BTG - I Am Buying B2Gold For The First Time: A Giveaway Valuation

2024-03-28 08:30:00 ET

Summary

• B2Gold's current undervaluation and future growth potential outweigh the risks of owning mining assets in politically unstable regions.
• Higher costs and lower production levels projected for 2024 are problematic, but a big swing for better results is expected in 2025.
• A 6% dividend yield, lower than industry-average costs of production, alongside the potential for new gold discoveries should be supportive of the share quote.
• Technical buying momentum is starting to appear, as icing on the cake to make a purchase decision.

After avoiding B2Gold ( BTG ) over the years, I have decided to buy a small position this past week. Despite a rather extensive list of operating risks to consider, the valuation argument has become quite compelling, especially looking forward to 2025-26 guidance and projections for much higher annual gold output on far lower mining costs per ounce. For me, upside potential is starting to outweigh downside risks for owning the stock. A final positive pushing me into the bull camp is technical buying momentum appears to be expanding in March. So, other investors, hedge funds, and brokers may be coming to the same investment conclusion. Let me explain my thinking.

Company Background

I have not been very excited about investing in B2Gold over the years for several reasons. For starters, mine life estimates have always been low. Today's rough 1-million ounce annual production level is backed by around 7 million ounces of likely mined reserves (5.4 million in proven reserves at producing mines + another 1.5 million in expected production from Back River in Canada), and perhaps another 3 million in likely convertible ounces from the measured & indicated category. Honestly, a 7 to 10-year companywide mine-life stat sits on the weaker end of the major miner scale. In terms of attractive alternatives, the big boyz of Newmont ( NEM ), Agnico Eagle ( AEM ), and Barrick ( GOLD ), run company mine-life estimates of 15-20 years (if not longer) on current production levels, a good double the duration of BTG....

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