B2Gold Corp.

Double-digit Revenue Growth Aided by Higher Realization Price: B2Gold Corp. (TO: BTO) is a low-cost Canada based global gold producing company and operates through three gold mines and several exploration and development projects globally.

Key Highlights:

• The company is increasing its capacity from existing 6 mtpa to 7.5 mtpa in its Fekola Mine located in Mali. The company derives close to 47% of its revenue from Fekolka mine. The business is in the process of creating one of the largest off-grid hybrid solar/HFO plant in the world with a capacity of 30-megawatt solar component combined with 64 MW of HFO and diesel-generating capacity which is expected to deliver the best economic result. The development is expected to be completed in Q3FY20.
• In FY19, the company reported margin improvement; operating margin stood at 43.96%, improved from 27.21% in the previous financial year. Long-term debt reduced to US$235.8 million from US$454.5 million in FY18.
• The company expects its gold production within the range of 1,000 Koz to 1,055 Koz with projected revenue of US$1.5 billion for FY20. Cash from operating activities is expected at US$700 million, while ASIC is expected in between US$780/oz to US$820 /oz.
• On 15^th October 2019, BTO completed the sale of its Nicaraguan Assets and recorded a gain on sale of US$40 million.

FY19 Financial Highlights: BTO declared its full year results, wherein the company reported its revenue of US$1,156 million, as compared to US$1,051 million in FY18. The company sold 827,800 ounces of gold at an average realized price of US$1,396 per ounce, as compared to 833,696 ounces of gold with an average realized price of US$1,261 per ounce in FY18. The increase in the revenue was driven by a 10% increase in the average realization. Adjusted net income stood higher at US$237.7 million, as compared to $141.4 million in the previous financial year. At December 31, 2019, the business reported ~25,000 ounces of gold inventory waiting for final processing.

Key Income Statement Highlights for FY19 (Source Company Reports)

Valuation Methodology: EV/EBITDA Based Relative Valuation

EV/EBITDA Based Relative Valuation (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of BTO closed at CAD 4.19 with a market capitalization of CAD 4.32 billion. The stock made a 52-week low and high of CAD 3.12 and CAD 6.52 and is currently trading close to the lower band of its 52-week’s trading range. For 2020, B2Gold remains well positioned for continued strong operational and financial performance improved operational efficiency majorly after the expansion of the Fekola mine. We have valued the stock using EV/EBITDA based relative valuation method. For this, we have considered peers like Kirkland Lake Gold Ltd (TO: KL), Yamana Gold Inc (TO: YRI), Endeavour Mining Corp (TO: EDV), etc., and arrived at a target price which is offering a double-digit upside return (in % terms).  Hence, we have given a ‘Buy’ recommendation on the stock at the closing price of CAD 4.19, up 9.68% as on 16^th March 2020.

BTO Daily Technical Chart (Source: Thomson Reuters)

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