Planets align for Beadell's Amazon dig
Three months after pouring its first gold bar at the Tucano mine in Amapa, Beadell predicts the mine will become Brazil's third-largest producer of the metal. With the benefits of low taxes and labour costs, Beadell plans to produce bullion for 32 per cent less than the average cost among peers worldwide.
The low costs are so appealing that Beadell could fetch 20 per cent more than its $623 million market value in a sale, said stockbroker Hartleys.
The mine, expected to produce about 200,000 ounces of gold in 2013, may attract bids for Beadell from AngloGold Ashanti and Kinross Gold, which both have operations in Brazil, according to Ord Minnett.
Beadell's production target "attracts the attention of some very, very serious players", said James Wilson, an analyst at RBS Morgans. "It's a very good target."
Beadell's stock surged 19 per cent on March 8 amid speculation a takeover bid was imminent. The company said later the same day it was not aware of such an offer.
"We haven't had any specific approaches," chief financial officer Gregory Barrett said. "But we're a pragmatic board. If companies approach us and put an offer on the table that we think is reasonable to take to shareholders, we'll take it to them."
Beadell also owns the Tropicana East deposit in Western Australia, where an exploration campaign is planned for the second quarter. Beadell's biggest asset is Tucano, which covers 2500 square kilometres in a Brazilian state mostly comprising unexplored Amazon rainforest.
Business conditions are also working in Beadell's favour. The corporate tax rate of 15.75 per cent in Brazil is almost half the rate in Australia, and labour costs are about six times lower. About 40 per cent of the gold industry's costs are tied to labour.
Beadell expects to produce gold at Tucano for a cash cost of as little as $US450 an ounce, well below the $US657 average in 2012 at 17 peers including Newmont Mining, the world's second-biggest producer.
Frequently Asked Questions about this Article…
Tucano is Beadell's remote gold mine in Amapa in northern Brazil. The article says it could become Brazil's third-largest gold producer, covers about 2,500 square kilometres largely in unexplored Amazon rainforest, and is the company's biggest asset — making it a core reason investors watch Beadell.
Beadell expected Tucano to produce about 200,000 ounces of gold in 2013, according to the article's production forecast.
Beadell expects cash costs as low as US$450 an ounce at Tucano, which the article says is about 32% below the US$657 average cash cost reported in 2012 for 17 peer companies (including Newmont).
The article highlights lower business costs in Brazil: a corporate tax rate of 15.75% (almost half the Australian rate) and labour costs about six times lower. It also notes roughly 40% of the gold industry's costs are tied to labour, which boosts Tucano's cost competitiveness.
Analysts in the article say Tucano's low-cost profile makes Beadell attractive to buyers. Stockbroker Hartleys suggested Beadell could fetch about 20% more than its US$623 million market value in a sale, and the company’s production target reportedly draws attention from major industry players.
The article names AngloGold Ashanti and Kinross Gold as possible bidders for Beadell, based on commentary from Ord Minnett, because both have operations in Brazil.
Beadell also owns the Tropicana East deposit in Western Australia, where an exploration campaign was planned for the second quarter, according to the article.
Beadell's stock jumped 19% on March 8 amid takeover speculation. The company later said it was not aware of any offer. CFO Gregory Barrett was quoted saying the board is pragmatic and would take any reasonable offer to shareholders.
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