B2Gold stays strong through typhoon turmoil

B2Gold (TSX: BTO; NYSE-MKT: BTG) may have escaped the worst of Typhoon Haiyan in the Philippines, but it isn’t forgetting those who didn’t.

“Our thoughts and our prayers are with those affected by the terrible tragedy,” B2Gold CEO Clive Johnson said on a conference call connected to its third-quarter financials. “Fortunately for our employees at our Masbate mine, we were far enough away to be largely unaffected.”

As a sign of solidarity with the community, B2Gold announced it is contributing US$1 million to relief efforts and will provide the avenues for investors that are looking to help out as well.

With the tragic news addressed in the South Pacific, chief financial officer Mark Corra took over the call and turned to operations. Corra pointed out that this year marks the fifth in a row that B2Gold has reported growth in gold production.

With just under 261,000 oz. production so far this year, the company has more than doubled last year’s production over the first nine months of the year.

All three of its operating mines — La Libertad and Limon in Nicaragua and Masbate in the Philippines — exceeded production guidance, and cash costs came in lower that what B2Gold was expecting.

The La Libertad mine saw quarterly production of 37,300 oz. gold, beating B2Gold’s own forecast by 2%, with a cash-operating cost of US$544 per oz. The higher grades helped — which were 2.36 versus the expected 2.22 grams per tonne — and so did improved recoveries.

Production at the Limon mine came in at 14,388 oz. gold, which is 20% more gold than the mine produced in last year’s third quarter.

Overall production costs came in at US$653 per oz. — US$70 lower than projected — and production came in at 99,000 oz., compared to the 41,000 oz. produced last year.

At the recently acquired Masbate mine, which accounts for 48% of its current production, the company has pushed through operational challenges to reach third-quarter production of 47,000 oz. This beat its own estimate by over 2,000 oz. gold, while operating costs came in at US$735 oz., compared to the budgeted US$855 per oz.The improvements came on the back of better throughput and better recoveries, which were only slightly offset by lower grades at the mine.

B2Gold reiterated its guidance for the year of between 360,000 and 380,000 oz. gold, with operating cash costs of $675 to $690 per oz. Next year the company says it will churn out between 395,000 and 420,000 oz. gold, at operating cash costs of US$680 to US$705 per oz.

Its operational success so far led to third-quarter adjusted earnings of 4¢ per share. The number was in line with BMO Research’s estimate, but slightly above the 3¢ consensus.

As for production guidance, BMO Research’s expects B2Gold to produce 364,000 oz. gold for the year at operating cash costs of US$694 per oz.

BMO Capital Markets analyst Brian Quast rates B2Gold shares as “outperform,” with a $3.25-per-share target.

While B2Gold’s results were in line with BMO’s forecast, Scotiabank analyst Ovais Habib wasn’t bothered by the slight earnings miss. Instead, he highlighted that the company is gearing up for a record fourth quarter.

Habib also pointed out that B2Gold finished with slightly less cash-on-hand than he expected. The analyst was expecting to see $350 million cash on the balance sheet, but B2Gold reported $284 million in cash. The discrepancy came from B2Gold repaying $50 million of a credit facility and putting $25 million more into capital expenditures than expected.

Corra, however, pointed out that $284 million is the most cash the company has held in its history.

It has another $100 million in its revolving-credit facility, and is well positioned to take advantage of the current low gold price, if it deems this prudent.

As for organic growth, the company is building the Otjikoto project in Namibia. B2Gold says construction is full steam ahead, and the mine remains on schedule and on budget. A maiden resource estimate for the project’s Wolfshag zone should be out before year-end.

The fourth quarter should also bring news from the company’s prefeasibility study at Gramalote in Colombia.

On Nov. 14 — the day after the results were released — company’s shares closed 6% higher at $2.45 per share, on 2.4 million shares traded.