Recent Buy – B2Gold Corp

Whenever I make a purchase, I like to share my buys to document my journey towards financial independence. This latest purchase continues to diverge from the normal DGI stock buys that I normally pursue, as I shared in this post – Multipronged Approach to Investing and Recent Sell – The Big Reset Edition.

Regular readers of this blog are aware that I am not crazy about this stock market and the crazy valuations we are seeing. In addition, companies are routinely adjusting their financials, which isn’t being highlighted by the media. This I find is very concerning and fear the worst pushing me towards more safety trades.

Over the past few months, I have shared my moves in the precious metals space with a purchase of Silver Wheaton Corp (SLW.TO) and Pan American Silver Corp (PAA.TO). Continuing with the theme, I added another mining company, this time focused on gold. Note that at the moment, I own IAMGold Corp (IMG.TO), but have a covered call which is in-the-money and expect to expire in a couple of weeks and get called away. This was a way for me to get rid of a company that I am not very confident in — its a decent company, but the management hasn’t done a great job and there are better run companies in the space.

Last month, I initiated a position in B2Gold Corp (BTO.TO) (also trades as NYSE:BTG) with 500 shares @ C$3.60. The company does not pay any dividend.

Company Overview

B2Gold Corp. (B2Gold) is a Canada-based gold producer with approximately four operating mines and one mine under construction. The Company has a portfolio of other evaluation and exploration projects in various countries, including Mali, Colombia, Burkina Faso, Finland, Chile and Nicaragua. Its material mineral properties consist of three mines and one mine under construction: Otjikoto mine, an open pit gold mine located approximately 300 kilometers north of Windhoek, the capital of Namibia (Otjikoto Mine); Masbate mine, an open pit gold mine, located near the northern tip of the island of Masbate, over 360 kilometers south-east of Manila (Masbate Gold Project); La Libertad mine, an open pit gold mine located over 110 kilometers due east of Managua and 32 kilometers northeast of Juigalpa, Nicaragua (La Libertad Mine), and Fekola gold project, an open pit gold mine under construction located approximately 40 kilometers south of the city of Kenieba, Mali (Fekola Project).

Recent Buy Decision

Why Gold?

  • Gold is the oldest currency in human civilization. I have lost faith in the fiat currencies and am hedging by owning gold in my portfolio. While I own a little bit of physical gold, I also like to own gold mining companies as a way to gain exposure to the gold market.
  • Gold is a tremendous value store that has stood the test of time. Some people may argue that it is a barbaric metal that does not really do much, but I vehemently disagree. Gold still plays the best value store and hedge against the current fiat currencies. Exposure to precious metals is warranted given the current economic outlook. There are plenty of challenges facing the financial and monetary system. It is not a question of ‘if’, but a question of ‘when’, the next recession or financial crisis will hit the markets. Once investors face challenges in the financial markets, everybody runs to safe havens such as gold and silver.
  • The materials/precious metals sector has been the most hated/underperforming sector over the past 3-4 years. We could possiblynbe on the cusp of a new bull market.

47389602_14636585032668_rId11 (Image Source: Seeking Alpha)

Why B2Gold?

  • B2Gold is an intermediate gold producer with four producing mines. The company also bought, completed FS and is on track to start production of the Fekola mine in Mail. The company has a strong financial position compared to peers.

B2Gold-operations

  • B2Gold is projected to produce 510K-550K ounces of gold at an all-in cost of $895-$925 /oz.
  • Those production numbers are expected to ramp up as Fekola comes online in late 2017. Current projections are for 550-600K oz in 2017 and 800-850K oz in 2018.
  • A mining company is only as good as the reserves it has a stake on. The following chart summarizes the inferred reserves as of Dec 2015. As can be seen, the company has amazing resources and the mining operations should produce some juicy returns.

B2Gold-inferredResources

Risks

  • The strength in US$ means that precious metals can face continued pressure on the prices. This could be a damper on the stock price for B2Gold.
  • Gold prices might collapse bringing the all-in costs for B2Gold higher than spot price.
  • Miners may also face a risk of a reserve failing to produce and the company miscalculating the assets present in ground.

Summary

I have been eyeing precious metals investments for over a year now and had been thinking that the time was not right. The breakaway late last year and earlier this year has me moving into this asset class as my faith in the rest of the financial system collapses. There is plenty to worry about in the rest of the economy and I believe we are at the start of a bull market in gold and silver as investors turn towards safety trades. Owning a high quality mining company such as B2Gold is my way of getting more exposure to gold. My position in IAMGold will come to an end later this month as I expect my covered call to end in-the-money and this move is my upgrade in quality of a gold mining company in my portfolio.

Further Reading

Full Disclosure: Long all companies mentioned. Our full list of holdings is available here.

14 thoughts on “Recent Buy – B2Gold Corp

  1. Interesting buy Roadpmap. Personally, I’m not the biggest fan of commodity companies (except for oil). I’ve never really dove too much into the gold market because of the volatility that usually ensues. It sounds like you hedged your bet with the covered call though. I’ll be interested to see how this stock performs for you in the current/crazy market environment, especially considering there is no dividend to reward you along the way.

    Best of luck! Keep the grind going.

    Bert

    • Hi Bert,
      The hunt for yield has made DGI unattractive, so Ive been looking elsewhere for returns. As it stands, the best place to invest right now is the gold/silver market as it starts its bull market. Returns have been spectacular lately, and I managed to get into B2Gold at a decent time — its already up 30% since I bought it. Hoping for a pullback so that I can buy more. There are plenty of other avenues to get returns outside the dividend world 🙂

      R2R

  2. Hi there R2R!

    This is an interesting buy, especially for a longtime DGI like yourself! I can appreciate your argument about safety given the current state of the economy. I see lots of chatter about the (impending?) demise of the financial system and paper money. Along with that, also strong recommendations to buy Gold. Are there good dividend paying Gold stocks out there? 🙂

    • Haha…Like I said in the response above to Bert, Ive had to look outside the DGI world for better investment opportunities. The current financial system is precariously balanced as we have learned nothing from the last crisis and will need another crisis and resetting/rewriting some of the rules for our monetary system. The stock market & bond market have nothing to give and I have been looking for safety trades (gold/silver) as I see chaos on the horizon.

      There are a few companies that pay dividends. Agnico Eagle (AEM) (a very good/stable mining company) just raised dividends for the first time after many years. But mining companies are a different animal. They have constantly depreciating assets as they mine more — so they need to refill their portfolio with new mines either by funding new exploration projects or buying out smaller E&P companies.

      If you are looking more for a buy-and-forget style of investing (which most DGI investors will be comfortable with), take a look at streaming & royalty companies — which are essentially financing the E&P projects upfront for the right to buy the assets at a certain price. Usually the spread is pretty big, so even if the spot prices crash, they are protected compared to mining companies. Examples include FNV, SLW, RGLD & SAND. FNV & SLW are the best of the breed.

      Best wishes
      R2R

  3. Nice buy buddy. Commodities, especially silver/gold, continue to be one of the few areas that interest me. For me, gold and silver are money…..so they have some value even though I don’t particularly like the mining space. Still, the miners are leveraged to the upswing we are seeing in gold/silver values. I hope this investment works out well for you. If only we could go back to January, and buy like Jay …………… 🙂
    -Bryan

    • Hi Bryan,
      Thanks for the comment. I agree that gold and silver are money…no matter what anyone says. Its been the oldest form of money and it continues to be.

      The miners are leveraged and these good times mean that they are rising with the tide. Yup…wish I was making these moves in Jan as well, but I am happy with the gains I am seeing now. Cant complain at all.

      R2R

  4. Sabeel,

    Well, one thing for certain I think your readers can appreciate is the fact that you don’t mince words and you just tell it like you see it… 🙂 Not always easy to do, particularly when your thoughts and actions aren’t coinciding with popular sentiment, but altogether refreshing to hear.

    I’m with you there and haven’t been a fan of the overall markets for awhile now. In fact, I cashed out of general equities entirely in 2015 as the disconnect between fundamentals and valuations pushed things into a level where I was no longer comfortable with the risks involved. Gold and silver still remain a contrarian trade, but it’s very early stages right now and if price action is any indicator, the markets are clearly telling us that we are just at the start of the next bull market. It could be an epic run and it’s one I most definitely don’t want to miss out on.

    With so much uncertainty right now, precious metals are a pretty good place to be too, dividends or no dividends… Cash is another one, although it’s extremely boring and waiting out for buying opportunities could take a very long time… I really think patience will be rewarded, but in the interim, it sure is a snooze fest waiting this thing out.

    All the best!

    • Thanks for the complements, Jay. It certainly isnt a popular opinion…which is what makes the investment attractive.

      You got in at a good time. I wish I got in earlier but I dont think I am too late to the party. Theres plenty of run left in the gold and silver market. The valuations are very attractive and with the rest of the economy balancing at the edge, we will see either a collapse or the central banks ease more by launching more QEs or driving into NIRP — both of which make for a good case for gold investing.

      PM and cash are where investors need to be. I am not completely there and still stay invested partially, but I am a lot more comfortable than I was a couple of months ago.

      cheers
      R2R

  5. Interesting buy R2R, you are going against the crowd of DGI – and I’m sure history will say whether it was the right call 🙂 Seems like a good play into the gold industry with mines all over the world. I look forward to seeing how this plays out.

    Tristan

    • Hi Tristan,
      I am going against the crowd. In investing, thats a good thing…once you identify a depressed asset and know that its starting its bull run, you need to hop on quick before the rest of the momentum kicks in. Im just kicking myself for not buying more since B2G is already up 30% since I bought it last month 🙂

      cheers
      R2R

  6. Hi Roadmap,

    very interesting buy, but I would be quite reluctant to buy it now (congrats of buying last month) as share price is at all time highs… you know for gold companies it is hard to understand why valuation is higher than when gold prices were higher and when gold reserves were bigger…

    Best regards,
    DividendTIME

    • Just because its an all time high shouldnt mean that you should avoid it. New discoveries have been made, new mines are under production, its a new cycle and the price points are different. Just because the stock price is testing new limits doesnt mean its overvalued. The stock has had quite a run and I would wait a bit of a pullback before I add more, but evaluating mining/resource companies like other companies is why most DGI investors do not succeed in this space.

      cheers
      R2R

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