Far East Capital Newsletter
Markets let off steam as we focus on Alpha HPA and Bellevue Gold
17 Aug 2019

In This Issue

Markets let off steam as we focus on Alpha HPA and Bellevue Gold

On Wednesday night the Dow fell by more than 3% and the gold price jumped by more than $20/oz at one point, in response to the yield curve inverting. That was all everyone talked about for the rest of the week. As we are advised by historians, an inverted yield curve points to a recession 1-2 years out. So, pangs of fear caused the sell button to be pushed.

Alpha HPA - The bottom line is that Alpha looks good. It looks promising. Technical risks look low but there is an element of acting on faith as the key to the process is an "11 magic herbs and spices" formula of organic feedstock. This is the key IP.
For those investors who are seeking to make money out of the growing EV market, and who don't want to play commodities with volatile prices, Alpha could be the way to go if you have a little patience. The potential upside could be several times your money some time over the next year or two.

Bellevue Gold - Given the very strong A$ gold price, and the high grade tenor of the Bellevue orebodies, you would expect a valuation would give you top dollar. With a market capitalisation of $300m (net of cash) we get an in situ value of A$160/oz. If the mine operated at a cash margin of A$1,000/oz, which is possible with the high grades, it would generate over a billion dollars of free cash if you assume 60% recovery of the 1.8 Moz. What if the resource doubles, which is a distinct possibility? That could lead to a doubling of the share price if you use the A$160/oz valuation.

Where the share price will go depends upon how much more gold is found, what the gold price is doing, and whether a corporate raider wants to make a move. The shares are drifting a little just now, but that doesn'tmean the show is over. Wild speculation is quietening down and the aggressive punters may be exiting to find the next 10 bagger, but the risk profile is falling and Bellevue is emerging as a legitimate institutional gold stock. It is difficult to find a better story in the gold sector just now. 

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