The increase stems from the declaration of the maiden resource of 1 million tonnes at 12.3 g/t for 400,000 ounces at the Deacon Lode.
Canaccord Genuity has reiterated its speculative buy rating for Bellevue with a price target of $1.10.
Following is an extract from Canaccord’s research update:
Catalyst rich 2020 awaits...
We highlighted BGL in our recent Top Stock Picks note (here) as the most exciting exploration/development story in the Australian gold space, a view we continue to hold. BGL has been a relative under-performer against the sector over the past 12 months (A$ gold +25%, XGD +20%, BGL -8%), and while infill drilling can be loveless from a market perspective, the expected near-term Resource upgrades, and implications for the scale and validity of the project are being underappreciated, in our view.
What's in store for 2020. In deriving our base case valuation on BGL +12 months ago, we made a number of assumptions that, in our view, remain on track to be validated or exceeded during 2020.
- Maiden Inferred Resource for Deacon/Mavis expected in the MarQ'20. Deacon/Mavis was discovered in 2H 2019, and with mineralisation defined over +1.5km strike length, the orebody is emerging as a meaningful potential addition to the Resource base. Drilling has primarily focused on a ~500m panel within the mineralised corridor, which in our view should see a maiden Inferred Resource of 250-350koz at 8-10g/t released shortly, taking the total Inferred Resource to +2Moz. As drilling continues, we see good scope for Deacon/Mavis to support 500koz-1Moz within 12 months.
- Maiden Indicated Resource for Tribune, Viago and Bellevue expected in the JunQ'20. Infill has been the focus for essentially six of the eight diamond rigs on site, targeting the shallower parts of the current 1.8Moz at 11g/t Resource. We see good scope for a maiden Indicated Resource of 350-500koz at 8-11g/t, with grade likely to depend on the ratio of Tribune (8g/t, shallower) and Viago (16g/t, deeper) included in the update. Infill results released today continue to strongly support BGL’s geological model, which predicts gently plunging, high-grade shoots within the mineralised envelops, an interpretation consistent with shoots that were mined at the Bellevue underground mine. Importantly, the results from all the Resource domains currently targeted with infill drilling confirm robust underground mineable widths and grades of the lodes and excellent continuity to the plunging ore shoots. Highlights from the latest infill drilling include: 1) Viago - 4.7m at 33g/t, 3.2m at 21g/t, 4.6m at 10g/t; 2) Tribune – 5.7m at 17g/t, 8.2m at 8g/t, 3m at 36g/t; and 3) Bellevue Lode – 4.3m at 28g/t, 2.5m at 22g/t, 2.4m at 23g/t. With an aggressive infill drilling program ongoing and potential access to underground the 2H 2020, we expect the Indicated Resource to be +1Moz in <12 months and form the basis for Economic Studies.
- Dewatering underway, Economic Studies kick off in 2H 2020. Water at the Bellevue mine has already been pumped to ~100m below surface and should be complete during the JunQ’20. Depending on the rehabilitation requirements, underground drilling platforms could be established during 2H'20, which would markedly accelerate the infill and extensional drilling programs.
We see our base case assumption that at the time of FID (CG est. mid 2021), ~50% of a 2.75Moz Inferred Resource (mid-point of expectations) converts to a mining inventory, as increasingly conservative. As a reminder, we assume capex to build the project of A$110m (including A$30m underground development), which supports a ~160kozpa production profile at an AISC of ~A$1,000/oz. With first production assumed by mid-2022, BGL could emerge as one of the highest margin producers in Australia.
Valuation and recommendation. Our A$1.10/sh valuation (unchanged) is based on a DCF analysis (NPV10%) for the Bellevue gold project, plus nominal exploration value, diluted for future assumed equity financing and net of corporate adjustments. We retain a SPEC BUY recommendation.