In a July 2 research note, BMO Capital Markets analyst Brian Quast reported that B2Gold Corp. (BTG:NYSE; BTO:TSX; B2G:NSX) agreed to sell its Nicaraguan assets to Calibre Mining for $100 million and a roughly 31% equity interest in Calibre. Closing of the deal is slated for October 2019.
The two gold mines being sold are El Limon and La Libertad, which together contribute about 150,000 ounces per year, or approximately 15% of B2 Gold's total production.
Per the agreement, Calibre Mining will pay, on closing, $40 million in cash, 40 million Calibre common shares (valued at CA$0.60 per share) and a $10 million convertible debenture. Calibre will pay another $10 million in cash a year after the closing. With the transaction, B2Gold's interest in Calibre will increase to about 31% from 11.9%.
BMO Capital considers the deal "positive" and the price "fair," given it values the two mines together at CA$240 million, CA$225 million for El Limon and CA$15 million for La Libertad, Quast wrote. "With Nicaragua being a less traditional mining jurisdiction, and both mines underperforming expectations of late, it was unlikely that any acquirer was going to pay over net present value for either of these assets," he added.
Quast highlighted that "the divestiture will allow B2Gold to better focus on optimizing and growing its larger, lower-cost assets." It also will result in a lower all-in sustaining cost for the miner, decreasing to CA$665 per ounce from CA$683 per ounce.
BMO Capital has an Outperform rating and a CA$5.50 per share target price on B2Gold, whose stock is currently trading at around CA$3.94 per share.
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Disclosures from BMO Capital Markets, B2Gold, July 2, 2019
IMPORTANT DISCLOSURES
Analyst's Certification
I, Brian Quast, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 9B: BMO Capital Markets makes a market in B2Gold in United States.
