This gold miner could be a top pick for investors wanting exposure to this side of the market.
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James Mickleboro James Mickleboro has been a Motley Fool contributor since late 2015. After studying economics at university back home in the United Kingdom, James came to live in Australia and managed to land a job at an Australian fund manager. This was the start of a love affair with Australian equities and he hasn’t looked back since. James is part of the CFA Institute’s Chartered Financial Analyst program and hopes it teaches him how to become an astute investor which allows him to help others with their own investing. Outside of reading and researching he spends many a late night watching the English Premier League and Seinfeld reruns. Published March 3, 2:24 pm AEDT
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If you are wanting to gain exposure to the booming gold price, then Bellevue Gold Ltd (ASX: BGL) shares could be the way to do it.
That’s the view of analysts at Goldman Sachs, which believe the ASX 200 gold stock is still cheap at current levels.
What is the broker saying about this ASX 200 gold stock?
Goldman notes that Bellevue Gold released its half year results last week and delivered an operating profit ahead of expectations. It said:
BGL reported underlying NPAT of A$12mn, nominally in-line with GSe. Implied underlying EBITDA of ~A$90mn was above GSe on lower opex.
The broker was also pleased with its guidance for FY 2025, which has been reaffirmed. It adds:
FY25 production guidance remains 150-165koz where we forecast ~152koz (unchanged), with AISC guidance to A$1,900-2,100/oz (GSe ~A$2,115/oz). BGL target 5,000m of development advance in both 3Q (>1,700m achieved in January) and 4Q, for ~300kt and ~350kt of mined ore respectively on an increase from 5 to 7 mining fronts with 6 jumbos fully operational (GSe remains below).
BGL continues to expect this to be back ended at a ~200koz pa run rate by 4Q FY25. Beyond FY25, BG’s 5-year growth plan remains for an accelerated expansion to 1.6Mtpa processing capacity driving gold production to ~250kozpa from FY28E and lowering AISC to ~A$1,500-1,600/oz (GSe a more prolonged ramp up to ~250kozpa and above 5yr AISC guidance).
Big potential returns
In response to the results, Goldman Sachs has reaffirmed its buy rating and $1.50 price target on the ASX 200 gold stock.
Based on its current share price of $1.18, this implies potential upside of 27% for investors over the next 12 months.
Goldman highlights that based on its long term gold forecast, the company’s shares are trading at a discount to peers.
And while it acknowledges that its free cash flow (FCF) is being held back by accelerated capital expenditure, it believes it won’t be long until there is a big improvement. This could even mean that capital returns aren’t too far away. The broker concludes:
On our LT gold price of US$2,300/oz, BGL is trading at ~0.9x NAV or pricing in US$2,160/oz (peer average ~1.1x NAV and ~US$2,360/oz). While near-term FCF yields are impacted by the accelerated development spend, we see these returning to double digits in FY26E, and remaining attractive vs. peers, supporting upside to the outlook for possible future capital returns once the expansion ramps up (despite ~25-30% of medium-term gold sales being hedged at ~A$2,700-2,900/oz, and 31.5koz of A$3,500/oz puts in FY25).
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.