If you are looking for gold sector exposure for your portfolio, then read on.
That's because the team at Bell Potter has just named one ASX 200 gold stock to buy now.
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Which ASX 200 gold stock?
The gold miner that the broker is bullish on is Evolution Mining Ltd (ASX: EVN).
Bell Potter has been looking ahead to the company's quarterly update and is expecting a decent performance, albeit with some weather and operational disruptions. It said:
With this update we have made allowances for various weather and operational disruptions that have eventuated during the March quarter, causing us to shift some production from the March quarter to the June quarter and overall result in a modest reduction to our FY26 production forecasts.
Lower gold production is partially offset by higher copper production. All-In-Sustaining-Costs (AISC) are marginally higher overall. Our near-term commodity price forecasts are up (2%-11% for gold, 1% for copper) and partially offset by a higher exchange rate. The net impact is a 14% reduction to our FY26 earnings forecast and a 5% reduction to our full year dividend distribution forecast.
The good news is the broker believes the ASX 200 gold stock is well placed to deal with any energy security issues caused by war in the Middle East. It adds:
We view EVN as relatively well placed to deal with potential energy security issues. It benefits from grid electrical power to all the processing plants in its asset portfolio, removing exposure to diesel power generation. EVN's mining production is dominated (~60%) by underground mining which is less diesel intensive than open-pit mining. Its open-pit operations (Cowal and Mungari) both hold substantial ore stockpiles, including ~5yrs mill feed at Cowal and 12-18 months mill feed at Mungari.
EVN is also relatively less exposed to flight restrictions, with all its operations (other than Ernest Henry) having largely residential workforces rather than Fly-In-Fly-Out (FIFO). While risks remain, we believe this provides EVN with greater optionality in contingency planning compared with most peers. We expect these options and the outlook on input costs to be a key focus of the quarterly.
Major upside potential
According to the note, the broker has retained its buy rating on Evolution Mining's shares with a slightly trimmed price target of $16.60 (from $16.70).
Based on its current share price of $12.88, this implies potential upside of almost 29% for investors over the next 12 months.
It also expects an attractive 4% dividend yield over the forecast period, lifting the total return further.
Commenting on its buy recommendation, Bell Potter said:
EVN offers effectively unhedged gold and copper exposure via a portfolio of high quality, long-life assets in Tier 1 jurisdictions and overseen by a high-quality management team. EVN has stated its intention to pass growing free cash flows on to shareholders. Our NPV-based Target Price is lowered 1% to $16.60/sh and we retain our Buy recommendation.
