B2Gold: A gold miner for the 21st Century

More than just a gold miner, the company provides an array of real benefits to the local communities near its operations.

By Ellsworth Dickson

B2Gold Corp. [BTO-TSX; BTG-NYSE AMERICAN; B2G-NSX] has seen remarkable success in the past 11 years and has done so by not shying away from operating in countries experiencing an assortment of difficulties. The company has five mines in four different countries and employs over 5,100 people.

For example, for Q2 2018, the company reported a quarterly record in consolidated gold production of more than 240,000 ounces – a 98% increase over the same period last year.

In an interview, Clive Johnson, President and CEO, told Resource World, “The biggest factor was the commencement of production at the end of September last year of our fifth and now largest mine – the Fekola Mine in Mali, West Africa.” The first gold pour at Fekola took place shortly afterwards on October 7. Within only 60 days from start-up, Fekola achieved commercial production on November 30, one month ahead of the revised schedule and four months ahead of the original schedule. “We are projecting a dramatic increase in the company’s consolidated gold production this year because Fekola is projected to produce between 420,000 and 430,000 ounces of gold – this gives us a big jump in production of almost a 50% increase compared to last year,” added Johnson. He also noted that this could take B2Gold up to just under one million ounces of gold in 2018, at a projected 920,000 – 960,000 ounces, and maybe even break through the 1 million-ounce level.

B2Gold’s quarterly-record increase in gold production was also above the company’s guidance for Q2 2018. “We had a very good quarter and beat the budget by 7% due to the continued, strong performance from the Masbate Mine in the Philippines, the Otjikoto Mine in Namibia and, of course, Fekola,” said Johnson. “All three mines did well and contributed to the strong quarter we projected.” Johnson sees this level of gold production to be sustainable for the rest of the year.

B2Gold remains well on target to achieve transformational growth in 2018. With the new, large, low-cost Fekola Mine now in full production, this could reduce consolidated cash operating costs and all-in sustaining costs to be between $505 – $550 and $780 – $830, per ounce of gold, respectively. “The other big thing that Fekola will do for the company is dramatically increase our revenues, cash from operations and cash flow,” explained Johnson. “Starting this year, on average over the next three years, the company is projecting gold sales of approximately $1.2 billion a year, cash flow from operations of around $0.5 billion and a significant increase in free cash flow.”

At the Fekola Mine, B2Gold has increased the exploration budget for the Fekola North Extension Zone, where the potential exists to significantly increase open-pit resources and reserves, north of the current Fekola open-pit reserve.

“We’re going to have eight drill rigs focused on drilling immediately north of Fekola to see how big the 3.34-million-ounce deposit actually is. If successful, we will come out with a new mineral resource for the Fekola deposit, including a portion of the Fekola North Extension, early in Q4 2018. If, as expected, a larger open-pit resource is confirmed by current exploration, this could lead to expanding the Fekola Mine and mill facilities.”

With regards to extending mine life, B2Gold has reported finding more gold at its EI Limon Mine in Nicaragua. “In February of this year, we announced a positive Inferred Mineral Resource of 5,130,000 tonnes at a very good grade of 4.92 g/t, containing 812,000 ounces of gold, at the newly-discovered Central zone, near El Limon mill,” said Johnson. “The majority of it looks like an open-pittable resource. We’re currently conducting engineering and metallurgical studies on the Central Zone, and results are expected by Q3 2018, but right now, internal studies are looking positive. We believe that there’s going to be a strong case to expand the mill capacity, increasing annual gold production with improved economics, as mining this large, good grade resource has the potential to decrease the mine’s cash operating costs and all-in sustaining costs per ounce, and significantly extend its mine life.”

El Limon Mine is a historic mine and has been in operation since 1941 as both an open pit and underground mine. “We’ve had the best results when we had a combination of open pit and underground mining,” said Johnson. “Over the last year, we were mainly an underground mine and the costs were higher, but we persevered as we knew we had a new discovery. Now, with this new resource, we’ll be able to get back to sustainable open-pit mining and combine it with underground mining as well – it’s this combination that works best.”

With El Limon Mine having been in production for so long, B2Gold is also investigating the potential of re-processing the old mine tailings produced by the former operators many years ago. “There’s a great deal of tailings nearby. Back in the old days, they were mining extremely good grades,” said Johnson. “However, there was not the kind of recoveries that we see today so we expect that there should be a great deal of good-grade material just waiting to be processed. We’re currently completing a study to determine the economic viability of re-processing the tailings, and we plan to release the results by the end of the year. The project has the potential to produce about 20,000 – 25,000 ounces of gold and 70,000 – 80,000 ounces of silver, per year, for approximately 9 – 11 years, so we think there’s going to be added value later on in, or near the end of, the mine life.” He added that if the plant is expanded, then the company could possibly look at processing the old tailings in conjunction with mining.

Reflecting on the prevailing investor sentiment regarding gold stocks, Johnson said, “The disappointing thing for B2Gold is that our share price is not reflected in the growth we’ve seen. When you see your cash flow from operations go from $155 million in 2017 to a projected $0.5 billion this year, you would anticipate that this would be reflected in a re-rating of our share price; however, there’s a real disconnect today between the share price of gold producers and the gold price, which isn’t that bad at just under US $1,230 an ounce.”

He then explained B2Gold’s strategy: “We don’t run our business on the basis that gold is going to go up and make our shareholders a bunch of money. We believe we should be able to make a profit whatever the gold price is, and at these gold prices we are extremely profitable.”

For this year, B2Gold has a $53 million exploration budget with approximately 80% of this going towards brownfields exploration. “We are looking for more ore deposits at our existing operations where we tend to find more gold, which is a bonus in terms of our original acquisitions,” said Johnson. “We are now looking forward to the market reflecting the value for what we’ve built, and in the future, we will look at mergers and acquisitions for growth again – but on our terms and our timing.”

“I always say the best time to build a low-cost gold mine is any time, all the time. We took the opportunity to do some creative acquisitions in the past without a lot of competition, and now some others are playing catch up.”

With great gold mining projects getting harder to find, other gold mining companies are currently seeking quality acquisitions. “We don’t need to compete now,” notes Johnson. “We’ve done our timely acquisitions and have lots of things in the pipeline. So that’s our strategy going forward. We will continue to use our healthy cash flows from operations to pay down debt and, going into next year, we’ll probably start exploring a dividend policy.”

Rather unique for a mining company, B2Gold recently published its second annual Responsible Mining Report – Raising the Bar. Johnson explained that the publication provides a detailed overview of the company’s economic governance, environmental and social performance in 2017, and reflects how seriously the company takes its responsibilities concerning people and communities, human rights, livelihoods, health and safety, and environmental stewardship.

“All of our corporate social responsibility programs continue to show that a modern mining company can be responsible in every way,” Johnson said. “Responsible mining practices are at our core; we will demonstrate leadership by going beyond industry standards and will continue to raise the bar on our own performance.”

B2Gold is now generating electricity from a new, 7-MW solar power plant at the Otjikoto Mine in Namibia. The plant, that commenced full commissioning in April 2018, is used in combination with its existing heavy fuel oil (“HFO”) diesel generators, from which the mine obtained 100% of its energy requirements. The Otjikoto Solar Power Plant is one of the first fully-autonomous hybrid plants in the world. The sophisticated system can determine where the most cost-efficient power is at any time of the day. For example, if it is bright sunshine during the day, it will use solar, however, in cloudy weather, when solar is unable to deliver sufficient power to the plant, it makes up the difference using HFO. At night, HFO is used.

“We expect that the solar plant will significantly reduce fuel consumption and greenhouse gas emissions from the site’s current 24-MW HFO power plant and reduce energy costs by up to 14%,” said Johnson. “It’s the best of both worlds because there’s an economic case for the solar plant and it definitely demonstrates being proactive in terms of environmental responsibility. One of the great things about the solar plant could be its legacy. We’re looking into the opportunity of connecting the plant to the national power grid at the end of the mine life for revenue generation by exporting and selling energy back to the grid. We could potentially use this revenue to support ongoing regional corporate social responsibility activities, well beyond the life of the mine.”