The delivery of the second stage feasibility study is expected to be a key short-term catalyst for the Bellevue project.
() (OTCMKTS: BELGF) obtained a price target of A $ 1.20 per share from Macquarie Research analysts Andrew Bowler, Hayden Bairstow and Jon Scholtz.
In a recent report, analysts detailed a recent site visit to the company’s Bellevue gold project, with highlights including good soil conditions underground and potential or continued resource / reserve growth.
âWe believe mineral inventory growth is expected to continue at Bellevue as drilling efficiency improves from additional underground drill positions.
“We then raise our mining inventory hypothesis by 22% before the feasibility study of the second stage, which is expected in mid-CY21.”
Potential for continued resource growth
The report highlighted the discovery potential at Bellevue, whether it be extensions of known veins or the tracking of many highly prospective targets generated by BGL’s proven exploration methods.
âBGL continues to use downhole electromagnetic surveys to generate targets with good success rates.
“As BGL continues its infill drilling and resource extension business, the company notes that as drilling rigs move underground, the cost and speed of drilling operations will improve.”
Second stage study catalyst
The report noted the delivery of the Second Stage Feasibility Study for Bellevue as a key short-term enabler, with new growing resource areas in Bellevue, which are under development, having already been costed in. the study of the first stage.
Analysts said, âBGL has continued to increase its resources while upgrading areas to the indicated category.
âThis, in our view, presents a key opportunity for the study of the second stage of generating both growth in mining inventories and reduced capital intensity per ounce.
âWe expect this to be evidenced by the inclusion of the recent Marceline resource, and other extensions of the Deacon Zone, in the second stage study.
Profits and target price revision
The report also pointed out that a smaller equity increase assumption reduces analysts’ stock dilution expectation by 7%.
This is offset by increases in its amortization outlook (D&A) at Bellevue, which translate into medium-term earnings per share (EPS) reductions of 8%, 9%, 4% and 3% respectively from fiscal years 2023-2026.
âThe increase in D&A results in a slight reduction in tax payments during these years, while the increase in our mine inventory at Bellevue raises our DCF valuation of the assets by 38% to A $ 704 million.
âThe increase in the DCF valuation for Bellevue, and the reduction in our dilution assumption is the main driver of the 14% increase in our NAV derived TP value to A $ 1.20 / share.
âThe risks include the price of gold, financing and labor pressures during the development and operation of Bellevue.â