Do you want big returns and exposure to the booming gold price?
Well, I have good news for you. That's because one leading broker is tipping one ASX gold stock to double in value from current levels.
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Which ASX gold stock?
Analysts at Bell Potter believe that Alkane Resources Limited (ASX: ALK) is a gold stock to buy right now.
The broker highlights that the gold miner has just released the scoping study for the Boda-Kaisar Project in New South Wales.
While a touch softer than its expectations, the broker sees the study results as "a good outcome." It said:
Principal differences to BPe include: (1) average grade is 0.46g/t AuEq vs BPe 0.57g/t AuEq (driven by processing of low-grade stockpiles, excluding stockpiles average Study grade is 0.53g/t AuEq, much closer to BPe), (2) mining duration in the Study is 13-years, vs BPe 20-years, as the Study largely excludes the Underground Resource (374Mt at 0.59g/t AuEq), (3) Study initial capital costs are A$1,783m (including A$250m of growth and contingency) vs BPe A$1,500m, and (4) due to the previous points, $1,120m Post-tax NPV (adjusted for tax by BP) is less than BPe $1,500m.
Bell Potter agrees with management that Boda-Kaiser can support a large gold mining operation thanks to strong commodity prices. It adds:
We agree with management that the Study shows that at current copper and gold prices, Boda-Kaiser can support a large operation with strong economic returns in highly attractive commodities with strong fundamentals over the long-term.
Big returns
In response to the study, Bell Potter has retained its buy rating and $1.10 price target on the ASX gold stock. Based on its current share price of 51.5 cents, this implies potential upside of 113% for investors over the next 12 months.
Bell Potter then concludes by explaining why it thinks its shares could re-rate to higher multiples in the future. It said:
In ALK's forward plan we can see steps to increase market value recognition for Boda / Kaiser, including: (1) feasibility studies to include Underground Resources in the Project using mass mining methods (Sub-level Caving), to prolong the duration of higher-grade plant feed over the current 13-year mining period, (2) exploration to discover additional open pit deposits would also enable a longer duration of higher-grade plant feed, (3) securing a high-calibre partner could promote market value recognition of Boda / Kaiser, given the Projects large capital cost relative to ALK's market capitalisation, and Tomingley's ability to generate free cash.
