Bellevue poised for re-rate on stage two feasibility study at WA gold project

Analysts point to scope for inventory growth and reduced costs. Plus, Centaurus set to lift the lid on its value-adding strategy to supply much-needed nickel to lithium battery makers.
21st May 2021
Barry FitzGerald

Gold equities are lighting up again thanks to the metal standing tall with its 5.5% price gain in the past 30 days while all around it – including “new gold” cryptocurrencies – have come under the pump.

A belief that inflation from the COVID economic recovery is not as transitory as a reluctant-to-taper US Federal Reserve believes, has been behind gold’s $US200/oz rise from March lows to $US1868/oz.

Gold equities have been in recovery mode since the gold price turned in March, but still have a long way to go to recover the losses from the highs of last year when gold broke through $US2,000/oz.

Whether gold sees $US2,000/oz again is anyone’s guess. What’s more certain is that gold’s haven-like behaviour has prompted a return of buying support for gold equities.

As is always the case, a company getting out and about to talk about a major re-rating event it has up its sleeve is the best way to take advantage of the sector’s recharged buying support.

That’s just what Bellevue (BGL) managing director Steve Parsons has been doing this week at the Resources Rising Stars lunch series with investors in the eastern states, and before that, on a tour of the company’s namesake project.

The re-rating event is the mid-year release of the Stage Two feasibility study into Bellevue’s development as a high-grade producer, with first production likely in the December quarter next year.

It hasn’t been released, so no numbers just yet. But given it will incorporate another six months of exploration/development drilling results from what was used in the Stage One study released in February, expect significant enhancements.

Ahead of the release of the Stage Two study, Bellevue’s shares have pretty much been marking time at 87c. In a May 14 research note, Macquarie placed a 12-month price target on the stock of $1.20 a share, even though its 2022FY gold price expectation is all of $US1,575/oz.

The note was penned after a visit to the project, with Macquarie saying the highlight was the continued potential for more ounces to be discovered from extensions to known high-grade lodes, or at numerous highly prospective targets that have been generated by the company’s proven exploration method.

“Importantly, new and growing resource areas at Bellevue are near development that has already been costed in the Stage One study. This, in our view, presents a key opportunity for the Stage Two study to deliver both mining inventory growth and a reduced per ounce capital intensity,” Macquarie said.

“We expect this to be highlighted by the inclusion of the recent Marceline resource, and further extensions to the Deacon area, in the Stage Two study.”

Macquarie’s production base case for Bellevue base stands at 1.76Moz over 12.5 years. How much of that upside from the Stage One study’s 1.1Moz over 7.4 years is captured in the Stage Two study by Bellevue will be known soon enough.

What is clear though is that a longer-lived and improved capital intensity project is in the making - as good a re-rating event independent of gold price fluctuations as can be had.


BHP chief executive Mike Henry reminded investors during the week that the behemoth was intent on getting bigger in the “future-facing” metals of nickel and copper through mining innovation, exploration and potential acquisitions.

The two metals are key to the world’s decarbonisation-through-electrification efforts and on BHP’s estimates, the world is set to consume four times as much nickel in the next 30 years as it did in the past 30 years, and twice as much copper.

No one is sure if the mining industry is up to the supply challenge. But it will be if incentive pricing for the required investment is in place. And it is starting to happen, with both nickel and copper now well ahead of their 2020 averages.

Given the supply challenge for nickel comes with a factor of four times, it is today’s interest. Unlike copper which is trading just below last week’s record (nominal) levels, nickel is still in recovery mode from a 20% price dump in early March.

The March price shock was triggered by China’s Tsingshan announcing it would be producing a high-grade nickel matte for the battery market from its nickel pig iron (NPI) operations in Indonesia, with NPI traditionally restricted to the stainless steel market.

Nickel prices responded by falling from a $US8.90/lb high in February to around $US7.20/lb in early March.

But a realisation that the world needs every nickel unit it can get under a factor of four scenario – and doubts about the cost and environmental acceptance of Tsingshan’s nickel matte plans – has seen the price grind back up to $US8.05/lb.

That compares with the March quarter average of $US7.94/lb, and last year’s (calendar) average of $US6.26/lb. So the thematic that higher prices are needed if the supply challenge is to be met remains intact.

That’s all well and good but after being hit hard by nickel’s heavy fall in March, nickel equities have yet to recover in line with the metal’s subsequent price recovery. The good news in that is nickel stocks are better value than they were in March.

Centaurus (CTM) is an example. It got as high as 92c in February but has since drifted back to 72c. It has been on RRS’s eastern states lunch series this week bringing investors up to speed on its plans to become a 20,000tpa (nickel in concentrates) producer from its Jaguar project in Brazil’s Carajas province.

The company delivered what it called a base case scooping study in March that pointed to an initial 10-year operation with all-in sustaining costs at a robust of $US3.37/lb. Impressive enough in itself in a world set to run short of the metal.

But Centaurus also has a potential game changer in the wings – a scoping study into a value-adding opportunity to further process the nickel concentrate using a hydrometallurgical process to produce nickel sulphate for the premium-paying battery market.

The release of the value-add study is not far off and given the likelihood it will confirm a compelling proposition, a more valuable Jaguar will be rolled into a prefeasibility study and on to a bankable study.

Concentrates get sold to smelters for about 75% of the metal content while nickel sulphate can command a premium to LME prices. So an overall 30-40% value uplift could likely be outlined in the value add study.

It’s release could well be the trigger for a reboot for the company’s share price which, like others in the sector, has continued to languish after the hit in March, even if nickel has returned to its best price in years in response to the factor of four imperative.

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