Are you looking for exposure to the mining sector outside the status quo of BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO)?
If you are, and have a higher tolerance for risk, then it could be worth checking out the ASX mining stock in this article.
That's because Bell Potter believes it is on track to deliver big returns and equally big profits in the near future.
Image source: Getty Images
Which ASX mining stock?
The stock that Bell Potter is tipping as a buy is WA1 Resources Ltd (ASX: WA1).
It is the niobium-focused mineral exploration company behind the West Arunta project in Western Australia.
Bell Potter notes that since its listing, WA1 Resources has focused on an aggressive drill-out program at West Arunta, specifically targeting the Luni carbonatite structure.
Niobium is considered to be a critical mineral by both the United States and European Union due to supply concentration and economic importance.
Bell Potter was pleased with the recently updated mineral resource estimate (MRE) for the Luni deposit. It said:
The total MRE tonnage for Luni was already established and widely understood, what this update importantly delivers is the conversion of Inferred material into the Indicated category. At 57% of contained niobium now sitting in Indicated, WA1 has crossed a material threshold in terms of resource maturity and provides a platform for Ore Reserve declaration, pre-feasibility study completion, and ultimately, project financing. The Indicated high-grade subset represents a meaningful improvement in tonnage and grade versus the prior update.
This material is expected to anchor the initial mine schedule and underpin any starter operation economics. Our base case assumes a staged development, beginning with a 0.5Mtpa operation (5yrs) processing ore at average grade of 2.5% Nb₂O₅, scaling to 1.0–1.5Mtpa over the following decade. The high-grade Indicated subset as it now stands is sufficient to support that schedule.
Based on this, Bell Potter believes the company is well-placed to start generating sales and profits in FY 2028.
It is forecasting sales of $491.8 million, EBITDA of $354.1 million, and a net profit after tax of $256.1 million.
Should you invest?
According to the note, Bell Potter has retained its speculative buy rating and $24.80 price target on the ASX mining stock.
Based on its current share price of $16.17, this implies potential upside of 53% for investors over the next 12 months.
Commenting on its recommendation, the broker said:
We maintain our Speculative Buy recommendation with a $24.80/sh valuation (unchanged). Our valuation is based on a Notional Development Scenario (NDS) for Luni, discounted at 10% and risked at 30% to reflect the project's current stage. Key catalysts for higher valuations and share price re-rating include: eastern zone assay results, Measured classification, PFS/Reserve declaration and potential MRE increase from eastern AC extensions.
