There's plenty of high-quality gold miners on the ASX, but when it comes to finding a company that might have some share price upside, it's not a bad strategy to ask the experts.
The analyst team at Moelis has run the ruler over two of the producers on the ASX and believes both represent good value at current levels.
Let's have a look at what they're saying.
Alkane Resources Ltd (ASX: ALK)
Alkane, in its quarterly report last week, announced that its cash pile had grown to $362 million, up $130 million for the quarter.
The company reported record gold production of 45,776 ounces at an all-in sustaining cost (AISC) of $ 2,928 per tonne, and maintained full-year guidance of 160,000 to 175,000 ounces of gold.
Alkane Managing Director Nic Earner said it was "another great quarter" for the company.
The Moelis team said Alkane "comfortably beat our production estimates while landing in-line with AISC forecasts for the March Quarter''.
They added:
At a group level, there was a slight increase in AISC primarily due to higher royalties (coinciding with higher realised gold prices) and the impact of diesel cost – albeit this only occurred later in the quarter. Reaching at least the bottom end of guidance looks to be a relatively simple target over the balance of the full year given the ~120koz gold equivalent produced to date.
Moelis has a price target of $2.30 on Alkane shares compared with the current price of $1.54, implying potential upside of 49.4%.
Black Cat Syndicate Ltd (ASX: BC8)
This company also last week released its quarterly production report, which showed the company had cash flow of $61 million generated from 10,374 ounces of gold produced.
Back Cat's cash balance inched $1 million higher to $92 million, which the company said was a pleasing result considering its investments in growth programs.
This included a $46 million spend on the Kal East mine ramp-up.
Black Cat also said it was working on a new growth strategy, "focused on clearly articulating its capabilities, growth initiatives and capital deployment priorities, with an update expected within the next three months''.
Following completion of this process, the company said it intended to provide annual guidance, including on AISC.
Moelis said the quarter was softer than its estimates, "but in fairness, there has been relatively little laid out in the form of guidance and the nature of the operations at Kal East in particular have made predictions (and subsequent verification) challenging – up until now''.
Moelis said the company was transitioning to mining and treating its own ore, and while cash build was soft, "excess operating cashflow has been redeployed across the business where we think there is low hanging fruit''.
Moelis has a price target of $1.70 on Black Cat compared with $1.18 currently, implying potential upside of 44.1%.
The post Moelis is tipping these two ASX gold miners will deliver better than 40% returns appeared first on The Motley Fool Australia.
Motley Fool contributor Cameron England 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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