B2Gold shares rise amid deal with Mali on Fekola mine

B2Gold (TSX: BTO; NYSE-A: BTG) has reached agreement with the government of Mali to resolve all issues surrounding the Fekola mine complex and related projects in light of the application of a new mining code. Its shares gained 10.3% on Thursday morning. 

The Fekola mine complex, including the Fekola and Cardinal open pits and the proposed underground project, will continue to be governed by the 2012 mining code, the Canadian company said in a release on Wednesday. The Malian government currently holds a 20% interest in Fekola.

That would offer the company continued stability of ownership, income tax and customs regimes, and its dispute resolution rights under the Fekola Mining Convention, which would run through 2040.

In addition, the exploitation permits for the Fekola regional projects, namely the Bantako, Menankoto and Bakolobi permits comprising the Anaconda area and the Dandoko permit, as well as approval of the exploitation phase of the Fekola underground project, are to be expedited by the Malian government, it said.

The agreement with B2Gold comes one week after Allied Gold (TSX: AAUC) signed a preliminary agreement with Mali for a 10-year permit on Sadiola mine and production from the nearby Diba deposit, while the military government imposed higher fees and a lump sum on disputed taxes. Mali also hosts Western miners such as Barrick Gold (TSX: ABX; NYSE: GOLD) with its Loulo-Gounkoto gold complex and Resolute Mining’s (ASX: RSG; LSE: RSG) Syama underground gold mine further south near Cote d’Ivoire. 

Mali’s ruling junta, which came to power in a 2021 coup, had previously announced that it would delay the granting of all new mining permits to B2Gold while conducting an audit of its mining sector to apply a new mining code, which it issued in 2023.

This new code will apply to B2Gold’s Fekola regional projects, which the company estimates could generate approximately 80,000 to 100,000 oz. of additional gold production per year starting in early 2025. Initial production from the Fekola underground project is expected to commence shortly after.

B2Gold shares traded at $4.11 apiece on Thursday, valuing the company at $5.3 billion. Its shares traded in a 52-week range of $3.18 and $4.74. 

Agreement terms

The deal comes on the back of continued discussions between the parties over the past year since the 2023 mining code’s introduction. It creates a framework covering the settlement of outstanding matters arising from Mali’s mining audit, income tax and customs audits, as well as clarification and agreement on the new code’s application to the Fekola complex.

Key terms include the conversion of all retained earnings currently attributable to Mali’s 10% ordinary share interest into a 10% preferred share interest with priority dividends going forward. B2Gold’s 80% interest will remain ordinary share interest. The agreement also includes the settlements of all income tax disputes dating back to 2016 as well as outstanding customs and value-added tax disputes.

B2Gold has also agreed to begin to pay taxes on mine fuel imports that were previously exonerated under the Fekola Mining Convention. To offset these taxes, the State of Mali will offer a 2% reduction on revenue-based taxes and royalties to be applied to the entire Fekola complex, including both the Fekola mine and Fekola regional projects.

The agreement provides the Fekola complex with a clean slate to move forward under the new economic partnership with Mali, B2Gold said.