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(Reissue) Research Note - B2Gold Corp. (BTO:TSX,$4.34|BUY $10.50 TARGET) Q2 Financials In Line – Gramalote Project Put Aside

Yesterday after market close, B2Gold Corp. reported Q2/22 financial and operating results. Production results were pre-released on July 14th, 2022. The Company reported a strong Q2 with costs within company guidance and production beating both guidance and our estimates. BTO has outperformed peers against the inflationary headwinds the industry has been facing and we expect this to continue in the back half of the year. We highlight BTO’s decision to halt development of the Gramalote Project as the Project did not meet the Company’s investment thresholds.


Revenue for Q2 was $382M on sales of 205 Koz at a gold price of $1,861/oz, in line with our estimate of $391M. Operating cash flow was $134M, below our estimate of $144M. Cash costs (excluding Calibre) were $771/oz, well below budget and beating our estimate of $904/oz. Q2 AISC (excluding Calibre) came in at $1,109/oz in line with our estimate of $1,083/oz. Company guidance infers that costs are expected to decrease throughout the year to achieve an annual cash cost of $620-660/oz an AISC of $1,010-1,050/oz (including attributable costs projected from Calibre).


We are maintaining our BUY rating and lowering our target price to C$10.50/share (previously C$11.00/share).


BTO continues to maintain a strong financial position with cash and equivalents of $587 at the end of Q2. In addition, BTO has working capital of $775M and a fully undrawn and available $600M revolving credit facility. B2Gold maintained its quarterly dividend of $0.04/share or 4.6% annualized. We note that the cash balance decreased QoQ due to significant capital investments in the development of the Anaconda Area where we expect mining permits in place by year-end. 


BTO increased its exploration budget for 2022 from $65M to $75M with the majority of the additional $10M being spent at the recently acquired Bakolobi permit in Mali, which is located between the Menankoto permit, to the north, and the Medinandi permit.


B2Gold’s acquisition of Oklo and its flagship Dandoko Project, is expected to be completed in mid-September. The property will extend the footprint of BTO’s exploration in Mali to over 1,700 km2 and add a Measured and Indicated Resource estimate of 528 Koz at 1.88 g/t Au and an Inferred Resource of 141 Koz at 1.67 g/t Au.


Gramalote Project: BTO provided an update on its Gramalote Project (50/50 JV with AngloGold) in Colombia, stating that based on the preliminary results of the optimized feasibility study, both partners have determined that the Project does not currently meet their investment thresholds for development at this time. This is primarily due to the low-grade nature of the deposit and the Project’s economic sensitivity to the recent increase in both capital and sustaining costs. The two parties are currently reviewing alternatives for the Project. We have lowered our multiple on the Project from 0.4x NAV to 0.3x NAV resulting in an attributable valuation to ~$190M from ~$250M previously.

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