If you have a high tolerance for risk and want exposure to gold, then it could be worth considering the speculative ASX share in this article.
That's because if Bell Potter is on the money with its recommendation, investors could potentially double their money over the next 12 months.
Image source: Getty Images
Which speculative ASX gold share?
The share that Bell Potter has been running the rule over is Falcon Metals Ltd (ASX: FAL).
It is an Australian gold explorer behind the 100%-owned, high grade Blue Moon gold project at Bendigo.
Bell Potter notes that drilling at Blue Moon has confirmed multiple zones of visible gold within quartz reefs hosted by the Garden Gully anticline, which is a structural setting that historically produced 5.2 Moz @ ~15 g/t Au.
The broker highlights that the ASX gold share has identified four stacked high-grade target zones. These are Morning Glory (~30–40m below surface), Jasmine (~300-400m), Lotus (~500–700m) and Dahlia (~750–900m).
Importantly, each remains open along strike and down-dip, with visible gold observed in multiple sections.
Based on what it has seen, Bell Potter has given the company a valuation of $245 million in its initiation note. It explains:
For valuation purposes we assume: (1) a potential future Mineral Inventory of 6.3Mt at 14.5g/t Au for 2.9Moz contained Au; (2) a Mining Inventory of 4.7Mt at 11.6g/t Au for 1.8Moz contained Au; (3) production of 107kozpa from CY32 at a mining rate of 300ktpa; and (4) A$250m of construction capex. On this basis, we derive a risked, undiluted net present value (NPV) of $170m for Blue Moon (DCF, nominal, post-tax, 10% discount rate, 90% risked) and a diluted equity value of $245m.
Shares tipped to more than double
According to the note, Bell Potter has initiated coverage on the ASX gold share with a speculative buy rating and $1.10 price target.
Based on its current share price of 48 cents, this implies potential upside of approximately 130% over the next 12 months.
Commenting on its recommendation, Bell Potter said:
We initiate coverage of FAL with a SPECULATIVE BUY recommendation and a A$1.10/sh valuation. In our view, the market is increasingly valuing Blue Moon as a district-scale extension of the Bendigo system rather than a one-off discovery.
The upside case depends less on a single spectacular visible-gold intercept and more on proving continuity along strike and down plunge across the four mineralised zones, precisely what the step-out program is beginning to deliver, offering re-rating potential. Continuity and repeatability of high-grade results are early positive indicators that Blue Moon's average Resource grade may prove materially higher once formally estimated. Given mining earnings are highly sensitive to grade, this presents meaningful upside to future operational value.
