B2Gold Corp. (BTG, Financial) announced July 18 it has reached an agreement with a syndicate of international lenders to increase its revolving credit facility to $500 million. The principal amount was $425 million.
The increased credit facility will have sliding scale interest rate of between LIBOR plus 2.25% and 3.25 based on B2Gold's consolidated net leverage ratio.
If the outstanding debt secured by the company’s 3.25% bearing interest rate, which matures in October 2018, is greater than $100 million at the end of 2017, then the sliding scale interest rate will increase to a range between LIBOR plus 2.50% and 4%.
Concerning the undrawn portion of the facility, B2Gold is committed to fees that range between 0.50% and 0.925% on a sliding scale basis.
The agreement also envisages the possibility to further increase the line of available credit to $600 million before its maturity on July 7, 2021.
B2Gold says the funds will be used for general corporate purposes. While it does not go much into detail about the specific "general corporate purposes," the company says the proceeds from the upsized RCF may be used to pay off subordinated notes and financing acquisitions.Ă‚
The company will also be able to maintain its operations and fund the construction of the Fekola Project.
The Fekola Project, which is in Mali, is ahead of schedule. B2Gold anticipates production will begin in the fourth quarter of this year.
Once it is running at full capacity, Fekola will add significantly to the company's total gold production. As a result, B2Gold’s cash operating costs per ounce and all-in sustaining costs per ounce - both on a long-term horizon - will be significantly reduced.
As of the first quarter of fiscal 2017, which ended March 31, B2Gold had cash and securities of $103.23 million, or 11 cents per share. The company’s total debt amounts to $526.89 million for a total debt-equity (mrq) ratio of 35.77 versus the industry’s average ratio of 50.11. The current ratio of 1.34 is lower than the industry’s average ratio of 2.62. The book value per share is 1.50.
The long-term debt-equity ratio of 34.63 is in line with the industry average of 33.54.
The interest coverage (TTM) ratio is 0.81, which may denote some troubles in paying interest expenses on outstanding debt. Regardless, it is higher than the industry average of -0.91.
The gold stock is trading at $2.75 per share with a market capitalization of $2.483 billion, a price-book (P/B) ratio of 1.83, a price-sales (P/S) ratio of 3.62, a price-earnings (P/E) ratio of 137.50 and an EV/Ebitda ratio of 12.08.
For B2Gold, analysts have set a forward P/E ratio of 14.47. When multiplied by EPS of four cents– as forecasted by analysts for fiscal 2017 - it yields a value of 58 cents per share. When the forward P/E ratio is multiplied by EPS of 19 cents – as forecasted by analysts for fiscal 2018 – it gives a value of $2.75.
As of today, only one analyst has covered B2Gold. The target price is $4 per share and the recommendation rating is 1.5 out of 5.
There is another metric I like to consider when screening for mining companies, which is the EVO. This is calculated as the miner’s enterprise value divided by the total mineral reserves held at the end of the most recent fiscal year.
B2Gold has total probable gold reserves of 7,281,000 ounces. When this figure – which includes mineral stockpiles – is factored into the equation, the EVO is $434, which is not one of the lowest in the industry.
Disclosure: I have no positions in B2Gold Corp.
