Buy this ‘sector leading’ ASX 200 gold stock for big returns

With the gold price hitting record highs this week, investors may be looking for ways to gain exposure to the precious metal.

One way could be through ASX 200 gold stock Capricorn Metals Ltd (ASX: CMM).

That’s the view of analysts at Bell Potter, which believe investors should be snapping up its shares at current levels.

Why is it an ASX 200 gold stock to buy?

Bell Potter notes that Capricorn Metals recently released an update for the 100% owned Karlawinda Gold Project (KGP).

Unfortunately, the project was impacted by a major rainfall event late in the third quarter, which means that gold production fell a touch short of expectations.

In addition, as open-pit mining material movements are still recovering from the rainfall, gold production for the current quarter will now be softer than expected. This inevitably means that production for FY 2024 will be short of its guidance.

Bell Potter thinks management will be very disappointed with this news given its impressive track record of delivering on promises for the last three years. It said:

This will be disappointing for CMM, which has built a metronomic track record of guidance delivery since commencing production at the KGP in June 2021. March quarter 2024 gold production of 26.0koz is the lowest since the ramp-up quarter of September 2021 and comes at a time when CMM will have been aiming to maximise unhedged gold sales before hedge book deliveries re-commence in September 2024.

But the broker thinks investors should look beyond this rainfall event. It adds:

However, the quality of the KGP and its operational management are evidenced by the strong quarterly cash addition to the balance sheet of A$680/oz. Low costs, a strong balance sheet and free cash flow mitigates CMM’s single mine risk and explains in part why it carries a premium rating when compared with peers.

Buy this sector leading gold miner

Overall, the broker believes that this ASX 200 gold stock is a great option for investors. It said:

Our NPVbased valuation is up 3% to $6.15/sh as we roll forward past the March 2024 quarter, update for CMM’s increased cash position and pick up FY25 earnings upgrades. CMM is a sector leading gold producer with a strong balance sheet, clear organic growth options and a management team with an excellent track record of delivery.

As it says above, Bell Potter has reiterated its buy rating this morning with an improved price target of $6.15. Based on where the ASX 200 gold stock currently trades, this implies potential upside of 15% for investors over the next 12 months.

The post Buy this ‘sector leading’ ASX 200 gold stock for big returns appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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