Bellevue Gold Limited

Company Overview: Bellevue Gold Limited (ASX: BGL) is involved in the exploration and evaluation of minerals in Western Australia. The company’s projects include Bellevue Gold Project, Yandal Project, and Kathleen Valley Project. The company was listed on ASX in December 2005.

BGL Details

Rising Reserves to Fuel Future Business Growth: The company’s Bellevue gold project (BGP) is a high-grade, high margin growth gold project located in a tier-one jurisdiction in Australia with significant and proven growth potential against the peers. BGP is fully financed for production with a liquidity of $351 million as of 31 March 2022. As of now, the project is 62% complete from the commencement of the development phase, which started in July 2020. The company is optimistic about its position as a high grade, high margin business with growth potential that is forecast to be profitable through the cycle. In addition, BGL believes that continued organic resource growth may help in delivering further outperformance as the reserve has grown at a Compound Annual Growth Rate (CAGR) of 68% since February 2021.

Insights of Q3FY22: The below picture provides an overview of the business progress in Q3FY22:

Quarterly Summary (Source: Analysis by Kalkine Group)

Business Updates: The following picture showcases highlights of the recent business updates:

Business Updates (Source: Analysis by Kalkine Group)

Top 10 Shareholders: The top 10 shareholders together form ~45.57% 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 2.14x of the industry median. In addition, it posted a nil debt to equity ratio in 1HFY22.

Liquidity Profile (Source: Analysis by Kalkine Group)

Key Risks:

• Change in Climate: The company is exposed to risks arising from the extreme change in the climate, which may pause operations on a temporary basis.
• Gold Price Risk: BGL’s growth is mainly dependent on the spot prices of gold, as it is a major revenue stream. Any adverse movement in the prices of gold could impact operational and financial performance.
• Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure in compliance could lead the business to fines, penalties, etc.

Outlook: The company anticipates commercial production for the first 12 months in the range of 180,000-200,000 ounces at an AISC of A$1,000-$1,100/oz at the Bellevue Gold Project. The commercial production has been scheduled for 2HFY23. The project is likely to be the lowest carbon emitter per ounce of ASX-listed gold producers, with an expected range of 0.15 to 0.20 t CO2e per ounce. BGL is optimistic about the significant scope for organic growth, which will be supported by the Bellevue processing plant to accommodate future increases in throughput above the initial 1Mtpa nameplate capacity. Looking forward, BGL continues to de-risk the project through the completion of significant infill drilling and grade control, optimised mine plan and savings initiatives, as well as securing key project contracts.

Growth Plans (Source: Analysis by Kalkine Group)

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 Commentary: BGL price broke the downward sloping trend line by upside and the prices are sustaining above the breakout level from past 5 months. Also, prices have tested its downward sloping trend line support level recently and shown some reversal signs. RSI (14-period) came up from oversold region to ~46.08 that also support our bullish stance. The immediate support level for the stock are AUD 0.755 and AUD 0.690 and resistance levels are AUD 0.935 and AUD 1.090.

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 ~7.52% in the past month. 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, considering the COVID-19 uncertainties and rising cost pressure, etc. For 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, rising resources, decent performance in Q3FY22, nil debt to equity ratio in 1HFY22, optimistic long-term outlook, technical analysis mentioned above, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.855, down by ~2.840% as on 07 June 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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