Thx Top Gear. In case this hasn't been posted before, this is worth the read. I still don't know why people keep selling this stock. _________________________
SOUTH AMERICA Fri 08/06/2012Gold, iron and a silver bullet Michael Quinn, 6 June 2012
Iron ore at Beadell's Tucano gold project could help slash the project's operating costs to about $US400/oz.John Bowler, the managing director of Brazil gold project developer Beadell Resources, says he has never seen so much money “sitting on the sidelines” as institutions such as Colonial First State swap the cheque book for the worry beads in the face of all the global uncertainty. However, he believes there are two or three key things that can be done to attract some of those funds to the Beadell story. He told shareholders last month that proving it could build a $US100 million, 180,000 ounce-a-year project in Brazil, as well as cutting a deal with the world’s fourth biggest major with regards iron ore also found at the project, would see a big market re-rating of the company.
With regards the first two, confirmation looks imminently forthcoming, with Bowler adamant the budget remains intact, and that first gold is on its way as planned (by about August).
Bowler also has his fingers crossed that an agreement with Anglo American regarding the iron ore will be in hand by about the same time. His confidence on the iron ore is underscored by the apparent indications that Anglo and 30% partner Cliffs want to sell the iron ore project that abuts Beadell’s Tucano project. According to Bowler, adding the significant iron resources that would come with a deal with Beadell would potentially add 15 or more years to the project’s current 7-10 year mine life, making it far more attractive to potential buyers. A deal with Anglo for the iron ore located within and surrounding the Tucano gold pits could effectively reduce Beadell’s cash costs by between $US30 and $US50 per ounce. Beadell is in fact blessed by the iron ore within its gold orebody given a magnetic separation plant to be commissioned later this year after gold begins to be poured (and targeting the production of an iron concentrate via a magnetic separation technique) could reduce cash costs by a further $US180/oz. It is thus no surprise that Bowler referred to the magnetic separation plant as “the silver bullet”, potentially slaying as it does, cash costs. The bottom line is, all going to plan Beadell could be producing some 180-200,000oz or so per annum at cash costs of little more than $US400/oz. That, in anyone’s language, would represent a major cash generating business and the clear reason why Bowler is so bullish about a significant re-rating of the company being warranted. “This will ensure we are one of the most admired cash cost producers in the world,” Bowler told shareholders. Beadell is currently covered by about 10 analysts, and Bowler expects that to be up to 14 or 15 in the next six months. “It seems to me the North American and European institutions are starting to get the gold story ahead of the Australian market,” Bowler said. On the Tucano exploration front, Beadell is aiming to have delineated 3Moz of reserves and 7Moz of resources in the next couple of years. Back in Australia, Bowler said the company wasn’t interested in “giving away” or joint venturing its Tropicana East project, which he suggested had delivered superior results to those achieved at the same stage by the Tropicana discovery now being developed by the AngloGold/Independence joint venture. However, it required an “economically irrational amount of money to be spent on it at the moment”. Presumably the exploration budget will become rational once the gold starts pouring and the dollars start accruing courtesy of Tucano.
BDR Price at posting:
65.0¢ Sentiment: LT Buy Disclosure: Held
