If you are looking for exposure to the booming gold price, then it could be worth considering the ASX 200 gold stock in this article.
That's because despite rising 250% over the past 12 months, the team at Bell Potter believes there's still very strong returns to come.
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Which ASX 200 gold stock?
The gold stock that Bell Potter is recommending to clients is Minerals 260 Ltd (ASX: MI6).
It is a Perth-based exploration and development company behind the Bullabulling Gold Project (BGP).
Bullabulling has a mineral resource estimate of 6.2Moz at 1.0g/t Au and a recently completed pre-feasibility study outlines a compelling development case for production of 150,000 ounces per annum at an all-in-sustaining-cost of A$2,520 per ounce over a 19 year mine life.
Bell Potter notes that the ASX 200 gold stock received an additional investment from Franco-Nevada (NYSE: FNV) this month. The broker believes "this represents a strong endorsement by one of the world's most credible, capable and successful gold investment companies."
In addition, Bell Potter highlights that the deal significantly de-risks the development of the BGP. It explains:
Following the deal, pro-forma cash will be ~$633m against an estimated $855m pre-production capital requirement per the PFS. A funding gap of ~$250-$300m is expected to be covered by project finance debt. Non-binding term sheets exceeding this requirement have already been received, credibly de-risking the development funding requirement ahead of the Final Investment Decision (FID) planned for 1QCY27.
This removes near-term financing overhang that can weigh on developer share prices pre-FID. It also puts MI6 in a strong position to negotiate competitive, hedge-free terms for its debt. MI6 has a demonstrated strategy of using its strong funding position to de-risk its development schedule and budget via early commitment to water infrastructure, grade control drilling, camp construction and personnel buildout.
Should you invest?
According to the note, Bell Potter has retained its buy rating on the ASX 200 gold stock with a slightly improved price target of $1.45 (from $1.40).
Based on its current share price of 84 cents, this implies potential upside of almost 73% for investors over the next 12 months.
Commenting on its buy recommendation, the broker said:
MI6 offers gold exposure via the 6.2Moz BGP, valuation uplift through discovery success, project advancement and de-risking as the BGP progresses towards production. MI6 is now largely funded to develop the BGP and on track to complete a DFS and make a FID in early CY27, plus secure long-lead items and commence early site works.
