Bellevue Gold Ltd (ASX:BGL) has sustained a 'SPECULATIVE BUY' rating and a price target of A$1.50 from Canaccord Genuity (TSX:CF, LSE:CF) following the addition of 300,000 ounces to the total indicated resource of its namesake gold project.
BGL increased the total indicated resource for the Bellevue Gold Project in Western Australia to 1.7 million ounces at 11.2 g/t, an “impressive” annual growth rate of 43% since the maiden indicated resource was released in July 2020.
“Pleasingly, the increase has not come at the expense of lower grades with the total resource growing by 100,000 ounces to 3.1 million ounces at 9.9 g/t (previously 3 million ounces at 9.9 g/t),” says Canaccord.
“The growth has also been achieved at a cost of less than A$25 per ounce, an impressive result, in our view, and reflective of the cost benefit of the company’s timely pivot to underground drilling in the current inflationary environment.”
Bellevue is continuing to target more ounces with ongoing infill drilling near the Deacon North deposit, having completed more than 40,000 metres of underground drilling since August last year to grow the resource.
Updated reserve later this quarter
Canaccord anticipates there will be an increase in the current reserve at Bellevue – as well as the life of mine (LOM) inventory – as the reserve reflected about 74% of indicated resources before the upgrade.
“If this ratio is maintained it would imply a potential increase in reserve ounces of 223,000 ounces (21%).
“Noting the current reserve grade of 6/1 g/t vs the indicated resource grade of 11.2 g/t, we also see potential for improvement in grades through the mill as, for example, optionality for stockpiling lower grades earlier in the mine plan become apparent.”
Drilling to continue with two rigs underground
BGL has previously stated it will maintain two drill rigs underground to target resource conversion, growth and grade control drilling.
“This should, in our view, continue to increase the scale of the project (we expect multiple resource/reserve updates prior to first gold), allow for ongoing optimisation of the project to offset current inflationary challenges in the industry, and markedly de-risk the project.”
Project refresher
The Bellevue Gold Project’s stage 2 feasibility study highlighted an 8.1-year life of mine project, producing an average annual production of 183,000 ounces of gold at an all-in sustaining cost (ASIC) of A$1,014 per ounce over the life of mine, with the first five years averaging an “impressive” 200,000 ounces per annum at an ASIC of A$922 per ounce.
“Delivering on these outcomes would see BGL become a sector leader with the stage 2 feasibility study forecasting the Bellevue Project to be Australia’s greenest gold mine, with the lowest emission on a per-ounce basis.”
Valuation and recommendation
“We continue to be high conviction on BGL, with the stock trading on a price to net asset value ratio of 0.64x and a number of catalysts that validate and de-risk the project expected in the short term (resource/reserve updates, optimisation studies, award of preferred power provider and award of the engineering, procurement and construction (EPC) mill construction contract).
“SPECULATIVE BUY recommendation maintained.”