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A Healthy Hybrid

October 17th, 2011

B2Gold Grows With Auryx Buy

By Ted Niles

It is a rare company that hasn’t seen its share price take a beating this year. Rarer still, one that has seen the steady growth that B2Gold Corp TSX:BTO has. President and CEO Clive Johnson puts it down to strength of management, “beating your projections” and growth through exploration and acquisition. He adds, “Most explorers don’t produce; and most producers don’t find a lot. In our case, we’re a bit of a hybrid company. We’re producers, but we’re also very good at exploration. We always have been.”

True enough, as anyone familiar with B2Gold and its predecessor, Bema Gold, will attest. When Bema—a company which began as a grassroots explorer—was acquired by Kinross Gold Corporation TSX:K in 2006 for $3.1 billion, it had nine mines in five countries with reserves and resources of 50 million ounces gold, 80 million ounces silver and 2.9 billion ounces copper. Founded in 2007 (and retaining Bema’s executive and management team), B2Gold now has two producing mines in Nicaragua—La Libertad and Limon, with combined production in 2010 of 108,700 ounces gold—as well as other properties in Latin American and now, after its October 11 acquisition of Auryx Gold Corp TSX:AYX, Namibia.

B2Gold Grows With Auryx Buy

“Some people ask if we can handle all these projects in all these different locations, but I think you have to look at our history,” Johnson remarks. “All of us together in B2Gold built Bema Gold—so we’ve done it before in Russia, in South Africa, in Chile and now in Nicaragua. We have an unusually strong team from exploration all the way through construction and production. We didn’t go to Namibia saying we have to have something in Namibia—we’ve been looking at lots of projects. The [Otjikoto] project itself was the first thing that attracted us. We’re definitely ready to build another mine, and we have the team to do it. We’ve shown we can do it anywhere in the world.”

B2Gold acquired Auryx and its flagship Otjikoto gold project last week in a friendly-merger deal for $160 million. Otjikoto is located on the Damara Belt Formation—which also hosts AngloGold Ashanti’s Navachab Mine—and has a December 2010 NI 43-101 resource estimate of 1.16 million ounces gold indicated and 660,000 ounces inferred. In September 2011 Auryx released a positive preliminary economic assessment showing a pre-tax net present value of $301 million, and an internal rate of return of 42% (with gold at $1,300 per ounce).

“[Otjikoto] is a robust project economically,” Johnson continues. “We think there’s a lot of upside, and we think there’s a lot of optimization that can be done in a number of areas to make an already good project even better. It’s got a minimum 10-year mine life with, by 2015, [production of] 100,000 ounces per year. We think there’s upside on that, but that’s a long mine life. And Namibia is a very good jurisdiction. The logistics are fantastic; the tax regime is fair; and the mining law works. We think it’s a good acquisition for us, and it can have a significant impact on our production. By 2015, we’re looking at getting up over 300,000 ounces.”

B2Gold will visit the project this week. Auryx anticipated the completion of a definitive feasibility study by 2Q 2013, and while B2Gold will be conducting a detailed review, Johnson expects to follow the same timeline.

Meanwhile, B2Gold’s La Libertad and Limon mines in Nicaragua proceed apace. The company had gold revenues totalling $127.5 million in 2010—an increase of 517% from 2009—and expects to increase 2011 production to approximately 135,000 ounces. Also, exploration drilling at La Libertad in 2010 yielded the discovery of the high-grade Jabali target, which already has an inferred mineral resource of 522,000 ounces gold, increasing La Libertad’s total inferred resources by 180%.

We’re definitely ready to build another mine, and we have the team to do it. We’ve shown we can do it anywhere in the world —Clive Johnson

Johnson notes that the company’s Gramalote property in Colombia is becoming an important asset. It is a joint venture with AngloGold Ashanti (B2Gold holds 49%, AngloGold Ashanti 51%), with AngloGold as the project operator. “The 2.4 million ounces we started with there is definitely getting a lot bigger, and everything is looking very positive,” Johnson says. “Anglo is talking 250,000 to 300,000 ounces a year, and we think it might be larger than that.” Johnson expects an updated resource at Gramalote by the end of year.

The combination of good management, year-over-year production increases and aggressive exploration and acquisition have granted B2Gold a degree of financial independence unusual in the junior mining sector. Johnson reports, “We’re generating from the Nicaragua mines right now about $118 million of cash from operations. So we can do all of our capital spends at the mine and all of our exploration—our budget this year totalled $53 million—and we can take on [Otjikoto] as well and still maintain a really strong cash balance going well into the future. With [Auryx's] cash and our cash we’ll have about $100 million in cash and no debt or hedging.”

He concludes, “We’re looking at production growing from about 145,000 ounces this year to, within two years, over 200,000 ounces. Then up to 320,000 ounces or thereabouts by bringing the [Otjikoto] project on. Then there’s the Colombian project. So we see a path to approaching a half-million ounces a year from existing ounces. This puts us in a very unusual place in the sector right now. And there are more acquisitions to be done.”

At press time, B2Gold had 344 million shares trading at $3.36, for a market cap of $1.16 billion. Its other exploration projects in Nicaragua are the Trebol, Pavon and San Pedro properties, which it holds in joint venture with Radius Gold Inc TSXV:RDU; and the Borosi prospect, also a joint venture with Calibre Mining Corp TSXV:CXB. It also has the Bellavista property in Costa Rica, the Mocoa property in Colombia and the Cebollati property in Uruguay.

Calibre President Robert Brown on Nicaragua assays of 10.25 g/t gold and 288.25 g/t silver over 5.4m

April 19th, 2011

“Riscos de Oro—which means ‘golden ridge’ in Spanish—was an open pit and underground operation that was in production from 1977 to 1981. It was originally put into production by the Rosario Mining Company but then was nationalized by the Nicaraguan government. So, it was shut down in 1981 for political reasons, not because of the resource. We had a good understanding of where the open pit was. It’s about 250 metres long; [the previous operators] took the topographic high, mined that and went down about 25 metres. They then sunk a shaft to about 525 feet. The development that we have records for was only from the 150-foot and 300-foot levels. So last year we came into the program and drilled under the mine. We made sure that we were deep enough not to hit any of the old workings. Last year’s program identified mineralization going down 300 metres below surface. Then we stepped out on strike, and we hit an additional ore shoot. So we’ve identified two ore shoots. The program we’re doing right now is about a 2,500-metre program. And we’re coming back and infilling from 300 metres up towards surface on both of these shoots.

“These are our best results to date. One of the things that we’ve been able to identify with this program right now is that we think we’re looking at multiple horizons. It’s just a matter of coming back in and infilling. The one thing that remains unanswered is: does this lower unit that we’ve identified in holes 10 and 12 continue up underneath the old mine? Because, historically, all the information stops at the one zone, and there’s no drilling past that.

“This year we’ll finish this 2,500-metre program. We’re also going to be stepping out on strike with some geophysics down to the southwest. The Riscos de Oro concession is an exploitation concession, as it is a past mine, and there’s about two kilometres of strike on that zone. To the southwest it continues for another five kilometres, which is also on our wholly-owned concession. The southernmost end of the structure has a target running around 12.5 g/t over 2.5 metres at surface. So we’re looking at a very long structure, and we’re also finding parallel zones.

“It’s very similar to the Bonanza Camp, which is roughly 30 kilometres to the northwest and has been in production since the early 1900s. It’s a similar system; a low-sulphidation epithermal system, that’s roughly a 19-kilometre by four-kilometre structural zone. It’s in the hands of a private company that’s been producing 40,000 ounces a year.

“The interesting thing with Riscos is that we’re seeing multiple episodes of mineralization and brecciation. On a typical low-sulphidation system you usually see a zonation going from a gold-rich zone to a silver-rich zone then to base metals. But we’re seeing four or five different episodes of mineralization and brecciation, and we’re seeing a different zonation to the metals; so at the 150-metre level we’re getting this high grade silver and gold and then below that we’re getting a gold-rich system. So either we’re seeing a telescoping of the system or multiple pulses coming through. I think it’s multiple mineralizing events.

“We don’t have a resource estimate for Riscos. Most of this drilling is going towards that end. Last week, we also put out a 43-101 compliant report for our Cerro Aeropuerto and La Luna deposits at just under a million ounces gold equivalent. If, at the end of this drill program, it makes sense to put a resource estimate together for Riscos, then we’ll do it this year.”

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