B2Gold Corp.

Moat: 1/5

Understandability: 2/5

Balance Sheet Health: 4/5

B2Gold is a Canadian low-cost international senior gold producer with operating mines in Mali, Namibia, and the Philippines, as well as development projects in several countries.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview

B2Gold is primarily a gold mining company, meaning its revenues are tied to the price of gold and production levels at its mines. It explores, develops, and operates gold mines, relying on extracting gold from the Earth and processing it to sell on the global market.

Revenue Distribution:

B2Gold’s revenue is primarily generated from the sale of gold bullion. Revenue is distributed amongst its mining locations with Mali and Philippines being the majority contributors to their overall output. The company also has a small percentage of its revenues coming from its silver production.

The gold mining industry is influenced by several key trends:

  • Gold Prices: Gold prices fluctuate based on various factors, including inflation, economic uncertainty, and the strength of the U.S. dollar. Increased demand from central banks has caused gold to go up recently.
  • Production Costs: The cost of producing gold can vary greatly depending on factors such as the mine’s location, grade of ore, and processing technology. Rising operating costs have negatively impacted the industry as a whole.
  • Geopolitical Risks: As a global business, it’s exposed to the economic impacts that occur in developing countries, as they are present in many politically unstable nations.

Margins

B2Gold’s profitability and margins are tied to operating costs and are heavily dependent on gold prices. The recent high price environment will bolster their margins as the current gold market has an unusual dynamic of high prices without high production costs and therefore creating large profitability opportunities for gold miners. Operating costs are a major influence on profitability as high costs can eliminate profitability in a declining gold price environment.

Competitive Landscape

The gold mining industry is highly competitive, with a wide range of players, from small juniors to large global operators. Competition exists between other gold producers and also with gold miners in different sectors such as gold exploration or gold royalty companies. The main differentiation within this space is primarily around production costs, geographical diversification and scale of operations.

What Makes B2Gold Different

B2Gold positions itself as a low-cost producer with a focus on operating in safe jurisdictions. They are growing through exploration and acquisitions and developing mines with strong economics. The company has recently been adding a lot of their exploration efforts with a strong focus on new discoveries. However, a lot of their mines are in areas that are inherently risky to operate in due to politics or crime, that could cause a risk for their operations.

Financials (In-Depth)

B2Gold’s financials are complex to evaluate due to several moving parts and accounting intricacies of a mining business. They are heavily driven by production numbers and gold prices. Let’s take a look at their most recent data, which includes their 2023 Full Year results and their Q1 2024 results.

  • Revenue: B2Gold’s 2023 full-year revenue was $2.1 billion, slightly down compared to $2.23 billion from 2022. Production was down 8% compared to last year. This revenue is obviously dependent on the price of gold. In Q1 2024, B2Gold had a revenue of $412 million.
  • Net Income: B2Gold had net income of $160.9 million in 2023, which decreased compared to $368 million in 2022. In Q1 2024, they had a loss of $70 million. The change in net income is mainly tied to changes in gold prices and production numbers, as their expenses seem to be fairly stable.
  • Margins: B2Gold’s gross profit margins were 53% in 2023 and 57% in 2022. Their operating margin was 20.9% in 2023. They saw an overall decline in profitability due to costs staying the same despite a drop in gold price and production.
  • Production: B2Gold produced 1,017,347 ounces of gold in 2023 compared to 1,086,009 ounces in 2022. In Q1 of 2024 they produced 224,288 ounces of gold. The decline was due to higher than expected rainfall at their main producing mines. However, they do expect production to improve in the later quarters of 2024. The 2024 guidance is set at 1.0-1.08 million oz.
  • All-in Sustaining Costs: Their all-in sustaining costs (AISC) were $1,229 per ounce of gold sold in 2023, up from $1,016 in 2022. That was mainly due to increased inflationary pressures. The 2024 guidance for AISC is set between $1,365 and $1,405 an ounce.
  • Balance Sheet: B2Gold has a fairly strong balance sheet with $654 million in cash at the end of Q1 2024 and a debt of $646 million, a net cash position. This is a very healthy balance sheet, especially when considering how volatile their income and cash flows are. * Capital Spending: B2Gold is committed to spending an average of 670 million dollars for exploration and development to improve their portfolio and future opportunities.
  • Cash Flows: Cash flow from operations in 2023 was $743.7 million compared to $1.01 billion in 2022. This reflects the decline in profitability mentioned earlier.

Moat: 1 / 5

B2Gold possesses little to no economic moat in the traditional sense. They are reliant on gold prices and have minimal pricing power. Their operational advantages are not that difficult for competitors to replicate, as other firms can also operate in low-cost mines if they have the capital. As such they can be considered a price taker in a very competitive market and have little to no ability to create a wide moat, and therefore the rating given to them is a 1 out of 5.

Legitimate Risks That Could Harm the Moat and Business Resilience:

  • Fluctuating Gold Prices: As a gold producer, B2Gold is acutely exposed to swings in gold prices, which can dramatically affect its revenues and profitability.
  • Geopolitical Risk: As their mines and development projects are in areas with some high political and environmental risks they are always in danger of their operation being disrupted, or needing to follow costly new regulations.
  • Operational Risks: Mining operations are inherently complex and risky. Events such as accidents, natural disasters, or geological difficulties can disrupt production and increase costs. * Cost Inflation: Mining is an input-heavy industry and therefore exposed to increases in expenses that would compress profits. * Acquisition Risk: While their acquisitions may add production value, they are not guaranteed to be successful and the goodwill on the balance sheet that does not create results can hurt the company in the long-term.

Despite the risks, B2Gold has proven to be financially robust and their long-term focus on developing value through new mines will create value for shareholders in a high gold price environment. Their low cost of operation gives them a strong base to generate revenue. Also, they have little long-term debt on their balance sheet and are well-capitalized, giving them a good level of financial resilience.

Understandability: 2 / 5

B2Gold’s business model is not overly complicated; its main objective is to extract gold and sell it, which is easily understandable. However, valuing it involves understanding geological reports, commodity pricing, and financial analysis of a capital-intensive project. That makes the business’s long-term prospects and value complicated to analyze, and that is why it receives an understandability score of 2 out of 5.

Balance Sheet Health: 4 / 5

B2Gold maintains a healthy balance sheet with low net debt, good operating cash flow, and substantial capital investments that should sustain it long-term. However, they rely on a fluctuating commodity price which makes it difficult to predict future financials. However, the current balance sheet makes them very resilient to these price swings. Therefore the score of 4 / 5 is appropriate.