B2Gold shares down on new Nunavut mine plan with stricter resource model

B2Gold (TSX: BTO, NYSE AMERICAN: BTG, NSX: B2G) has provided a new life-of-mine plan for the Goose project in Nunavut, Canada that confirms its previous timeline and cost estimates, but lowered its high-confidence resource count.

Goose represents B2Gold’s first project in the Back River gold district, which consists of 11 mineral claims blocks along an 80-km belt. The proposed mine is scheduled to pour its first gold in the second quarter of this year, ramping up to commercial production the following quarter.

The company’s new mine plan is based on a technical report containing an updated gold reserve estimate for the Goose project, totalling 11.3 million tonnes grading 6.82 grams per tonne gold for a total of 2.48 million oz. This reserve base is expected to support continuous gold production over nine-year mine life, with annual production of 270,000 oz., including 300,000 oz. during the first six full years from 2026 through 2031.

In addition to confirming the project’s previous timeline, the new mine plan also reiterated its construction and mine development cost estimate, which was pegged at C$1.54 billion ($1.08bn) last fall. However, the operating costs were higher than anticipated, with the all-in sustaining cost projected at $1,547/oz., versus $1,363/oz. from before.

New resource model

In a note Friday, BMO Capital Markets said the technical report has a “slight negative impact” on the Goose project estimates since it used a stricter resource model that downgraded a portion of the indicated mineral resources to the inferred category. There are now 3.56 million oz. indicated and 2.44 million oz. inferred, but with higher gold grades.

Shares of B2Gold fell 9.5% by midday to C$4.11 apiece, for a market capitalization of C$5.4 billion. Its 52-week high was C$4.84, while its low was C$3.16. BMO has maintained its “outperform” rating for the company, but lowered its price target to C$6.50 on the news.

However, B2Gold said in its press release that it “remains highly confident” that with additional in-fill drilling to be completed over time, a large portion of the inferred resources will convert to indicated, and therefore be eligible for classification as mineral reserves.

The mine plan currently includes Echo, Umwelt, Llama, and Goose open pits, plus the mining of Umwelt underground. B2Gold believes that multiple areas that were contemplated in the prior report (Echo underground, Llama underground and Goose underground) will have their resources upgraded with infill drilling.

Historically across its existing operations, B2Gold has converted in excess of 75% of inferred mineral resources to indicated mineral resources through this method, the company said.

Further upside

With first production at Goose expected within three months, B2Gold said it has also begun multiple optimization studies to improve the operation, including the potential additional of a SAG mill to increase its throughput to 6,000 tonnes per day from 4,000 tonnes.

The gold miner is also evaluating ways to exceed the planned production from the Umwelt underground, expected to begin high-grade stope ore production in the third quarter. This could involve the development of more active production levels and alternative mining methods to lower costs.

The company is also considering the viability of constructing and running the Goose project winter ice road on a less than annual basis.

B2Gold also said it sees the potential to increase the “significant mineral resource base” at the Goose project, with 12,000 metres of drilling planned targeting extensions of the largest and highest-grade resources at the Llama and Umwelt deposits. It will also follow up on the Nuvuyak, Mammoth and Hook targets from the 2023-24 drilling.