Beadell Resources (ASX:BDR), a company that has consistently missed the majority (if not, all) of its guidances now seems to be back on track on its Tucano gold project in Brazil. The company expects to produce 145,000-160,000 ounces of gold in the current calendar year, which would be a 19-31% increase compared to the total gold production in 2015. The AISC is expected to come in around $715-815/oz whilst non-sustaining capex will result in an additional cost of approximately $30 per produced ounce of gold.
The June quarter will be the weakest quarter for Beadell whilst the third quarter should be an exceptionally good quarter as Beadell will process some more high-grade ore from the Duckhead zone. It’s also great to see Beadell has increased its stockpiles as this will reduce the risk of running low on mill feed during the wet season, when its mining operations are a bit constrained.
We hope Beadell’s guidance will be achieved, because it would mean the company would be generating a substantial amount of free cash flow, based on an AISC of $800/oz and an average gold price of $1225/oz. Meanwhile, the company has also released the results of the pre-feasibility study that was aiming to determine whether or not an underground mine at Urucum would be viable.
The economics seem to be alright and despite the fact the average grade will be less than 4 g/t, the payback period of the initial $18M investment is approximately 4 years (including some of the sustaining capex). Keep in mind Beadell used a base case gold price of $1120/oz, so the current spot price would expand the all-in margin by approximately 30% and this could easily reduce the payback period by a year.
Let’s hope Beadell Resources has now finally turned the corner after missing its expectations for several years in a row.
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The author has no position in Beadell Resources right now. Please read the disclaimer
