• Comqpany Overview - Beadell Resources Limited is an Australia-based gold mining company. The principal activities of the Company are the mining and processing activities at its primary asset Tucano Gold Mine (Tucano) located in Northern Brazil and exploration for and evaluation of mineral resources in Australia and Brazil. The Company has two operating segments: Australian exploration and Brazilian exploration and operations. Tucano has approximately 5.4 million ounces of gold resources and 1.3 million ounces of gold reserves. Tucano covers over 2,500 square kilometers of prospective gold exploration tenements. The Company also has a portfolio of gold exploration tenements throughout Australia and Brazil, including the prospective Tartaruga in Brazil and Tropicana East Projects in Australia.
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• Improving gold sales driven by prices: Beadell Resources Ltd (ASX: BDR) delivered a better unreconciled gold sales of around 29,400 ounces of gold during the September 2015 Quarter, as compared to the 21,045 ounces of gold in June 2015 Quarter. Meanwhile, the group estimates an ongoing growth in the throughput and grade at Tucano and is on track to deliver the gold sales guidance in the range of 65,000 – 80,000 ounces during the second half 2015. Beadell also recorded that its ROM stockpiles increase is ongoing and reported an 80,000 tonnes @ 1.30 g/t gold as at October 1, 2015, as compared to 41,000 tonnes @ 1.30 g/t during June 30 2015.

• Positive Urucum Underground Pre-Feasibility Study results: AMC Consultants undertook the pre-feasibility study of Urucum underground which would be finished by this year end. Accordingly, the study released new results of the drilling at Urucum underground, which comprised highest grade intercept including 15.45 m @ 17.19 g/t gold and 4.27 m @ 55.97 g/t gold. This positive results approves the ongoing presence of the high grade Central Lode 1 ore shoot, that is currently defined at around 400 meters strike length. Meanwhile, based on the results of the pre-feasibility study, the group could take the project to definitive feasibility study in the first quarter of 2016 and then the board might decide the further proceedings on Urucum underground project.

• Gold pricing pressure impacted the overall performance in the first half: Beadell Resources reported a revenues of $83.3 million during the first half of 2015, derived from selling 53,986 ounces at average price of $1,543/oz during the period, as compared to 69,240 ounces sold at average price of $1,597/oz in the corresponding period of last year. The group’s AISC per ounce was impacted by gold sales pressure on the back of reducing gold prices as well as from decrease in fleet utilization and reduction in material mining impacted by heavy rainfall than the average during the period. As a result, the feed grade decreased during the first half as higher volumes of inferior grade stockpiles were used to supplement the mill feed. Moreover,  the first SAG Mill re-line at Tucano in March 2015 quarter which took eight days ( twice as long as planned)  leading to over 2,000 ounces of unbudgeted lost gold production. Meanwhile, Beadell Resources conducted exploration activities mainly in Urucum Underground, Tucano Regional and Duckhead Mine Corridor during the period. Accordingly, the group incurred exploration costs of $4.5 million in the first half of 2015 against the $4.3 million costs in corresponding period ending at June 2014. Meanwhile, Beadell Resources incurred a huge pre-tax Impairment charge of $16.0 million, during the period which comprises $12.3 million in losses related to its Magnetic Separation Plant and iron ore receivables. Moreover, tough conditions faced by Zamin, the group’s iron ore by-product off-take partner due to port facility at Santana destruction and production activities suspension also contributed to the heavy impairment charges. As a result, the group delivered a loss after tax of $30.3 million in 1H15 as compared to a profit after tax of $15.1 million in the corresponding period of last year.  
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• Solid Urucum Underground Mineral Resource highlights: Beadell Resources reported a total Urucum Underground mineral resource of 4.86 million tonnes @ 4.06 g/t gold for 634,000 ounces, which is above the lower cut off of 1.6 g/t gold. The total measured and indicated resources are 2.73 million tonnes @ 4.56 g/t gold for 400,000 ounces, while the total Inferred resources reached 2.13 million tonnes @ 3.42 g/t gold for 234,000 ounces. The high grade Central Lode 1 ore is situated just under the Urucum North open pit having an overall resource of 0.59 million tonnes @ 7.54 g/t gold for 143,000 ounces. As per the South Lode 1, the ore has 1.46 million tonnes @ 3.70 g/t gold for 174,000 ounces. Meanwhile, Lode 2 ore has 0.84 million tonnes @ 3.99 g/t gold for 108,000 ounces while the Lode 300 ore shoot comprises 1.06 million tonnes @ 4.00 g/t gold for 136,000 ounces. On the other hand, a major part of the Urucum underground lode system is still disorganized. Therefore the group commented that there is a scope of huge potential for expanding the resource in the future.

• Balance sheet and other highlights: Beadell Resources net assets declined to $164.1 million as at June 2015, as compared to $221.8 million in December 2014. Beadell reorganized its Bridge Loan with Santander of USD 60 million to an unhedged three year Facility with Banco Santander and Banco Itau during January 2015. Meanwhile, BDR’s gearing declined to $31.0 million as the group assigned the Macquarie Lease Facility to MACA Limited. The first Santander-Itau Facility instalment payment as well as recompense of other additional credit facilities of US$7 million also affected the gearing ratio. The group’s cash and bullion fell to around $22 million at the end of the half year, as compared to cash on December 2014 of around $73 million. As per the cash flow highlights, the group got cash payment of 65,373 ounces during 1H15, leading to a net cash flows of operating activities to $9.2 million, but still a decrease against $12.2 million in June 2014. Cash payments for investing activities reduced to $18.7 million in June 2015 from $20.7 million in prior corresponding period, as the group invested in building West Pond and North Mill Pond tailings dams. With regards to the cash flows from financing activities, they deceased to $7.9 million during the period against $21.4 million in June 2014. Restricted cash fell to $31.2 million during the period due to repayment of loans and borrowings of $13.9 million, dividend payment of $8.0 million and interest payments of $1.4 million.

• Outlook: Beadell Resources started cutback of its high grade Duckhead Stage 3 post receival of the obligatory approvals. This move would add over 20,000 low cost ounces at 28.7 g/t gold to the group’s production profile during the first quarter of 2016. Beadell Resources estimates its gold sales to be in the range of 65,000 – 80,000 ounces during the second half 2015 while AISC is expected to be in the range of US$850 – US$950 per ounce. Meanwhile, at present only 10% to 20% of the crusher feed is primary rock with oxide material covering the balance. But, the group intends to rise the primary feed to 30% in the coming months, to achieve an optimal primary or oxide blend for the present mining schedule. The group is also adding major extra oxide tonnages to the mine plan from its latest Urucum and Tap AB areas discoveries. SRK Consulting made primary rock trial to determine the timing of any extra crushing or grinding capital necessities to uphold the throughput rates satisfactory to achieve annualized gold production of approximately 160,000 ounces for the 7-year open pit Life of Mine.

     

• Stock Performance: Beadell Resources shares fell over 33.3% during this year to date owed to the gold prices volatility. On the other hand, BDR stock surged by 61.9% (as of October 12) in the last four weeks driven by the recovery in the gold prices. Moreover, the Brazilian Real has declined against the US Dollar by 8% during the July 31, 2015 and September 01, 2015 period, as compared to the Australian Dollar which fell over 2%against the US Dollar during the same period. As per the year-to-date performance, the Brazilian Real has depreciated over 29% while the Australian Dollar has depreciated 14%. Accordingly, the Brazilian gold price touched an all-time record BRL gold price of BRL$4,209.23 per ounce, during September 1, 2015. With the further rally in the gold prices, we believe that BDR would continue its positive momentum in the coming months. Moreover, BDR also has an attractive dividend yield of 5.9%. We give a “BUY” recommendation on the stock at the current price of $0.165

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