Monsters of Rock: Bellevue high (and low) on gold and Sierra Rutile approached by new suitor

Bellevue ramps up production and nets $41m of free cash flow on gold highs
A Sierra Leone petrol station owner has lobbed its own takeover bid for Sierra Rutile as the troubled miner tries to get out of dodge
Rio and BHP said to be looking at yet more copper deals

Bellevue shines on quarterly production

Bellevue Gold (ASX:BGL) has delivered a solid quarter, producing 42,705oz to June 30, a marked upgrade from 37,338oz in Q1.

The increase brings BGL’s H2 FY24 gold production to 80,043oz sold, sneaking into the upper half of its 75-85,000oz guidance range.

With gold prices dancing in and around $3500 lately, you could arguably produce below guidance and still make bank, bearing in mind Bellevue has around 225,000oz of forward production hedged at an average $2,772/oz on account of its debt arrangements.

And Bellevue has banked some dosh, raking in free cash to the tune of $41m in the three months to June 30. It had around $55m in the bank as of June 30, up from around $21m at the start of the quarter.

Multi-year guidance is expected later this month, with an eye on increasing nameplate throughput from a realised 1.2Mpta run rate at times during H2 FY24 to >1.5Mtpa.

“It was a successful quarter in which we ramped up production in line with our plan, met guidance and generated strong free cash flow,” BGL MD Darren Stralow said.

“Underground tonnes increased in line with the plan and the processing plant is performing strongly.

“We are now well into the expansion study, which is aimed at leveraging the infrastructure we now have in place and enabling us to unlock the full value of the Bellevue asset.”

One bonkers takeaway from the quarterly was intercepting a 30cm spread of gold at an eye-popping 3501g/t during grade control drilling of the Deacon Main underground.

BGL shares fell almost 5% on a mixed day for goldies.

Mineral sands civil war in Sierra Leone

The bidding war is on again for the world’s largest natural rutile producer, Sierra Rutile (ASX:SRX), between a domestic petrol station owner and Gemcorp.

The former, Leonoil, holds a 19.85% stake in SRX and is offering 18c per share.

It puts the cat among the pigeons after SRX said the offer could become a superior proposal to the one from Gemcorp at 16c that it’s already recommended shareholders accept.

SRX’s 778Mt operation in West Africa contains 8.1Mt rutile at a grade of 1.04%, 3.45Mt heavy minerals and some ilmenite and zircon to boot.

The Iluka Resources spin-off ran a cropper earlier this year after announcing plans to shut its Area 1 mine, a bridge to the development of the longer life Sembehun mine, because the Sierra Leone Government reneged on a tax deal designed to improve its profitability.

After legal threats from the very same government, SRX was cajoled into restarting Area 1 at the same time as it attempted to ward off a previous hostile takeover bid from PRM Services at just 9.5c a share.

The previous ~$67m Gemcorp bid proved an opportunity for suffering SRX shareholders to get out of dodge, giving SRX holders a cash out at a 68.4% premium to the 9.5c PRM offer. Gemcorp has three business days to respond to the Leonoil counter-offer.

Monster M&As

Mining heavyweights Rio Tinto (ASX:RIO) and BHP (ASX:BHP) are rumoured to be readying themselves to lob bids for Canadian copper miners Teck Resources and Filo Corp.

According to Sky News over the weekend, Rio is planning a US$32bn bid for Teck, which saw off a similar shark in Glencore last year by trading its Canadian met coal assets to the international miner and trading house.

Teck owns a number of growing copper assets and zinc mines, many of them in South America including the 300,000tpa Quebrada Blanca 2 development in Chile. Codelco was rumoured to be interested in a stake for 10% of that mine alone for US$500m.

BHP, which walked away from a larger bid for Anglo American a few weeks back, is reputedly considering throwing its hat in the ring for a US$3.2bn joint offer for Filo Corp with Filo parent co. Lundin Mining.

It would net BHP access to the Filo Del Sol deposit on the Argentina-Chile border, one of the few large scale copper discoveries made in recent years and the subject of an early stage C$100m investment from the world’s biggest miner in 2022.

Perhaps BHP could be chastened by Rex Minerals (ASX:RXM) boss Richard Lauffman’s accusation last week it was a ‘risk management company’ unprepared to do the hard yards of developing new copper assets and growing the supply side of the market itself after it remained on the sidelines of a process to sell Rex and its 42,000tpa Hillside project in South Australia.

Several analysts have noted inflationary pressures and low valuations for underperforming miners mean it is cheaper or easier for the big producers to justify using their scrip to acquire existing copper mines at a premium rather than take on execution risk and build new discoveries themselves.

The materials sector closed the day up 0.55%, but battery metals struggled, with Liontown Resources down 3% despite signing a short term offtake deal with a Chinese lithium refiner for its Kathleen Valley mine.