Wednesday, November 2, 2016

Recent Buy – B2Gold Corp

Whenever I make a purchase, I like to share my buys to document my journey towards financial independence. As regular readers are aware, I have broken from the pack of DGI and sold some of my investments to move to a cash position. I shared details on my motivation to do so in this post. In that post, I have indicated that I am bullish only on one sector currently — the resource/materials sector, and more specifically gold and silver.

I continued adding to my precious metals equity sector as I still see tremendous value. Earlier this week, I added to my position in B2Gold Corp (BTO.TO) (also trades as NYSE:BTG) with 300 shares @ C$3.42. This is the third transaction to for this particular company in my portfolio. The company does not pay any dividends.

I usually present my thesis on why I bought a particular investment security and present the risks associated in the Recent Buys posts. In this case, I will simply link to my original post on B2Gold purchase. Note that there was one major event that occurred on Tuesday which caused the stock to take a ~12% hit after which I added to my position. More on this after the link below.

New Risk Event for B2Gold

The event was related to the Government of Philippines DENR (Department of Environment and Natural Resources) announced the results of the nationwide audit of metallic mines. This is a new added risk to the Masbate Gold mine that B2Gold operates and provides significant portion of B2Gold’s revenue. It is also a very economical mine in B2Gold’s arsenal where All-In Sustaining Cost (AISC) is a lowly $595 /oz. The audit definitely throws a wrench in the works and will add some complication and added risk — which the management assures shareholders will be handled and de-risked appropriately. We will have to wait and see how things progress.

Valuation

I believe B2Gold is attractively valued even after considering the above risk. In addition to the growing revenue and earnings expected from B2Gold in the coming years, there is also added tailwind from the rising gold prices (which I am bullish on). Following infographic from Simply Wall St (read my recent review here) illustrates the valuation. Note that the infographic represents the US-listed stock NYSE:BTG and in US$.

AMEX:BTG B2Gold Intrinsic value by Simply Wall St

AMEX:BTG B2Gold Intrinsic value by Simply Wall St

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