Bellevue Gold Ltd (ASX:BGL) (OTCMKTS:BELGF) has secured a target price of A$1.20 per share from Macquarie Research analysts Andrew Bowler, Hayden Bairstow and Jon Scholtz.
In a recent report, the analysts detailed a recent site visit to the company’s Bellevue Gold Project, with highlights including good ground conditions underground and the potential or continued resource/reserve growth.
“In our view, mineral inventory growth is likely to continue at Bellevue as drilling efficiency improves from additional underground drill positions
“We subsequentially lift our mining inventory assumption by 22% ahead of the Stage Two feasibility study, which is expected in mid-CY21.”
Continued resource growth potential
The report highlighted the potential for discovery at Bellevue, be it extensions to known lodes or the following up of numerous highly prospective targets that are generated by BGL’s proven exploration methods.
“BGL continues to use downhole electromagnetic surveys to generate targets with good rates of success.
“As BGL continues its resource infill and extensional drilling, the company notes that, as drill rigs move underground, the cost and speed of drilling activity will improve.”
Stage Two study catalyst
The report noted the delivery of the Stage Two feasibility study for Bellevue as a key near-term catalyst, with new and growing resource areas at Bellevue, which are near development having already been costed in the Stage One study.
The analysts said: “BGL has continued to grow resources while also upgrading areas to the indicated category.
“This, in our view, presents a key opportunity for the Stage Two study to deliver both mining inventory growth and a reduced per ounce capital intensity.
“We expect this to be highlighted by the inclusion of the recent Marceline resource, and further extensions to the Deacon area, in the Stage Two study.”
Earnings and target price revision
The report also highlighted that a smaller equity raise assumption reduces the analysts’ share dilution expectation by 7%.
This is offset by increases to its depreciation and amortisation (D&A) outlook at Bellevue, which result in mid-term earnings per share (EPS) reductions of 8%, 9%, 4% and 3% from financial years 2023-2026 respectively.
“The increased D&A see a modest reduction in tax payments in those years while increases to our mining inventory at Bellevue lift our DCF valuation of the asset by 38% to A$704 million.
“The increase in DCF valuation for Bellevue, and the reduction in our dilution assumption is the primary driver behind the 14% lift in our NAV derived TP to A$1.20/share.
“Risks include gold price, funding and labour-related pressures during Bellevue’s development and operation.”