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Bellevue Gold’s maiden indicated resource expectations grow: Canaccord Genuity

Published: 14:27 29 May 2020 AEST

Bellevue Gold Ltd - Bellevue Gold’s maiden indicated resource expectations grow: Canaccord Genuity
Bellevue’s resource is set to eclipse Canaccord’s previous estimate

Bellevue Gold Ltd’s (ASX:BGL) recent infill drilling at its namesake project in WA returned up to 1-metre at 1,169 g/t gold from 100 metres with the likelihood of boosting a mid-year resource upgrade at the project.

While the 1-metre result was returned from Bellevue North, one of the peripheral lodes, there were also a host of ‘exceptional’ results from the Deacon lode, which accounts for 41,000 ounces at 12.3 g/t gold of the 2.2-million-ounce inferred resource.

Canaccord Genuity reiterated its SPEC BUY rating for Bellevue after reviewing the new high-grade hits. The broker has a target price of $1.35 per share (current price: 85 cents).

The following is an extract from Canaccord’s research update:

Deacon infill results confirm its development merit, in our view. Infill drilling at Deacon (Inferred Resource of 410koz at 12.3g/t) confirms the lode as a repeat of the historic Bellevue mine. Best results from the Central Area infill program (now drilled on 40m centres) include:

  • 5.3m at 54.5 g/t gold from 650.9m
  • 1.5m at 168.8 g/t gold from 651.7m including 0.5m at 499.1 g/t gold
  • 2.5m at 49.2 g/t gold from 527.8m • 10.3m at 10.7 g/t gold from 566.9m
  • 4.3m at 9.1 g/t gold from 701.9m • 2.6m at 10.0 g/t gold from 626.0m
  • 1.64m at 48.0 g/t gold from 640.0m • 3.3m at 22.5 g/t gold from 618.1m

Our key takeaway from the update is that the latest Deacon infill results will be included in the maiden Indicated Resource planned for mid-year. We had not assumed any of the Deacon orebody making it into maiden Indicated Resource, which we believe on inclusion, should see the company eclipse our previous estimate of 400-500koz at 8-10g/t comfortably. In looking at the long section of Deacon (here), infill drilling looks to us to have covered 40-50% of the existing Inferred Resource, and with grades holding consistent with previous drilling, we think Deacon should add material ounces to the updated Resource. As such, we revise our maiden Indicated Resource estimate to 550-650koz at 8-10g/t, and continue to see good scope for this to grow to ~1Moz by the end of 2020E (total Inferred Resource 2.2Moz at 11.3g/t).

We also note that a number of drill holes outside the existing Resource at Deacon to the north were reported recently (including 3m at 12g/t, 1m at 12.6g/t, 4.5m at 7g/t, 0.4m at 26g/t), which in our view could double the strike length of the defined mineralisation. A number of EM conductors to the north and south will be tested as part of the current step out program, which in our view supports Deacon emerging as having ~1Moz potential. With a growing critical mass and favorable geometry for mining, Deacon should become an important part of a production scenario for BGL and a key component of the Economic Studies (begin 2H 2020). We also note that Deacon sits <350m from existing underground infrastructure at Bellevue (currently being de-watered), and note that access via a development drive would be modest (CG est. <$3m).

De-watering progressing well. The company also provided an update on de-watering of the historic Bellevue mine, where the water level is now down to 200m below surface. Geotechnical, metallurgical and mining studies are all well advanced with inspections up to the water level indicating “the underground infrastructure to be in good condition and suitable for refurbishment and re-entry”. Access to the underground is significant for BGL for two key reasons, in our view:

  • Drilling from underground should allow BGL to drill at twice the rate and at a significantly lower cost than drilling from surface. BGL flagged that tender evaluations are underway in preparation for a planned underground re-entry in SepQ’20, to allow access to underground diamond drill cuddies for Resource drilling programs.
  • Based on the ~28km of exiting underground workings, there is ~A$200m of development within the existing underground. BGL expects the infrastructure to play a key role in minimizing capital costs and expediting the timeline to bring the deposit back into production.

Valuation and recommendation. Our A$1.35/sh TP is based on a DCF analysis (NPV10%) for the Bellevue gold project, plus nominal exploration value, diluted for future assumed project equity financing and net of corporate adjustments. SPEC BUY rating maintained.

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