If you’re looking to capitalize on the rising gold prices, Bellevue Gold Ltd (ASX: BGL) might be an appealing option to consider. According to analysts at Goldman Sachs, the ASX 200-listed gold mining company is still undervalued despite its recent strong performance. Bellevue Gold has been showing promising results, including an operating profit that exceeded expectations, and its future growth plans appear to be on track. With an ambitious production forecast and expansion strategy, the company seems poised for potential long-term gains. However, like any investment, there are risks, particularly in the form of capital expenditure and hedging strategies. This article explores why Bellevue Gold Ltd might be worth your consideration and examines the potential upside, risks, and expert opinions surrounding the stock.
Positive Half-Year Results: Bellevue Gold reported an operating profit higher than expected, with underlying NPAT (Net Profit After Tax) of A$12 million, which was in-line with Goldman Sachs’ estimates. The company’s EBITDA of ~A$90 million was better than anticipated due to lower operating costs.
Production Guidance: The company has reaffirmed its FY25 production guidance, which is expected to be between 150,000 to 165,000 ounces of gold. Goldman Sachs’ forecast is near the lower end, at around 152,000 ounces. The All-In Sustaining Cost (AISC) guidance is expected to range from A$1,900 to A$2,100 per ounce.
Expansion and Future Growth: Bellevue Gold aims for an accelerated growth plan, targeting 250,000 ounces of gold production annually by FY28. This plan includes expanding its processing capacity to 1.6 million tonnes per annum (Mtpa) and reducing its AISC to A$1,500 to A$1,600 per ounce.
Target Price and Upside Potential: Goldman Sachs has reaffirmed its “buy” rating and set a price target of $1.50 for Bellevue Gold shares, which represents a 27% upside based on the current share price of $1.18. Goldman Sachs believes the company is trading at a discount compared to its peers in the gold industry.
Key Risks
Capital Expenditure: The company’s free cash flow (FCF) is temporarily impacted by increased capital expenditure for expansion, although Goldman Sachs expects these to improve significantly by FY26. Additionally, there are hedged gold sales at higher prices, which could limit short-term growth.
Conclusion
Investors looking to gain exposure to the gold sector may find Bellevue Gold Ltd an attractive option, especially if they believe in the long-term potential of gold prices and the company’s expansion plans. However, the stock is still under a heavy capital expenditure phase, which could limit short-term cash flow generation. It’s important to consider whether the projected upside is worth the short-term risks.
Before investing, it’s also worth considering that other experts, such as Motley Fool’s Scott Phillips, have different stock picks and believe there are potentially better opportunities for investors right now.
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