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B2Gold Lifts Fekola's Mineral Resource on Solid Infill Drilling

Zacks Equity Research

B2Gold Corp BTG has updated its estimates for Fekola Mineral Resource, including a significant increase in Indicated Mineral Resources at the Fekola Mine following a successful infill drilling program in 2019.

Infill Drilling Boosts Fekola’s Prospects

Last year, B2Gold completed more than 25,000 metres of infill drilling at the Fekola mine, in a bid to convert the existing Inferred Mineral Resource category to the Indicated Mineral Resource category. Consequently, as of Dec 31, 2019, B2Gold increased the indicated category to 2,675,000 ounces of gold, while the inferred category went up to 541,000 ounces. These estimates are compared with the 4,383,000 ounces of gold production in the indicated resource category and 507,000 ounces in the inferred category, reported as per sensitivity case in the June 2015 Fekola Optimized Feasibility Study. Year over year, the updated Indicated Mineral Resource estimate has increased by 1,290,000 ounces of gold.

The Fekola Indicated Mineral Resource estimate will provide the basis for an updated design pit and the new Fekola Probable Mineral Reserve estimate, likely to be completed during the current quarter.

As of Dec 31, 2019, the updated Indicated Mineral Resource estimate stands at 110,600,000 tons at 1.70 grams per ton (g/t) gold, for a total of 6,052,000 ounces of gold constrained within a $1,500 per ounce gold pit shell above a cut-off grade of 0.5 g/t gold.

The Fekola mine in Mali produced its first million ounces of gold last December, following 2.5 years of production. The mine has produced 1,006,000 ounces of gold since it commenced operations in 2017.

2020 Exploration Plans at Fekola & Anaconda

In 2020, exploration at Fekola will be focused on extending the deposit to the north and south, and near the surface area while also testing for additional mineralized zones in the east and west of the Fekola deposit.

In 2019, Anaconda mine completed the exploration of more than 45,000 metres of drilling. This was mainly focused on increasing saprolite resources at the Adder and Mamba zones, and further testing the sulphide mineralization in the Mamba zone. With the recent drilling extension, Mamba zone has the potential to become a substantial new gold deposit for B2Gold near the Fekola Mine.

Further, the current-year exploration will focus on expanding the saprolite resources within the Anaconda Area, including the Adder and Mamba Zones. The exploration budget for both Fekola deposit and the Anaconda is around $18 million for this year.

Fekola Expansion Project Shines Bright

The expansion project at the Fekola mine is likely to enhance the mine’s processing throughput to 7.5 million tonnes per annum (Mtpa) from the base rate of 6 Mtpa. This expansion will likely conclude by third-quarter 2020. Also, the mine is projected to produce between 590,000 and 620,000 ounces of gold this year. B2Gold plans to invest $50 million over a period of approximately 18 months for the expansion of the mine, which will allow the company to produce around 5 million ounces of gold over the new mine life of 12 years.

The company announced that a new large-scale off-grid Fekola solar plant project is scheduled for completion this August. The project is estimated to slash Fekola's processing costs by approximately 7%.

Rising Gold Prices Boost B2Gold’s Near-Term Prospects

Backed by solid gold production in 2019 and rising gold prices, the company has issued gold production guidance between 1,000,000 ounces and 1,055,000 ounces for 2020. The current-year consolidated cash costs are also expected to be lower than 2019. For 2020, B2Gold expects to generate cashflows from operating activities of roughly $700 million factoring a gold price of $1,500 per ounce.

The company will continue to focus on maximizing profitable production from its mines, expansion of the Fekola Mine throughput, and exploration and development of the existing projects while reducing debt levels.

So far this year, gold prices have gained 2.4% following a 19% gain in 2019. Uncertainty on the U.S-Sino trade front, geopolitical concerns between the United States and the Middle East, the Brexit turbulence, slowdown in manufacturing activity, bleak global economic outlook and rate cuts collectively compelled investors to seek safe-haven investment options like gold in 2019.  These factors have been contributing to the rally in B2Gold’s share-price performance.

Share Price Performance

In the past year, shares of B2Gold have appreciated 53.8%, outperforming the industry’s gain of 34.7%.

Zacks Rank & Stocks to Consider

B2Gold currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Mining – Gold industry are Osisko Gold Royalties Ltd OR, Pretium Resources Inc. PVG and Royal Gold, Inc. RGLD. While Osisko Gold flaunts a Zacks Rank #1 (Strong Buy), Pretium Resources and Royal Gold carry a Zacks Rank of #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Osisko Gold has a projected earnings growth rate of 15.96% for the current year. The company’s shares have gained 5.8% over the past year.

Pretium Resources has an estimated earnings growth rate of a whopping 107% for the ongoing year. Its shares have appreciated 58.7% in a year’s time.

Royal Gold has an estimated expected earnings growth rate of 83.4% for fiscal 2020. The company’s shares have rallied 38.4% over the past year.

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