Evolution Mining Ltd (ASX: EVN) shares had a tough session on Thursday.
The gold miner's shares ended the day almost 4% lower at $11.34 after investors reacted negatively to its fourth-quarter update.
While this is disappointing, Bell Potter thinks it could have created a buying opportunity for investors.
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What is the broker saying?
Bell Potter was pleased with the company's update despite production coming in softer than expected. It commented:
EVN released its June quarter 2026 production and cost report which, in our view, was a solid final quarter from EVN and was its second-best quarter of FY26. While both gold and copper production came in below our forecasts, Ernest Henry returned to full production following the weak March quarter and delivered its best quarterly performance of FY26. For the June quarter, group production was 179.7koz gold and 18.8kt copper (vs BPe 189.0koz gold and 19.6kt copper).
The broker also highlights that the ASX gold stock has released part of its guidance for FY 2027, revealing that its costs are expected to rise and its investments will increase. However, it is comfortable with this. It said:
EVN released high-level elements of FY27 guidance. Overall, it pointed to steady production, but higher sustaining capital, higher AISC on general cost inflation and higher CAPEX on growth projects. It also flagged increased spending on exploration and on life-of-mine studies. While higher than our prior forecasts, we are comfortable the organic investment options are lower risk and higher returning than M&A in the current market. EVN has an excellent track record on this front, where returns on invested capital at Cowal, Ernest Henry and Mungari have been high.
Should you buy Evolution Mining shares?
According to the note, Bell Potter has retained its buy rating on Evolution Mining shares with a trimmed price target of $15.10 (from $16.45).
Based on its current share price, this implies potential upside of 33% for investors over the next 12 months.
In addition, Bell Potter is forecasting an attractive 4.4% dividend yield in FY 2027. This boosts the total potential return beyond 37%.
Commenting on its investment thesis, the broker said:
EPS changes on this update are -6% for FY26, -15% for FY27 and -4% for FY28. We have trimmed our production forecasts and increased our AISC forecasts in line with initial guidance for FY27. We have also lifted our capital expenditure assumptions in line with the outlook. As a result, we also trim our dividend forecasts on the lower free cash flow.
EVN offers fully unhedged gold and copper exposure via a portfolio of high quality, long-life assets in Tier 1 jurisdictions, overseen by a high-quality management team. EVN has stated its intention to pass growing free cash flows on to shareholders.
