Bellevue Gold Limited

Company Overview: Bellevue Gold Limited (ASX: BGL) is a gold exploration company focused on the exploration and development of its Bellevue Gold Project. The company’s projects include the Bellevue Gold Project, Yandal Project, and Kathleen Valley Project.

BGL Details

Expected Growth in Bellevue Gold Project to Aid Future Business Performance: The company operates high-grade, low-cost Bellevue Gold mine and it expects to produce over 200kozpa for the first 5 years of operations and a life of mine production of 183kozpa for over next 8 years with 1Moz Reserve with a grade of 6.1g/t and an All-in Sustaining Cost of A$1,014/oz. The company believes that Bellevue Gold Project may deliver sector-leading EBITDA margins of over 66% and A$1.8b of pre-tax free cash flow and will be one of only 8 assets in tier-1 jurisdictions that produce over 180kozpa at a reserve grade over 5g/t gold. In addition, the updated Stage 2 Feasibility Study stated that BGL is likely to enter the Top 20 largest producing gold mines in Australia. The Bellevue Gold Project is fully financed to production with total liquidity of $373 million, which would support funding the dual-track strategy of project development and exploration with capex of $254 million from the updated FS2 study and it had earmarked $21-$26 million for exploration.

Insights of 1HFY22: During the half-year ended 31 December 2021, the company generated nil operating revenues, and posted loss after tax of ~$7.44 million against ~$4.79 million in 1HFY21.

Financial Summary (Source: Analysis by Kalkine Group)

Business Updates: The following table provides an overview of key business updates:

Key Business Updates (Source: Analysis by Kalkine Group)

Top 10 Shareholders: The top 10 shareholders together form around ~45.08% of the total shareholding, while the top 4 constitute the maximum holding. BlackRock Investment Management (UK) Ltd. and 1832 Asset Management L.P. are holding a maximum stake in the company at ~13.86% and ~9.08%, respectively, as also highlighted in the chart below:

Top 10 Shareholders (Source: Analysis by Kalkine Group)

Key Metrics: During 1HFY22, the company recorded a current ratio of 16.48x as compared to 2.09x of the industry median.

Liquidity Profile (Source: Analysis by Kalkine Group)

Key Risks:

• Gold Price Risk: The company’s business growth is exposed to risks arising from the adverse movement in the prices of gold.
• Change in Climate: BGL’s performance could be impacted by an extreme change in climate, which may cause the temporary suspension of its operation.
• Regulatory Risk: The company is exposed to complex regulatory environment; any failure in the compliances could lead the business to fines, penalties, etc.

Outlook: The company believes that the pre-production capital estimate in the upcoming Bellevue Gold Project update would be in line with the total pre-production cost forecasts contained in the Stage Two Feasibility Study. BGL also affirmed that the project is fully funded for production. In addition, the exploration drilling from underground is generating significant benefits in the productivity drivers of faster drilling rates, decreased cost per metre of drilling, time and collar length to target depth. These are allowing for faster Reserve conversion and will enable these results to be included in the Reserve update. BGL is optimistic about the significant upside potential of the Bellevue Gold Project, with multiple drill rigs turning, and low delivery costs of A$18 per Resource oz. The resources have grown at a healthy Compound Annual Growth Rate (CAGR) of 81%, which is one of the fastest-growing gold developments globally in a Tier 1 mining jurisdiction with a future focus of converting the other 1.5Moz that sits outside the current 1.5Moz life of mine.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Technical Analysis: BGL prices broke the downward sloping trend line by upside in February 2022 and the prices are sustaining above the breakout level from past three months indicates prices are trading in a bullish momentum.  Also, prices are trading above its trend following indicators 21-period and 50-period SMA on a weekly chart which is also supportive for the price action. RSI (14-period) is hovering at ~49.82 that indicates prices are trading in a positive momentum. Immediate support levels are AUD 0.820 and AUD 0.775, and immediate resistance levels are AUD 1.065 and AUD 1.225.

Stock Recommendation: The stock of BGL has a 52-week low-high range of $0.710 - $1.130, respectively. The stock has been corrected by ~5.44% in the past nine months. The stock has been valued using a P/BV multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average P/BV multiple, considering the COVID-19 uncertainties and rising cost pressure, etc. For the purpose of valuation, a few peers like Gold Road Resources Ltd (ASX: GOR), Red 5 Ltd (ASX: RED), and Silver Lake Resources Ltd (ASX: SLR) have been considered. Considering the expected upside in valuation, decent drilling results, decent liquidity position, nil debt to equity ratio in 1HFY22, optimistic long-term outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.950 as on 12 April 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BGL Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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