Bellevue poised to re-rate as it joins an exclusive club of top-shelf gold mines

• Eyes on Ioneer amid expectations of an imminent selldown at its Nevada lithium-boron project
• Liontown spinout Minerals 260 to give maiden investor webinar today 
•  Zenith awaits assays from JV partner Rumble and its Earaheedy zinc-lead zinc discovery in WA.

It is an embarrassment for the gold sector that companies with Australian operations have been seriously outperformed this year by the ASX-listed west African gold producers.

Good on the likes of Perseus (ASX: PRU) and West African (ASX: WAF) for showing up their Aussie counterparts too.

Their outperformance is their reward for their low-cost production, something that local miners are struggling with.

Once the locals were cocky as with their $A1,100 an ounce cost gold. Now they seem happy with a $A1,500-$A1,800/oz cost performance.

Clearly, the market isn’t, given investors have been trading out of high-cost and Tier 1 production in Australia for less than Tier 1 but low-cost production in west Africa.

It’s not panic stations yet, with the Aussie gold price at $2,458/oz. But any further compression of margins from rising costs, a falling gold price, and growing CAPEX commitments, and there will be a rush for the exits.

It is against that backdrop that Bellevue (ASX: BGL) has delivered its much-anticipated Stage Two feasibility study for the development of its namesake mine, with the first production targeted for the June quarter of 2023.

The study follows on from the Stage One study released in February and is a major upgrade in every way.

Stage Two brings in the benefits of the company’s dual-focus strategy of continuing to explore – it has been adding 70,000oz a month to the resource base – while pushing ahead with development work, now more than fully funded due to a $200 million loan from Macquarie, a $106 million underwritten equity raising at 85 cents and a $25 million share purchase plan at the same price.

Forecast production rises 25% to 200,000oz for the first five years (life of mine 183,000ozs per annum) for a minimal increase in capital cost and importantly, given what was said above, AISC costs are reduced to A$922/oz for the first five years and $A1,014/oz for LOM, currently put at 8.1 years but with another 1.5Moz in resources available for conversion and what ongoing exploration delivers.

There are only a couple of gold mines in the Australian industry (ignoring the gold-copper producers) capable of delivering sub-$A1,000/oz-cost gold.

Using a $A2,400 gold price, the Stage Two study forecast average LOM EBITDA of about $300m. That’s interesting stuff when the industry valuation metric of 4-10 times EBITDA is applied to a company that before going into a trading halt ahead of the fundraising was valued at $811 million, or 94.5c a share.

It means a re-rating is in the works as the first production draws closer.

“This is not smoke and mirrors, there is just lots more gold,” head of corporate development Luke Gleeson said in an analyst briefing.

Bellevue managing director Steve Parsons took particular delight in the briefing to point out that the mine development is on track to join an exclusive club of operations producing from 5gpt dirt at an annual rate of more than 180,000oz annually. There are only seven others in the world, in Tier 1 locations, that is.

Ioneer (ASX: INR)

While the lithium stocks have all been swept higher this year, the push upwards has been far from even. Some have soared, others have edged higher.

Ioneer is an example of the latter. It is the developer of the Rhyolite Ridge lithium-boron project in southern Nevada, about halfway between Reno and Las Vegas.

According to a definitive feasibility study in April last year, revenue from the boron could establish the project as the lowest-cost producer of battery-ready lithium carbonate/hydroxide in the world at $US2,510/t.

Production of 22,000t a year from a $US785m development gives the project Tier 1 credentials in the "boomingest" of the boom commodities.

While Ioneer at its current price of 54c has a none-too-shabby market cap of a little more than $A1 billion, the point that it has been a laggard in the share price stakes when compared to the stellar gains of its better known ASX peers remains.

But that could be about to change.

Ioneer has long let it be known that with the help of Goldman Sachs, it was out to secure a “strategic partner” before September 30. And here we are on September 3.

Given what has been going on in the lithium space, it would not surprise if the delivery of a strategic partner will be seen as a game-changing event, or a re-rating event if you prefer.

That is based on the expectation that a strategic partner will deliver the majority of the required equity financing for the project. It is also based on the assumption that the selldown occurs as close as possible to the project’s NPV, put at $US1.26 billion in the BFS.

Bridge Street Capital’s Chris Baker, who called the turnaround in the lithium stocks ahead of the pack, expects a 25% equity selldown at a 50% discount to underlying project NPV which he has higher at $US1.6b on his price decks and project cost inputs.

Assuming a modest equity raise (probably post-permitting in 2022), Baker arrived at a $1.07 a share valuation.

Minerals 260

Talking about stellar share price performance in the lithium space, Liontown (ASX: LTR) has been right up there with the best of them.

The guy who led the team that delivered the Tier 1 Kathleen Valley lithium resource which underpins Liontown’s $1.8 billion market cap, David Richards, now gets his chance for a repeat performance, not in lithium, but in gold-nickel-PGE.

Richards is managing director of Minerals 260, which is being demerged from Liontown so it can pick up the running on the non-lithium assets Richards had assembled during his stint as Liontown MD.

The demerger through an in-specie distribution of shares to Liontown shareholders and a $15-$30 million raising from new shares at 50 cents a share, with Liontown shareholders having priority, will value Minerals 260 at $110 million at the issue price, assuming the full $15 million is raised.

So Minerals 260 is not your average exploration stock. There is a good reason for that. Richards had Liontown take up ground in the Yilgarn’s southwest terrane back in 2018 for the region’s underexplored gold-nickel-PGE potential.

That was well ahead of sister company Chalice (ASX: CHN) – a sister to Liontown/Minerals 260 because Tim Goyder is the biggest shareholder in all three - set the region alight with its Julimar PGE-nickel-copper discovery. Chalice is now a $2.45 billion company on the strength of Julimar.

Minerals 260’s key project Moora is the same geological terrain as Julimar, 95km to the south, and has already delivered promising gold and copper/gold results. It is early stage stuff but there is plenty of interest in what comes next.

Richards is on hand today to flesh out the story on a webinar today (9 am WST). This is worth a listen you would think after his Kathleen Valley success, and what the sister company has achieved down the road at Julimar.

ZENITH MINERALS (ASX: ZNC)

Latest drill results from Rumble’s (ASX: RTR) Earaheedy zinc-lead zinc discovery in WA can’t be too far off now, even with assay lab delays.

It’s the one with Tier 1 potential, with Rumble confident enough to have placed an “exploration target’’ of 100-200 million tonnes grading 3.5%-4.5% zinc-lead on the find.

That’s why Rumble has zoomed off to become a $279m company at a share price of 45c ahead of confirming drill results from the Chinook deposit, and what may come from its testing of some targets to the south-east.

So it is one to watch in the coming weeks. But today’s interest is in Zenith Minerals, which is 25% free carried at Earaheedy up to a bankable feasibility study. At its 21.5 cent share price, Zenith’s market cap is $69 million.

That is bang on the see-through value of its Earaheddy stake, based on Rumble’s market cap. Because it is free-carried to the BFS, it could be argued the see-through value should be higher.

But the bigger issue is that see-through value gives nothing for Zenith’s other assets – gold in WA and copper high-grade copper up in Queensland – and its $7 million in cash.

The cash is allowing Zenith to crank things up in Queensland where it already has 2.6mt open-cut resource grading a nice 1.76% copper along with zinc, gold and silver values.

Get to 10mt at similar grades and it will have a nice project on its hands given the copper price and investor interest in the red metal. To that end, it is now drilling away in a three-rig program near the existing resource (Sulphide City) and at eight new targets.

So the newsflow could be strong. And there’s Earaheddy to come.

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