B2Gold Corp.

BTG Details

B2Gold Corp. (NYSE: BTG) is a Vancouver-based gold mining company with three operating gold mines, namely the Fekola in Mali, the Masbate mine in the Philippines, and the Otjikoto mine in Namibia. BTG also has 50% interest in the Gramalote project in Columbia and an 81% interest in the Kiaka project in Burkina Faso. The company also operates other exploration projects in Mali, Burkina Faso, Namibia, Uzbekistan, and Finland. It generates maximum revenue from the Fekola mine segment. As of May 25, 2021, the company’s market capitalization stood at USD 5.55 Billion.

Sale of Toega Property: On April 28, 2021, the company and its 10% partner GAMS-Mining F&I Ltd entered into an agreement with West African Resources Limited to sell its Toega property situated in Burkina Faso. As a result of this transaction, the Company's USD 9 million share of the non-refundable cash payment was credited to the carrying value of the mineral property, and the remaining value of USD 12.00 million has been recognized as an asset held for sale in the Q1FY21 consolidated balance sheet.

Solid Q1FY21 Results: The company reported a 4.73% decline in gold revenues to USD 362.30 million on sales of 202,330 oz of gold at an average price of USD 1,791 /oz in Q1FY21 (ending March 31, 2021) compared to USD 380.29 million on sales of 239,500 ounces of gold at an average price of USD 1588 /oz in Q1FY20 (ending March 31, 2020). Total Gold production of 220,644 oz and consolidated production of 205,643 oz in Q1FY21 were both 9% above budget. The company’s net income increased by 19.06% to USD 98.83 million in Q1FY21 compared to USD 83 million in Q1FY20, primarily due to a decrease in current income tax. As of March 31, 2021, the company had cash and cash equivalents of USD 512.56 million, having an unused revolving credit facility of USD 600 million, with long-term debt of USD 67.02 million.

Key Risks: The company’s gold production from the Fekola mines contributed 59.81%, 46.50%, and 46.04% of the total gold production in FY20, FY19, and FY18, respectively, resulting in significant mine concentration risk. Any adverse event related to the Fekola mine can have a material impact on the operating and financial health of the company.

FY21 Production Guidance by Mine (Source: Company Presentation, March 2021)

Outlook: BTG has guided for total gold production of 970 Koz to 1,030 Koz for FY21 with the cash operating costs to be in the range of USD 500 /oz to USD 540 /oz. The company is projecting to earn a revenue of approximately USD 1.70 billion, assuming the average gold price of USD 1800 /oz for FY21. BTG is estimating its projected cash flows from operating activity to be around USD 630 million for FY21.

Valuation: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

*% Premium/(Discount) is based on our assessment of the company’s FY21 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BTG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BTG has increased by 5.79% in the past three months and is currently inclined towards the lower end of its 52 weeks’ range of USD 4.16 to USD 7.55. The stock is currently trading around 200 DMA. We have valued the stock using the EV/EBITDA multiple-based relative valuation method and arrived at a target price of USD 5.62. Considering the increase in the stock price in the past three months, fluctuation in gold prices, growth potential, and current valuation, we recommend a “HOLD” rating on the stock at the closing price of USD 5.11, down by 4.49% as of May 25, 2021.

* The reference data in this report has been partly sourced from REFINITIV.