Why B2Gold Can Bounce Back After a Weak Start to 2019

B2Gold [stock_market_widget type="inline" template="generic" color="default" assets="BTO.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has been in bad shape this year on the stock market, losing nearly 10% of its value even though gold prices have held their ground and could get even better in the future. That’s probably because investors didn’t like that the company issued flat production guidance for the year and also forecasts an increase in costs.

But that doesn’t mean that B2Gold isn’t capable of surprising.

B2Gold Delivers Stronger-than-anticipated Q1 Production

B2Gold delivered consolidated Q1 gold production of 230,859 ounces, which was 6% above its original expectation. As a result, the company managed to sell 232,076 ounces of gold, which was again 6% above what the company was originally projecting.

In all, B2Gold’s first-quarter revenue from sales of gold came in at $302 million. Analysts were originally anticipating $294 million in first-quarter revenue from the company, but the results clearly state that it has done better than that.

B2Gold’s better-than-anticipated production for the quarter was a result its Fekola, Masbate, Otjikoto, and El Limon mines performing beyond expectations last quarter. The company was also helped by a gold price of $1,300 an ounce during the quarter, though the same was down from last year’s average realized price of $1,325 an ounce.

But the good news for investors is that gold prices have the potential to rise higher on global cues and a fall in the number of discoveries. At the same time, B2Gold seems capable of boosting its output thanks to the progress it has reported at its mines.

Why Things Should Get Better

When combining increased production and a potential increase in gold prices, B2Gold’s financial performance could trump Wall Street’s current expectations.

B2Gold believes that it is firmly on track to achieve gold production between 935,000 ounces and 975,000 ounces this year, which is in line with its original forecast. But don’t be surprised to see the company deliver stronger growth in light of its first-quarter results.

B2Gold’s Fekola and Masbate mines outperformed in the first quarter, and as these operations continue to ramp up, the company’s output in the second half of the year will increase substantially. The Fekola mine’s production was 6% higher than B2Gold’s budget, while the Masbate mine’s production was 15% above expectations.

Looking ahead, B2Gold’s second-half production will be 14% higher in the second half of the year as compared to the first half because of planned open-pit development that it will carry out in the first six months. If the results of such developments are better-than-anticipated, B2Gold should witness higher production numbers as the year progresses.

When combined with a potential increase in gold prices, B2Gold’s financial performance could trump Wall Street’s current expectations.

B2Gold’s revenue is expected to increase just 1% this year and its earnings per share will remain flat. As such, the company will have to properly execute its mine development and production plans so that it can continue delivering beyond expectations quarter after quarter this year, or it might not be able to come out of its ongoing slump.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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