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Hold B2Gold

- By Alberto Abaterusso

On Wednesday, shares of B2Gold Corp. (BTG) (BTO.TO) closed flat at $2.86 on the American Stock Exchange and fell 1.05% to 3.78 Canadian dollars ($2.85) on the Toronto Stock Exchange following the release of gold production and sales figures for 2018.

B2Gold is a strong, performing operator in the industry with productive assets in the Americas, Africa and the Philippines.


The Canadian miner closed 2018 with 51% growth to a record 953,504 ounces of consolidated gold production and an impressive 92% upside to a record $1.2 billion in consolidated gold revenue. The targets were reached thanks to strong performance at the Fekola mine in Mali and new record production established at the Masbate Mine in the Philippines. Fekola and Masbate exceeded the upper limits of their guidance ranges with 439,068 ounces and 216,498 ounces of gold.

The Otjikoto mine in Namibia performed as expected, but its high gold recovery rates were not sufficient enough to offset production declines recorded in Nicaragua as a result of national, political and social unrest.

Catalysts

The miner has several catalysts that could boost its performance.

The Fekola Mine is ahead in regard to mill throughput and gold recovery rates. The process of higher-than-budgeted tonnage should move toward medium and high-grade ore. The resource model will continue to perform as planned, pushing costs lower.

The Colorado Pit of the Masbate Gold Mine could continue to surprise workers by delivering high tonnage of oxide ore characterized by superior gold grade. This will also result in better gold recovery rates and lower operating costs.

The company will develop a higher-grade ore pit at the Otjikoto Gold Mine, improving production and costs beginning in the second half of 2019.

In the current quarter, the production from La Libertad Gold Mine should benefit from stopes in certain areas of the Jabali Antenna underground development project, where the access to mining zones have been extended. Further, B2Gold anticipates the Jabali Antenna Pit will start producing in the second half of the year.

Following the end of the political unrest in Nicaragua and the resolution of local employment issues, the El Limon Mine is now back to normal production rates and the development of a new pit has also begun. The asset should deliver in terms of higher output.

Looking ahead, the company is targeting 2019 gold production of 935,000 to 975,000 ounces.

Valuation

Wall Street analysts have given the stock a buy recommendation rating and an average price target of $5.19 per share. The target price reflects a nearly 80% upside from the closing share price on Wednesday, which was below the 50-, 100- and 200-day simple moving average lines. The 52-week range is $2.1 to $3.3 on the U.S. exchange and CA$2.77 to CA$4.06 on the Canadian exchange.

Source of the chart: Yahoo Finance

The 14-day relative strength index of 53.5 suggests the stock is neither overbought nor oversold.

B2Gold has a price-book ratio of 1.68 versus an industry median of 1.74 and an EV-to-EBITDA ratio of 9.29 versus an industry median of 9.3.

Since shares are not cheap, I would suggest holding the stock to take advantage of its next rally.

The release of financial results for fourth-quarter and full fiscal 2018 could push the share price over the 52-week high. If that happens, I would consider trimming my position. B2Gold's current share price is about 120% off the value that one share represents in terms of expected production for full-year 2019 valued at a long-term gold price of $1,300 an ounce.

My prediction stems from the possibility of the miner posting record annual consolidated operating cash flow of about $450 million as well as beating earnings estimates. B2Gold is expected to report quarterly results on March 12, and the precious metal is projected to remain supportive of the share price in the meantime.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.