VANCOUVER – With its list of gold mines having just climbed from two to three following the takeover of CGA Mining and with a fourth mine under construction, B2Gold (BTO-T) expects to be churning out more than half a million ounces of gold annually by 2015. It's a feat that is earning the company growing praise from an industry happy to see an acquisition-based success story amidst so many overpriced and failed deals.
And in its latest news, B2Gold reports its drills are hitting high grade gold at a satellite zone at Otjikoto, the mine under construction in Namibia, that could well add years and ounces to the operation.
Otjikoto sits 300 km north of the Namibian capital of Windhoek. The project, in which B2Gold holds a 92% stake in a partnership with Namibian black economic empowerment group EVI Gold, is home to 29.4 million probable tonnes of open pit reserve grading 1.42 g/t Au. Construction of an open pit mine at Otjikoto kicked off in January, with initial gold production expected in late 2014.
Otjikoto's current reserves support production of 112,000 oz of gold annually for 12 years. However, B2Gold believes there is much more gold to discover at the burgeoning mine. To that end, the company has already completed 47 drill holes at the project this year.
Thirteen of those holes were collared within the planned Otjikoto open pit to better delineate certain ore shoots, while another six holes were drilled to inform civil engineering studies. The other 28 holes all probed Wolfshag, a known but little explored gold zone situated immediately northeast of the planned pit.
Using historic data and a few drill holes, B2Gold tracked Wolfshag along 950 metres of strike by the end of last year. This year, drills have almost doubled the zone's known strike to 1,600 metres.
Much of that additional strike length is in the south, where drills complete a set of 100-metre step outs starting from the company's first big hit at Wolfshag. That came in hole OTG25, which returned 15 g/t Au over 19.8 metres.
The first step out, hole 344, was collared 100 metres to the south and intersected a series of stacked mineralized zones. The first zone returned 2.05 g/t Au over 27.1 metres; the next bore 6.48 g/t Au over 4.3 metres.
Hole 345 stepped another 100 metres to the south and also encountered a series of gold zones. First the drill hit 8.6 metres grading 4.91 g/t Au at 53 metres depth, then it encountered 14.5 metres of 1.65 g/t Au from 227 metres depth, and then it reached the high grade, returning 35.7 metres grading 4.82 g/t Au. The high grade intercept included "abundant visible gold," according to B2Gold.
The company also deepened three historic holes that also probed south of the known zone at Wolfshag. Each hole returned short gold hits, such as 3.74 g/t Au over 4.3 metres.
Wolfshag comprises a series of stacked zones that dip to the east and plunge gently to the south, where the zone remains open. Gold is hosted banded parallel pyrite-magnetite-calcite veins and replacement zones that are interlaced with metasediments and marble lenses.
B2Gold has three rigs turning at Otjikoto, focused on Wolfshag and funded by an $8-million exploration budget. The company plans to calculate an initial resource estimate for the zone by the end of the year.
When it achieves operation about 20 months from now, Otjikoto will add ounces to B2Gold's blossoming production count. The company already operates two mines in Nicaragua: La Libertad and Limon. In 2012 La Libertad produced 108,935 oz of gold at a total cash cost of US$564 per oz, while Limon churned out 48,950 oz at a cost of US$715 per oz.
This year B2Gold expects output to rise at both of its Nicaraguan operations: La Libertad is expected to produce 131,000 to 137,000 oz and Limon to produce 54,000 to 58,000 oz during 2013. The company's 2013 gold output will also include, for the first time, the Masbate mine in the Philippines. B2Gold acquired Masbate in its recent takeover of CGA Mining.
It is not yet clear exactly how much gold to expect from Masbate. B2Gold is still reviewing the operation and has not announced any production guidance. Under CGA's management the mine was ramping up to its design capacity of 200,000 oz of gold annually.
All told, B2Gold is projecting its gold output will total 385,000 oz in 2013, rising to 400,000 oz in 2014.
In 2015 Otjikoto will start producing as well, lifting output to 550,000 oz of gold.
While it explores and builds Otjikoto, B2Gold will also be keeping a close eye on progress at Gramalote, its 49%-owned gold project in Colombia being advanced through prefeasibility studies by 51% owner AngloGold Ashanti. Results from that prefeasibility study, which is assessing the project as a large scale open pit gold mine, are expected in the third quarter of the year.
These are clearly busy days for B2Gold, especially since the company is also watching for acquisition opportunities. Indeed, it is because of acquisitions that the company is closing in on annual production of half a million ounces. B2Gold has completed three deals since 2009 to gain assets in Nicaragua, Namibia, and the Philippines.
However, the company says it had achieved acquisition success when others have failed because it takes a very disciplined approach.
"The company's discipline towards acquisitions will continue to be focusing on projects that are accretive to its shareholders based on the existing asset," said the company in announcing its annual financial results. "The company will not pursue acquisitions that require the hope of exploration success or higher gold prices to be justified or accretive."
B2Gold's share price has been quite volatile over the last year, ranging from above $4 to below $3 twice in the last 52 weeks. It closed recently at $2.91. B2Gold has 646 million shares outstanding.
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