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Trade Idea: B2Gold

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I'm getting interested in B2Gold (BTG) again.

I see a bull flag, a failed head and shoulders pattern, and the stock is above the 50 DMA (red line). On-balance volume indicates terrible selling pressure but the RSI indicates the stock is no longer oversold. Has the market priced in the Mali risk and the cost overruns on the Goose project? No way to tell, but this is the kind of setup I like.

B2Gold is a gold miner with 3 operating mines - Masbate in the Philippines, Otjikoto in Namibia, and the crown jewel is the Fekola mine in Mali. The company is expected to produce 900,000 gold ounces this year, including 40-50k attributable ounces from Calibre Mining (CXB.TO) and 470-500k gold ounces from Fekola.

In April 2023, the company diluted shareholders to the tune of C$1.1B (current market cap: C$5B) in an all-share deal to acquire Sabina Gold & Silver (SBB.TO) for its Goose project up in the Nunavut. The market did not like the deal, which has weighed down these shares through this entire rally in gold.

The acquisition makes sense from the company POV. Mali is a huge risk and the government has been intent on exploiting B2. There have even been attacks on its employees, with 4 killed in February this year. Neighbouring country Niger is unstable as well, and the waning US influence in this entire region is becoming problematic for western miners.

The attributable ounces from Calibre Mining is the result of the company washing its hands off Nicaragua following the 2019 pension protests in the country. B2Gold began its debut as a miner with 2 mines in the country, never made money on them, and finally let them go, in exchange for an equity stake in Calibre, which was then a mere explorer. Calibre tried to make them work all these years, then finally said to hell with it and acquired Marathon Gold (MOZ.TO) for its Valentine gold project in safe Newfoundland, Canada, early this year.

There's a good reason mining companies deserve their poor reputation. It's where capital goes to die.

In a sector like this, the way to make money is to really, really understand the fundamentals, not believe the hype, and above all - trade on the technicals and never overstay your welcome.

Coming back to B2Gold.

The company needs to raise funds to finance Goose, which is already facing cost overruns and delays, and will face still more cost overruns and delays. No company wants to come out and say the project will be well above budget and delayed by several quarters. They put out the bad news in increments of $100M and 1-2 quarters. The Goose mine is now expected to cost C$1.455B and be online in Q2 2025. We'll see.

All good reasons to think the share price may have bottomed.

Now all they need is a good story to tell the market. Management has built a lot of goodwill over the decades, and they are seasoned operators, so that won't be a problem. The analysts will give them positive coverage. Also, as the only undervalued large-cap gold stock, this story sells itself to value investors.

I'm planning to take an initial position today and wait for price confirmation to add.

Update: BTG is now a 0.9% position. I want to see it close above $3 to confirm the trend change.

Good Trading!


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