Bellevue Gold Ltd (ASX:BGL) (ASX:BGL) has received a vote of confidence from Canaccord Genuity (TSX:CF, LSE:CF) after intersecting further high-grade gold that is likely to boost resources thereby supporting the plan to extend mine life and increase the production rate at Bellevue Gold Project in Western Australia.
Canaccord continues to highly rate Bellevue’s pragmatic approach to development that should materially improve over time and sees it as one of the most exciting near-term development (or takeover) opportunities in the Australian gold space.
The following is an extract from Canaccord’s research update:
The hits keep on coming. BGL has provided an exploration update which bodes well for improvements to the current mine plan. Results from underground drilling of the Deacon North lode have targeted areas of the Inferred Resource outside the current mine plan as well as testing extension beyond the defined Resource envelope. Better drill intersections from the Deacon North program include:
- 7.4m @ 16.9g/t gold from 485.5m
- 8.9m @ 12.7g/t gold from 454.7m including 4m @ 22.9m from 454.7m
- 3.1m @ 31.9g/t gold from 518.9m
- 3.8m @ 24.6g/t gold from 503m
- 4.0m @ 17.0g/t gold from 457m
- 9.0m @ 7.2g/t gold from 492m
As a quick refresh, BGL/s recent Stage 2 Feasibility Study (FS2) outlined forecast production of ~200kozpa at an AISC of A$922/oz for the first five years and average production of 183kozpa at an AISC of A$1014/oz over an eight-year life of mine. The company has flagged that it will continue optimisation work on the LOM with a view to extending mine life and improving the production rate beyond the first five years. BGL has budgeted over 110,000 m of drilling between now and forecast first production in June 2023, with drilling from underground progressively ramping up, which in our view should continue to expedite the rapid conversion of Inferred Resources and the growth of total Resources due to cheaper and faster drilling rates.
Resource and Reserve updates flagged for MarQ'22 and MarQ'23. BGL expects to update its current Resource and Reserve inventory twice before production begins which, in our view, points to further positive iterations of the project like seen in FS2. As a reminder, BGL has been growing the Resource at +800kozpa since discovery and FS2 is based on only ~50% of the total 3Moz at 9.9g/t Resource. With an aggressive exploration program ongoing, we will likely see increases to the scale of the deposit as well as growth in the M&I Resource/Reserves going forward, which has the potential to positively augment the economics beyond our current modelling. By way of example, an increase in throughput to 1.25Mt and 1.5Mtpa (assuming static mine life and linear capex increases) would likely see our price target increase to A$1.60 and A$1.85, respectively. Similarly, a simple increase in mine life to 10 and 12 years (from ~8.5 years) would also increase our price target to A$1.50 and A$1.60, respectively. We also explore sensitivities less in BGL's control, like gold price and FX, which highlight the robustness of the project at less favourable gold prices. At its current share price, BGL is implying a gold price of A$1,590/oz vs current spot of A$2,430/oz, a disconnect that is at odds with a project of this quality, in our view.
Valuation and recommendation. We continue to rate highly BGL's pragmatic approach to development that should materially improve over time, and we see it as one of the most exciting near-term development (or takeover) opportunities in the Australian gold space. SPEC BUY maintained.