B2Gold (T.BTO) in focus: Gold miner set for 74% production increase in three years

Stockhouse Editorial
0 Comments| January 31, 2014

B2Gold Corp. (TSX: T.BTO, Stock Forum) is set to join an exclusive set of mining companies that are currently producing 500,000 ounces of gold per year. It’s a club that is currently occupied by Goldcorp Inc.’s (TSX: T.G, Stock Forum)  takeover target Osisko Mining Corp. (TSX: T.OSK, Stock Forum), and Detour Gold Corp.  (TSX: T.DGC, Stock Forum).

B2Gold will achieve that status in 2015 through a 35% year-over-year production increase to 549,000 ounces of gold annually, according to a research report by Scotia Capital analyst Ovais Habib.

The report predicted that output from B2Gold’s 90%-owned Otjikoto gold project in Namibia will push B2Gold into the exclusive half million ounce club.

“The company is making impressive progress on construction and is likely to achieve first gold by the end of this year,’’ said Habib in a report that follows a recent trip to the mine site.

“Seeing the project firsthand has given us confidence that the company will be able to bring it online at the end of this year, on time, and even potentially under budget as the feasibility study included $13.6 million for an EPCM contract but B2Gold is completing the work internally.’’

According to the report, B2Gold’s annual production is set to ramp up by 74% within the next three years, potentially hitting 705,000 ounces per year by 2017, at a cash cost of $623 an ounce.

However, it’s the 500,000 ounce-per-year breakthrough that could make B2Gold a potential takeover candidate down the road.

“This threshold is significant, in our view, as it is high enough to be meaningful to a senior gold producer that might be interested in growing through merger and acquisition,’’ Habib said in his report.

“We don’t see B2Gold as a near-term takeout candidate since the majors continue to focus on shoring up balance sheets and divesting in non-core assets, but with exploration budgets being slashed, a medium-term sustained pop in gold prices (perhaps driven by rising inflation as the effects of U.S. quantitative easing work their way through the economic engine) could spur a wave of M&A, in our view,’’ he said.

B2Gold produced 373,400 ounces of gold in 2013, material that includes non-attributable pre-acquisition production of 7,087 ounces from the Masbate Mine in the Philippines.

Meanwhile, B2Gold is planning an $8 million drilling program at Otjikoto in 2014, primarily to upgrade ounces at the Wolfshag zone, which hosts an inferred resources of 703,000 ounces. B2Gold has stated it is currently working on conceptual mine plans to see if/when it would make sense to include material from Wolfshag in the processing feed.

B2Gold is rated as a “focus stock” at Scotia Capital, which has one-year target of $4.

The stock was trading Friday at $2.63, leaving the company with a market cap of $1.8 billion, based on 674.7 million shares outstanding. The 52-week range is $3.94 and $1.87.

Tags: GOLD

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