Bellevue Gold Ltd (ASX:BGL) (OTCMKTS:BELGF) has received an updated target price of A$1.25 from Canaccord Genuity following an upgrade in global resources to 8.5 million tonnes at 9.9 g/t gold for 2.7 million ounces.
An accelerated drilling program is underway at Bellevue’s Western Australian eponymous project, aimed at increasing and upgrading the resource estimate at Marceline and the Deacon North discovery, as well as the open pits for inclusion in a stage two feasibility study.
The following is an extract from Canaccord’s research update:
In short order from release of its Stage 1 Feasibility Study, BGL has upgraded its Global Resource (both Indicated +15% and Inferred +12%). In our view, the upgrade provides a solid indication of how the ongoing aggressive exploration program will positively augment the project economics as the company moves through iterations of Studies towards production.
Maiden Marcelin Resource drives the upgrade. BGL's updated Global Resource of 8.5Mt at 9.9g/t for 2.7Moz of gold (previously 2.4Moz at 10g/t) represents a +12% increase, with the Indicated category increasing 15% to 3.3Mt at 11g/t for 1.2Moz. The increase was underpinned by the maiden Resource at Marceline of 570kt at 9. 7g/t for 310koz (130koz at 10.1g/t in the Indicated category), an impressive result considering it was only discovered in late 2020. We believe the rapid delineation of a Resource at Marceline further highlights the significant growth potential that still exists within the Bellevue system. BGL is maintaining an aggressive drill program (8 rigs on site, 1 underground increasing to 3 by end of 2021) aimed at increasing the Resources and Reserves at Marceline, Deacon North and the open pits for inclusion in the Stage 2 Feasibility due for release mid-CY21. A second underground rig is expected to commence drilling in the short term, specifically targeting the area between Marceline and Deacon North, which we see as a good opportunity to define new ounces outside the current Resource. Initial results (from surface) in the area have been promising, highlighted by an intersection of 3. 75m at 25.4g/t in the first pass drill testing.
Further Resource and Reserve upgrades and improved project economics expected. BGL has flagged that as part of the Stage 2 Feasibility Study, Resources and Reserves will again be updated, which we expect will incorporate drill results up to the end of May. In our view, this should see the Resources base increase to ~3Moz and Reserves (currently 690koz at 8g/t) grow to between 800koz-1Moz. While a Reserve increase at the top end of our range would be extremely impressive, even the low/ midpoints support a comparatively long Reserve based mine life, noting that we expect it will continue to grow, particularly as drilling from underground accelerates (50% shorter holes at 25% cheaper unit costs). In the upcoming mid-year Resource and Reserve update (in line with Stage 2 Feasibility), we expect the Marceline and Deacon North lodes, together and the possible link zone between them, to account for the bulk of the additional ounces. We also highlight that defining additional Resources and Reserves in this area would be proximal to planned (and fully costed in the Feasibility Study) underground development, and access would require diminutive additional capital for inclusion to mine plan. As part of this note, we have increased the assumed production LOM from 1.25Moz to 1.36Moz, with additional production from FY26 bolstering the second half of our assumed mine plan (See Figures 1-6 in this report).
Feasibility inputs are conservative. As a reminder, we highlight a number of inputs in the Stage 1 Study that are conservative and help de-risk the project. These include 1) assumed development rates of 250m/month per Jumbo vs current rates being achieved and industry standard rates at similar mines of ~300m/month; 2) 90,000tkm/month per truck vs. ~110,000tkm/month industry average; and 3) assumed stope and fill tonnes per bogger scheduled at 830t/day vs ~1,000t/day industry average in WA. With a growing Resource and Reserve, pragmatic mine plan that should materially improve over time and growing management team of high calibre professionals, we continue to see BGL as an exciting development proposition.
Valuation and recommendation. On incorporation of the changes noted above, together with updating for the MarQ'21 cash position (A$116m) our target price (1.0x forward curve NPV10%) has increased to A$1.25/sh (from A$1.15/sh). SPEC BUY recommendation maintained.