A Member of Pat McKeough’s Inner Circle recently asked for his advice on a gold producer that has more than doubled its production from a year ago. It operates five properties, in Mali, the Philippines, Nicaragua and Namibia.
Pat highlights the company’s positive cash flow, sound balance sheet and experienced management team as good fundamentals. The company plans to produce as many as 950,000 ounces of gold in the next year and the stock trades at just 5.8 times its forecast cash flow. But the miner nonetheless faces challenges, says Pat.
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B2Gold Corp (BTO on Toronto; www.b2gold.com) owns five mines: the Limon and Libertad gold mines in Nicaragua; the Otjikoto mine in Namibia; the Masbate mine in the Philippines; and the new Feloka mine in Mali.
B2Gold also holds a 49% interest in Colombia’s Gramalote project.
The company was formed by the management team of Bema Gold after Kinross Gold bought out that mining firm in early 2007.
Six years later, in 2013, B2Gold completed its $1.1 billion purchase of CGA Mining (symbol CGA on Toronto). CGA owned the Masbate gold mine in the Philippines.
B2Gold successfully completed construction of the Fekola mine in late September 2017. That was more than three months ahead of schedule. The mine achieved commercial production on November 30, 2017.
The company produced a record 242,040 ounces of gold in the three months ended September 30, 2018 (including 107,002 ounces from the Fekola mine). That’s up 127.5% from 106,412 ounces a year earlier.
Mining Stocks: Increased future gold production offers aggressive upside
For 2018, the Fekola mine should produce between 400,000 and 410,000 ounces of gold. That should push B2Gold’s overall output as high as 950,000 ounces.
The company’s balance sheet is sound: it holds cash of $354.8 million U.S., or $0.38 U.S. a share, and its total debt of $746.9 million U.S. is a manageable 25% of its market cap.
Operating in Mali, the Philippines, Nicaragua and Namibia adds political risk. But B2Gold’s management team has successfully dealt with those types of challenges before. Those same mining veterans built Bema Gold into a $3.5 billion company before Kinross took it over. Their three major gold discoveries—Refugio and Cerro Casale in Chile, and Kupol in Russia—contributed to that success.
Positive cash flow and rising output give B2Gold speculative appeal. The stock trades at just 5.8 times the company’s forecast 2019 cash flow of $0.50 U.S. a share.
Recommendation from Inner Circle: B2Gold Corp. is okay to hold for aggressive investors.
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