Meet the ASX gold stock that could double in value

Bell Potter thinks big returns could be on the cards for buyers of this gold miner.

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Do you want big returns and exposure to the booming gold price?

Well, I have good news for you. That's because one leading broker is tipping one ASX gold stock to double in value from current levels.

Which ASX gold stock?

Analysts at Bell Potter believe that Alkane Resources Limited (ASX: ALK) is a gold stock to buy right now.

The broker highlights that the gold miner has just released the scoping study for the Boda-Kaisar Project in New South Wales.

While a touch softer than its expectations, the broker sees the study results as "a good outcome." It said:

Principal differences to BPe include: (1) average grade is 0.46g/t AuEq vs BPe 0.57g/t AuEq (driven by processing of low-grade stockpiles, excluding stockpiles average Study grade is 0.53g/t AuEq, much closer to BPe), (2) mining duration in the Study is 13-years, vs BPe 20-years, as the Study largely excludes the Underground Resource (374Mt at 0.59g/t AuEq), (3) Study initial capital costs are A$1,783m (including A$250m of growth and contingency) vs BPe A$1,500m, and (4) due to the previous points, $1,120m Post-tax NPV (adjusted for tax by BP) is less than BPe $1,500m.

Bell Potter agrees with management that Boda-Kaiser can support a large gold mining operation thanks to strong commodity prices. It adds:

We agree with management that the Study shows that at current copper and gold prices, Boda-Kaiser can support a large operation with strong economic returns in highly attractive commodities with strong fundamentals over the long-term.

Big returns

In response to the study, Bell Potter has retained its buy rating and $1.10 price target on the ASX gold stock. Based on its current share price of 51.5 cents, this implies potential upside of 113% for investors over the next 12 months.

Bell Potter then concludes by explaining why it thinks its shares could re-rate to higher multiples in the future. It said:

In ALK's forward plan we can see steps to increase market value recognition for Boda / Kaiser, including: (1) feasibility studies to include Underground Resources in the Project using mass mining methods (Sub-level Caving), to prolong the duration of higher-grade plant feed over the current 13-year mining period, (2) exploration to discover additional open pit deposits would also enable a longer duration of higher-grade plant feed, (3) securing a high-calibre partner could promote market value recognition of Boda / Kaiser, given the Projects large capital cost relative to ALK's market capitalisation, and Tomingley's ability to generate free cash.

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 no position in any of the stocks mentioned. 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.

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