B2GOLD, the Toronto-listed gold producer, reported an auspicious start to the life of its newly commissioned Fekola gold mine in Mali, saying it had reached commercial production a month ahead of budget and had produced 80,000 ounces of gold to date – enough to lift the firm’s output guidance for 2017 by as much as 50,000 oz.
Commercial production – defined as 30 consecutive days of mill throughput at 65% or greater of nameplate capacity – was reached on November 30. The 80,000 oz of gold output was about 158% above budgeted production of 31,000 oz. Gold production from the mine – which cost about $521m to build – was expected to be between 100,000 and 110,000 oz outstripping the mine’s original guidance of 45,000 to 55,000 oz.
“Based on current assumptions and updates to B2Gold’s current year guidance and long-term mine plans, the company is now projecting consolidated gold production in 2017 of between 580,000 and 625,000 ounces,” it said. Previous guidance was put at 530,000 to 570,000 oz for the year.
Gold production for the group in 2018 is forecast to be between 925,000 and 975,000 oz. “This represents an increase in annual consolidated gold production of approximately 58% for B2Gold in 2018 versus 2017,” it said. Shares in B2Gold have come off slightly over the last three months but are virtually flat on a 12-month basis.
B2Gold forecast average cash flow from operations over the next three years from 2018 of $500m largely owing to Fekola. Commenting in its third quarter production and financial results published earlier today, the company also projected annual gold sales revenues of about $1.2bn and “… a significant increase in free cash flow” which it defined as operating cash flow less investing cash. These estimates were based on a gold price of $1,275/oz. The gold price is currently at $1,276/oz.
B2Gold also mines gold from the Masbate gold mine in Philippines, and two operations in Nicaragua: La Libertad and El Lion. It also derives gold from Otjikoto in Namibia which it bought through the takeover of Auryx Gold in 2011.
Despite the success of Fekola, B2Gold has had a more difficult operating performance in the nine months of the financial year compared to 2016. Year-to-date cash flow of $129.4m is more than half the cash generated at the same point in the previous financial year, although $120m of last year’s cash was from prepaid sales transactions.
Net income for the nine months ended September came in at $27.1m equal to $0.03/share compared to net income of $30.5m ($0.04/share) in the comparable period of 2016. Adjusted net income was $46.1m ($0.05/share) compared to $96.5m ($0.10/share) for 2016. The decrease in adjusted net income was mainly attributable to lower gold sales revenue and higher operating costs, the company said.