B2Gold Corp.

BTG Details

B2Gold Corp, Inc (NASDAQ: BTG) is a Canada-based gold mining company with three gold mines and various exploration projects in Mali, Nicaragua, the Philippines, and Burkina Faso. The company’s operating segments include its mining operations, namely Fekola, Masbate, and Otjikoto, and other development and mineral properties. It generates maximum revenue from the Fekola mine segment. As of 14^th April 2021, the company’s market capitalization stood at USD 4.93 Billion.

Solid FY20 Results: The company reported 55% growth in topline to USD 1.79 billion in FY20 as compared to that of USD 1.16 billion in FY19. The was due to a 27% increase in the average realized gold prices and 22% to the increase in gold volumes sold. The company sold 1,006,455 oz of gold at an average price of USD 1,777 /oz in FY20 as compared to 827,000 oz of gold at an average price of USD 1,397 /oz in FY19. The net income grew by 112% to USD 672 million in FY20 as compared to USD 316 million in FY19.

Key Risks: The total gold production of the company was 1,040,737 oz in FY20, out of which Fekola mine production stood at 622,518 oz or 59.81% of the total production. This exposes it to 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.

BTG Gold Production by Mine in Q4FY20 & FY20 (Source: Company Presentation)

Outlook: BTG is planning an aggressive exploration in 2021 with a budget of approximately USD 66 million, including a record USD 25million allocated to high-quality targets for the company’s ongoing grassroots exploration programs. The company has guided for total gold production of 970,000- 1,030,000 oz for FY21 as compared to 995,258 oz produced in FY20. The average gold production for 2020-2024 is forecasted to be 950,000 with all-in sustaining costs (AISC) averaging USD 825 per ounce.

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

Stock Recommendation: BTG has corrected 10% 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 below 200 DMA. We have valued the stock using the EV/EBITDA multiple based relative valuation method and arrived at a target price of USD 5.65. Considering the correction over the past three months, current trading levels, and decent fundamentals we recommend a “BUY” rating on the stock at the closing price of USD 4.68 as of 14^th April 2021.

Yamana Gold Inc.

AUY Details

Yamana Gold Inc (NYSE: AUY) is a Canada-based gold and silver metal producing company. It is engaged in precious metals mining and allied activities, including exploration, extraction, processing, and reclamation. They operate 5 mines namely, Canadian Malartic (50% interest), Jacobina (Brazil), El Peñón (Chile), Cerro Moro (Argentina) and Minera Florida (Chile). The company generates maximum revenue from the Canadian Malartic mine, which is in 50% partnership with Eagles Mines Limited (AGNICO). As of 14^th April 2021, the company’s market capitalization stood at USD 4.38 Billion.

Odyssey Project Production Profile (100% basis) (Source: Company Press Release)

Approved Construction on Odyssey Underground Gold Project: Yamana Gold and Agnico Eagle approved the construction of their Odyssey project at their Canadian Malartic mine in Quebec, Canada in February 2021. The project will be one of the Canada’s largest underground mine. It involves the development of the continuity of deposit in the Canadian Malartic and Barnat pits. As per the deposit’s significant potential, the life expectancy of the mine could extend until 2039. From 2029 onwards, the Odyssey mine is estimated to yield an average of 545,000 oz of gold per annum.

FY20 Results: The company reported a 3.2% decline in revenue to USD 1,561 million in FY20 as compared to that of USD 1,616.2 million in FY19. The difference was largely attributable to the absence of contribution from Chapada Mines (divested 5th July 2019) as well as lower sales volume from Canadian Malartic and Cerro Moro Mines, which were impacted by the suspension of operation because of Covid-19. Excluding USD 226.8 million revenue contribution from Chapada mine in FY19, AUY reported a 12.7% YoY uptick in the topline in FY20. The company produced 779,810 oz of gold in FY20 as compared to 848,029 oz in FY19. The company sold 754,970 oz of gold at an average price of USD 1,777 /oz in FY20 as compared to 862,130 oz of gold at an average price of USD 1,387 /oz in FY19.

Key Risks: The COVID-19 outbreak can cause supply chain delays disruptions, labor shortage, shutdowns, social unrest, government actions etc., thus leading to a loss of production and/or other operations.

Outlook: AUY is planning to increase its projects to build its future pipeline. The company has invested around USD 1.33 billion for their Odyssey project at their Canadian Malartic Mine in Quebec, Canada and is expecting to produce 862 Koz of gold and 10 Moz of silver in FY21. Gold output is anticipated to rise further to 889 Koz in FY23.

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

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

Stock Recommendation: AUY corrected 11.05% in the past three months and is currently inclined towards the middle point of 52 weeks’ range of USD 3.96 to USD 7.02. it is currently trading below 200 DMA. We have valued the stock using the EV/EBITDA multiple based relative valuation method and arrived at a target price of USD 5.17. Considering the correction in the past three months, project pipelines, current trading levels, and decent fundamentals, we recommend a “BUY” rating on the stock at the closing price of USD 4.51, down by 2.59% as of 14^th April 2021.

AUY Daily Technical Chart (Source: Refinitiv, Thomson Reuters)