Company Overview: Beadell Resources Limited is a gold producer. The Company's principal activities include the mining and processing activities at its primary asset Tucano Gold Mine (Tucano) located in Northern Brazil, and exploration for and evaluation of mineral resources in Brazil. The Company operates through two segments: Australian exploration and Brazilian exploration and operations. Tucano is located in the Amapa state, in northern Brazil. Tucano covers approximately 2,500 square kilometers of exploration licenses and a mining concession. The Tartaruga gold project is located in Brazil, 120 kilometers northeast of the Tucano Gold Mine covering over 360 square kilometers of the Tartarugalzinho greenstone Belt. The project contains inferred Resources of over 6.5 million tons at over 1.63 grams per ton gold for approximately 337,000 ounces. The Company also has a portfolio of gold exploration tenements throughout Brazil.
 
 

BDR Details

Beadell Resources Ltd (ASX: BDR) has been gaining slight momentum with the latest resource and reserve update while the group tracks well on its strategy for a turnaround at Tucano. The group appears to be trading at a discount against its forward plans and is gearing for steady returns and realisation of the exploration upside.

Interim Ore Reserve and Mineral Resource update: Beadell recently reported an interim updated resource and reserve that included 58 holes for 12,073 meters of RC while diamond exploration and resource definition drilling was finished in the first half of 2017 mostly in the Tap AB complex. The company had predominantly targeted the drilling in the deeper sections on the Carbonate and AB Trough Lodes, leading to the discovery of a new lode at Neo East. After June 30, 2017, the company’s ongoing drilling had continued to witness success locating at a new lode at Urso discovered in between the Tap AB and Tap C deposits. The exploration drilling would enhance over the coming months with a second RC rig in operation and recent refurbishment of the existing RC rig completed. Further, the drilling is ongoing at Mutum and Torres and results are expected over the New Year period. BDR in an interim Ore Reserve and Mineral Resource update as at June 2017, has announced that the Open Pit Reserve grade got increased by 5% to 1.77 g/t gold and total Ore Reserve grade has increased by 5% to 1.83 g/t gold. The total Ore Reserves have fallen 3% after allowing for production to end of June 2017 and are 25.1 million tonnes @ 1.83 g/t gold for 1.47 million ounces. Urucum Open Pit Ore Reserves have remained unchanged with 10.25 million tonnes @ 1.73 g/t gold for 568,000 ounces. Urucum would be a major mill ore source in the second half of 2018 after finishing the plant upgrade. Moreover, BDR’s Measured, Indicated and Inferred Mineral Resources as at June 2017 were 63.5 million tonnes @ 1.82 g/t gold for 3.73 million ounces. There is thus a decrease of 3% to 135,000 ounces after allowing for the first half of 2017 depletion of 59,000 ounces. The total Open Pit Resources are 35.4 million tonnes @ 1.61 g/t gold for 1,836,000 ounces and the total Stockpile Resources are 5.2 million tonnes @ 0.59 g/t gold for 99,000 ounces. A total of 20,000 ounces from the stockpile were milled in the first half of 2017. Further, the total Underground Resources at Urucum and Tap AB are 16.4 million tonnes @ 2.75 g/t gold for 1,455,000 ounces, which is an increase of 5%. Additionally, the total Tucano Ore Reserves as at June 2017 were 25.1 million tonnes @ 1.83 g/t gold for 1.47 million ounces compared to 28.2 million tonnes @ 1.74 g/t gold for 1.58 million ounces as at December 2016, indicating a fall owing to first half of 2017 depletion. Overall, the interim June 2017 updated reserve and resource was completed to coincide with the company’s year-end budgeting and life of mine scheduling.
 

Ore Reserve as at June 30, 2017 (Source: Company Reports)
 
Operations Update as of the September quarter and guidance: The gold production enhanced 21% to 28,764 ounces for the September quarter over the June 2017 quarter figure. The production for the December 2017 quarter is forecasted to be over 60,000 ounces as high-grade material from the Tap AB complex is processed. The planned head grade for the December 2017 quarter is 2.2 g/t gold. Moreover, the cash costs for the September 2017 quarter were US$1,176 per ounce and All-in Sustaining Costs (AISC) for the September 2017 quarter were US$1,264 per ounce, which is a 19% decrease from June 2017 quarter. The improved mine productivity and cost saving initiatives brought about an improvement in AISC per ounce from the June 2017 quarter. BDR expects further reductions in AISC per ounce in the December 2017 quarter as higher-grade ores are mined as planned and gold sales are significantly increasing. Additionally, in 2017, annual gold production is expected to fall at the lower end of annual guidance (140,000 ounces - 150,000 ounces). Due to the high costs in the first half of 2017, mainly due to the negative impacts of a stronger than forecast Brazilian Real during the year, the full year AISC per ounce for CY2017 is now expected to be in the US$1,000 to US$1,100 per ounce range. On the other hand, the gold sales for the September 2017 quarter had totaled 28,298 ounces at an average cash price received of US$1,287 per ounce. The cash and bullion as at September 2017 was A$18.1 million (as at June 2017 was A$38.3 million).
 
Tucano entered the Next Phase: Tucano mine was indicated to finish the Phase 2 while the group is entering Phase 3 in 2018 wherein the group is planning for a CIL plant upgrade (underway and fully financed). There is a major sulphide Plant upgrade underway. The plant upgrades include a new ball mill, pre-leach thickener, additional CIL tank, and oxygen plant; and this will allow mine to be optimized for the first time. They are expecting a major recovery from 88% to 93%. Meanwhile, the group sees a major underexplored Greenstone Belt having a Mineral endowment exceeding 60 million ounces. The mine has an under-drilled 8 km mine corridor promising a solid potential to enhance resources. The property-wide drilling depth averages only 100 meters with a total of 2,500 km² under license –100% owned.
 

Tucano Gold Plant (Source: Company Reports)
 
Outlook: As grade increases with depth in the Tap AB complex, the production is expected to be significantly higher in the next nine months. The consistency in head grade and production should result from the mine being fully optimized after the completion of the plant upgrade in mid-2018. BDR expects to see increasing free cash flow going forward, and this coupled with continuing exploration success underpins the long-term creation of value for shareholders. Additionally, the company is focused to build a sustainable long-term business at Tucano.
 
Stock Performance: The shares of BDR have fallen 23.3% in the last three months as on December 19, 2017 and lost over 41.1% in this year to date, owing to volatile gold prices. On the other hand, the group is a 100% owner of Tucano Gold Mine which is a multi-million -ounce gold resource having a district scale exploration potential. The group has an open pit reserves of 20.9 Mt @ 1.69 g/t for 1.1 Moz with a seven-year open pit mine life. They are planning a production increase of more than 170,000 ounces in the next 12 months. The group got an experienced board and management team as they are aiming to be an intermediate producer. They have a solid exploration potential in greenstone belt. BDR is still an undervalued player as compared to their peers. The group’s Urucum would be a major mill ore source in the second half of 2018 after completion of the plant upgrade. Overall, the interim updated reserve and resource was completed to coincide with the company’s year-end budgeting and life of mine scheduling. We believe investors need to leverage the correction in the stock as an entry opportunity given the solid potential of BDR. We give a “Buy” recommendation on the stock at the current price of  $0.165


BDR Daily Chart (Source: Thomson Reuters)

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