Gold Investment Opportunity with Evolution MiningGold Investment Opportunity with Evolution Mining Introduction In the current market environment, exposure to gold can be beneficial for investment portfolios. This article analyzes the recommendation of Goldman Sachs for the ASX 200 gold share Evolution Mining (EVN). Goldman Sachs’ Recommendation Goldman Sachs visited Northparkes and Cowal, two of Evolution Mining’s gold operations, and came away impressed. They believe the site visits provided clarity on the medium-term outlook for both the company and its assets. The analysts highlight reduced risk of capital raisings, stable production, and later major capital investments that are expected to be funded through the assets’ own cash flows. Valuation and Potential Returns Goldman Sachs reaffirms its “Buy” rating for Evolution Mining shares with a reduced price target of $4.00. This represents a potential upside of 15% based on the current share price of $3.48. The analysts explain that the company’s valuation is attractive based on long-term gold price forecasts and strong free cash flow yields compared to peers. Conclusion Goldman Sachs’ recommendation suggests that Evolution Mining shares offer a compelling investment opportunity for investors seeking exposure to the gold sector. The company’s medium-term outlook is expected to be positive, with minimal risks and strong financials. Investors should consider the potential returns and valuation indicated by Goldman Sachs when making their investment decisions.
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Since many analysts expect gold prices to remain high for years to come, having some exposure to the gold sector can be a good idea for a portfolio.
But which ASX 200 gold shares should investors consider buying now? Let’s take a look and see what Goldman Sachs analysts recommend.
Which ASX 200 gold share is a buy?
Goldman Sachs recently visited the gold operations of Northparkes and Cowal Evolution Mining Ltd (ASX: EVN) and liked what it saw.
According to the note, the broker believes the site visits have provided him with greater clarity regarding the medium-term prospects of the ASX 200 gold shares. It explains:
We see that the improved clarity on the medium-term outlook for both assets and the broader portfolio reduces the risk of significant capital raisings/production weakness versus peer expectations and reduces uncertainty. The timing of major capital investments later this decade at Northparkes, Cowal and Ernest Henry is not seen as a risk as assets largely fund their own capital needs (GSe net cash in FY27).
Which returns are possible?
The note shows that Goldman Sachs sees a lot of value in Evolution Mining’s shares.
In response to the site visits, the analysts reaffirmed their buy rating with a reduced price target of $4.00.
Based on the current Evolution Mining share price of $3.48, this implies a potential upside of 15% for this ASX 200 gold share over the next 12 months. The commentary:
Our Northparkes valuation increases on deferred capital, offset by a reduction in our Cowal valuation on higher medium-term capital investments compared to our prior expectations. However, together with the recent quarter-to-date production update (and its implications into FY25), our FY24/25/26E EPS is +1%/-20%/-36%, partly due to higher non-cash inventory costs (especially at Cowal).
The broker then highlights that the company’s shares are trading at an attractive level based on the long-term gold price forecasts. Goldman also points to strong free cash flow yields compared to peers. It adds:
Based on our LT gold price of US$1,800/oz, EVN is trading at ~1.1x NAV (based on our medium-term Red Lake production remaining below initial FY24 guidance), or pricing ~US$1,825/ oz of gold, largely in line with peers (~1.1x NAV on average and ~US$1,800/oz), although short-term FCF returns of c. 10% in FY25/26E remains attractive versus peers at c. Average 0-10%.
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