(BTG - Free Report
) announced year-over-year growth of 98% in gold production and rise of 73% in gold revenues for the second quarter. Further, gold production was record 240,093 ounces in the quarter, 7% above budget, driven by continued strong performances of the Fekola Mine in Mali, Masbate Mine in the Philippines and the Otjikoto Mine in Namibia.
Consolidated gold revenues came in at $285 million, a significant increase of 73% over the prior year. Gold sales were at 220,738 ounces at an average price of $1,290 per ounce compared with 131,737 ounces at an average price of $1,247 per ounce in the prior year quarter. The year-over-year improvement in overall revenues came on the back of new production from the Fekola Mine and an increase of 3% in the average realized gold price, partially offset by lower sales volumes due to the timing of gold shipments from the Otjikoto and Masbate mines.
The new Fekola Mine, which is in its second full-quarter of commercial operations, is performing ahead of plan. It produced 112,644 ounces of gold in the quarter or 11% above budget. Backed by its strong year-to-date performance, B2Gold hiked Fekola’s annual production guidance to 420,000-430,000 ounces of gold from the previous 400,000 to 410,000 ounces.
Production at the Masbate Mine increased 9% and came in line at the Otjikoto Mine, both compared with the prior-year quarter levels. Both exceeded their targeted production levels for the quarter.For the Masbate Mine, the company now anticipates full-year production to be at or above the top end of its original annual production guidance range of between 180,000 and 190,000 ounces of gold, at cash operating costs of between $675 and $720 per ounce and AISC of between $875 and $925 per ounce.
For 2018, production from the Otjikoto Mine is expected between 160,000 ounces and 170,000 ounces of gold, primarily from the Otjikoto Pit, at cash operating costs in the range of $480-$525 per ounce and AISC in the range of $700-$750 per ounce.
A Record First-Half Performance
Gold production was a record 479,777 ounces in the first half of 2018. The figure was 89% higher than the production of 225,593 ounces in the comparable period last year and also came in 7% above the company’s budget.
During the first half B2Gold sold a record 480,575 ounces of gold at an average price of $1,309 per ounce, resulting in record revenues of $629 million. Compared with the prior year, revenues soared 103%, primarily attributable to the new production from the Fekola Mine, an increase of 7% in the average realized gold price and the positive impact from the timing of gold shipments (including 27,450 ounces sold in the first quarter which related to Fekola's Dec 31, 2017 finished gold inventory).
Projects Higher Gold Production for 2018
For 2018, the company now projects a higher annual gold production between 920,000 ounces and 960,000 ounces compared with its previous guidance between 910,000 ounces and 950,000 ounces. From 2017 levels, this guidance reflects an approximately 300,000 ounces increase.
Cash operating costs are expected between $505 and $550 per ounce and all-in sustaining costs (“AISC”) are expected to range between $780 and $830 per ounce.
With the new Fekola Mine contributing to the production, the resulting increase in production levels along with low costs is likely to boost B2Gold's production, revenues, cash from operations and cash flow in the years ahead. On average over the next three years, beginning in 2018, the company projects per annum gold sales revenues of approximately $1.2 billion, cash flow from operations of approximately $0.5 billion and a significant increase in free cash flow.
The company intends to remain focused on continuing its impressive operational and financial performance from existing mines. Simultaneously, it will try to reduce its debt burden, explore expansion opportunities at existing operations and continue with aggressive exploration and development programs to unlock the potential of its existing portfolio of properties.
B2Gold has underperformed the industry
over the past year. Its shares declined 5.7% compared with the industry’s drop of 0.2%.
B2Gold currently carries a Zacks Rank #3 (Hold).
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