Bellevue’s timing is absolute gold with production and cashflow rising in tandem with the bullion price

The company is on the cusp of declaring commercial production at the Bellevue gold mine near Leinster in Western Australia just as the gold price hit a record of more than A$3500 an ounce this week.

“It’s a fantastic time to deliver a fantastic project,” Bellevue managing director Darren Stralow told the Resources Rising Stars Gather Round Conference in Adelaide yesterday.

Bellevue poured first gold in October 2023 and has been ramping up production since then, culminating in 13,364 ounces produced in February, 28% up month-on-month, at a head grade of 5.2 grams per tonne.

“As the grade has come up, so have the ounces produced so we’re looking forward to that trend continuing,” Stralow said.

The mill achieved or exceeded nameplate capacity of 1 million tonnes per annum for the third month running.

Bellevue has maintained production guidance of 75,000-85,000oz for the June 2024 half and will set cost guidance once commercial production is declared.

According to the company, achieving that guidance would generate positive free cashflow.

When Bellevue made that announcement on March 12, the gold price was sitting at A$3250 an ounce.

At more than A$3500/oz today, that positive free cashflow should be growing by the day.

Canaccord Genuity analyst Tim McCormack forecasts 37,000oz of production in the March quarter, noting “this may prove to be conservative given combined January/February production of 24,000oz”.

He maintained his June quarter forecast of 50,000oz and sees June 2024 free cashflow of A$76 million.

That cashflow figure is based on Canaccord’s FY24 gold price assumption of US$2001/oz, below the current price of just below US$2300/oz.

McCormack has lifted his FY25 production forecast to 200,000oz from 188,000oz and forecasts FY25 free cashflow of A$306 million for a yield of 14%.

Again, that uses a gold price assumption of US$2134/oz, still considerably below today’s spot price.

“The journey from here is about growth from a resource, reserve and production standpoint,” Stralow said.

“We’re setting ourselves up well and FY25 is going to be a strong one.”

Grade is king

Two weeks ago, Bellevue reported the discovery of a high-grade shoot at the 1.4 million ounce Deacon orebody.

High-grade results included 10.8m at 66.8g/t gold; 14m at 49g/t; 8.9m at 71.1g/t and 0.5m at 374g/t.

The results are higher grade than the existing resource and can be mined in the near term.

The new shoot replicates the high-grade shoots mined at Bellevue in the 1990s, where 800,000oz of gold was mined at a grade of around 13g/t.

To date, the shoot has been defined over 45m of strike and 90m of plunge and averages 4m true width at 52g/t gold (uncut) and remains open down-plunge.

“Simplistically, and not accounting for mining dilution, the shoot could contain 70,000oz, most of which would sit outside the reserve-based mine plan,” McCormack said.

Bellevue has also identified the potential for six similar structures – “potentially seven” – and has sent a drill rig to test the targets.

“There’s lots of potential for upside as we move through there,” Stralow said.

Bellevue also sees the potential for a Deacon extension or repeat to the south, which is a high priority target.

The 15km of underground development completed to date will allow the company to drill the target from underground.

“All of this hasn’t been tested because we’ve been busy building a mine,” Stralow said.

Catalysts still looming

Since the start of the year, Bellevue has increasingly been the target of short-sellers, who are likely betting against the company’s ramp-up guidance.

According to shortman.com.au, the short position in Bellevue reached a high of 6.37%, the day before the company reported the new Deacon drilling results.

Bellevue shares reached a record high of just under A$2 a day later.

Since then, it’s dropped to around 4.3%, making it the 30^th most shorted stock on the ASX.

The stock is up 14.5% so far this year and is likely to be a prime candidate to be added to the VanEck Gold Miners ETF, or the GDX.

The GDX is the largest gold ETF in the world. The criteria for inclusion is a listing on a recognised exchange, a market capitalisation of more than US$750 million, average daily volume of at least 50,000 shares and average daily value of more than US$1 million.

Bellevue ticks the boxes on all fronts.

Stralow remains bullish on gold.

“It’s had a good run but the narrative around the gold price is that the Federal Reserve is going to cut rates – that hasn’t even happened yet,” he said.

“2024 and 205 are set up really well for gold.”