The gold sector has been having a tough time since Donald Trump won the race to the White House.
While this is disappointing, it could have created a buying opportunity for investors.
That's the view of analysts at Bell Potter, which think that one "sector leading" ASX 200 gold stock could be a buy this week.
Image source: Getty Images
Which ASX 200 gold stock is the broker tipping as a buy?
The gold stock in question is Capricorn Metals Ltd (ASX: CMM), which operates the Karlawinda Gold Project (KGP) in Western Australia.
Bell Potter is feeling very positive about the ASX 200 gold stock's outlook following the successful completion of a $200 million capital raising. It said:
Combined with current net cash of $95m and free cash flows from operations, this is expected to fund aggressive production growth across both CMM's projects, from ~115kozpa to ~300kozpa combined, within the next three years.
With this raise, the Mt Gibson Gold Project (MGGP) is now also fully funded and we incorporate its development and ~150kozpa production profile into our formal financial forecasts.
The broker notes that this means that Capricorn Metals is well-placed to become the fourth ASX 200 gold stock to produce over 300kozpa from all-Australian asset bases. It said:
We now forecast production to more than double to a 300kozpa run-rate by end FY27, positioning CMM as the fourth ASX-listed gold producer (of three currently) producing over 300kozpa from all-Australian asset bases. The raise removes the drawdown of additional debt, imposition of covenants, debt service costs and additional hedging while de-risking CMM's production growth profile
Time to buy
According to the note, the broker has responded to the capital raising by retaining its buy rating with a slightly trimmed price target of $7.23.
Based on its current share price of $6.25, this implies potential upside of 16% for investors over the next 12 months.
Commenting on its buy rating, the broker said:
EPS changes in this report are: FY25: -8%, FY26: -2% and FY27: +71%. CMM is a sector leading gold producer with a strong balance sheet, management team with an excellent track record of delivery and clear organic growth options to lift group production to 300kozpa. Our NPV-based valuation is lowered 4% to $7.23/sh on equity raise dilution. We retain our Buy recommendation.
All in all, this could make Capricorn Metals a good option for investors that are on the lookout for exposure to the gold sector.
