B2Gold – BTO.TO

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Report Last Updated On December 13th 2019

Stocktrades.ca Growth Report Card

BTO safety score

Amount

Rating

Market Cap:

$5.1 Billion

Beta:

0.61

BTO Valuation Score

Amount

Rating

Price To Sales:

3.97

Price To Earnings To Growth:

0.34

Price To Book:

2.73

BTO Growth Score

Amount

Rating

Expected EPS Growth Next Yr:

41.70%

Expected Revenue Growth Next Yr:

20.8%

Consecutive Yearly EPS Growth:

0

Consecutive Yearly Revenue Growth:

1

Overall Growth Rating :  3.4 / 5

What We Like

  • Lower cost producer (~AISC $850 per oz). 
  • Strong organic growth profile.
  • Strong cash flow ($500 million in 2019).
  • Introduction of a dividend.
  • Strong management team with a history of meeting targets.

Possible Issues

  • A drop in metal prices.
  • Lack of diversity (only five operating mines).
  • Operates in countries with greater geo-political risk.

Company Information:

Sector:

Basic Materials

Industry:

Gold

Stock Type:

Growth

Best Held In:

TFSA

Analysts 1 Yr Price:

$4.81

1 Yr Upside Potential:

-2% (@ $4.92)

Shares Outstanding:

1.03 Billion 

Forward P/E:

13.61

EV/EBITDA:

​​9.04

Yield:

1.09%

Payout Ratio:

N/A

30 Day RSI:

64.83 (NEAR OVERBOUGHT)

B2Gold engages in the exploration and development of mineral properties for gold deposits in Nicaragua, the Philippines, Mali, Columbia, Burkina Faso, and Namibia. The company holds an 80% interest in the Fekola mine, which is located in Mali, 90% interest in the Otjikoto mine located in Namibia and 100% interest in the El Limon mine in Nicaragua, along with other notable mines.

The company is relatively young, founded in 2006.

Plans For Growth:

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One of the more attractive aspects of the company is its ability to grow organically. A new mineral resource report is expected on Fekola by year’s end, and an updated mine plan will be introduced in the first quarter of 2020.  Likewise, its study on the Wolfshag pit at Otjikoto is also expected by end of the year.

Both of these reports should drive resource and production estimates upwards. In 2020, the company is targeting production to be between 1.005 and 1.050 million ounces, a 7.6% bump over 2019 results. It also represents an uptick from previous guidance for 0.955 to 1.005 million ounces.

Increased production and lower costs are expected to drive a considerable uptick in earnings. In 2020, analysts expect earnings per share to jump by 50% year over year. Looking further out, the expectation is for 15% annual earnings growth over the next five years.

Biggest Risks:

The price of gold notwithstanding, the company’s lack of diversification is one of its greatest risk. The Fekola mine in Mali accounts for approximately 60% of 2020 estimated production. If you include the other two big mines – Otjikoto and Masbate – the big three account for 95% of production.

Given this, any operational issues, or unforeseen event at one of these mines could impact the company in a big way.

Along the same lines, these three mines (and its two smaller mines) are located in Mali, Nambia, Nicaragua and the Philippines. All four of which have considerable higher geo-political risk. Case in point, northern Mali has seen a rise in jihadist insurgency and in 2012, the country was hit by a military coup d’état.

These type of issues can have a big impact on producers as they are often seen as high value targets. Political regiments are more volatile, which can lead to less certainty around taxes, exports and the like.

Quarterly Earnings History:

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It was a strong third quarter for B2Gold as it beat on both the top and bottom lines. Earnings of $0.09 beat by $0.02 and revenue of $311 million beat by $2.01 million. It accomplished these impressive results on the back of record quarterly production, exceeding guidance by 7%.

Cash costs per ounce came in 10% below expectation and AISC dropped to $755 million. Strong financial performance enabled the company to introduce its first ever dividend. The quarterly dividend of $0.01 per share is equal to a current yield of 1.10%.

Overall Summary And Stocktrades Recommendation:

B2Bold is an attractive mid-tier gold producer. So long as there are no negative geo-political surprises, the company is well positioned to grow production. Likewise, at today’s gold prices it is generating considerable cash which will enable it to better fund growth and return cash to shareholders via the dividend.  

At today’s prices, the company appears fully valued. Although it trades at a reasonable 13 times forward earnings, it has a high P/B, P/S and PEG ratio which are all above industry averages. Analysts are overwhelmingly bullish on the company with all 15 analysts covering the company rating it a “buy”. Granted, they have a one-year price target of $4.92 per share, in-line with today’s price. This doesn’t imply much upside.

At today’s prices, we’d expect the company to grow inline with its long term expected growth rates. It also would be a good buy on any significant dip. This is all assuming of course, the price of god remains stable.

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