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B2Gold (BTG) Hit Hard by Low Gold Prices and Cost Concerns

B2Gold Corp BTG has been bearing the brunt of the downtrend in gold prices and inflationary costs so far this year. Despite witnessing a year-over-year decline in production in the third quarter of 2022, BTG maintains its 2022 guidance for consolidated gold production at 990,000-1,050,000 ounces, backed by an expected pickup in mine performances in the fourth quarter. BTG continues to pursue growth through further exploration, development and expansion of its existing projects with high potential.

Low Gold Prices, High Costs Hurt Results

B2Gold reported adjusted earnings per share of 3 cents for third-quarter 2022, lower than the 12 cents reported in the prior-year quarter. Revenues were $393 million, plunging 23% from the prior-year quarter’s level resulting from a 20% decrease in gold ounces sold and a 4% drop in the average realized gold prices.

So far this year, the pricing scenario has not favored gold, having lost 4% of its value and currently being pegged at around $1,757 an ounce. Gold prices declined against a backdrop of continued higher yields and a stronger U.S. dollar. This will hurt B2Gold’s results this year.

Moreover, BTG is witnessing cost-inflation pressure across all sites, impacting input prices, including reagents, fuel and consumables. For 2022, cash operating costs are projected at the upper end of its guided range of $620-$660 per ounce. All-In Sustaining Cost (AISC) is in the range of $1,010-$1,050 per ounce. Cash operating costs and AISC are expected to be 24% and 18% higher than the respective 2021-levels. Higher fuel and labor costs coupled with a stronger foreign exchange rate are driving these costs higher. These factors are expected to weigh on BTG’s results until the situation normalizes.

2022 Production Guidance Intact

B2Gold’s total gold production of 227,016 ounces in the third quarter was lower than expected as output at the Fekola and Otjikoto mines was affected by temporary mining sequence changes. BTG expects an uptick in production from both operations in the fourth quarter of 2022. At Fekola, ore production from its open-pit Phase 6 commenced already.

In the December quarter, the gold grade mined at Fekola is anticipated to average above 3.0 grams per ton. At Otjikoto, gold production is anticipated to benefit as mining reached a higher-grade zone in the said pit and with stope ore production from the Wolfshag Underground mine.

Backed by expectations of a solid performance in the ongoing quarter, B2Gold maintains its total gold production guidance at 990,000-1,050,000 ounces for 2022.

Acquisitions, Investments to Aid Growth

B2Gold completed the acquisition of Oklo Resources Limited in September 2022. The takeover provides BTG with an additional landholding of 1,405 square kilometers covering highly prospective greenstone belts in Mali, West Africa, including the Dandoko Project, now forming part of the Fekola Complex.

With the buyout of Oklo and its flagship Dandoko project, BTG continues to evaluate its options for the timing and sourcing of material on a regional basis from all deposits within the Fekola Complex area (including Fekola, Cardinal, the Anaconda Area, Bakolobi and Dandoko). This updated evaluation is expected to be completed by the end of 2022, with the first saprolite production now anticipated in the second quarter of 2023.

B2Gold is planning an expansive exploration in the current year with an approximate $76-million budget, including $31 million allocated to high-quality targets for its ongoing grassroots exploration program

Price Performance

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In the past year, B2Gold’s shares have dropped 15.3% compared with the industry’s fall of 2.2%.

Zacks Rank & Stocks to Consider

B2Gold currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the basic materials space are Sociedad Quimica y Minera de Chile S.A. SQM, Olympic Steel, Inc. ZEUS and Commercial Metals Company CMC.

Sociedad has a projected earnings growth rate of 538.1% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has moved 1.2% north in the past 60 days.

Sociedad has a trailing four-quarter earnings surprise of 27.2%. SQM has rallied roughly 51% in a year. The stock is currently carries a Zacks #1 Ranked. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Commercial Metals currently flaunts a Zacks Rank of 1. The Zacks Consensus Estimate for CMC's current-year earnings has been revised 4.1% upward in the past 60 days.

Commercial Metals’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 19.7%. CMC has gained around 42% in a year.

Olympic Steel currently sports a Zacks Rank #1. The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 1.8% upward in the past 60 days.

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