If you are looking for big returns and don't mind investing in the mining sector, then the ASX gold stock in this article could be worth a closer look.
That's the view of analysts at Bell Potter, which believe the gold miner's shares could be destined to more than double in value from current levels.
Which ASX gold stock?
The gold miner in question is Alkane Resources Limited (ASX: ALK). It has aspirations to grow to become one of Australia's multi-mine gold and copper producers.
At present, Alkane Resources' gold production is from the Tomingley Gold Operations in Central West New South Wales. It has been operating since 2014 and has the resources to continue to operate beyond 2030.
It also controls several highly prospective gold and copper tenements. The most advanced exploration projects are in the tenement area between Tomingley and Peak Hill, which has the potential to provide additional ore for its current operations.
What is the broker saying?
Bell Potter notes that the ASX gold stock released its full year results this week. And while its profits were short of expectations, it has seen enough to remain positive. Commenting on its results and guidance, the broker said:
Revenue was $173m, from gold sales of 57.6koz (down from 70.2koz in FY23) and an average gold price of $3,004/oz. Underlying EBITDA was $59.8m (vs BPe $60.2m). NPAT: $17.6m (vs BPe $28m). NPAT was weaker than our forecast, on increased depreciation and tax. Depreciation ($35m) was $5m greater than BPe, and Tax ($7m) was $3m greater than BPe.
FY25 guidance is 70koz-80koz at $2,400/oz-$2,600/oz All-in-Sustaining-Costs (AISC). Production is a 30% increase on FY24. AISC is a 17% increase on FY24 as Roswell Underground Mine development is advanced. FY26/FY27 guidance is 90koz/105koz at $1,900/$2000 per oz, as the Tomingley Gold Expansion is completed.
In light of the above, Bell Potter has held firm with its buy rating and $1.10 price target on the ASX gold stock. Based on its current share price of 40.5 cents, this implies potential upside of 170% for investors over the next 12 months.
Bell Potter believes that its shares are seriously undervalued by the market. It concludes:
We maintain our Target Price and our recommendation, in accordance with our ratings structure. In our view ALK is undervalued relative to the expanded Tomingley Gold Project, which we forecast will produce around 100kozpa of gold between FY26 and FY32, without significant additional discovery. In addition to the operating Tomingley Gold Project, ALK is working towards the development / monetisation of the Northern Molong Porphyry Project, where it has already defined Resources of 14.7Moz AuEq.
