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Here's Why You Should Hold On to B2Gold (BTG) Stock Right Now

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·5 min read
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B2Gold Corp. BTG is gaining from solid performance across its operating mines as well as continued focus on mine expansion and exploration activities. The company’s strong financial position and higher gold prices are also likely to drive growth.

The company currently carries a Zacks Rank #3 (Hold) and has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has a trailing four-quarter average earnings surprise of 5.2%. In the past five years, B2Gold has registered earnings growth of 65.2%.

Valuation is Inexpensive

The trailing 12-month EV/EBITDA ratio is 4.9 for the company, while the industry's average trailing 12-month EV/EBITDA ratio is 6.3.

Superior Return on Assets

B2Gold currently has a Return on Assets (ROA) of 15.9%, higher than the industry’s 6.1%. An above-average ROA denotes that the company is generating earnings by effectively managing its assets.

Growth Drivers in Place

The company is focused on achieving impressive operational and financial performance from its existing mines, and expanding the Fekola Mine throughput and annual gold production. The mine continued its solid operating performance in first-quarter 2021 with 125,088 ounces of gold production. The Fekola mine expansion to 7.5 million tons per annum (Mtpa) from an annual base rate of 6 Mtpa was completed on Sep 10, 2020. The Fekola mill now has the potential to run above the annualized throughput rate of 7.5 Mtpa. The mine is expected to produce between 530,000 ounces and 560,000 ounces of gold in 2021. In the Otjikoto mine, development of the Wolfshag underground mine continues to progress well and is on schedule. The mine is estimated to produce between 190,000 and 200,000 ounces of gold, as high-grade ore is scheduled to be sourced from Phase 3 of the Wolfshag Pit in the second half of the current year. The Masbate Mine is likely to produce between 200,000 and 210,000 ounces of gold.

Also, B2Gold’s Colombia-based Gramalote joint-venture (JV) project will be a growth driver as it has the potential to become a large, low-cost open-pit gold mine. The project partners are currently reviewing a revised feasibility study with total $86-million budget, which will enable the final feasibility study to be completed by the end of first-quarter 2022.

In 2021, B2Gold expects to generate cash flows of around $630 million and maintain a robust financial position on improved gold production and higher gold price forecast. Also, the company aims to reduce debt levels backed by its strong cash position. Management is planning heavy exploration in this year with an approximately $66-million budget, including a record $25 million allocated to high-quality targets for the company's ongoing grassroot exploration programs.

Gold prices had been gaining on economic uncertainty amid the pandemic. Even though gold prices have dipped lately, the impending demand-supply imbalance will boost prices eventually.

B2Gold’s gold production is anticipated to increase significantly during the second half of the current year when mining reaches the higher-grade zones of the Fekola Pit, and mining at Otjikoto reaches the higher-grade zone at the base of the Wolfshag Pit. The company projects current-year gold production to be between 970,000 ounces and 1,030,000 ounces.

Bottom Line

Investors might want to hold on to the stock, at present, as it has ample positive prospects of outperforming peers in the near future.

Price Performance

The stock has depreciated 22.6% over the past six months compared with the industry’s loss of 7.7%.

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Zacks Investment Research

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Stocks to Consider

Better-ranked stocks in the basic materials space include Univar Solutions Inc. UNVR, Nucor Corporation NUE and Cabot Corporation CBT. While Univar Solutions and Nucor sport a Zacks Rank #1, Cabot carries a Zacks Rank of 2, currently.

Univar has a projected earnings growth rate of 35.2% for 2021. The company’s shares have rallied around 53% in a year’s time.

Nucor has a projected earnings growth rate of 259.9% for the current year. The company’s shares have soared around 130% over the past year.

Cabot has an expected earnings growth rate of around 126% for the current fiscal year. The company’s shares have surged 60% in the past year.

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