The Bellevue Gold Ltd (ASX: BGL) share price had a tough finish to the week.
The ASX gold stock was down as much as 27% before closing the day almost 22% at $1.44.
Investors were selling the gold miner's shares after it raised funds through an institutional placement.
Bellevue Gold revealed that it received firm commitments for a $150 million fully underwritten institutional placement at a 15.3% discount of $1.55 per new share.
Proceeds will be used to repay debt, unlocking project free cash flow to allow the ASX gold stock to self-fund its expansion in line with its updated five-year growth plan, and to support accelerated exploration and growth.
It is also worth noting that its new growth plan unveiled higher than expected costs in FY 2025. Something which didn't go down well with the market.
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Buy this ASX gold stock
Goldman Sachs believes that this weakness has created a buying opportunity for investors.
Its analysts have responded to the above by reiterating their buy rating with a trimmed price target of $1.85 (from $2.15). This implies potential upside of over 28% for investors from current levels.
According to the note, the broker believes that the market underappreciates this ASX gold stock. It said:
Relative to peers, BGL remains relatively underappreciated in our view, where as a scenario, the raise price implies a P/NAV of ~1x and ~US$1,780/oz LT gold (peer average ~1.1x NAV and ~US$1,910/oz). While near-term FCF yields are impacted by the accelerated development spend, we see these returning to double digit by FY27E, and remaining attractive vs. peers, supporting upside to the outlook for possible future capital returns once the expansion ramps up (despite ~25% of medium-term gold sales being hedged at ~A$2,700-2,900/oz). We note a 5-year resource extension adds ~30% to our valuation under a 1.6Mtpa processing scenario respectively, for which we capture some upside in our nominal value.
Goldman also highlights that there are significant expansion opportunities underground for the company. It adds:
We expect significant underground mine investment to-date de-risks ore access and opens up new areas for expansion/further exploration, with several faces now open (rather than drilling from the surface). BGL's most recent drilling highlighted assays with significantly higher grades than current resources (from already above peer gold grades), and potential for additional high-grade shoots, likely supporting future resource updates. On our estimates, a prolonged mine life from resource extension could add ~30% to our NAV from a 5-year mine extension on the 1.6Mtpa mill expansion at our ~US$1,800/oz LT gold price from CY28 (real $ 2024), with further upside if LT prices are closer to spot.
