Analysts back in Bellevue as WA gold miner hits inflection point

Bellevue Gold (ASX:BGL) has had its challenges since it poured its first gold in October 2023 from its namesake high-grade underground mine to the north of Leinster in Western Australia.

Despite intense underground pre-development work, including grade control drilling on 20x10m centres, the originally-promoted 200,000oz of annual production became a bridge too far in a hurry.

Gold’s take-off from the sub-US$2,000/oz prices of October 23 could have washed away investor concerns with the project but the hedge book in support of the project’s financing was soon hopelessly out-of-the-money.

But after the hard slog to get the underground humming and an attack on the scale of the painful hedges, a clear inflection point has been reached.

That came through in Tuesday’s report of NPAT of $7.1m for FY26, including the revenue-sapping effect of 83,400oz being delivered in to the hedge book at prices much lower than spot.

Bellevue noted that its NPAT would have been $205m had it been able to sell its gold at average spot prices for the period. More than that, the company said it expects to close out its hedge book in FY27, setting it up for strong cash flow growth in the year.

Guidance for production in FY27 remains unchanged at 150,000-170,000oz at a project AISC of $A2,800-A$3,100/oz. And the company is feeling confident enough to step up its exploration expenditure rather than only drilling for grade control.

All in all, the inflection point in both the company’s own confidence, and the market’s view of the stock, has arrived.

That was reflected in the broker reports that followed the profit report. The price targets in the reports ranged from $1.80 a share on the low side (Jarden) and $2.10 on the high-side (Moelis), with most at more than $2. Bellevue was trading in Thursday’s market at $1.59 a share.

Barrenjoey said that Bellevue has a very high-grade orebody that needs to be selectively and carefully mined to optimise financial outcomes.

“But Bellevue is showing signs of better operational momentum, including beating market expectations in MQ26 and JQ26,” the firm said.

“The share price is trading at a 15% discount to our NPV, which is based on a US$4,000/oz long-term gold price.

“We maintain an overweight rating as Bellevue is showing signs of better operational momentum, is dealing with its hedge liabilities, and we think relative value to peers has emerged.”

Jarden with its outlier price target of $1.80 noted the significant exploration potential at Bellevue and the company’s corporate appeal in an increasingly consolidating sector.

“We continue to assume a 15-year LOM with annual production of 175,000oz from FY28e,” it said.

“The key upside risk to our view is sustained higher gold prices. The key downside risk, apart from lower gold prices, is lower-than-expected mined grades, noting that grade variability has been a feature of the Bellevue production profile over the past couple of years as management has worked to establish mining stability across the multiple mining front.”

FirstAU/Javelin:

Last week’s recommended takeover of Javelin (ASX:JAV) by FirstAU (ASX:FAU) to create a 350,000oz resource base across three projects near Kalgoorlie comes across as a sensible combining of juniors.

Bulking up means that access to toll treatment/ore purchase agreements to convert the gold in to cash will be all that much easier to achieve, particularly as access to third-party mills in the Kalgoorlie region is a bit tight at the moment.

There is no near-term production on the horizon for the enlarged FirstAU, which gets to add Javelin’s Eureka and Coogee gold projects to its Riverina East and Gimlet projects.

But investor interest in the combined group is nevertheless stepping up.

That’s because the combination is being seen as a potential Forrestania 2.0.

It is a reference to Forrestania Resources (ASX:FRS).

It too was a junior with a $25m market cap back in May last year when former Mineral Resources (ASX:MIN) operative of 21 years David Geraghty joined as a non-executive director.

A metallurgical engineer who also worked with Rio Tinto back in the day evaluating ore bodies, Geraghty became chairman in July last year and subsequently launched Forrestania on its processing hub strategy in the Southern Cross and Forrestania regions.

It has basically being acquiring anything not nailed down in those regions with a view to pushing ore through the two mills it has acquired – Edna May in the Southern Cross region and Lake Johnston in the Forrestania region.

Cutting to the chase, the market cap of Forrestania has since grown to $800m.

The FirstAU/Javelin combination is being seen as the first step towards a Geraghty-inspired consolidation plan for the Kalgoorlie region. It is notable that Geraghty and associated interests increased his personal stake in Javelin from 7.58% to 9.65% after the FirstAU bid announcement.

And FirstAU chairman Daniel Raihini is a non-executive director of Forrestania where Geraghty has also attracted the backing of Kerry Stokes and the Roberts Family.

A FirstAU enlarged by the takeover of Javelin is not going to be a Forrestania 2.0 of the Kalgoorlie and the broader Eastern goldfields based on the current combined resource base. But build out the resource base to a million ounces or so and throw in a mill/mill access, and it would be well on its way.

Latitude 66 (ASX:LAT):

There’s no need to travel far in the ASX junior gold space to find a currently chronically undervalued stock.

Having said that, latitude 66 does mark the Arctic Circle, which is as far away from the Aussie mining market as is possible.

All that probably explains why the company Latitude 66 (ASX:LAT) currently has what looks to be a seriously underdone market cap of $25 million (13.5c a share).

For a long time its main go has been its KSB gold-cobalt project in northern Finland which comes with a 7.3Mt resource grading 2.7g/t gold for 650,000oz of gold and in the European context, a strategically interesting 5,840t of cobalt.

A scoping study earlier this month arrived at a base case post-tax NPV of AS$674m and a post-tax IRR of 85% at an assumed gold price of US$3,500/oz.

Plug in $US4,500/oz gold and the NPV becomes A$1.04 billion and the IRR 122%.

Capex is low for the annual production of 65,000oz of gold and 475t of cobalt at $US130m which at spot prices, could be paid back in all of 8 months.

The project is being moved in to the preliminary feasibility study stage, with a likely completion date in mid-2027.

That’s when the various funding sources for critical minerals – thanks to the cobalt production representing 25% of the European market – will be tapped to push KSB towards production.

So it can be said with great confidence that the Aussie market is seriously undervaluing the company on KSB alone.

But Latitude 66 added to its sales pitch late last year by picking up an 80% interest in an advanced gold project in the Laverton region of WA.

And in late August it announced it had grown the resource across the Tin Dog and Red Dog deposits to 339,000oz at 1g/t gold. The project sits with 100km of five third-party treatment plants which makes toll treatment/ore purchase agreements a real likelihood.

Again, the Laverton project more than covers the company’s market cap.

Weighting the Laverton project for an 80% interest, Latitude has a combined gold resource base of 918,000ozs across Finland and WA, all inside a $25m market cap. It won’t last.