Hedge funds slash bullish wagers on gold before war jitters
Speculators have reduced net-long positions by 3.6%.
In February, B2Gold Corp. (TSX: BTO; NYSE: BTG) announced an initial open-pit inferred resource for the newly discovered El Limon Central zone at its El Limon mine in Nicaragua.
This week the gold producer announced the results of an expansion study that evaluated the life-of-mine options for combining El Limon’s remaining underground inferred resource (17 million ounces of gold) with the new inferred resource for the Central zone (5.13 million tonnes grading 4.92 grams gold per tonne for 812,000 ounces of contained gold).
The study concluded that for capex of just US$35 million, El Limon’s life-of-mine would be extended to 21 years
Based on El Limon’s combined inferred resource from both open pit and underground (6 million tonnes grading 4.3 grams gold for about 829,000 ounces of gold), the expansion study recommended the expansion of the existing plant from 485,000 tonnes per year to 600,000 tonnes per year and the addition of a third stage of milling for a fine grind. (The finer grind would improve recoveries of mineralized material from both open pit and underground and allow the company to reprocess high-grade historic tailings.)
The study concluded that for capex of just US$35 million, El Limon’s life-of-mine would be extended to 21 years (10 years producing 75,000 oz. gold per year, followed by 11 years of reprocessing historic tailings for production of 18,000 oz. gold per year).
Excluding expansion capital costs, direct cash operating costs per oz. would come in at below US$600 per oz. and all-in sustaining costs would be around US$900 per oz.
At a gold price of US$1,300 per oz., the study forecast an after-tax net present value of over US$135 million at a 5% discount rate, which would generate an after-tax internal rate of return of about 28%.
Brian Quast of BMO Capital Markets described the expansion “as a step in the right direction for BTO to hit its long-term 1 million oz. per year target,” and Tara Hassan of Raymond James said she was “encouraged” by the study’s results.
“While El Limon currently represents only 3% of our net asset value, we view the results from the study positively and expect to revisit our valuation for El Limon to reflect the results,” Hassan wrote in a research note to clients.
“Although B2Gold has performed well in recent weeks,” she continued, “we continue to view the company’s current discounted valuation to be an attractive entry point into one of the better positioned intermediate producers given a track record of operational execution and strong organic growth opportunities.”
At presstime in Toronto B2Gold was trading at $3.59 per share within a 52-week range of $2.77-$4.06.
