Bellevue Gold Ltd (ASX: BGL) shares had a tough session on Monday.
The ASX gold stock dropped 5% to close the day at $1.93.
While this is disappointing for shareholders, analysts at Goldman Sachs believe it could be a buying opportunity for the rest of us.
What is the broker saying about this ASX gold stock?
The team at Goldman Sachs notes that Bellevue Gold achieved its production guidance in the second half of FY 2024. Though, it does concede that the gold miner fell a touch short of its estimates. It said:
BGL reported gold production of ~43koz, in line with 2H guidance though slightly below GSe/Visible Alpha Consensus on lower mill rates as the production ramp up stabilises (commercial production declared early May).
The broker also notes that later this month more will be revealed on its production plans for FY 2025. Goldman is expecting a large increase on FY 2024's total production of 80k ounces. It said:
FY25/multi-year production and cost guidance is set to be released later this month (likely around the site visit on 31st July), with BGL forecasting recoveries to improve as a more consistent stockpile blend grade is maintained (following higher stoping/mine grades in the quarter), where we factor in production/AISC of 192koz/~A$1,515/oz, respectively.
Time to buy
In response to the update, the broker has reaffirmed its buy rating and $2.15 price target on the ASX gold stock. Based on its current share price of $1.93, this implies potential upside of approximately 11.5% for investors over the next 12 months.
Goldman likes the company due to its low cost production expansion opportunity and strong free cash flow generation. It explains:
We rate BGL a Buy, where low cost expansions support production upside. On valuation, while now trading broadly in line with peers at our LT gold price of US$1,800/oz (peer average ~1.1x NAV and ~US$1,900/oz), near-term FCF yields of c. 10% in FY25/26 remain attractive vs. peers (despite ~25% of medium-term gold sales being hedged at ~A$2,700-2,900/oz). We note mine optionality supports further exploration upside, where a 5-year resource extension adds ~A$0.4bn/A$0.5bn (~20%/25%) to our valuation under a 1.2Mtpa and 1.5Mtpa processing scenario, respectively, for which we capture some upside in our nominal value.
All in all, the broker believes this could make Bellevue Gold a good ASX gold stock to buy if you are looking for exposure to this side of the market right now.
