B2Gold Reports Record Low Cost with Record High Output

B2Gold Reports Record Low Cost with Record High Output

Price $4.17                      Recent Purchase                       November 1, 2021

  • 4.3% dividend yield.
  • One of the lowest AISC in history, at $788/oz.
  • Significant ESG progress with >95% of the workforce is local, and solar initiatives to reduce heavy fuel consumption.
  • Efficiency increases, and significant expansion opportunities are available at existing sites.
  • Greenfield expansion possibilities in Finland and Uzbekistan.

Investment Thesis

B2Gold (TSX: BTO, NYSE: BTG) is a gold mining firm based in Canada with some of the lowest all-in sustaining costs (AISC) per ounce. Operating around the world in a diverse set of mines, with significant ESG goals.

BTG boasts the highest dividend yield in the sector, massive cash flow growth, and significant opportunity beyond its current operations. For this reason, we believe that BTG is an excellent choice for both capital appreciation and growth.

Projects

BTG operates 3 mines, the Fekola mine in Mali, the Otjikoto mine in Namibia, and the Masbate mine in the Philippines. On top of the 2 operational mines, BTG has several mines within various stages of development. Mines in active development are the Gramalote mine in Columbia, a joint venture with 50% ownership, and the Kiaka mine in Burkina-Faso.

BTG outputted approximately 1,040,737 oz of gold in 2020, with an average all-in sustaining cost of $788/oz. This is among the lowest in history and certainly one of the best in the sector.  

Mine

Location

All in Sustained Cost (AISC)

Estimated Mineral Resources (thousands of Oz)

2021 Estimated Output (full ownership basis, thousands of Oz)

Fekola

Mali

$750/oz

4,220 kOz

540 kOz

Otijikoto

Namibia

$850/oz

790 kOz

195 kOz

Masbate

Philippines

$970/oz

2,170 kOz

205 kOz

Kiaka

Burkina-Faso

N/A

5,380 kOz

Development

Gramalote

Colombia

N/A

4,060 kOz

Development

Attributable Production from mines not operated, but at least partially owned by, BTG

$1,100/oz

 

55 kOz

Total 2021 Estimated Output

995 kOz

The 5-year average estimated output from 2021 and beyond is 970 kOz a year, which could be raised to push output to over 1,000 kOz should the expansions planned to be successful. The largest of the planned expansions are in the Fekola mine, in which tests are underway to increase the potential output capacity per year. Additionally, Fekola began to access new mineral veins nearby the main site, in which the output will see a boost in Q3 2021 as this comes online.

The 2021 exploration budget is $66 million, with most of it going toward the existing projects in development and some exploration into existing mines for expansion.

The Gramalote project in Columbia is still in its initial stages of development, with the final feasibility study expected to be completed in Q2 2022. However, the Gramalote project is underway in other ways, with road optimization, design, river deviation planning, and infrastructure layout.

The Kaika project in Burkina-Faso is much further along, with initial construction currently active. Currently, local fuel prices coupled with plans for solar energy mean that the AISC of the Kaika project is lower than previously expected.

BTG has two unnamed mines in exploratory stages, one in Finland and one in Uzbekistan. Both would be grassroots operations, with the Finland mine being a joint-venture and the Uzbekistan mine being an unexplored area next to the Muruntau “super-mine.” 

ESG

The mining industry is an environmentally and previously socially detrimental one. BTG takes significant steps to improve the lives of local workers, with 96.7% of the local workforce being from the area in which the mine is located. Additionally, 55% of senior management roles are filled with locals from the operations areas. Although vaccine rollout in Africa and the Philippines have stalled, BTG is working with local governments to provide funding, technical support, and management of ICU equipment, vaccines, and PPE equipment.

BTG maintains a climate risk management plan, which includes rehabilitating previous mine sites worldwide with the reintroducing important fauna and flora. For example, in Mali, the solar plant powering the Fekola mine is online, reducing the heavy fuel consumption of the mine by over 10 million liters per year.

Risk

Mali and Burkina-Faso are two nations with significant political strife and significant Islamic State presence. While the United Nations and several NATO states spend significant resources to keep the peace in the region, it is important to note the unpredictability of active conflict zones.

BTG is exposed to the prices of gold. Should the price of gold become volatile or drop significantly, it could threaten operations at its more expensive locations.

Metrics

BTG maintains one of the highest dividend yields in the sector, at 4.3%. Management expects this to stay this way for the following year, as BTG has significant free cash flow, and the price of gold is currently quite high. In the last 5 years alone, BTG has seen a 513% increase in operating cash flow.

In 2021, BTG expects to see record gold production, which should only increase as expansions and new mines come online.

B2Gold (BTG)

E2021

E2022

E2023

Price-to-Sales

2.7

2.6

2.7

Price-to-Earnings

10.0

9.2

10.2

EV/EBITDA

4.1

3.7

4.4

Estimated Next 12 Months

Dividend Yield

Price-to-Sales

Price-to-Earnings

B2Gold (BTG)

4.3%

2.7

10.2

Gold Fields (GFI)

3.1%

2.1

10.2

Pan American Silver (PAAS)

1.5%

2.7

15.1

Barrick Gold (GOLD)

2.5%

2.9

15.7

Newmont (NEM)

3.8%

3.7

17.3

Nomad Royalties (NSR)

2.4%

7.9

20.8

Silvercrest Metals (SILV)

0.0%

Neg

252.1

Dundee Precious Metals (DPMLF)

1.8%

2.0

7.1