Argonaut - "Beacon Minerals - Proven Performer"

Argonaut sent out the below research note on BCN today: (link to the full report is at the bottom)

Quick Read

Beacon Minerals (ASX:BCN) is a small WA based gold producer that’s been a quiet achiever since bringing its Jaurdi Operation into production in late 2019. Since 2019, BCN has achieved a 28kozpa production profile combined with steady positive operating cash flows. From the generated cash build, BCN has paid out a total of ~A$41.6M in dividends and reinvested into project acquisitions that will extend the Jaurdi mine life out to at least FY31. With 7-year mine life in place, we look for a production profile increase as BCN brings on higher grade ore sources into its mine plan. Argonaut initiates coverage with a Speculative Buy recommendation and a $0.035 price target.

Key Points

Track record of operational performance: BCN’s Jaurdi commissioning commenced in late 2019 with the ramp phase occurring during the worst part of the COVID lockdowns. Despite this hurdle, in the four years of production at Jaurdi BCN generated over A$99m of operating cash flows with only two quarters of negative operating cashflow.

7-year mine life in place: After dividends, BCN has invested the balance of its cash build into five strategic project acquisitions for a total cost of around A$31.3M. Once the Lady Ida Acquisition B is finalised, BCN will have reserve/production multiple of 9.5, ahead of many large-scale producers such as RMS, RRL, SLR and WGX.

Higher Grade Feed Options to lift Ounce Profiles: BCN’s Jaurdi mill has a current operating capacity of around ~800ktpa with a +6year TSF capacity. Utilising the existing Jaurdi Mill, we see BCN bringing forward recently acquired higher grade projects Mt Dimer and Lady Ida as the pathway towards an increased ounce profile.

Infrastructure advantage with a M&A niche: We like the competitive advantage that BCN holds in the Coolgardie/Kalgoorlie region. Competing mills in the area - Northern Star (KCGM), Gold Fields (St Ives) and Evolution (Mungari) all require deposits with scale and high margins to fit their portfolio. Of the assets left over, BCN has next to no competition and has been able to acquire projects at its own pace and without acquisition premiums

1HFY2025 Results: BCN’s 1HFY2025 results delivered a NPAT of A$11.17M with gold sales totalling 48koz at an average realised price of A$2,969/oz. Total cash and cash equivalents totalled A$14.3M as of December 31. A fully franked dividend of A3.7M was paid out on December 2023.

Recommendation

Recent acquisitions have built out a 7-year mine life which gives BCN solid platform for further growth. We like the operational track record of the BCN team’s that’s delivered returns on small-scale assets which can be difficult to operate. We initiate coverage of BCN with a Speculative Buy recommendation and a $0.035 price target.

Argonaut Research File

Tuesday, 5 March 2024

	Stock	Beacon Minerals (BCN)
1	Recommendation	SPEC BUY
2	Current Price	$0.022
3	Valuation	$0.035
4

Proven Performer

Analyst | Patrick Streater

Link to Research

Quick Read

Beacon Minerals (ASX:BCN) is a small WA based gold producer that’s been a quiet achiever since bringing its Jaurdi Operation into production in late 2019. Since 2019, BCN has achieved a 28kozpa production profile combined with steady positive operating cash flows. From the generated cash build, BCN has paid out a total of ~A$41.6M in dividends and reinvested into project acquisitions that will extend the Jaurdi mine life out to at least FY31. With 7-year mine life in place, we look for a production profile increase as BCN brings on higher grade ore sources into its mine plan. Argonaut initiates coverage with a Speculative Buy recommendation and a $0.035 price target.

Key Points

Track record of operational performance:BCN’s Jaurdi commissioning commenced in late 2019 with the ramp phase occurring during the worst part of the COVID lockdowns. Despite this hurdle, in the four years of production at Jaurdi BCN generated over A$99m of operating cash flows with only two quarters of negative operating cashflow.

7-year mine life in place:After dividends, BCN has invested the balance of its cash build into five strategic project acquisitions for a total cost of around A$31.3M. Once the Lady Ida Acquisition B is finalised, BCN will have reserve/production multiple of 9.5, ahead of many large-scale producers such as RMS, RRL, SLR and WGX.

Higher Grade Feed Options to lift Ounce Profiles:BCN’s Jaurdi mill has a current operating capacity of around ~800ktpa with a +6year TSF capacity. Utilising the existing Jaurdi Mill, we see BCN bringing forward recently acquired higher grade projects Mt Dimer and Lady Ida as the pathway towards an increased ounce profile.

Infrastructure advantage with a M&A niche:We like the competitive advantage that BCN holds in the Coolgardie/Kalgoorlie region. Competing mills in the area - Northern Star (KCGM), Gold Fields (St Ives) and Evolution (Mungari) all require deposits with scale and high margins to fit their portfolio. Of the assets left over, BCN has next to no competition and has been able to acquire projects at its own pace and without acquisition premiums

1HFY2025 Results:BCN’s 1HFY2025 results delivered a NPAT of A$11.17M with gold sales totalling 48koz at an average realised price of A$2,969/oz. Total cash and cash equivalents totalled A$14.3M as of December 31. A fully franked dividend of A3.7M was paid out on December 2023.

Recommendation

Recent acquisitions have built out a 7-year mine life which gives BCN solid platform for further growth. We like the operational track record of the BCN team’s that’s delivered returns on small-scale assets which can be difficult to operate. We initiate coverage of BCN with a Speculative Buy recommendation and a $0.035 price target.