The achievement is a milestone not only for the company, but also for Namibia — Otjikoto is only the second gold mine in the country, and according to B2Gold it's made history for being one of Namibia's fastest-moving mine construction projects.
Ramp up coming
Otjikoto's progress to this point has indeed been fast. The company received a mining license just two years ago, with construction starting in April 2013. For the last several months, work has been focused on transitioning Otjikoto from the construction stage to a steady state of operations.
That said, B2Gold doesn't plan to slow down now. In 2015′s first quarter, investors can expect to see the company complete an updated mineral resource study for Otjikoto. It also plans to put out an updated mine plan by the end of 2015; it will look at open-pit and underground mining at the Wolfshag zone, which is adjacent to the main Otjikoto pit.
Amidst that activity, the company expects Otjikoto to achieve 2015 production of 140,000 to 150,000 ounces of gold at a cash operating cost of about US$500 per ounce and an all-in sustaining cost of around $700 per ounce. In a note to clients, Haywood Securities said those numbers differ from its forecast of 120,000 ounces at a cash operating cost of $734 per ounce.
Looking longer term, gold production at Otjikoto is expected to increase to 200,000 ounces in 2016 and 2017 following the completion of a mill expansion in Q3 2015. The company believes that output, combined with production from its three other mines — two in Nicaragua and one in the Philippines — should bring its total production to about 540,000 ounces in 2015 and 610,000 ounces in 2017. Haywood has forecast a more modest 524,000 ounces for 2015, but notes that "if 2015 production costs and output for Otjikoto come in closer to the Company's expectations ... then operating margins and gold output could be appreciably better than [the Haywood] forecast."
Haywood's price target for B2Gold is $3.20 and it rates the stock a "buy." As the firm states in last week's note, its positivity largely stems from the fact that it believes the company is "a rapidly growing, emerging mid-tier producer capable of delivering ~967,000 ounces of gold a year in 2018."
Explaining further, Haywood notes that B2Gold has the potential to "further consolidate" the gold sector, which as investors well know has lately suffered from "depressed metal prices and disharmonic equity valuations." The company has completed acquisitions worth over $1.9 billion since 2009, according to the firm, which shows that it has a good grasp on how to deliver growth, manage costs and successfully navigate community relations.
That certainly sounds promising, and it will be interesting to see both how work at Otjikoto progresses, and whether B2Gold pursues more acquisitions. At close of day Friday, shares of the company were sitting at $2.01 each on the TSX, up 1.10 percent, and at $1.73 on the NYSEMKT, down 0.57 percent.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.B2Gold Pours First Gold at Otjikoto Ahead of Schedule from Gold Investing News