B2Gold (BTG) Gains From Focus on Mine Growth Amid Cost Woes

Zacks Equity Research
·4-min read

B2Gold Corp. BTG is benefiting from its ongoing strategy of maximizing profitable mine production, moving forward with its remaining development and exploration projects.

However, inflationary costs, primarily fuel and labor, will hurt margins in the upcoming quarters. Nonetheless, B2Gold has a strong balance sheet and maintains a robust cash position.

Ongoing Strategy Boosts Results: The company will benefit from its ongoing strategy of maximizing profitable mine production, moving forward with its remaining development and exploration projects, and evaluating additional exploration, development and production prospects.

The Goose project is expected to produce its first gold in the second quarter of 2025, with full production beginning in the third quarter of the same year. B2Gold expects gold production from the Goose Project to be 300,000 ounces per year for the first five years of operation.

Pick-Up in Gold Price Bodes Well: In the major part of 2023, gold price was affected by a strong U.S. dollar and high interest rates. However, prices have picked up in 2024, as traders see a potential for the Fed to begin lowering rates. Since the start of 2024, gold prices have risen 13.4%. Remaining consistently above the $2,000-per-ounce mark, the yellow metal peaked at an unprecedented $2,431.55 per ounce in April.

Several factors have contributed to this upward trajectory, including increased geopolitical tensions, a depreciating U.S. dollar, the potential for monetary policy easing and continuous purchasing by central banks. Physical demand has also been strong in China of late since the weaker yuan, volatile stock market and comparatively low deposit rates have led investors to explore alternatives for their savings.

Currently, the gold price is around $2,339 per ounce. This pick-up in the price of gold is likely to improve B2Gold’s results in the upcoming quarters.

Effective Acquisitions Support Growth: B2Gold completed the acquisition of Oklo Resources Limited in September 2022. The acquisition provides B2Gold with an additional landholding of 1,405 square kilometers, covering highly prospective greenstone belts in Mali, West Africa, including the Dandoko Project, which now forms part of the Fekola Complex.

With the acquisition of Oklo and its flagship Dandoko project, the company is continuing to evaluate its options for the timing and sourcing of material on a regional basis from all deposits within the Fekola Complex area (including Fekola, Cardinal, the Anaconda Area, Bakolobi and Dandoko).

On Feb 13, 2023, the company inked a deal worth C$1.1 billion ($820 million) to acquire Sabina Gold & Silver Corp. Per the deal, B2Gold will have its first mining assets in Canada and receive the full ownership of Sabina’s Back River Gold District, including five mineral claims spanning 80 km. Among these, the Goose project is the most advanced, and is fully permitted and construction-ready. It has been de-risked with substantial infrastructure.

BTG intends to increase production in the first five years of the mine life by accelerating the Goose project's underground mine development. The transaction will boost operational and geographic diversification by combining B2Gold's stable production base with a high-grade, advanced development asset in a Tier-1 mining jurisdiction.

Elevated Costs Act as Headwinds

B2Gold is witnessing cost inflation pressure across all sites, which is impacting input prices, including reagents, fuel and consumables. For 2024, cash operating costs are projected between $835 and $895 per ounce. AISC is expected to be $1,360-$1,420 per ounce. Both are likely to be higher than the 2023 reported levels.

Price Performance

B2Gold’s shares have lost 24.9% in the past year against the industry’s growth of 14.1%.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the basic materials space are Carpenter Technology Corporation CRS, Ecolab Inc. ECL and ATI Inc. ATI. CRS sports a Zacks Rank #1 (Strong Buy) at present, and ECL and ATI have a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Carpenter Technology’s 2024 earnings is pegged at $4.18 per share. The consensus estimate for 2024 earnings has moved 6% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 15.1%. CRS shares have gained 134.9% in a year.

The Zacks Consensus Estimate for Ecolab’s 2024 earnings is pegged at $6.59 per share, indicating an increase of 26.5% from the prior year’s reported number. It has an average trailing four-quarter earnings surprise of 1.3%. ECL shares have gained 34.5% in a year.

The Zacks Consensus Estimate for ATI’s 2024 earnings is pegged at $2.41 per share. The Zacks Consensus Estimate for ATI’s current-year earnings has been revised 3% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 8.3%. The company’s shares have rallied 65.9% in the past year.

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