Bellevue Gold Ltd
BGL Details
Positive Response for Debt Funding Proposal: Bellevue Gold Ltd (ASX: BGL) is engaged in the exploration of gold and is also developing the Bellevue Gold Project. The company has updated that it has received debt funding proposals for the Bellevue Gold Project from a dozen of domestic and offshore financial firms. The debt offered is in the range of $170 million to $289 million. It had a cash position of ~$94 million as of 30 June 2021.
March 2021 Quarterly Update:
- Post the completion of stage one feasibility study, subsequent global resource increases to 2.7Moz at 9.9g/t, comprising indicated resources of 1.2Moz at 11g/t.
- It expects maiden probable ore reserve of 2.7Mt at 8g/t gold for 690,000oz from the feasibility study.
- During the quarter, it reported a cash outflow of $1.13 million from operations.
Trend in Cash & Short-Term Investments (Source: Analysis by Kalkine Group)
Key Risks: The company’s line of business makes it prone to prudent regulatory purview, which can impact the forecast estimations of profitability and performance.
Outlook: After the successful completion of stage one feasibility analysis, the Bellevue Gold Project is forecasted to be one of the profitable operations in Australia based, and is expected to deliver EBITDA margin of 63%. Further drilling has been planned by the company to increase and upgrade resources at Marceline, Deacon North in Stage Two Feasibility Study.
Valuation Methodology: P/B 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.
Stock Recommendation: As per a recent update, the company is set for an expanded feasibility study with the increase in resources to 3.0Moz at 9.9g/t. As per ASX, the stock of BGL is trading below its average 52-weeks’ levels of $0.647-$1.490. The stock of BGL gave a positive return of ~2.15% in the past three months and a negative return of ~7.76% in the past six months. It has a support level of ~$0.76 and resistance level of ~$1.06. We have valued the stock using a P/B multiple-based illustrative relative valuation and have arrived at a target price of high single-digit upside (in % terms). We believe that the company can trade at some premium to its peer average P/B (NTM trading multiple), considering the positive outlook for the Bellevue Gold Project and strong balance sheet. For this purpose, we have taken peers such as Dacian Gold Ltd (ASX: DCN), Gold Road Resources Ltd (ASX: GOR), Regis Resources Ltd (ASX: RRL), to name a few. Considering the expected upside in valuation and current trading levels, decent cash position, positive response for its funding needs and optimistic outlook for the Bellevue Gold Project, we recommend a ‘Hold’ rating on the stock at the current market price of $0.950, up by ~0.529% as on 28 July 2021.
BGL Daily Technical Chart, Data Source: REFINITIV
Magnum Mining and Exploration Limited
MGU Details
Update on the Magnus Project: Magnum Mining and Exploration Limited (ASX: MGU) is engaged in mineral exploration and evaluation. As per a recent announcement, the management has provided an update on the Magnus project.
- It has confirmed that phase 1 remains on track to start production of Direction Shipping Ore (DSO) 62% Fe in Q4FY21.
- For its water requirements, the company has contracted Confluence Water Resources LLC to drill 3 wells in September 2021 for up to 600 US Gallons per minute.
- GR Engineering has finalised the ore processing plant design and will be setup in the mine area on completion of Reclamation Bonding.
Quarterly Update for Period Ending 31 March 2021
- The company completed the settlement of the purchase of Buena Vista on 9 February 2021.
- The transaction was financed through a combination of Magnum shares and cash. $5.5 million of the consideration has been linked to key project milestones.
- The project provides opportunities to existing rail, power and port facilities and for the production of green steel.
Trend in Cash & Short-Term Investments (Source: Analysis by Kalkine Group)
Key Risks: The company is faced with project execution risk, which could impact the revenue-generating capabilities of the company.
Outlook: The company has signed an MOU with Port of Stockton for its accessibility requirements. It is also negotiating with Savage Services Corp, for service agreement for trucking & rail haulage. An MOU is expected to be signed in early August in this regard.
Stock Recommendation: The company has recently updated that its director Matthew Latimore undertook the full entitlement by investing $250,000 and subscribing to 1,666,666 of the company shares. As per ASX, the stock of MGU is trading above its average 52-weeks’ levels of $0.032-$0.210. The stock of MGU gave a positive return of ~368.75% in the past one year and a positive return of ~188.46% in the past nine months. It has a support level of ~$0.14 and resistance level of ~$0.1850. Considering the current trading levels, recent rally in the stock price, subdued profitability, decrease in current ratio and the key risks associated with the business, we recommend an ‘Expensive’ rating on the stock at the current market price of $0.150, as on 28 July 2021.
Technical Overview:
MGU's prices witnessed a downside movement in the past couple of sessions and the movement is backed by a rise in the volumes, thereby higher market participation supporting a downside direction. Currently, the prices are trading around a major support level of AUD 0.140 and a breakout of the same may extend selling in the stock. On the daily chart, the RSI (14-period) is trading in negative territory at ~42.00 levels. Prices are sustaining below the trend following indicators 21-period SMA and 50-Period SMA, further supporting a negative stance. Now an immediate resistance level for the stock appears at AUD 0.185 level.
MGU Daily Technical Chart, Data Source: REFINITIV
Note: The purple color line in the chart depicts RSI (14-period) while the green color histograms at the bottom of the chart showing daily volumes. The sky-blue and red color lines showing 50-period SMA and 21-period SMA respectively.
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.
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