B2Gold Corp. (BTG, Financial) is one of the publicly traded gold producers that I would suggest adding buying for the remainder of 2018 and for 2019, but not at the valuation that it made on Friday. The share price was $2.55 at close on Nov. 9 for a market capitalization of approximately $2.56 billion.
B2Gold Corp. is a gold mining company with strong performing assets in the Americas, Finland, Africa and the Philippines that I would buy as soon the share price has declined at least 6% from the market value at close Friday.
There is one thing in particular that makes me look favorably at this gold mining company. B2Gold Corp. presents a gem in its portfolio of mineral assets, and this is the Fekola gold producing asset in Mali.
The Fekola mine represents an opportunity to seize what an investment in B2Gold Corp. is offering. The third-quarter operations demonstrated that with 107,002 ounces of produced gold, Fekola did better than what the company assessed during the ramp-up phasing.
Thanks to the amazing output from the Malian mine, B2Gold Corp. has been capable of reporting strong growth in total revenues of $323.86 million, reflecting a 110.1% upside compared to the same trimester of 2017. The increase was so impactful on the income statement that B2Gold Corp. has met consensus on non-GAAP earnings of 5 cents per share, which was a 400% increase year-over-year.
But there is much more. The Fekola mine in Mali will continue running above expectations on mill throughput and recoveries. The mill will deliver to the tune of more than 1.4 million tons of quarterly material to process, and gold recovery rates will border on 95%. An average grade of 2.5 grams of gold per ton of ore means that the Fekola mine has the fundamentals to deliver over 110,000 ounces of gold per quarter. This would lead B2Gold Corp. towards a consolidated gold production of over 960,000 ounces over a 12-month period or more than 2% of the higher limit of what the mining company is guiding for full-year 2018.
The company has also considered starting processing a higher grade of ore. The Masbate mine in The Philippines, the Otjikoto mine in Namibia and the El Limon in Nicaragua will also prove to be strong contributors. The La Libertad mine, also located in Nicaragua, is forecasted to underperform, but its production decline will be more than counterbalanced by the other mines.
If diesel and fuel oil prices will stay within the company’s budget, this gold producer has everything it needs to deliver in terms of robust cash-flow results even in a non-supportive commodity-price environment. The cash flow produced by operations – the company is targeting at least $500 million every year over the next five years – will be B2Gold Corp.’s lifeblood for accomplishing its organic growth target.
The presence of this strong catalyst is making the target price of $5.05 per share highly reliable.
However, I would start adding B2Gold Corp. at a share price below $2.40, which will increase the odds of entering at a fair valuation. A compelling valuation is traceable underneath the 50-day simple moving average line. The stock has decreased 4% for the 52 weeks through Nov. 9, but it is still trading above the 100-SMA line as well. The 52-week range is $2.10 to $3.30 per share.
Since gold is trending downward, a significant weakness in the market value of B2Gold Corp. is also highly reliable. Therefore, I would wait before increasing.
The average recommendation rating is to buy the stock.
Disclosure: I have no positions in any securities mentioned.
Add B2Gold Corp as the Share Price Falls
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