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Mine Expansions & Low Debt Aid B2Gold (BTG), Cost Woes Prevail

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On Mar 8, we issued an updated research report on B2Gold Corp (BTG - Free Report) . The company is anticipated to benefit from the solid performance of its operating mines, as well as continued focus on mine expansion and exploration activities. However, projected higher costs and muted production forecast for the current year might impact its performance.

Impressive Q4 & 2020 Results

B2Gold reported fourth-quarter 2020 adjusted earnings per share of 14 cents, reflecting a year-over-year surge of 133%, driven by rising production and higher gold prices. The company generated record revenues of $480 million, suggesting year-over-year growth of 53%.

In 2020, B2Gold reported adjusted earnings per share of 49 cents, which jumped a whopping 123% year on year. The company delivered record total gold production of 1,040,737 ounces, near the upper end of its projected range of 1,000,000 ounces to 1,055,000 ounces. This marks the company’s 12th consecutive year of record annual consolidated gold production. Production was also 17% higher than the 2019 levels, primarily backed by the Fekola Mine in Mali.

Solid Balance Sheet to Aid Growth

The company’s long-term debt was $76 million as of Dec 31, 2020, substantially down from $236 million as of Dec 31, 2019. B2Gold had cash and cash equivalents of $480 million at the end of 2020 compared with $141 million at the end of 2019. It estimates to generate cash flows of around $630 million from operating activities in 2021. Hence, the company is well placed to further reduce debt levels backed by its strong cash position.

Mine Expansion to Drive Performance

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. In 2020, the Fekola mine had a record annual gold production of 622,518 ounces, exceeding the upper end of its guided range (of between 590,000 and 620,000 ounces). 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. At the Otjikoto mine, development of the Wolfshag underground mine continues to progress well and is on schedule.

Also, B2Gold’s Colombia-based Gramalote Joint-Venture Project will be a growth driver as Gramalote has the potential to become a large, low-cost open-pit gold mine. The company intends to pursue additional internal growth through further exploration, development and expansion of existing projects. B2Gold is planning for heavy exploration this year, with an approximately $66-million budget, including $25-million high-quality targets for the ongoing grassroots exploration programs.

Higher Cost, Lower Production Forecast for 2021 to Dent Margins

For 2021, the company projects cash operating costs to lie between $500 per ounce and $540 per ounce. Meanwhile, AISC is anticipated to be within $870 per ounce to $910 per ounce. Both are estimated to be higher than 2020 due to the planned lower production and higher planned stripping activities at Fekola, rising forecast fuel and labor costs in Mali, and the drawdown of ore stockpiles at Otjikoto.

B2Gold forecasts current-year gold production between 970,000 ounces and 1,030,000 ounces. This marks a decline of 5% from the 2020 levels due to lower expected production from Fekola in 2021 (as Phase 5 and 6 of the Fekola Pit are developed in the first half of 2021).

Low Gold Price is a Concern

In 2020, gold prices gained on apprehensions regarding the coronavirus pandemic. However, gold prices have dipped lately and are hovering below $1,700 per ounce on prospects of a swift economic recovery, stimulus measures and vaccine roll-outs. A stronger dollar and high government bond yields have also put pressure on the precious metal. Hence, a drop in gold prices might dent B2Gold’s profitability and cash flow.

Price Performance

Over the past year, B2Gold’s shares have gained 6.8% compared to the industry’s growth of 9.7%.

Zacks Rank & Stocks to Consider

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

Better-ranked stocks in the basic materials space include Impala Platinum Holdings Limited (IMPUY - Free Report) , Fortescue Metals Group Limited (FSUGY - Free Report) and BHP Group (BHP - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 195.9% for the current fiscal year. The company’s shares have surged 84% in the past year.

Fortescue has a projected earnings growth rate of 84.3% for the current fiscal year. The company’s shares have soared 182% in a year’s time.

BHP Group has an estimated earnings growth rate of 65.6% for the current fiscal year. The company’s shares have appreciated 75% over the past year.

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