Bellevue Gold Ltd (ASX:BGL) has had its speculative BUY and $1.40 price target maintained by Canaccord Genuity (TSX:CF, LSE:CF), following strong results from infill drilling at Tribune open pit of the Bellevue Gold Project in WA, which Canaccord Genuity says has considerably lowered the risk of the project.
A share price target increase may be on the horizon, as Canaccord predicts a likely positive augment to Bellevue’s JORC resource from the company’s current exploration drilling campaign.
The following article consists of edited excerpts from Canaccord Genuity’s company update research report on Bellevue Gold.
BGL’s grade control drilling at the Tribune open pit and shallow underground areas produced selected results of:
- 10 metres at 15.4 g/t gold from 115 metres;
- 2.4 metres at 46.2 g/t from 146 metres;
- 2.2 metres at 24.8 g/t from 73 metres;
- 4.7 metres at 10.0 g/t from 81 metres; and
- 6 metres at 5.5 g/t from 72 metres.
Canaccord says the grade control model completed on the early mine life areas of Tribune reconcile positively with existing known resource in the area, with an increase in gold grade of 4% and a 2% increase in total contained resources (an additional 1,000 ounces).
The results, in Canaccord’s view, validate the accuracy and high-quality nature of the existing resource, de-risking the project and pointing to further improvements in the resource as drilling continues.
Read: Bellevue Gold verifies namesake gold project’s resource with grade control drilling
Improving economics
BGL has budgeted over 110,000 metres of drilling between now and forecast first production in June 2023, with the aim of extending known mineralisation and upgrading more of the 1.4-million-ounce resource (47% of total resources) which is not currently incorporated in the mine plan.
Recent drilling at Deacon North targeting inferred resources and mineralisation extensions beyond the current mine plan returned 7.4 metres at 16.9 g/t gold, 8.9 metres at 12.7 g/t and 3.1 metres at 31.9 g/t.
The company expects to update its current resource and reserve inventory twice (March quarter '22 and March quarter '23) before production begins which, in Cannacord’s view, points to further positive iterations of the project, similar to the Stage 2 Feasibility Study (FS2).
Stage 2 feasibility
BGL’s recent FS2 outlined forecast production of approximately 200,000 ounces per annum at an all-in sustaining cost (AISC) of A$922/ounce for the first five years and average production of 183,000 ounces per annum at an AISC of A$1,014/ounce over the current 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.
With its aggressive exploration program ongoing, Canaccord expect to see increases to the scale of the deposit as well as growth in the measured and indicated resource/reserves going forward. This, in Canaccord’s view, has the potential to positively augment the economics beyond their current modelling.
By way of example, an increase in throughput to 1.25 million tonnes per annum or 1.5 million tonnes per annum (assuming static mine life and linear capital expenditure increases) would likely see Canaccord’s price target increase to A$1.60 and A$1.85, respectively.
Funding through to production
In parallel with FS2, BGL also announced a funding package comprising a A$200 million debt facility, A$106 million fully underwritten institutional placement and a share purchase plan (SPP) to raise up to A$25 million.
Assuming the SPP completes BGL will have approximately A$400 million in liquidity which sees the company comfortably funded through to production while maintaining an aggressive exploration effort to increase the scale and confidence of the resource and reserve.
Valuation and recommendation
Canaccord Genuity says: “We continue to see BGL as one of the most exciting near-term development (or takeover) opportunities in the Australian gold space. SPEC BUY maintained, price target A$1.40.”