Why the Beadell Resources share price is soaring today

Beadell Resources Ltd (ASX: BDR) has seen its share price climb more than 22% to 22 cents, after the gold miner forecast a strong 2016 financial year.

Beadell has forecast production of between 145,000 and 160,000 ounces of gold in the 2016 calendar year, an increase of at least 19% over the 2015 calendar year (CY2015). The gold miner produced 122,292 ounces in CY2015.

Additionally, the company is also forecasting lower all-in sustaining costs (AISC) of between US$715 and US$815 an ounce, a fall of 19% to 20% over CY2015. In the last quarter, Beadell reported AISC of US$899 an ounce, down from US$1,033 an ounce in September, and lower than the US$922 an ounce recorded in CY2014.

Beadell produces gold from just one mine, Tucano in Brazil, but the company owns 100% of the mine and it’s the third largest gold mine in Brazil.

Rollercoaster history

Investors have long had high hopes for Beadell. When Tucano started producing gold in late 2012, the company forecast production of over 200,000 ounces of gold in CY2013, but ended up producing 182,547 ounces of gold. Ultra-low production costs partly thanks to iron ore by-product credits resulted in a net profit of $113.5 million.

2014 was a disaster, with production even lower at 153,691 ounces produced, but costs exploded and net profit plunged to $13.5 million. 2015 production was even lower at 122,292 ounces – but Beadell has yet to report its full-year financial results. The miner reported a $30 million loss for the six months to end of June 2015 – suggesting it probably won’t be great.

A new management team took over in November 2015, and it seems they have high expectations (the same high expectations Beadell’s 2012 management had?) of the company in the future.

Foolish takeaway

The share price might be soaring today, but that doesn’t mean the company’s future looks materially different to the past.

As is likely to be the case with many gold miners, shareholders are unlikely to see much in the way of dividends – their company has yet to pay a dividend. Profits are more than likely going to go on additional exploration, which may or may not result in any additional benefit to shareholders. Buyer beware.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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