B2Gold (BTO.TO) soared after the company delivered its second-quarter results, and the stock’s move north was not surprising as the company has shown that it is well-placed to take advantage of the improving gold pricing environment.
B2Gold’s results were better than expectations and it won’t be surprising to see the company get even better in the future because of a potential increase in gold prices.
What’s working for B2Gold?
B2Gold delivered a record quarterly production of 246,000 ounces of gold during the quarter. This was an increase of 2% over the prior-year period, but more importantly, the production exceeded the company’s own budget by 8%.
However, B2Gold’s revenue increased at a much faster pace during the quarter. The company delivered $267.2 million in second-quarter revenue as compared to $242 million in the prior-year period. The reason why its revenue grew at a faster pace than the increase in production was because B2Gold witnessed stronger gold pricing during the quarter.
The company clocked an average realized gold price of $1,312 an ounce as compared to the year-ago price of $1,289 an ounce. This, however, was not the only positive for B2Gols last quarter. The company’s cash operating cost of $456 an ounce was $42 below budget. Moreover, consolidated all-in cash costs of $807 an ounce were also $87 below budget.
The lower costs can be attributed to the stronger recoveries and a substantial increase in the mill throughput. B2Gold’s mill throughput of 1.8 million tonnes was an increase of 34% over the company’s budget and a 37% increase over the prior year period. As such, the company is making all the right moves as far as the operational side is concerned.
This paves the way for a stronger performance going forward.
All set to get better
B2Gold’s production is all set to increase substantially in the coming quarters once the Fekola mine comes online in the fourth quarter of the year. In fact, B2Gold is witnessing stronger production all across the board.
According to the company’s earnings call transcript:
“It’s really driven similar considerations to previous quarters is outperformance by Fekola, with is 10,000 ounces ahead of budget; Masbate, which was 4,000 ounces ahead; and Otjikoto, which was 1,000 ounces ahead. On the Nicaraguan side, overall, they were 2,000 ounces ahead of budget.”
Moreover, B2Gold is taking smart steps to reduce its cost profile. This includes a solar plant that’s expected to reduce the company’s processing cost to the tune of 7%. All of this indicates that B2Gold is looking to further streamline its business, and this should allow it to take advantage of a further increase in gold prices.
Gold is currently trading at over $1,400 an ounce, and it could be headed higher because of the prevailing macroeconomic conditions. Goldman Sachs estimates that gold prices could climb to $1,600 an ounce in the next six months thanks to growing demand in light of a shaky stock market. As such, B2Gold can deliver a stronger performance going forward as it is making the right moves to take advantage of stronger gold prices.