CANADA

BTO CN Outperform

Price (at CLOSE#, 17 Jun 2013) C$2.24

Valuation C$ 3.72 - DCF (WACC 5.0%)

12-month target C$ 3.75

12-month TSR % +67.4

Volatility Index High

GICS sector Materials

Market cap C$m 1,499

Market cap US$m 1,474

30-day avg turnover C$m 8.0

Number shares on issue m 669.0

Investment fundamentals Year end 31 Dec 2012A 2013E 2014E 2015E

Revenue m 259.1 566.4 579.9 775.7 EBITDA m 110.5 168.8 211.5 307.3 Reported profit m 51.9 95.5 139.0 188.7 CFPS US$ 0.30 0.32 0.20 0.43 EPS rep US$ 0.13 0.15 0.21 0.28

BTO CN vs TSX, & rec history

Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, June 2013

(all figures in USD unless noted)

17 June 2013 Macquarie Capital Markets Canada Ltd.

B2Gold Site visit – Masbate is a giant Event

Site visit provides a comprehensive asset review. Last week, we attended B2Gold‟s first site visit to its flagship Masbate gold mine, Masbate Province, Philippines. As expressed in our initial takeaways research note on 3 June (LINK), our overall impression was very positive for exploration upside, plant optimization, and expansion opportunities.

Philippines mining jurisdiction offers opportunities and challenges. We expect B2Gold will be successful in the Philippines on the strength of CGA Mining‟s initial track record at Masbate, but patience will be required.

Impact

Strong positive. Highlights include:

Plant optimization and mine planning progressing well – expansion study at YE. Ongoing work on recoveries via fine grinding and variable residence times is an important step to ensure maximum recoveries are achieved. We model a +50kozpa expansion in 2016.

Large exploration potential. With a plethora of exceptional targets, all permitted for drilling within its Mining Licence, B2Gold is well positioned for the documentation of near-pit resources and the discovery of raw, potentially game-changing new zones associated with regional targets.

Strong management on site complemented by B2Gold resources and management depth. The site visit was hosted by CEO Clive Johnson. Key presentations were given by Country Manager, Cris Acosta (was with CGA Mining). The ability to rely on operational input among a broad-based management team is clearly serving the Masbate team well.

Earnings and target price revision

Our target increases to $3.75 (was $3.50) based on our increased confidence of a longer mine life at Masbate and projection of an additional five years of higher grade. There are only minor changes to our earnings estimates.

Price catalyst

12-month price target: C$3.75 based on a DCF methodology.

Catalyst: Production guidance and updated reserve estimate (~July); 2Q13

results; exploration drill results – multiple projects (ongoing).

Action and recommendation

We recommend B2Gold with an Outperform rating and $3.75 target (was $3.50) and view 2013/14 as a transition/optimization stage for the Masbate asset. We value the company by sum-of-parts NAV with mainly DCF5% models using the forward curve and long-term gold price. B2Gold is a top pick amongst our intermediate gold producers.

This report was prepared by Macquarie Capital Markets Canada Ltd and is being distributed by Macquarie Private Wealth Inc. Macquarie Private Wealth Inc and Macquarie Capital Markets Canada Ltdare separate affiliated corporate entities that are part of the Macquarie group of companies. Please refer to the important disclosures and analyst certification on the inside back cover of this document.

Macquarie Research B2Gold

17 June 2013 2

Purpose and introduction This research note is to provide a detailed summary of our 3 June 2013 site visit to B2Gold‟s flagship

Masbate gold mine located in Masbate Province, Philippines. This was our first opportunity to see

Masbate on the ground and gain an appreciation for the key opportunities and challenges.

We have also appended background information on the Philippines and mining in the Philippines as a

primer. Appendix A is largely derived from Michael Siperco‟s 25 March research from his OceanaGold

site visit (LINK) along with our Philippines research team‟s views on the mining sector from last year

(Hunting stocks – 6 March 2012 by RJ Aguirre).

Executive summary of Masbate site visit Key opportunities

Large exploration upside – Our assessment is that the exploration potential is one of the most

attractive features of Masbate. The deposit is a giant +10moz gold system, in our view. We expect

B2Gold will be able to not only extend mine life but also identify higher grades to potentially

increase production.

Optimization in the cards – A reclassification of the oxide/transitional/sulphide ores will

potentially enhance the mine plan scheduling and recoveries. We model a +50kozpa increase in

production by 2016 via mill expansion – B2Gold will have a BFS level study by YE and decide on

the scope of any expansion.

Expansion of the high grade – We concluded that based on the visibility of near-pit

mineralization, the ultimate reserve to be established at Masbate will likely add at least five years

to the high-grade +1g/tAu mine life (we have adjusted our model accordingly).

More deals to come in the Philippines – CEO Clive Johnson was clear that whenever B2Gold

enters a new country that it is rare to only do one deal (also echoed at the 14 June 2013 AGM).

We expect B2Gold to be opportunistic and seek high-quality projects via JV or M&A.

Key challenges

Complex ore body – The array of veins with multiple orientations at Masbate have an extensive

footprint and are characterized by both lower-grade gold as stockwork quartz vein mineralization

and by higher-grade quartz vein ore zones that punctuate the stockwork zones. The

oxide/transitional/sulphide ore and its importance due to variable mill recoveries makes it

important to document and complicates the picture.

Footprint for mine infrastructure – The mill is flanked by the open pits, waste piles, low-grade

stockpiles and the tailings management area. Despite a large property size, the main area being

mined has to be managed carefully to ensure waste is not moved very far and at the same time

that resources with near-pit potential can be accessed for mining.

Patience with Philippines politics in connection with the mining sector – While B2Gold has a

good MPSA agreement, the government is in the process of bringing new revisions to the Mining

Act for Congress to review. This has led to some investor uncertainty as to whether the

Philippines will remain a stable and fair tax regime (B2Gold lost $300m in market cap recently

based on a government official comment on a potential increased royalty). We believe the

Philippines government will ultimately embrace the mining sector as a source of growth and

foreign investment.

Mother Nature could deliver some curve balls – While not a high risk, the threat of disruptions

from typhoons, earthquakes or volcanic eruptions is real in the Philippines. The plant and tailings

management facility have both been built to withstand a reasonably strong earthquake, and the

stockpile should provide a backstop if heavy rains temporarily halt mining.

Macquarie Research B2Gold

17 June 2013 3

Synoptic overview of Masbate site visit

Good access and infrastructure, albeit higher cost HFO for power

The Masbate mine is reasonably well located on the north end of Masbate Island, Masbate Province

(Figs 11 & 13). Supplies are either barged into the port or flown into the company-owned airstrip.

Access to the mine from the port is via a short unpaved road. Labour is +70% from Masbate (as

mandated) and non-unionized.

Power is reasonably expensive at ~$0.19/kWh as the plant relies on heavy fuel oil (HFO) generators.

There does not appear to be a viable power alternative, therefore, B2Gold will look for ongoing power

savings, including improved cooling systems to reduce costs.

Optimization of Masbate – Numerous opportunities

New reserve and mine plan coming. With a marked difference in recovery depending on ore type,

the reclassification of oxide (93%* recovery) / transitional (86%* recovery) / sulphide ore (82%* recovery)

at Masbate was an initial priority for B2Gold (recoveries from 43-101 technical report). This is being

addressed by re-logging the core for visual sulphides and will be complemented by assaying for total

sulphur and potentially for cyanide soluble gold (see Fig 1 for photo). We see this as an important step

in optimizing production. In the revised estimate there will be at least 60km of new drilling

incorporated. For every 0.1g/tAu increase in head grades to the mill above our model, we estimate an

impact of $0.05 NAVPS.

Silver to be included in the next resource update – Silver has not historically been part of the

reserve and resource model at Masbate, as silver was not assayed for. B2Gold will establish silver

resources in the next estimate – we model 8moz Ag based on an approximate 1:1 Au to Ag ratio. The

silver by-product credit in 1Q13 was $1/oz.

Ongoing work to improve recoveries – Grind size and residence time are the most important factors

that impact gold recoveries at Masbate. The plant is currently grinding to 106 microns, and test work is

investigating a finer grind with various residence times in the leach tanks. With better characterization

of the oxide/transitional/sulphide ores, we expect better controls on recoveries. Reagents are

important too. In 3Q11, CGA Mining enhanced the plant recoveries by up to 5% by adding PbNO3 to

the leach circuit. Since that time, cyanide analysers have been added to control cyanide use and

further optimize recoveries (management indicates NaCN consumption of 0.50 to 0.52kgt on average).

For every 1% increase in gold recoveries at Masbate we estimate an impact of $0.06 NAVPS.

Mining equipment & sequence review – VP of Operations Dale Craig indicated that B2Gold will

likely change out 773 haul trucks for larger 775 haul trucks as one step to improve efficiency. The haul

roads will be reviewed along with a contractor review for any optimization opportunities. In conjunction

with the revised reserve estimate, the mine plan/sequence will be reviewed.

Purchasing power potential – One area that could see cost reductions is in the purchase of

reagents. For example, B2Gold purchases sodium cyanide (NaCN) for its Nicaragua and Philippines

operations from different Asian suppliers. The cost is $3,800–3,900/t and higher than for operations

that we cover in Mexico and the USA. By combining forces there may be savings on such contracts.

* for +1g/t ore

Macquarie Research B2Gold

17 June 2013 4

Fig 1 Masbate mining – Left side – Main pit viewing east. Note the old underground workings associated with the brown oxidized areas (highlighting the importance of logging these zones and establishing domains in the block model). Right side – grade control drilling at the Colorado pit.

Source: Company reports, Macquarie Research, June 2013

Expansion decision ...we’ll know the scope by YE

Masbate has the crushing capacity and mining fleet to ramp up production significantly. The key to an

expansion would be to increase grinding and tankage capacity. B2Gold management has indicated

that it is in the process of an FS level study that will contemplate mill expansion scenarios with the

goal of completing it by the end of 2013. As part of this study, $2m is earmarked for metallurgical test

work from additional drilling in key areas.

CGA Mining had conducted an internal PEA on an expansion that suggested an additional 100kozpa

was possible for $120m (management conference call disclosure). We believe this estimate might have

been aggressive and have modelled an expansion in 2016 to 25ktpd processing capacity for $75m. We

see upside in such an expansion especially given the excellent exploration potential on the property.

Macquarie production & cash cost forecasts for Masbate

We have highlighted our LOM production estimates for Masbate (Fig 2). Our 2013 forecast of

184kozAu is at the high end of B2Gold‟s guidance of 175koz to 185kozAu.

Note that our forecasts incorporate an expansion to the plant from 17.5ktpd to 25ktpd in 2016 that we

estimate would result in an additional 50kozpa. We believe this estimate could be conservative given

CGA Mining had conducted an internal PEA that suggested an additional 100koz might be possible at

a capital cost of $120m (CGA Mining acquisition conference call disclose).

Given the outstanding near-pit exploration upside, we have added an additional five years of high-

grade (~1g/t) production in our DCF5% model. Thus, we have not incorporated any higher-grade

discovery upside from regional targets, although we appreciate B2Gold will be focused on delivery of

such potential into the mine plan.

Macquarie Research B2Gold

17 June 2013 5

Fig 2 Masbate – Forecast of production and cash costs

Source: Macquarie Research, June 2013

Exploration upside is excellent – giant gold system at play

In Toronto at the PDAC this past March, when we listened to CEO Clive Johnson describe Masbate as

“La Libertad on Steroids,” it was easy to dismiss as hyperbole. However, after a review of the

geology with VP Exploration, Tom Garagan, in combination with our site visit – we concur. Masbate is

an extensive low sulphidation epithermal (LSE) gold system and is amongst the top-nine such

systems worldwide that we are aware of for size (+5mozAu LSE systems, Fig 3).

Fig 3 B2Gold – Masbate approaching +10mozAu giant status – We provide the +5mozAu low sulphidation epithermal gold systems, past production and resources with Masbate ranking #5 for size

Source: Company reports, Macquarie Research, June 2013

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Macquarie Research B2Gold

17 June 2013 6

B2Gold’s 2013 exploration budget for the Philippines is $11m. It is clear the 2013 exploration

program is designed to address the priorities of identifying: i) near-mine/near-surface oxide resources

(high recoveries); ii) near-mine high-grade zones (maintain grade throughput); and iii) new regional

discoveries to feed the mill. Feeding the mill with accretive ounces is a priority (see Fig 2).

Controls on mineralization important in the search for high grades. B2Gold is bringing to bear its

systematic exploration approach to Masbate. Areas of major vein intersections typically lead to the

development of thick veins/stockwork with local high-grade shoots (Fig 4). Significant sulphides (in

particular sooty pyrite) are also an important control for gold. It appears that there is a +/-300m boiling

window where gold has been developed so elevation control is important. The system appears to be

adularia-rich and could ultimately be a vectoring tool to identify upflow zones (+/-high grades) within this

extensive system. At this stage it is not clear to us until more lithogeochemistry is conducted whether

there is a more favourable andesite trap rock within the volcanic stratigraphy of clastics and flows.

Fig 4 Masbate Drill core photos – Left side - exemplifies the stockwork quartz-carbonate veins within sericite-altered (light brown) andesite host rocks (local areas with sooty pyrite have the best gold grades) – Right side – quartz vein breccia with vein fragments suggesting multigenerational vein system.

Source: Company Reports, Macquarie Research, June 2013

Top exploration targets. In Fig 5 we have summarized the top „near-pit‟ and „regional‟ Masbate targets

along with a plan map (Fig 6). We expect this target list to expand as new targets are identified.

Macquarie Research B2Gold

17 June 2013 7

Fig 5 B2Gold – Masbate near-pit and regional exploration targets

Near-pit target Previous work Results and target rationale Ranking and Macquarie comments

Pajo Hill Previously mined vein system over 3km

Highlight drill results include 28m @ 1.14g/t Au from 47m (PHRC012)

High potential & priority. Oxide mineralization with good recoveries. Only a short distance from the mill. We expect this target to be systematically drilled off to establish a resource.

Montana North Continuation of the Montana vein (70koz in production)

Exploration indicates a +700m strike length

Highlight drill results include 32m @ 1.54g/t Au from 44m vertical depths (PHRC010)

Moderate to High potential. Only 1.5km from the mill and within the MPSA permitted land area. Drill results and artisanal workings suggest high-grade open-pit potential.

Panique Exploration drilling Exploration indicates a +1.5km strike length to be tested

Drilling results include 37m @ 22.32g/t Au from 120m (PQRC127) at <300m vertical

High priority for high-grade ug. Potential significant strike length indicated linking structures at depth point to UG potential.

Regional targets

Luy-A Soil (373) and stream sed geochem anomalies, small scale workings. Trenching in progress.

3km of strike length, rock chip values to 19.06g/tAu

High potential. This is the best regional target thus far based on the extensive and permissive Au-in-soil footprint.

Tailings dam east prospect

Multiple rock and stream anomalies, small-scale mining activity

Rock chip samples greater than 10g/t Au

Moderate potential.

Source: Company reports, Macquarie Research, June 2013

Fig 6 B2Gold – Near-mine exploration targets (upper left) and regional targets inset (right)

Source: Company reports, Macquarie Research, June 2013

Macquarie Research B2Gold

17 June 2013 8

Operational management – strength now complemented by depth

A strong operational team at Masbate staffed by the CGA Mining team has become stronger with the

addition of B2Gold resources (including capital) and in-house expertise. In particular, the depth of

B2Gold‟s metallurgical/operational/exploration team has provided key insights that have been

welcomed by GM Ray Mead. On the exploration front, Vern Shein leads the geological team and has

established the “B2Gold process” for collecting and verifying data that will be incorporated into the

next block model. This has led to the identification of how important it is to accurately classify ore

(oxide vs transitional vs sulphide) and the establishment of priorities for testing near-pit resources

throughout the Mining Licence.

It is important in the Philippines to have an ongoing positive relationship with the government at all

levels. Cris Acosta (from CGA Mining) is the Country Manager and has an impressive resume,

including being educated at West Point and MIT. He will work closely with VP Operations, Dale Craig,

to communicate B2Gold‟s position on mining issues and gauge the government‟s ongoing support for

foreign investment.

Community relations / CSR – B2Gold embracing CGA’s positive approach

B2Gold continues to fund the local community programs as established by CGA Mining and as

mandated by the MPSA agreement with the government. The breakdown of $3.2m in expenditures

during 2009–2013 is a product of consultations with the community and includes: i) 42% infrastructure –

including schools, roads and waste systems (47% of households now with potable water); ii) 25%

education – supported 307 student scholars that obtained 58 college degrees (Fig 8 – first day of school

backpack program); and iii) 14% health – including improving equipment, training, and building and

repairing medical centres. Fig 7 shows the increase in population at the north end of Masbate Island

between 2006 and 2012 as the economic benefits and employment opportunities have attracted families.

Fig 7 B2Gold – North end of Masbate Island in the Masbate Mine area – population map of the surrounding villages showing population growth from 2006 to 2012.

Source: Company reports, Macquarie Research, June 2013

Macquarie Research B2Gold

17 June 2013 9

We appreciate the importance of such programs to maintain a social licence to operate; however, B2Gold

is following through and embracing the impact that these programs have from the top down (Fig 8).

Fig 8 B2Gold – CEO Clive Johnson with children from the local village receiving B2Gold-sponsored school supplies

Source: Company reports, Macquarie Research, June 2013

Literacy rates improving where needed. We appreciate from our discussions with an Asian

Development Bank representative that Masbate Province had one of the lowest literacy rates in the

Philippines. We expect an ongoing significant and direct impact on literacy rates in the region where

the mine operates and employs 1,900 workers (including contractors).

The minimum wage in the Philippines is ~460P (Pesos) per day (~$10/day), compared with the

average wage earned at Masbate of close to ~1,400P/day ($30/day). These high-paying mining jobs

and skills that are being acquired will improve the quality of life in the nearby communities.

Community-related revenue-sharing royalty of 1% increases to 1.5% in July 2014. We are

confident that B2Gold will utilize the MPSA security of tenure, its stable and fair stable tax/revenue

sharing agreement, and the support of local residents and government to operate effectively at Masbate.

We did not learn of any NGO opposition that would impact mine operations, and we understand that

there is strong support from the local mayor and the Catholic Church representative on Masbate Island.

Significantly we note that Mining (Masbate Mine) is 80% of the GDP for Masbate Province.

Macquarie Research B2Gold

17 June 2013 10

Weather a risk, but manageable

The Masbate mine is situated on the island of Masbate on the north coast and is considered to be a

Type II climate regarding rainfall (see Fig 9). The area is of high rainfall for mining and could impact

operations, but the lack of a pronounced rainy season limits the impact to operating a mine.

Typhoon risk – There have been 29 typhoons that have passed within 50km of the Masbate mine

since 1950. The most recent typhoon was in June 2009 and caused minor flooding and wind damage

to trees. Operations were not significantly affected at the Masbate mine. B2Gold has an emergency

plan in the event of typhoons.

Fig 9 Climate zones of the Philippines

Source: Company reports, Macquarie Research, June 2013

Secure site – Far enough away from violence in the south

Masbate Island is far enough north of Mindanao Island not to be impact by some of the violence that

has manifested from groups seeking autonomy (see Appendix A for background and details).

At Masbate, due to the large property size and number of artisanal/small miners present in the region,

B2Gold has 300 people that are designated for security. We do not see any specific issues with the

small miners but appreciate B2Gold will need to work effectively with them to ensure mining proceeds

smoothly.

Masbate

Macquarie Research B2Gold

17 June 2013 11

Mining reform, taxes and ownership

On 6 June 2013, media reports relayed comments by the Philippines Environment Secretary, Ramon

Paje, regarding new excise tax proposals for the mining sector (FTbeyondbrics blog). Our research note

(LINK) highlighted that “the government wanted to impose a single excise tax rate of 10% on the gross

sales of mineral products in lieu of the existing 2% excise tax, 5% royalty tax on minerals in the so-

called state reservations, an indigenous peoples share and local business taxes” (date of interview was

not disclosed). We subsequently revised our model to reflect an increased excise tax of 5% (from 3.5%)

as the general mining sector view was that a 5–7% excise tax would be implemented. Thus, the 10%

excise tax comment was a negative shock. Congress is expected to vote on a reform over the next 12

months, and it is not clear whether those with existing MPSA or FTAA agreements will be impacted.

Exploration licence status. Since early 2011, the Federal government has imposed a moratorium on

exploration drilling, and the granting of new mining permits related to the ongoing review of the

country‟s mining policy. Part of the goal was to reform some of the regulations related to land

speculation, where licence holders with no intention of conducting exploration gained rights for a

relatively low carrying cost. On 7 March 2013, the Mines and Geosciences Bureau (MGB)

recommended that the moratorium be lifted as of 18 March 2013. However, the lift of the ban has still

not been approved by the government. B2Gold is in a strong position as it is able to drill throughout its

Mining Licence.

The MPSA agreement. Masbate is operating under an MPSA (Mineral Production Sharing

Agreement) issued by the federal government (series from 2005–2010). B2Gold‟s MPSA is one of a

number issued by the government of the Philippines since 2006 (Appendix A, Fig 12). Despite ongoing

government deliberations over new mining policies, which may affect future agreements, it is our

understanding that B2Gold‟s MPSA agreement for its Masbate mine will be grandfathered and

remains legal and binding according to the terms of the contract. See below for a brief description of

the difference between an MPSA vs FTAA agreement:

Under an MPSA, the title to the land must be controlled by a majority Filipino entity. Foreign

entities with interests in mines operated under an MPSA must rely on ownership structures that

separate mineral processing from mining and leave land titles in the hands of a local entity in

order to stay onside with the law. Taxes and duties are paid as normal, with no overarching

structure to keep revenue in the country. B2Gold‟s Masbate mine and Philex‟s Padcal mine are

the most significant projects with an MPSA.

Under an FTAA, foreign interests can own land and mineral rights, increasing security of tenure.

The principle behind the agreement is for the country to share in 60% of revenue from the mine

once invested capital has been recovered, including all royalties and duties, local and federal

taxes and community and social responsibilities. Didipio, Xstrata‟s Tampakan and Metals

Exploration‟s Runruno assets are the most significant projects with an FTAA.

Macquarie Research B2Gold

17 June 2013 12

Numerous catalysts ahead We have provided a summary of B2Gold‟s important catalysts (Fig 10). Operation-related catalysts at

Masbate will be important along with decisions on what will happen with the Gramalote asset once a PFS

is delivered in October 2013 (advance the project or asset swap).

Fig 10 B2Gold – Upcoming catalysts

Catalyst Impact & description Timeline

Masbate reserve and mine plan Positive. B2Gold will report a revised reserve & resource estimate and mine plan that will incorporate a tighter classification of oxide/transition/sulphide ore (6 months post-CGA Mining takeover).

~July

Prosperidad drill results Potential positive. Initial grab samples from this new/raw Nicaragua prospect returned +40g/t Au from trenches; veins up to 3m thick will be drill-tested.

June-July

Wolfshag infill drill results Potentially very Positive. Systematic $8.5m infill/expansion drilling of the Wolfshag zone, in Namibia, will sketch in an inferred resource by YE & determine whether it could be economically captured by expanding the main Otjikoto pit.

2H13

Jabali Central feeds La Libertad mill Neutral. Despite the higher 2.6g/t grades to the mill and increase in production, the high 18:1 LOM strip and early capitalized strip will increase all-in cash costs for La Libertad.

June (initial feed)

Jabali Antenna zone permitting Positive. Jabali Antenna Zone is the key as vs the Central Zone it has much higher grade, a lower 7:1 strip and clear UG potential.

2H13(?)

Gramalote PFS Neutral? This PFS will likely reflect larger (+50ktpd) and smaller (30ktpd) mill options for B2Gold and 51% JV partner Anglo Gold Ashanti to consider. The smaller scenario with a higher cut-off grade is our preferred approach to this asset.

Oct/13

Gramalote drill results Neutral. Visibility on increasing the size of the deposit beyond the 4moz resource (100% basis) and on converting inferred ounces to indicated.

2H13

Source: Company reports, Macquarie Research, June 2013

Macquarie Research B2Gold

17 June 2013 13

Valuation and recommendation We have made a number of changes to our DCF5% model for Masbate. The effect of these changes

to our DCF5% is an increase in NAV by 4% for the Masbate mine to $835m from $805m (see

backpage). The changes are as follows:

We have extended the period of ~1g/t material to be processed by adding five years of high-grade

reserves as we have confidence in B2Gold‟s ability to identify such near-pit and satellite

resources. Following the higher-grade mine plan, we model the low-grade stockpile to be moved

and processed at $1/t handling cost.

We increased the strip ratio to 3.7:1 for 2013 to 2015 while maintaining a 2.3:1 strip ratio over the

LOM.

We have adjusted our unit costs per tonne upward for mining ($1.85/t – increase of 6%), milling

($10.50/t – change of nil) and SGA and Other ($5.25/t – and increase of 70%).

For Otjikoto, we have made the following adjustments to our DCF5% model based on increased

production potential commented on during the Masbate site visit:

We have increased the production profile by 10% (to 150koz in the first five years) on the basis

that installing a pebble crusher and extra tankage as part of the flow sheet could increase

production by as much as 20%.

We will monitor results from the Wolfshag drilling as to whether we incorporate an extended mine

life or not (management has commented that projections of the potential Wolfshag resource is

pulled into conceptual pits).

We recommend B2Gold with an Outperform rating and have increased our target price to $3.75

(was $3.50). We believe B2Gold, with the Masbate project in the fold, now has the type of long-life

asset that provides both stability and growth opportunities. We expect the company to continue to be

opportunistic in this market and seek high-quality transactions while there is a gap in the ability of the

seniors to consider M&A, whereas the juniors have essentially run out of financing options. Although it

may take B2Gold a year to get Masbate to perform at an optimal level, we believe it was a very good

acquisition and is a sign of management‟s operational and exploration strengths.

Macquarie Research B2Gold

17 June 2013 14

Appendix A – Philippines Primer The Philippines – Snapshot of one of the ‘Tiger Cubs’

The Philippines are located in the South Pacific Ocean between China to the north and Indonesia to

the south. The country was colonized by Spain in the 16th century, and following the Spanish-

American war in the 19th century, became an insular area of the US (similar status as Puerto Rico or

Guam) until independence in 1946. The resulting cultural influences make the country unique in Asia,

with heavy American and Spanish influences on the indigenous population. The legacy of the period of

American colonization is apparent in the system of government, legal system, and the widespread use

of English, which is an official language and spoken by the vast majority of the population.

The independent history of the Philippines has seen periods of instability in the past, including the

20-year rule of Ferdinand Marcos that ended in 1986. Since then, despite several coup attempts,

struggles with corruption and low-level violence, reforms and increased stability (particularly since

2004) have shown results in the form of increased growth, even throughout the global financial crisis.

The country has seen a boom in foreign direct investment and GDP growth over the last decade,

evidenced by a further 6.6% increase in GDP in 2012, higher than neighbouring emerging economies

Vietnam and Indonesia. The growth has been driven by the expansion of outsourcing (especially call

centres) in the country; a natural fit for the country given the native English speaking population. A

significant amount of American, European and Asian investment is fuelling a boom in construction in

the Manila area, creating jobs and raising household income (from a very low base, country wide). At

the same time, the country faces challenges from extreme poverty, with the IMF estimating that over

40% of the population lives on less than US$2/day.

In 2012, both Moody’s and S&P raised the Philippines’ credit rating (to Ba1 and BB+

respectively), a step below investment grade and at the same level as Indonesia and Turkey.

Broadly speaking, the country is clearly on the right long-term track from a political and

economic perspective. As one of the ‘Tiger Cub’ next wave of export-driven emerging Asian

economies (along with Vietnam, Indonesia, Malaysia and Thailand), we have confidence in the

country as a stable, improving jurisdiction with upside as reforms continue.

Macquarie Research B2Gold

17 June 2013 15

Fig 11 The Philippines at a glance

Source: CIA World Factbook, IMF, Company reports, Macquarie Research, June 2013

Mining in the Philippines

Masbate is one of several relatively new mines in the Philippines, along with: i) OceanaGold‟s Didipio;

ii) Red 5‟s Siana; and iii) Metals Exploration‟s Runruno. The new production joins existing gold producers

Co-O (Medusa), and Padcal (Philex). Collectively, these mines represent ~700koz of annual gold

production from the country. See our Philippines research team‟s report on mining in the Philippines

for additional background (Hunting stocks – 6 March 2012 by RJ Aguirre).

The most significant project in the planning stages is Xstrata‟s Tampakan project in the south of the

country. The feasibility study calls for a 180ktpd mill producing an average of 450k oz of gold and

450kt of copper per year. This would be a landmark project for the country, the largest by far and a

world-class asset. The $6bn project recently received its Environmental Compliance Certificate (ECC)

and could begin construction within the next 1–2 years.

With exploration set to resume in the country, we expect increased investment from miners already in

the country, and more foreign investment, particularly from Australia. More focus on mining in the

Philippines with more projects on the ground should lead to a stronger voice with the government and

mining law reform and the streamlining of future project approval.

Unit Global rank

Population m 103.0 12

Manila m 11.5 5 - 10

GDP (PPP) $bn 416 33

GDP growth (2012) % 7%

GDP (PPP) per capita US$ 4,300 133

Labour force

Agriculture % 33%

Industry % 15%

Services % 52%

Export partners

Japan % 19%

US % 15%

China % 13%

Lanuages

English Official

Filipino (Tagalog) Official

Religions

Catholic 83%

Muslim 5%

Government: Democratic Republic (US model)

Executive, bicameral congress,

independent judiciary

Head of government: President Benigno Aquino

Term: 6 years (2010)

Next elections: Congressional elections May 2013

Macquarie Research B2Gold

17 June 2013 16

Fig 12 Selected mines and projects in the Philippines

Glencore Xstrata (GLEN LN, £3.16, OP, TP: £4.15) covered by Jeff Largey B2Gold (BTO CN, C$2.26, OP, TP: C$3.75) covered by Michael Gray OceanaGold (OGC CN, C$1.60, OP, TP: C$2.75) covered by Michael Siperco Gold Fields (GFI SJ, R59.57, OP, TP: R74.00) covered by Richard Hart Medusa, Philex, Red 5, Medusa, Saint Augustine, Crazy Horse and Metals Exploration are Not rated. *** Note that under an MPSA license, a foreign entity cannot have more than 40% interest. Ownership levels in this table for MPSA structures refer to overall economic interest.

Source: Company reports, Macquarie Research, June 2013

Fig 13 Philippines – Location of selected mines (red and green) and development projects (yellow)

Source: Company reports, Data SIO, NOAA, US Navy, NGA, GEBCO, US Dept of State Geographer, Mapabc.com, Macquarie Research, June 2013

Company Ticker Project Ownership Tax Status Startup Metals Mine type Average structure date Throughput Gold Copper

(est.) (tpd) 000 oz 000 t Producing mines

OceanaGold OGC CN Didipio 92.0% FTAA Production 2013 Au, Cu OP/UG 10,000 100 15 B2Gold BTO CN Masbate 100.0% MPSA Production 2009 Au UG 18,000 200 - Medusa MML AU Co-O 100.0% MPSA Production 2006 Au UG 10,000 80 - 90* - Philex PX PM Padcal 100.0% MPSA Production 1959 Au, Cu UG 22,000 120 15 Red 5 RED AU Siana 100.0% MPSA Production 2012 Au UG 2,000 85 -

Advanced projects Glencore Xstrata GLEN LN Tampakan 62.5% FTAA Permitting ~2019 Au, Cu OP 180,000 450 450 Medusa MML AU Bananghilig 100.0% MPSA Exploration ~2015 Au UG 175 200 - St. Augustine SAU CN Kingking 60.0% MPSA Feasibility ? Au, Cu OP 90,000 400 120 Crazy Horse CZH CN Taysan 100.0% MPSA Feasibility (sale) ? Cu, Au, Ag, Fe OP 40,000 30 35 Gold Fields (option) GFI SJ Far Southeast 60.0% FTAA (application) Reserve development ? Au, Cu UG 11,500 250 30 Metals Exploration MTL LN Runruno 100.0% FTAA Construction 2013 Au, Mb OP 5,000 100 -

Avg. annual production (approx)

Macquarie Research B2Gold

17 June 2013 17

Security in the Philippines

The security situation in the Philippines is complex, but it is important to note that Masbate is located

far enough north to be part of a stable region of the country.

The violence that the country has experienced has been primarily focused in the south, on the island of

Mindanao and the Sulu archipelago (see Fig 14), where the Muslim minority has been clashing with the

government (and the US army) for over a decade. The separatist movement is led by the Moro Islamic

Liberation Front (MILF) and associated splinter groups, bolstered (and occasionally in conflict with) more

radical Islamic groups, Abu Sayyaf (ASG) and Jemaah Islamiyah (JI). While there are still incidents of

violence, terrorism and kidnapping of foreigners, there is a political process in place that will lead to

increased autonomy for the south of the country, which has reduced the risk in recent years.

One group with broader reach across the country is the New People‟s Army (NPA), which initiated a

Maoist insurgency in 1969, typified by attacks on the Filipino army, police, and has included extortion

of businesses in areas under its control. Peace talks resumed in 2011, but the group is still active and

has conducted guerrilla attacks in and around Manila.

While the Philippines has its share of security risks, we note that few countries are risk-free in this

regard. Even with the various insurgencies and attacks, the Philippines compares favourably to parts

of Mexico, West Africa, and parts of South America in terms of violence. And while other jurisdictions

have seen businesses, and specifically mining concerns targeted for attacks and theft, the primary

cause of violence in the Philippines is social, religious and political – it is not a general reflection of

lawlessness or an ineffective government security apparatus.

Fig 14 Violence historically focused in the south (red areas) on the island of Mindanao and the Sulu Archipeligo

Source: Wikipedia, Macquarie Research, June 2013

Masbate

Ma

cq

ua

rie R

es

ea

rch

B

2G

old

17

Ju

ne

20

13

1

8

B2Gold (BTO CN, Outperform, Target price: C$3.75)

All figures in USD unless otherwise noted

All NAV values based on forward curve commodity price assumptions, earnings estimates are based on Macquarie price assumptions

Source: Company reports, Macquarie Research, June 2013

Assumptions 2012A 2013E 2014E (LT) 2018 2012A 2013E 2014E 2015E NAV Breakdown (5% discount)

Gold 1671 1467 1385 1473 La Libertad 109 136 157 157 US$m US$ / Sh C$ / Sh % Total

FX (US:CAD) 1.00 0.96 0.91 0.95 Limon 49 57 62 62 Gold Operations

Income Statement 2012A 2013E 2014E 2015E Masbate - 177* 206 206 Masbate (dcf) 860 1.29 1.30 35%

Revenue 259 566 580 776 Otjikoto - - - 136 La Libertad (dcf) 463 0.69 0.70 19%

Costs 132 362 336 475 Gramolate - - - - Limon (dcf) 257 0.38 0.39 10%

Operating margin 127 204 244 301 Total Gold Production 158 370 426 561 Sub-total 1,581 2.36 2.39 63%

Depreciation 33 43 36 76 Increase from 2011 base 134% 170% 255% Other Mining Assets

EBT 77 126 175 232 Ave Cash Operating Costs ($/oz) 587 700 656 650 Otjikoto (dcf) 431 0.64 0.65 17%

Tax 25 31 36 43 Total Cash Costs ($/oz) 640 756 730 704 Gramolate (dcf) 225 0.34 0.34 9%

Net Income 52 95 139 189 Other exploration assets 240 0.36 0.36 10%

EBITDA 111 169 212 307 Valuation (Macq commodity price assumption)

Adjusted Net Income 52 162 160 210 P/E 23.8 13.1 13.3 10.2

Adj EPS (FD) 0.13 0.24 0.24 0.31 P/CF 10.9 12.6 12.1 8.0 Total Operating NAV 2,476 3.70 3.74 99%

EV/EBITDA 18.7 12.5 10.5 7.5 WC (to Year-End) 131 0.20 0.20 5%

Cash Flow Statement P/NAV 0.9 Long Term Debt (102) (0.15) (0.15) 0%

Operating CF (before w /c) 114 170 176 265 Corporate adjustments (40) (0.06) (0.06) -2%

Operating CF (after w /c) 105 213 151 255 Valuation (Forward curve) Subtotal (11) (0.02) (0.02) 4%

Investing CF (148) (214) (264) (331) P/E 24.0 13.5 12.9 9.5

Financing CF 8 20 125 - P/CF 11.0 12.9 11.7 7.7

Op CFPS (FD), adj 0.29 0.25 0.26 0.40 EV/EBITDA 18.8 12.9 10.2 7.1 NET ASSET VALUE 2,341 3.68 3.72 103%

P/NAV 0.9

Balance Sheet P/NAV operating multiple 0.95

Cash & cash equiv 68 87 99 23

Working Capital 92 76 (11) (77)

Total debt - 66 191 191 Reserves and Resources (attributable)

Shareholder Equity 560 1,636 1,776 1,965

Au (koz) 2P MI I Total

Enterprise Value 2,063 2,109 2,222 2,298 La Libertad (100%) 648 471 343 1,462

Limon (95%) 213 341 110 664

Masbate (100%) 2,999 2,739 1,599 7,337

* Masbate estimate does not include 7koz produced from Jan 1-15 Gramalote (49%) 1,251 847 2,098

prior to consolidation w ith B2Gold. Otjikoto (92%) 1,234 114 100 1,448

Total 5,094 4,916 2,999 13,009

Bellavista (100%) 314 421 0 735

-

100

200

300

400

500

600

2012A 2013E 2014E 2015E

Pro

du

cti

on

(ko

zA

u)

B2Gold production profile

La Libertad Limon Masbate Otjikoto Gramolate

Macquarie Research B2Gold

17 June 2013 19

Important disclosures:

Recommendation definitions

Macquarie - Australia/New Zealand Outperform – return >3% in excess of benchmark return Neutral – return within 3% of benchmark return Underperform – return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield

Macquarie – Asia/Europe Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie First South - South Africa Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie - Canada Outperform – return >5% in excess of benchmark return Neutral – return within 5% of benchmark return Underperform – return >5% below benchmark return

Macquarie - USA Outperform (Buy) – return >5% in excess of Russell 3000 index return Neutral (Hold) – return within 5% of Russell 3000 index return Underperform (Sell)– return >5% below Russell 3000 index return

Volatility index definition*

This is calculated from the volatility of historical price movements. Very high–highest risk – Stock should be expected

to move up or down 60–100% in a year – investors should be aware this stock is highly speculative. High – stock should be expected to move up or down at least 40–60% in a year – investors should be aware this stock could be speculative. Medium – stock should be expected to move up or down at least 30–40% in a year. Low–medium – stock should be expected to move up or down at least 25–30% in a year. Low – stock should be expected to move up or down at least 15–25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only

Recommendations – 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations

Financial definitions

All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).

Recommendation proportions – For quarter ending 31 March 2013

AU/NZ Asia RSA USA CA EUR

Outperform 45.12% 53.24% 50.00% 40.70% 62.98% 43.30% (for US coverage by MCUSA, 10.55% of stocks followed are investment banking clients)

Neutral 41.52% 28.01% 41.43% 55.01% 32.60% 34.10% (for US coverage by MCUSA, 9.05% of stocks followed are investment banking clients)

Underperform 13.36% 18.74% 8.57% 4.29% 4.42% 22.60% (for US coverage by MCUSA, 0.00% of stocks followed are investment banking clients)

Company Specific Disclosures: Macquarie Capital Markets North America Ltd., which is a registered broker-dealer and member of FINRA, accepts responsibility for the contents of reports issued by Macquarie Capital Markets Canada Ltd in the United States and sent to US persons. Any US person wishing to effect transactions in the securities described in the reports issued by Macquarie Capital Markets Canada Ltd should do so with Macquarie Capital Markets North America Ltd. The Research Distribution Policy of Macquarie Capital Markets Canada Ltd is to allow all clients that are entitled to have equal access to our research. The primary analyst for B2Gold has visited its material operations and development assets within the past year; the company has furnished local transportation and accommodations as part of these site visits. Macquarie Group Limited or one of its affiliates received compensation for products and services other than investment advisory services from B2Gold during the past 12 months. During this time, Macquarie Group Limited or one of its affiliates provided non-securities services to B2Gold. Macquarie Group Limited is currently providing B2Gold with non-securities services. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures.

Analyst Certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd ABN 94 122 169 279 (AFSL No. 318062) (MGL) and its related entities (the Macquarie Group) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General Disclaimers: Macquarie Securities (Australia) Ltd; Macquarie Capital (Europe) Ltd; Macquarie Capital Markets Canada Ltd; Macquarie Capital Markets North America Ltd; Macquarie Capital (USA) Inc; Macquarie Capital Securities Ltd and its Taiwan branch; Macquarie Capital Securities (Singapore) Pte Ltd; Macquarie Securities (NZ) Ltd; Macquarie First South Securities (Pty) Limited; Macquarie Capital Securities (India) Pvt Ltd; Macquarie Capital Securities (Malaysia) Sdn Bhd; Macquarie Securities Korea Limited and Macquarie Securities (Thailand) Ltd are not authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia), and their obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL) or MGL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of any of the above mentioned entities. MGL provides a guarantee to the Monetary Authority of Singapore in respect of the obligations and liabilities of Macquarie Capital Securities (Singapore) Pte Ltd for up to SGD 35 million. This research has been prepared for the general use of the wholesale clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient you must not use or disclose the information in this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. MGL has established and implemented a conflicts policy at group level (which may be revised and updated from time to time) (the "Conflicts Policy") pursuant to regulatory requirements (including the FSA Rules) which sets out how we must seek to identify and manage all material conflicts of interest. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. In preparing this research, we did not take into account your investment objectives, financial situation or particular needs. Macquarie salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions which are contrary to the opinions expressed in this research. Macquarie Research produces a variety of research products including, but not limited to, fundamental analysis, macro-economic analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research, whether as a result of differing time horizons, methodologies, or otherwise. Before making an investment decision on the basis of this research, you need to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of your particular investment needs, objectives and financial circumstances. There are risks involved in securities trading. The price of securities can and does fluctuate, and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. No member of the Macquarie Group accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. Clients should contact analysts at, and execute transactions through, a Macquarie Group entity in their home jurisdiction unless governing law permits otherwise.

Macquarie Research B2Gold

17 June 2013 20

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