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The Greatland Gold share price is flying: here’s what I’d do next

Rupert Hargreaves
·3-min read
Hand holding pound notes
Hand holding pound notes

The Greatland Gold (LSE: GGP) share price has taken flight over the past few weeks. After falling from 27p to around 19p at the end of September, the stock has since rallied. It’s currently changing hands at about 24p, up 26% from the lows.

Shares in the mining minnow have jumped following news from the company’s flagship Havieron gold mine. The firm’s partner, mining giant Newcrest, has published its latest exploration report on the prospect, which is full of good news.

In particular, the report showed that Newcrest’s latest drilling results have “returned the best intercept to date at Havieron from infill drilling.

Greatland’s CEO believes these figures “further reinforce the potential for a bulk tonnage mining operation at Havieron.

And there could be more good news to come. The group is expecting further exploration results before the end of the year. If these are anywhere near as lively as the latest update, I think the Greatland share price could react extremely positivity.

Greatland Gold share price: time to buy?

So how should one react to this news? Well, it’s clear to me this information from Greatland further fortifies the company’s investment case. It’s apparent the firm’s Havieron asset is world-class, and additional drilling is only reinforcing that fact.

However, it could be some time before the company can generate revenues from the site. This is the hard part. The majority of mining operations fail because they can’t get the funding to progress from the exploration to the production stage.

That said, the fact Greatland is already supported by sector giant Newcrest lessens the risk of failure, in my view.

Newcrest has deep pockets and skilled engineers. If Havieron is as rich as drilling figures suggest, it doesn’t seem unreasonable to suggest Greatland’s large partner will want to support the mine’s development. Newcrest may even offer to buy Greatland. In this best-case scenario, there may be a substantial return on the investment.

Positive outcome

As such, while there’s a chance Greatland will struggle to commercialise its world-class mine, I think the odds are skewed towards a positive outcome for the business.

What’s more, the rising price of gold has only increased attractiveness of this new mining prospect in recent months. Further drilling and exploration progress over the next few months should only boost the investment case and Greatland’s long-term potential.

Therefore, I think investors may benefit from buying a share of this business for the long term as part of a diversified portfolio. Doing so would provide exposure to the company and its world-class mine while limiting downside risk if management struggles to get funding for the project in the near term.

In my opinion, combining the stock in a portfolio with a selection of high growth shares would provide the best of both worlds.

The post The Greatland Gold share price is flying: here’s what I’d do next appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020