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B2Gold Concludes Sale of Nicaragua Assets to Calibre Mining

Zacks Equity Research

B2Gold Corp. BTG has completed the sale of its two gold mines and assets in Nicaragua to Calibre Mining Corp. for an aggregate consideration of $100 million.

The two concerned gold mines are the El Limon and La Libertad Gold Mines, which the company had acquired in 2009. The deal also includes the Pavon gold project and additional mineral concessions in Nicaragua. Over the past decade, the company has invested more than $560 million in Nicaragua. It has significantly improved operations and economics of the El Limon Mine and constructed a mill facility. It also commenced profitable gold production at the La Libertad Mine and realized significant exploration success around both mines.

Since 2009, these mines have produced more than 1.4 million ounces of gold. For fiscal 2019, gold production from the two mines is expected to be 150,000-160,000 ounces.

Financials of the Deal

B2Gold received an aggregate of 87,986,666 common shares of Calibre, which represents approximately 28.35% of its shares, $40 million in cash, and convertible debentures worth $10 million. Additionally, B2Gold has an option to receive either a cash payment of $10 million or additional shares in Calibre Mining based on the five-day volume weighted average price of Calibre Shares at the time of such payment. However, it is subject to a condition that B2Gold’s holding in Calibre should exceed 31%.

Post-deal, B2Gold holds 93,331,666 shares in Calibre, representing approximately 30.08% stake. This is excluding any shares in Calibre that may be issuable on the conversion of the debentures or the abovementioned additional payment.

Per the investor rights agreement between the two parties, as long as B2Gold holds at least 10% Calibre’s shares, it will have pro rata participation rights and piggyback registration rights. Additionally, for so long as B2Gold holds at least 5% of the Calibre Shares, it has the right to nominate one director to the Calibre’s board of directors, with the initial B2Gold nominee being Dale Craig, vice president, operations.

Given that B2Gold has become Calibre's largest shareholder and with positions on its advisory board and board of directors, the company will remain involved with the Nicaraguan operations. The La Libertad and El Limon Mines have been an important contributor to the local and national economies, accounting for a major percentage of the country's gold exports. Gold currently ranks third in Nicaragua’s main exports.

With Calibre and the combined Nicaraguan management team focusing on these mines and other opportunities in the country, B2Gold will concentrate on optimizing production at its other existing mines in Mali, Namibia and the Philippines. It will also work toward developing its impressive pipeline of development and exploration projects. Additionally, B2Gold will continue to pursue additional greenfield and advanced exploration opportunities.

B2Gold will benefit from efforts to reduce debt and higher gold prices. Further, the Fekola Mine expansion and continued pursuit of growth through exploration, development and expansion of existing projects positions the company well for growth.

B2Gold’s shares have gained 20.0% in the past year, compared with the industry’s growth of 48.6%.

Zacks Rank & Other Key Picks

B2Gold currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks in the Basic Materials sector are The Scotts Miracle-Gro Company SMG, Agnico Eagle Mines Limited AEM and Royal Gold, Inc RGLD. While The Scotts Miracle-Gro Company and Agnico Eagle Mines sport Zacks Rank #1, Royal Gold carries a Zacks Rank #2 (Buy).

Scotts Miracle-Gro has an expected earnings growth rate of 21.3% for fiscal 2019. The company’s shares have surged 38% in the past year.

Agnico Eagle has an estimated earnings growth rate of 158.6% for the current year. Its shares have moved up 41% in the past year.

Royal Gold has a projected earnings growth rate of 82.1% for fiscal 2020. The company’s shares have rallied 48% in a year’s time.

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