Capricorn Metals Ltd (ASX: CMM) recently reported first-quarter gold production results, which piqued the interest of the analyst team at Barrenjoey.
The Barrenjoey team has a bullish price target on Capricorn shares, after the company reported better-than-expected gold production for the quarter.
I'll get to the specifics of that price target shortly, but first, let's look at what the company reported.
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Ramping up gold production
Capricorn said it had produced 31,218 ounces of gold from its Karlawinda gold project, up from 30,437 ounces in the previous quarter, while construction of the Karlawinda expansion project was successfully completed on schedule and within budget.
The company said it was now on track to produce 137,000 to 147,000 ounces of gold at an all-in sustaining cost of $1,900 to $2,100 per ounce in FY27.
Capricorn's cash and gold on hand at the end of the September quarter was $535 million, up from $507 million at the end of the June quarter.
Development activities at the company's Mt Gibson gold project also progressed, with detailed engineering complete and all major contracts finalised.
Analysts like the growth story
Barrenjoey said in their research report that the solid results during the quarter were an example of the company's ability to execute well.
They added that Capricorn had bigger things planned:
CMM has made clearer its growth agenda unveiling a new business plan, which includes a production target of ~410koz in FY31, a large uplift on the 124koz delivered in FY26 and a prior business plan target of ~300kozpa. This growth is to come from an expansion of Karlawinda (to 150kozpa) and delivery of the Mt Gibson project (now ~260kozpa; prior business plan was ~150kozpa). This growth is projected to be high margin, with the prefeasibility study outlining all-in sustaining costs of less than $2000 per ounce.
Barrenjoey said the growth projects would be funded through cash.
They added:
We do not think this growth agenda is fully priced in, with the market at face value pricing in a discount for execution risk. We have high regard for the ability of management to execute, which has again been demonstrated this quarter, with the Karlawinda mill expansion commissioned on schedule and ramping up well. We think CMM looks attractive, with the share price a ~30% discount to our net present value.
Barrenjoey said Capricorn was trading at a higher multiple than many of its peers, but they believed this was justified by its robust growth pipeline.
The broker has a price target of $22.50 for Capricorn shares, compared with the current price of $14.85.
This would constitute a 51.5% increase if achieved. The company is valued at $6.58 billion.
