Bluebird Merchant Ventures is a South Korea-focused resources company which is bringing old gold mines back to life. It is far quicker and cheaper to rehabilitate old gold mines than fund exploration, mines where production was curtailed a couple of decades ago due to a low gold price (under US$140/oz). Recently, Bluebird gained a binding agreement for a US$5-20m gold streaming style deal to fund reopening its gold mines.
Bluebird is expected to commence gold production in 2021 with a swift trajectory to 100,000oz pa (as BMV plans to buy the remaining 50% stake) by 2025. At attractively low operating costs of US$576/oz, this could be a big money spinner. In a country which has a highly pro-mining government.
There could be no better time to be a junior about to commence gold mining as experts reckon that the looming recession will be the deepest peak to trough decline in recent memory. Bank of America has recently published a report saying that gold could surge to this all-time high by the end of 2021 due to record bank balance sheets/government fiscal deficits.
Colin Patterson (CEO) and Charles Barclay (COO) have developed a cracking business model. In 2010, the Apex Mine (Philippines) was acquired for $7m, reinvigorated by the team and 2 years later received an offer for $180m from a major. Bluebird bears all the hallmarks of being Apex Mark II.
We believe our NPV valuation is very conservative and update coverage of Bluebird with a target price of 34.79p and a Conviction Buy stance.