Fortescue Ltd (ASX: FMG) shares have been hammered over the past 12 months.
During this time, the mining giant's shares have lost 25% of their value.
At the same time, the S&P/ASX 200 Index (ASX: XJO) has risen an impressive 20%.
This is a relative underperformance of 45%.
Time to buy Fortescue shares?
Despite their fall from grace, analysts at Bell Potter don't believe that investors should be picking up shares yet.
A recent note reveals that the broker has a sell rating and $17.04 price target on Fortescue's shares, which implies potential downside of approximately 7.5%.
But which mining stock should you buy instead if you want exposure to this side of the market? Let's look at one that the broker is bullish on.
Buy this miner
Instead of Fortescue shares, Bell Potter thinks that investors should be buying Capricorn Metals Ltd (ASX: CMM).
It is a gold miner whose primary asset is the 100%-owned Karlawinda Gold Project (KGP), located ~65km south-east of Newman in Western Australia. It also owns the Mt Gibson Gold Project (MGGP) project in the state.
The company recently released an ore reserve estimate for MGGP and the broker was very pleased with what it saw. It said:
This is a very positive update for CMM. On our data, the increased Reserve positions CMM as the holder of the largest all-Australian Ore Reserve base among the ASX-listed producers. This provides CMM with a high confidence basis for long-term production and cash flow. The Reserves have been calculated using conservative gold prices and operating costs – the implication being that production should generate high and robust margins over a long mine life and through the gold price cycle.
It should translate to a premium valuation relative to peers and presents a competitive advantage in respect to funding and M&A. This is before any Ore Reserves have been estimated for potential underground operations and strike and depth extensions remain to be tested at several other MGGP deposits.
In response to the update, the broker reaffirmed its buy rating with an improved price target of $7.54. Based on its current share price of $6.36, this implies potential upside of almost 19% for investors
It concludes:
CMM is a sector leading gold producer, fully funded to grow production from ~115kozpa to ~300kozpa by FY27, from two gold mines in WA, each with +10 year mine lives run a management team that has an excellent track record of delivery. Our NPV-based valuation is up 4% to $7.54/sh. We retain our Buy recommendation.
All in all, this could make it a superior option to Fortescue shares if you are looking for mining sector exposure.
