Company Overview: Bellevue Gold Limited, formerly Draig Resources Limited, is an Australia-based gold exploration company. The Company’s principal project is the Bellevue Gold Project, which is located approximately 157 kilometers north west of Laverton in Western Australia. The Bellevue Gold Project covers an area of approximately 27 square kilometers over three granted mining leases and one exploration license. The Company also holds interests in the Tribune Lode high grade discovery and the South Yandal Gold project.
 

BGL Details
 
Deacon Lode Discovery Expected to Drive the Company’s Future Earnings: Bellevue Gold Limited (ASX: BGL) operates Bellevue gold project, which is located in the northern part of the Norseman-Wiluna Greenstone belt in the Yilgarn Craton, Western Australia. This project covers around 1,930 square kilometers of land area and is around 40 kilometers north by sealed highway from the regional centre of Leinster. The company’s total exploration tenement package including applications covers in excess of 3,600 square kilometers.

The company has a unique opportunity to unleash the full potential of one of Australia’s high-grade gold mines, and the current financial year seems to bring prosperity in terms of its finances. The latest results from the Deacon lode discovery, located in the footwall of the historic Bellevue Mine, highlights high-grade gold mineralisation. The exploration activities at Bellevue is expected to maintain growth momentum with eight diamond drill rigs currently on site. Drilling at these sites is focused on targeting new areas of strike extension that is expected to grow the global Bellevue Resource in 2020.


Bellevue Gold Project Performance (Source: Company Reports)

December’19 Quarter Key Highlights: The company appointed Mr Craig Jones as Chief Operating Officer (COO) of the company. Mr Jones has more than 26 years of experience in underground gold mining in gold and additional commodities. He has spent more than seven years with Northern Star Resources (ASX: NST) and led both the Paulsen’s and Plutonic Gold Mines as the General Manager contributing to the growth of the company.

Its 12-month rolling average Lost Time Injury Frequency Rate (LTIFR) as on December 31, 2019, was reported at ‘zero’, with no reportable incidents recorded during the quarter.

During the period, the company started early site works which included dewatering and re-establishment of access to the historic underground Bellevue mine.

Under exploration, a total of 29-kilometer of the 80-kilometer diamond core drilling was completed on infill drilling to convert to the higher indicated category as well as step-out drilling to grow the current global inferred resource. At Tribune lode, the infill drilling results included numerous high-grade golds, i.e., 9.6 meters @ 14.1 g/t gold from 107.9 meters in DRDD257; 3.0 meters @ 33.0 g/t gold from 162.0 meters in DRDD247; and 0.6 meters @ 273.5 g/t gold from 155.0 meters in DRDD220. At Viago lode, higher resource confidence level is expected by mid-2020 with results of 0.7 meters @ 74.8 g/t gold from 590.4 m in DRDD227; 5.0 meters @ 11.1 g/t gold from 606.0 meters in DRDD222; and 3.0 meters @ 19.8 g/t gold from 580.5 meters in DRDD233.  At Deacon lode, drilling confirmed high-grade mineralization with results of 2.3 meters @ 39.0 g/t from 819 meters in DRDD273; 3.0 meters @ 10.4 g/t from 587.5 meters in DRDD295; and 3.5 meters @ 12.0 g/t from 571 meters in DRDD313. At Bellevue lode, high-grade drill results confirmed extensions of the historic Bellevue underground mine Lode with results involving 3.5 meters @ 11.9 g/t from 99.4 meters in DRDD287; 2.8 meters @ 46.9 g/t from 175 meters in DRDD242; and 3.0 meters @ 19.8 g/t from 580.5 meters in DRDD233.

Net cash outflow from operating activities for the period was reported at $11.678 million. Net cash outflow from investing activities for the period was reported at $0.173 million. Net cash outflow from financing activities for the period was reported at $2,000. At the end of the quarter, the company held a cash position of $20.7 million, as compared to $32.8 million in the previous quarter.


December’19 Quarter Operating Cash Flow Statement (Source: Company Reports)

FY19 Key Highlights for the period ended June 30, 2019: Group’s cash position at the end of the period was reported at $19.8 million, and in July 2019, the company raised a further $18.5 million (before costs). Group’s consolidated net loss for the period was reported at $7.146 million as compared to a loss of $5.90 million in the previous year. The loss in the income statement included share-based payment expense of $3.6 million as compared to $4.2 million in the previous year. The expense under accounting and audit, consultants and contractors, corporate costs and employees’ benefits increased by high margins.

On the balance sheet front, group’s net assets for the period increased to $50.851 million as compared to $19.848 million in the previous year. Its trade and other receivables for the period increased from $481,209 in FY18 to $1,167,423 in FY19. The trade and other payables for the period increased from $2,392,848 in FY18 to $5,547,496 in FY19.


FY19 Income Statement (Source: Company Reports)

Top 10 Shareholders: The top 10 shareholders have been highlighted in the table, which together form around 43.43% of the total shareholding. 1832 Asset Management L.P. and Kitara Investments Pty. Ltd. hold maximum interests in the company at 12.35% and 5.22%, respectively.


Top 10 Shareholders (Source: Thomson Reuters)

A Quick Look at Key Metrics: Its current ratio for FY19 stood at 3.71x, better than the industry median of 1.81x, implying a decent liquidity position for the company. Its Debt to Equity ratio and % long-term debt to total capital for FY19 stood at zero levels, implying that the company utilizes its funds to fuel its operations.


Key Metrics (Source: Thomson Reuters)

Key Risks: The company is susceptible to certain risks such as credit risk, liquidity risk, and market risk, which includes currency risk, interest rate risk, etc.

What to expect: As per the release, the company has commenced economic studies on the Bellevue Gold Project. With the starting of dewatering of the Bellevue underground mine, the company is expected to get benefitted by the +28k meters of existing underground mine development; lower cost drilling for M&I category resources; lower cost and more rapid drilling of Deacon and Mavis Lode discoveries; access for drilling resource extensions to the south under a lake; and ready development for future mining options.

The company is expected to identify possible early cash positive production scenarios from resources adjacent to the Bellevue decline and mineralisation beneath existing open pits. Moreover, the regional exploration on the 20-kilometer Bellevue mineralised corridor targeted parallel and new lodes in close proximity to a future Bellevue processing plant.

Gold Outlook: At the time of writing, gold spot (XAU/USD) price traded at US$1566.95 (15:31 (UTC+11)). On technical analysis, the gold spot is trading above 20 EMA, 50 EMA and 200 EMA on weekly timeframe chart, indicating bullish trend. It recently broke an important resistance level of US$1558.08, on the verge of war-like situation between the US and Iran. If the gold price sustains this level, then a fresh new upside rally can be expected in the coming weeks.


Gold Spot (XAU/USD) (Source: Thomson Reuters)


Key Valuation Metrics (Source: Thomson Reuters)

Technical Analysis:

Monthly Chart:

(Source: Thomson Reuters)

Weekly Chart:

(Source: Thomson Reuters)

On monthly chart, the stock is trading above 20 EMA and 50 EMA, indicating bullish trend, underpinned by weekly chart where the stock is trading above 200 EMA and crossed 50 EMA from below. The stock is expected to test the strong Fibonacci extension level (38.2%) at $0.665, breaking of which may lead to the next level at Fibonacci extension level (50%) at $0.737.

Stock Recommendation: The company’s stock posted a positive return of 5% for one-year, whereas, in the last six months, it posted a negative return of 16.67%. Currently, the stock is trading below the average range of 52-week high and low levels at $0.735 - $0.430. Exploration discovery at Deacon lode along with developments at tribune lode and Bellevue lode, are expected to help the company in improving its financial performances. Considering the company’s December quarter results, cash balance, exploration outcomes, gold outlook, and current trading levels, we recommend a “Buy” rating on the stock at the current price of $0.530, up 0.952% on January 21, 2020.
 

Daily Price Chart (Source: Thomson Reuters)

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