B2Gold Buys Papillon Resources for $570 Million

B2Gold and Papillon Resources announced an agreement in early June whereby B2Gold will acquire Papillon in an all-share transaction that values Papillon at about $570 million. Papillon is developing the Fekola gold project in southwest Mali, where a 2013 pre-feasibility study considered a project that would deliver more than 300,000 oz/y of gold at low operating costs over a nine-year mine life. In late March, Papillon appointed Lycopodium Minerals as lead engineer for the definitive feasibility study for the project.

Papillon is an Australian junior company headquartered in Perth, Western Australia. The Fekola pre-feasibility study assumed an ore processing rate of 4 million mt/y at a plant feed grade of 2.73 g/mt gold and a mining cut-off grade of 1.1 g/mt gold from measured and indicated resources totaling 44 million mt. A total of 2.8 million oz of gold would be recovered over a nine-year mine life at an average recovery of 92.7%.

Up-front capital costs for Fekola were estimated at $292 million. Life-of-mine all-in sustaining cash costs, including corporate overheads, sustaining capital, exploration expenditure, and royalties, were estimated at about $725/oz.

B2Gold is based in Vancouver, British Columbia, and has three producing gold mines: La Libertad and Limon in Nicaragua and Masbate in the Philippines. Collectively, the B2Gold mines produced 366,000 oz of gold in 2013 at an all-in sustaining cost of $1,064/oz. B2Gold expects its production to increase to about 550,000 oz/y by 2015, when its low-cost Otjikoto mine in Namibia is up and running.

The B2Gold-Papillon agreement will be implemented by way of a Scheme of Arrangement under the Australian Corporations Act 2001. Upon completion of the Scheme, existing B2Gold shareholders and former Papillon shareholders will own approximately 74% and 26%, respectively, of the combined company.

Based on current assumptions, including successful completion of its acquisition of Papillon, B2Gold expects to be producing more than 900,000 oz/y of gold from five operating mines by 2017.

In other news from B2Gold, the company reported that construction of its 90% owned Otjikoto open-pit gold mine in Namibia remains on schedule for a production start in late 2014. The mine is expected to produce an average of about 141,000 oz/y of gold during its first five years of operation. Total construction and development costs remain in line with feasibility study projections, including pre-development costs of $244 million and deferred stripping estimates of $33 million.

Based on the recent discovery of the high-grade Wolfshag zone near the planned open pit, B2Gold is building the Otjikoto processing plant and infrastructure to support a plant expansion from an initial processing capacity of 2.5 million mt/y to 3 million mt/y. When the expansion is complete at the end of 2015, B2Gold expects gold production from the main Otjikoto pit to increase to about 170,000 oz/y. Meanwhile, the company will rerun its mine plans to include higher-grade ore from the Wolfshag zone.

As featured in Womp 2014 Vol 07 - www.womp-int.com