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Here's Why You Should Add B2Gold (BTG) to Your Portfolio

Zacks Equity Research

B2Gold Corp BTG seems to be an attractive pick now, thanks to steady operational and financial performances from its mines. Also, the company is likely to benefit from its focus on lowering debt levels and continued pursuit of growth through exploration, development and expansion. Higher gold prices and solid earnings growth are added positives.

The above-mentioned tailwinds have secured analysts’ confidence in the stock. Evidently, the Zacks Consensus Estimate for the current and next-year earnings has moved up 5%, respectively, over the past 30 days.

A glance of the company’s price performance in the past six months shows that B2Gold has gained 43.0% compared with the industry’s 38.8% rally.

B2Gold currently has a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank  stocks here.

Factors That Make B2Gold an Attractive Pick

Earnings Growth: The company recorded an earnings growth rate of 54.2% over the last five years, outperforming the industry’s growth of 10.8%. This momentum is likely to continue, as reflected by B2Golds projected earnings per share growth of 37.50% for fiscal 2019 and 77.27% for fiscal 2020.

Strong Revenue Growth: B2Gold’s revenues witnessed an 18% compounded annual growth rate over the last five years (ended fiscal 2018). The company continues to pursue additional internal growth through further exploration, development and expansion of existing projects, and pursuit of greenfield exploration projects alone or in joint ventures.

Strong Leverage: B2Gold debt/equity ratio is 18.2%, lower than the industry average of 22.2%. The strong financial health of the company will likely help it to capitalize on growth opportunities.

Return on Assets (ROA): B2Gold currently has a ROA of 7.4%, while the industry's ROA is 2.5%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.

Return on Equity (ROE): B2Gold trailing 12-month ROE of 11.0% reinforces its growth potential. The company’s ROE is higher than the ROE of 4.3% for the industry, highlighting its efficiency in utilizing shareholders’ funds.

Positive Earnings Surprise History: The company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters. The company has an average positive earnings surprise history of 11.31%.

Upbeat Guidance: B2Gold’s guidance for fiscal 2019 annual gold production is at the mid-point of 935,000-975,000 ounces. In 2018, the company recorded annual consolidated gold production of 953,504 ounces. With these projections, the company is set to outperform its peers with production growth of 74% from 2016 through 2019. Projected gold revenue for fiscal 2019 is at $1.3 billion.

B2Gold’s consolidated gold production (including production from El Limon and La Libertad mines) in the first nine-month period of 2019 was 735,079 ounces, 7% above budget. With this performance, the company seems on track for continued strong operational and financial performance in fiscal 2019.

Growth Drivers

B2Gold plans to consistently maximize cash flows and maintain strong financial position. To achieve this, the company is banking on its impressive operational and financial performance from existing mines, reducing overall debt levels, expanding the Fekola Mine throughput and annual gold production. It also intends to pursue additional internal growth through further exploration, development and expansion of existing projects, and pursuit of greenfield exploration projects alone or in joint ventures. B2Gold’s focus on lowering debt levels is also commendable.

The Fekola Mine in Mali had produced 336,567 ounces of gold year to date, exceeding its budget by 7% and a 1% improvement from the prior year. The company announced that a new large-scale off-grid Fekola solar plant project has been approved by its board. The plant, which is scheduled for completion in August 2020, is estimated to reduce Fekola's processing costs by approximately 7%.

B2Gold plans to invest $50 million over a period of approximately 18 months for the expansion of the mine, which would allow the company to produce around 5 million ounces of gold over the new mine life of 12 years. Per the company’s latest report, projected annual processing rate increased to a baseline of 7.5 million ton per annum (Mtpa) from the current capacity of 6 Mtpa.

B2Gold has reached an agreement relating to the Gramalote Project in Colombia. This will increase B2Gold’s interest to 50% and assume the position of Manager of the Gramalote Joint Venture Project effective Jan 1, 2020. As part of that agreement, the companies agreed to a budget of up to $40 million for 2020 to complete significant resource infill drilling and complete a feasibility study for the project.  Gramalote has the potential to become a large open pit gold mine.

Other Key Picks

Some other top-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited AEM, Kirkland Lake Gold Ltd. KL and Franco-Nevada Corporation FNV, all sporting a Zacks Rank #1.

Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied roughly 46% in the past six months.

Kirkland Lake Gold has projected earnings growth rate of 96.3% for the current year. The company’s shares have surged around 45% in the past six months.

Franco-Nevada has estimated earnings growth rate of 46.2% for the current year. Over the past six months, the company’s shares have surged roughly 32%.

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