RE: Canaccord: Buy rating and $5.00 target for BTO
Metals and Mining -- Precious Metals and Minerals
Q1/13 BEATS EXPECTATIONS;
646.1 OPERATIONAL OUTPERFORMANCE
CONTINUES
Investment recommendation
We reiterate our BUY rating on B2Gold shares following the release of Q1/13 financial results, which were better than expected at all operations and continued to highlight the team’s excellent operational track record. B2Gold remains a 2013 Canaccord Genuity Canadian Focus List pick based on one of the best production growth profiles in the sector, relatively low permitting, financing and new mine development risk, and several upcoming potential catalysts that we believe should pave the way for a strong share price performance in 2013. With a strong balance sheet and relatively low capital requirements to fund growth to 540 koz by 2015E (relative to the expected cash flow profile), we see B2Gold as very well positioned to weather even an extended period of low gold prices.
Investment highlights
? Q1/13 adjusted EPS of $0.07 beat of our estimate of $0.05 and consensus of $0.06. There were several one-time/non-cash adjustments mostly related to the CGA acquisition. While production had been pre- released, cash costs were materially lower than we expected and were also below levels budgeted by the company. In our view, B2Gold’s ability to keep costs under control in a sector struggling to handle inflationary pressures should be viewed as a testament to the quality of the operating team.
? Consolidated cash operating costs excl. royalties were $722/oz ($771/oz incl. royalties), below our estimate of $764/oz ($825/oz incl. royalties). Consolidate cash operating costs (excl. royalties) were 8% below the company's internal budget of $785/oz.
? As of March 31, 2013, the company's balance sheet remained strong with $120.7 million in cash, and $113.6 million in working capital. Total debt was $65.8 million, including current debt of $49 million included in working capital, of which $37.5 million was consolidated with the CGA acquisition.