10,80,000 ounces, backed by expectations of a solid delivery and pickup in mine performances. The total gold production in 2022 was 1,027,874 ounces. The company intends to pursue additional internal growth through further exploration, development and expansion of existing projects.
Gold production at the Fekola mine is expected between 580,000 and 610,000 ounces in 2023. The company expects the Fekola mine to process 9 million tons of ore in 2023 at an average grade of 2.20 g/t gold and a process gold recovery of 93.4%. Fekola's all-in-sustaining costs are expected to rise in 2023, owing primarily to greater sustaining capital expenditure.
Pick up in Gold Price Bodes Well
In 2022, the gold price was majorly affected by persistently high inflation and interest rates. The prices were also negatively impacted by the stronger U.S. dollar, rising interest rates and sluggish growth. However, the uncertainty around global economic growth has worked in favor of gold and silver prices this year. Gold prices have gained 7% so far this year.
Currently, the gold price is around $1,924 per ounce and silver price is around $24 per ounce. This pickup in the price of gold and silver is likely to improve B2Gold’s results in the upcoming quarters.
Elevated Costs to Hurt Margin
B2Gold is witnessing cost inflation pressure across all sites, which is impacting input prices, including reagents, fuel and consumables. For 2023, cash operating costs are projected between $670 and $730 per ounce. AISC is expected to be $1,195-$1,255 per ounce. Both are likely to be higher than the 2022 reported levels.
The company’s royalty and stream interests are subject to foreign currency fluctuations and inflationary pressures, which may impact its profitability. Higher fuel and labor costs are headwinds.
Shares of the company have lost 0.7% against the industry’s growth of 20.1%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
B2Gold currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Hawkins, Inc. HWKN, PPG Industries, Inc. PPG and L.B. Foster Company FSTR. HWKN sports a Zacks Rank #1 (Strong Buy) at present, and PPG and FSTR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares gained 35.7% in the last year.
The Zacks Consensus Estimate for PPG Industries’ fiscal 2023 earnings per share is pegged at $7.47, indicating growth of 23.5% from the prior-year actual. Earnings estimates have moved 3% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 4.3%. PPG’s shares have gained 9.7% in the past year.
L.B. Foster has an average trailing four-quarter earnings surprise of 134.5%. The Zacks Consensus Estimate for FSTR’s 2023 earnings is pegged at 53 cents per share. Earnings estimates have been unchanged in the past 60 days. FSTR’s shares gained 30.2% in the last year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PPG Industries, Inc. (PPG) : Free Stock Analysis Report
L.B. Foster Company (FSTR) : Free Stock Analysis Report
B2Gold Corp (BTG) : Free Stock Analysis Report
Hawkins, Inc. (HWKN) : Free Stock Analysis Report
