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Bellevue Gold remains Macquarie’s preferred exploration and development story in the ASX gold sector

Results from Bellevue Gold Project continue to impress and opportunities to fast-track the project towards development are becoming more apparent.

Bellevue Gold Ltd - Bellevue Gold remains Macquarie’s preferred exploration and development story in the ASX gold sector
Macquarie has increased its target price by 33% to $1.20

Bellevue Gold Ltd (ASX:BGL) (OTCMKTS:BELGF) recently hit 17 metres at 4.2 g/t gold in its first regional hole drilled on the 20-kilometre Bellevue Trend in Western Australia.

This hole at Government Well prospect is about 7 kilometres from the existing 2.2-million-ounce at 11.3 g/t inferred resource at Bellevue Gold Project.

Macquarie Research has retained its Outperform recommendation for Bellevue and has increased its target price by 33% to $1.20 per share (current price: 96 cents).

The following is an extract from Macquarie’s research note:

Key points

  • BGL has intersected high-grade gold mineralisation at the Government Well prospect 7km to the north of the Bellevue Gold Project.
  • BGL will release an upgraded resource for Bellevue in the coming weeks, dewatering of the old decline is underway as are mining studies.
  • Results from Bellevue continue to impress and opportunities to fast-track development are firming. Maintain OP and we upgrade our TP to $1.20.

Event

  • BGL has reported 17m at 4g/t gold in the first of a series of four drill holes at the Government Well prospect located 7km north of the high-grade 2.2Moz Bellevue mine area.

Impact

  • Drilling highlights regional exploration potential. BGL also notes that the reported intersection is 180m along strike from an historical RC result of 2m at 18.7 g/t from 32m. BGL has completed a mapping and sampling programme at Government Well and the prospect has been defined over 1.2km of strike. Sampling of outcropping veins returned assays from rock chips of up to 32g/t. Drilling has been completed over 500m of strike with assays pending for the remaining holes, notably one of the holes has had visible gold panned over a 1m interval of quartz veining with pyrite mineralisation.

Earnings and target price revision

  • No change to our earnings forecast. BGL continues to de-risk the resource at Bellevue and today's drill result highlights the exploration potential of the region. In light of our view of reduced delivery risk we have lowered the discount rate we use in our DCF from 8% to 5%, this is in line with other Australian domiciled gold producers and developers we have under coverage. We have also increased our option value for exploration from a notional $0.06/sh to a risk weighted $0.18/sh representing 14% of our sum-of-the-parts valuation of BGL. As a result our target price increases 33% to $1.20.

Price catalyst

  • 12-month price target: A$1.20 based on a DCF methodology.
  • Catalyst: BGL will release an upgrade to the Bellevue resource in the coming weeks. Dewatering of the old workings is well progressed and once complete will allow progressive refurbishment of the mine. This will facilitate drilling from underground which should help fast track evaluation and also potentially lead to early production options. As demonstrated by today's result, and with a further 1Okm of drilling planned for regional exploration targets this year, exploration is also a likely source of positive catalysts.

Action and recommendation

Maintain Outperform. BGL's first meaningful exploration efforts away from the main Bellevue system have brought early success at the Government Well prospect. Results from Bellevue continue to impress, and with opportunities to fast-track the project's development becoming more apparent BGL remains our preferred exploration and development story in the ASX gold sector.

Quick facts: Bellevue Gold Ltd

Price: 1.17 AUD

ASX:BGL
Market: ASX
Market Cap: $941.73 m
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