The gold sector certainly is booming right now.
For example, the S&P/ASX All Ords Gold index is up an incredible 80% since the start of the year thanks to a rampant rise in the price of the precious metal.
And while Minerals 260 Ltd (ASX: MI6) shares are up 75% over the same period, one leading broker believes the ASX gold share could still rise materially from current levels.
What is being said about this ASX gold share?
The team at Bell Potter is feeling particularly bullish on this small cap gold developer following the release of drilling data from the 100%-owned Bullabulling Gold Project in Western Australia.
The broker believes that this suggests that there will be a big increase to its mineral resource when its update is released before the end of the year. It said:
MI6's 100%-owned Bullabulling Gold Project (BGP) continues to strengthen its credentials as a compelling gold development project. Recent drill results have extended the Resource along strike and at depth, returned some of the highest grades and gram-metre intersections in the project's history and, in our view, increased optionality by showing potential for underground mining as grades increase with depth.
These results will be included in a Mineral Resource update targeted for December 2025. We anticipate a substantial increase in contained ounces at likely higher grades. Our analysis indicates Bullabulling offers strong leverage to higher grades, with a hypothetical 17% increase in grade driving a 26% increase to our standalone project valuation and an increase in modelled project EBITDA margins from ~54% to ~67%.
Big returns
Despite rising strongly this year, Bell Potter believes the ASX gold share is being undervalued by the market. Though, it concedes that it is a higher risk option and unsuitable for the average investor.
According to the note, the broker has retained its speculative buy rating and 34 cents price target on its shares. Based on its current share price of 21 cents, this implies potential upside of 62% for investors over the next 12 months.
Commenting on its buy recommendation, Bell Potter said:
MI6 offers gold exposure via the 2.3Moz Bullabulling Resource, valuation uplift through discovery success and further Resource growth, project advancement and de-risking as the BGP progresses towards production. There is also potential M&A activity in a market characterised by well valued gold producers with strong balance sheets and appetites for growth. We retain our Speculative Buy recommendation and Valuation of $0.34/sh.
