With the gold price at high levels, having a bit of exposure to the precious metal could be a good thing for an investment portfolio.
But with so many options to choose from, it can be hard to decide which ASX gold mining stock to buy.
But don't worry because the team at Macquarie Group Ltd (ASX: MQG) has just named one as a buy with significant upside potential.
Which ASX gold mining stock?
The gold stock that has been given the thumbs up from analysts at Macquarie is Westgold Resources Ltd (ASX: WGX).
It remains positive on the company despite the release of a weaker than expected fourth quarter update this month.
Macquarie wasn't overly impressed with the company's performance during the quarter, with production, costs, and sales falling well short of expectations. It said:
Group production of 88koz was a 4%/8% (~6% avg) miss vs VA/MQe, while sales missed by 22%/25% (~24% avg) vs VA/MQe. Group AISC was 7%/16% (~12% avg) higher than VA/MQe. FY25 production of ~326koz at an AISC of A$2,666/koz was outside (a miss on) the previous downgraded guidance ranges of 330-350koz at an AISC of A$2,400-2,600/oz. FY26 guidance and 3-year outlook due Aug/Sep-25.
Nevertheless, even after revising its estimates, the broker believes that this ASX gold mining stock is being materially undervalued by the market. Especially given its strong free cash flow outlook. It adds:
A softer 4QFY25 completed a challenging year for WGX, marked by positive QoQ operational improvements, but falling short of downgraded guidance. The 3-year outlook (Sept) will be a key test of our assumptions which positively forecast ~11% FCFe yields over the next 3 years.
Big potential returns
According to the release, the broker has retained its outperform rating and $3.60 price target on the ASX gold mining stock.
Based on its current share price of $2.80, this implies potential upside of 28% for investors over the next 12 months.
To put that into context, a $10,000 investment would grow into $12,800 by this time next year if Macquarie is on the money with its recommendation.
The broker concludes:
Earnings changes: Mixed EPS of -48% in FY25E (lower sales), ~+6% over FY26/27E from the stronger Fortnum outlook/bullion unwind, and ~-17% over FY28/29E from changes to our production/cost outlook.
Valuation: No change to our A$3.60/sh target price. Our 50:50 blend of 1.2x NAV and 8x OCF methodology is unchanged. Catalysts: We view FY26 guidance (due Aug-25) and the 3-year outlook (due Sep-25) as key upcoming catalysts that could validate our outlook.
