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B2Gold Releases 2016 Results

- By Alberto Abaterusso

B2Gold Corp. (BTG)(BTO.TO) is a Canadian gold producer headquartered in Vancouver. It runs four mines in the Philippines, Africa and Central America. The miner is also engaged in several exploration activities and projects. Production at the Fekola project in Mali is expected to start in October.

In its fourth quarter and full-year 2016 report, the miner said gold production at its Masbate, Otjikoto and La Libertad mines met expectations, with the first two assets achieving a record. B2Gold produced 206,224 ounces at Masbate in the Philippines, 166,285 ounces at Otjikoto in Namibia and 132,431 ounces at La Libertad in Nicaragua, a respective increase of 17%, 14% and 11% on a year-over-year basis.

In contrast, its second mine in Nicaragua, Gold El Limon, had a disappointing performance. Due to "fleet availability limitations and water control issues," the company closed 2016 producing 45,483 ounces of gold at that mine, a 13% decrease on a year-over-year basis, and missed its expectations on production.

Of the company's total production for 2016, Masbate contributed 37.5%, Otjikoto 30.2%, La Libertad 24% and El Limon 8.3%.

B2Gold reported a record in gold production for 2016. On a consolidated basis, it produced 550,423 ounces, in line with the company's guidance of 535,000 ounces to 575,000 ounces of gold and 12% higher compared to 2015 consolidated gold production. The overall improvement in the company's production from 2015 to 2016 was due to higher recoveries and ore grades processed at Masbate Mine, increased operation rates and optimization achieved at Otjikoto and higher ore grades processed at La Libertad.

The company sustained record low cash operating costs of $508 per ounce of gold in 2016, an 18% decrease compared to cash operating costs of $616 per ounce in 2015. It was also below the lower limit of the company's guidance of $560 to $595 per ounce.

The cash operating costs will diminish over the next few years due to the contribution of the Fekola mine, which is expected to add considerably to the total production at a lower cost per ounce.

Due to "lower than budgeted capital expenditures at several mine sites," all-in sustaining costs also decreased 16% from $945.24 per ounce of gold in 2015 to $794 per ounce of gold in 2016. Initially, the company expected an AISC between $895 per ounce and $925 per ounce.

B2Gold also achieved a record in the volume of gold sold in 2016. During the year, the mining company sold 548,281 ounces of gold, an increase from 481,185 ounces sold in 2015.

The company sold one ounce of gold at an average price of $1,246, an 8.3% increase on a year-over-year basis. As a result, B2Gold closed fiscal 2016 with record revenue of $683.3 million, 23% higher than 2015 revenue. It beat expectations on revenue by $1.37 million.

Source: Yahoo Finance

In 2016, B2Gold Corp generated a cash flow of $411.8 million from its operations, a 135% increase on a year-over-year basis, due to increased revenue, proceeds form prepaid sales transactions and lower production costs.

After spending $383,710 in capital expenditures, the company's free cash flow for 2016 was $28.1 million.

For 2017, B2Gold expects to invest $46 million in brownfield exploration and drilling activities.

B2Gold forecasts 2017 consolidated gold production will be between 545,000 ounces and 595,000 ounces. The forecast includes Fekola's pre-commercial production of 45,000 to 55,000 ounces.

For 2018, the company forecasts its consolidated gold production to be between 900,000 ounces and 950,000 ounces.

The net income in 2016 was $38.6 million, 126.6% higher than a loss of $145.1 million in 2015. Net profit adjusted to one-time charges was $99 million, a 644.4% increase on a year-over-year basis.

Concerning its financial position, the company has $144,671 in cash on hand and securities, plus a $425 million line of credit. Combined with its cash flow, the company has "adequate resources both to maintain operations and fund the construction of the Fekola Project through completion."

The long-term debt amounts to $472,845. The debt-equity ratio of 30.39, according to Reuters, is in line with the industry average ratio of 36.51. The interest coverage ratio is 0.55, indicating the company may have some problems paying interest expenses on the outstanding debt.

B2Gold is trading around $3 with a price-book ratio of 2.04 and a price-sales ratio of 4.4. The company has a market capitalization of $2.8 billion and an enterprise value of $3.2 billion. The EV/Ebitda ratio is 64.6 and the forward price-earnings ratio is 100.

Disclosure: I have no positions in B2Gold Corp.

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This article first appeared on GuruFocus.