Why B2Gold Stock Stands out Among TSX Gold Miner Peers

The yellow metal has gained 18% since mid-October, while B2Gold stock has soared 30%.

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The yellow metal appears to be in great shape this year after a muted performance for most of 2022. The slowing pace of interest rate hikes and recession fears might continue to fuel gold higher this year. Canadian TSX gold miner B2Gold (TSX:BTO) is an attractive bet to play the gold rally. Here’s why it stands tall among peers.

Gold and TSX gold miner stocks

Gold has been climbing higher since record-high inflation started to fizzle out in mid-October. It has gained 18% since then, while B2Gold stock has soared 30% in the same period.

B2Gold is a $5.6 billion gold mining company that operates three mines in Mali, the Philippines, and Namibia. For 2022, it produced a total of 1.03 million ounces of gold, achieving the upper half of the guidance. It aims to produce 1.04 million ounces of gold this year, implying flattish production growth year over year.

B2Gold is expected to announce its fourth-quarter results by mid-March. Based on its preliminary production data released last month, the low-cost gold miner produced 367,870 ounces of gold in Q4 2022. This was a record quarterly production volume and 27% higher than Q4 2021.

Given higher production and realized prices during the quarter, B2Gold will likely report handsome topline growth in the fourth quarter of 2022. However, how that will percolate to the bottom line will be interesting to see. That’s because inflation has notably upped its operating expenses and marred margins in the last few quarters.

However, 2023 will likely be much better for gold and gold mining companies. Analysts expect handsome earnings growth this year, thanks to the rallying bullion, after a weak 2022.

Why has gold been moving higher lately?

Last year brought in a flurry of interest rate hikes that pushed Treasury yields higher. The yellow metal loses sheen as Treasuries offer a better risk-reward proposition in such times. As a result, market participants dumped gold and allied assets and took shelter in U.S. Treasuries.

However, things could somewhat reverse this year. That’s mainly because the Fed has already signalled that the rate hike cycle could pause soon, given the slowing inflation growth. So, gold might regain its glory, and bullion investors might see some respite. Recessionary fears are also expected to push investors towards the traditional defensive – gold.

B2Gold has increased its production by 11% compounded annually in the last five years. Its high-quality assets keep operating expenses in check, helping profit margins. To be precise, its all-in sustaining costs have increased by 4% compounded annually in the last five years. High gold prices could further boost its margins this year.

Moreover, its debt leverage has come down significantly in the last few years, making it a relatively safe bet from an investment perspective. Mining is a capital-intensive business and companies generally carry a large amount of debt on their books. But that’s not the case with B2Gold. It has a debt-to-equity ratio of 2%, much lower than the industry average.

B2Gold also pays handsome dividends that yield 3%, higher than its peers. It pays a quarterly dividend of $0.04 per share. From a valuation standpoint, BTO stock does not look expensive. It is currently trading at a forward price-to-earnings valuation of 18x, marginally lower than its peers’ average.

Bullish gold outlook

So, if gold moves along the expected lines, B2Gold stock could outperform peers. With its robust profitability, low leverage, and undervalued stock, the gold producer is well-placed for a strong price environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends B2Gold. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

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