Bellevue Gold price target raised by Canaccord Genuity as focus shifts to resource growth

Bellevue Gold Ltd (ASX:BGL) has received a price target upgrade from Canaccord Genuity who is “extremely enthusiastic about Bellevue’s strategy of mine development (FID expected mid-2021,) paralleled by a $35 million exploration and resource definition budget over the next 12 months.” Canaccord has increased its price target from $1.45 to $1.55 per Bellevue share and has retained its SPEC BUY rating. The following is an extract from Canaccord’s research update: Dual track strategy delivers Indicated Resource grows to +1Moz at 11.4g/t. Infill drilling at Deacon and Bellevue North (mostly the Armand lode) has underpinned an ~20% increase to the Indicated Resource, which now stands at 2.8Mt at 11.4g/t for 1.04Moz. The updated Indicated Resource will now form the basis of an Economic Study on the project, which is expected in the MarQ'21. The updated total Resource also increased modestly to 7.5Mt at 10g/t for 2.4Moz, with the inclusion of the recently discovered Armand lode of 442kt at 13.9g/t for 185koz, of which 100koz at 15.4g/t is in the Indicated category. New drill results from Armand have been impressive, and include 8.3m at 32g/t, 6.5m at 23.4g/t, 5m at 15.4g/t and 1.9m at 29.7g/t, making them some of the best results reported since the discovery of the Viago lode ~18 months ago. Armand remains open down dip and up plunge with further drilling aimed at increasing the size and confidence level of the existing Resource. BGL has now completed 292,000m of diamond drilling at the project, with most of the 2020 focus on infilling selected Inferred areas (80x80m) to 40x40m, 40x20m or tighter drill spacings. Exploration focus to pivot from infill to Resource growth. While infill drilling will be ongoing, the focus for BGL’s exploration team will now shift back to growing the total Resource base. Flagged areas that will be targeted as part of the next program include Viago North, Tribune North, Vlad, Deacon North, Armand, and the newly discovered Maceline lode. The new Maceline discovery was initially identified as a 550m EM conductor north of the Deacon lode, and the latest holes have confirmed high grade mineralisation. Best results include 2.6m at 14.7g/t, 25.9m at 4.3g/t, 1.4m at 63.2g/t, 2.6m at 14.7g/t and 3.6m at 10.2g/t. We highlight that all the key targets in the next program remain open along strike and we think offer considerable scope for growth in the 2021. Further, with two new discoveries recently being made while essentially focusing on infill, we see our ~3Moz total Resource target in 2021 as increasingly conservative. The company currently has four drill rigs on site, with a fifth rig expected shortly. BGL is also set to begin drilling from underground this Q (CG est. late December), capitalising on the lower costs and increased productivity compared with surface drilling. We expect BGL to ultimately have up to three underground rigs operating in 2021, which should improve targeting efficiency and expedite Resource growth, in our view. Economic Study due in the MarQ'20. With the updated Indicated Resource set to form the basis of the Economic Study, we expect to see outcomes released in the MarQ'20. BGL has long flagged that "consistent high grade mineralisation will be targeted in the early mine life at the project", which is a comment that resonates strongly with us. In our view, it is sensible with respect to improving the project payback and a luxury afforded to BGL by virtue of its extensive underground infrastructure network (decline currently being refurbished). In the Resource update today, we also note that the addition of Armand creates three independent mining areas (Armand, Deacon and Viago), which have a combined Indicated Resource of 1.1Mt at 15.2 g/t gold for 560koz. Depending on the ultimate development strategy, we see good potential for higher production in the initial years of the mine life due to the location of the high grade Indicated Resources relative to existing underground infrastructure. We currently model modestly higher production for the first two years before a flat grade profile for the project of 8g/t over an 8-year mine life, which supports an average production profile of ~150kozpa at an AISC of A$1,000/oz. Valuation and recommendation. We remain extremely enthusiastic about BGL's strategy of mine development (FID expected mid-2021,) paralleled by a A$35m exploration and Resource definition budget over the next 12 months. Our price target has increased modestly to A$1.55/sh (previously A$1.45/sh) on incorporating Armand/ Maceline in our nominal exploration value, and we maintain a SPEC BUY rating.