I have said many times that BAU gold project is so ridiculously undervalued but I feel it is still an understatement. The appropriate word to describe it is probably "shockingly undervalued". To understand how shockingly undervalued it is, we need to look at other peer gold exploration stocks on ASX. Today I want to invite people to look at AGC versus BEZ and see how the 2 projects are valued.
AGC's MC as of today is around $90mil with $21mil cash on hand, EV = around $70mil.
Versus BEZ's MC of around $46mil at 11c sp with $27mil cash on hand, EV = $19mil.
So, what each company's project has achieved? Where does each project stand?:
1. AGC has had its 1st round of drilling and hit some gold from 15th May 2024 and its sp has increased from around 10c to 61c and is now sitting at 35c for $90mil MC. Take a good look at the image provided here to see for yourself how many drilling holes it has done, how thick is the gold intersections and at what grades they are. Please look at the image provided here:
Look at the grades, the thickness of interception, and the grades. In fact, let me list them all down here for you to see:
- 13m @ 0.3 g/t Au
- 39m @ 0.3 g/t Au
- 5m @ 2.3 g/t Au
- 8m @ 1 g/t Au
- 8m @ 1.6 g/t Au
- 5m @ 16.9 g/t Au
- 2m @ 1.4 g/t Au
- 7m @ 1.2 g/t Au
- 4m @ 2.3 g/t Au
- 4m @ 2 g/t Au
- 3m @ 0.5 g/t Au
- 10m @ 0.4 g/t Au.
BEZ's BAU project has 8 nearby gold deposits with around 3mil oz resource. There have been numerous drilling hits during 2022-2024 drilling campaign and results that have not been included in a new resource statement yet. Management is now targeting 5mil oz resource upgrade and new MD recruited has accepted 5mil oz resource as a condition to be awarded 400k performance shares as part of his incentive package of 1.2mil performance shares.
Let's put it in perspective. If AGC continues to spend $100mil on drilling expenses and general capital expenses during the next 10 years and let's assume that AGC achieve exactly the same results as listed above in each of the 10 drilling campaigns over the next 10 years, it is still very unlikely for AGC to be able to achieve 1.5mil oz IMO. The only way it can achieve significantly higher resource is via significantly higher average gold interception THICKNESS + higher GRADES.
But even if it spent $100mil in the many years ahead and is lucky enough to achieve 1.5mil oz compared to BEZ's current 3mil oz, it still needs to go through many steps that cost a lot more money to get to where BEZ is, namely metallurgical studies, water, energy, fauna, soil,...studies, Feasibility Study. Then pilot plant and trial pit design, engineering, EIA submission, ordering, manufacturing, shipping, construction, DFS preparation work done and is ready to commence, and 275k oz off-take agreement with 5% deposit has been paid (AUD $38mil) to be in the same position as BEZ is today. AGC would need to do at least 7-10 rounds of CRs at $5mil-$10mil each round and dilute its SOI by many multiples.
Let's look at all of the drilling results at 2 of the 8 deposits that BAU project has achieved over the last 2 years that have not been incorporated into the MRE yet. These results will be included in the next MRE upgrade. And management has stated 5mil oz is their next MRE upgrade target. One need to remember these results are at Jugan and Bekajiang deposits only. 6 other deposits have been confirmed with drilling hits of gold but drilling there have been only at early stage or just a scratch on the surface. There are much bigger potential resource to be discovered. That's why the Exploration Target = 9.3mil oz.
Let's put it this way: some of these drilling results EITHER in thickness OR in grades easily blow away AGC's whole drilling round results. And these results are on top of the 3mil oz resource. They will be incorporated into the DFS and next resource upgrade.
This comparison shows how shockingly mispriced and undervalued BEZ is. Even if BEZ is $1 sp tomorrow I still say BEZ is very undervalued when compared to AGC.
Next stuff:
How BEZ compares to SXG which is currently at around $550mil MC with up to 1.6mil oz Exploration Target (no MRE yet), with no PFS, no pilot plant design, no pilot plant ordering and manufacturing, no water and energy studies, no metallurgical studies, no fauna and plant studies, no EIA approval, no off-takes, no DFS,...likely underground mining operation versus BEZ's open pit mining operation. We will see why BEZ should be valued at more than SXG's valuation.
Also I will take a look at other gold exploration projects as well (PDI, SMI,...).
