One of Australia’s top gold analysts has picked his next winner. And it is …
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Special Report: He’s one of Australia’s most successful gold analysts with a track record of picking the sector’s winners and losers ahead of the market.
And now he has revealed the stock he believes will be the next winner in the red-hot Australian gold mining sector.
Bardoc Gold (ASX:BDC) has been named by Hartleys analyst John Macdonald as a “buy” based on its rapid success in building a 2.7-million-ounce resource in the heart of WA’s goldfields.
In a market where the small are being urged to get big and the big are being told to get bigger, Bardoc has set itself up to be Australia’s next 100,000-plus-ounce-a-year producer.
And Macdonald says shareholders stand to do very nicely.
In his latest research report, Macdonald has put a Speculative Buy recommendation and 16c price target on the stock (it’s currently trading around 10-11c), with the caveat that it was “influenced by valuations between 12c and 35c”.
He says Bardoc is examining the feasibility of a co-ordinated open pit and underground mine development, and construction of a new ~2Mtpa ore treatment facility at the Bardoc project near Kalgoorlie.
“Measured and indicated resources for the main deposits, Aphrodite, Excelsior and Zoroastrian, totalled 1.5Moz in November 2018,” Macdonald says in his report.
“Revised resource estimates are due for completion by the end of September 2019, as part of an ongoing feasibility study.”
Macdonald says that Aphrodite will be Bardoc’s baseload deposit, comprising two-thirds of project resources, complemented by an open cut mine at Excelsior and open cut and underground mines at Zoroastrian.
“Hartleys thinks Bardoc can potentially put +1 million ounces into undeveloped mine plans, backed by extensive drilling, mine scale sampling and studies.
“Hartleys models payable gold production at Bardoc of 100-150kozpa, in bullion and concentrate, at an AISC [all-in sustaining cost] of A$1200-1400/oz from mid-CY2021. We presume upfront capital of $175m including $35m pre-strip earthmoving.”
Macdonald’s note came as Bardoc this morning revealed it further enhanced the scale of the Bardoc asset with the strategic acquisition of the Mayday and North Kanowna Star gold projects, located between 20 and 50km away.
Importantly, the twin projects contain a JORC resource of 111,600oz, which the company said in an ASX release “represents an important and low-cost strategic addition” to its existing resource base.
JORC refers to the mining industry’s official code for reporting exploration results, mineral resources and ore reserves, managed by the Australasian Joint Ore Reserves Committee.
Bardoc CEO Robert Ryan said both projects had been mined historically, with “outstanding opportunities” to develop satellite mining operations to supplement its cornerstone operations at Aphrodite, Zoroastrian and Excelsior.
“This acquisition is consistent with our corporate strategy, which is to rapidly build a sizeable and high-quality gold resource in the Kalgoorlie region, consolidate gold deposits located within an economic haulage distance of a potential centrally located plant at Bardoc, our strategic footprint and growth pipeline,” he said.
The company – which is led by former Pilbara Minerals executives Tony Leibowitz, Neil Biddle and John Young – has already clearly signalled its intent to grow rapidly through acquisition and exploration.
Just last week, it acquired the Vettersburg prospecting licence located just 7.5km north of its cornerstone Zoroastrian deposit.
The tenement contains the historic Slug Hill gold mine, mined between 1897 and 1908, which produced over 20,000oz at an incredible grade of 23.5 grams per tonne (g/t) gold, making it one of the highest grade historic mines in the district.
And in May, it acquired a strategic exploration package from cash-strapped junior Torian Resources (ASX:TNR), further expanding its coverage of some of the key prospective gold-hosting structures in the district.
Bardoc has also been putting its money where its mouth is with the drill rig.
Following a $12m capital raising in April, it embarked on an expanded 40,000m drill program – and has since been churning out assay results almost every second week ahead of a planned project-wide resource update due later this month.
“To be a relevant player in the mid-tier gold space, you need scale – and scale is what we’re chasing, both with the drill rig and through strategic acquisition,” says Ryan, a former general manager of the large Paddington gold operation located on the outskirts of Kalgoorlie.
“The interesting thing is that, with the Australian Dollar gold price well north of $2200 an ounce, it changes the perspective on a lot of gold deposits around Kalgoorlie that have been forgotten about or overlooked for many years,” Ryan says.
“We’re looking to capitalise on some of these opportunities through a smart acquisition strategy that complements our organic growth push.”
Bardoc’s growth push comes against the backdrop of continued gold price strength, as demand for “safe havens” has soared on the back of the US-China trade war and global economic headwinds.
The US Federal Reserve cut interest rates in July for the first time in over a decade, and expectations are growing there will be more cuts ahead – possibly as early as this month.
BNP Paribas last week became the latest bank to tip continued strength in the gold price, forecasting it will surge above $US1600 ($2,339) an ounce as “the Fed” embarks on what it predicts will be a quartet of interest rate cuts to combat slowing US growth and the fallout from the trade war.
BNP’s head of commodity research, Harry Tchilinguirian, predicts that real rates will move and “stay in negative territory, raising the appeal of holding gold”.
“The trade war is unlikely to be resolved quickly,” he said in a note to clients. “In this context, gold has resumed its traditional role as a safe-haven asset.”
BNP predicted that gold will average $US1400 an ounce in 2019, $US1560 in 2020 and then rise above $US1600 in the first quarter of 2020.