March 6, 2012 / 5:40 PM / 8 years ago

PDAC-Canada's B2Gold bets on Nicaragua

* B2Gold to spend $100 mln in Central American nation

* Company operates as both miner and explorer

* Relations with Nicaragua are good, CEO Johnson says

By Pav Jordan

TORONTO, March 6 (Reuters) - Canadian gold explorer and miner B2Gold Corp plans to spend about $100 million in Nicaragua this year, a vote of confidence in a country known for its political volatility.

The funds are earmarked for further development of B2Gold’s two mines in the Central American country, CEO Clive Johnson told Reuters in an interview at PDAC, the mining industry’s largest annual convention.

Vancouver-based B2Gold was formed in 2007 by the former management team of Bema Gold Corp, an international gold producer that was acquired by Kinross Gold for C$3.5 billion ($3.52 billion).

The company, Nicaragua’s largest gold producer, has two operating gold mines in the country: La Libertad, with about 90,000 ounces of production a year, and its 95 percent-owned Limon site, which produced about 40,000 ounces in 2010.

Cash costs are low, Johnson said, at about $600 an ounce or less, compared with spot gold prices near $1,700 an ounce. Most producers spend above $1,000 an ounce as operating costs rise across the board.

B2Gold is one of a handful of foreign miners in Nicaragua, and is the only publicly traded gold producer operating there.

Johnson and his team have a reputation for being the first to test the waters in mining regions avoided by foreign operators. He went to Chile in 1988, braving the regime of Augusto Pinochet in a search for mineral wealth. In 1998, he set up an operation in Russia.

One of the first stops Johnson made after getting to Nicaragua in 2007 was to meet with President Daniel Ortega, the former Marxist revolutionary who branded himself as a moderate and sought ties with business groups during his most recent presidential term.

What was meant to be a 20-minute meet-and-greet turned into a two-hour discussion about how Johnson planned to run his company. He said that session put B2Gold in good standing, a status that the company still enjoys. “I made promises and I have kept those promises,” he said.


B2Gold calls itself a hybrid company because it is both exploration company and miner, whereas most companies fall neatly into one category or the other.

That is what allows the company to be an aggressive explorer even as it expands existing operations, relying mostly on cash flow from mines and project finance, Johnson said on Monday on the sidelines of the conference, organized by the Prospectors and Developers Association of Canada.

La Libertad and Limon should produce $140 million in cash from operations this year, Johnson said, compared with C$100 million in the bank at the end of 2011. He sees cash from operations of some C$170 million next year and then $200 million the year after that.

“So that lets us ... do all this exploration work and we don’t have to dilute our shareholders. We don’t have to rely on the banks,” Johnson said after a presentation to investors at the PDAC, a four-day mining industry convention in Toronto.

B2Gold also plans to bring on output from properties in Colombia and Namibia in coming years, and targets production of about 450,000 ounces of gold a year by around 2016.

Johnson said the company also has its eye out for acquisitions, but that it will be selective.

“We’ve signed 150 confidentiality agreements in the past two years, looking at projects virtually all over the world, and we’ve done two deals, so we are very selective.”

The company agreed in October to buy Auryx Gold Corp for about C$130 million in a cash and stock deal that gave it 92 percent control of the Otjikoto gold project in the southern African nation of Namibia.

“We’re going to grow through acquisitions of projects with ounces that are accretive and we are doing grassroots exploration and every other stage of exploration in many places around the world.”

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