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B2Gold (BTG) Dips 10.5% Post Q2 Earnings: Should You Buy It?
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Shares of B2Gold Corp (BTG - Free Report) have dipped 10.5% since reporting second-quarter 2024 results on Aug 8. The decline was caused by lower-than-expected earnings and a reduced guidance for 2024, attributed an excavator damage at its Fekola mine. This incident is expected to delay the mining of higher-grade ore from Phase 7 of the Fekola pit in the second half of 2024. The gold miner thus anticipates a production loss of 50,000 ounces from Fekola. It, therefore, trimmed the total production outlook for 2024.
The BTG stock is currently trading below its 50-day moving average, a technical indicator often seen as a bearish signal. This movement suggests a continuation of the downward trend, at least in the short term.
BTG Trading Below the 50-Day Moving Average
Image Source: Zacks Investment Research
Year to date, BTG shares have declined 21.8% against the industry's 16.3% growth. Meanwhile, the Zacks Basic Materials sector has declined 7.5%, while the S&P 500 has risen 16.3%.
BTG's YTD Price Performance
Image Source: Zacks Investment Research
Before addressing the critical question of how investors should position themselves regarding the stock, let us first review the company’s second-quarter results.
Fekola Incident Hurts Gold Output: B2Gold’s total gold production was 212,508 ounces, including 8,267 ounces of attributable production from Calibre Mining Corp. The metric marked a 19% year-over-year dip mainly due to a 27% production decline at the Fekola mine. Mining rates in the quarter were impacted by the damage to an excavator in the mine as an operator tipped over it. The rates were also hurt by the delay in receiving replacement equipment. Meanwhile, output at the Masbate mine was down 10%, while production at the Otjikoto Mine improved 9%.
Prices Aid Revenue Growth: Revenues in the quarter moved up 5% year over year to $493 million. Average realized gold moved up 19% to $2,343 per ounce, which offset the impacts of a 12% decline in gold ounces sold (due to lower production).
Earnings Lag Estimates, Dip Y/Y: BTG reported second-quarter 2024 adjusted earnings per share of 6 cents, which dipped 14% from the year-ago quarter and missed the Zacks Consensus Estimate of 8 cents. This mainly resulted from the production loss at the Fekola mine. The company reported a net loss of 2 cents in the second quarter of 2024 primarily due to the recognition of a non-cash impairment of the Fekola Complex.
2024 Production Guidance Lowered: B2Gold expects total gold production between 800,000 ounces and 870,000 ounces (including 20,000 ounces of attributable production from Calibre). B2Gold’s production in 2023 was 1,061,060 ounces (which included 68,717 ounces of attributable production from Calibre).
BTG’s prior guidance was between 860,000 ounces and 940,000 ounces (which included 40,000-50,000 ounces of attributable production from Calibre). BTG sold a portion of its equity interest in Calibre in June. Its updated guidance factors in lower contribution from Calibre and lost production of 50,000 ounces at Fekola. Output at Masbate and Otjikoto are expected to be higher.
Provides Upbeat 2025 Guidance: BTG expects to recoup the above-mentioned lost production at Fekola in the first half of 2025. Also, the company expects a significant increase in gold production from the Fekola Complex in 2025 as a result of the processing of higher-grade ore from the Fekola and the Cardinal pits and the contribution from Fekola Regional. The guidance also includes the contribution of the Goose Project, which is gearing up for the first gold pour in the second quarter of 2025.
Strong financial position & liquidity: On Jun 30, 2024, the company had cash and cash equivalents of $467 million, and working capital of $600 million. Its debt-to-capital ratio was at 0.11 as of Jun 30, 2024, lower than 0.47 as of Dec 31, 2023.
Factors That Pave the Way for BTG’s Long-Term Growth
Goose Project on Track: B2Gold completed the 2024 Winter Ice Road (“WIR”) campaign in the second quarter. Further, it has delivered all necessary items that will enable the completion of construction of the Goose Project in the second quarter of 2025.
Upbeat Expectations for Gramalote Project: On Jun 18, 2024, the company released the results of a positive Preliminary Economic Assessment (“PEA”) on its 100% owned Gramalote Project in Colombia. The PEA indicates a significant production profile, with an average annual gold production of 185,000 ounces over a 12.5-year life and an after-tax internal rate of return. B2Gold is targeting the completion of a feasibility study by mid-2025.
Springbok Zone at Otjikoto Mine Looks Promising: On Jun 20, 2024, BTG released an initial mineral resource estimate for Springbok Zone at the Otjikoto Mine in Namibia. The company plans to initiate a PEA on the deposit by underground mining methods. Subject to the receipt of a positive PEA and permit, mining of the Springbok Zone, along with the exploration potential of the greater Antelope deposit, BTG expects to boost gold production at Otjikoto in 2026.
Gold Prices Gain Momentum: Gold prices have increased 17.9% so far this year and are currently at $2,442 an ounce. The bullion is being supported by expectations of a rate cut in September and ongoing geopolitical tensions.
Analysts expect this momentum to continue and are projecting gold prices to scale to around $3,000 an ounce by 2025, backed by solid demand amid limited supply prospects.
B2Gold is poised well to benefit from this trend by maximizing production at its existing mines, advancing development and exploration projects, and investing in junior exploration companies.
Industry-Leading Dividend Yield
The company has a five-year dividend growth rate of 6.1%. BTG’s 6.48% dividend yield is higher than the industry’s 1.55%. The company has a payout ratio of 66.67%, higher than the industry’s 56.27%. The company has a five-year dividend growth rate of 24.2%.
Upward Estimate Trajectory
The Zacks Consensus Estimate for 2024 and 2025 earnings have moved up over the past 60 days. The consensus mark for 2024 earnings is pegged at 30 cents per share, suggesting 7.1% growth from that reported in the prior year. The same for 2025 indicates a 59.5% year-over-year increase.
Image Source: Zacks Investment Research
The estimate for 2025 revenues is pegged at $1.95 billion, implying a 1% rise as higher gold prices will likely offset the impacts of lower production. The consensus mark for 2025 suggests a substantial rise of 60% due to growth in production and prices.
Valuation
BTG is currently trading at a forward 12-month Price/Earnings ratio of 6.07, at a discount to the industry’s 14.52. The reading is also below its median over the last five years. The company is also less expensive compared to other gold miners, Barrick Gold (GOLD - Free Report) , Agnico Eagle Mines (AEM - Free Report) and Kinross Gold (KGC - Free Report) .
Image Source: Zacks Investment Research
Summing Up
Backed by an upward trend in gold prices, combined with the company’s solid growth projects, sound financial health, attractive valuation and dividend yield, the stock presents a solid bet for investors.
Image: Bigstock
B2Gold (BTG) Dips 10.5% Post Q2 Earnings: Should You Buy It?
Shares of B2Gold Corp (BTG - Free Report) have dipped 10.5% since reporting second-quarter 2024 results on Aug 8. The decline was caused by lower-than-expected earnings and a reduced guidance for 2024, attributed an excavator damage at its Fekola mine. This incident is expected to delay the mining of higher-grade ore from Phase 7 of the Fekola pit in the second half of 2024. The gold miner thus anticipates a production loss of 50,000 ounces from Fekola. It, therefore, trimmed the total production outlook for 2024.
The BTG stock is currently trading below its 50-day moving average, a technical indicator often seen as a bearish signal. This movement suggests a continuation of the downward trend, at least in the short term.
BTG Trading Below the 50-Day Moving Average
Image Source: Zacks Investment Research
Year to date, BTG shares have declined 21.8% against the industry's 16.3% growth. Meanwhile, the Zacks Basic Materials sector has declined 7.5%, while the S&P 500 has risen 16.3%.
BTG's YTD Price Performance
Image Source: Zacks Investment Research
Before addressing the critical question of how investors should position themselves regarding the stock, let us first review the company’s second-quarter results.
Fekola Incident Hurts Gold Output: B2Gold’s total gold production was 212,508 ounces, including 8,267 ounces of attributable production from Calibre Mining Corp. The metric marked a 19% year-over-year dip mainly due to a 27% production decline at the Fekola mine. Mining rates in the quarter were impacted by the damage to an excavator in the mine as an operator tipped over it. The rates were also hurt by the delay in receiving replacement equipment. Meanwhile, output at the Masbate mine was down 10%, while production at the Otjikoto Mine improved 9%.
Prices Aid Revenue Growth: Revenues in the quarter moved up 5% year over year to $493 million. Average realized gold moved up 19% to $2,343 per ounce, which offset the impacts of a 12% decline in gold ounces sold (due to lower production).
Earnings Lag Estimates, Dip Y/Y: BTG reported second-quarter 2024 adjusted earnings per share of 6 cents, which dipped 14% from the year-ago quarter and missed the Zacks Consensus Estimate of 8 cents. This mainly resulted from the production loss at the Fekola mine. The company reported a net loss of 2 cents in the second quarter of 2024 primarily due to the recognition of a non-cash impairment of the Fekola Complex.
2024 Production Guidance Lowered: B2Gold expects total gold production between 800,000 ounces and 870,000 ounces (including 20,000 ounces of attributable production from Calibre). B2Gold’s production in 2023 was 1,061,060 ounces (which included 68,717 ounces of attributable production from Calibre).
BTG’s prior guidance was between 860,000 ounces and 940,000 ounces (which included 40,000-50,000 ounces of attributable production from Calibre).
BTG sold a portion of its equity interest in Calibre in June. Its updated guidance factors in lower contribution from Calibre and lost production of 50,000 ounces at Fekola. Output at Masbate and Otjikoto are expected to be higher.
Provides Upbeat 2025 Guidance: BTG expects to recoup the above-mentioned lost production at Fekola in the first half of 2025. Also, the company expects a significant increase in gold production from the Fekola Complex in 2025 as a result of the processing of higher-grade ore from the Fekola and the Cardinal pits and the contribution from Fekola Regional. The guidance also includes the contribution of the Goose Project, which is gearing up for the first gold pour in the second quarter of 2025.
Strong financial position & liquidity: On Jun 30, 2024, the company had cash and cash equivalents of $467 million, and working capital of $600 million. Its debt-to-capital ratio was at 0.11 as of Jun 30, 2024, lower than 0.47 as of Dec 31, 2023.
Factors That Pave the Way for BTG’s Long-Term Growth
Goose Project on Track: B2Gold completed the 2024 Winter Ice Road (“WIR”) campaign in the second quarter. Further, it has delivered all necessary items that will enable the completion of construction of the Goose Project in the second quarter of 2025.
Upbeat Expectations for Gramalote Project: On Jun 18, 2024, the company released the results of a positive Preliminary Economic Assessment (“PEA”) on its 100% owned Gramalote Project in Colombia. The PEA indicates a significant production profile, with an average annual gold production of 185,000 ounces over a 12.5-year life and an after-tax internal rate of return. B2Gold is targeting the completion of a feasibility study by mid-2025.
Springbok Zone at Otjikoto Mine Looks Promising: On Jun 20, 2024, BTG released an initial mineral resource estimate for Springbok Zone at the Otjikoto Mine in Namibia. The company plans to initiate a PEA on the deposit by underground mining methods. Subject to the receipt of a positive PEA and permit, mining of the Springbok Zone, along with the exploration potential of the greater Antelope deposit, BTG expects to boost gold production at Otjikoto in 2026.
Gold Prices Gain Momentum: Gold prices have increased 17.9% so far this year and are currently at $2,442 an ounce. The bullion is being supported by expectations of a rate cut in September and ongoing geopolitical tensions.
Analysts expect this momentum to continue and are projecting gold prices to scale to around $3,000 an ounce by 2025, backed by solid demand amid limited supply prospects.
B2Gold is poised well to benefit from this trend by maximizing production at its existing mines, advancing development and exploration projects, and investing in junior exploration companies.
Industry-Leading Dividend Yield
The company has a five-year dividend growth rate of 6.1%. BTG’s 6.48% dividend yield is higher than the industry’s 1.55%. The company has a payout ratio of 66.67%, higher than the industry’s 56.27%. The company has a five-year dividend growth rate of 24.2%.
Upward Estimate Trajectory
The Zacks Consensus Estimate for 2024 and 2025 earnings have moved up over the past 60 days. The consensus mark for 2024 earnings is pegged at 30 cents per share, suggesting 7.1% growth from that reported in the prior year. The same for 2025 indicates a 59.5% year-over-year increase.
Image Source: Zacks Investment Research
The estimate for 2025 revenues is pegged at $1.95 billion, implying a 1% rise as higher gold prices will likely offset the impacts of lower production. The consensus mark for 2025 suggests a substantial rise of 60% due to growth in production and prices.
Valuation
BTG is currently trading at a forward 12-month Price/Earnings ratio of 6.07, at a discount to the industry’s 14.52. The reading is also below its median over the last five years. The company is also less expensive compared to other gold miners, Barrick Gold (GOLD - Free Report) , Agnico Eagle Mines (AEM - Free Report) and Kinross Gold (KGC - Free Report) .
Image Source: Zacks Investment Research
Summing Up
Backed by an upward trend in gold prices, combined with the company’s solid growth projects, sound financial health, attractive valuation and dividend yield, the stock presents a solid bet for investors.
B2Gold currently sports a Zacks Rank #2 (Buy) and boasts a Value Score of A, making it an attractive investment option, according to Zacks' proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.