Monsters of Rock: Anxious wait continues for Bellevue Gold production update

Market in the dark as trading halt continues for Bellevue
Gold Road rolls out underground results in wake of Gold Fields M&A stoush
ASX 300 Metals and Mining index up 1.67% this week

Bellevue Gold (ASX:BGL) has kept the market waiting on what is widely expected to be a negative production downgrade, signalling yet more ramp up issues for its gold mine of the same name in the Northern Goldfields.

A voluntary suspension has been issued to extend the pause to as late as next Friday. BGL shares fell from $1.30 at the start of the week to as low as $1.12 on Tuesday before the halt was called at $1.14 a day later.

While gold prices hit a record high, not all equities are raking in the benefits, with a string of guidance issues and an unexpected capital raise last year placing pressure on BGL shares.

The $1.5bn capped miner pulled in $75m in NPAT in FY24 as the roughly $200 million underground mine started to spit out gold bars.

But a $175 million placement and share purchase plan in July at $1.55/sh, intended to restructure its financing with Macquarie so Bellevue could invest in exploration and growth earlier than planned, hurt market confidence.

BGL produced 96,000oz in FY24, originally guided 165-180,000oz in FY25 and wants to grow that to 250,000oz from FY28.

Having traded at $1.83 before the raise, BGL was at $1.14 before called a trading halt on Wednesday to announce a still as yet review of gold production outcomes “which may result in a downward adjustment to its production guidance”.

That’s a ~40% one-year price slide at the same time as the underlying commodity’s value has lifted by almost the same percentage. Ouch.

And it comes after FY25 guidance was already reduced to 150,000-165,000oz, with all-in sustaining cost projections for the full year lifted from $1750-1850/oz to $1900-2100/oz.

Second half guidance had been set at 90,000oz at $1750-1950/oz.

Mining contractor Develop Global (ASX:DVP) has already gotten out ahead of the market, with Bill Beament’s digger and copper developer issuing a release “due to rumours circulating in the investment community that have no basis”.

“Develop’s Mining Services Division is contracted at Bellevue Gold operations till the end of CY2025m” DVP said.

“Bellevue Gold can extend the contract a further 12 months from the end of the period at their sole election. Develop has ~340 highly skilled personnel and 30 major pieces of mobile equipment at the Bellevue operation, both of which are extremely difficult to replace in this environment.”

It also said BGL, led by Beament’s former Northern Star colleague Darren Stralow, is up to date on its payments, and insisted the relationship between the miner and contractor “is very strong in all areas”.

“…co-operation at the operational level is achieving record mine physicals, with March quarter development metres and ore tonnes mined both forecasted to be +20% above the December quarter’s results.”

DVP shares were down 2.05% at 1pm AEDT to $2.85.

Gold Road goes deep

Gold Road Resources’ (ASX:GOR) post-bid defence after rejecting a $3.3bn takeover offer from its larger JV partner Gold Fields has taken another turn, rolling out early results from an underground drill program at the Gruyere gold mine.

The aim is to work out the underground potential underneath the base of the planned Gruyere pit, due to expire in 2032.

Notably, the fact Gold Fields went public with its rejected offer for Gold Road at a time when it had revealed a production downgrade and was working on an underground study rankled GOR and its boss Duncan Gibbs.

Gold Fields manages the JV.

Results from the early stages of the 18-month, 60,000m drill campaign targeting ore zones 700m below the final reserve pit design and infilling an upper 400m section of a conceptual underground resource have been low in grade but wide.

Hits included 119m at 1.1g/t (incl. 33m at 1.57g/t) from 834m and 54m at 1.62g/t (incl. 28m at 1.99g/t) from 480m, included among 13 infill drill holes from the first 9478m returned from the program, targeting to 200m below the final ore reserve pit design.

“These initial results from the drill program, supported by results from existing drillholes, provide further confidence that the ore body extends as expected and that there is good potential for profitable underground mining at Gruyere. The studies and drilling have the potential to prove that gold mining at Gruyere could continue well beyond 2032, adding material value to Gruyere and Gold Road shareholders,” GOR’s Gibbs said.

Gold Road shares are sitting at $2.94, close to the $3.05 offer price of the knocked back Gold Fields bid.

Argonaut cut its rating from a buy to a hold after recent share price gains which have taken GOR shares close to the offer price.

“We expect further negotiations will continue between both parties with an eventual completion of the proposed transaction as our most likely outcome,” suggested analyst Patrick Streater.