B2Gold Corp

B2Gold Corp (TSX: BTO) is a Canada based low-cost international senior gold producer. The company has three operating gold mines and numerous exploration and development projects in various countries including Philippines, Namibia, Mali and Colombia.

Key Highlights

• For Complete FY-2020, the Company has forecasted total consolidated gold production to be in the range of 1,000,000 and 1,055,000 ounces, with total consolidated cash operating costs expected to be at or below the low end of its guidance range of USD 415 and USD 455 per ounce.

• Based on forecasted total gold production assumptions, including a gold price of USD1,900 per ounce for the balance of 2020, the Company expects to generate cash flows from operating activities of more than USD 900 million in 2020.

• The Company is almost debt-free. As on 30September 2020, the company has a total long-term debt of only USD 25.8 million while the cash balance stood at USD 365 million. Recently, the company repaid an outstanding Revolving Credit Facility balance of USD 425 million, and now it has the full amount of USD 600 million in RCF available.

• Based on the Company's stable net cash position, robust operating results and the current higher gold price environment, the quarterly dividend rate was increased in Q3 2020 by 100% on Y-o-Y basis to USD 0.04 per common share.

Financial Overview of Q3 2020

(Expressed in thousands of United States dollars, except per share amounts)

Source: company

• During Q3 2020, consolidated gold production of 248,733 ounces from the three operating mines reflected a significant increase of 17% over the Q3 2019.

• The Company recorded consolidated gold revenue of USD 487 million in Q3 2020, a significant increase of USD 176 million or 57% over the same period in the previous year. 

• The Company posted a net income attributable to the shareholders at USD 263 million in Q3 2020 as against USD 56 million in pcp on the back of higher revenues and reversal of impairment of assets.

• Consolidated cash flow provided by operating activities from the Company's three operating mines was USD 301 million, reflecting a significant increase of USD 133 million or 79% over Q3 2019.

Risk associated with Investment

The company’s financial performance is mostly dependent on the price of gold, which directly affects the company’s profitability, margins and cash flows. The price of gold is subject to volatility. It is affected by various factors, such as the strength of the US dollar, Interest rates, Inflation rates, demand and supply, all of which are beyond the company’s control.

Valuation Methodology (Illustrative): EV to EBITDA

(Note: All forecasted figures and peers have been taken from Thomson Reuters).

Stock recommendation

We are bullish on the gold prices and believe that despite a little pullback, gold, as an asset class would continue to remain in the limelight as uncertainty over the global economic growth is still prevailing. Further ETFs are showing no sign of decline in gold buying, which is likely to increase the gold prices higher. We believe that average realized gold prices per ounce would continue to expand, which would lead to margin expansions. For FY-2020, the Company has also forecasted total consolidated gold production to be in its guidance range of between 1,000,000 and 1,055,000 ounces, and the current production numbers reflect that they will achieve these figures. Therefore, based on the above rationale and valuation, we have given a ‘Hold’ rating at the closing price of CAD 8.41 on November 4, 2020. We have considered Endeavour Mining Corp, Kirkland Lake Gold Ltd, Yamana Gold Inc etc. as a peer group for the comparison.

BTO daily technical chart. Source: Refinitiv (Thomson Reuters)

Disclaimer

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