B2Gold Corp. (TSX: BTO) is a gold mining company, which operates in mines and numerous exploration projects and have a presence across four continents in various countries, like Nicaragua, the Philippines, Namibia, Mali, and Burkina Faso. 

Key Highlights:

• Stable Production guidance: For FY22, the company expects its full year production in between 990,000 to 1,050,000 ounces, which is in line with the previous year production of 1,047,414 ounces. The Fekola Mine is expected to report production of 5,70,000 to 6,00,000 ounces while 1,75,000 to 1,85,000 ounces of production is expected from the Otjikoto Mine. Cash flow from operating activities is expected at ~USD 625 million and gold revenue is estimated at ~USD 1.76 billion.

   Source: Company Report

• Significantly higher dividend distribution: In FY21, the company reported a higher dividend payment of USD 168.3 million, as compared to USD 115.2 million in FY20. This is impressive, as most of the companies are lowering their dividend payment in order to retain liquidity. Notably, the stock of BTO also carries a healthy dividend yield of ~3.559% on an annualized basis, which looks attractive considering the persisting interest rate scenario.

• Reported higher mineral reserve: On March 23, 2022, the company reported a higher mineral reserve across the Anaconda area, which comprised of the Menankoto permit and the Bantako North permit and located nearly 20 kilometres from the Fekola Mine. This is including the initial estimates for oxide Indicated Mineral Resources and sulphide Inferred Mineral Resources. Below is the current indicated mineral reserve provided by the company.

 Source: Company Report

Key Financial Highlights: FY 21

FY21 Income Statement Highlights (Source: Company Report)

• BTO announced its full year result, wherein the company posted its gold revenue of USD 1,762.2 million, lower than USD 1,788.9 million in FY20. This decline was primarily attributable to a slower sales volumes of 981,401 ounces v/s 1,006,455 ounces, partially offset by a higher realized gold price of USD 1,796/ounce in FY21 v/s USD 1,777/ ounce in FY20.
• The company reported its gross profit of USD 768.5 million, significantly lower than USD 958.2 million in FY20. This was primarily due to a slightly lower top-line coupled with higher cost of sales.
• The period was marked by higher general & administrative costs, surge in share-based payments, while reported impairment cost amounting USD 5.9 million, as compared to an income from impairment amounting USD 174.3 million in FY20, partially offset by a net gain on disposal of Burkina Faso Assets at USD 22.4 million. This resulted to a decline in operating income of USD 714.6 million, as compared to USD 1,052.9 million in FY20.
• Net income stood lower at USD 460.8 million in FY21, as compared to USD 672.4 million in FY20. This was primarily due to lower operating income, partially offset by lower interest & financing expense coupled with a gain on derivative instruments amounting USD 24.3 million in FY21.

Risk Associated with the Investment:

The company’s revenue is directly related to the international gold prices, and international price volatility would likely to impact the company’s revenue and cash flows.

Valuation Methodology (Illustrative): EV to Sales Based

Analysis By Kaline Group

Stock Recommendation:

The company reported a higher EBITDA margin and net margin of 60.5% and 26.1%, respectively, in FY21, as compared to the industry median of 38.3% and 13.7%, respectively. This indicates better cost structure and is a key positive. We have valued the stock using the EV to Sales-based relative valuation method and have arrived at a single-digit upside (in percentage terms). For the said purposes, we have considered peers like SSR Mining Inc, Endeavour Mining PLC etc. Considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock of BTO at the last closing price of CAD 5.90 on April 01, 2022.

One-Year Technical Price Chart (as on April 01, 2022). Analysis by Kalkine Group

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.