Interview: Clive Johnson of B2Gold (TSX:BTO)
Another Bema? If B2Gold, a company founded in 2007 by the former executives and management of Bema keeps its current pace, the second time around might be a whole lot quicker. Bema, of course, was acquired by Kinross Gold in 2007 in a friendly takeover valued at CDN$3.5 billion. Surprisingly, B2Gold actually stumbled out of the gate; shares of the company fell from over $2 immediately after going public, to a low of $0.35 during the height of the financial crisis. Since then, however, the company has rebounded and then some. B2Gold expects to produce approximately 135,000 ounces of gold in 2011 and the company's shares are now trading at just over $4.
A quick look at their growing portfolio of properties shows that B2Gold has inherited Bema's international flavor; Bema had producing gold mines in Russia, Chile and South Africa as well as development projects in Russia and Chile. The company operates two producing gold mines in Nicaragua and has exploration and development projects in Colombia. This diversification, coupled with the operational track record of B2Gold's management and lower than expected production cost, led Macquarie Capital analyst Michael Gray to call B2Gold, "One of our top picks amongst mid-tier gold producers". Gray recently gave the company an "outperform" recommendation.
MiningFeeds.com editor Kirk Exner connected with Clive Johnson to discuss the evolution of Vancouver's mining capital markets and the prospects for B2Gold.
You've been involved in minerals exploration and development for many years now having built your career in Vancouver. Please talk about the evolution of the mining finance business in Vancouver from your early days with the VSE to what is now arguably the mining finance capital of the world.
As you point out in your question, Vancouver has seen significant transformation from a penny stock exploration market in the 70s and 80s to a major force for mining and mining finance. I think there are a few reasons for this. Firstly, there were a number of successful companies like Bema Gold (which we ran for over 20 years) that transitioned from exploration to successful development and production and secondly there were some very successful entrepreneurs putting together Vancouver based mining companies such as the Wheaton River/GoldCorp combination. Finally in the international world of mining a company can have its head office anywhere and Vancouver is one of the top choices for many executives.
B2Gold has a corporate mandate to grow via acquisitions, has the high price of gold affected this strategy in any way?
B2Gold’s growth strategy has always been to grow by exploration and acquisitions (as was Bema Gold’s strategy). As the gold price goes higher, quality acquisitions become harder to find. We are one of the few producers that have a proven exploration team with an impressive track record with significant gold discoveries. The cheapest ounces will always be the ones you find. While acquisitions are more challenging in this gold environment, B2Gold shares have outperformed most of the sector over the last 6 months, which may increase our opportunities for the acquisition of other companies.
To date all of B2Gold's assets are within the America's but you've focused on some lesser know Latin American countries like Uruguay and Nicaragua to build your portfolio - please explain the benefits of this strategy to our readers.
In the days of Bema and now B2Gold we have always looked for opportunities in countries that are in economic and/or political transition or are under explored. In our current portfolio Nicaragua is a country that is largely unexplored and is in a stage of positive political and economic transition, while Colombia is another country that is largely unexplored and has had a dramatic transition to a safe country to explore in. And finally, Uruguay is a very stable country with great potential that has been under explored.
The rising price of gold has resulted in a plethora of junior and intermediate gold producers now listed on the TSX Exchanges. Why should an investor select B2Gold as an investment choice over many of your counterparts?
B2Gold represents and unusual opportunity for investors because it is a combination of a company with solid profitable gold production with no gold hedging and no debt and has a portfolio of projects to grow from. In addition we have numerous high quality exploration targets and one of the most successful exploration teams in the world.
Your Limon mine experienced a force majeure and flood in late June and underground operations have been suspended. When is the mine expected to be fully operational?
The Limon Mine is expected to be back to full-scale production in September. In the meantime, production has continued from other open pits and stockpiles. The company expects to meet its guidance production for Limon of between 42,000 and 46,000 ounces of gold in 2011.
How is your exploration program progressing and what is on the horizon as we head into 2012?
Exploration programs are continuing in Nicaragua at the Libertad Mine property, Limon Mine property and on the Trebol exploration project. In Colombia, exploration and pre-feasibilty work is underway on the Gramalote property, a 51% AngloGold/49% B2Gold joint venture, and finally, exploration drilling continues on the Cebollati project in Uruguay. B2Gold’s total 2011 exploration budget is over $40 million dollars. The company intends to announce exploration results from its various projects in September, 2011. We anticipate exploration on these properties to continue through 2012.
This interview is featured in the article 10 Most Interesting Gold Stocks - Part 3 - CLICK HERE to read more.