BGL trading at a discount
Disclaimer: I am invested with BGL. This is not financial advice.
I previously posted about BGL on 31 July 2025. They are a gold producer operating out of WA, making an attempt at being low emissions (very high renewable energy consumption on site) but the main area to consider whether BGL is now a good investment (in my opinion) is the state of their hedge book.
On my previous post, a couple of users raised concerns about the state of their forward hedge book - and at the time it didn't look great. For user's unfamiliar, this is effectively gold that they have already committed to selling in the future (when it is mined) at a fixed price. The price gets locked in when the contract is agreed and is unlikely to be a good price for the miner. They do it so whoever they owe debt to (banks etc) knows there is guaranteed income to cover the debt if the spot price tumbles. It's important because the spot price of gold is way higher than the price in those locked in hedges, which is hurting revenue.
As at their last quarterly update (31 Mar 26), BGL had:
- ~91k oz on the hedge book (amount to still clear) (down from 124k in December)
- $2,932 AUD average hedge price
- ~40k oz produced
- $3,459 AUD/oz average realised price
- $2,578 AUD/0z all in sustaining cost (AISC)
- $158M free cash flow (FCF)
- $18M FCF after voluntary hedge pre-deliveries
- $181M cash and gold
- $100M debt
The key point I'd like to make is that BGL cleared a big amount of their existing hedge book in that quarter. It hurts cash generation now but increases exposure to the spot price in future after all hedges are cleared. The rate of clearance is 6-10k oz per month and I would anticipate that the hedge book would be fully cleared at this rate in about 10 months (assuming all other variables remain the same). If gold is still strong in a year, then BGL turns significantly more profitable.
The share price has been all over the place since I last posted, but only upwards from then. It got up to $2 in January and two days ago (when I bought back in), it was trading at $1.20. Price at posting: $1.35.
The bear case is that this is a single asset underground gold miner and tied at the hip to the spot price. It's also subject to grade failures, AISC increases, delays etc. Confidence could slip despite good fundamentals and we could head back below $1.
I am nothing if not a gambler though and the bear case sees us above $2 within the year and then matching GMD for market cap in 2-3 years.
The next announcement by the company should be within the next few weeks, being the June quarterly announcement, which will give some additional context to the above figures and help crystal ball even better.
As always, keen for the thoughts from the brain's trust.