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Which ASX mining stock could rise 120% according to a leading broker?

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A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face.

If you are looking for big returns in the mining sector, then it could be worth hearing what Bell Potter is saying about one ASX mining stock.

That’s because it believes this stock could more than double in value over the next 12 months.

Which ASX mining stock?

The stock that Bell Potter is recommending to clients with a high tolerance for risk is Viridis Mining and Minerals Ltd (ASX: VMM).

It is a minerals exploration and development company with seven projects across three countries.

However, Bell Potter notes that the majority of the value in the business is focused on its Colossus ionic adsorption clay (IAC) project in Minas Gerais, Brazil.

Bell Potter highlights that the company is closing in on a final investment decision for the project. It said:

VMM are rapidly progressing towards a Final Investment Decision (FID) (BPe 2HCY26) for the Colossus project, which is targeting production commencement in 2028. Ahead of that, the company has been progressing offtake arrangements, facilitated by governments in particular the US and EU. We suspect the ultimate direction of offtake will depend on optimising 1) funding for the US$358m capital cost of Colossus, and 2) maximising shareholder value via contract pricing (i.e. maintain the greatest amount of leverage to underlying prices).

The most critical catalysts over the coming months are 1) Demonstration plant commissioning (BPe April) 2) production offtake (we’re expecting a mix of floor and market linked price, with payabilities 70% or greater), 3) submission of construction licence application (BPe April) and 4) Finalisation of financing, predominantly debt (~US$250m) with a smaller portion of strategic equity/ public equity (~US$50-$80m).

The broker also highlights that the ASX stock’s valuation is very attractive compared to peers. It adds:

It’s the land of opportunity. The relative value of VMM vs peers remains stark in our opinion. Peers such as Meteoric (MEI, Buy Spec $0.25/sh, market cap A$440m), which is developing a similar project adjacent to VMM (Caldeira), and Aclara (ARA.TSX, not covered, market cap C$700m), which has a lower-grade and higher cost project in Brazil (although has further optionality downstream).

Big potential returns

According to the note, the broker has a speculative buy rating and $4.30 price target on the ASX mining stock.

Based on its current share price of $1.95, this implies potential upside of 120% for investors.

Commenting on its recommendation, Bell Potter concludes:

The world is shifting, major global producers Lynas (LYC, Hold $19.00/sh) and MP Materials (MP, not covered) have price floors in place now covering the US and Japan. We are yet to see price floors extended to Europe to guarantee offtake and security of supply.

The examples have been set as to what an acceptable price is now, with shared participation above certain levels, and preference ascribed to those who can provide a Light Rare Earth (NdPr) and Heavy Rare Earth (Dy, Tb, Y, Sm) solution. Our valuation is increased to $4.30/sh after accounting for the recent capital raise and we maintain our Buy (spec) recommendation.

The post Which ASX mining stock could rise 120% according to a leading broker? 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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