For disclosure still one the sidelines. Still patienty waiting for a re-entry point. SMF

B2Gold loses $23.97-million (U.S.) in Q1 2014

2014-05-14 06:45 ET - News Release

Mr. Clive Johnson reports

B2GOLD ANNOUNCES FIRST QUARTER 2014 RESULTS

B2Gold Corp. has released results from its operations for the first quarter ended March 31, 2014. All dollar figures are in U.S. dollars unless otherwise indicated. Highlights from the first quarter include:

For the first half of 2014, budgeted gold production of 194,033 ounces is expected to be lower than in the second half of the year of 207,355 ounces, due to a number of factors including the SAG mill replacement in June at the Masbate mine. In the first quarter of 2014, gold production of 96,303 ounces was near the lower end of the company's forecast range. Over all, consolidated production guidance of 395,000 to 420,000 ounces of gold for the year remains unchanged.

Consolidated cash operating costs for the first quarter of 2014 were $634 per ounce of gold, a significant reduction of approximately $90 per ounce compared with the same period last year of $722 per ounce. Consolidated cash operating costs were also 7 per cent below budget in the first quarter of 2014, each of the company's three operating mines achieved lower than budgeted per ounce cash operating costs. Consolidated all-in-sustaining costs for the quarter were $1,039 per ounce.

The company is projecting another record year for gold production in 2014. Companywide production in 2014 from the Masbate, Libertad and Limon mines is expected to be in the range of 395,000 to 420,000 ounces of gold at an operating cash cost of $667 to $695 per ounce. All-in sustaining cash costs are forecast to be in a range of $1,025 to $1,125 per ounce of gold. The production forecast for 2014 does not include any estimated gold production from the Otjikoto development project in Namibia as revenue earned from the sale of precommercial production will be credited to mineral property development costs prior to commercial production. With the first full year of gold production from the Otjikoto gold project in Namibia scheduled for 2015, the company is projecting 2015 gold production of 555,000 ounces, based on current assumptions.

2014 first-quarter financial results

Gold sales in the first quarter of 2014 were 98,995 ounces on production of 96,303 ounces. This compares with sales of 95,042 ounces on production of 79,661 ounces in the first quarter of 2013. Gold sales in the first quarter of 2013 benefited from the sale of 20,811 ounces relating to the Masbate mine's gold bullion inventory acquired on Jan. 16, 2013.

Gold revenue for the first quarter of 2014 was $129-million on sales of 98,995 ounces at an average price of $1,303 per ounce compared with $154.9-million (which included a non-cash amount of $9.4-million described below) on sales of 95,042 ounces at an average price of $1,629 per ounce in the 2013 first quarter. The decrease in gold revenue was mainly attributable to a 20-per-cent decline in the average realized gold prices. Gold sales volume only increased by 4 per cent in the first quarter of 2014 (compared with a 21-per-cent increase in gold production in the quarter) as gold revenue in the first quarter of 2013 included the sale of the Masbate mine's gold product inventory acquired on Jan. 16, 2013.

Gold revenue of $154.9-million in the first quarter of 2013 also included a non-cash amount of $9.4-million related to the amortization of deferred revenue, associated with the fair value adjustment of the gold forward contracts acquired as part of the CGA acquisition. As at Dec. 31, 2013, all of the Masbate gold forward contracts had been delivered into (and the related fair value adjustment of negative $37.4-million on acquisition had been fully amortized to gold revenue in 2013).

Cash flow from operating activities before changes in non-cash working capital was $43.3-million (six cents per share) in the first quarter of 2014 compared with $38.1-million (six cents per share) in the fourth quarter of 2013, an increase of 14 per cent. In the first quarter of 2014, cash flow from operating activities before changes in non-cash working capital was the second highest in the company's history, despite a significant decrease in the average realized gold price. In the first quarter of 2013, cash flow from operating activities before changes in non-cash working capital was $47-million (eight cents per share), higher than in the first quarter of 2014 as it benefited from the gold sales of the Masbate mine's gold product inventory acquired on Jan. 16, 2013.

Adjusted net income was $17.5-million (three cents per share) compared with $40-million (seven cents per share) in the same period of 2013. Adjusted net income in the first quarter of 2014 primarily excludes a non-cash mark-to-market loss of $38.3-million relating to the overall change in fair value of the company's convertible senior subordinated notes issued on Aug. 23, 2013. The convertible notes are measured at fair value on each financial reporting period-end date.

For the first quarter of 2013, the company generated a (generally accepted accounting principles) loss of $24-million (negative four cents per share) compared with net income of $60,000 (nil per share) in the equivalent period of 2013. As discussed above, the company's first-quarter earnings were affected by a non-cash mark-to-market loss of $38.3-million relating to the overall change in fair value of the company's convertible senior subordinated notes issued on Aug. 23, 2013.

Liquidity and capital resources

At March 31, 2014, the company remained in a strong financial position with cash and cash equivalents of $183.5-million and working capital of $237.5-million. In the first quarter of 2014, resource property expenditures totalled $95-million which included Otjikoto mine construction and mobile equipment expenditures of $61.5-million. The company expects that it will be able to complete the Otjikoto mine construction along with its other planned 2014 capital and exploration expenditures, by using its strong mine operating cash flows, existing cash position and its available credit facilities. In 2015, the company's cash from operations is expected to increase significantly due to gold production from the Otjikoto mine.

As at March 31, 2014, the company had available a $200-million senior credit facility of which $50-million had been utilized. On Feb. 19, 2014, the company entered into an amending agreement pursuant to which the facility amount of the senior credit facility was increased by $50-million to a total amount of $200-million, subject to updating security documents to reflect the increased amount of the facility. The company also has a $34-million Otjikoto equipment loan facility available, of which $22.1-million had been drawn down by March 31, 2014.

Operations

Masbate gold mine -- Philippines

At the Masbate mine in the Philippines, first-quarter production was 42,576 ounces of gold compared with budget of 51,892 ounces. Over all, production guidance for the year remains unchanged. Gold production was lower than budget, due to a number of factors. At the end of 2013, mine development at the Colorado pit had advanced more slowly than planned. As a result, mill feed in the first quarter of 2014 (which was forecast to be 100-per-cent high-grade oxide material from the Colorado pit) contained transitional and primary ore from the HMBE and Main vein pits not anticipated in the budget, which have a lower predicted recovery than the oxide ore from the Colorado pit. As the Colorado pit development is expected to catch up to budget in the coming months, the high-grade oxide ore from Colorado which had been scheduled to be processed in the quarter will be mined and processed later in the year.

In the first quarter of 2013, gold production at the Masbate mine was 43,554 ounces of which 36,467 ounces were included in the consolidated results of the company. The difference of 7,087 ounces related to production from Jan. 1, 2013, to Jan. 15, 2013, prior to the acquisition of the Masbate mine by the company on Jan. 16, 2013.

Cash operating costs for the first quarter of 2014 were $723 per ounce, approximately 4 per cent lower than budget, as a result of less than budgeted waste being mined and high-grade ore stockpiling which provided a positive stockpile adjustment against mining costs. Mining of ore was ahead of schedule in the quarter. High-grade ore production significantly exceeded both budget (2,105,576 tonnes compared with budget of 1,530,575 tonnes) and ore tonnes milled, resulting in a stock-pile increase. High-grade ore production was below budget in terms of grade but significantly above budget in terms of tonnes and (contained) ounces. This predominately reflects differences in mining location versus budget schedule.

Total capital expenditures in the first quarter of 2014 totalled $9.5-million, consisting mainly of a tailings dam expansion, the construction of a water treatment plant and additions to mining equipment.

The Masbate mine is projected to produce approximately 190,000 to 200,000 ounces of gold in 2014, at an operating cash cost of approximately $765 to $800 per ounce.

In the second quarter of 2014, the existing SAG mill is planned to be replaced. The SAG mill is on site and transfer and assembly of the crane is under way. Actual change-out of the SAG mill will occur in June. On restart, the operation will gain approximately 300,000 tonnes per year of operating capacity. SAG mill motors and gear boxes have been upgraded to handle the additional capacity.

Last year, the company began a metallurgical sampling and analysis program in order to assess the potential for a mill expansion at the Masbate mine. That preliminary work continues, with conclusions expected in the fourth quarter of 2014. A proposed mill expansion would allow the company to take advantage of opportunities to process additional ore, allow for the full utilization of the new SAG mill and optimize process plant gold recoveries.

La Libertad gold mine -- Nicaragua

La Libertad continued its strong operational performance in the quarter, with both gold production ahead of budget and operating cash costs below budget. First-quarter gold production at La Libertad was 38,596 ounces, 33 per cent higher than in the same period of 2013 and 2,430 ounces higher than budget. Higher grade than budgeted contributed to the surplus production (2.36 grams per tonne processed versus 2.17 grams per tonne budget), due to better grade performance from pit sources.

Cash operating costs were $541 per ounce in the quarter, approximately $42 per ounce below budget. Operating cash costs were better than expected due to higher gold production arising from better grades at the Mojon and Crimea pits.

Total capital expenditures in the first quarter of 2014 were $7.8-million, which included $2.9-million of deferred stripping costs, mainly at the Mojon pit, and La Esperanza tailings dam construction costs of $2.2-million.

La Libertad mine is projected to produce approximately 143,000 to 150,000 ounces of gold in 2014 at a cash operating cost of approximately $545 to $565 per ounce.

El Limon gold mine -- Nicaragua

Quarterly production at the Limon open-pit and underground mine was 15,131 ounces of gold, slightly below budget of 15,685 ounces, but a 7.5-per-cent improvement over the first-quarter 2013 production of 14,070 ounces.

Cash operating costs were $624 per ounce in the quarter, approximately $42 per ounce below budget. The better than expected operating cash costs were mainly due to lower site contractor and outside services charges. Processing costs were also positively impacted by reduced liner and reagent usage.

Capital expenditures in the first quarter of 2014 totalled $4.8-million which mainly included deferred underground mine development of $1.2-million, deferred prestripping charges of $1.1-million, and the purchase of mobile equipment of $1-million.

The Limon mine is projected to produce approximately 62,000 to 70,000 ounces of gold in 2014 at a cash operating cost of approximately $650 to $675 per ounce.

Development projects

Otjikoto development project, Namibia

Construction at the company's open-pit Otjikoto mine in Namibia remains on time and on budget. Construction is expected to be completed and production is scheduled to commence in the fourth quarter of 2014.

Construction commenced January, 2013, and will continue into the fourth quarter of 2014. Construction is being managed by B2Gold's experienced team. Excavation at the mill area is complete and a concrete batch plant is in continuous use to assist with the pouring of foundations. A total of about 15,000 cubic metres of concrete will be poured during construction, and a total of 13,000 cubic metres of concrete has been poured through March, 2014. The mill and mining offices have already been completed by a local contractor and the construction of all the other administration buildings is progressing well. Most of the equipment and supplies to build the mill have been purchased and are arriving daily at site. Mill construction activities are progressing well, 9,000 cubic metres of concrete having been poured in this area, and six leach tanks and five CIP tanks having been erected to date. Additionally, steel is arriving daily at site and the steel workers have begun to erect steel around the mill and tank areas. The total volume of material moved from the pit area to date is approximately 6.5 million tonnes. In addition, the tailings impoundment has been constructed and lined. This facility is substantially complete and will be used to capture water to start the mill in 2014.

Preproduction expenditures for the quarter ended March 31, 2014, totalled approximately $61.5-million (on a cash basis), including mobile equipment purchases of $6.8-million, power plant costs of $3.4-million and prestripping costs of $1.4-million.

The current mine plan is based on probable mineral reserves of 29.4 million tonnes at a grade of 1.42 grams per tonne containing 1,341,000 ounces of gold at a stripping ratio of 5.59:1 to be mined over an initial 12-year period. The current average annual production for the first five years is estimated to be approximately 141,000 ounces of gold per year at an average cash operating cost of $524 per ounce and for the life of mine approximately 112,000 ounces of gold per year at an average cash operating cost of $689 per ounce. However, based on the positive drill results from the Wolfshag zone to date, on Jan. 21, 2014, the company announced plans to expand the Otjikoto mine in 2015, increasing ore throughput from 2.5 million tonnes per year to three million tonnes. The increased throughput will be achieved through the installation of a pebble crusher, additional leach tanks and mining equipment at a total cost of approximately $15-million. Once the expansion is completed at the end of 2015, the company expects that the annual gold production from the main Otjikoto pit would increase to approximately 170,000 ounces per year.

The 2014 Otjikoto exploration program is budgeted at $8-million. The exploration drilling program will focus primarily on infill drilling on the northern portion of the Wolfshag zone and will further test the extension of the Wolfshag zone to the south. The company anticipates being in a position to upgrade the mineral resource classification to the indicated category by the end of 2014. The 2014 program will also include metallurgical and geotechnical test work for the Wolfshag zone.

Kiaka development project, Burkina Faso

The company owns an 81-per-cent interest in the Kiaka project following its acquisition of Volta in December, 2013. The property is located in south-central Burkina Faso in the regional province of Boulgou and Zoundweogo, approximately 140 kilometres southeast of the capital Ouagadougou.

A permitting study to advance the Kiaka property to an exploitation licence was completed and submitted to the Ministry of Mines and Energy in Burkina Faso on March 13, 2014. The permitting study is based on processing six million tonnes per year of higher-grade ore at the plant while the lower-grade ore is stockpiled, and utilizes a smaller pit that resulted in an improved ore to waste ratio. The company is progressing on a feasibility study that focuses on the higher-grade section of the resources of 54 million tonnes at an average grade of 1.49 grams per tonne gold for 2.58 million ounces in measured and indicated resource categories.

The 2014 development budget for Kiaka and West Africa is $8.7-million, mainly for completing the permitting study and advancing the Kiaka exploration licence to an exploitation licence, completing a feasibility level study for Kiaka based on lower throughput options (including additional metallurgical programs), keeping the tenements in good standing and for overhead and administration.

In 2014, the $3.6-million exploration program at Kiaka will focus on drilling of the inferred resource to upgrade areas of inferred to indicated, complete a geological interpretation of the deposit and continue to evaluate some of the regional targets within the claim area.

Gramalote development project, Colombia

On March 12, 2014, the company announced positive results from the preliminary economic assessment for the Gramalote gold project in Colombia. The Gramalote property is a joint venture between AngloGold Ashanti Ltd. (51 per cent) and B2Gold joint venture (49 per cent) AngloGold Ashanti as the project manager. Gramalote is located 230 kilometres northwest of Bogota and 80 kilometres northeast of Medellin in central Colombia.

At current gold price levels, the Gramalote project economics are positive but at this time do not move the project to the top of the company's priority list for continued development toward a final feasibility. The joint venture partners have agreed on a work program for 2014 that advances the environmental impact study so it can be formally submitted to the Colombian regulators during 2014 which is key to advancing the permitting process. Focus will also be given on addressing other project risk issues such as infill drilling of inferred mineral resources, social programs, environmental monitoring and government relations. Gramalote owns two diamond drills and will utilize those two machines to target 8,000 to 10,000 metres of infill drilling in 2014. At this time, a final budget for 2014 has not been agreed on but should be finalized by May. Current budget estimates for 2014 (100-per-cent basis) is $27.8-million. Both joint venture partners continue to finance their share of the project costs while final budget options are being reviewed.

Outlook

The company is projecting another record year for gold production in 2014. Companywide production in 2014 from the Masbate, Libertad and Limon mines is expected to be in the range of 395,000 to 420,000 ounces of gold with consolidated cash operating costs of $667 to $695 per ounce (a similar range as in 2013).

With the first full year of gold production from the Otjikoto gold project in Namibia scheduled for 2015, the company is projecting 2015 gold production of 555,000 ounces, based on current assumptions. The potential addition of production from the recently acquired Kiaka project could add an additional 200,000 ounces of annual gold production in the future.

Clearly B2Gold's strategy of growth through accretive acquisitions and exploration success to date speaks for itself. Over the last six years, the acquisitions of Central Sun Mining Inc. (the Nicaraguan mines), Auryx Gold Corp. (the Otjikoto project, Namibia) and CGA Mining Ltd. (the Masbate mine, Philippines) have seen the company grow annual production dramatically. The acquisition of Volta Resources Inc. (the Kiaka project, Burkina Faso), offers the potential for significant additional production growth.

Due to its strong cash position and cash flow from operations, the company is fully financed to complete its mine site capital expenditures, exploration and the construction of the Otjikoto mine, and finish 2014 with a strong cash balance. In 2015, the company's cash from operations will increase significantly due to gold production from the Otjikoto mine.

Looking ahead, B2Gold will continue to focus on accretive acquisitions and exploration for continued growth. With a proven technical team, strong financial position and access to capital, the company is well positioned to utilize its model of growth to continue building a profitable, growth oriented, sustainable intermediate gold producer.

First-quarter 2014 financial results -- conference call details

B2Gold executives will host a conference call to discuss the results on Wednesday, May 14, 2014, at 10 a.m. PT/1 p.m. EST. You may access the call by dialling the operator at 416-340-8527 or toll-free 800-446-4472 prior to the scheduled start time or, you may listen to the call via webcast on-line. A playback version of the call will be available for one week after the call at 905-694-9451 or toll-free 800-408-3053 (passcode: 1022589).

           CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
           (in thousands of U.S. dollars, except per share amounts)

                                        For the three months ended March 31,
                                                           2014        2013

Gold revenue                                          $ 129,020   $ 154,853
Cost of sales
Production costs                                        (62,305)    (70,345)
Depreciation and depletion                              (25,310)    (14,231)
Royalties and production taxes                           (4,310)     (3,939)
Inventory fair value adjustments on CGA
acquisition                                                   -     (32,354)
                                                      ----------  ----------
Total cost of sales                                     (91,925)   (120,869)
                                                      ----------  ----------
Gross profit                                             37,095      33,984
General and administrative                               (7,322)     (6,780)
Share-based payments                                     (3,391)     (2,915)
Foreign exchange (losses)                                  (332)     (1,590)
CGA acquisition costs                                         -      (5,859)
Other                                                      (910)     (1,195)
                                                      ----------  ----------
Operating income                                         25,140      15,645
(Loss) on fair value of convertible notes               (38,287)          -
Community relations                                      (1,509)       (698)
Interest and financing costs                               (995)       (347)
Realized (losses) on derivative instruments                (566)       (405)
Unrealized (losses) on derivative instruments               (88)     (2,414)
Accretion of mine restoration provisions                   (298)       (703)
Writedown of long-term investments                         (262)     (3,494)
Other                                                     1,468        (314)
                                                      ----------  ----------
(Loss) income before taxes                              (15,397)      7,270
Current income tax, withholding and other taxes          (9,459)     (6,488)
Deferred income tax recovery (expense)                      878        (719)
                                                      ----------  ----------
Net (loss) income for the period                      $ (23,978)  $      63
                                                      ==========  ==========
Attributable to
Shareholders of the company                           $ (24,005)  $      63
Non-controlling interests                                    27           -
(Loss) earnings per share (attributable to
shareholders of the company)
Basic                                                 $   (0.04)  $    0.00
Diluted                                                   (0.04)       0.00

We seek Safe Harbor.