Pat McKeough recently replied to an Inner Circle member seeking an opinion on B2Gold Corp. The international miner saw its cash flow double in the quarter on both production and price increases, says Pat.
Q: Pat: Thanks for all your help over the years with my questions. What do you think about B2Gold?
A: B2GOLD CORP. (symbol BTO on Toronto; www.b2gold.com) owns four mines: the Limon and Libertad gold mines in Nicaragua; the Otjikoto mine in Namibia and the Masbate mine in the Philippines. The company also has a mine under construction in Mali. As well, B2Gold holds exploration and development properties in Burkina Faso, Mali, Colombia, Nicaragua and Finland.
Bema Gold’s management team formed B2Gold after Kinross Gold bought Bema in early 2007.
In 2013, the company completed its $1.1 billion purchase of CGA Mining (symbol CGA on Toronto). CGA owned the Masbate gold mine in the Philippines.
B2Gold produced a record 135,242 ounces of gold in the three months ended June 30, 2016, up 11.2% from 121,566 ounces a year earlier. The increase in gold production is primarily attributable to stronger operational performance at the Masbate mine in the Philippines. The higher overall output, plus higher gold prices, doubled cash flow per share to $0.08 U.S. from $0.04 U.S.
The real outlook for mining stocks
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Mining Stocks: 2016 production to reach 510,000 ounces
The company will likely produce between 510,000 and 550,000 ounces this year. B2Gold’s output could jump to as high as 950,000 ounces in 2017 if it successfully completes its project at the Fekola site in Mali. A 350,000-ounce-per-year mine is now under construction with completion scheduled for late 2017.
Operating in the Philippines, Nicaragua, Nambia and elsewhere in Africa adds political risk. But B2Gold’s management team has successfully dealt with those challenges before. It built Bema Gold into a $3.5 billion company before Kinross took it over. Part of that operation’s success were three major gold discoveries: Refugio and Cerro Casale in Chile and Kupol in Russia.
B2Gold trades at 9.5 times the company’s forecast 2016 cash flow of $0.31 U.S.
Inner Circle recommendation: HOLD for aggressive investors.
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Thanks for the update. This company should continue to gain as gold prices move higher. But there are less risky choices for gold bugs.
I appreciate the advice on B2Gold. I am interested in gold but at this point in my working life, I can not afford the volatility.